Notes to the INTERIM CONDENSED Consolidated financial statements

for the three-month period  ended 31 March 2025

(in millions of US dollars, unless otherwise indicated)

2.    Basis of preparation and accounting policies

Basis of preparation

The interim condensed consolidated financial statements for the three-month period ended 31 March 2025 have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" as adopted by the European Union (EU). The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements and should be read in conjunction with the Group's annual consolidated financial statements as of 31 December 2024, prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and the requirements of the Cyprus Companies Law, Cap.113.

The interim condensed consolidated financial statements are presented in the US dollars (USD) and all values are rounded to the nearest million, except when otherwise indicated.

Going concern

In 2025, the Group has continued its operations in an environment severely affected by the Russian invasion of Ukraine since 24 February 2022. The Group concluded that the analysis of the observable impact of the War as described on pages 171 and 217-218 of the Annual Report, which is available at mhp.com.cy, continues to be relevant for these interim condensed consolidated financial statements. The updates in the economic environment conditions during January-March 2025 are presented in Note 12 Operating environment.

Management has prepared financial forecasts, including cash flow projections, covering the 2025-2026 budget cycle. These forecasts reflect expected economic conditions, considering anticipated changes in the operating environment, including the impact of the War and other relevant factors. The Group ensures financial stability by continuously monitoring its obligations under existing debt agreements and implementing necessary measures to meet its debt servicing requirements in full and on time.

These forecasts indicate that the Group has adequate resources to continue in operational existence for the foreseeable future. The Directors have therefore concluded that it is appropriate to apply the going concern basis of accounting in preparing these consolidated financial statements. However, due to the currently unpredictable effects of the ongoing War, the Directors have concluded that a material uncertainty exists, which may cast significant doubt on the Group's ability to continue as a going concern, in which case the Group may be unable to realize its assets and discharge its liabilities in the normal course of business.

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 the Ukrainian companies of the Group is the Ukrainian Hryvnia ("UAH"); the functional currency of the Cyprus companies and Luxembourg company of the Group is the US Dollar ("USD"); the functional currency of the European companies of the Group is the Euro ("EUR"); the functional currency of the United Arab Emirates companies is the Dirham ("AED"); the functional currency of the UK company is the British Pound ("GBP"); the functional currency of the Saudi Arabia company is the Saudi Riyal ("SAR").

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 prevailing rates 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"), the Group's presentation currency, and all values are rounded to the nearest million, except when otherwise indicated.

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

 

Notes to the INTERIM CONDENSED Consolidated financial statements

for the three-month period  ended 31 March 2025

(in millions of US dollars, unless otherwise indicated)

2. Basis of preparation and accounting policies (continued)

Functional and presentation currencies (continued)

·      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 are translated at exchange rates at the dates of the transactions;

·      Exchange differences arising on translation for consolidation are recognised in other comprehensive income and presented as a separate equity component. 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 the revaluation reserve are translated at the historical exchange rate. The revaluation reserve is translated at the closing rate as of the statement of financial position date.

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.

The relevant exchange rates were:

Currency	Closing rate as of            31 March 2025	Average for three months ended     31 March 2025	Closing rate as of 31 December 2024	Average for three  months ended    31 March 2024
UAH/USD	41.4787	41.7563	42.039	38.1727
UAH/EUR	44.7472	43.8887	43.9266	41.4668
USD/EUR	1.0788	1.0511	1.0449	1.0863
USD/GBP	1.2946	1.2579	1.2594	1.2683
AED/USD	3.67	3.67	3.67	3.67
SAR/USD	3.75	3.75	3.75	3.75

Material 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 2024.

Seasonality of operations

Poultry and related operations, European operating segment, and Vegetable oils operations segment are not significantly exposed to seasonal fluctuations.

Agriculture operations segment, due to seasonality and implications of IAS 41, 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, it reflects sales of crops and the effect of revaluation of agricultural produce harvested during the year. Also, Agriculture operations segment has seasonal requirements for working capital increase from November to May due to the sowing campaign.

3.    Changes in the group structure

Acquisition of  Ukrainskyi Miasnyi Khutir

On 24 January 2025, the Group obtained control over Ukrainskyi Miasnyi Khutir LLC, a Ukrainian meat processing company. The acquisition was carried out in stages: an initial 24.9% stake was acquired in April 2024, increased to 49% in August 2024, and completed with the acquisition of the remaining 51% in January 2025.

