A LEADING
INTERNATIONAL
FOOD AND AGROTECH
COMPANY
ANNUAL REPORT
AND ACCOUNTS 2022
STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
4 War in Ukraine
7
Performance Highlights
10 MHP at a Glance
15 Chair’s Statement
18 CEO’s Statement
33
38
46
Key Performance
Indicators
114
Chair’s Introduction to
Corporate Governance
142 Statement of the Board
218 Shareholder
of Directors
Information
Financial and Operational
Review
116
Corporate Governance
Report
143 Independent Auditor’s
219 Glossary of Terms
Review
Measures of Financial
Performance
119
Board of Directors
149 Consolidated Financial
127 Audit & Risk Committee
Statements
155 Notes to Financial
Statements
20 Segment Overview
49
Risk Management
Report
28 Our Business Model
54
MHP’s Growth Pillars
& case studies
107 TCFD Disclosures
111
Non-Financial
Information Statement
133 Nominations and
Remuneration Committee
Report
135 Sustainability and
International Affairs
Committee Report
137 Management Report
CONTENTS
STRATEGIC
REVIEW
4 War in Ukraine
7
Performance Highlights
10 MHP at a Glance
15 Chair’s Statement
18 CEO’s Statement
20 Segment Overview
28 Our Business Model
02
I
W
E
V
E
R
S
S
E
N
S
U
B
I
03
E
C
N
A
N
R
E
V
O
G
04
05
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
F
I
I
I
N
O
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
STRATEGIC REVIEW
WAR IN UKRAINE
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
WAR IN UKRAINE
THE MILITARY INVASION OF UKRAINE BY RUSSIAN FORCES BEGAN ON 24 FEBRUARY
2022, MARKING THE BEGINNING OF FULL-SCALE WAR ACROSS THE COUNTRY. AT
THE TIME OF PUBLICATION OF THIS REPORT, THE WAR CONTINUES, INFLICTING
DESTRUCTION ON UKRAINE'S INFRASTRUCTURE AND ITS POPULATION. MANY LIVES
HAVE TRAGICALLY BEEN LOST, INCLUDING 58 MEMBERS OF OUR WORKFORCE
KILLED IN ACTION AS OF THE DATE OF THIS REPORT; OUR THOUGHTS ARE WITH THE
FAMILIES OF THESE PATRIOTIC COLLEAGUES.
The Group is managing successfully the
significant risks and challenges caused by
the sustained Russian attacks on Ukraine’s
infrastructure and is currently operating
at close to full production capacity.
MHP’S RESPONSE TO THE WAR
The past year has demonstrated the
tremendous resilience and agility of
MHP’s business model and workforce.
The Group’s ability to maintain operations
and ensure stable production is also
attributable
rapidly
the
implemented by the management team
at the start of the War in areas including
supply chain management and logistics.
steps
to
Managing extreme uncertainty, ensuring
the safety of
the workforce, and
maintaining operations and employment
were the greatest challenges following
invasion. On 24 February 2022,
the
the Group established three war-time
priorities which remain unchanged today:
ensuring the safety and wellbeing of our
workforce; domestic food security; and
supporting Ukraine and its people. At the
same time, the Group put in place systems
to ensure constant communication with
all its stakeholders. Management teams
were devolved to enterprises
in the
regions to provide effective leadership
and role models, to boost morale, and to
demonstrate courage and, above all, unity.
For an overview of the Board’s main areas
of focus since the outbreak of War, see
Introduction to Corporate
the Chair’s
Governance on page 114.
risk
to operations due
At the time of publication, notwithstanding
the significant general uncertainties
inherent to the continued war, the
management team sees a significant
ongoing
to
the recurring attacks on the critical
infrastructure of Ukraine which led to
a number of disruptions in operations,
particulary in the second half of 2022. The
frequent attacks on infrastructure have
continued in the first quarter of 2023.
For more information on the Group’s
management of War-related risks see
the Principal Risks and Uncertainties
section on page 50 and the Audit & Risk
Committee Report on page 127.
4
ANNUAL REPORTAND ACCOUNTS 2022 BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
STRATEGIC REVIEW
WAR IN UKRAINE
1
SAFETY AND WELLBEING
OF OUR WORKFORCE
MHP's culture of looking after its people
has never been more pertinent than over
the past year. Since the outbreak of the
War, the Group has spared no effort to
ensure the safety and well-being of its
workforce. MHP has (a) identified those
most at risk, relocating approximately 600
staff and their families from dangerous
locations to 'hubs' in safer areas (b)
endeavored to provide a safe working
environment for employees returning to
work and (c) continued to offer stable
employment to our workforce, committed
to ensure Ukraine's food security.
support
includes
Broader ongoing
packages of assistance to employees
who have suffered because of military
action; full coverage of treatment and
rehabilitation costs in the event of injury
caused by the hostilities; psychological
the establishment of
support; and
children’s centres to enable employees to
go to work. More information on support
provided by the Group can be found in
Growth Pillars 2 and 3 on pages 63 and 75.
MHP is continuing to pay wages in full to
all employees seconded to the Ukrainian
Army. At the time of publication, that
number is over 1,700 people.
2
FOOD SECURITY
AND HUMANITARIAN AID
Since the outbreak of War, the workforce
has been united in undertaking every
effort possible to ensure that Ukrainians
have access to food now and in the
future. MHP’s businesses and sales teams
have continued to work and to assist
partners in all regions, often in dangerous
fleets of
situations, operating
to
logistics
our business model
the
establishment of new routes to market
and two-way supply chains. For more
the CEO’s
information, please see
Statement on page 18.
large
Adaptations
included
vehicles.
Working with volunteers and alongside
NGOs, the Group has provided over
12,000 tonnes of poultry, other food
products, and equipment pro bono to
residents of war zones, communities,
homes,
and maternity
hospitals
charitable
internally
institutions, and
displaced persons.
Following de-mining and the Ukrainian re-
claiming of land, the Group completed the
harvest on virtually all MHP’s land in 2022
(cropped land around 341,000 hectares
compared with 351,400 hectares in 2021).
5
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC REVIEW
WAR IN UKRAINE
3
SUPPORT FOR UKRAINE
AND ITS PEOPLE
The Group remains highly responsive to
the Ukrainian population’s needs. MHP
has worked tirelessly
in cooperation
with NGOs and local authorities, and
through the MHP Charitable organisation
“MHP – Gromadi”, to support the safety
and wellbeing of the people of Ukraine
through a range of cultural, social, and
economic initiatives.
included
to date has
the
Support
purchase of modern ambulances and a
tow truck for the evacuation of medical
vehicles transporting wounded Ukrainian
soldiers; the provision of refrigeration
for supermarkets; aid and
services
support
(including healthcare, access
to social services and counselling) to
more than 300,000 internally displaced
persons (IDPs) from around 100 Ukrainian
centres; the provision of the Group’s
KOKO-branded baby food and other
hygiene products to 100,000 IDP children;
the establishment of two IDP shelters
in central and western Ukraine; and
financial contributions
the
establishment of 75 bomb shelters in
kindergartens, schools and hospitals
across eight regions of Ukraine. The
Group’s National “Cinema for Victory!”
initiative was
in August
2022 with the objectives of boosting
morale and providing support and
to communities and
encouragement
IDPs. 1,306 film screenings were held in
2022 in 18 regions of Ukraine.
launched
towards
sustained
economy.
To
development
The Group also continues to support
promote
Ukraine’s
the
of
entrepreneurship during the War, MHP
has provided business grants for start-
ups and for the relocation of businesses
to safer areas, and, in response to Russia’s
relentless attacks on Ukraine’s energy
for projects
funding
infrastructure,
working to ensure local energy security.
Working with the Ministry of Agrarian
Policy and Food, the Group is supporting
implementation
the development and
of business ideas for the development
of agriculture in communities and food
self-sufficiency. For more information on
the broad support provided, see Growth
Pillar 3 on page 75.
Key to the Group’s economic support
is the maintenance of our operations
and workforce. Throughout the War,
the Group has focussed on mobilising
employees and maximising employment
levels. This has been possible due to
the tremendous engagement of our
workforce and, often, the retraining of
employees, for example, in logistics. The
implementation of our adaptive approach
to remuneration also enabled the Group
to maintain maximum levels of activity
at the enterprises. For more details, see
Growth Pillar 3 on page 75.
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
WAR-RELATED LOSSES, DISRUPTIONS AND COSTS
At the time of publication, the Group
has not suffered any material damage to
its facilities, infrastructure and produce
in Ukraine except for the destruction
of a leased storage facility in Kvitneve
village resulting in a loss of US$6 million
(approximately 3,000 tonnes) of frozen
poultry in March 2022. The “Ukrainian
Bacon” (meat-processing) operations in
the Donetsk region were suspended in April
2022 and subsequently transferred to other
locations in Ukraine.
