Q2 2026 MHP SE Earnings Call
Speaker #1: And thank you for joining MHP's conference call covering Q2 and 6 months of the year. My name is Anastasiya, Investor Relations Director, and I'm joined today by Viktoriia Kapeliushna, CFO of MHP.
Speaker #1: Together we will present and discuss the company's operational and financial performance for the reporting period. Please note that today's discussion is based on the press release, financial statements, and investor presentation published earlier today.
Speaker #1: During the call, we may also discuss our outlook: strategic priorities and future plans. These statements are based on our current expectations, assumptions, and assessments of market conditions.
Speaker #1: And are therefore subject to risks and uncertainties. We encourage you to consider these factors when evaluating the information presented begin. We are on page number 3 of the presentation.
Speaker #1: Let me start with a brief overview of the macroeconomic environment in Ukraine. The operating environment remains challenging, but the economy continues to demonstrate a degree of resilience.
Speaker #1: In the second quarter of 2026, real GDP increased, insignificantly less than 1% year on year, and by less than 1% compared with the first quarter.
Speaker #1: This growth was achieved despite continued missile attacks on infrastructure and ongoing pressure on the energy system. For the full year, the National Bank of Ukraine currently expects GDP growth of around 2%.
Speaker #1: The outlook continues to reflect significant infrastructure damage, electricity constraints, and the impact on higher energy prices. Turning to inflation: quarter-on-quarter CPI moderated to approximately 2.2% in the second quarter, compared with 3.4% in the first quarter.
Speaker #1: According to the latest NBU forecast, average annual inflation is expected to reach 9.4%, with a further gradual decline projected over the following 2 years.
Speaker #1: On foreign exchange, the grivna has continued to weaken during the year. The exchange rate moved to approximately 44.5 grivna per 1 US dollar, reflecting among the other factors damage to the energy sector and the broader external environment.
Speaker #1: As before, the NBU continues to play an important role in managing foreign exchange market imbalances. Finally, looking at agriculture, the 2025 harvest demonstrated continued resilience of the Ukrainian agricultural sector.
Speaker #1: Total grain production reached approximately 63.5 million tons, I'm sorry, I'm talking about 2026, of course, and 63.5 million tons is up by 13% year on year.
Speaker #1: Wheat production was around 23 million tons, and corn approximately 31 million tons. At the same time, oilseed production was weaker, with sunflower production declining by 7% to approximately 10 million tons.
Speaker #1: Overall, the macro environment remains demanding, particularly from infrastructure energy and foreign exchange perspective, while economic activity and the agricultural sector continue to operate with a significant degree of resilience.
Speaker #1: Let us move on slide number 4. It's about the financial overview. So, for the first 6 months of 2026, revenue of the company increased by 32% year on year to around 2 billion 161 million dollars.
Speaker #1: The main driver of this increase was the consolidation of UVESA, within our operating segment, European operating segment. Gross profit increased by 8% to 397 million dollars, the increase was more moderate than the gross in revenue, as the positive contribution from agriculture and UVESA was partly offset by a weaker performance in the poultry segment.
Speaker #1: Operating profit decreased by 17% year on year. Adjusted EBITDA, net of FRS 16, remained broadly stable at 232 million US dollars, compared to 236 million US dollars in the first half of 2025.
Speaker #1: The corresponding EBITDA margin declined from 14% to 11%. At the net income level, the group recorded a loss of 57 million dollars, compared with the profit of 75 million dollars.
Speaker #1: Sorry, 75 million exchange loss. In the current period, compared with the gain, in the prior year period. So the key message for the first half is that strong revenue growth, including the contribution from UVESA, supported broadly stable growth EBITDA, while profitability was affected by weaker poultry performance.
Speaker #1: Higher operating expenses and foreign exchange movements. At the same time, the second quarter showed a meaningful sequential improvement in operating performance. Let us move on slide number 5.
Speaker #1: And let's look at the financial results by segment. Starting with revenue mix, here, poultry and related operations, remained our largest segment. Generating 976 million US dollars, or approximately 45% of group revenue.
Speaker #1: The European operating segment contributed 738 million US dollars, representing approximately 34% of group revenue. The EBITDA contribution, however, was quite different from the revenue mix.