The total estimated consideration for this acquisition is USD 15.6 million. At the acquisition date, the fair value of the company's identifiable net assets was USD 6.3 million, primarily consisting of property, plant and equipment, inventories, trade and other accounts receivables and payables.

Goodwill of USD 9.3 million was recognized as part of the transaction, reflecting expected synergies from the enhanced market presence in the processed meat segment, access to established brands such as  

 

Notes to the INTERIM CONDENSED Consolidated financial statements

for the three-month period ended 31 March 2025

(in millions of US dollars, unless otherwise indicated)

3. Changes in the group structure (continued)

Acquisition of  Ukrainskyi Miasnyi Khutir (continued)

"Ukrainskyi Miasnyi Khutir" and "Parowki", and anticipated operational efficiencies from integrating support functions while maintaining the acquired company's autonomous operations.

From the date of acquisition, Ukrainskyi Miasnyi Khutir contributed revenue of USD 3 million to the Group`s results. Its contribution to net profit was not material.

As of the date of approval of these consolidated financial statements, the Group is in the process of completing the purchase price allocation for the business combination, which is expected to be finalized within twelve months from the acquisition date. In addition to goodwill, the allocation is likely to result in the recognition of other intangible assets, such as trademarks and customer relationships.

4.    Segment information

The reportable segment information for the three-month period ended 31 March 2025 comprised:

	Poultry and related operations	Vegetable oils operations	Agriculture operations	European operating segment	Total reportable segments	Eliminations	Consolidated
External sales	421	119	92	147	779	-	779
Sales between segments	3	45	65	-	113	(113)	-
Total revenue	424	164	157	147	892	(113)	779
Segment results	48	-	25	13	86	-	86
Unallocated corporate expenses							(26)
Other expenses, net 1)							(21)
Profit before tax							39
Other information:
Depreciation and amortization expense 2)	33	1	17	7	58	-	58
Net change in fair value of biological assets and agricultural produce	30	-	(34)	-	(4)	-	(4)

¹⁾ Includes finance income, finance costs, foreign exchange gain.

²⁾ Depreciation and amortization for the three-month period ended 31 March 2025 does not include unallocated depreciation and amortization in the amount of USD 1.5 million.

The reportable segment information for the three-month period ended 31 March 2024 comprised:

	Poultry and related operations	Vegetable oils operations	Agriculture operations	European operating segment	Total reportable segments	Eliminations	Consolidated
External sales	398	116	69	136	719	-	719
Sales between segments	4	42	53	-	99	(99)	-
Total revenue	402	158	122	136	818	(99)	719
Segment results	66	12	8	13	99	-	99
Unallocated corporate expenses							(15)
Other expenses, net 1)							(70)
Profit before tax							14
Other information:
Depreciation and amortization expense 2)	21	1	14	6	42	-	42
Net change in fair value of biological assets and agricultural produce	12	-	1	(3)	10	-	10

¹⁾ Includes finance income, finance costs, foreign exchange loss.

²⁾ Depreciation and amortization for the three-month period ended 31 March 2024 does not include unallocated depreciation and amortization in the amount of USD 0.8 million.

Notes to the INTERIM CONDENSED Consolidated financial statements

for the three-month period ended 31 March 2025

(in millions of US dollars, unless otherwise indicated)

5.    Profit for the period

Gross profit decreased by 4% to USD 163 million for the three-month period ended 31 March 2025, down from USD 170 million for the same period in 2024. The decrease was largely attributable to diminished gross profits in the poultry and vegetable oil operations. However, improved performance in the agriculture segment helped to partially offset these losses.

Operating profit fell to USD 60 million for the three-month period ended 31 March 2025, down from USD 84 million for the same period in 2024. The decrease was driven by adverse changes in gross profit and  increased payroll expenses within the selling, general, and administrative functions along with additional war-related costs recorded under other operating expenses.

Profit for the three-month period ended 31 March 2025 was USD 32 million, up from USD 16 million for the same period in 2024. This increase was mainly attributable to the relative stabilization of Ukrainian Hryvnia against US Dollar and EURO, leading to a foreign exchange gain of USD 13 million for the three-month period ended 31 March 2025, compared to a loss of USD 40 million for the same period in 2024.