In the second half of 2022, MHP experienced
a number of significant disruptions and
operational
its business
issues within
as a result of severe power outages in
Ukraine caused by Russia's attacks on
Ukrainian power generation and distribution
infrastructure. These outages caused
temporary instability of oilseed processing,
poultry and silo operations, which the
Company managed to mitigate equipping
its key assets with diesel generators.
incurred substantial
The Group has
War-related costs. For
the period
ended 31 December 2022. These
amounted to US$ 69 million, including
community support donations, write-
and biological
off of
assets, and other War-related expenses.
inventories
THE GROUP HAS
INCURRED SUBSTANTIAL
WAR-RELATED COSTS OF
US$
69 M1
1 Without loss on impairment of property, plant and
equipment (section War in Ukraine)
6
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC REVIEW
PERFORMANCE HIGHLIGHTS
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
PERFORMANCE
HIGHLIGHTS
FINANCIAL HIGHLIGHTS
REVENUE
US$ million
+11% y/y
EXPORT REVENUE
US$ million
+26%
y/y
EXPORT REVENUE AS
A % OF TOTAL REVENUE
ADJUSTED EBITDA1
US$ million
-41%
y/y
61%
53%
2,642
2022
2,372
2021
1,601
2022
1,265
2021
2022
2021
384
2022
648
2021
NET DEBT
US$ million
NET DEBT/LTM
EBITDA RATIO
3.22
WAR-RELATED COSTS2
2022:
1.90 69
US$ million
1,237
2022
1,230
2021
2022
2021
2021: NIL
7
1 Adjusted EBITDA is net of IFRS 16
2 Without loss on impairment of property, plant and
equipment (section War in Ukraine)
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC REVIEW
PERFORMANCE HIGHLIGHTS
OPERATIONAL
HIGHLIGHTS
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
RESILIENCE
RESISTANCE
INNOVATION
The Group is operating at almost
100%
capacity utilisation despite
War-related challenges
SUPPORT FOR MOBILISED
EMPLOYEES
1,700
people of our workforce mobilised
to the Ukrainian army;
MHP continues to pay their
salaries in full
Our vertically integrated
business model underpinned
our robust performance
Re-establishment of supply and
export routes has enabled the Group
to continue to export to over
70+
countries
WE WORK FOR UKRAINE
We will continue to support
Ukraine, its economy, and its
people
PARTNERSHIPS
Unprecedented ongoing
support from bondholders,
creditors, and suppliers
FINANCIAL SUPPORT
CARE FOR OUR WORKFORCE
HUMANITARIAN AID
US$12.9M
paid in support of the elderly,
mobilised employees,
and their families
Broad ongoing support for our
28,300
- strong workforce
and their families
OVER
12,000
US$28.4M
tonnes of poultry
donated pro bono
to Ukraine
of funding provided
for social projects
(incl. response to War)
8
ANNUAL REPORTAND ACCOUNTS 2022
STRATEGIC REVIEW
PERFORMANCE HIGHLIGHTS
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
OUR COMMITMENT TO
RESPONSIBLE BUSINESS
CONTINUES
For detailed information on
our approach to responsible
business see our six Growth
Pillars set out from page 54
onwards.
GREENHOUSE GAS EMISSIONS — UKRAINE
CARBON TRUST
SCOPE
1 EMISSIONS,
TONNES
-5%
y/y
SCOPE
2 EMISSIONS,
TONNES
-7%
y/y
Alltech ECO2
project finalised
Carbon Trust accreditation
process underway
353,413 373,673
2022
2021
220,985 237,776
2022
2021
UKRAINE
WATER USAGE
14.5 m3
MILLION
9
WATER USAGE
EUROPEAN OPERATING
SEGMENT WATER USAGE
2.0 m3
MILLION
ENERGY MANAGEMENT — UKRAINE
TOTAL ENERGY USED
FROM RENEWABLE
SOURCES, TJ
STABLE
OF WHICH
BIOGAS, TJ
STABLE
1,707
2022
1,691
2021
1,031
2022
1,065
2021
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC REVIEW
MHP AT A GLANCE
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
MHP AT A GLANCE
Since 2019, MHP has been transforming to
a culinary company. Its vision is to be a
world-leading sustainable food producer.
WE ARE MHP
MHP is a leading international food and
agrotech company. The Group is focussed
on developing and providing high quality,
sustainable proteins,
food products
and culinary solutions that are safe and
responsibly sourced.
The Group is the largest producer of
poultry, culinary and processed-meat
products, and grains and oils in Ukraine.
It is also one of the leaders in poultry
production and meat processing
in
the Balkans through its Perutnina Ptuj
operations.
For information on the Group’s response
to the War, and on the support provided
by MHP, see the War in Ukraine section
on page 4 and Growth Pillars 2 and 3 on
pages 63 to 77.
WE WORK FOR UKRAINE
Since the invasion of Ukraine by Russia
in February 2022, our near-term purpose
and strategy have evolved as we have
adapted to the rapidly changing situation.
Our immediate priority is to safeguard
the security of our workforce and the
people of Ukraine, and to work to ensure
food security. Our long-term purpose and
strategy remain unchanged.
10
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC REVIEW
MHP AT A GLANCE
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
OUR PURPOSE AND STRATEGY
THE GROUP’S NEAR-TERM PURPOSE AND STRATEGY HAVE EVOLVED AND ADAPTED
AS MHP HAS PLAYED A LEADING ROLE IN BOTH DOMESTIC AND INTERNATIONAL
FOOD SECURITY AND THE PROVISION OF HUMANITARIAN AID DURING THE WAR IN
UKRAINE. OUR LONG-TERM PURPOSE AND STRATEGY REMAIN UNCHANGED.
OUR PURPOSE
To provide our customers with high quality,
food products
sustainable proteins,
and culinary solutions that are safe and
responsibly produced.
Our Purpose drives everything we do: our
strategy, our culture, and our approach to
responsible business.
OUR STRATEGY
Our medium- to long-term strategic objectives remain unchanged.
TRANSFORMATION
TO A CULINARY
COMPANY
INTERNATIONAL
DIVERSIFICATION AND
EXPANSION
EXPANSION OF
INTERNATIONAL SALES
AND DISTRIBUTION
NETWORK
BECOME THE
UNDISPUTED LEADER
IN THE AGRICULTURAL
MARKET OF UKRAINE
CONTINUOUS
IMPROVEMENT AND
INNOVATION
The continued development
of value-added food products,
supported by our state-of-the-
art culinary research centre,
and in collaboration with
customers and leading culinary
experts.
Development of retail and
HoReCa segments including
street food, dark kitchens, and
virtual restaurants.
Strategic partnerships with
food industry players, and
investment in businesses that
expand the Group’s culinary
expertise.
Client business development
training for all sales teams.
The expansion of existing
and entry into new export
markets through market
targeting and increased sales
of higher margin, value-added
products.
Launch of new international
sales branches and
distribution offices, and the
potential establishment of
joint ventures.
Ensure high efficiency crop
production through higher
yields and optimisation of cost
control, including the digitisation
of production and harvesting
processes.
Ensure the stability of the Group’s
landbank.
Maintenance of the Group’s
“continuous improvement”
approach including optimising
human productivity; high biosecurity
standards; environmental standards;
health and safety; and animal
welfare practices, including the
antibiotic-free programme.
PEOPLE AND
WORKFORCE
EFFICIENCY OF
BUSINESS PROCESSES
BRAND PROMOTION
AND DEVELOPMENT
ALTERNATIVE ENERGY
PROJECTS
Development of the Group’s
approach to people, including
providing a healthy and safe
workplace and an environment
that enables every employee
to develop their skills to their
maximum potential.
Constantly increase
production efficiency through
modernisation and innovation;
improvement in cost and quality
control; use of up-to-date
technology across all business
segments, including PP.
Continue to promote and
develop MHP’s strong
brands, both domestically
and internationally, through
consumer-driven innovation,
rigorous quality control,
and the introduction of new
products.
Expand alternative energy
projects including biogas,
biomethane, and biomass
with carbon capture and
storage (“BECCS”), resulting
in carbon sequestration].
CULINARY TRANSFORMATION
Since 2019, MHP has been transforming
from a raw materials provider to an
international company specialising
in
the development of culinary solutions
for its customers. This evolution reflects
the accelerating changes in the food
production
landscape as consumer
preferences shift to sustainable food
value-added
choices
products.
higher
and
RESPONSE TO WAR
The dynamic situation in Ukraine presents
both significant challenges and new
opportunities.
adaptations
in response to the War have focussed
upon
lines. For
more information see the War in Ukraine
section and the CEO’s Statement on
pages 4 and 18 respectively.
logistics and supply
Strategic
M&A OPPORTUNITIES
AND STRATEGIC
PARTNERSHIPS
Continue to monitor and
explore M&A opportunities and
potentially acquire assets in the
UK, EU, and MENA.
11
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
OUR CULTURE
Our cultural identity and values drive the
way we work, our behaviours and our
decision making. They unite us.
RESPONSIBLE BUSINESS
Our Purpose is directly linked to six
Growth Pillars that guide us as we pursue
our strategy.
COURAGE
INTEGRITY
TEAMWORK
STAKEHOLDER
ENGAGEMENT
pages 59 to 62
OUR PEOPLE AND
THEIR WELLBEING
pages 63 to 74
ACCOUNTABILITY
OUR ROLE IN SOCIETY
AND OUR LICENCE TO OPERATE
RESPONSIBLE FOOD
PRODUCTION
TRANSPARENCY
pages 75 to 77
pages 78 to 86
MHP aims to build a culture where
everyone’s welfare, health and safety, and
wellbeing matters within a workplace that
is welcoming to all.
Our values and culture have been actively
demonstrated during the War by the
support our workforce has provided
to the people of Ukraine and by the
tremendous courage,
teamwork, and
resilience our people have shown
throughout.
THE PLANET
pages 94 to 106
BUSINESS CONDUCT
pages 87 to 93
Growth Pillars pages 54 to
106
Growth Pillars pages 54 to
106
12
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC REVIEW
MHP AT A GLANCE
WHERE WE OPERATE
MHP is headquartered in Ukraine with
operations in Ukraine and in the Balkans,
and with distribution centres in the UAE,
Saudi Arabia, the Netherlands1 and the UK.
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
SHARE OF POULTRY EXPORT VOLUME, %
36%
EU
10% 34%
Africa
MENA
17%
CIS
3%
Asia
GROUP REVENUE BY DESTINATION
The Group has a strong position
in
the domestic market and diversified
international markets, exporting to 72
countries, primarily in MENA, the EU and
CIS.
For more information on exports see the
CEO’s Statement and the Operational
and Financial Review on pages 18 and 38
respectively.
39%
Domestic2
47%
Domestic2
61%
Export
53%
Export
Group revenue by destination
2022
Group revenue by destination
2021
1 Operations in the Netherlands also include a cutting
plant.
2 Domestic revenue comprises revenue generated
from sales by MHP Ukraine in Ukraine; and revenue
generated from sales by Perutnina Ptuj in the
Balkans.
13
WE EXPORT TO
70+
COUNTRIES
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC REVIEW
MHP AT A GLANCE
OUR OPERATIONS
The Group is organised into and operates
through four business segments.
More detail on the products, brands and
strategy of the business segments can
be found in the Segment Overview on
page 20.
For information on the performance of
each business segment and the drivers
behind the year-on-year trends please
see the Financial and Operational Review
on page 38.
MHP has a vertically-integrated business
model, owning and operating modern
facilities at each of the key stages of the
chicken meat production process and
differentiating MHP from its peers.
See page 28 for more information on the
Group’s business model.