Speaker #1: Agriculture was the largest contributor, to first half adjusted EBITDA, net of FRS 16, generating 149 million US dollars. The European operating segment contributed 86 million dollars, while poultry and related operations contributed 49 million dollars and vegetable oils only 9 million dollars.
Speaker #1: Looking at the EBITDA bridge versus the first half of 2025, group adjusted EBITDA, net of FRS 16, moved from 236 million dollars to 232 million dollars, meaning it remained stable.
Speaker #1: The largest negative movement came from poultry and related operations, with a reduction of 118 million US dollars. This reflects lower meat prices, lower sales volumes, and high costs.
Speaker #1: This decline was largely compensated by stronger performance in other businesses of the group. I think we are ready now to move to the segment overview.
Speaker #1: And I think Viktoriia we can move on.
Speaker #2: Thank you, Anastasiya. Good afternoon, everyone. Let's turn to poultry and related operations segment performance, slide number 6. Following the softer pricing environment, we experienced in Q1, poultry export price showed a partially recovery through Q2 this year.
Speaker #2: So the segment's results still reflected the path throughout of the weaker price based only in the half. Both poultry meat and processed meat volumes grew year on year and quarter on quarter, domestic sales volume remained relatively low, with growing driven by high export sales to European market.
Speaker #2: Processed meat volumes continued to grow, supported by our ongoing shift toward higher value-added product. Revenue for Q2 increased by 10% year on year and by 15% quarter on quarter, to 523 million dollars, and for 6 months increased by 9% year on year to 976 million driven by higher sales of by-product from poultry production, as well as energy products such as biomethane.
Speaker #2: Average selling price for poultry meat decreased year on year in both periods, while showing a partial recovery on quarter on quarter basis. Price for processed meat continued on consistent upward trend.
Speaker #2: Gross profit declined to 63 million in Q2, down by 48 year on year and to 123 million for 6 months, down 44 year on year, primarily reflected lower meat price and higher production cost, together with significant effect of IFS 41 biological assets revaluation loss compared to the gain in the prior year period.
Speaker #2: Adjusted EBITDA, net FRS 16, followed the same trend, down 65 year on year in Q2 to 30 million and down 70 for 6 months to 49 million, while improving 58 quarter on quarter as pricing stabilized.
Speaker #2: I would like also to note that following revenue attack on Black Sea port and export infrastructure, the group managed to adjust its export delivery rules for poultry product, there is no significant effect on export logistic and volume to EU and UK, however it remained challenging and take longer and more expensive to export to Middle East and Africa.
Speaker #2: Looking ahead, poultry export price reached the low point in Q1 this year and have shown gradual recoveries since through we don't expect a quick return to the peak level seen during the Q2 and Q3 last year.
Speaker #2: Poultry export price in EU remain weak. At the same time, should the disruption to Black Sea grain logistic continue to wait on regional grain prices, this could help offset pressure on the segment production cost.
Speaker #2: In the second half of this year, turning to our vegetable oil segment, slide number 7. Revenue in Q2 increased by 38% year on year and by 25% quarter on quarter to 145 million and for 6 months increased by 70% year on year to 261 million due to the higher sunflower and soybean oil prices together with higher sunflower oil sales volume.
Speaker #2: Sunflower oil sales volume continued to grow, both year on year and quarter on quarter, supported by the launch and new sunflower extraction line which increased oil yield and expanded overall processing capacity.
Speaker #2: Soybean oil sales volume remained low year on year through stable on this basis, mainly due to the high internal consumption of soybean oil in feed recipes.
Speaker #2: Gross profit increased in Q2 and 6 months driven by higher sales volume and improved margin in sunflower oil. Adjusted EBITDA followed the same trend, increased to 7 million in Q2 and 10 million for 6 months.
Speaker #2: Looking ahead, the segment profitability will remain highly dependent on the availability of export route from Ukraine port, which has already had a significant effect on price for our key inputs, sunflower seed and soybean.
Speaker #2: Should the situation persist, we see potential for substantial improvement in segment profitability through an increasing of processing volume and better margin due to the low price of oil crops in Ukraine.
