Mhp Reg S Regulatory News (MHPC)

04 September 2020, Limassol, Cyprus

MHP SE

Financial Results for the Second Quarter and Six Months Ended 30 June 2020

MHP SE (LSE:MHPC), the parent company of a leading international agro-industrial group with headquarters in Ukraine, today announces its results for the second quarter and six months ended 30 June 2020. Hereinafter, MHP SE and its subsidiaries are referred to as "MHP", "The Company" or "The Group".

OPERATIONAL HIGHLIGHTS

Despite the challenges posed by the global COVID-19 pandemic and the effects of a first-quarter outbreak of H5N1 avian influenza in Ukraine, the Company delivered a satisfactory performance for the second quarter and six months ended 30 June 2020.

An outbreak of H5N1 avian influenza in the Vinnytsia region of Ukraine was announced at the end of January 2020. While no infections were experienced within the Company's facilities, this caused a temporary cessation of exports from Ukraine to the EU, Saudi Arabia and other MENA markets and the majority of CIS countries. Exports to the EU restarted at the beginning of March and Saudi Arabia/MENA markets reopened in February and March, while the majority of CIS countries recommenced in May. To mitigate the adverse impact on MHP's operations and profitability, poultry production was reduced by approximately 10% from February until the end of March. Since the beginning of April, all of the Company's poultry production facilities have been operating at full capacity again.

In the second quarter, the effects of the COVID-19 pandemic and quarantine measures worldwide resulted in significant market disruption, in particular with the almost complete shutdown of the HoReCa (hotel, restaurant and catering) sector and a sharp decrease in demand for breast fillet in EU and MENA markets. MHP was able to substantially offset these reductions in demand as a result of increased demand for poultry in the Ukrainian domestic market. Poultry prices were also adversely affected in both domestic and export markets.

Despite the impact of COVID-2019, the Company has largely continued to operate normally (apart from the avian influenza-related cut in production). A full range of measures has been implemented to prevent the spread of infection within the Company, including remote working, additional medical screenings, corporate transfers and use of protective masks. At production facilities, work has been organised in shifts of smaller numbers of people to limit contact and minimise the potential spread of infection. As of the date of this report, absenteeism of employees at MHP's facilities is at the same level as last year.

Q2 2020 highlights

· Poultry production volume remained relatively stable year-on-year at 181,291 tonnes (Q2 2019: 182,306 tonnes). Poultry production volume of the European operating segment (comprising Perutnina Ptuj, or PP) increased by 9% to 26,101 tonnes (Q2 2019: 24,0031) tonnes)

· The average chicken meat price decreased by 16% year-on-year to USD 1.27 per kg (Q2 2019: USD 1.51 per kg) (excluding VAT). The average price of poultry meat produced by PP was EUR 2.50 per kg (Q2 2019: 2.67 EUR per kg)

· Chicken meat exports totaled 88,505 tonnes, a decrease of 9% from 97,439 tonnes in Q2 2019.

H1 2020 highlights

· Poultry production volume increased slightly to 359,931 tonnes (H1 2019: 353,578 tonnes). Poultry production volume of the European operating segment increased by 58% to 49,959 tonnes (H1 2019: 31,6661) tonnes)

1) results of PP from 21 February 2019 when the acquisition was completed

· The average chicken meat price decreased by 9% year-on-year to USD 1.32 per kg (H1 2019: USD 1.45 per kg) (excluding VAT). The average price of chicken meat produced by PP during H1 2020 was EUR 2.53 per kg (1H 2019: 2.65 EUR per kg)

· Chicken meat exports decreased by 10% to 170,553 tonnes compared with 190,484 tonnes in H1 2019.

FINANCIAL HIGHLIGHTS

Q2 2020 highlights

· Revenue of US$ 425 million, down 17% year-on-year (Q2 2019: US$ 509 million)

· Export revenue of US$ 215 million, comprising 51% of total revenue, decreased by 24% year-on-year (Q2 2019: US$ 284 million, 56% of total revenue)

· Operating profit of US$ 91 million was down 29% year-on-year from US$ 128 million; operating margin declined from 25% to 21%

· Adjusted EBITDA (net of IFRS 16) was down from US$ 165 million to US$ 126 million; adjusted EBITDA margin (net of IFRS 16) declined from 32% to 30%

· Net profit was US$ 112 million, compared to US$ 138 million in Q2 2019, including non-cash foreign exchange gains of US$ 52 million (unchanged from US$ 52 million in Q2 2019). Net profit before foreign exchange differences for Q2 2020 amounted to US$ 60 million, 30% lower than US$ 86 million in Q2 2019.