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
GROUP REVENUE BY BUSINESS
SEGMENT 2022
GROUP EXPORT BY PRODUCT
2022
71%
Poultry &
Related
Operations
6%
Grain
Growing
Operations
2022
5%
Meat-Processing
& Other
Agricultural
Operations
18%
European
Operating
Segment
60%
Chicken Meat
& Related
Products
28%
Vegetable
Oils
2022
8%
Grains
4%
Meat-Processing
Products
& Other
BUSINESS SEGMENT REVENUE BY DESTINATION 2022
3%
Export
28%
Domestic1
23%
Domestic1
97%
Domestic1
25%
Export
75%
Domestic2
72%
Export
77%
Export
Poultry & Related
Operations
Grain Growing
Operations
Meat-Processing &
Other Agricultural Operations
European Operating
Segment
1 Domestic revenue for Poultry & Related Operations,
Grain Growing Operations and Meat-Processing &
Other Agricultural Operations comprises revenue
generated from sales by MHP Ukraine in Ukraine.
14
2 For the European Operating Segment, domestic
revenue comprises revenue generated from sales by
Perutnina Ptuj in the Balkans.
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC REVIEW
CHAIR’S STATEMENT
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
CHAIR’S
STATEMENT
DEAR SHAREHOLDER
2022 WAS AN INTENSELY CHALLENGING YEAR DURING WHICH OUR OVERRIDING
PRIORITY WAS TO SURVIVE. HOWEVER, MHP ACHIEVED MUCH MORE: IT
MAINTAINED ITS OPERATIONS AND STABLE PRODUCTION AND CONTINUED TO
INVEST, WHERE POSSIBLE, IN ITS STRATEGY AND VISION.
IT IS DIFFICULT TO DO JUSTICE IN WORDS TO THE TREMENDOUS SPIRIT OF
UKRAINE AND THE COURAGE OF ITS PEOPLE AND OUR WORKFORCE. SINCE
THE OUTBREAK OF WAR, MHP HAS PROVIDED SIGNIFICANT SUPPORT TO THE
PEOPLE OF UKRAINE AND REMAINS AN IMPORTANT PART OF THE FOOD SUPPLY
CHAIN. OUR STRATEGY REMAINS UNCHANGED, THOUGH WE MUST TAKE EACH
DAY AS IT COMES AND SWIFTLY ADAPT IN THE FACE OF UNCERTAINTY. OUR
ROBUST PERFORMANCE DURING THE YEAR IS TESTAMENT TO THE RESILIENCE
AND AGILITY OF OUR BUSINESS MODEL, AND THE BRAVERY AND TENACITY OF
OUR PEOPLE.
CLEARLY THE GROUP’S STEPS TO DEVELOP MHP’S RESPONSIBLE BUSINESS
STRATEGY HAVE BEEN SIGNIFICANTLY IMPACTED BY THE WAR. HOWEVER, MHP
REMAINS COMMITTED TO DEVELOPING ITS APPROACH AND TO CONTINUOUS
IMPROVEMENT
ITS SUSTAINABILITY-RELATED ACTIVITIES AND
REPORTING. I HAVE PLEASURE IN PRESENTING MHP’S FIRST INTEGRATED
REPORT IN WHICH WE SET OUT FOR THE FIRST TIME THE SIX GROWTH PILLARS
OF OUR SUSTAINABILITY FRAMEWORK.”
IN BOTH
15
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC REVIEW
CHAIR’S STATEMENT
OUR PEOPLE
I want to express my heartfelt thanks to
our people for their efforts and sacrifices.
Many have placed themselves in very
dangerous situations to achieve our shared
goal of ensuring food security for Ukraine;
many have learned new skills and retrained;
all have demonstrated commitment and
courage; many were mobilized.
In these extraordinary circumstances,
I want to highlight the exceptional
contribution from Yuriy Kosyuk, our
founder and CEO. Yuriy has led from
the top, 24/7, since the start of the war.
His natural effervescence and optimism,
combined with his
limitless energy
and drive, have had a tremendously
positive impact on our employees, our
management team, and our stakeholders;
he has been a role model for Ukraine.
in
rallying
I also wish to extend my thanks to the
non-executive members of the Board for
their support and special contributions
during wartime. There has been non-
stop communication between the non-
executives and the executive management
team. The non-executives have been
international
instrumental
support and in ensuring that the world is
made aware of the grim realities of the
situation in Ukraine in using their networks
of international contacts to facilitate
progress; and in boosting morale. More
information on the Board’s contribution
and interaction with stakeholders can
in the Sustainability and
be found
International Affairs Committee Report on
page 135 and the Corporate Governance
Report on page 116.
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
SUPPORT FROM OUR STAKEHOLDERS
AND PARTNERS
I am extremely grateful for the support
provided by the financial community
and for their continued backing of MHP,
which we hope will continue in the future
taking into account challenges of the War.
Of note was the unprecedented strong
support from our bank lenders and our
Eurobond holders during the consent
solicitation process in March 2022. I am
grateful too to the EBRD for its continued
vitamins pro bono supply earlier this year
in order to help MHP during the war time.
As part of our commitment to effective
communication with all our stakeholders
during such challenging times, we have,
since April 2022, published monthly
operational trading updates in addition
to our ‘normal’ reporting schedule. For
more information on our engagement
with stakeholders, see Growth Pillar 1 on
page 59.
FOLLOWING THE GROUP’S ROBUST FY 2022
PERFORMANCE AND TREMENDOUS EFFORTS TO
MAINTAIN OPERATIONS, PRODUCTION AND SALES
VOLUMES, THE GROUP IS FUNDED TO MAINTAIN
OPERATIONS AND BUSINESS CONTINUITY.
support in the form of an extension to
the Group of a short-term facility of
EUR 24 million in June 2022 as part of its
Food Security Ukraine package, and for
its more recent US$ 100 million short-term
loan in February 2023 for PXF.
received generous
The Group has
and widespread support from many
international partners and stakeholders.
It is, of course, not practicable in this
forum to mention all these contributions.
That said, I would like to briefly note the
support from AllTech E-CO2 and BASF,
namely in helping with our environmental
development projects and enzymes and
FY 2022 PERFORMANCE
Despite the very significant and ongoing
War-related challenges, the Group reported
a relatively robust performance for the FY
2022 with revenue of US$ 2,642 million, up
11% y/y, and EBITDA of US$ 384 million,
down 41% y/y. The decline in profitability
was driven by an 13% decrease in USD terms
in Ukraine poultry meat prices in Ukraine
including an 8% decline in export sales
volumes offset partly by a 40% increase
in export prices; and by a 26% decline in
harvest volumes mainly due to unfavourable
weather conditions during the summer and
autumn harvesting seasons. For detailed
results
commentary on
the financial
and our outlook for what will be another
challenging year in 2023 see the Financial
and Operational Review on page 38.
FINANCIAL POSITION
Following the Group’s robust FY 2022
performance and tremendous efforts to
maintain operations, production and sales
volumes, the Group is funded to maintain
operations and business continuity.
Given the ongoing military hostilities and
sustained attacks on Ukraine’s energy
infrastructure, the outlook still remains
highly uncertain. More information on
the Group’s financial position, cash flow,
debt structure and liquidity can be found
in the Financial and Operational Review
on page 38.
CORPORATE GOVERNANCE
The Group recognises the importance of
strong corporate governance in line with
good international practice and aims to
comply with the requirements of the UK
Corporate Governance Code 2018 (the
“UK Code”) to the extent practicable.
Despite the War, MHP has continued
to develop its approach to corporate
governance.
consideration
Following
during the year, the Group has drafted
a Diversity Statement which is due to
be approved by the Board in 2023. This
Statement sets out our commitment
to creating an equal and
inclusive
working environment for people of all
backgrounds. In 2022, we updated the
Group’s Ethics and Compliance Programme
to manage effectively the new challenges
presented by the Russian invasion. More
information can be found in Growth Pillar 5:
Business Conduct on page 87.
16
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC REVIEW
CHAIR’S STATEMENT
CORPORATE GOVERNANCE
(CONTINUED)
On 7 March 2023, we were delighted to
announce the appointment of a new
Independent Non-Executive Director.
Mr. Oscar Chemerinski brings with him
extensive experience
in agribusiness,
risk management,
emerging markets,
sustainability and business strategy.
Following Mr. Chemerinski’s appointment,
and at the time of publication, the
Board comprises four Independent Non-
Executive Directors and four Executive
Directors, including the Executive Chair.
PLANET
MHP aims to conduct its activities in an
environmentally responsible manner and
to meet the global challenges presented by
climate change. Our green transformation
vision and decarbonisation process were
put in place before the War. Clearly,
progress has slowed, but in 2022 we
have reported
lower greenhouse gas
emissions year-on-year as a result of
energy efficiency measures which are
carried out as part of the implementation
ISO 50001
and requirements of the
energy management standard.
Our Net Zero 2030 target remains.
However, we must acknowledge that 2030
is a potentially moveable goal in the current
circumstances: if there is a relatively near-
term resolution to the War, 2030 may
prove achievable. If, however, the war
continues for a
longer period then
realisation may be pushed back. The
potential importance of the Ukrainian
reconstruction phase in the achievement
of Net Zero cannot be underestimated.
Despite
setbacks, we have made
progress during 2022. The Carbon
Trust accreditation process
is now
underway: a remarkable achievement in
the challenging circumstances and one
17
steam,
is also
industrial
demonstrates
the Group’s
which
desire to meet
its Net Zero target
as soon as practicable. The Group
continues to use biogas to produce
and
electricity,
heating.
integrating energy
It
storage technology and looking to roll
this out more widely, as well as investing
in biomethane projects.