Speaker #2: As of today, despite close the port of Black Sea in Ukraine, MHP established a number of ways and roads to export vegetable oils to partners in different parts of the world.
Speaker #2: Let's move to slide number 8, agriculture operations. Revenue for 6 months remained broadly stable year on year, 186 million dollars, gross profit more double 141 million, due to the higher effect of FRS 41 biological assets revaluation gain compared to the last year.
Speaker #2: Adjusted EBITDA following the same trend, more than double. Such improvement was a result of significantly improved market price for both grains and oilseed at June and July this year.
Speaker #2: Winter crops harvested is complete, with yield 6.7 ton per hectare for the wheat and 3.8 ton per hectare for rapeseed. Harvesting of spring crops is underway.
Speaker #2: With yield expected broadly in line with last year. Looking ahead, however, I should note that since July this year, prices for grains and oilseeds have declined in Ukraine, reflecting the same export capacity constraints I referenced earlier, driven by logistic cost increase.
Speaker #2: Should this trend persist, it could be weight of EBITDA in the segment thought we would expect this to be larger offset by low production cost in our poultry and vegetable oil segment starting mainly from Q4.
Speaker #2: Given those segment, direct exposure to grain and oilseed input cost. Let's proceed to slide number 9. Several words about our European operating segment. Revenue for Q2 more than double year on year to 384 million, an increased 8% quarter on quarter, while 6 months revenue more than double year on year to 738 million, driven by consolidation of USA and supported by higher process meat sales volumes and prices.
Speaker #2: Gross profit increased by 26% year on year, to in Q2 to 59 million, and 57 for 6 months to 124 million, as higher revenue outpaces in the increase in cost, further supported by positive contributions from the USA acquisition and positive revaluation of source and peak following the price recovery on Spanish market.
Speaker #2: EBITDA followed the similar trend, up 47% year on year in Q2 to 44 million and 76 for 6 months to 86 million. Looking ahead to the reminder of 2026, we expect price for poultry and process meat in European operating segment to remain broadly stable, with sales volume continue to grow.
Speaker #2: This is expected to support steady growth in EBITDA of the courses of the year. Slide number 10. A few words about our cash flow, debt, and liquidity.
Speaker #2: Operating cash flow for 6 months decreased year on year driven by low cash earning, mainly reflected negative trend in poultry meat prices. Working capital represented an investment 107 in 6 months, including seasonal investment in crops field, partially offset by consumption of agricultural produce, harvest in 2025.
Speaker #2: CAPEX decreased to 93 million for 6 months, with capital expenditure focused mainly on key strategies area including the maintenance and modernization of existing facility.
Speaker #2: I would like also note that on 16 June 2026, our Spanish subsidiary USA acquired 100% of PAIAN as a Spanish poultry company, for total consideration 28 million, the acquisition generate goodwill 17 million, and accounting remain provision of 30 June 2026.
Speaker #2: The transaction strengths our position in the Spanish poultry market. Regarding debt, the shift toward long-term debt reflected this year's refinancing of the 550 million senior notes, 2026, with new senior notes due to 2029, cash and cash equivalents stood at 348 million, by the end of the first half of the year, the group complied with all bank covenants of the 30 June of 2026, with the acquisition leverage ratio reflecting USA on full perform basis of 2.8 to 1, comfortable below the 3.0.
Speaker #2: Now I give the floor to Anastasiya.
Speaker #1: Thank you very much, Victoria. Before we conclude the presentation, let me briefly summarize the current operating environment. The first half of 2026 demonstrated the resilience of MHP's diversified business model, with stronger contributions from agriculture, vegetable oil, and European operating segment helping to offset pressure in Ukrainian poultry.
Speaker #1: At the same time, the operating environment in Ukraine remains highly challenging, recent attacks on Black Sea ports, as Victoria commented already, commercial shipping and logistic infrastructure have increased freight cost, disrupted loading schedules, and reduced the reliability of export routes.
Speaker #1: As of today, the ports are closed, as you understand, a number of the logistic group's logistics warehouses were also destroyed, with estimated losses currently at approximately 6.5 million dollars.
Speaker #1: As we approach the winter period, we remain particularly focused on the potential for further disruption to energy infrastructure, logistics, and export capacity. At the same time, MHP is well positioned to meet energy disruption challenges, taking into account long-term CAPEX program since 2022.