H1 2020 highlights

· Revenue of US$ 867 million, down 8% year-on-year (H1 2019: US$ 945 million)

· Export revenue of US$ 453 million, comprising 52% of total revenue, decreased by 18% year-on-year (H1 2019: US$ 552 million, 58% of total revenue)

· Operating profit of US$ 138 million was down 22% year-on-year from US$ 178 million; operating margin declined from 19% to 16%

· Adjusted EBITDA (net of IFRS 16) decreased from US$ 248 million to US$ 216 million; adjusted EBITDA margin (net of IFRS 16) declined from 26% to 25%

· Net loss was US$ 62 million, compared to net profit of US$ 171 million in H1 2019, primarily due to US$ 129 million of non-cash foreign exchange losses in H1 2020, reflecting a 11% weakening in the Ukraine Hryvnia/US Dollar exchange rate, compared to a FX gain of US$ 73 million in H1 2019. Net profit before foreign exchange differences for H1 2020 amounted to US$ 67 million, 32% lower than US$ 98 million for H1 2019.

FINANCIAL OVERVIEW

* pps - percentage points

Average official FX rate for Q2 2020 UAH/US$ 26.91 and for Q2 2019 UAH/US$ 26.56

Average official FX rate for H1 2020 UAH/US$ 25.98 and for H1 2019 UAH/US$ 26.93

DIVIDENDS

On 13 April 2020, the Board of Directors approved payment of an interim dividend of US$ 0.2803 per share, equivalent to US$ 30 million, to shareholders on the register as of 24 April 2020. The Board of Directors approved that no dividend would be paid on the Company's shares held in treasury. All dividends were paid to shareholders by 30 June 2020.

DIAL-IN DETAILS

MHP's management will host a conference call for investors and analysts followed by Q&A on the day of the results

In order to follow the presentation together with the management, please use the following link:

https://mm.closir.com/slides?id=645982

For Investor Relations enquiries, please contact:

Anastasia Sobotiuk (Kyiv) +38 044 207 99 58 a.sobotyuk@mhp.com.ua

For Analysts enquiries, please contact:

Iryna Bublyk (Kyiv) +38 044 207 00 04 i.bublik@mhp.com.ua

Segment Performance

Poultry and related operations

Poultry

The total volume of chicken meat sold to third parties in H1 2020 decreased by 5% to 328,385 tonnes (H1 2019: 345,278 tonnes) as a result of lower exports. In Q2 2020, export sales amounted to 88,505 tonnes, down 9% compared to 97,439 tonnes in Q2 2019. In H1 2020, poultry exports decreased by 10% to 170,553 tonnes (H1 2019: 190,484 tonnes). The decrease was due to the temporary closure of export markets following the first-quarter outbreak of H5N1 avian influenza in Ukraine as well as the impact of the COVID-19 pandemic.

Poultry export prices decreased by 8% year-on-year, mainly driven by the product mix change and weaker prices on breast fillet in EU as many global competitors experienced reduced demand and resulting excess stock. Prices on the domestic market decreased by 13% year-on-year, mainly for the same reasons as export prices as well as a higher proportion of lower-priced frozen chicken sales in Ukraine.

Vegetable oil

In Q2 2020, sunflower oil sales volume amounted to 82,646 tonnes, down 5% year-on-year. In H1 2020, MHP's sales of sunflower oil decreased by 12% compared to H1 2019 to 163,356 tonnes, mainly due to lower production of oil as a result of a decreased share of sunflower cake in fodder.

Sales of soybean oil were 10,841 tonnes in Q2 2020, 19% higher year-on-year, and 21,609 tonnes in H1 2020, 11% lower year-on-year, mainly as a result of a production decrease (decreased share of soybean cake in fodder and 3rd party sales).