In addition,
for the first time, this Report discloses
information
the
recommendations of the Taskforce on
Climate Related Financial Disclosure
(“TCFD”). For TCFD and more information
on our progress and our work with
the Carbon Trust, see Growth Pillar 6 on
page 94.
with
line
in
DIVIDENDS
Given the uncertainties of War, and the
resulting need to preserve liquidity to
support the Group’s ongoing business
operations and sustain the population of
Ukraine, the Directors have decided not
to declare a final dividend for the 2022
financial year.
continue
to monitor
GLOBAL PARTNERSHIPS AND
DEVELOPMENTS
global
We
developments and potential opportunities
to accelerate and expand our culinary
transformation, particularly in the UK,
EU, and MENA. A key tenet of our stated
strategy has been supplementing organic
growth with acquisitions, an approach
borne out by the success of the integration
of Perutnina Ptuj from 2019. That said,
whilst international expansion remains on
our agenda, it has inevitably had to take
a back seat during the War. However,
we have continued to make progress:
following the opening of two direct sales
branches in Saudi Arabia in 2021, and in
line with our continued investment in the
region, in February 2023 we announced
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
the signing of a memorandum of
understanding
(“MoU”) with Tanmiah
Food Company, one of Saudi Arabia’s
leading producers of poultry and other
processed-meat products. The MoU is
the first step in the establishment of a
joint venture, the aim of which will be to
improve food security in the Kingdom.
information on strategy,
For more
and
including
alliances, see the Purpose and Strategy
section on page 11.
future partnerships
While MHP has not been directly
affected, outbreaks of Avian Influenza
(“AI”) in both commercial and wild birds
continue to occur on an unprecedented
scale across Europe and the United
Kingdom. These outbreaks will continue
to present significant challenges for the
global poultry industry and coordinated
inter-governmental management of these
issues will be important for 2023. For more
information, see the Sustainability and
International Affairs Committee Report on
page 135.
DR JOHN RICH
Executive Chair,
MHP Board
11 April 2023
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC REVIEW
CEO’S STATEMENT
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
CEO’S
STATEMENT
MHP IS UNITED IN WORKING FOR UKRAINE. RECOGNISING THE GROUP HAS A
KEY RESPONSIBILITY FOR ENSURING THE FOOD SECURITY OF THE COUNTRY,
NOW AND IN THE FUTURE, I WANT TO THANK OUR PEOPLE FOR THEIR TIRELESS
EFFORTS AND COURAGE: THE COURAGE TO WORK; THE COURAGE TO MAKE
DECISIONS IN CONDITIONS OF COMPLETE UNCERTAINTY; THE COURAGE TO
DEVELOP AND LEARN; THE COURAGE TO START SOMETHING NEW IN SUCH
CHALLENGING TIMES. OUR WORKFORCE HAS GONE ABOVE AND BEYOND THE
CALL OF DUTY TO DELIVER UPON OUR SHARED GOALS.
ASSISTANCE TO THOSE WHO ARE IN NEED COPING WITH CHALLENGES OF THE
WAR: DISPLACED FAMILIES, ORPHANS, RETIRED, HOSPITALS AND SUPPORT
FOR SOCIAL PROJECTS WAS ALSO ONE OF OUR MAIN PRIORITIES SINCE THE
BEGINNING OF THE WAR IN UKRAINE.
OUR ROBUST 2022 PERFORMANCE REFLECTS THE RESILIENCE OF THE GROUP.
WE CONTINUE TO DELIVER UPON OUR STRATEGY, ADAPTING, WHERE NECESSARY,
TO THE CHALLENGES OF WAR. 2023 IS SET TO BE ANOTHER DIFFICULT YEAR:
WE WILL CONTINUE TO MONITOR THE RISKS AND MANAGE UNCERTAINTY,
BUT WE WILL CONTINUE MOVING FORWARD.
MHP’S TRANSFORMATION TO A CULINARY
COMPANY BEGAN IN 2019 AND CONTINUES.
OUR TRANSFORMATIVE MINDSET AND
COLLECTIVE WILLINGNESS TO EMBRACE NEW
CHALLENGES AND ESTABLISH NEW WAYS
OF DOING THINGS IS NOW DEEPLY ROOTED
IN THE GROUP’S DNA, AND HAS PREPARED
US WELL FOR THE CURRENT UNEXPECTED
WARTIME CHALLENGES.”
18
ANNUAL REPORTAND ACCOUNTS 2022 BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
on logistics: by the end of April 2022, we
had substantially increased the number of
trucks in operation making it possible to
transport by road products previously
carried by rail or by sea. Our logistics
teams and drivers worked tirelessly,
often waiting for very prolonged periods
at Ukraine’s borders; our sales teams
continued
to work; we constantly
communicated and cooperated with
domestic and
international partners,
including distributors. Everything to ensure
food security for Ukraine’s population.
publication, the Group is exporting to
over 70 countries worldwide, a significant
achievement in the circumstances.
OUR CULINARY TRANSFORMATION
Our transformation to a culinary company
is fundamental and continued despite
is testament
setbacks. This progress
to the determination and efforts of our
Management Team, many of whom are
new to the Company and all of whom
share a developmental mindset and
a focus on new opportunities. At the
time
more
high-quality
convenience,
semi-ready-to-eat pizza. We will continue
to evolve the food culture in Ukraine,
and
offering
ready-to-cook
tasty
giving
ready-to-eat products,
and
consumers the opportunity to direct
their
towards other activities.
For more detailed information on our
transformation to a culinary company,
including the development of routes
to market and the Group’s culinary
“ecosystem”, see the Poultry & Related
Operations Segment Overview on page
20 and Growth Pillar 4: Responsible Food
Production, page 84.
WHEN RUSSIA INVADED UKRAINE, WE IMMEDIATELY
SET OUT OUR PRIORITIES: TO CARE FOR OUR PEOPLE,
TO MAINTAIN FOOD SECURITY, AND TO SUPPORT
UKRAINE.
International
The establishment of new routes to
market enabled the continuation of
exports.
agreements
also facilitated routes and removed
restrictions. On 22 July 2022, the Black
Sea Grain Initiative was signed, putting in
place procedures to safely export grain
and vegetable oils from certain ports in
Ukraine. In Europe, we are grateful for
economic support under the Free Trade
Agreement in the form of the lifting of
quotas and the removal of tariffs on
Ukrainian produce imported into the
EU and Great Britain. At the time of
outbreak of War in February 2022, we
stopped product development to focus
on providing the most necessary and
basic foods to domestic markets. Our
culinary centre
in Kyiv operated as
a humanitarian hub during this time.
However, from the end of March 2022,
we resumed development and have since
continued to innovate. That same month,
we launched our own range of baby food
under our “KOKO” brand, produced from
our antibiotic- and growth hormone-free
“Nasha Ryaba” chicken. At the beginning
of the summer, we launched a frozen
OUR CULTURE AND VALUES
Our culture and values drive the way we
work, our behaviours, and our decision
making. They unite us. Both have been
actively demonstrated during the War by
the courage of our workforce, and the
humanitarian aid and support provided
to the people of Ukraine. We have never
been more vividly aware of who we are. For
this reason, we have started the process
of officially forming the Group’s Values.
This project continues with the active
participation of the Management Team,
and I look forward to updating you on this
process.
YURIY
KOSYUK
CEO and Founder, MHP
11 April 2023
STRATEGIC REVIEW
CEO’S STATEMENT
OPERATIONAL REVIEW
When Russia
invaded Ukraine, we
immediately set out our priorities: to care
for our people, to maintain food security,
and to support Ukraine. Offline business
needs offline leadership, and, with our
management teams, I went direct to our
enterprises to demonstrate resilience,
unity, and our will to win, and to reorganise
business processes. With constant
communication channels in place, the
provision of psychological support, the
uninterrupted payment of stable wages,
and Group Management by their sides,
we were able to help our people gradually
adjust to the new realities. We transformed
businesses processes in response to war-
related operational challenges more quickly
than other companies in the market.
Operational challenges were very
significant: the mobilization of employees;
the disruption of supply chains; a
temporary decrease in the supply of
including vitamins and
some goods,
minerals to produce feed, and plant
protection goods including pesticides;
the physical destruction of energy
and transport infrastructure; and the
temporary occupation of some territories.
Persistently high energy prices and
record-high inflation in partner countries
has also fueled price pressures in Ukraine.
Our strategy remains unchanged but
rapid adaptations were made to our
business model enabling us to maintain
operations and production. Our focus was
19
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC REVIEW
SEGMENT OVERVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
POULTRY & RELATED
OPERATIONS
STRATEGY
The Segment’s strategy is focussed on both international and
domestic markets as the Group continues its transformation to a
culinary company.
PRODUCTION FIGURES1
PRODUCT
Chicken meat produced, tonnes
Hatching eggs, million
Sunflower oil, tonnes
Soybean oil, tonnes
2022
697,071
544
318,202
44,620
2021
754,387
563
212,425
47,493
Mixed fodder, tonnes
1,958,128
1,920,607
Biogas, MW
17
17
1 For more information on the Segment’s performance and year-on-year trends,
please see the Financial and Operational Review on page 38.
OPERATIONS
Processes and sells chicken meat (fresh and frozen, whole and
cuts); pre-prepared and culinary products (marinated chicken,
and ready-to-eat and ready-to-cook convenience food, including
restaurant-grade products); vegetable oils (sunflower and soya);
and mixed fodder.
the circular
Our operations support
economy with by-products used
to
produce biodiesel, biogas, culinary fats,
fodder and natural fertilisers.
For more information on
our business model see
page 28.
Operations include three chicken meat complexes, two breeding
complexes, three sunflower oil plants, one soybean crushing
plant, three feed mills and two biogas complexes.
20
CUSTOMERS
Supplies products to a number of
nationwide supermarket chains
including Fozzy, Metro Cash &
Carry, ECO, Novus and Auchan.
The Segment also produces and
sells vegetable oils, mainly to
international traders. This is an
important source of hard currency
revenue.
EXPORT MARKETS
International
and market
diversification
targeting, combined with the development of
both routes to market and value-added product
ranges.
DOMESTIC MARKETS
The development and production of more
value-added and further processed primary and
cooked products and the evolution of routes to
market through retail, HoReCa, modern trade
and franchises.
For more information
see Purpose and
Strategy on page 11.
POULTRY EXPORT VOLUMES BY REGION IN TONNES, %
3%
Asia and other
10%
Africa
17%
CIS
34%
MENA
6%
Asia and other
12%
Africa
23%
CIS
38%
MENA
36%
EU
2022
2021
21%
EU
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC REVIEW
SEGMENT OVERVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
CULINARY
TRANSFORMATION
OUR TRANSFORMATION TO A CULINARY COMPANY CONTINUES DESPITE SETBACKS
AND WAR-RELATED CHALLENGES.