6.    Property, plant and equipment

During the three-month period  ended 31 March 2025, the Group's additions to property, plant and equipment amounted to USD 66 million (three-month period ended 31 March 2024: USD 59 million) mainly related to  maintenance and modernization of existing facilities.

There were no significant disposals of property, plant and equipment during the three-month period ended 31 March 2025.

7.    Inventories and agricultural produce

An increase in inventory balance as of 31 March 2025 compared to 31 December 2024 is mainly attributable to costs incurred by grain growing entities in preparation for the upcoming spring sowing campaign. Additionally, increased acquisitions of sunflower seeds intended for vegetable oil production have contributed to this uptick.

A decrease of agricultural produce for three-month period ended 31 March 2025 was mainly as a result of consumption of internally produced grains that was partially mitigated by increase of chicken meat stocks.

8.    Shareholders' equity

As of 31 March 2025 and 31 December 2024 the authorized, issued and fully paid share capital of MHP SE comprised the following number of shares:

	31 March 2025		31 December 2024
Number of shares issued and fully paid	110,770,000		110,770,000
Less: Treasury shares	(3,731,792)		(3,731,792)
Number of shares outstanding	107,038,208		107,038,208

The authorized share capital as of 31 March 2025 and 31 December 2024 was EUR 221,540 million 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 three-month period ended 31 March 2025

(in millions of US dollars, unless otherwise indicated)

9.    Bank borrowings

The following table summarizes bank borrowings and credit lines outstanding as of 31 March 2025 and 31 December 2024:

								31 March 2025					31 December 2024
				Currency			WAIR 1)		USD' mln			WAIR 1)		USD' mln mlm000
Non-current
				EUR			EURIBOR2) + 1.04%		116			EURIBOR2) + 1,03%		105
				EUR			1.99%		4			1,50%		4
				USD			SOFR3) + 3.95%		337			SOFR3)+ 3,95%		337
				USD			UIRD4) + 5.53%		42			UIRD4)+ 5,53%		44
				UAH			UIRD4) + 4,00%		2			UIRD4)+ 4,00%		2
									501					492
Current
				EUR			EURIBOR2) + 2.30%		35			EURIBOR2) + 2,30%		34
				EUR			4.80%		54			4,60%		54
				USD			SOFR3) + 2.48%		32			SOFR3) + 2,48%		32
				USD			5.70%		55			5,70%		45
Current portion of long-term bank borrowings				EUR			EURIBOR2) + 1.04%		29			EURIBOR2) + 1,03%		26
				EUR			1.99%		1			1,50%		1
				USD			SOFR3) + 3.95%		75			SOFR3)+ 3,95%		74
				USD			UIRD4) + 5.53%		7			UIRD4)+ 5,53%		5
									288					271
Total bank borrowings									789					763

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

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

³⁾         The Secured Overnight Financing Rate (SOFR) is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities;

⁴⁾         Ukrainian Index of Retail Deposit Rates (UIRD) - indicative rate calculated at 15:00 Kyiv time of each Banking Day in the Thomson Reuters system based on nominal rates on time deposits of individuals in US Dollars for a period of 3 months with interest paid upon the expiration of the deposit agreement, operating in 20 largest Ukrainian banks in the size of the deposit portfolio of individuals;

The Group's borrowings are drawn from various banks, mostly from international ones and Ukrainian subsidiaries of international banks as term loans, credit line facilities. Repayment terms of principal amounts of bank borrowings vary from monthly repayment to repayment on maturity depending on the terms of the agreement with each bank.

As of 31 March 2025 and 31 December 2024, the Group's bank term loans and credit lines bear either floating or fixed interest rates.

Term loans and credit line facilities were as follows as of 31 March 2025 and 31 December 2024:

	31 March 2025		31 December 2024
Credit lines	176		164
Term loans	613		599
	789		763

Bank borrowings and credit lines outstanding as of 31 March 2025 and 31 December 2024 were repayable as follows:

	31 March 2025		31 December 2024
Within one year	288		271
In the second year	137		134
In the third to fifth year inclusive	344		336
After five years	20		22
	789		763

Notes to the INTERIM CONDENSED Consolidated financial statements

for the three-month period ended 31 March 2025

(in millions of US dollars, unless otherwise indicated)

9. Bank borrowings (continued)

As of 31 March 2025, the Group had undrawn facilities of USD  177 million (31 December 2024: USD 162 million). These undrawn facilities expire during the period until January 2030.