1) pps - percentage points

As a result of the decrease in sales volumes and prices of chicken meat, revenue of the poultry and related operations segment decreased by 12% in H1 2020 compared to H1 2019.

IAS 41 standard loss in Q2 2020 amounted to US$ 5 million (compared with a US$ 6 million gain in Q2 2019) mainly as a result of the lower chicken meat prices.

Gross profit for Q2 2020 decreased by 43% compared to Q2 2019 to US$ 51 million, mainly due to the lower sales volumes and prices. Poultry production costs in Q2 2020 remained almost at the same level as in Q1 2020.

Adjusted EBITDA in H1 2020 decreased by 24%, in line with the decrease in gross profit.

Grain growing operations

In 2020 the Company expects to harvest around 360,000 hectares of land, similar to the area harvested in 2019.

This year, exceptionally unfavorable weather conditions in the central regions of Ukraine have led to significantly lower-than-expected yields across all crops, and especially corn, in these regions. As of the date of this report, the Company's harvesting campaign of rapeseeds and wheat is complete, so that winter crops current (bunker) yields are as follows:

The Grain growing segment's revenue for H1 2020 amounted to US$ 35 million compared to US$ 83 million in H1 2019. The decrease was mainly attributable to the lower amount of crops in stock designated for sale as of 31 December 2019 compared to stock for sale as of 31 December 2018, mainly as a result of higher yields in 2018.

IAS 41 standard gain for H1 2020 amounted to US$ 38 million compared with US$ 26 million in H1 2019 mainly as a result a more substantial decrease in grain stock in H1 2019 compared to H1 2020. The gain mainly represents the result of the revaluation of crops in fields (biological assets) at the reporting date, partly offset by the net change in the effect of revaluation of agricultural produce (sunflower, corn, wheat and soya) as a result of a decrease of grain in stock due to internal consumption. 

Meat processing and other agricultural operations segment

Sales volume of meat processing products remained broadly unchanged year-on-year and amounted to 16,522 tonnes in H1 2020. The average processed meat price increased by 6% year-on-year to UAH 69.99 per kg in H1 2020, driven mainly by price management strategy and an increased share of higher-priced products in the portfolio.

Sales volumes of convenience food in H1 2020 remained broadly stable and amounted to 8,537 tonnes. The average price in H1 2020 decreased by 2% to UAH 39.91 per kg (excluding VAT), mainly due to the product mix change affected by the "freeze" in HoReCa (e.g. KFC, local fast food services etc.) operations due to the COVID-19 pandemic.

1)pps - percentage points

2)includes milk, cattle, and feed grains.

Segment revenue and adjusted EBITDA in H1 2020 were unchanged year-on-year at US$ 67 million and US$ 9 million respectively.

European operating segment

1) results of PP from 21 February 2019 when the acquisition was completed. NOTE: H1 2019 poultry sales (if calculated since 01 January 2019) were at 29,777 tonnes

Poultry sales of the European operating segment remained stable at 15,855 tonnes in Q2 2020 (Q2 2020: 15,835 tonnes). Average prices decreased by 6% from EUR 2.67 in Q2 2019 to EUR 2.50 in Q2 2020.

1) includes sausages and convenience foods

2) results of PP from 21 February 2019 when the acquisition was completed. NOTE: H1 2019 meat processing products sales (if calculated since 01 January 2019) were at 16,301 tonnes

Meat processing product sales of the European operating segment were up 12% year-on-year and amounted to 9,429 tonnes in Q2 2020 (Q2 2019: 8,430 tonnes). Average prices were relatively stable at EUR 2.69 in Q2 2020 and EUR 2.72 in H1 2020.

1) results of PP from 21 February 2019 when the acquisition was completed. NOTE: H1 2019 EBITDA net of IFRS 16 effect (if calculated since 01 January 2019) was US$ 19 million

The European operating segment's revenue in Q2 2020 amounted to US$ 79 million, and US$ 157 million in H1 2020. Adjusted EBITDA (net of IFRS 16) reached US$ 15 million (up 19% year-on-year) and US$ 26 million (up 17% year-on-year) for Q2 2020 and H1 2020 respectively. The increase of Adjusted EBITDA in Q2 2020 compared to Q2 2019 was mainly attributable to the higher sales of more profitable meat processing products in 2020.

