RNS Number : 2469L
MHP SE
09 September 2021
 

 

 

 

 

                                                                MHP SE AND ITS SUBSIDIARIES

Interim condensed consolidated Financial Statements

 

                                                                As of and for the six-month period ended 30 June 2021

 

 

 

 

 

 

 

 

 

CONTENTS

 

STATEMENT OF MEMBERS OF THE BOARD OF DIRECTORS................................................................. 3

MANAGEMENT REPORT............................................................................................................................... 4

REVIEW REPORT OF INTERIM condensed consolidated FINANCIAL INFORMATION...................6

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE SIX-MONTH PERIOD ENDED 30 JUNE 2021

INTERIM CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME.............................................................................................................................................................. 7

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION....................................... 9

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY...................................... 10

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS................................................... 12

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS................................. 14

1. Corporate information.................................................................................................................................. 14

2. Basis of preparation and accounting policies............................................................................................... 15

3. Changes in the group structure.................................................................................................................... 16

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

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

6. Profit for the period....................................................................................................................................... 20

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

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

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

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

11.  Share capital.............................................................................................................................................. 21

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........................................................................................................................... 28

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 2021 to
30 June 20
21 that are presented on pages 7 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 as a whole, and

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

 

 

8 September 2021

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                                                                                                                   Philip J Wilkinson

Director                                                                                                                   Christakis Taoushanis

 

 

 

MANAGEMENT REPORT

Key financial highlights

During the six-month period ended 30 June 2021 consolidated revenue increased by 14% to USD 988,575 thousand, compared to USD 867,448 thousand for the six-month period ended 30 June 2020. The increase was mainly attributable to higher export and domestic prices as well as growth in export volume of chicken meat sold. Export sales for the six-month period ended 30 June 2021 constituted 51% of total revenue and amounted to USD 501,564 thousand, compared to USD 452,721 thousand, and 52% of total revenue for the six-month period ended 30 June 2020. The increase in export revenue was mainly attributable to higher prices and volume of chicken meat sold.

Gross profit increased by 63% to USD 358,085 thousand for the six-month period ended
30 June 2021 compared to USD 219,014 thousand for the six-month period ended 30 June 2020.
The increase was driven mainly by higher returns earned by the grain growing segment due to increase in grain prices.

Operating profit increased by 85% to USD 255,154 thousand for the six-month period ended 30 June 2021 compared to USD 138,041 thousand for the six-month period ended 30 June 2020.

Profit from continuing operations for the six-month period ended 30 June 2021 amounted to USD 232,306  thousand, compared to loss of USD 60,629 thousand for the six-month period ended 30 June 2020. The improvement reflects the increase in operating profit as well as appreciation of the Ukrainian Hryvnia against US Dollar and EURO, which resulted in a foreign exchange gain of USD 50,503 thousand for the six-month period ended 30 June 2021 compared to a foreign exchange loss of USD 129,472 thousand for the six-month period ended 30 June 2020.

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 2021.

Related parties

During the six-month periods ended 30 June 2021 and 30 June 2020 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

At the extraordinary general meeting, which was held on 28 April 2021, the Shareholders of MHP SE have approved payment of an annual dividend of USD 0.2803 per share, equivalent to USD 30,000 thousand to shareholders on the register as of 7 May 2021. As at 30 June 2021 dividends were fully paid to shareholders.

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. The directors do not consider that the principal risks and uncertainties have changed since the publication of the annual report for the year ended 31 December 2020. A detailed explanation of the risks, and how the Group seeks to mitigate them, can be found on pages 154 to 157 of the annual report which is available at www.mhp.com.cy.

In 2020 the new COVID-19 coronavirus 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.

 

 

 

 

 

 

 

 

Risks and uncertainties (continued)

COVID-19 had an adverse impact on 2020 earnings, mainly because of its impact on prices and export volumes as many global competitors were experiencing reduced demand and resulting excess capacity. At the end of 2020 and in 1H 2021 the situation stabilized temporarily, although it still could negatively impact the remainder of 2021. These challenges could increase our operating costs and negatively impact our volumes. Management cannot currently predict the impact that COVID-19 may have on short and long-term demand, as it will depend on, among other things, the severity and duration of the COVID-19 crisis.

Management has concluded that COVID-19 is unlikely to have a material impact on MHP's business operations. The Company's liquidity is expected to be adequate to continue operations and meet obligations as they become due in the foreseeable future.

 

 

8 September 2021

 

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 7 to 30, which comprise the interim condensed consolidated statement of financial position as at 30 June 2021 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 are not prepared in all material respects in accordance with International Financial Reporting Standard IAS 34 Interim Financial Reporting as adopted by the European Union.

 

 

 

 

 

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

8 September 2021

 

 

 

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

for the six-month period ended 30 June 2021

(in thousands of US dollars, unless otherwise indicated)

 

 

 

Six-month period
ended 30 June

 

Three-month period
ended 30 June

 

Notes

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

 

Revenue

4, 5

 988,575

 

 867,448

 

 541,566

 

 424,736

Net change in fair value of biological assets and agricultural produce

4

 125,326

 

 46,329

 

 146,330

 

 43,286

Cost of sales

 

(755,816)

 

(694,763)

 

(395,632)

 

(340,881)

Gross profit

6

 358,085

 

 219,014

 

 292,264

 

 127,141

 

 

 

 

 

 

 

 

 

Selling, general and administrative expenses

 

(105,396)

 

(88,269)

 

(57,202)

 

(42,862)

Other operating income

 

 7,313

 

9,579

 

 5,938

 

7,635

Other operating expenses

 

(4,848)

 

(2,283)

 

(1,843)

 

 (884)

Operating profit

6

 255,154

 

 138,041

 

 239,157

 

 91,030

 

 

 

 

 

 

 

 

 

Finance income

 

 6,307

 

 7,749

 

 3,184

 

 3,429

Finance costs

12, 13

(71,766)

 

(73,036)

 

(36,830)

 

(35,740)

Foreign exchange gain/(loss), net

 

 50,503

 

(129,472)

 

 30,607

 

 52,479

Other (expenses)/income, net

 

(73)

 

(5,208)

 

 54

 

(1,744)

Profit/(Loss) before tax

 

 240,125

 

(61,926)

 

 236,172

 

 109,454

Income tax (expenses)/benefit

 

(7,819)

 

 1,297

 

(4,738)

 

 2,530

Profit/(Loss) for the period from continuing operations

6

 232,306

 

(60,629)

 

 231,434

 

 111,984

Discontinued operations

 

 

 

 

 

 

 

 

Profit/(loss) for the year from discontinued operations

 

 179

 

(1,482)

 

 179

 

 -

Profit/(Loss) for the period

 

 232,485

 

(62,111)

 

 231,613

 

 111,984

 

 

The accompanying notes on the pages 14 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 (continued)

for the six-month period ended 30 June 2021

(in thousands of US dollars, unless otherwise indicated)

 

 

 

Six-month period
ended 30 June

 

Three-month period
ended 30 June

 

Notes

2021

 

2020

 

2021

 

2020

Other comprehensive income

 

 

 

 

 

 

 

 

Items that will not be reclassified to profit or loss:

 

 

 

 

 

 

 

 

Decrease in revaluation reserve as a result of impairment of property, plant and equipment

3

(4,105)

 

-

 

(4,105)

 

-

 

 

 

 

 

 

 

 

 

Items that may be reclassified to profit or loss:

 

 

 

 

 

 

 

 

Cumulative translation difference on retranslation to group's presentation currency

 

 25,460

 

(150,042)

 

 38,682

 

 54,083

Other comprehensive income/(loss) for the period

 

 21,355

 

(150,042)

 

 34,577

 

 54,083

Total comprehensive income/(loss) for the period

 

 253,840

 

(212,153)

 

 266,190

 

 166,067

 

 

 

 

 

 

 

 

 

Profit/(Loss) attributable to:

 

 

 

 

 

 

 

 

Equity holders of the Parent

 

 225,577

 

(67,234)

 

 224,105

 

 107,560

Non-controlling interests

 

 6,908

 

 5,123

 

 7,508

 

 4,424

 

 

 232,485

 

(62,111)

 

 231,613

 

 111,984

Total comprehensive income/(loss) attributable to:

 

 

 

 

 

 

 

 

Equity holders of the Parent

 

 248,174

 

(215,752)

 

 254,520

 

 160,757

Non-controlling interests

 

 5,666

 

 3,599

 

 11,670

 

 5,310

 

 

 253,840

 

(212,153)

 

 266,190

 

 166,067

Earnings/(Loss) per share from continuing and discontinued operations

 

 

 

 

 

 

 

 

Basic and diluted earnings/(loss) per share (USD per share)

 

 2.11

 

(0.63)

 

 2.09

 

 1.00

 

 

 

 

 

 

 

 

 

Earnings/(Loss) per share from continuing operations

 

 

 

 

 

 

 

 

Basic and diluted earnings/(loss) per share (USD per share)

 

 2.11

 

(0.61)

 

 2.09

 

 1.00

 

 

On behalf of the Board: 

 

Chief Executive Officer                                                                                                                              Yuriy Kosyuk

 

 

Chief Financial Officer                                                                                                                                Viktoria Kapelyushnaya

 

 

The accompanying notes on the pages 14 to 30 form an integral part of these interim condensed consolidated financial statements

 

INTERIM CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as of 30 June 2021

(in thousands of US dollars, unless otherwise indicated)

 

 

Notes

30 June 2021

 

31 December 2020

ASSETS

 

 

 

 

 