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 31 March 2025, the Group had borrowings of USD 204 million that were secured by property, plant and equipment with a collateral amount of USD  192 million (31 December 2024: USD 189 million and USD 188 million respectively).

As of 31 March 2025, the Group had borrowings of USD 85  million that were secured by agricultural produce with a carrying amount of USD 107 million (31 December 2024: USD 84 million and USD 105 million respectively).

As of 31 March 2025 and 31 December 2024, interest payable on bank borrowings was USD 18.0 million and USD 8.6 million, respectively.

Covenants

The Group, as well as its specified subsidiaries, have to comply with the following maintenance covenants imposed by the banks providing the loans: EBITDA to interest expenses ratio, current ratio, and liabilities to equity ratio. These covenants are assessed periodically to ensure compliance, and the Group is required to meet these covenants on a quarterly basis.

As of the reporting date, the carrying amount of non-current liabilities related to these covenants is USD 327 million. The Group has reviewed all relevant facts and circumstances and believes that is unlikely that the risk of non-compliance with these covenants can be realized. This assessment considers the Group's current financial position and historical performance, along with its established processes for proactively managing financial metrics to maintain compliance with covenant requirements. The Group consistently monitors these metrics to ensure that all covenant obligations are met.

Separately, in case of excess of Net Debt to EBITDA ratio (the Group's leverage ratio), there are negative covenants in respect of restricted payments, including dividends, additional indebtedness and restrictions on mergers or consolidations, limitations on liens and dispositions of assets and limitations on transactions with affiliates.

As of 31 March 2025 the Group has complied with all bank covenants. As of 31 March 2025, the Group's leverage ratio slightly increased to  2.13  to 1, below the defined limit of 3.0 to 1, compared with 2.08 to 1 as at 31 December 2024 respectively.

10.  Bonds issued

Bonds issued and outstanding as of 31 March 2025 and 31 December 2024 were as follows:

Carrying amount

Nominal amount

 

	31 March 2025		31 December 2024		31 March 2025		31 December 2024
Non-current
6.25% Senior Notes due in 2029	348		348		350		350
6.95% Senior Notes due in 2026	547		546		550		550
	895		894		900		900
Unamortized debt issuance cost	-		-		(5)		(6)
Total bonds issued	895		894		895		894

 

As of 31 March 2025 and 31 December 2024 amount of accrued interest on bonds issued was USD 19.5 million and USD 15.4 million, respectively.

 

Notes to the INTERIM CONDENSED Consolidated financial statements

for the three-month period ended 31 March 2025

(in millions of US dollars, unless otherwise indicated)

10. Bonds issued (continued)

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 million 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 general corporate purposes.

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 in March and September. 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.

6.95% Senior Notes

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

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 in April and October. 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 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 million 7.75% Senior Notes due in 2024 at par value. Out of the total issue amount, USD 245 million were designated for redemption and exchange of existing 8.25% Senior Notes due in 2020.

To refinance part of these Notes, the Group secured up to USD 400 million in facilities from DFC, IFC, and EBRD. These funds were used for repurchasing Notes under Tender Offers in November 2023 (USD 151 million repurchased for USD 128 million) and January 2024 (USD 138 million repurchased for USD 131 million). As the Group repurchased these Notes with discount, finance income in the amount of USD 6 million was recognized in 2024 (2023: USD 22 million). The remaining USD 211 million was repaid in May 2024.

As a result, all obligations under the 7.75% Senior Notes due in 2024 have been fully discharged.

Notes to the INTERIM CONDENSED Consolidated financial statements

for the three-month period ended 31 March 2025

(in millions of US dollars, unless otherwise indicated)

10. Bonds issued (continued)

Covenants

Certain restrictions under the indebtedness agreements (e.g. incurrence of additional indebtedness, restricted payments as defined above, dividends payment) are dependent on the leverage ratio of the Group calculated as Net Debt to EBITDA. Once the leverage ratio exceeds 3.0 to 1, it is not permitted for the Group to make certain restricted payments, declare dividends exceeding USD 30 million in any financial year, or incur additional debt except that defined as a Permitted Debt. According to the indebtedness agreements, the consolidated 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).