Current Group cash flow

1)Calculated as cash used for Purchases of property, plant and equipment plus cash used for purchases of other non-current assets 2)Calculated as Net Cash from operating activities plus Cash used in investing activities plus Total financial activities

Cash flow from operations before changes in working capital for H1 2020 amounted to US$ 99 million (H1 2019: US$ 138 million).

Use of funds in working capital during H1 2020 was mostly related to investments in crops in fields to be harvested in H2 2020. The difference compared to H1 2019 was mainly attributable to higher investments in inventory during H1 2020 (sunflower and soya) designated for internal consumption, mostly due to lower stock of crops as of 31 December 2019 compared to 31 December 2018.

In H1 2020, total CAPEX amounted to US$ 41 million mainly on maintenance and modernizing Perutnina Ptuj production facilities.

Debt Structure and Liquidity

1) Net of IFRS 16 adjustments: as if any lease that would have been treated as an operating lease under IAS 17 as was in effect before the 1 January 2019, is treated as an operating lease for purposes of this calculation. In accordance with covenants in MHP's bond and loan agreements, these data exclude the effects of IFRS 16 on accounting for operating leases.

2) Indebtedness under trade credit facilities that is required to be repaid within 12 months of drawdown should be excluded for purposes of this calculation.

As of 30 June 2020, MHP's cash and cash equivalents amounted to US$ 185 million. Net debt increased to US$ 1,282 million, compared to US$ 1,139 million as at 31 December 2019. The share of long-term debt in the total outstanding debt remained unchanged at 98%. The weighted average interest rate is around 7%.

The Net Debt / LTM adjusted EBITDA (net of IFRS 16) ratio was 3.72 as of 30 June 2020, higher than the limit of 3.0 specified in the Eurobond agreement. Although exceeding the ratio of 3.0 does not constitute a breach of covenants under the indebtedness agreement, this requires the Company to introduce additional control measures. In particular, MHP is then required to supervise and assess any incurrence of additional indebtedness, restricted payments (e.g. dividends or investments in third parties), mergers with third parties outside of the Group, and granting of any financing to third parties. Such restrictions became effective on the date of publication of the audited consolidated financial statements for the year ended 31 December 2019 on 14 April 2020.

As a hedge for currency risks, revenues from the export of grain, sunflower and soybean oil, sunflower husks, and chicken meat, which are denominated in US Dollars and Euros, are more than sufficient to cover debt service expenses. Export revenue for H1 2020 amounted to US$ 453 million or 52% of total revenue (US$ 552 million or 58% of total sales in H1 2019).

Outlook

Globally, the poultry industry has gone through an extremely challenging time in the first half of this year with disruption due to the COVID-19 pandemic, significantly lower prices for poultry meat globally, over-supply in many markets, ongoing Brexit uncertainty in the UK and volatile currency markets. In spite of these challenges, the Company has managed to produce a good set of results and is rightly proud of this achievement.

The Company sees opportunities both in export markets and in Ukraine as a key driver for the remainder of 2020.

In addition, the acquisition of Perutnina Ptuj in 2019 has generated a strong result with better than expected financial results due to cost optimization and their strength in branded higher value-added products.

When we released the results for the first quarter of 2020, we reported on better than expected results in the grain growing division. Unfortunately, parts of Ukraine have been hit with extremely hot and arid weather conditions that have had a significantly negative impact on the final weeks of the growing season, especially in corn. Therefore, we expect lower results in corn.

In spite of the unusual combination of headwinds the Company has faced this year to date, we currently expect to deliver a financial result for the full year similar to 2019.

Notes to Editors:

About MHP

MHP is the leading producer of poultry products in Ukraine and the Balkans (Perutnina Ptuj Group).

Ukraine: MHP has the highest share of the poultry market (around 57% of industrial production) and strongest brand recognition for its products. MHP owns and operates each of the key stages of chicken production processes, from feed grains and fodder production to egg hatching and grow out to processing, marketing, distribution and sales (including through MHP's franchise outlets). Vertical integration reduces MHP's dependence on suppliers and its exposure to increases in raw material prices. In addition to cost efficiency, vertical integration also allows MHP to maintain strict biosecurity and to control the quality of its inputs and the resulting quality and consistency of its products through to the point of sale.