Non-current assets

 

 

 

 

 

Property, plant and equipment

8

 1,711,024

 

 1,678,917  

 

Right-of-use asset

 

 223,464

 

 207,001  

 

Intangible assets

 

 91,982

 

 96,841  

 

Goodwill

 

 69,286

 

 70,614  

 

Non-current biological assets

 

 30,606

 

 25,584  

 

Non-current financial assets

 

 24,783

 

 23,083  

 

Long-term bank deposits

 

 10,317

 

 4,612  

 

Deferred tax assets

 

 2,760

 

 1,822  

 

 

 

 2,164,222

 

 2,108,474  

 

Current assets

 

 

 

 

 

Inventories

 

 256,173

 

 240,715  

 

Biological assets

10

 515,412

 

 175,085  

 

Agricultural produce

9

 139,743

 

 269,045  

 

Prepayments

 

 24,805

 

 16,776  

 

Other current financial assets

 

 80,401

 

 81,314  

 

Taxes recoverable and prepaid

 

 59,533

 

 54,647  

 

Trade accounts receivable

 

 150,611

 

 119,187  

 

Cash and cash equivalents

 

 161,874

 

 217,579  

 

 

 

 1,388,552

 

 1,174,348  

 

TOTAL ASSETS

 

 3,552,774

 

 3,282,822  

 

 

 

 

 

 

 

EQUITY AND LIABILITIES

 

 

 

 

 

Equity

 

 

 

 

 

Share capital

11

 284,505

 

 284,505  

 

Treasury shares

 

(44,593)

 

 (44,593) 

 

Additional paid-in capital

 

 174,022

 

 174,022  

 

Revaluation reserve

 

 637,169

 

 648,982  

 

Retained earnings

 

 1,400,043

 

 1,195,143  

 

Translation reserve

 

(995,142)

 

 (1,020,229

 

Equity attributable to equity holders of the Parent

 

 1,456,004

 

 1,237,830  

 

Non-controlling interests

 

 14,803

 

 16,373  

 

Total equity

 

 1,470,807

 

 1,254,203  

 

 

 

 

 

 

 

Non-current liabilities

 

 

 

 

 

Bank borrowings

12

 54,024

 

 64,608  

 

Bonds issued

13

 1,374,020

 

 1,370,999  

 

Lease liabilities

17

 157,750

 

 136,495  

 

Deferred income

7

  45,102

 

 44,505  

 

Deferred tax liabilities

 

 31,280

 

 29,867  

 

Other non-current liabilities

 

 6,994

 

 7,233  

 

 

 

 1,669,170

 

 1,653,707  

 

Current liabilities

 

 

 

 

 

Trade accounts payable

 

 179,027

 

 149,768  

 

Other current financial liabilities

 

 66,722

 

 86,638  

 

Advances received

 

 30,558

 

 15,227  

 

Bank borrowings

12

 48,844

 

 39,788  

 

Interest payable

12,13

 21,355

 

 21,487  

 

Lease liabilities

17

 66,291

 

 62,004  

 

 

 

 412,797

 

 374,912  

 

TOTAL LIABILITIES

 

 2,081,967

 

 2,028,619  

 

TOTAL EQUITY AND LIABILITIES

 

 3,552,774

 

 3,282,822  

 

 

 

 

 

 

 

 

On behalf of the Board:

Chief Executive Officer                                                                                  Yuriy Kosyuk

Chief Financial Officer                                                                                    Viktoria Kapelyushnaya

 

The accompanying notes on the pages 14 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 2021

(in thousands of US dollars, unless otherwise indicated)

 

 

 

Attributable to equity holders of the Parent

 

 

 

 

 

 

 

Share

capital

 

Treasury shares

 

Additional paid-in capital

 

Revaluation reserve

 

Retained earnings

 

Translation reserve

 

Total

 

Non-controlling interests

 

Total equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of  1
January 2021

 284,505  

 

 (44,593) 

 

 174,022  

 

 648,982  

 

 1,195,143  

 

 (1,020,229) 

 

 1,237,830  

 

 16,373  

 

 1,254,203  

Profit for the period

 -

 

 -

 

 -

 

 -

 

 225,577

 

 -

 

 225,577

 

 6,908

 

 232,485

Other comprehensive profit

 -

 

 -

 

 -

 

(2,490)

 

 -

 

 25,087

 

 22,597

 

 (1,242)

 

 21,355

Total comprehensive profit for the period

 -

 

 -

 

 -

 

(2,490)

 

 225,577

 

 25,087

 

 248,174

 

 5,666

 

 253,840

Transfer from revaluation reserve to retained earnings

 -

 

 -

 

 -

 

 (34,695)

 

 34,695

 

 -

 

 -

 

 -

 

 -

Dividends declared by the Parent (Note 18)

 -

 

 -

 

 -

 

 -

 

 (30,000)

 

 -

 

(30,000)

 

-

 

(30,000)

Dividends declared by subsidiaries

-

 

-

 

-

 

-

 

-

 

-

 

-

 

(7,985)

 

(7,985)

Non-controlling interests arising in a business combination

-

 

-

 

-

 

 -  

 

 -  

 

-

 

 -

 

 749

 

 749

Translation differences on revaluation reserve

-

 

-

 

-

 

 25,372    

 

 (25,372)

 

- 

 

 -

 

-

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of 30
June 2021

 284,505  

 

 (44,593) 

 

 174,022  

 

 637,169  

 

 1,400,043  

 

 (995,142

 

 1,456,004  

 

 14,803  

 

 1,470,807  

 

 

 

 

 

 

 

 

 

On behalf of the Board:

Chief Executive Officer                                                                                                        Yuriy Kosyuk

Chief Financial Officer                                                                                                          Viktoria Kapelyushnaya

 

 

 

 

 

 

The accompanying notes on the pages 14 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)

 

 

Attributable to equity holders of the Parent

 

 

 

 

 

 

 

Share

capital

 

Treasury shares

 

Additional paid-in capital

 

Revaluation reserve

 

Retained earnings

 

Translation reserve

 

Total

 

Non-controlling interests

 

Total equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of 1
January 20
20

 284,505  

 

 (44,593) 

 

 174,022  

 

 862,435  

 

 1,148,113  

 

 (842,188) 

 

 1,582,294  

 

 13,572  

 

 1,595,866  

Loss for the period

 -

 

 -

 

 -

 

 -

 

 (67,234)

 

 -

 

(67,234)

 

 5,123

 

(62,111)

Other comprehensive loss

 -

 

 -

 

 -

 

 -

 

 -

 

 (148,518)

 

 (148,518)

 

 (1,524)

 

(150,042)

Total comprehensive loss for the period

 -

 

 -

 

 -

 

 -

 

(67,234)

 

(148,518)

 

(215,752)

 

 3,599

 

(212,153)

Transfer from revaluation reserve to retained earnings

 -

 

 -

 

 -

 

 (41,585)

 

 41,585

 

 -

 

 -

 

 -

 

 -

Dividends declared by the Parent (Note 18)

 -

 

 -

 

 -

 

 -

 

 (30,000)

 

 -

 

(30,000)

 

-

 

(30,000)

Translation differences on revaluation reserve

-

 

-

 

-

 

 (95,930)  

 

 95,930

 

- 

 

 -

 

-

 

 -

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of 30
June 20
20

 284,505  

 

 (44,593) 

 

 174,022  

 

 724,920  

 

 1,188,394  

 

 (990,706

 

 1,336,542  

 

 17,171  

 

 1,353,713  

 

 

 

 

 

 

 

 

 

 

 

 

On behalf of the Board:

Chief Executive Officer                                                                                                                                                                                        Yuriy Kosyuk

Chief Financial Officer                                                                                                                                                                                           Viktoria Kapelyushnaya

 

 

 

 

 

 

 

 

 

The accompanying notes on the pages 14 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 2021

(in thousands of US dollars, unless otherwise indicated)                       

 

Notes

Six-month period ended 30 June 2021

 

Six-month period ended 30 June 2020

Operating activities

 

 

 

 

Profit/(Loss) before tax

 

 240,125

 

 (61,926)

Loss/(Profit) before tax from discontinued operations

 

 179

 

 (1,482)

Non-cash adjustments to reconcile profit or loss before tax to net cash flows

 

 

 

 

Depreciation and amortization expense

4

 89,066

 

 87,738

Net change in fair value of biological assets and agricultural produce

4

 (125,326)

 

 (46,329)

Change in allowance for expected credit losses and direct

write-offs

 

 2,099

 

 1,503

Loss on disposal of property, plant and equipment and other non-current assets

 

 909

 

 270

Finance income

 

 (6,307)

 

 (7,749)

Finance costs

12, 13

 71,766

 

 73,036

Released deferred income

 

 (758)

 

 (772)

Non-operating foreign exchange loss/(gain), net

 

 (50,503)

 

 129,472

Operating cash flows before movements in working capital

 

 221,250

 

 173,761

Working capital adjustments

 

 

 

 

Change in inventories

 

 (28,123)

 

 (39,188)

Change in biological assets

 

 (134,047)

 

 (143,173)

Change in agricultural produce

 

 68,962  

 

 54,352 

Change in prepayments made

 

 (7,342)

 

(1,060)

Change in other current assets

 

 (3,717)

 

 2,966 

Change in taxes recoverable and prepaid

 

 (2,346)

 

 (5,717)

Change in trade accounts receivable

 

 (31,974)

 

 (5,402)

Change in advances received

 

 14,493

 

 (23,146)

Change in other current liabilities

 

 (26,653)

 