PRODUCT DEVELOPMENT LED BY OUR CULINARY CENTRE
ROUTES TO MARKET
Development is focussed on ready-to-eat (“RTE”) and ready-to-cook (“RTC”) products
and the application of modern technologies. This is led by our Culinary Centre in Kiev
which is an important platform for B2B, HoReCa and B2C development, and enables
MHP to undertake cutting-edge R&D and to bring together players from across the food
industry.
The Centre includes five demonstration kitchens; an industrial kitchen; a technology
workshop; a specially equipped workshop for pizza production; a sensory analysis
laboratory; and a studio kitchen. In February 2022, we launched LaStrava's ‘restaurant-
grade’ RTE meals: these are produced using high-pressure processing (“HPP”) technology
which allows storage of prepared dishes in chilled form for up to 56 days without
preservatives. MHP is the only company in Ukraine using this expertise.
Our
focus on changing consumer
preferences and the sale of food from
franchised and owned stores close to the
consumer continues. At the end of 2022,
179 “MeatMarket” convenience stores
were
the
in operation, embodying
“MeatMarket 2.0” or “food experience”
concept launched in July 2021; and 98
“DonerMarket” gyro fast food stores
selling doner, shawarma and other
street food. At the same time, we have
format of our
the
been upgrading
existing and extensive network of “Nasha
Ryaba” retail stores to one of “fresh food”.
Immediately following the outbreak of War,
a third of our existing network of stores
was lost in occupied and de-occupied
territories. Despite these setbacks, our
franchisees have continued to work and
to open new stores. At the end of 2022,
additional 284 new format stores have
been operational.
Ukraine. We also continue to invest in
businesses that expand our culinary
expertise and product portfolio.
For more information
on the financial
and operational
performance of Poultry
and Related Operations
see page 20.
STRATEGIC PARTNERSHIPS
to develop
strategic
We continue
partnerships with players in the food
industry with the goal of bringing MHP
closer to the customer. One such partner
is Glovo, for which MHP is the only supplier
of semi-finished products for their virtual
(delivery or pick-up only) restaurants.
Progress continued with an order for new
concepts in March 2022, and the supply
of RTC products for their kitchens from
May 2022. MHP is now supplying these
products for Glovo’s operations outside
21
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC REVIEW
SEGMENT OVERVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
RETAIL OUTLETS
1,522
retail outlets
(owned and franchised)
CULINARY SOLUTIONS
Development of ready-
to-cook and ready-to-
eat products
CULINARY EXPERTS
Leading culinary experts of
Ukraine are responsible for
culinary direction and product
development
MHP’S CULINARY
ECOSYSTEM
CULINARY CENTRE
MHP’s state-of-the-art and
unique Culinary Centre facilitates
innovation and brings together
players from the HoReCa industry
PARTNERSHIPS
Strategic partnerships
with food industry
players
INVESTMENTS
Investments in businesses
that expand the Group’s
culinary expertise
22
ANNUAL REPORTAND ACCOUNTS 2022
STRATEGIC REVIEW
SEGMENT OVERVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
MAJOR BRANDS
Meat
Chilled
Meat & Culinary
Chilled
Frozen
Processed meat
Chilled
Processed meat
Ukraine
Whole
Parts
Minced
Sliced
Ready to eat
Ukraine & Export
Ukraine
By-products
Whole
Parts
Minced
Sausages
Smoked
Chicken
Pate
Meat
Chilled
Meat & Culinary
Chilled
Frozen
Ukraine
By-products
Whole
Minced
Formed
Meat
Frozen
Export
Whole
Parts
Meat
Meat, Culinary,
Vegetable and Convenience
Chilled
Frozen
Meat & Convenience
Umbrella food solution for HoReCa
Ukraine
Whole
Parts
Marinated
Formed
Chilled
Ukraine
Parts
Frozen
Export
Processed meat
Convenience
Meat
Chilled
Frozen
Ukraine
Ready to eat
Ready to cook
Convenience
Frozen
Convenience
Ukraine
Ready to cook
Whole
Parts
Minced
Sous vide
Food
solutions
Whole
Parts
Marinated
Minced
Formed
Ready to cook
Meat, Culinary, Vegetable and Convenience
Chilled
Frozen
Umbrella food solution for HoReCa
Ready to cook
Ready to eat
Supplementary
products (e.g. mustard,
mayonnaise, ketchup)
23
Convenience
Dried meat
Convenience
Ukraine
Ready to eat
Snacks
Chilled
Ukraine
Ready to eat
Ready to cook
Chilled
Frozen
Ukraine & Export
Parts
Minced
By-products
Ready to eat
Formed
Chilled
Ukraine
Baby food
Dried meat
Ukraine
Ready to eat
Snacks
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC REVIEW
SEGMENT OVERVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
STRATEGY
The Group aims to become the undisputed leader in the
agricultural market in Ukraine and a pioneer in sustainable
agriculture.
Central to the achievement of these goals is increasing
the Segment’s profitability by ensuring high efficiency
crop production (through higher yields and optimisation of
cost control), as well as improving resource management
strategies and ensuring the stability of the landbank.
This will be achieved through innovation, the upgrading of
agricultural machinery, and the use of technology including
Artificial Intelligence (“AI”) and machine-learning algorithms
for real-time analysis, forecasting and facilitation of
decision making.
LANDBANK
MHP leases agricultural land located primarily in the highly
fertile black soil regions of Ukraine.
In 2022, MHP’s total landbank constituted approximately
362,000 hectares (“ha”) of land, representing one of the
largest land portfolios in Ukraine. Despite the War, the
Group was able to complete the harvest on virtually all of
its land in 2022.
GRAIN GROWING
OPERATIONS
CROPPED AREA, HECTARES, %
4%
Other1
8%
Repeseed
12%
Wheat
13%
Soya
18%
Sunflower
6%
Other1
6%
Repeseed
10%
Wheat
7%
Soya
25%
Sunflower
45%
Corn
2022
2021
46%
Corn
1 Including barley, rye, sugar beet, sorghum, and
other and excluding land left fallow as part of crop
rotation.
OPERATIONS
MHP is one of the leading grain cultivation
businesses in Ukraine.
The Segment grows corn, sunflower
and soybean as well as other grains
including rape and wheat, both for fodder
the Group’s
production
chicken production, and to export for
sale to third parties.
to support
24
In 2022, MHP harvested 340,748 ha
of land, yielding 1,934,647 tonnes of
grain, a decrease of 26% year-on-year
mainly driven by unfavourable weather
the summer and
conditions during
autumn harvest seasons. For more
detailed
Segment
performance and year-on-year trends,
see
the Financial and Operational
Review on page 38.
information
on
storage
Grain
totalled
1,605,918 m3 with a capacity of
1,131,600 tonnes (in plastic bags).
facilities
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC REVIEW
SEGMENT OVERVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
MEAT-PROCESSING & OTHER
AGRICULTURAL OPERATIONS
PRODUCTION FIGURES, TONNES
PRODUCT
Convenience food
Processed meat
2022
24,365
14,323
2021
21,584
34,329
For more information on the financial and operational performance of Meat-
Processing & Other Agricultural Operations see page 42.
STRATEGY
The Segment will continue to focus upon
its core meat-processing operations and
the evolution of its route-to-market strat-
egy through retail, HoReCa, modern trade
and franchises.
BRANDS
The Segment’s major brands are shown
on page 23, alongside the major Poultry &
Related Operations brands.
25
OPERATIONS
MHP produces and sells sausage, salami,
convenience foods and produce from
cattle and dairy operations.
incorporates two facilities for the
It
production of prepared meat products,
a number of cattle farms and a beef-
processing facility.
The meat-processing operations are
the Segment’s core business and an
important driver of
the Segment’s
profitability.
MHP is one of the leading players in
the highly fragmented meat-processing
market in Ukraine.
WAR AFFECT
One of the meat- processing facilities
was “Ukrainian Bacon”. As hostilities in
intensified, MHP
the Donetsk region
has decided to temporarily suspend
operations of “Ukrainian Bacon” (meat-
processing operations, c.34,000 tonnes
annual capacity, Kramatorsk district,
Donetsk region). Despite the difficulties
encountered during the War, MHP has
operated “Ukrainian Bacon” for more than
a month (March 2022). The supply of raw
materials from the Company’s poultry
production facilities was necessary to
continue the production of finished
(convenience
value-added products
food, sausages, pate).
MHP has asked its employees (over 1,900
people) and their families to move to safer
regions of Ukraine. Some employees were
redeployed to other MHP production
facilities.
MHP was working actively on
the
commissioning of similar production sites
at MHP facilities in order to continue
to provide Ukrainians with high-quality
“Bashchynsky”
products
brand, which were originally produced
at “Ukrainian Bacon”. However, such
commissioning required additional time
and resources.
under
its
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC REVIEW
SEGMENT OVERVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
EUROPEAN OPERATING
SEGMENT (PERUTNINA PTUJ)
BRANDS
EUROPEAN OPERATING SEGMENT PRODUCTION FIGURES
PRODUCT
Chicken meat produced, tonnes
Processed meat products, tonnes
Hatching eggs, million
Mixed fodder, tonnes
Biogas, MW
2022
124,040
43,938
78.2
255,000
1
2021
111,973
41,411
75.4
229,600
1
For information on the financial and
operational performance of European
Operating Segment see page 37.
INVESTMENT IN OUR
SERBIAN FACILITIES
CONTINUES, AND
WILL TOTAL
30
BY 2025E
EUR
MILLION
MEAT
MEAT PRODUCTS
MEAT PRODUCTS
MEAT PRODUCTS
MEAT PRODUCTS
FEED
SERVICES
OPERATIONS
The European Operating Segment
comprises 100% of Perutnina Ptuj (“PP”),
a leading poultry and processed-meat
producer in the Balkans.
It has production assets in Slovenia,
Croatia, Serbia, Bosnia and Herzegovina,
and distribution companies in Austria,
North Macedonia and Romania.
It
18 European
supplies products
countries.
to
in
the Serbian
facilities
Investment
continued during the year, and will total
EUR 30 million by 2025e, with capex
focussed on
the establishment of
broiler farms, the modernisation of the
slaughterhouse, and the construction of
a processing plant and hatchery.
26
STRATEGY
To become the number one producer
of poultry meat and processed-meat
products across the Balkans driven by
a focus on more value-added products,
export markets, and market penetration.
Over the past year, the Segment has
accelerated its culinary transformation,
establishing and increasing production of
new value-added products.