MHP also has a leading grain cultivation business growing corn to support the vertical integration of its chicken production and increasingly other grains, such as wheat and rape, for sale to third parties. MHP leases agricultural land located primarily in the highly fertile black soil regions of Ukraine.

The Balkans: Perutnina Ptuj is a leading poultry and meat-processing producer in the Balkans, with production assets in four Balkan countries: Slovenia, Croatia, Serbia, Bosnia and Herzegovina. It also owns distribution companies in Austria, Macedonia and Romania and supplies products to 15 countries in Europe. Perutnina Ptuj is vertically integrated across all stages of chicken meat production, including feed, hatching eggs, breeding, slaughtering and further poultry processing.

MHP trades on the London Stock Exchange under the symbol MHPC.

Forward-Looking Statements

This press release may contain forward-looking statements that refer to future events or forecast financial indicators for MHP SE. Such statements do not guarantee that these are actions to be taken by MHP SE in the future, and estimates can be inaccurate and uncertain. Actual final indicators and results can differ considerably from those declared in any forward-looking statements. MHP SE does not intend to change these statements to reflect actual results.

MHP SE AND ITS SUBSIDIARIES

Interim condensed consolidated Financial Statements

As of and for the six-month period ended 30 June 2020

CONTENTS

STATEMENT OF MEMBERS OF THE BOARD OF DIRECTORS......................................................... (a)

MANAGEMENT REPORT....................................................................................................................... (b)

REVIEW REPORT OF INTERIM condensed consolidated FINANCIAL STATEMENTS...........(d)

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2019

INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME.................................................................................................................................................. 6

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION.......................... 8

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY.......................... 9

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS...................................... 11

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS................... 13

1. Corporate information..................................................................................................................... 13

2. Basis of preparation and accounting policies................................................................................. 14

3. Changes in the group structure...................................................................................................... 15

4. Segment information...................................................................................................................... 17

5. Revenue......................................................................................................................................... 20

6. Profit for the period......................................................................................................................... 21

7. Deferred income............................................................................................................................. 21

8. Property, plant and equipment........................................................................................................ 21

9. Agricultural produce........................................................................................................................ 21

10. Biological assets.......................................................................................................................... 21

11. Share capital................................................................................................................................ 22

12. Bank borrowings.......................................................................................................................... 22

13. Bonds issued............................................................................................................................... 23

14. Related party balances and transactions..................................................................................... 25

15. Contingencies and contractual commitments............................................................................... 26

16. Fair value of financial instruments................................................................................................ 28

17. Risk management policy.............................................................................................................. 29

18. Dividends...................................................................................................................................... 30

19. Subsequent events....................................................................................................................... 30

20. Authorization of the interim condensed consolidated financial statements................................... 30

STATEMENT OF MEMBERS OF THE BOARD OF DIRECTORS

In accordance with Article 10 of the Transparency Requirements (Securities for Trading on Regulated Market) Law 190(l)/2007 ("Law"), as amended, we the members of the Board of Directors of MHP SE confirm that to the best of our knowledge:

(a) The interim condensed consolidated financial statements for the period from 1 January 2020 to30 June 2020 that are presented on pages 6 to 30:

i. were prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union and in accordance with the provisions of Article 10 (4) of the Law, and

ii. give a true and fair view of the assets and liabilities, the financial position and the profits of MHP SE and the businesses that are included in the interim condensed consolidated financial statements, and

(b) the interim management report gives a fair review of the information required under Article 10 (6) of the Law.