Speaker #1: The situation remains fluid, and the visibility on the duration and ultimate impact of these disruptions is limited. At the same time, we continue to develop our European assets in line with the plan, pertaining up to a continuous to demonstrate solid operational performance, and development while we integration of USA is progressing according to plan.
Speaker #1: We are already seeing improvements in operational efficiency of USA, and continue to focus on realizing the benefits of the enlarged European platform. This is consistent with the strong contribution from the European operating segment during the first half of the year.
Speaker #1: Overall, our priority remains to preserve resilience and financial flexibility in Ukraine, while continuing the disciplined development of our European operations. We remain focused on maintaining resilience across the group, while adapting our operations to the changing environment.
Speaker #1: Thank you very much for your attention, and we would now be pleased to take your questions.
Speaker #3: Thank you. Thank you very much for the presentation. We'll now move to the question and answer section. Please note that we can take the voice questions during the call, and after the call, MHP IR team will get back to you on your written questions.
Speaker #3: If you would like to ask a question, please press star 2 on your phone and wait to be prompted. If you are connected via the web, you can also request to ask a voice question or send your question as a text.
Speaker #3: Our first voice question comes from Stella Cridge from Barclays. Stella, please go ahead. Your line is now open.
Speaker #4: Thank you, and thanks for all the updates in the really today, and for talking through all the complexities of how the port closure impacts the business.
Speaker #4: I have a couple of questions, if that's okay. I was just wondering on a couple of the follow-ups on redirecting the goods. Could you just give us some idea of what the alternative routes would be, for exporting poultry to Middle East or Africa, or what the alternative routes are for the vegetable oils?
Speaker #4: And for the agricultural segment, I wanted to ask do you think you can still sell all the volumes, or might there be some kind of accumulation of inventory?
Speaker #4: And maybe if I could start with that, I'll follow up with the other question.
Speaker #2: As Stella, thank you for your question. Regarding the intuition after the close, Black Sea port, regarding poultry, as I told that we have the completely different logistic route for Miena and for Africa.
Speaker #2: We have two different ways. One of them through Klaipėda, and the other through Constanța. Yeah. And yeah, we don't see any big problem with this, just anyway, it is a problem because logistic cost increase.
Speaker #2: Just cost of logistic cost. Regarding oil, because you know that every month we produce around 50,000 of oil different sunflower and soy oil, and before the situation, we exported directly to Europe, to Italian, our client only 10, 15 percent.
Speaker #2: Now we exported to Europe directly through West Border, around 50 percent. And the rest, we exported through the same through Constanța, yeah, this way.
Speaker #2: Anyway, and yeah, it is, yeah, we try to find different way. It is the more optimal for us. Regarding grain, yeah, it is the more difficult, the most difficult issue.
Speaker #2: No, to be honest, regarding rapes, it is, we exported almost all rapes to Europe, which we did previously, directly without any sea. Yeah, but at the same time, regarding wheat and corn is the biggest is a big problem because logistic cost today is a crazy figures.
Speaker #2: But at the same time, you know that we consume internally almost 95 percent of total corn, yeah, and that is why we will consume this corn.
Speaker #2: For food. And just now we are working how to exporting 50 percent of our wheat. Just approximately 150,000 tons. Mostly the same, we export through Europe.
Speaker #2: No. Thank you.
Speaker #4: So for many, thanks for those additional details. If I could perhaps ask on a different topic, with the Greece acquisition, so you saw leverage kind of tick up, quarter on quarter.
Speaker #4: Do you think you still have the headroom within the covenants to go ahead with this acquisition, or how might you address that issue?
Speaker #2: No, first of all, you know that we have governance regarding our bond and all our debt. It is in current governance. Yeah, you know that our governance free.
Speaker #2: Yeah, as we have just, we don't have any problem with the fall because it is not maintenance governance. It is just issue regarding to take new loans.
Speaker #2: Okay, we understand how difficult current situation, especially why we have so difficult situation, because first of all, with business, the situation regarding business in Ukraine, yeah, because financial result in Ukraine I am sure this year, unfortunately, will be would be one of the lowest during the last 10 or maybe even 15 years, due to the current situation.