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC REVIEW
SEGMENT OVERVIEW
BRANDS
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
Meat
Meat
Classic
Ham
Natur
Poultry products,
with packaging
highlighting low fat
and cholesterol
content
Meat
Meat
Piknik
Cut and pre-
seasoned fresh
poultry products
Meat Products
Meat Products
Perutnina Ptuj
Sausages, frank-
furters, frozen and
other ready-made
products
Golica
Traditional
Slovenian
chicken franks
Meat Products
27
Natur Premium
Products from
poultry bred in
accordance with
premium breeding
standards
Meðimursko
pile
Croatian, antibiotic-
free, fresh poultry
products
Slim & Fit
Low-fat poultry
products
Classic
Classic
Classic
Poli
Classic
Poli Kids
Chicken
Breast
Paté
Paté
Poli
Kids
Paté
Poli
Kids
Poli
Light
Poli
Paté
Franks
Franks
Poli
Vegetables
Poli
Cheese
Poli Dog
Convenience
Poli Rolls
Ham
Convenience
Poli
Hammy
Poli Pizza
Classic
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC REVIEW
OUR BUSINESS MODEL
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
OUR BUSINESS MODEL IN 2022
POULTRY & RELATED
OPERATIONS SEGMENT
We produce and sell chicken
meat (fresh and frozen);
culinary products; vegetable
oils (sunflower and soybean);
and mixed fodder.
US$
1,887
MILLION
REVENUE
697,071
TONNES OF POULTRY
PRODUCED
GRAIN GROWING
SEGMENT
We grow crops for fodder
production and for sale to
third parties.
US$
158
MILLION
REVENUE
1.9M
TONNES OF CROPS
PRODUCED
EUROPEAN OPERATING
SEGMENT*
We produce and sell chicken
meat and processed poultry
meat products.
US$
464
MILLION
REVENUE
124,040
TONNES OF POULTRY
PRODUCED
* Perutnina Ptuj's results are classified as the
European Operating Segment
28
HOW WE GENERATE
REVENUE
MEAT-PROCESSING &
OTHER AGRICULTURAL
SEGMENT
We produce and sell sausages;
processed and cooked meat;
convenience foods; and
produce from cattle and dairy
operations.
US$
134
MILLION
REVENUE
32,443
TONNES OF MEAT
PRODUCTS PRODUCED
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC REVIEW
OUR BUSINESS MODEL
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
1
TRANSFORMATION TO
A CULINARY COMPANY
The transformation from a
raw materials provider to an
international culinary company
enables the Group to grow
its market as it responds to
customer demand for value-
added products.
6
SUPPORT FOR
UKRAINE
Continued to serve Ukraine and
the world with poultry products,
vegetagle oils and grains in a War
environment, cooperating with
international partners and strongly
supporting communities on the
ground.
29
2
RESPONSIBLE
BUSINESS
MHP has a group-wide
responsible business model.
SUSTAINED INVESTMENT
IN INNOVATION,
BUSINESS EFFICIENCY
AND R&D
3
Sustained CAPEX and R&D
programmes have enabled
consistent efficiency
improvements and cost controls,
developed and maintained
product quality, and ensured
high standards of product safety.
The Company continues to look
for dynamic and innovative ways
to develop its production and
agricultural processes to improve
efficiency, drive down costs
and reduce its environmental
impacts.
HOW WE CREATE
VALUE
5
SUSTAINABLE
FINANCIAL HEALTH
Our businesses have a consistent
track record of strong revenue,
efficient costs and positive cash
generation providing a solid
platform for value creation.
4
INTERNATIONAL
MARKETPLACE
MHP is always looking at new
initiatives on product development
and for new markets for its
products, and now sells to over 70
countries.
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC REVIEW
OUR BUSINESS MODEL
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
OUR PEOPLE
BUSINESS CULTURE
We have a highly skilled and
knowledgeable workforce (2022
MHP Group: 32,545 employees), an
experienced, strong and innovative
management team and we are
committed to continuously investing
in training and development.
We strive to create a business
culture in which our employees feel
empowered to make quick decisions
to capitalise on market opportunities
and gain competitive advantage.
OUR ASSETS
VERTICALLY-INTEGRATED
STRUCTURE
Our vertically-integrated structure
structure differentiates us from our
peers and enables us to reduce our
dependence on third-party suppliers
and our exposure to raw material
price volatility. It also ensures the
maintenance of strict biosecurity
and quality standards throughout
the production process.
MODERN AND EFFICIENT
PRODUCTION ASSETS
Extensive investment has enabled
us to employ modern, state-of-the-
art production assets. The Company
believes that its chicken complexes
are amongst the most efficient in the
world.
OWN RETAIL IN UKRAINE
AND AT PP
MHP and PP are continuing to
grow and develop their retail
operations both in Ukraine and
The Balkans/EU.
STRONG BRANDS
Our brands have high market
recognition with a reputation for
quality, enabling products to be
sold at premium prices.
30
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC REVIEW
OUR BUSINESS MODEL
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
2 complexes
BIOGAS
17 MW
Land on long-term
lease in Ukraine
with a harvest of
1.9 M tonnes of
grain in 2022
44,620 tonnes
of soybean oil
produced,
3 production
facilities
2 breeding complexes
with 544 M hatching
eggs produced in
2022
3 vertically-integrated poultry complexes,
from hatching to rearing and processing
362,000
hectares
318,202
tonnes of sunflower
oil produced
1.9 M
tonnes of mixed
fodder produced
100%
in-house
production
100%
in-house
production
8.1 M
per week
100%
in-house
production
1* production
facility
38,688
tonnes
9 distribution
centers in
Ukraine
403
vehicles
1,526
Franchise outlets
MHP
LAND
SUNFLOWER
AND SOYBEAN
PROTEIN
FODDER
PRODUCTION
BREEDING
HATCHING
POULTRY
PRODUCTION
SLAUGHTER-
HOUSES
MEAT-
PROCESSING
DISTRIBUTION
RETAIL
PERUTNINA PTUJ
3,950
hectares
1,317
tonnes of
soybean oil
c.255,000
tonnes of mixed
fodder produced
99%
in-house
production
86%
in-house
production
1.2 M
per week
100%
in-house
production
43,938
tonnes
38
vehicles
18
Land on long-
term lease in the
Balkans
Soybean oil,
1 facility in Serbia
3 facilities in
Slovenia, 1 in
Croatia and 1 in
Serbia
4 locations,
80 M hatching eggs
produced (Slovenia,
Croatia, Bosnia &
Herzegovina and
Serbia)
Hatchery of day old
chicken:
4 locations (Slovenia,
Croatia, Bosnia &
Herzegovina and
Serbia)
4 locations
8% in-house
production
(Slovenia, Croatia,
Bosnia & Herzegovina
and Serbia)
5 facilities
(2 in Slovenia, 1 in
Croatia, 1 in Bosnia
& Herzegovina, 1 in
Serbia)
6 production
facilities
1 distribution
centres in
Ukraine
31
1 complex
BIOGAS
1 MW
* due to severe
hostilities in Donetsk
region, MHP had to
cease operations at
“Ukrainian Bacon”
since April 2022
01
I
W
E
V
E
R
C
G
E
T
A
R
T
S
I
BUSINESS
REVIEW
33
Key Performance Indicators
38
Financial and Operational Review
46
Measures of Financial Performance
49
Risk Management
54
MHP’s Growth Pillars
& case studies
59
63
Growth Pillar 1:
Stakeholder Engagement
Growth Pillar 2:
Our People and Their Wellbeing
75
78
87
94
Growth Pillar 3:
Our Role in Society and Our
Licence to Operate
Growth Pillar 4:
Responsible Food Production
Growth Pillar 5:
Business Conduct
Growth Pillar 6:
The Planet
107 TCFD Disclosures
111
Non-Financial Information
Statement
03
E
C
N
A
N
R
E
V
O
G
04
05
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
F
I
I
I
N
O
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
STRATEGIC
REVIEW
BUSINESS REVIEW
KEY PERFORMANCE INDICATORS
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
KEY PERFORMANCE
INDICATORS
WE MONITOR PROGRESS AGAINST THE DELIVERY OF OUR STRATEGIC GOALS USING
SEVERAL FINANCIAL KEY PERFORMANCE INDICATORS (“KPIS”). EACH KPI PROVIDES
A WAY OF MEASURING ELEMENTS OF OUR STRATEGY. OUR STRATEGY IS FOCUSSED
UPON THE MEDIUM TO LONG TERM AND THEREFORE WE CONSIDER HOW WE HAVE
PERFORMED OVER A NUMBER OF YEARS, SHOWING THE KPIS FOR THE LAST FIVE
YEARS. OUR PERFORMANCE IN 2022 WAS SIGNIFICANTLY IMPACTED BY THE WAR IN
UKRAINE.
GROUP REVENUE
2018
2019
2020
2021
2022
1,556
2,056
1,911
2,372
2,642
US$m
GROUP EXPORT REVENUE
GROUP ADJUSTED EBITDA1
ADJUSTED EBITDA MARGIN1
2018
2019
2020
2021
2022
924
1,186
1,016
1,265
1,601
US$m
59%
58%
53%
53%
61%
2018
2019
2020
2021
2022
450
376
340
648
384
US$m
29%
27%
18%
18%
15%
56%
27%
17%
18%
15%
14%
29%
29%
25%
28%
18%
15%
21%
18%
12%
2018
2019
2020
2021
2022
Export Revenue, US$m
% of total revenue
Adjusted Group EBITDA1, US$m
Adjusted EBITDA margin1 (Poultry & Related Operations), %
Adjusted Group EBITDA margin1, %
Adjusted EBITDA margin1,2 (Grain Growing Operations), %
Group Adjusted EBITDA margin1, %
1 Adjusted EBITDA (net of IFRS 16) and Adjusted
EBITDA margin (net of IFRS 16) since 2019
2 Adjusted EBITDA margin for the Grain Growing
Operations was calculated based on revenue
that includes intercompany sales
33
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
KEY PERFORMANCE INDICATORS
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
KEY PERFORMANCE
INDICATORS
REVENUE, US$M
EXPORT REVENUE, US$M
HOW WE CALCULATE IT
As reported.
Revenue to destinations outside country of production.