3 September 2020

Members of the Board of Directors:

Chief Executive Officer Yuriy Kosyuk

Chief Financial Officer Viktoria Kapelyushnaya

Director Yuriy Melnyk

Director John Grant

Director John Clifford Rich

Director Roger Wills

Director Christakis Taoushanis

Director Roberto Banfi

Director Philip J Wilkinson

MANAGEMENT REPORT

Key financial highlights

During the six-month period ended 30 June 2020 consolidated revenue decreased by 8% to USD 867,448 thousand, compared to USD 944,727 thousand for the six-month period ended 30 June 2019. The decrease in revenue was mainly attributable to a decline in the price and export volume of chicken meat sold as well as a decrease of grain sales due to the lower amount of crops in stock designated for sale as of 31 December 2019; this was partly offset by inclusion in 2020 of the results of Perutnina Ptuj for the full six-month period compared with the shorter period from 21 February 2019 when the acquisition of Perutnina Ptuj was completed. Export sales for the six-month period ended 30 June 2020 constituted 52% of total revenue and amounted to USD 452,721 thousand, compared to USD 552,418 thousand, and 58% of total revenue for the six-month period ended 30 June 2019. The decrease in export revenue was mainly attributable to an avian influenza outbreak in Ukraine in the first quarter 2020, which caused a temporary cessation of exports from Ukraine to the EU and to certain MENA markets, as well as the impact of the COVID-19 pandemic since March 2020.

Gross profit decreased by 13% to USD 219,014 thousand for the six-month period ended30 June 2020 compared to USD 252,043 thousand for the six-month period ended 30 June 2019. The decrease was driven mainly by reduced gross profit in the poultry and related operations segment, partly offset by an increase in the Europe operating segment.

Operating profit decreased by 23% to USD 138,041 thousand for the six-month period ended 30 June 2020 compared to USD 178,204 thousand for the six-month period ended 30 June 2019. In addition to reduction in gross profit, administration, sales and distribution expenses increased primarily due to the inclusion of additional expenses of Perutnina Ptuj.

Continuing operations recorded a loss of USD 60,629 thousand for the six-month period ended 30 June 2020 compared to a profit of USD of 172,701 thousand for the six-month period ended 30 June 2019. The loss in 2020 was mainly due to an unrealized foreign exchange loss of USD 129,472 thousand for the six-month period ended 30 June 2020, mostly attributable to the effect of the UAH depreciation against the USD and EUR on bonds and bank borrowings denominated in foreign currencies; this compared to a foreign exchange gain of USD 72,696 thousand for the six-month period ended 30 June 2019.

Having regard to the activities of the Group, management believes that the above measures are frequently used by investors, analysts and stakeholders to evaluate the efficiency of the Group's operations. For further information on the above measures, please refer to page 6 of the interim condensed consolidated financial statements for the six-month period ended 30 June 2020.

Related parties

During the six-month periods ended 30 June 2020 and 30 June 2019 the Group entered into transactions with related parties that are under common control of the Principal Shareholder of the Group (Note 1) in the ordinary course of business. Detailed information on operations with related parties is disclosed in Note 14.

Dividends

On 13 April 2020, the Board of Directors approved payment of an interim dividend of USD 0.2803 per share, equivalent to USD 30,000 thousand to shareholders on the register as of 24 April 2020. The Board of Directors approved that no dividend will be paid on the Company's shares held in treasury. All dividends were fully paid to shareholders by 30 June 2020.

Risks and uncertainties

There are a number of potential risks and uncertainties which could have a material impact on the Group's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results.

Except as disclosed below, the directors do not consider that the principal risks and uncertainties have changed materially since the publication of the annual report for the year ended 31 December 2019. A detailed explanation of the risks, and how the Group seeks to mitigate them, can be found on pages 145 to 149 of the annual report which is available at www.mhp.com.cy.

COVID-19

Starting from early 2020, the new coronavirus disease (COVID-19) spread rapidly all over the world, resulting in the announcement of pandemic status by the World Health Organization in March 2020. The world economy entered a period of unprecedented health-care crisis that has already caused considerable global disruption in business activities and everyday life.

COVID-19 had an adverse impact on the second quarter 2020 earnings, mainly because of the effect on prices as many global competitors are currently experiencing reduced demand and resulting excess stock. These challenges are anticipated to persist for the remainder of 2020 and potentially into 2021.

Although Management cannot currently predict the ultimate impact that COVID-19 will have on short and long-term demand, as it will depend on, among other things, the severity and duration of the COVID-19 crisis, they have concluded that the pandemic will not have an immediate material impact on the MHP's operations.

In spite of these adverse external factors, the Company's liquidity is expected to be adequate to continue to run operations and meet obligations as they become due.