 12,409

Change in trade accounts payable

 

 49,078  

 

 24,827 

Cash generated by operations

 

 119,581

 

 50,629

Interest received

 

 2,409

 

 7,530

Interest paid

 

(69,697)

 

(79,853)

Income taxes paid

 

(3,269)

 

(2,072)

Net cash flows from/(used in) operating activities

 

 49,024

 

(23,766)

Investing activities

 

 

 

 

Purchases of property, plant and equipment

8

(52,393)

 

(38,566)

Purchases of other non-current assets

 

(1,705)

 

(2,063)

Proceeds from disposals of property, plant and equipment

 

 3,142

 

 1,145

Proceeds from disposals of subsidiary

3

 671

 

 2,700

Purchases of non-current biological assets

 

(963)

 

(699)

Acquisition of subsidiaries, net of cash acquired

3

(1,569)

 

-

Prepayments and capitalized initial direct costs under lease contracts

 

(2,198)

 

(2,008)

Investments in short-term deposits

 

(10,792)

 

(193)

Withdrawals of short-term deposits

 

 450

 

-

Loans repaid by/(provided to) employees, net

 

 387

 

(1,288)

Loans provided to related parties

14

(1,044)

 

(36,047)

Loans repaid by related parties

14

 11,000

 

 -

Net cash flows used in investing activities

 

(55,014)

 

(77,019)

Financing activities

 

 

 

 

Proceeds from bank borrowings

 

 79,000

 

 65,362

Repayment of bank borrowings

 

(78,771)

 

(74,663)

Repayment of lease liabilities

 

(14,227)

 

(3,828)

Dividends paid

18

(30,000)

 

(30,000)

Dividends paid by subsidiaries to non-controlling shareholders

 

(7,819)

 

(30)

Net cash flows used in financing activities

 

(51,817)

 

(43,159)

 

 

 

 

The accompanying notes on the pages 14 to 30 form an integral part of these interim condensed consolidated financial statements

 

 

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (continued)

for the six-month period ended 30 June 2021

(in thousands of US dollars, unless otherwise indicated)

 

 

Notes

Six-month period ended 30 June 2021

 

Six-month period ended 30 June 2020

Net decrease in cash and cash equivalents

 

(57,807)

 

(143,944)

Net foreign exchange difference on cash and cash equivalents

 

 2,102

 

(11,525)

Cash and cash equivalents at 1 January

 

 217,579

 

 340,735

Cash and cash equivalents at 30 June

 

 161,874

 

 185,266

 

 

 

 

 

 

Non-cash transactions

 

 

 

 

Non-cash repayments of lease liabilities

 

 752

 

 486

 

 

 

On behalf of the Board:

Chief Executive Officer                                                                                                                               Yuriy Kosyuk

Chief Financial Officer                                                                                                                                Viktoria Kapelyushnaya

 

 

 

 

 

 

The accompanying notes on the pages 14 to 30 form an integral part of these interim condensed consolidated financial statements

 

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

for the six-month period ended 30 June 2021

(in thousands of US dollars, unless otherwise indicated)

1.    Corporate information

MHP SE (the "Parent" or "MHP SE"), a limited liability company (Societas Europaea) registered under the laws of Cyprus, was formed on 30 May 2006. Hereinafter, MHP SE and its subsidiaries are referred to as the "MHP SE Group" or the "Group". The registered address of MHP SE is 16-18 Zinas Kanther Street, Agia Triada, 3035 Limassol, Cyprus. The MHP SE shares are listed on the London Stock Exchange ("LSE") in the form of global depositary receipts ("GDRs").

The controlling shareholder of MHP SE is Mr. Yuriy Kosyuk ("Principal Shareholder"), who owns 100% of the shares of WTI Trading Limited ("WTI"), which is the immediate majority shareholder of MHP SE, which in turn directly owns of 59,7% of the total outstanding share capital of MHP SE.

The principal business activities of the Group are poultry and related operations, grain growing, as well as meat processing and other agricultural operations. The Group's poultry and related operations integrate all functions related to the production of chicken, including hatching, fodder manufacturing, raising chickens to marketable age ("grow-out"), processing and marketing of branded chilled products and include the production and sale of chicken products, vegetable oil, mixed fodder. Grain growing comprises the production and sale of grains. Meat processing and other agricultural operations comprise the production and sale of cooked meat, sausages, convenience food products, milk and feed grains. As at 30 June 2021 the Group employed 29,791 people (31 December 2020:  30,471 people).

The primary subsidiaries, the principal activities of the companies forming the Group and the Parent's effective ownership interest as of 30 June 2021 and 31 December 2020 were as follows:

Name

Country of registration

Year established/
acquired

Principal activities

30 June 2021

31 December 2020

 

 

 

 

 

 

Raftan Holding Limited1)

Cyprus

2006

Sub-holding Company

-

100.0%

Hemiak Investments Limited1)

Cyprus

2018

Sub-holding Company

-

100.0%

Eledem Investments Limited1)

Cyprus

2006

Sub-holding Company

-

100.0%

MHP Lux S.A.

Luxembourg

2018

Finance Company

100.0%

100.0%

MHP

Ukraine

1998

Management, marketing and sales

99.9%

99.9%

Myronivsky Plant of Manufacturing Feeds and Groats

Ukraine

1998

Fodder and vegetable

 oil production

88.5%

88.5%

Vinnytska Ptakhofabryka

Ukraine

2011

Chicken farm

100.0%

100.0%

Peremoga Nova

Ukraine

1999

Breeder farm

99.9%

99.9%

Oril-Leader

Ukraine

2003

Chicken farm

99.9%

99.9%

Myronivska Pticefabrika

Ukraine

2004

Chicken farm

99.9%

99.9%

Starynska Ptakhofabryka

Ukraine

2003

Breeder farm

100.0%

100.0%

Zernoprodukt MHP

Ukraine

2005

Grain cultivation

99.9%

99.9%

Katerinopilskiy Elevator

Ukraine

2005

Fodder production and grain storage, vegetable oil production

99.9%

99.9%

SPF Urozhay

Ukraine

2006

Grain cultivation

99.9%

99.9%

Agrofort

Ukraine

2006

Grain cultivation

99.9%

99.9%

MHP-Urozhayna Krayina

Ukraine

2010

Grain cultivation

99.9%

99.9%

Ukrainian Bacon

Ukraine

2008

Meat processing

79.9%

79.9%

MHP-AgroKryazh

Ukraine

2013

Grain cultivation

51.0%

51.0%

MHP-Agro-S

Ukraine

2013

Grain cultivation

51.0%

51.0%

Zakhid-Agro MHP

Ukraine

2015

Grain cultivation

100.0%

100.0%

Perutnina Ptuj d.d.

Slovenia

2019

Poultry production

100.0%

100.0%

MHP Trading FZE

United Arab Emirates

2018

Trading in vegetable oil and poultry meat

100.0%

100.0%

MHP Food Trading

United Arab Emirates

2016

Trading in vegetable oil and poultry meat

100.0%

100.0%

MHP B.V.

 Netherlands

2014

Trading in poultry meat

100.0%

100.0%

MHP Trade B.V.

 Netherlands

2018

Trading in poultry meat

100.0%

100.0%

1) On 19 April 2021 merger of MHP SE with its subsidiaries, namely Raftan Holding ltd, Hemiak Investments  ltd and Eledem Investments ltd, took place. All assets and liabilities of merging companies have been transferred to the succeeding company MHP SE. Subsidiary companies were dissolved

The Group's primary operational facilities are located in different regions of Ukraine as well as in Southeast Europe, including Slovenia, Serbia, Croatia and Bosnia and Herzegovina.

 

Notes to the INTERIM CONDENSED Consolidated financial statements

for the six-month period ended 30 June 2021

(in thousands of US dollars, unless otherwise indicated)

2.    Basis of preparation and accounting policies

Basis of preparation

The interim condensed consolidated financial statements for the six-month period ended 30 June 2021 have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union.

Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with International Financial Reporting Standards ("IFRS") have been condensed or omitted. However, such information reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of the Group management, necessary to fairly state the results of interim periods. Interim results are not necessarily indicative of the results to be expected for the full year.

These interim condensed consolidated financial statements have been prepared on the assumption that the Group is a going concern and will continue in operation for the foreseeable future.

The 31 December 2020 statement of financial position was derived from the audited consolidated financial statements, which were prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union (EU) and the requirements of the Cyprus Companies Law, Cap.113. Audited consolidated financial statements are available at www.mhp.com.cy.

Adoption of new and revised International Financial Reporting Standards

The adoption of the new or revised Standards did not have any effect on the financial position or performance of the Group and did not result in any changes to the Group's accounting policies and the amounts reported in the interim condensed consolidated financial statements of the Group.

Functional and presentation currencies

The functional currency of Ukrainian companies of the Group is the Ukrainian Hryvnia ("UAH"); the functional currency of the Cyprus companies and Luxembourg company of the Group is US Dollars ("USD"), the functional currency of the other European companies of the Group is EURO ("EUR"), the functional currency of the United Arab Emirates companies is Dirham ("AED"). Transactions in currencies other than the functional currency of the entities concerned are treated as transactions in foreign currencies. Such transactions are initially recorded at the rates of exchange ruling at the dates of the transactions. Monetary assets and liabilities denominated in such currencies are translated at the rates prevailing on the reporting date. All realized and unrealized gains and losses arising on exchange differences are recognized in the consolidated statement of profit or loss and other comprehensive income for the period.

These consolidated financial statements are presented in US Dollars ("USD"), which is the Group's presentation currency.