ADJUSTED EBITDA, US$M
Adjusted EBITDA is defined as profit before tax, net finance costs,
depreciation and amortisation, net after-tax exceptional and non-
recurring items, net foreign exchange loss, and net other expenses.
To ensure we are successful in growing the business.
WHY WE MEASURE IT
To ensure we are delivering on our strategy of international
expansion in turn leading to additional hard currency revenue.
Export revenue provides MHP with a natural hedge against local
currency volatility.
2022 PROGRESS
To track the underlying performance of the business.
Revenue was up 11% y/y mainly driven by a substantial increase in
sunflower oil sales.
Export revenue was up 26% y/y mainly driven by increased sales
of chicken meat and vegetable oils.
Adjusted EBITDA (net of IFRS 16) was down 41% y/y mainly due to
the impact of US$ 69 million of War-related expenses
which offset the price increases in export markets; adjusted
EBITDA margin (net of IFRS 16) decreased from 27% to 14%.
The Company's strategy remains unchanged but rapid adaptations
were made to our business model enabling us to maintain
operations and production, with a particular focus on logistics.
In response to logistics challenges in shipping to some export
markets, the strategy for export sales was focussed on increasing
access to markets such as the EU and UK, while adapting
logistics arrangements so as to continue to meet the needs of
our other export markets including MENA and CIS.
Following the Russian invasion, there was an immediate shift of
strategy to focus on survival of the business by adapting supply
chains in order to maintain production and distribution, while
managing the inevitable increase in costs.
STRATEGY IN WAR
KPI unchanged y/y.
CHANGE TO KPI
KPI unchanged y/y.
KPI unchanged y/y.
34
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
KEY PERFORMANCE INDICATORS BY SEGMENT
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
KEY PERFORMANCE
INDICATORS BY SEGMENT
THE GROUP IS UNDERPINNED BY ITS VERTICALLY-INTEGRATED BUSINESS MODELS,
ITS EXPERIENCED MANAGEMENT TEAM AND ITS DIVERSIFIED DOMESTIC AND
INTERNATIONAL MARKETS. ALL OF THESE FACTORS CONTRIBUTED TO THE GROUP’S
ROBUST PERFORMANCE DURING THE YEAR, BUT NEVERTHELESS PERFORMANCE IN
2022 WAS SIGNIFICANTLY IMPACTED BY THE WAR IN UKRAINE.
POULTRY AND RELATED OPERATIONS
PRODUCTION AND
EXPORT VOLUMES
Production of poultry,
thousand tonnes
Poultry exports,
thousand tonnes
Poultry exports
(as % of Poultry
sales volumes)
2018
2019
2020
2021
2022
618
287
729
357
731
374
754
402
697
368
Thousand tonnes
41%
53%
54%
57%
55%
35
1 Adjusted EBITDA is net of IFRS 16
REVENUE AND
ADJUSTED EBITDA1
Revenue, US$m
Adjusted EBITDA, US$m
EBITDA per 1 kg, US$
2018
2019
2020
2021
2022
1,241
311
1,368
281
1,298
194
1,607
267
1,887
270
US$m
0.53
0.41
0.30
0.36
0.39
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
KEY PERFORMANCE INDICATORS BY SEGMENT
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
GRAIN GROWING
OPERATIONS
2,654
2,408
1,707
2,597
1,935
Thousand tonnes
YIELDS
Corn
Wheat
Sunflower
416
167
272
962
PRODUCTION
OF GRAINS
REVENUE AND
ADJUSTED EBITDA1
Revenue, US$m
Adjusted EBITDA, US$m
Adjusted EBITDA per ha, US$
2018
2019
2020
2021
2022
2018
2019
2020
2021
2022
181
151
268
60
134
97
188
338
158
93
36
1 Adjusted EBITDA is net of IFRS 16
US$m
2018
2019
2020
2021
2022
10.9
6.1
3.2
9.4
6.4
3.6
5.6
5.1
2.8
10.0
5.9
3.2
7.2
5.5
2.5
273
Tonnes per hectare
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
KEY PERFORMANCE INDICATORS BY SEGMENT
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
EUROPEAN OPERATING
SEGMENT (PP)
PRODUCTION OF POULTRY, THOUSAND TONNES1
PRODUCTION OF MEAT-PROCESSING PRODUCTS, THOUSAND TONNES1
112
2021
124
2022
REVENUE AND ADJUSTED
EBITDA2
Revenue, US$m
Adjusted EBITDA2, US$m
Adjusted EBITDA margin2, %
37
102
2020
70
2019
41
2021
44
2022
39
2020
30
2019
2019
2020
2021
2022
271
42
335
53
401
63
464
63
US$m
15%
16%
16%
14%
ADJUSTED EBITDA MARGIN2
14%
IN 2022
1 Results from 21 February 2019 when the
acquisition of PP was completed
2 Adjusted EBITDA (net of IFRS 16) and
Adjusted EBITDA margin (net of IFRS 16)
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
FINANCIAL AND OPERATIONAL REVIEW
BUSINESS REVIEW
FINANCIAL AND OPERATIONAL REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
FINANCIAL
AND OPERATIONAL
REVIEW
OPERATIONAL HIGHLIGHTS
POULTRY PRODUCTION
VOLUMES IN UKRAINE
DECREASED BY 8% Y/Y TO
697,071
TONNES
(2021: 754,387 tonnes)
Poultry production volumes
for PP increased by 11% y/y
to 124,040 tonnes
(2021: 111,973 tonnes).
MHP’S AVERAGE CHICKEN
MEAT PRICE INCREASED
BY 17% Y/Y TO
US$ 1.95
PER KG
(2021: US$ 1.67 per kg)
excluding VAT.
The average price of poultry
meat produced by PP also
increased by 25% to EUR 3.24
per kg (2021: EUR 2.59 per kg).
CHICKEN MEAT EXPORT
VOLUMES FROM UKRAINE
DECLINED BY 8% Y/Y TO
368,379
TONNES
(2021: 402,388 tonnes)
38
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
FINANCIAL AND OPERATIONAL REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
FINANCIAL HIGHLIGHTS
REVENUE INCREASED
BY 11% Y/Y TO
EXPORT REVENUE
INCREASED BY 26% Y/Y TO
OPERATING PROFIT
DECREASED BY 49% Y/Y TO
US$ 2,642
US$ 1,601
MILLION
MILLION
(2021: US$ 2,372 million)
mainly driven by an increase in poultry
export prices y/y and by an increase in
sunflower oil sales volumes, partly offset
by lower poultry volumes due to the
effects of War and export logistics.
(2021: US$ 1,265 million,
53% of total revenue)
representing 61% of total
Group revenue, driven by an
increase in poultry export
prices y/y and higher sunflower
oil volumes.
US$ 255
MILLION
(2021: US$ 503 million)
and operating margin
decreased from 21% to 10%.
ADJUSTED EBITDA
(NET OF IFRS 16) DECREASED
BY 41% Y/Y TO
US$ 384
MILLION
NET LOSS OF
US$ 231
MILLION
(2021: 648 million)
(2021: profit of US$ 393 million)
mainly due to the impact of
US$ 69 million of War-related expenses
which offset the price increases in
export markets; adjusted EBITDA
margin (net of IFRS 16) decreased
from 27% to 15%.
primarily reflecting a US$
365 million non-cash foreign
exchange loss in 2022 (2021:
US$ 40 million foreign
exchange gain).
39
FINANCIAL OVERVIEW
(in mln. US$, unless indicated otherwise)
REVENUE
IAS 41 standard (loss)/profit
GROSS PROFIT
Gross profit margin
War-related expenses
OPERATING PROFIT
Operating profit margin
ADJUSTED EBITDA
Adjusted EBITDA margin
ADJUSTED EBITDA (NET OF IFRS 16)
Adjusted EBITDA margin (net of IFRS 16)
NET (LOSS)/PROFIT
Net (loss)/profit margin
1 pps – percentage points
2022
2,642
(128)
608
23%
(69)
255
10%
443
17%
384
15%
(231)
-9%
2021
2,372
185
745
31%
—
503
21%
709
30%
648
27%
393
17%
% change1
11%
-169%
-19%
-8 pps
n/a
-49%
-11 pps
-38%
-13 pps
-41%
-12 pps
-159%
-26 pps
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
FINANCIAL AND OPERATIONAL REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
SEGMENT PERFORMANCE
POULTRY AND RELATED OPERATIONS SEGMENT
PRODUCTION AND PRICES
2022
2021
% change1
POULTRY
Sales volume1, third party, tonnes
665,975
704,010
Export sales volume, tonnes
368,379
402,388
Domestic sales volume, tonnes
297,596
301,622
-5%
-8%
-1%
- 2 pps
17%
4%
-13%
40%
32%
55%
1.95
47.01
1.45
2.33
57%
1.67
45.37
1.66
1.67
272,807
207,240
40,845
45,209
-10%
Export sales, % of total sales
Average price per 1 kg net of VAT, US$
Average price per 1 kg net of VAT, UAH (Ukraine)
Average price per 1 kg net of VAT, US$ (Ukraine)
Average price per 1 kg net of VAT, US$ (export)
SUNFLOWER OIL
Sales volume, third party, tonnes
SOYBEANS OIL
Sales volume, third party, tonnes
1 Total poultry sales include domestic sales, export sales and sales of culinary products; data for 2021 has been
adjusted in line with this approach
CHICKEN MEAT
The total volume of chicken meat sold to third
parties in 2022 decreased by 5% to 665,975
tonnes (2021: 704,010 tonnes) mainly due
to logistical challenges for export sales and
lower demand in Ukraine due to the effects
of the War.
Driven by War-related news and challenges
as well as by seasonality, in Q2 2022
increased significantly.
poultry prices
However, from September 2022, due to
changes in the economic environment in
the EU and UK and increased competition
in the MENA region, poultry prices across
all export markets (MENA, EU and CIS)
from September 2022 started to decline
sharply, which resulted in an 11% q/q
decrease in price in Q4. Current prices
remain substantially lower than in Q3
2022. Moreover, MHP has, since March
2022, been facing significant y/y increase
in its export logistics costs, unlike our
international competitors which have
considerably lower logistics costs.