Speaker #2: But at the same time, we told a lot of time all investors, bond holders, yeah, for MHP is very important to provide expansion outside in Ukraine, especially in Europe.
Speaker #2: First of all, is very important the same for our stability. Because unfortunately, yes, environment in Ukraine very unpredictable. Yeah. Okay. No,
Speaker #4: Thank you for that, Victoria. That's very helpful as well. And maybe if you don't mind.
Speaker #2: We will find, we will try to find.
Speaker #3: Apologies, it seems we have some problem with Victoria connection. Victoria, we cannot hear you.
Speaker #2: Sorry. Do you hear me?
Speaker #3: Yes, yes, we can hear you now.
Speaker #2: Now do you hear me, yeah? Do you hear me?
Speaker #3: Yes, yes. ahead.
Speaker #2: Yeah?
Speaker #3: Yes, yes.
Speaker #2: Okay. I answered for question. Again? Yeah? Because I don't know when you lost.
Speaker #4: We got to when you said it was important for stability.
Speaker #2: Okay. No, almost. Yeah. No. It might be better next question. Sorry.
Speaker #4: Okay. Maybe I'll just do one final one, and then I will go back in the queue. The final one was.
Speaker #2: No, no, no, no. Yeah. you did not.
Speaker #4: We didn't hear the full answer. We got up to when you said. You spent time with bondholders is very important for stability. And then you said you'll try to work on something, but we just missed the last bit.
Speaker #2: yes. No, okay, okay. It is just my few last sentence. Yeah. Okay. Is it important to provide, as I told, is important to provide our expansion?
Speaker #2: And no, we will find, we will try to find some solution for this, okay? Because expansion for us is very, very important.
Speaker #4: Thank you for that. That's all very clear. Thanks, Frances.
Speaker #2: Okay.
Speaker #4: Yeah. So one just final one, if I can squeeze it in. I just wanted to ask about this short-term debt. So you have around about 600 million in short-term debt.
Speaker #4: I was just wondering how much of that you think you can roll, how much you need to work on for the refinancing. And if you do need working capital, for grains, for example, do you think you can get that from local banks, for instance?
Speaker #2: Yeah. Regarding working capital, yes, we have short-term debt mostly from local banks. It is the total short-term debt around 350. Yeah, million dollars. But due to the current situation, yes, we have some issues regarding our agro segment.
Speaker #2: Yeah, but at the same time, we try to provide some optimization how is possible in working capital, in other our direction.
Speaker #4: That's clear.
Speaker #2: This is why our expectation even for this year, very difficult year. Yeah, very difficult year. And our expectation about investment in working capital, approximately 20, 30 million.
Speaker #4: Thank you. That's clear. And you know the other part of the short-term debt that's not from the local banks? Is that some refinancing you need to work on, or what specifically do you have coming to?
Speaker #2: Yeah. Please clarify your question about what? I'm looking for what?
Speaker #4: So of the 600 million in short-term debt, so you have the portion to local banks. The other debt that's coming due in the short term that you would need to refinance, is there some things you're working on?
Speaker #2: No, no. Yes. I told you, yeah, because I don't know where you find 600, but I know that next year we need to repaid, I find approximately 150, 100, no, 150 million.
Speaker #2: Just and some debt from our European companies around 30 million.
Speaker #4: Okay. Okay. Thank you for that. I'll go back in the queue.
Speaker #3: Thank you. Thank you very much. Our next voice question comes from Gustavo Campos from Jefferies. Gustavo, please go ahead. Your line is now open.
Speaker #5: Hello. Thank you very much for the presentation. And your updates are very helpful. Yeah, a few questions from my side. If you could please elaborate a bit if I know that the situation is very fluid and you know a lot can still change by the end of the year, but could you provide an update in your EBITDA and Capex guidance for the year?
Speaker #5: Maybe some expectations on working capital, dynamics, all of that would be very helpful. I much appreciate it. Thank you.
Speaker #2: Thank you so much for your question. Yeah, thank you for your understanding how difficult to say our forecast about EBITDA. Yeah, this year, especially due to the current situation, we understand this year, unfortunately, we will have level of EBITDA loss and we expected even and we had in our budget, but current our understanding approximately 420, 450.