The results and financial position of the Group are translated into the presentation currency using the following procedures:

·      Assets and liabilities for each consolidated statement of financial position presented are translated at the closing rate as of the reporting date of that statement of financial position;

·      Income and expenses for each consolidated statement of profit or loss and other comprehensive income are translated at exchange rates at the dates of the transactions;

·      The exchange differences arising on translation for consolidation are recognised in other comprehensive income and presented as a separate component of equity. On disposal of a foreign operation, the component of OCI relating to that particular foreign operation is reclassified to profit or loss;

·      All equity items, except for the revaluation reserve, are translated at the historical exchange rate. The revaluation reserve is translated at the closing rate as of the date of the statement of financial position.

For practical reasons, the Group translates items of income and expenses for each period presented in the financial statements using the quarterly average exchange rates, if such translations reasonably approximate the results translated at exchange rates prevailing at the dates of the transactions.

 

 

Notes to the INTERIM CONDENSED Consolidated financial statements

for the six-month period ended 30 June 2021

(in thousands of US dollars, unless otherwise indicated)

2.    Basis of preparation and accounting policies (continued)

Functional and presentation currencies (continued)

The following exchange rates were used:

Currency

Closing rate as of            30 June 2021

Average for six months ended     30 June 2021

Average for three months ended     30 June 2021

Closing rate as of 31 December 2020

Average for six  months ended    30 June 2020

Average for three months ended  30 June 2020    

UAH/USD

27.1763

27.7792

27.5910

28.2746

25.9834

26.9143

UAH/EUR

32.3018

33.4936

33.2332

34.7396

28.6091

29.6028

USD/EUR

1.1886

1.2057

1.2045

1.2287

1.1011

1.0999

Significant accounting policies

The accounting policies adopted in the preparation of the interim condensed consolidated financial statements are consistent with those followed in the preparation of the Group's annual financial statements for the year ended 31 December 2020.

Seasonality of operations

Poultry and related operations, European operating segment and Meat processing and other agricultural operations are not significantly exposed to seasonal fluctuations.

Due to seasonality and implications of IAS 41, results of the Grain growing segment in the first half of the year mainly reflects sales of carried forward agricultural produce and the effect of biological assets revaluation, while during the second half of the year they reflect sales of crops and the effect of revaluation of agricultural produce harvested during the year. Also, the grain growing segment has seasonal requirements to increase working capital from November to May, due to the sowing campaign.

3.    Changes in the group structure

Discontinued operation

During the six-month period ended 30 June 2020, the Group disposed of the Snyatynska poultry farm in Ukraine, which carried out goose meat and foie gras operations, and was previously presented within the Meat processing and other agricultural operations segment. Net assets as of the date of disposal were USD 3,303 thousand. The total consideration of USD 2,700 thousand was received in cash during this reporting period.

During the six-month period ended 30 June 2021 the Group disposed of the assets of its subsidiary Dobropilskyi GPP PrJSC, which was located in Ukraine and carried out grain storage operations, and was previously presented within the Poultry and related operations segment. Net assets as of the date of disposal were USD 620 thousand. Before the sale the property plant and equipment included into the net assets disposed were impaired by USD 4,105 thousand. Impairment was recognized as decrease in revaluation reserve related to those property, plant and equipment. The total cash consideration of USD 671 thousand was received during this reporting period.

Discontinued operations are excluded from the results of continuing operations and are presented as a single amount as profit or loss after tax from discontinued operations in the consolidated statement of profit or loss. All other notes to the financial statements include amounts for continuing operations, unless otherwise mentioned.

Acquisitions

On 01 June 2021, the Group acquired a 51% share in Lubnym`yaso LLC, a Ukrainian meat production plant, whose main economic activity is the production and sale of beef under the trade mark Scott Smeat. As of the date of acquisition, net assets of the acquired plant amounted to USD 1,529 thousand. Purchase consideration of USD 1,569 thousand was paid in cash. Goodwill in the amount of USD 788 thousand is attributable to the expectation that this acquisition will support the Group's strategic transformation to a culinary company through launch of additional products.

 

 

Notes to the INTERIM CONDENSED Consolidated financial statements

for the six-month period ended 30 June 2021

(in thousands of US dollars, unless otherwise indicated)

4.    Segment information

The Group's business is managed on a worldwide basis, but operates manufacturing facilities and sales offices primarily in Ukraine and Europe.

Reportable segments are presented in a manner consistent with the internal reporting to the Group's chief operating decision maker ("CODM").

Segment information is analysed on the basis of the types of goods supplied by the Group's operating divisions. The Group's reportable segments under IFRS 8 are as follows:

Poultry and related operations segment:

 

•    sales of chicken meat

•    sales of vegetable oil and related products

•    other poultry related sales

Grain growing operations segment:        

•    sales of grain

Meat processing and other agricultural operations segment:

•    sales of meat processing products and other meat

•    other agricultural operations (milk, feed grains and other)

European operating segment:

•    sales of meat processing and chicken meat products in Southeast Europe

The accounting policies of the reportable segments are the same as the Group's accounting policies described in Note 2. Sales between segments are carried out at market prices. The segment result represents operating profit under IFRS before unallocated corporate expenses and loss on impairment of property, plant and equipment. Unallocated corporate expenses include management remuneration, representative expenses, and expenses incurred in respect of the maintenance of office premises. This is the measure reported to the CODM for the purposes of resource allocation and assessment of segment performance.

European operating segment primarily includes sales of chicken meat and meat processing products, produced in the facilities of Perutnina Ptuj. The CODM manages this as a single segment, on the basis that each of research, development, manufacture, distribution and selling of chicken meat and meat processing products require single marketing strategies, a centralised budgeting process and centralised management of production operations.

 

 

Notes to the INTERIM CONDENSED Consolidated financial statements

for the six-month period ended 30 June 2021

(in thousands of US dollars, unless otherwise indicated)

4.    Segment information (continued)

The following table presents revenue and profit information regarding the Group's operating segments for the six-month period ended 30 June 2021:

 

Poultry

and related operations

Grain growing operations

Meat processing and other agricultural operations

European operating segment

Total reportable segments

Eliminations

 

 

 

 

 

 

 

 

External sales

 707,352

 12,489

 77,622

 191,112

 988,575

 -

 988,575

Sales between business segments

 20,045

 119,604

 148

 -

 139,797

 (139,797)

 -

Total revenue

 727,397

 132,093

 77,770

 191,112

 1,128,372

 (139,797)

 988,575

Segment results

 92,963

 142,209

 6,964

 23,919

 266,055

 -

 266,055

Unallocated corporate expenses

 

 

 

 

 

 

 (10,901)

Other expenses, net 1)

 

 

 

 

 

 

 (15,029)

Profit before tax from continuing operations

 

 

 

 

 

 

 240,125

Other information:

 

 

 

 

 

 

 

Depreciation and amortization expense 2)

 47,162

 28,801

 3,364

 9,083

 88,410

 -

 88,410

 

 

 

 

 

 

 

 

Net change in fair value of biological assets and agricultural produce

 18,426

 102,154

 2,982

 1,764

 125,326

 -

 125,326

1) Includes finance income, finance costs, foreign exchange gain (net) and other expenses (net).

2) Depreciation and amortization for the six-month period ended 30 June 2021 does not include unallocated depreciation and amortization in the amount of USD 656 thousand.

The following table presents revenue and profit information regarding the Group's operating segments for the six-month period ended 30 June 2020:

 

Poultry

and related operations

Grain growing operations

Meat processing and other agricultural operations

European operating segment

Total reportable segments

Eliminations

Consolidated

 

 

 

 

 

 

 

 

External sales

 608,312

 34,594

 67,416

 157,126

 867,448

 -

 867,448

Sales between business segments

 14,919

 93,697

 166

 -

 108,782

 (108,782)

 -

Total revenue

 623,231

 128,291

 67,582

 157,126

 976,230

 (108,782)

 867,448

Segment results

 71,767

 48,836

 5,210

 18,064

 143,877

 -

 143,877

Unallocated corporate expenses

 

 

 

 

 

 

 (5,836)

Other expenses, net 1)

 

 

 

 

 

 

 (199,967)

Loss before tax from continuing operations

 

 

 

 

 

 

 (61,926)

Other information:

 

 

 

 

 

 

 

Depreciation and amortization expense 2)

 50,519

 23,783

 3,507

 9,448

 87,257

 -

 87,257

 

 

 

 

 

 

 

 

Net change in fair value of biological assets and agricultural produce

 6,227

 37,724

 371

 2,007

 46,329

 -

 46,329

1) Includes finance income, finance costs, foreign exchange gain (net) and other expenses (net).

2) Depreciation and amortization for the six-month period ended 30 June 2020 does not include unallocated depreciation and amortization in the amount of USD 481 thousand.