As of 31 March 2025 the Group has complied with all covenants. As of 31 March 2025, the Group's leverage ratio decreased to  2.13  to 1, below the defined limit of 3.0 to 1, compared with 2.08 to 1 as at 31 December 2024 respectively.

11.  Related party balances and transactions

For the purpose 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 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 under common control

The Group, in the ordinary course of business, enters into transactions with related parties that are companies under common control of the Principal Shareholder of the Group (Note 1) for the purchase and sale of goods and services and the key management personnel 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 the Group's trading activities do not vary significantly from the terms of similar transactions with third parties.

Transactions with related parties during the three-month periods ended 31 March 2025 and 31 March 2024 were as follows:

in thousand USD	2025			2024
Interest charged on loans and finance aid provided		36		63
Sales of goods		91		227
Purchases from related parties		78		31
Key management personnel of the Group:
Loans provided		-		131
Loans repaid		44		66

The balances owed to and due from related parties were as follows as of 31 March 2025 and 31 December 2024:

in thousand USD	2025		2024
Loans and finance aid receivable	3,635		5,287
Less: expected credit losses	(2,337)		(1,955)
	1,298		3,332
Loans to key management personnel	3,607		3,336
Less: expected credit losses	(792)		(596)
	2,816		2,740
Trade accounts receivable	317		346
Payables due to related parties	25		28
Payables due to associates	105		189

 

Notes to the INTERIM CONDENSED Consolidated financial statements

for the three-month period ended 31 March 2025

(in millions of US dollars, unless otherwise indicated)

11. Related party balances and transactions (continued)

Loans and finance aid receivable

For loans and finance aid receivable, credit risk increased to the point where it is considered credit-impaired. The expected credit loss for such loans amounted to USD 1,841 thousand and USD 1,810 thousand as at 31 March 2025 and 31 December 2024 respectively.

Compensation of key management personnel

Total compensation of the Group's key management personnel included primarily in selling, general and administrative expenses in the Consolidated Statements of Profit and Loss and Other Comprehensive Income amounted to USD 2,916 thousand and USD 2,843 thousand for the periods ended 31 March 2025 and 2024, respectively. Compensation of key management personnel consists of contractual salary and performance bonuses paid.

12.  Operating environment

On 24 February 2022, Russian forces commenced a military invasion of Ukraine, resulting in a full-scale war across the Ukrainian State. The ongoing military hostilities have led and continue to lead, to significant casualties, dislocation of the population, damage to infrastructure, disruption to economic activity in Ukraine. Some territories remain temporarily occupied, further complicating the situation.

In 2024, Ukrainian businesses continued their activities in the challenging economic environment, facing disruption of supply chains, rising operational costs, and physical destruction of production facilities and infrastructure. Between March and August 2024, Russian attacks on Ukrainian power generation and distribution infrastructure led to the loss of a number of power generating capacities, severe power outages and increased electricity price.

The stable operation of the Black Sea corridor, established during second half of 2023, continued to support economic activities of Ukrainian companies. However, logistic challenge, which arose from the blockade of the Polish-Ukrainian border by Polish truckers and farmers during November 2023 - April 2024, negatively impacted the country's external trade during this period.

The European Union's Autonomous Trade Measures (ATMs), which have granted Ukrainian agricultural products, including poultry, tariff-free access to EU markets, are set to expire on June 5, 2025. These measures have played a critical role in supporting Ukraine's economy during ongoing challenges. However, their expiration could result in the reinstatement of tariffs and quotas on key exports. The expiration of ATMs introduces uncertainty, and the Company is closely monitoring developments and preparing to adapt to the evolving trade landscape.

In the first quarter of 2025, the NBU estimates that real GDP grew by 0.5% y/y, supported largely by a relatively stable electricity supply. However, GDP growth for the full year is expected to remain subdued, constrained by the ongoing impacts of the war. Key limiting factors include labour shortages-exacerbated by a continued negative migration balance-increased shelling, and damage to gas infrastructure, which is expected to raise reliance on imports. Additionally, global trade tensions are weighing on external demand. These challenges have led to a downward revision of the real GDP growth forecast for 2025 to 3.1%.