Speaker #2: Yeah, no. We will see. What we do regarding. Capex, we think they may this year we completely stop all our new Capex in Ukraine.
Speaker #2: Unfortunately, some projects we started, it is not new project, it's the project which we started in 2025. That is why total our Capex for full year, it would be around 220, 230.
Speaker #2: Yeah. Include maintenance Capex. You understand that level of maintenance Capex for our businesses is the biggest approximately Ukraine plus our European perimeter our maintenance around 120, 140.
Speaker #2: Regarding working capital, yes, we try to provide optimization especially working capital, trade receivable, what is the possible, yeah, and we suppose that investment in working capital this year would be around 20, 30 million dollars.
Speaker #2: Thank you.
Speaker #5: Understood. Many thanks. If I may just quickly follow up here, just to clarify. So in the first quarter, you printed around 80 million dollars of EBITDA.
Speaker #5: In the second, it's 30 million dollars. So if you are guiding for roughly 430 million dollars, it seems that you would be expecting a material uptick in EBITDA for the second half of 2026.
Speaker #5: Is that correct? And would you please explain some of these drivers for this recovery? Thank you.
Speaker #2: Yeah. We understand, as I told, we understand that price of meat now since the second quarter, and especially in now we see higher than especially in the first quarter.
Speaker #2: One of the driver for our price. And I thought our expectation better financial result in oil crushing businesses. Yeah, this is maybe two driver for this result.
Speaker #2: And European operations, European operations in the second. Usually and how we see this second half of the year is higher than the first half of the year.
Speaker #2: Is a higher volumes and we see the price molestabilize.
Speaker #5: Understood. Yeah, apologies for my mistake. It's actually 153 million dollars of adjusted EBITDA that you printed on the second quarter. Yeah, so I see that results are still going to be more or less not too different from the first half of 2026.
Speaker #5: And ultimately, you are expected not material working capital outflows. Is that correct?
Speaker #2: Yes, yes, yes, correct. Yeah.
Speaker #5: Okay. Yeah, thank you very much. Another follow-up question. Is the 6.5 million dollars of logistics impact that were like some asset damage, is that the only asset damage that was incurred?
Speaker #5: Year to date only 6.5 million dollars? Or is there some other impact that's not included in this number?
Speaker #2: No, until today, yes, it is just inventories. On cost-based. Yes, is our meat. Calculate on cost-based. Yeah. Yeah, just inventory because yeah. You're right.
Speaker #2: No, it's very difficult to predict what we received to what we will see tomorrow. But until today, yes.
Speaker #5: Yes, yes. Absolutely. And lastly, could you please just quantify some estimate of EBITDA margin impact of the higher logistical costs that you are incurring since you cannot no longer rely on the Odessa ports?
Speaker #5: I'm just trying to understand how much more expensive costs could be under this new status quo. That would be my last question. Thanks a lot for the details.
Speaker #2: Regarding both, yeah, regarding only poetry segment, it would be approximately 20 million. Approximately 20 million, increasing logistic cost.
Speaker #5: Understood. And for the agricultural segment, it's.
Speaker #2: No, for agriculture segment, yeah, it's agriculture segment because we are finding because we are mostly corn, yeah, we consume internally. Regarding grape seed, yeah, the same road.
Speaker #2: Yeah. And previously because, yeah, logistic cost to Europe, did not increase so significant, just increase in line with the increasing price of fuel, no, it is not just increase for MHP for everybody in the world.
Speaker #2: That is no problem. Regarding poetry, yeah. But if you speak about, for example, how increased logistic cost for oil, it is a crisis approximately by $80 per ton.
Speaker #2: $80 per ton.
Speaker #5: And understood, understood. That's very helpful. And those higher logistical costs, are you also considering higher rail costs because there was higher increase from tariff by Ukraine and railways as well?
Speaker #5: So I was wondering if that's also embedded in the 20 million dollars that you mentioned.
Speaker #2: No, no, no, no. 20 million dollars because you understand when we previous when we sent our product by from Black Sea through Black Sea, it was one tariff.