 

 

Notes to the INTERIM CONDENSED Consolidated financial statements

for the six-month period ended 30 June 2021

(in thousands of US dollars, unless otherwise indicated)

4.    Segment information (continued)

The following table presents revenue and profit information regarding the Group's operating segments for the three-month period ended 30 June 2021:

 

Poultry

and related operations

Grain growing operations

Meat processing and other agricultural operations

European operating segment

Total reportable segments

Eliminations

Consolidated

 

 

 

 

 

 

 

 

External sales

 392,009

 3,553

 41,595

 104,409

 541,566

 -

 541,566

Sales between business segments

 10,451

 47,294

 75

 -

 57,820

 (57,820)

 -

Total revenue

 402,460

 50,847

 41,670

 104,409

 599,386

 (57,820)

 541,566

Segment results

 84,382

 140,679

 5,094

 15,938

 246,093

 -

 246,093

Unallocated corporate expenses

 

 

 

 

 

 

 (6,936)

Other expenses, net 1)

 

 

 

 

 

 

 (2,985)

Profit before tax from continuing operations

 

 

 

 

 

 

 236,172

Other information:

 

 

 

 

 

 

 

Depreciation and amortization expense 2)

 23,642

 11,247

 1,864

 4,695

 41,448

 -

 41,448

 

 

 

 

 

 

 

 

Net change in fair value of biological assets and agricultural produce

 17,633

 124,570

 2,708

 1,419

 146,330

 -

 146,330

1) Includes finance income, finance costs, foreign exchange gain (net) and other expenses (net).

2) Depreciation and amortization for the three-month period ended 30 June 2021 does not include unallocated depreciation and amortization in the amount of USD 119 thousand.

The following table presents revenue and profit information regarding the Group's operating segments for the three-month period ended 30 June 2020:

 

Poultry

and related operations

Grain growing operations

Meat processing and other agricultural operations

European operating segment

Total reportable segments

Eliminations

Consolidated

 

 

 

 

 

 

 

 

External sales

 302,011

 9,969

 33,554

 79,202

 424,736

-

 424,736

Sales between business segments

 6,279

 23,700

 (101)

 -

 29,878

 (29,878)

-

Total revenue

 308,290

 33,669

 33,453

 79,202

 454,614

 (29,878)

 424,736

Segment results

 28,979

 50,310

 1,494

 11,151

 91,934

 -

 91,934

Unallocated corporate expenses

 

 

 

 

 

 

 (904)

Other expenses, net 1)

 

 

 

 

 

 

 18,424

Profit before tax from continuing operations

 

 

 

 

 

 

 109,454

Other information:

 

 

 

 

 

 

 

Depreciation and amortization expense 2)

 24,754

 7,222

 1,729

 4,407

 38,112

-

 38,112

 

 

 

 

 

 

 

 

Net change in fair value of biological assets and agricultural produce

 (5,052)

 45,530

 933

 1,875

 43,286

-

 43,286

 1) Includes finance income, finance costs, foreign exchange gain (net) and other expenses (net).

2) Depreciation and amortization for the three-month period ended 30 June 2020 does not include unallocated depreciation and amortization in the amount of USD 231 thousand.

 

 

Notes to the INTERIM CONDENSED Consolidated financial statements

for the six-month period ended 30 June 2021

(in thousands of US dollars, unless otherwise indicated)

4.    Segment information (continued)

Non-current assets based on the geographic location of the manufacturing facilities were as follows as of
30 June 2021 and 31 December 2020:

 

2021

 

2020

 

 

 

 

Ukraine

1,871,668

 

 1,816,045

Europe

254,694

 

 262,912 

 

2,126,362

 

 2,078,957

1) Non-current assets excluding deferred tax assets and non-current financial assets.

5.    Revenue

Revenue for the six-month and three-month periods ended 30 June 2021 and 2020 was as follows:

 

Six-month period
ended 30 June

 

Three-month period
ended 30 June

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

Poultry and related operations segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chicken meat

 546,467  

 

452,539

 

 314,854  

 

226,509

Vegetable oil and related products

 127,284  

 

135,149

 

 59,251  

 

66,030

Other poultry related sales

 33,601  

 

20,624

 

 17,904  

 

9,472

 

 707,352  

 

608,312

 

 392,009  

 

302,011

 

 

 

 

 

 

 

 

Grain growing operations segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grain

 12,489  

 

34,594

 

 3,553  

 

9,969

 

 12,489  

 

34,594

 

 3,553  

 

9,969

 

 

 

 

 

 

 

 

Meat processing and other agricultural operations segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other meat

 61,297  

 

53,332

 

 34,224  

 

26,849

Other agricultural sales

 16,325  

 

14,084

 

 7,371  

 

6,705

 

 77,622  

 

67,416

 

 41,595  

 

33,554

 

 

 

 

 

 

 

 

European operating segment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Chicken meat

 119,732  

 

94,391

 

 65,383  

 

47,155

Other meat

 56,178  

 

50,448

 

 30,715  

 

25,921

Other agricultural sales

 15,202  

 

12,287

 

 8,311  

 

6,126

 

 191,112  

 

157,126

 

 104,409  

 

79,202

 

 988,575  

 

867,448

 

 541,566  

 

424,736

The geographic structure of revenue for the six-month and three-month periods ended 30 June 2021 and 2020 was as follows:

 

Six-month period
ended 30 June

 

Three-month period
ended 30 June

 

2021

 

2020

 

2021

 

2020

 

 

 

 

 

 

 

 

Export

 501,564

 

452,721

 

 285,040

 

215,323

Domestic

 487,011

 

414,727

 

 256,526

 

209,413

 

 988,575

 

867,448

 

 541,566

 

424,736

6.    Profit for the period

The Group's gross profit for the six-month period ended 30 June 2021 increased substantially compared to the six-month period ended 30 June 2020 to USD 358,085 thousand (30 June 2020: USD 219,014 thousand). The increase was driven mainly by higher gain from revaluation of biological assets in the grain growing segment due to increased grain prices.

The Group's operating profit increased mainly as a result of the increase in gross profit partly offset by increased administration, sales and distribution expenses.

 

Notes to the INTERIM CONDENSED Consolidated financial statements

for the six-month period ended 30 June 2021

(in thousands of US dollars, unless otherwise indicated)

6. Profit for the period (continued)

The Group's profit from continuing operations for the six-month period ended 30 June 2021 increased to a profit of USD 232,306 thousand compared to a loss of USD 60,629 thousand in the six-month period ended 30 June 2020. The improvement was attributable to the growth of operating profit and an unrealized foreign exchange gain of USD 50,503 thousand for the six-month period ended 30 June 2021 compared to a foreign exchange loss of USD 129,472 thousand for the six-month period ended 30 June 2020. Unrealized foreign exchange gains and losses are mostly attributable to the effect of changes in UAH exchange rates on bonds and bank borrowings denominated in US Dollars and Euros.

7.    Deferred income

Government grants for compensation of construction and reconstruction of livestock farms and compensation of cost of machinery and equipment are presented in the statement of financial position as deferred income, which is recognised in profit or loss on a systematic basis over the useful life of the related assets. All other compensations received were recognised in the consolidated statement of profit or loss and other comprehensive income. During the six-month period ended 30 June 2021 the Group recognized government compensations of USD 4,099 thousand (2020: USD 2,623 thousand) in the consolidated statement of profit or loss and other comprehensive income.

During the six-month periods ended 30 June 2021 and 30 June 2020, the Group received government compensations in accordance with EU farming subsidies policy and other compensations in accordance with the EU national programs of employment, assigned contributions for employees, and refunds of excise duties in amount of USD 4,199 thousand and USD 3,602 thousand respectively.

8.    Property, plant and equipment

During the six-month period ended 30 June 2021, the Group's additions to property, plant and equipment amounted to USD 52,393 thousand (six-month period ended 30 June 2020: USD 38,566 thousand) mainly related to modernization projects, new products development and the maintenance and improvement of Perutnina Ptuj production facilities.

There were no significant disposals of property, plant and equipment during the six-month periods ended 30 June 2021 and 30 June 2020.

The remaining part of the movement mainly relates to translation difference into the presentation currency.

9.    Agricultural produce

A decrease of agricultural produce balances for six-month period ended 30 June 2021 was mainly as a result of internal consumption of corn, sunflower, wheat and soya.

10.  Biological assets

The increase in current biological assets as compared to 31 December 2020 is primarily related to crops in fields balance. The increase in crops in fields balance mainly relates to spring crops seeded in the first half of 2021 classified as biological assets as well as due to IAS 41 revaluation adjustment.  

11.  Share capital

As of 30 June 2021 and 31 December 2020 the authorized, issued and fully paid share capital of MHP SE comprised the following number of shares:

 

30 June 2021

 

31 December 2020

 

 

 

 

Number of shares issued and fully paid

 110,770,000  

 

 110,770,000  

Number of shares outstanding

 107,038,208  

 

 107,038,208  

The authorized share capital as of 30 June 2021 and 31 December 2020 was EUR 221,540 thousand represented by 110,770,000 shares with par value of EUR 2 each.

All shares have equal voting rights and rights to receive dividends, which are payable at the discretion of the Group.

 

 

 

Notes to the INTERIM CONDENSED Consolidated financial statements

for the six-month period ended 30 June 2021

(in thousands of US dollars, unless otherwise indicated)

12.  Bank borrowings

The following table summarizes bank borrowings and credit lines outstanding as of 30 June 2021 and 31 December 2020:

 

 

 

 

30 June 2021

 

31 December 2020

 

 

Currency

 

WAIR 1)

USD' 000

 

WAIR 1)

USD' 000

 

 

 

 

 

 

 

 

 

Non-current

 

 

 

 

 

 

 

 

 

 

EUR

 

EURIBOR2) + 1.74%

 52,505

 

EURIBOR2) + 2.62%

 63,142  

 

 

EUR

 

2.34%

 1,519

 

2.54%

 1,466  

 

 

 

 

 

 54,024

 

 

 64,608  

 

 

 

 

 

 

 

 

 

Current

 

 

 

 

 

 

 

 

 

 

UAH

 

 

 -

 

6.25%

 3,537  

 

 

USD

 

LIBOR + 1.92%

 35,333

 

LIBOR + 3.25%

 15,000  

 

 

EUR

 

 

 -

 

2.30%

 8,601  

Current portion of
long-term bank borrowings 

 

EUR

 

EURIBOR2) + 1.74%

 13,511

 

EURIBOR2) + 2.62%

 12,650  

 

 

 

 

 

 48,844

 

 

 39,788  

Total bank borrowings

 

 

 

   102,868

 

 

  104,396  

1)  WAIR represents the weighted average interest rate on outstanding borrowings.