In the first quarter of 2025, consumer inflation was expected to rise, accelerating to 14.6% y/y in March, up from 12.0% in December 2024. A key driver of this increase was the limited domestic food supply following last year's poor harvests. While the primary impact of this factor was already reflected at the end of 2024, its residual effects are still being felt. However, these effects are expected to gradually subside as supply expands with the arrival of new harvests, including greenhouse and household produce.

To stabilize the foreign exchange market, anchor inflation expectations, and gradually bring inflation down to the 5% target over the policy horizon, the NBU raised its key policy rate to 15.5%.

The NBU continued implementing its managed exchange rate flexibility policy, first introduced in October 2023. Throughout the year, the official exchange rate of the hryvnia against the US dollar gradually declined, following a depreciation trend.

The Government continues to implement measures to stabilize markets and the economy. International organizations (such as the IMF, EBRD, World Bank), along with individual countries and charities, are providing Ukraine with financing, donations and material support. International assistance remains an important source of financing to meet state budget needs.

Despite the ongoing conflict, the Ukrainian economy has been demonstrating remarkable resilience and adaptability, relying on international support and domestic reforms to sustain recovery.

Notes to the INTERIM CONDENSED Consolidated financial statements

for the three-month period ended 31 March 2025

(in millions of US dollars, unless otherwise indicated)

12. Operating environment (continued)

The Group considers the following expenses incurred during the three-month periods ended 31 March 2025 and 31 March 2024 to be directly related to or driven by the continuing war:

	2025		2024
Salary to mobilized employees2)	5.6		5.2
Community support donations1)	5.1		3.5
Write-off of inventories and biological assets1)	2.6		-
Other war-related expenses1)	0.8		1.0
Total amount recognized in profit or loss	14.1		9.7

¹⁾         These expenses are presented within other operating expenses in the consolidated statement of profit or loss and other comprehensive income;

²⁾         These expenses are presented within cost of sales and selling, general and administrative expenses in the consolidated statement of profit or loss and other comprehensive income.

The Group, working with volunteers, has provided humanitarian aid (mainly through food supply) to the people of Ukraine since the beginning of the war.

While the Ukrainian businesses and government institutions demonstrated a high degree of adaptability and resilience in the face of challenges brought by the full-scale military invasion, the related security and macroeconomic risks remain high and continue to affect the economic situation in Ukraine. Due to the unpredictability in the future course of the war and the uncertainty regarding the timing of its cessation as well as availability of sustainable international financial support, other geopolitical and macroeconomic factors, it remains difficult to estimate the scale and direction of possible further developments, both negative or positive, in the operating environment in Ukraine at present.

13.  Contingencies and contractual commitments

Taxation and legal issues

The Group carries its operations in various jurisdictions, with a significant number of operations in Ukraine. Ukrainian legislation regarding taxation and other regulatory matters, including currency exchange control and customs regulations, is regularly changed and revisited. Non-compliance with tax laws and regulations may lead to the imposition of severe penalties and fines.

Management believes that the Group has complied 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 regulations. The Group believes that it complies with relevant transfer pricing requirements.

As of 31 March 2025 and 31 December 2024, management assessed the Group`s possible exposure to tax risks for a total amount of USD 4 million related to corporate income tax. No provision was recognised relating to such possible tax exposure.

As of 31 March 2025, companies of the Group were engaged in ongoing litigation with tax authorities for the amount of USD 34 million (31 December 2024: USD 35 million), including USD 3 million (31 December 2024: USD 5 million) 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 29 million as of 31 March 2025 (31 December 2024: USD 30 million) relates to cases where court hearings have taken place and where the court in either the first or second instance has ruled in favour of the Group. In addition, the Group maintained disputes with tax authorities in the amount USD 2 million, which are not brought to the courts as at 31 December, but there were not such disputes as at 31 March 2025.

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

Contractual commitments on purchase of property, plant and equipment

During the three-month period ended 31 March 2025, the companies of the Group entered into a number of contracts with foreign suppliers for the purchase of property, plant and equipment. These agreements are mainly related to maintenance and modernization projects, new product development in Ukraine, and expansion of Perutnina Ptuj production facilities. As of 31 March 2025, purchase commitments amounted to USD 77 million (31 December 2024: USD 70 million).

