Ladies and gentlemen, thank you for standing by. Now I'd like to welcome you to MHP's First Quarter 2025 Results Conference call on the 21st of May, 2025. At this time, all participant lines are in listen-only mode. The format of the call today is a presentation which will be followed by a question-and-answer session. Without further ado, I'd like to pass the line to Anastasiya Sobotyuk, Director of Investor Relations. Please go ahead.
Thank you very much, Luis. Dear stakeholders, good day, and thank you for joining us for MHP's conference call dedicated to our first quarter results. My name is Anastasiya, Director of Investor Relations and ESG Compliance and Reporting. I am joined today by Victoria Kapelyushnaya, Chief Financial Officer of MHP. Together, we will present and discuss the company's financial and operational performance for the reporting period. Please note that today's discussion is based on the press release and financial statements issued earlier today. In addition, during our discussion, we will share our outlook and strategic plans, which reflect current assumptions as well as prevailing domestic and international market trends. We kindly ask you to take this context into account during our call. We go to slide number three of our presentation. A few words about the macro environment.
Despite the challenging environment, including ongoing missile attacks on critical infrastructure, Ukraine's economy demonstrated notable resilience in 2024. According to official data, real GDP grew by almost 3% compared to the previous year. Looking ahead, the National Bank of Ukraine projects further recovery, with GDP expected to expand by 3.6% this year, 2025. Inflation trends have also shown some moderation. The Consumer Price Index for the first quarter of 2025 rose by 3.5%, which is down, by the way, from 5.2% in the first quarter of 2024. The central bank's current forecast anticipates inflation for the full year to reach 8.4%. On the currency front, since October 2023, the National Bank has adopted a managed exchange rate regime, introducing more flexibility into foreign exchange markets. The exchange rate remains highly sensitive to global geopolitical developments, including shifts in international trade and tariff policies.
In the agricultural sector, projections from the Minister of Agriculture indicate continued strong performance. The total area allocated for agricultural crops is expected to exceed 23 million hectares this year. Of these, around 11 million hectares, which is approximately 50% of the total, will be dedicated to grain cultivation, underscoring the sector's strategic importance to the national economy. These indicators collectively highlight both resilience and the potential of Ukraine's economy as it continues to navigate a complex and evolving environment. Let's move to slide number four of the presentation, where we turn into our financial performance for the first quarter of 2025. Compared to the first quarter last year, revenue increased across all operating segments, reflecting a strong overall sales performance. However, gross profit experienced a slight decline, primarily due to weaker margins in the poultry and vegetable oil segments.
These were partially offset by improved results in the agricultural segment. Operating profit at NBDA decreased year on year. This was largely driven by the decline in gross profit, higher payroll-related expenses across selling, general, and administrative functions, as well as additional war-related costs recognized under the other operating expenses. When comparing Q1 2025 to the fourth quarter of 2024, we observed a moderation in gross profit growth. This was mainly attributable to a softer performance in the agricultural segment, although this was partially offset by improved profitability in the poultry segment. Operating profit at NBDA declined quarter on quarter in line with the gross profit dynamics.
However, net profit increased during the quarter, and this improvement was primarily due to the relative stabilization of the Ukrainian hryvnia against both the US dollar and the euro, which resulted in a foreign exchange gain in the first quarter 2025, contrasting with the foreign exchange loss recorded in the previous quarter. Let's move to slide number five of our presentation. The slide shows the financial results by segment. In the first quarter of 2025, as you can see, the poultry and related operations segment remained the largest contributor to the company's performance, accounting for 54% of total revenue and 72% of total EBITDA. This was primarily driven by an increase in poultry prices, particularly in export markets, which continued to show strong demand. Adjusted EBITDA for the first quarter amounted to $119 million, representing a 7% year-on-year decrease.
This decline was mainly the result of weaker financial performance in the poultry and vegetable oil segments, driven by higher production costs. These challenges were partially offset by positive results in the agricultural segment and a stable financial contribution from our European operating segment. Let us now take a closer look at the performance of each business segment, and I will now hand over to Victoria for further details.