2)  According to the agreements terms, if market EURIBOR becomes negative, it shall be deemed to be zero for calculation of interest expense.

The Group's borrowings are drawn from various banks as term loans, credit line facilities and overdrafts. Repayment terms of principal amounts of bank borrowings vary from monthly repayment to repayment on maturity depending on the agreement reached with each bank. Interest on borrowings drawn with foreign banks is payable semi-annually.

As of 30 June 2021 and 31 December 2020, the Group's bank term loans and credit lines bear floating and fixed interest rates.

Bank borrowings and credit lines outstanding as of 30 June 2021 and 31 December 2020 were repayable as follows:

 

30 June 2021

 

31 December 2020

 

 

 

 

Within one year

48,844

 

 39,788  

In the second year

46,090

 

 17,196  

In the third to fifth year inclusive

7,934

 

 47,412  

 

102,868

 

 104,396  

As of 30 June 2021, the Group had available undrawn facilities of USD  210,956 thousand (31 December 2020: USD 304,910 thousand). These undrawn facilities expire during the period from July 2021 until March 2023.

The Group, as well as particular subsidiaries of the Group has to ensure ongoing compliance with the following maintenance covenants imposed by the banks providing the loans: EBITDA to interest expenses ratio, current ratio and liabilities to equity ratio. Separately, when the Groups Net Debt to EBITDA ratio exceeds 3.0 to 1, negative covenants become applicable in respect of restricted payments, including dividends, capital expenditures, additional indebtedness and restrictions on mergers or consolidations, limitations on liens and dispositions of assets and limitations on transactions with affiliates. The Group subsidiaries are also required to obtain approval from lenders regarding property, plant and equipment to be used as collateral. During the six-month period ended 30 June 2021 and year ended 31 December 2020 the Group has complied with all bank covenants. As at 30 June 2021, the Group's leverage ratio improved to 2.83 to 1 from 3.66 to 1 as at 31 December 2020.

 

 

Notes to the INTERIM CONDENSED Consolidated financial statements

for the six-month period ended 30 June 2021

(in thousands of US dollars, unless otherwise indicated)

12. Bank borrowings (continued)

The Group's bank borrowings are jointly and severally guaranteed by MHP, Myronivsky Plant of Manufacturing Feeds and Groats, Oril-Leader, Peremoga Nova, Starynska Ptakhofabryka, Zernoproduct MHP, Katerinopilskiy Elevator, Agrofort, SPF Urozhay, MHP SE, Scylla Capital Limited, Myronivska Pticefabrika, Ptakhofabryka Snyatynska Nova, Vinnytska Ptakhofabryka, Zakhid-Agro MHP, MHP-Urozhayna Krayina.

As of 30 June 2021, the Group had borrowings of USD 41,158 thousand that were secured by property, plant and equipment with a carrying amount of USD 71,153 thousand (31 December 2020: USD 45,958 thousand and USD 83,837 thousand respectively).

As of 30 June 2021, the Group did not have any borrowings that were secured by agricultural produce (31 December 2020: borrowings of USD 15,000 thousand were secured by agricultural produce with carrying amount of USD 18,750 thousand).

As of 30 June 2021, the deposit with carrying amount of USD 2,678 thousand (31 December 2020: USD 3,632 thousand) was restricted as collateral to secure bank borrowings.

As of 30 June 2021 and 31 December 2020, interest payable on bank borrowings was USD 598 thousand and USD 730 thousand, respectively.

13.  Bonds issued

Bonds issued and outstanding as of 30 June 2021 and 31 December 2020 were as follows:

 

Carrying amount

 

Nominal amount

 

30 June 2021

 

31 December 2020

 

30 June 2021

 

31 December 2020

 

 

 

 

 

 

 

 

7.75% Senior Notes due in 2024

489,222

 

 487,480  

 

 500,000

 

500,000

6.95% Senior Notes due in 2026

537,269

 

 536,153  

 

 550,000

 

550,000

6.25% Senior Notes due in 2029

347,529

 

 347,366  

 

 350,000

 

350,000

Unamortized debt issuance cost

-

 

 -  

 

 (25,980)

 

(29,001)

Total bonds issued

 1,374,020

 

 1,370,999  

 

1,374,020

 

1,370,999

As of 30 June 2021 and 31 December 2020 amount of interest payable on bonds issued was USD 20,757 thousand and USD 20,757 thousand, respectively.

6.25% Senior Notes

On 19 September 2019, MHP Lux S.A., a public company with limited liability (société anonyme) incorporated in 2018 under the laws of the Grand Duchy of Luxembourg, issued USD 350,000 thousand 6.25% Senior Notes due in 2029 at par value. The funds received were used to satisfy and discharge the 8.25% Senior Notes due in April 2020, for debt refinancing and for general corporate purposes.

All expenses associated with the placement of the 6,25% Senior Notes amounted to USD 2,888 thousand and were capitalized.

The Senior Notes are jointly and severally guaranteed on a senior basis by MHP SE, PrJSC "Oril - Leader", PrJSC "Myronivska Pticefabrika", "SPF "Urozhay" LLC, "Starynska Ptakhofabryka" ALLC, "Vinnytska Ptakhofabryka" LLC, "Peremoga Nova" SE, "Katerinopolskiy Elevator" LLC, PrJSC "MHP", PrJSC "Zernoprodukt MHP" and PrJSC "Agrofort".

Interest on the Senior Notes is payable semi-annually in arrears. These Senior Notes are subject to certain restrictive covenants including, but not limited to, limitations on the incurrence of additional indebtedness in excess of Net Debt to EBITDA ratio as defined by the indenture, restrictions on mergers or consolidations, limitations on liens and dispositions of assets and limitations on transactions with affiliates. If the Group fails to comply with the covenants imposed, the Trustee or the Holders of at least 25% in principal amount of outstanding Notes may, upon written notice to the Group, declare all outstanding Senior Notes to be due and payable immediately. If a change of control occurs, the Group shall make an offer to each holder of the Senior Notes to purchase such Senior Notes at a purchase price in cash in an amount equal to 100% of the aggregate principal amount thereof, plus accrued and unpaid interest and additional amounts, if any.
 

Notes to the INTERIM CONDENSED Consolidated financial statements

for the six-month period ended 30 June 2019

(in thousands of US dollars, unless otherwise indicated)

13. Bonds issued (continued)

6.95% Senior Notes 

On 3 April 2018, MHP Lux S.A. issued USD 550,000 thousand 6.95% Senior Notes due in 2026 at par value. Out of the total issue amount USD 416,183 thousand were designated for redemption and exchange of the existing 8.25% Senior Notes due in 2020.

The part of expenses, connected with placement of the 6,95% Senior Notes amounted to USD 11,564 thousand were capitalized, including USD 10,413 thousands related to the exchange. All other related expenses in the amount of USD 32,915 thousand were expensed as incurred. 

As a result of a non-substantial modification, the difference between the present value of the cash flows under the original and modified terms discounted at the original effective interest rate was recognised as a gain in the amount of USD 4,733 thousand at the date of modification in the consolidated profit or loss.

The Senior Notes are jointly and severally guaranteed on a senior basis by MHP SE, PrJSC "MHP", PJSC "Myronivsky Plant of Manufacturing Feeds and Groats", PrJSC "Zernoprodukt MHP", PrJSC "Agrofort", PrJSC "Oril-Leader", PrJSC "Myronivska Pticefabrika", "SPF "Urozhay" LLC, "Starynska Ptakhofabryka" ALLC, "Vinnytska Ptakhofabryka" LLC, "Peremoga Nova" SE, "Katerinopolskiy Elevator" LLC, Scylla Capital Limited. 

Interest on the Senior Notes is payable semi-annually in arrears. These Senior Notes are subject to certain restrictive covenants including, but not limited to, limitations on the incurrence of additional indebtedness in excess of Net Debt to EBITDA ratio as defined by the indenture, restrictions on mergers or consolidations, limitations on liens and dispositions of assets and limitations on transactions with affiliates. If the Group fails to comply with the covenants imposed, the Trustee or the Holders of at least 25% in principal amount of outstanding Notes may, upon written notice to the Group, declare all outstanding Senior Notes to be due and payable immediately. If a change of control occurs, the Group shall make an offer to each holder of the Senior Notes to purchase such Senior Notes at a purchase price in cash in an amount equal to 101% of the principal amount thereof, plus accrued and unpaid interest and additional amounts, if any.

7.75% Senior Notes

On 10 May 2017, MHP SE issued USD 500,000 thousand 7.75% Senior Notes due in 2024 at par value. Out of the total issue the amount of USD 245,200 thousand were designated for redemption and exchange of existing 8.25% Senior Notes due in 2020.

The carrying amount of the Senior Notes was adjusted on transition to IFRS 9. Under IFRS 9, as a result of a non-substantial modification, the difference between the present value of the cash flows under the original and modified terms discounted at the original effective interest rate should be recognised as a gain at the date of modification. The difference between the carrying amount of the Senior Notes under IAS 39 and IFRS 9 was recognised in opening retained earnings in the amount of USD 7,566 thousand.