Notes to the INTERIM CONDENSED Consolidated financial statements

for the three-month period ended 31 March 2025

(in millions of US dollars, unless otherwise indicated)

14.  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 defined as the amount at which the instrument could be exchanged in a current transaction between knowledgeable willing parties in an arm's length transaction, other than in forced or liquidation sale. 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, other current assets, and trade accounts payable due to the short-term nature of the financial instruments. The fair value of non-current financial assets is measured by discounting the estimated future cash outflows, with reference to market interest rates, and it approximates the carrying value of non-current financial assets.

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

	Carrying amount			Fair value
	31 March 2025	31 December 2024		31 March 2025	31 December 2024
Financial liabilities
Bank borrowings (Note 8)	806	772		806	774
Senior Notes due in 2026, 2029 (Note 9)	915	909		823	807

The fair value of bank borrowings was estimated by discounting the expected future cash outflows by a market rate of interest for bank borrowings, 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.

In determining the fair value of financial instruments, the impact of potential climate-related matters, including legislation, climate change, and company climate objectives, which may affect the fair value measurement of financial assets and liabilities, has been considered and found not to be material.

15.  Risk management policy

During the three-month period ended 31 March 2025 there were no material changes to the objectives, policies and process for credit risk, capital risk, liquidity risk, currency risk, interest rate risk, livestock diseases risk and commodity price and procurement risk managing.

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 subsidiaries undertake various export and import transactions and have certain loans and borrowings denominated in foreign currencies. In particular, the Ukrainian operations (with UAH as their functional currency) are primarily exposed to the foreign currency risk. The Group does not use any derivatives to manage foreign currency risk exposure. However, Management limits exposure to foreign currency fluctuations to manage currency risk.

The carrying amounts of the Group's foreign currency denominated monetary assets and liabilities as of
31 March 2025 and 31 December 2024 were as follows:

	31 March 2025			31 December 2024
	USD	EUR		USD	EUR
Assets	218	108		215	97
Liabilities1)	1,494	160		1,470	153
Net liabilities	1,276	52		1,255	56

                ¹⁾  Currency denominated liabilities consist mostly of bonds issued and bank borrowings.

 

Notes to the INTERIM CONDENSED Consolidated financial statements

for the three-month period ended 31 March 2025

(in millions of US dollars, unless otherwise indicated)

15. Risk management policy (continued)

The table below illustrates the Group's sensitivity to a change in the exchange rate of the Ukrainian Hryvnia against the US Dollar and EUR. The sensitivity analysis includes only outstanding foreign currency denominated monetary items and adjusts their translation at period end for possible change in foreign currency rates.

	Change in foreign currency exchange rates		Effect on profit before tax
2025
Increase in USD exchange rate	10%		(128)
Increase in EUR exchange rate	10%		(5)
Decrease in USD exchange rate	2%		26
Decrease in EUR exchange rate	2%		1
2024
Increase in USD exchange rate	10%		(126)
Increase in EUR exchange rate	10%		(6)
Decrease in USD exchange rate	2%		25
Decrease in EUR exchange rate	2%		1

During the three-month period ended 31 March 2025, the Ukrainian Hryvnia depreciated against the EUR by 1.8% but appreciated against the USD by 1.4% (three-month period  ended 31 March 2024: depreciated against the EUR by 0.4% and the USD by 3.2%). As a result, during the three-month period  ended 31 March 2025 the Group recognized net foreign exchange gain in the amount of USD 13 million (three-month period ended 31 March 2024: foreign exchange loss in the amount of USD 40 million) in the consolidated statement of profit or loss and other comprehensive income.

16.  Subsequent events

Planned acquisition in 2025

Subsequent to the reporting date, MHP signed additional adherence deeds following the Share Purchase Agreement (SPA) dated 20 March 2025 with shareholders representing 41% of UVESA's share capital, increasing its total acquired stake to 92%. Further details on this transaction are provided on the page 225 of the 2024 Annual Report, which is available at mhp.com.cy.

There are no other subsequent events to mention.

17.  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 20 May 2025.