Speaker #2: Now we sell our product through Klype and through Constance, it is a rail cost to this city and is the higher fract. Especially from Klype.
Speaker #5: Understood, understood. That's all for me. Thanks a lot for the answers. Very helpful.
Speaker #2: Yes, thank you.
Speaker #5: Thank you. Thank you very much. Our next voice question comes from Yevhen Solovey from EBRD. Please go ahead, your line is now open.
Speaker #4: Thank you for a great presentation. I would like to have a question related to the oil segment. Oil crushing segment, as you see, you said just that there is huge increase in prices per export of oil, right?
Speaker #4: But we see that huge decrease in sunflower seeds prices. Do you expect maybe increasing working capital for the need for oil crushing in order to kind of make inventory of sunflower seeds at a lower prices?
Speaker #2: Yeah, thank you for your question. First of all, you need to understand that current price on sunflower seed significantly lower, approximately by 30% lower that price of sunflower seed last year.
Speaker #2: And that is why you understand, yeah, by the end of last year, we had approximately 200,000 ton of sunflower seed in our stock. With price higher 650, today it would be less.
Speaker #2: We need to invest less amount money, less money because current price 450. You understand? But at the same time, you completely the right road is longer.
Speaker #2: Yeah. And we need to investment working capital in trade receivables. business crushing business, I think it would be very compensate, yeah, low investment in our stock.
Speaker #2: We'll compensate either high investment in trade receivables and goods on transit.
Speaker #4: Can I follow up on that? Because as you always said that you see oil crushing is more like a segment which provides feed for the poultry, right?
Speaker #4: With this maybe improvement in margins, generally crushing, do you expect to increase utilization of your processing capacity to the maximum level and maybe?
Speaker #2: Yeah, you completely right. Yeah, yeah. As I told previously, this year we launch extraction, yeah, and last year we produced approximately 25,000 sunflower oil.
Speaker #2: Now we produce around 50,000 sunflower oil per month. Because they yield of oil, because now we have extraction is the high. Because previous just press.
Speaker #2: And what's your question about what?
Speaker #4: Yeah, yeah, utilization. Will you achieve almost 100%?
Speaker #2: Yeah, yes. And now we utilize not just higher what I would like to emphasize that not just higher level of utilization this capacity. And we launch new capacity, extraction plan.
Speaker #4: Yeah, okay. Also, I would like to maybe follow up on poultry. That in the second half of the year, do you expect generally poultry to improve a little bit or it would be basically on par with what we see in the first half of the year?
Speaker #2: No, no, we improve it. As I told, yeah, thank you for your question. Yes, improve it because price, especially price right now, higher than price in the first quarter.
Speaker #2: Second, very important issues that since the first quarter, cost of production would be slightly lower of chicken. Why? Because protein from crushing business, cost of protein will be low and price of corn, yeah, on Ukraine will be low compared to the, yeah, in the first half of the year.
Speaker #4: So you expect that from the third quarter, right?
Speaker #2: No, to be honest, I expect from the first of September, maybe 15th of September. That is why it better to say I expect from fourth quarter, fourth quarter.
Speaker #4: Okay. And also, final question about agriculture segment. As we saw in the first half of the year, agriculture was a big driver. So basically, we should expect in the second half of the year, huge reversal and basically what's your outlook generally?
Speaker #2: You completely right. Yeah, you completely right. Because accordingly I first entered, yeah, I standard to be recognized our profit base of price which we had in Ukraine market, Ukrainian market price in June, July.
Speaker #2: Yeah, it would completely other life. Current price, our expectation, yes, no, regarding grapes, nothing changes. But regarding corn, yes, it would be low. Yeah.
Speaker #4: So basically, it would be almost elimination of all those 41 standard adjustments that you make. Basically.
Speaker #2: Yeah. It would be adjustment. Yeah, you're right. Thank you.
Speaker #4: Thank you.
Speaker #5: Okay, thank you. Thank you very much. We are moving to the next voice question that comes from Vidhi Veera from Goldman Sachs. Please go ahead, your line is now open.
Speaker #6: Hi, thank you for the presentation. I just wanted to better understand the dynamic between cost of grain and poultry segment and the intersegment profitability.