The Senior Notes are jointly and severally guaranteed on a senior basis by PrJSC "MHP", PJSC "Myronivsky Plant of Manufacturing Feeds and Groats", PrJSC "Zernoprodukt MHP", PrJSC "Agrofort", PrJSC "Oril-Leader", PrJSC "Myronivska Pticefabrika", "SPF "Urozhay" LLC, "Starynska Ptakhofabryka" ALLC, Vinnytska Ptakhofabryka LLC, SE "Peremoga Nova", "Katerinopolskiy Elevator" LLC, Scylla Capital Limited.

Interest on the Senior Notes is payable semi-annually in arrears. These Senior Notes are subject to certain restrictive covenants including, but not limited to, limitations on the incurrence of additional indebtedness in excess of Net Debt to EBITDA ratio as defined by the indenture, restrictions on mergers or consolidations, limitations on liens and dispositions of assets and limitations on transactions with affiliates. If the Group fails to comply with the covenants imposed, the Trustee or the Holders of at least 25% in principal amount of the then outstanding Notes may, upon written notice to the Group, declare all outstanding Senior Notes to be due and payable immediately. If a change of control occurs, the Group shall make an offer to each holder of the Senior Notes to purchase such Senior Notes at a purchase price in cash in an amount equal to 101% of the principal amount thereof, plus accrued and unpaid interest and additional amounts, if any.

 

 

Notes to the INTERIM CONDENSED Consolidated financial statements

for the six-month period ended 30 June 2021

(in thousands of US dollars, unless otherwise indicated)

13. Bonds issued (continued)

Covenants

Certain restrictions under the indebtedness agreements (e.g. incurrence of additional indebtedness, restricted payments, dividends payment) are dependent on the Group's leverage ratio. Once the Net Debt to EBITDA ratio exceeds 3.0 to 1, the Group is not permitted to make certain restricted payments, declare dividends exceeding USD 30 million in any financial year or incur additional debt except where defined as a Permitted Debt. According to the indebtedness agreement, the leverage ratio is tested on the date of incurrence of additional indebtedness or restricted payment and after giving pro forma effect to such incurrence or restricted payment as if it had been incurred or done at the beginning of the most recent four consecutive fiscal quarters for which financial statements are publicly available (or are made available). The Group has tested all the transactions occurred prior to publication of these financial statements and has complied with all the covenants defined by the indebtedness agreement during the reporting periods ended 30 June 2021 and 31 December 2020.

As at 30 June 2021 the Group's leverage ratio is 2.83 to 1 (31 December 2020: 3.66 to 1), which is below the defined limit 3.0 to 1. Thus, the Group believes that, as at the interim reporting date the leverage ratio met the covenants imposed, the aforementioned restrictions are no longer applicable to the Group as from 9 September 2021, being the date of publication of the reviewed interim condensed consolidated financial statements for the three and six months ended 30 June 2021.

14.  Related party balances and transactions

For the purposes of these financial statements, parties are considered to be related if one party controls, is controlled by, or is under common control with the other party, or exercises significant influence over the other party in making financial or operational decisions. In considering each possible related party relationship, attention is directed to the substance of the relationship, not merely the legal form.

Related parties may enter into transactions which unrelated parties might not, and transactions between related parties may not be effected on the same terms and conditions as transactions between unrelated parties.

Transactions with related parties

The Group enters 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 for the purchase and sale of goods and services and in relation to the provision of financing arrangements.

Terms and conditions of sales to related parties are determined based on arrangements specific to each contract or transaction. The terms of the payables and receivables related to trading activities of the Group do not vary significantly from the terms of similar transactions with third parties.

Transactions with related parties during the six-month periods ended 30 June 2021 and 30 June 2020 were as follows:

 

2021

 

2020

 

 

 

 

Loans and finance aid provided to related parties

 1,044  

 

 36,047  

Loans and finance aid repaid by related parties

 11,000  

 

 -  

Interest charged on loans and finance aid provided

 2,636  

 

 1,890  

Interest on loans and financial aid repaid

 1,121  

 

 2,476  

Sales of goods

 -    

 

 72  

Purchases from related parties

 390  

 

 10  

 

 

 

 

Key management personnel of the Group:

 

 

 

Loans provided

 -    

 

 1,722  

Loans repaid

 387  

 

434

 

 

Notes to the INTERIM CONDENSED Consolidated financial statements

for the six-month period ended 30 June 2021

(in thousands of US dollars, unless otherwise indicated)

14. Related parties balances and transactions (continued)

Transactions with related parties (continued)

The balances owed to and due from related parties were as follows as of 30 June 2021 and 31 December 2020:

 

30 June 2021

 

31 December 2020

 

 

 

 

Loans and finance aid receivable

 64,696

 

 73,035  

Less: expected credit losses

 (4,308)

 

 (4,340) 

 

 60,388

 

68,695  

 

 

 

 

Loans to key management personnel

 4,535

 

 4,698  

Less: expected credit losses

 (385)

 

(218)

 

 4,150

 

4,480

 

 

 

 

Trade accounts receivable

 113

 

 109  

Payables due to related parties

 19

 

 17  

Loans and finance aid receivable

On 21 January 2020, the Board approved a loan facility of up to USD 80,000 thousand to the company's principal shareholder, WTI Trading Limited ("WTI") to meet WTI's general liquidity requirements and other corporate purposes for a maximum of three years.

As of 30 June 2021, the Group had advanced loans to WTI in the aggregate amount of USD 57,400 thousand (31 December 2020: USD 67,400 thousand). The loans, with maturities between July 2021 and June 2022, bear interest at a rate of 8.25% to 9.25% and are secured by a personal guarantee of WTI's ultimate beneficial owner. Subsequent to period end, the maturity date of USD 21,000 thousand of these loans was extended to March 2022.

Expected credit losses on these loans amounted to USD 1,761 thousand as at 30 June 2021 (31 December 2020: USD 1,969 thousand).

The Group's Directors believe that the loans were issued at arm's length terms and for fair market value, and that they were in the best interests and for the commercial benefit of the Group and do not violate the terms of the Senior Notes (Note 13).

Compensation of key management personnel

Total compensation of the Group's key management personnel that was paid for for the periods ended 30 June 2021 and 2020 amounted to USD 12,143 thousand and USD 4,802 thousand, respectively. Compensation of key management personnel consists of contractual salary and performance bonuses that were paid in different periods year-on-year (second quarter 2021 and third quarter 2020).

15.  Contingencies and contractual commitments

Operating environment

Since 2016, the Ukrainian economy, which represents the core operating environment of the Group, has been demonstrating signs of stabilization after the years of political and economic tensions. Until the break-out of the coronavirus (COVID-19) pandemic in the first quarter 2020, real GDP had been steadily growing, however it decreased by around 4.2% for the year ended 31 December 2020. For the six-month period ended 30 June 2021, real GDP increased by around 1.9% year on year compared to a decrease of 4.8% for the six-month period ended 30 June 2020. The annual inflation rate was 10.2% (2020: 2.4%).

Ukraine continues to limit its political and economic ties with Russia, in view of the annexation of Crimea, an autonomous republic of Ukraine, and an armed conflict with separatists continuing in certain parts of Luhanska and Donetska regions.  As a result, the Ukrainian economy is refocusing on the EU market by realizing the potential of the established Deep and Comprehensive Free Trade Area with the EU.

To further facilitate business activities in Ukraine, the National Bank of Ukraine (the "NBU") has lifted the foreign currency proceeds surrender requirement from 20 June 2019, cancelled all limits on repatriation of dividends from July 2019 and gradually decreased its rate of refinancing, from 18.0% in January 2019 to 8% in September 2021.

 

 

Notes to the INTERIM CONDENSED Consolidated financial statements

for the six-month period ended 30 June 2021

(in thousands of US dollars, unless otherwise indicated)

15. Contingencies and contractual commitments (continued)

Operating environment (continued)

The degree of macroeconomic uncertainty in Ukraine in 2021 still remains high due to a significant amount of public debt scheduled for repayment in 2021, which requires mobilizing substantial domestic and external financing in an increasingly challenging financing environment for the emerging markets. At the same time, the Ukrainian authorities have demonstrated their commitment to introduce reforms in order to boost economic growth, while maintaining macro-fiscal stability and liberalizing economic environment.

Further economic growth depends, to a large extent, upon the success of the Ukrainian government in realization of the planned structural reforms and effective cooperation with the International Monetary Fund (the "IMF") as well as the ability of the government to cope with the macroeconomic challenges posed by the confinement measures introduced to contain the spread of COVID-19.

The responses put in place by many countries, including Ukraine and the EU, to contain the spread of COVID-19 resulted in significant operational disruption for many companies and had a significant impact on global financial markets. While food supply chains proved to be largely resilient during the pandemic and the confinement measures are now being progressively lifted or adapted in Ukraine and other countries, many uncertainties yet remain around the economic recovery, and thus around the evolution of the consumer demand and the supply chain stability. In particular, the forecast magnitude of the recession is such that it is expected to lead to a sharp increase in unemployment in the EU, negatively impacting private consumption and limiting the Group's ability to enjoy benefits from export supplies to the EU and other key markets.

Management has considered all available information about the future, including the impact of the COVID-19 outbreak on customers, suppliers and staff, as well as the actual and projected foreseeable impact from various other factors. Management will continue to monitor the situation closely and will assess the need for additional measures in case the period of disruption is prolonged or escalates further.

The Group reviews its non-financial assets to determine if any external or internal indicators of impairment exists. Based on these reviews, there were no indicators of impairment as of 30 June 2021.