Thank you, Anastasiya. Good afternoon, everyone. Let's have a precise look at poultry and related operations segment performance. Slide number six. MHP results in Q1 are higher than in Q1 2024, supported by a gradual recovery in poultry prices, which helped offset the sharp cost increases experienced in Q4 last year. The growth compared to the previous quarter was mainly due to the revaluation effect under IFRS 41 standard, which was caused by an increase in the prices of hatchling eggs and an increase in chicken meat stocks. Poultry costs in Q4 last year increased significantly, mainly due to the higher corn and gas prices. While poultry costs in Q1 this year remained relatively stable compared to the previous quarter, we anticipate further increases driven by rising grain prices and inflationary pressure on production inputs in Ukraine.
Poultry prices in Q1 increased by 5% compared to Q4 last year, mainly on the export market. This was caused by an increase in costs by the end of last year. Commodity price volatility remains a key challenge for MHP. To reduce exposure, we are strategically shifting toward higher margin and value-added products, producing more non-commodity products. We will continue to prioritize the sales of non-commodity products with a focus on those delivering the highest profitability. A few words about our vegetable oil segment, slide number seven. In Q1 2021, our EBITDA for the vegetable oil operation decreased compared to Q4, as well as compared to Q1 last year. The decline in vegetable oil results compared to last year was primarily due to the high sunflower and soybean prices and low oil prices. Oil prices experienced a downward trend, while sunflower prices increased, resulting in reduced oil crushing margin.
This was caused by lower yields in 2022 and increased crushing production capacity in Ukraine. As a result, we expect this segment to deliver low profitability in 2025. Let's move to slide number eight, agricultural operations. The winter sowing campaign was successfully completed, covering approximately 82,000 hectares, 65% under winter wheat and 35% under winter rapeseed. Spring sowing is progressing well, with corn and sunflower fully planted and soybean 90% completed. During the first quarter, grain prices continued to rise. However, this is not certain regarding the final price level by the end of the year. Segment revenue in Q1 amounted to $92 million compared to the $69 million in Q1 last year. The increase was mainly due to the higher sales volume of grains, particularly wheat and soybeans, to external customers. EBITDA for agricultural operations segment in Q1 was $35 million compared to the $17 million last year.
This result was primarily driven by higher grain prices, especially for corn, sunflower seed sold to poultry and vegetable oil segment, respectively. Looking ahead, MHP will keep working to improve crop yields and take advantage of strong market prices while carefully managing rising costs and market risk. Let's proceed to slide number nine, several words about the European operating segment. In Q1, revenue from the European operating segment rose 8% year-on-year to $147 million, driven by higher sales volume of both poultry and processed meat products. Poultry meat volume growth was supported by increased sales in Slovenia, Italy, and Macedonia, with average sales prices showing a slight year-over-year increase. Processed meat volume also grew modestly, mainly due to rising demand for convenience food, accompanied by an increase in average sales prices. EBITDA of the European operating segment in Q1 remained almost at the same level as Q1 last year.
MHP is focused on growing its European presence and enhancing its product mix to boost profitability. Slide number ten, a few words about our cash flow and liquidity position. Cash flow from operations before changing working capital in Q1 increased to $101 million compared to the $90 million in Q1 2024. Investment in working capital amounted to $52 million. This was mainly due to a temporary rise in trade receivables, particularly from poultry and vegetable oil sales. This is expected to normalize in Q2 2025. Inventory and crop field investment remained high due to the sowing campaign, but this impact was largely offset by the use of harvesting crops from 2024 and growth in recoverable VAT. Total CAPEX in Q1 amounted to $60 million and remained generally stable compared to last year.