Speaker #6: How much of the consumption of grain internally for poultry business, do you produce on your own and versus you buying outside? Why I'm asking that is right now grain prices in Ukraine, much lower than outside but if you only need your own grain, the cost based doesn't improve much, right?
Speaker #6: Because you're spending money on your own grain, etc. So how do we think about two second half profitability under these two dynamics, grain prices going lower, and poultry prices sort of remaining stable or improving?
Speaker #2: Yeah, I think if your question, yeah, regarding consumption of grain in poultry segment, yeah, 90% of corn which we produce in company we consume internally.
Speaker #2: But what is very important to understand that just in fourth quarter, because now we are gathering corn, yeah, and we started to put in further new corn with new low price since the 20th of September only.
Speaker #2: And we will see some effect only in the fourth quarter and during the nine months, 2027. We will have positive effect in our cost of production chicken, yeah, but this year we will have low profitability in our grain segment.
Speaker #2: You understand, yeah? And the same with wheat, but wheat we gathered with not a lot, 50% of wheat we consume the same internally. And we will have benefit in our cost of production of chicken.
Speaker #2: Yeah, the same part of them in the fourth quarter, and the three quarters next year. That is why we understand our even price of chicken will continue the same level.
Speaker #2: We will have benefit in the we will have better financial result in the fourth quarter and during the nine months, 2027.
Speaker #6: Got it, got it. But overall, that'll be offset, right, on a company level. That will be offset by the decline in margin in the grain growing.
Speaker #6: Operation.
Speaker #2: Yes, yes. But it would different year, different financial year. Just, yeah, just one force in 2026 and three force in next year.
Speaker #6: Okay, got it. And just one more thing on green growing. If the logistic situation is to remain as challenged as it is today, will it yet be possible to continue to export as you have historically the wheat and corn, or would there be a chance that the company may choose not to export and sort of to keep it given logistic costs are very high?
Speaker #2: Yeah, no, yeah, because you know that price of corn increased significantly in Europe, significantly increased. But current logistic cost to Europe approximately is a crazy figure.
Speaker #2: It's approximately I know that some company now is exporting. Yes. But it would be very difficult because but in generally, yeah, Ukraine every year exported approximately 20 million tons of corn.
Speaker #2: It would be unrealistic this year. No, if our Black Sea open. No, base of currency situation. I know that our business has very good level and characteristic of adaptation.
Speaker #2: We will see. No, business Ukrainian business, not MHP. It is not very important for MHP because we consume internally. But in general, thank you.
Speaker #6: Thank you. Thank you. And sorry, just one last one from my side is the European business. We see margins coming down a bit versus previous years, where it had reached double digits, 12, 13 percent, and now again it's come down to single digit.
Speaker #6: What's driving this? Is it the acquisition, which has diluted, and what is the forward-looking guidance for European business margin?
Speaker #2: Yeah, you completely right. If you look at company, yes, current profitability in US, no, even not current 2025, it was less than 10. It was approximately 8.
Speaker #2: Our target 15%. And Perutnina today has profitability BDA margin around 15%. This year, I'm sure that in USA we will have double digit. But not 15 because you know that we have the big issues regarding price of pork.
Speaker #2: Regarding poultry, we see the very good result in poultry. We significantly increase our profitability in poultry. But unfortunately, we have yes, very how to say, bad result in pork due to the collapse with pork pricing space.
Speaker #2: But our target anyway, our target and we understand how we will achieve 15% EBITDA margin in our poultry business in Europe.
Speaker #6: Thank you. Thank you.
Speaker #2: Thank you.
Speaker #1: Okay, thank you. Thank you very much. Just a quick reminder, if you would like to ask a voice question and you're connected via the phone, please press star two on your phone, keypad, and wait for a name to be prompted.
Speaker #1: If you're connected via the web, you can also request to ask a voice question text questions from web participants will be addressed by the IR team after the call.
Speaker #1: I'll just wait a moment or so for any additional question to come in.
Speaker #3: Rafael, thank you very much. Thank you for the update. The investors bondholders stakeholders and partners, thank you very much for the participation at the call.
Speaker #3: We were glad to hear you and your questions. As Rafael mentioned, we can proceed with answering your questions please use our email addresses and reach us as you know.