Taxation and legal issues

The Group performs most of its operations in Ukraine and therefore falls within the jurisdiction of the Ukrainian tax authorities. Ukrainian legislation and regulations regarding taxation and other operational matters, including currency exchange control and custom regulations, continue to evolve. Legislation and regulations are not always clearly written and are subject to varying interpretations by local, regional and national authorities, and other Governmental bodies. Non-compliance with Ukrainian laws and regulations can lead to the imposition of severe penalties and fines. Future tax examinations could raise issues or assessments which are contrary to the Group companies' tax filings. Such assessments could include taxes, penalties and fines, and these amounts could be material. While the Group believes it has complied with local tax legislation, there are new significant changes to the tax legislation that may be introduced in the near future.

Management believes that the Group has been in compliance with all requirements of effective tax legislation.

The Group exports vegetable oil, chicken meat and related products, and performs intercompany transactions, which may potentially be in the scope of the Ukrainian transfer pricing ("TP") regulations. The Group has submitted the controlled transaction report for the years ended 31 December 2018 and 31 December 2019 within the required deadlines.

As of 30 June 2021, the Group's management assessed its possible exposure to tax risks for a total amount of USD 5,680 thousand related to corporate income tax (31 December 2020: USD 5,459 thousand). No provision was recognised relating to such possible tax exposure.

As of 30 June 2021, companies of the Group were engaged in ongoing litigation with tax authorities for the amount of USD 37,594 thousand (31 December 2020: USD 36,616 thousand), including USD 27,326  thousand (31 December 2020: USD 26,153 thousand) of litigations with the tax authorities related to disallowance of certain amounts of VAT refunds and deductible expenses claimed by the Group. Out of this amount, USD 22,376 thousand as of 30 June 2021 (31 December 2020: USD 289 thousand) relates to cases where court hearings have taken place and where the court in either the first or second instance has already ruled in favour of the Group. In addition, the Group maintains disputes with tax authorities in the amount USD 26,951 thousand, which are not brought to the Court as at 30 June 2021.

 

 

Notes to the INTERIM CONDENSED Consolidated financial statements

for the six-month period ended 30 June 2021

(in thousands of US dollars, unless otherwise indicated)

15. Contingencies and contractual commitments (continued)

Taxation and legal issues (continued)

Manage-ment believes that, based on the past history of court resolutions of similar lawsuits by the Group, it is unlikely that a significant settlement will arise out of such lawsuits and no respective provision is required in the Group's financial statements as of the reporting date.

Contractual commitments on purchase of property, plant and equipment

During the six-month period ended 30 June 2021, the companies of the Group entered into a number of contracts with foreign suppliers for the purchase of property, plant and equipment for the development of agricultural operations. As of 30 June 2021, purchase commitments on such contracts were primarily related to modernization projects, new products development and the maintenance and improvement of Perutnina Ptuj production facilities and amounted to USD 16,923 thousand (31 December 2020: USD 15,396 thousand).

16.  Fair value of financial instruments

Fair value disclosures in respect of financial instruments are made in accordance with the requirements of IFRS 7 "Financial Instruments: Disclosure" and IFRS 13 "Fair value measurement". Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. As no readily available market exists for a large part of the Group's financial instruments, judgment is necessary in arriving at fair value, based on current economic conditions and specific risks attributable to the instrument. The estimates presented herein are not necessarily indicative of the amounts the Group could realize in a market exchange from the sale of its full holdings of a particular instrument.

The fair value is estimated to be the same as the carrying value for cash and cash equivalents, short-term bank deposits, trade accounts receivables, and trade accounts payable due to the short-term nature of the financial instruments.

Set out below is the comparison by category of carrying amounts and fair values of all the Group's financial instruments, excluding those discussed above, that are carried in the consolidated statement of financial position:

 

Carrying amount

 

Fair value

 

   30 June
 2021

31 December 2020

 

   30 June 2021

31 December 2020

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

Bank borrowings (Note 12)

103,466

 105,126  

 

102,662

103,737  

Senior Notes due in 2024, 2026, 2029 (Note 13)

1,394,777

 1,391,756  

 

1,482,501

 1,515,005  

The carrying amount of Bank borrowings and Senior Notes issued includes interest payable at each of the respective dates.

The fair value of bank borrowings was estimated by discounting the expected future cash outflows by a market rate of interest for bank borrowings 2.7% (31 December 2020: 3.4%), and is within Level 2 of the fair value hierarchy.

The fair value of Senior Notes was estimated based on market quotations and is within Level 1 of the fair value hierarchy

17.  Risk management policy

During the six-month period ended 30 June 2021 there were no changes to objectives, policies and processes for credit risk, capital risk, interest rate risk, livestock diseases risk and commodity price and procurement risk managing.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to settle all liabilities as they are due. The Group's liquidity position is carefully monitored and managed. The Group has in place a detailed budgeting and cash forecasting process to help ensure that it has adequate cash available to meet its payment obligations.
 

Notes to the INTERIM CONDENSED Consolidated financial statements

for the six-month period ended 30 June 2021

(in thousands of US dollars, unless otherwise indicated)

17.  Risk management policy (continued)

The following table details the Group's remaining contractual maturity for its non-derivative financial liabilities. The table has been drawn up based on the undiscounted cash flows of financial liabilities using the earliest date on which the Group can be required to pay. The table includes both interest and principal cash flows as of 30 June 2021 and 31 December 2020. The amounts in the table may not be equal to the statement of financial position carrying amounts since the table includes all cash outflows on an undiscounted basis.

 

Carrying

amount

Contractual

Amounts

Less than
 1 year

From 2nd to 5th year

After

5th year

30 June 2021

 

 

 

 

 

Bank borrowings

 103,466

 105,631

 50,424

 55,207

 -  

Bonds issued

 1,394,777

 1,893,313

 98,850

 1,367,900

 426,563

Lease liabilities

 224,041

 452,201

 66,670

 201,208

 184,323

Trade accounts payable

 179,027

 179,027

 179,027

-

-

Other current financial liabilities

 66,722

 66,722

 66,722

-

-

Total

 1,968,033

 2,696,894

 461,693

 1,624,315

 610,886

 

 

 

 

 

31 December 2020

 

 

 

 

 

Bank borrowings

 105,126

 109,620

 42,150

 67,470

 -

Bonds issued

 1,391,756

 1,942,738

 98,850

 837,275

 1,006,613

Lease liabilities

 198,499

 405,127

 57,204

 184,699

 163,224

Trade accounts payable

149,768

149,768

149,768

-

-

Other current financial liabilities

86,638

86,638

86,638

-

-

Total

 1,931,787

 2,693,891

 434,610

 1,089,444

 1,169,837

 

 

 

 

 

Currency risk

Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Group undertakes certain transactions denominated in foreign currencies.

The Group does not use any derivatives to manage foreign currency risk exposure, Group management sets limits on the level of exposure to foreign currency fluctuations.

The carrying amounts of the Group's foreign currency denominated monetary assets and liabilities as of
30 June 2021 and 31 December 2020 were as follows:

 

30 June 2021

 

31 December 2020

 

USD

EUR

 

USD

EUR

 

 

 

 

 

 

Total assets

 178,250

 55,329

 

 209,298  

 31,412  

Total liabilities

 1,436,734

 43,328

 

1,416,722

59,904

The table below details the Group's sensitivity to strengthening/(weakening) of the UAH against USD and EUR. This sensitivity range represents management's assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at the period end for possible change in foreign currency rates.

 

Change in foreign currency exchange rates

 

Effect on profit

before tax

2021

 

 

 

 

 

 

 

Increase in USD exchange rate

15%

 

(188,773)

Increase in EUR exchange rate

15%

 

 1,800

 

 

 

 

Decrease in USD exchange rate

15%

 

 188,773

Decrease in EUR exchange rate

15%

 

(1,800)

 

 

 

 

2020

 

 

 

 

 

 

 

Increase in USD exchange rate

15%

 

(181,114)

Increase in EUR exchange rate

15%

 

(4,274)

 

 

 

 

Decrease in USD exchange rate

15%

 

181,114

Decrease in EUR exchange rate

15%

 

4,274

 

 

 

 

 

 

Notes to the INTERIM CONDENSED Consolidated financial statements

for the six-month period ended 30 June 2021

(in thousands of US dollars, unless otherwise indicated)

17.  Risk management policy (continued)

Currency risk (continued)

During the six-month period ended 30 June 2021, the Ukrainian Hryvnia appreciated against the EUR by 7.5% and against the USD by 4.0% (six-month period ended 30 June 2020: depreciated against the EUR and USD by 11.8% and 11.3% respectively). As a result, during the six-month period ended 30 June 2021 the Group recognised net foreign exchange gain of USD 50,503 thousand (six-month period ended 30 June 2020: foreign exchange loss in the amount of USD 129,472 thousand) in the interim condensed consolidated statement of profit or loss and other comprehensive income.

18.  Dividends

At the extraordinary general meeting, which was held on 28 April 2021, the Shareholders of MHP SE approved payment of an annual dividend of USD 0.2803 per share, equivalent to USD 30,000 thousand to shareholders on the register as of 7 May 2021. As at 30 June 2021 dividends were fully paid to shareholders.

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. As at 31 December 2020 dividends were fully paid to shareholders.

19.  Subsequent events

There are no subsequent events to mention.

20.  Authorization of the interim condensed consolidated financial statements

These interim condensed consolidated financial statements were authorized for issue by the Board of Directors of MHP SE on 8 September 2021.

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