This investment focused on maintenance and modernization of existing facilities, investment in cost optimization and culinary strategy project, expansion and improvement of Perutnina Ptuj production facility. As you already know, in line with the EU expansion strategy, MHP signed SPA in March-April this year to acquire 92% of Spain's UVESA Group, valuing equity at approximately $270 million. Completion is subject to regulatory improvements. The deal will be financed through a mix of acquisition financing and internal funds. Regarding debt, by the end of the period, the company's total debt was nearly $1.7 billion and net debt about $1.2 billion. Liquidity position at the end of Q1 was $359 million in cash, stable compared to the first January compared to the beginning of this year, 60% of which was held by a group subsidiary outside in Ukraine.
By the end of the first quarter, the group's level ratio was 2.13, significantly below the defined limit of 3.2. We recognize the importance of 2026 notes and remain committed to addressing the maturity in a timely and responsible manner. Due to Ukrainian capital control, export proceeds generated in Ukraine must be repatriated within 120-180 days, limiting our ability to use offshore cash for Eurobond repayment. While MHP can service its domestic loan obligations, NBO restrictions currently prevent principal repayment and limit foreign currency payment to non-resident entities on legacy intergroup loans. We continue to operate under a highly challenging environment due to the ongoing war, and we appreciate the continued support from our investors since February 2022. We are committed to maintaining open communication and constructive engagement and are keen to continue our fruitful cooperation going forward. I give the floor to Anastasiya.
Thank you very much, Victoria. Thank you for the presentation. I think this concludes the presentation from our side. Luis, please assist us with the Q&A session. Thank you.
Thank you very much. We will now be moving to the Q&A part of this call. If you'd like to ask a question, please press Star 2 on your phone. That is, Star 2 on your phone. If you're dialed in by the web, you can type your question in the box provided or request to ask a voice question. We will wait a few moments for the questions to come in. Okay, our first question is from Augusto Nivi from Macquarie Asset Management. Your line is now open. Please go ahead.
Hey, good morning. Thank you for taking my question. Can you give us some more color on the refinancing options that you're seeing for the 2026 bond? Any conversation with banks or other alternatives that you can have in order to refine that would be helpful for us to understand. The second one has to do with the working capital usage, especially in account receivables. You mentioned that you've seen that normalizing in the second quarter is something that you've seen in the month of April and most of May now. Thank you.
Yeah, thank you for your question. I will start from the second question. Yes, now the trade receivables are more stabilized. Yeah, and we have investment in raw capital significantly low, around $78 million in trade receivables. What is regarding our Eurobond 2026, as I noticed during the presentation, is a very, very important issue for us. Yes, and we understand, and we continue to work around this issue. At the same time, I would like to emphasize that, unfortunately, we have a National Bank and Bureau restriction, which unfortunately do not allow us to pay principal repayment. At the same time, yeah, we understand how important this issue is, and it is the main issue for MHP for 2025.
Okay, thank you. Our next question comes from Stella Cridge from Barclays. Your line is now open. Please go ahead.
Hi, Deira. Afternoon, both mentioned export, all of the updates. I wondered if I could just ask on the poultry prices. It looks like they strengthened a little quarter on quarter. I was wondering if you could just talk through what the trends are in both the local market and export market. That would be great. Secondly, in the last few weeks since you had the last results call, has there been any developments on the Spain acquisition front? Could you just run through again this $270 million equity that you refer to and the overall kind of size of funding that you expect to be needed for the acquisition? That would be great.
Regarding your question regarding the price, yes, as I told during the presentation, our cost of production increased significantly in the first quarter last year due to the increase significantly in corn and gas prices. That is why, yeah, in the first quarter, we increased our price. Compared to last year, it was increasing our average price more than 10% compared to the first quarter, around 5%, mostly due to the European price. We gradually increased price on domestic, is increasing price on domestic market because last year, yeah, we did not increase price. Cost increased more than 13%, and we gradually increased on local market, but very, very gradually. Regarding the second question.
Yeah, regarding the second question, unfortunately, yes, as I told in our previous conference call, we need to, for us, it's very important to receive a lot of permission, yeah, from different antitrust from seven countries. Until today, we received permission from four countries. Plus, we need to receive permission from the EU Commission. Yeah, now we're in process. Yeah. And regarding other questions, I told you during the presentation that we understand that we will close the transaction, attract acquisition finance, and internal funds.