3 September 2020

On behalf of the Board: 

Chief Executive Officer Yuriy Kosyuk

Chief Financial Officer Viktoria Kapelyushnaya 

REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

To MHP SE

Introduction

We have reviewed the interim condensed consolidated financial statements of MHP SE (the "Company"), and its subsidiaries (collectively referred to as "the Group") on pages 6 to 30, which comprise the interim condensed consolidated statement of financial position as at 30 June 2020 and the interim condensed consolidated statements of profit or loss and other comprehensive income, changes in equity and cash flows for the six-month period then ended and selected explanatory notes. Management is responsible for the preparation and presentation of these interim condensed consolidated financial statements in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting as adopted by the European Union. Our responsibility is to express a conclusion on these interim condensed consolidated financial statements based on our review.

Scope of Review

We conducted our review in accordance with International Standard on Review Engagements 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity". A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the accompanying interim condensed consolidated financial statements do not present fairly, in all material respects, the financial position of the Group as at 30 June 2020 and of its financial performance and its cash flows for the six-month period then ended in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting as adopted by the European Union.

Other Matters

Comparative figures: The interim condensed consolidated financial statements of the Company as of and for the six-month period ended 30 June 2019, were reviewed by another auditor who expressed a modified conclusion on those statements on 5 September 2019 due to not being able to complete their review procedures on the underlying data used for the purpose of measuring and recognising a right-of-use asset and the associated lease liability as at 30 June 2019, and the respective adjustments recognised on transition to IFRS 16 as at 1 January 2019, due to issues identified in the underlying data which, as of the date of authorisation of the interim condensed consolidated financial statements as of and for the six-month period ended 30 June 2019, were still under evaluation by management. The audit opinion, expressed by the other auditor, on the consolidated financial statements of the Company for the year ended 31 December 2019, was unmodified. The adjustments recognised on transition to IFRS 16 as at 1 January 2019, in the interim condensed consolidated financial statements of the Company as of and for the six-month period ended 30 June 2019, remained the same as for the consolidated financial statements of the Company for the year ended 31 December 2019.

Financial information for the three-month period ended 30 June: the financial information presented in the interim condensed consolidated statement of profit or loss and other comprehensive income for the three-month period ended 30 June, has not been subjected to our review procedures.

Andreas Avraamides

Certified Public Accountant and Registered Auditor

for and on behalf of

Ernst & Young Cyprus Limited

Certified Public Accountants and Registered Auditors

Nicosia, Cyprus

03 September 2020

INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

for the six-month period ended 30 June 2020

(in thousands of US dollars, unless otherwise indicated)

The accompanying notes on the pages 13 to 30 form an integral part of these interim condensed consolidated financial statements

INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME

for the six-month period ended 30 June 2020

(in thousands of US dollars, unless otherwise indicated)

On behalf of the Board: 

Chief Executive Officer Yuriy Kosyuk

Chief Financial Officer Viktoria Kapelyushnaya

The accompanying notes on the pages 13 to 30 form an integral part of these interim condensed consolidated financial statements

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as of 30 June 2020

(in thousands of US dollars, unless otherwise indicated)

On behalf of the Board:

Chief Executive Officer Yuriy Kosyuk

Chief Financial Officer Viktoria Kapelyushnaya

The accompanying notes on the pages 13 to 30 form an integral part of these interim condensed consolidated financial statements

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six-month period ended 30 June 2020

(in thousands of US dollars, unless otherwise indicated)

On behalf of the Board:

Chief Executive Officer Yuriy Kosyuk

Chief Financial Officer Viktoria Kapelyushnaya

The accompanying notes on the pages 13 to 30 form an integral part of these interim condensed consolidated financial statements

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the six-month period ended 30 June 2019

(in thousands of US dollars, unless otherwise indicated)

On behalf of the Board:

Chief Executive Officer Yuriy Kosyuk

Chief Financial Officer Viktoria Kapelyushnaya

The accompanying notes on the pages 13 to 30 form an integral part of these interim condensed consolidated financial statements

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

for the six-month period ended 30 June 2020

(in thousands of US dollars, unless otherwise indicated)