That's superb. Many thanks for all that detail. What is exactly this $270 million? What does that refer to?
Yes, yes, you're right. Yeah, we paid for the equity $270 million. Yeah, dollars. Yeah, you're right.
Okay, for the equity component. Okay. Okay, thanks for clarifying that.
Thank you. Our next question is from Dimitri Ivanov from Jefferies. Your line is now open. Please go ahead.
Hello. Can you hear me?
Yes, we can hear you.
Yes, yes. Yeah, thank you very much for the presentation. It's very helpful. May I ask you about this UVESA acquisition once more? Apologies for my questions. Can you update us on this acquisition financing status? Because, as you mentioned just now, you'll use a mix of cash on hand and acquisition funding. Have you received any commitments from banks already? How is this progressing in terms of the numbers and etc.? If you could update us on the status of their funding with any commitments received, that would be much appreciated. Maybe one sub-question here. Do we have any condition precedent in this agreement, in SPA, that the closure of the deal is subject to getting the financing done by a specific date, for example, by September or October this year? This is my first question.
Yeah, thank you for your question. Maybe I did not catch your last question, but I understand your question, and I understand you're interested about acquisition finance. Yes, now we're in process. Yeah, we're in negotiation with the bank, but unfortunately, I cannot disclose for you this information. Yeah. We expect this is minimum 70% of total debt to attract the special financing. Yeah. Regarding the, yeah, please repeat the second your question.
Are there any kind of specific deadline for you to get this financing in this SPA agreement? For example, are there any deadlines, termination dates in the SPA by which you have to obtain this financing, basically? Or otherwise, it will be like this agreement will be terminated.
Yeah, no, we understand, yeah, because we need to receive, as I told previously, we need to receive all permission, regulatory permission. After that, during this few days and two weeks, we need to repay. We understand that, yeah, we will achieve and we will get our financing until this day.
Understood. Understood. My second question would be, there were some headlines about European countries potentially imposing pre-war quotas on Ukrainian products, including poultry. Can you maybe share any color? Do you think it might impact your export volumes to Europe this year? If you could share if it's a risk or concern for you, like reimposition of pre-war trade quotas that we saw on the headlines.
Yeah, you're completely right. Yes, until today, we don't have, yes, clear information. Anyway, we understand that the European Union will implement a quota regime. Unfortunately, not just regarding MHP and regarding all poultry companies in Ukraine and the companies who produce sugar and other agriculture produce, yes, unfortunately, for Ukraine, it would be implemented some quotas and some limitations. In general, it's not so good for countries, yeah, and Ukrainian producers. What is regarding MHP? Yes, we understand that this year, in 2025, we will export to the European Union less than previous. At the same time, we understand, and we always, during all our history, we always have the gold rules for our export: diversification, geography diversification. That is why we have other markets for exporting our product. Yeah, it is Canada, Canada, British, some minor regions.
Okay, in Europe, yes, yes, we will unfortunately export less.
Thank you very much. Can you remind us how much was exported to Europe last year? For us, just to understand the exposure.
Last year, it was approximately 1,030, approximately 1,025-1,030.
30, okay.
Last year.
Okay.
Yeah.
Okay. Okay, got it. Thank you very much. Yeah, that's all from me.
Thank you.
Thank you. Just a reminder, if you'd like to ask a question, please press Star 2 on your phone. That is, Star 2 on your phone. If you're dialed in by the web, you can type your question in the box provided or request to ask a voice question. We'll give a few more moments for any new questions to come in.
I can see that we do not have any further questions. Am I right?
Yes, we have text questions. Do you see that?
I think we can actually take those questions online. I mean, I can answer those questions later and directly to the person who raised those questions, to the people who raised those questions, if you do not mind.
Sounds great. Perfect. I'll let you conclude the call.
Yes. Thank you very much in this case. Thank you very much for the meeting. Of course, we remain at your disposal in case you have any further questions. Have a nice day. Bye-bye.
Thank you.
Thank you.
Bye.
Thank you and have a nice day.