VEGETABLE OIL
In 2022, MHP’s sales of sunflower oil
increased by 32% y/y (2021: 207,240 tonnes),
mainly driven by an increase in production of
sunflower cake (due to a change in the fodder
recipe), which was substantially lower in Q4
2021 (when the fodder recipe was based more
on soybean cake) as well as positive changes
in logistics with faster ships turnaround.
Sales of soybean oil were 40,845 tonnes,
10% lower y/y, mainly as a result of lower
production volumes of soybean cake
required for the fodder recipe (substituted
by sunflower cake since Q2 2022), and
challenges associated with export logistics
because of the War in Ukraine.
THE TOTAL VOLUME OF CHICKEN MEAT
SOLD TO THIRD PARTIES DECREASED TO
665,975
TONNES
FINANCIAL RESULT AND TRENDS
(in mln. US$, unless indicated otherwise)
REVENUE
Poultry and other
Vegetable oil
IAS 41 standard gain
GROSS PROFIT
Gross margin
War-related expenses
ADJUSTED EBITDA
Adjusted EBITDA margin
Adjusted EBITDA per 1 kg (net of IAS 41) (US$)
40
2022
1,887
1,425
462
13
375
20%
(38)
270
14%
0.39
2021
1,607
1,305
302
14
285
18%
—
267
17%
0.36
% change1
17%
9%
53%
-7%
32%
2 pps
n/a
1%
-3 pps
8%
In 2022, revenue increased by 17% y/y
driven by price increases in export markets,
partly offset by lower sales volumes of
meat.
Gross profit increased by 32% y/y to
US$ 375 million. The increase was mainly
driven by an increase in the price of
chicken meat, and a higher sales volume
and price of sunflower oil.
1 pps – percentage points
Adjusted EBITDA remained unchanged y/y,
mainly due to the impact of War-related
expenses (including donations, damages
and assets write-offs) which offset the price
increases in export markets.
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
FINANCIAL AND OPERATIONAL REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
GRAIN GROWING OPERATIONS SEGMENT
In 2022, MHP harvested around 341,000
hectares of land in Ukraine and gathered
around 1.9 million tonnes of crops, 26% less
than in 2021, mainly due to unfavorable
weather condition during the summer and
the harvesting season in autumn. MHP’s
average yields remain well above the
average for Ukraine for all crops due to
operational efficiency and employment of
best practices.
HARVEST RESULTS
20221
20211
Production
volume
in tonnes
Cropped
land
in hectares
Production
volume
in tonnes
Cropped
land
in hectares
1,088,476
151,850
1,624,173
163,295
224,391
159,357
104,849
109,240
248,334
40,711
62,585
27,520
44,953
13,129
216,007
279,822
71,055
57,208
348,590
36,773
88,256
21,522
22,879
18,715
1,934,647
340,748
2,596,855
351,440
Corn
Wheat
Sunflower
Rapeseed
Soybean
Other2
TOTAL
1 Only land of Grain Growing Operations Segment.
2 Including barley, rye, sugar beet, sorghum and other and excluding land left fallow as part of crop rotation.
FINANCIAL RESULT AND TRENDS
(in mln. US$ unless indicated otherwise)
REVENUE
IAS 41 standard (loss)/gain
GROSS PROFIT
War-related expenses
Adjusted EBITDA
Adjusted EBITDA (net of IFRS 16)
Adjusted EBITDA (net of IFRS 16) per 1 hectare
2022
158
(142)
105
(6)
150
93
273
2021
188
169
336
—
397
338
962
% change
-16%
-184%
-69%
n/a
-62%
-72%
-72%
The Grain Growing Operations Segment’s
revenue in 2022 was US$ 158 million (2021:
US$ 188 million). The 16% y/y decrease was
mainly attributable to the lower volumes
sold as a result of the late finishing of the
harvesting campaign, and lower yields of
corn, sunflower and wheat.
IAS 41 standard loss in 2022 was US$ 142
million (2021: a gain of US$ 169 million),
with the loss representing the net effect
of the revaluation of agricultural produce
(sunflower, corn, wheat and soya), as well
as a revaluation of fields due to lower
expected results from winter crops.
2022 Adjusted EBITDA (net of IFRS 16) of
the Segment decreased by 72% y/y, mainly
due to weaker harvest in 2022 compared
to the one in 2021, as well as higher grain
production costs due to increased prices
for main raw materials.
YIELDS
Corn
Wheat
Sunflower
Rapeseed
Soya
20221
20211
MHP’s average Ukraine’s average MHP’s average Ukraine’s average
tonnes per hectare
tonnes per hectare
7.2
5.52
2.5
3.82
2.4
6.6
4.1
2.2
2.9
2.4
10.0
5.9
3.2
3.3
2.5
8.0
4.6
2.5
3.0
2.7
IN 2022, MHP
HARVESTED AROUND
341,000
HECTARES OF LAND
IN UKRAINE
41
1 MHP yields are net weight, Ukraine yields are bunker weight.
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
FINANCIAL AND OPERATIONAL REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
MEAT PROCESSING AND OTHER AGRICULTURAL
OPERATIONS SEGMENT
Meat processing products
Sales volume, third party tonnes
Price per 1 kg net VAT, UAH
2022
14,284
99.06
2021
% change
33,954
82.20
-58%
21%
Sales volumes of meat processing
products decreased by 58% y/y to 14,284
tonnes in 2022 (2021: 33,954 tonnes)
driven by War-related challenges that
resulted in the temporary suspension of
production facilities at “Ukrainian Bacon”
in the Donetsk region and the subsequent
partial redeployment of its operations
to Central Ukraine. The average price
increased by 21% y/y to UAH 99.06 per kg
in 2022, driven mainly by an increase in
raw material prices (spices, packaging and
other components).
Convenience food
Sales volume, third party tonnes
Price per 1 kg net VAT, UAH
2022
18,159
61.90
2021
% change
18,857
48.62
-4%
27%
Sales volumes of convenience food in
2022 decreased by 4% y/y to 18,159 tonnes
(2021: 18,857 tonnes), mainly driven by
significant disruptions in HoReCa (both
KFC and McDonalds temporarily ceased
operations in Ukraine in Q2 2022 because
of the War). The average price in 2022
increased by 27% y/y to UAH 61.90 per
kg, mainly driven by raw material price
increases as well as a focus on increased
sales of higher-margin products.
2022
134
102
32
(1)
15
11%
(5)
8
6%
2021
% change1
176
143
33
(1)
17
10%
—
11
6%
-24%
-29%
-3%
0%
-12%
1 pps
n/a
-24%
0 pps
FINANCIAL RESULT AND TRENDS
(in mln. US$, except margin data)
REVENUE
Meat processing and convenience food
Other2
IAS 41 standard loss
GROSS PROFIT
Gross margin
War-related expenses
ADJUSTED EBITDA
Adjusted EBITDA margin
1 pps – percentage points.
2 includes milk, cattle, and feed grains.
The Segment’s 2022 revenue decreased
by 24% y/y to US$ 134 million. Adjusted
EBITDA was US$ 8 million
(2021:
US$ 11 million), mainly due to the effects
of the War and significant disruptions in
demand for the HoReCa segment.
SALES VOLUMES OF MEAT
PROCESSING PRODUCTS
DECREASED TO
14,284
TONNES
SALES VOLUMES OF
CONVENIENCE FOOD
DECREASED TO
18,159
TONNES
42
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
FINANCIAL AND OPERATIONAL REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
EUROPEAN OPERATING SEGMENT (PP)
Poultry
Sales volume, third party, tonnes
Price per 1 kg net VAT, EUR
2022
77,766
3.24
2021
72,841
2.59
% change
7%
25%
In 2022, poultry sales volumes increased
by 7% y/y to 77,766 tonnes. This was
driven by increased production of chicken
meat following the expansion of facilities
in Croatia and Serbia. The average price
of chicken meat increased by 25% y/y to
EUR 3.24 (2021: EUR 2.59).
Meat processing products1
2022
2021
% change
Sales volume, third party, tonnes
43,277
40,366
Price per 1 kg net VAT, EUR
3.09
2.78
7%
11%
1 Includes sausages and convenience food
Meat processing product sales increased
by 7% y/y to 43,277 tonnes ( 2021: 40,366
tonnes). The average price of meat
processing products increased by 11% y/y
to EUR 3.09.
FINANCIAL RESULT AND TRENDS
(in mln. US$, except margin data)
2022
2021
% change y/y
REVENUE
IAS 41 standard gain
GROSS PROFIT
Gross margin
ADJUSTED EBITDA
Adjusted EBITDA margin
ADJUSTED EBITDA (net of IFRS 16)
Adjusted EBITDA margin (net of IFRS 16)
1 pps – percentage points
464
2
113
24%
65
14%
63
14%
401
3
106
26%
66
16%
63
16%
16%
-33%
7%
-2 pps
-2%
-2 pps
0%
-2 pps
The European Operating Segment’s
revenue for 2022 increased by 16% y/y to
US$ 464 million (2021: US$ 401 million),
mainly driven by an increase in poultry
sales volumes and prices.
2022 adjusted EBITDA (net of IFRS 16) was
flat y/y at US$ 63 million (2021: US$ 63
million), with the adjusted EBITDA margin
(net of IFRS 16) declining by 2 pps to 14%.
POULTRY SALES
VOLUMES FOR THE
EUROPEAN OPERATING
SEGMENT INCREASED TO
77,766
TONNES
MEAT PROCESSING
PRODUCT SALES AT THE
EUROPEAN OPERATING
SEGMENT INCREASED TO
43,277
TONNES
43
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
FINANCIAL AND OPERATIONAL REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
CURRENT GROUP CASH FLOW
DEBT STRUCTURE AND LIQUIDITY
(in mln. US$)
Cash from operations
Change in working capital
Net Cash from operating activities
Cash used in investing activities
Including: CAPEX1
Cash from financing activities
Total change in cash2
2022
479
(341)
138
(174)
(160)
57
21
2021
370
(245)
125
(100)
(143)
35
60
(in mln. US$)
Total Debt1 2
LT Debt1
ST Debt1
Trade credit facilities2
Cash and bank deposits
Net Debt1
LTM Adjusted EBITDA1
Net Debt / LTM Adjusted EBITDA1
31 December 2022
30 September 2022
31 December 2021
1,537
1,507
182
(152)
(300)
1,237
384
3.22
1,503
1,480
168
(145)
(317)
1,186
404
2.94
1,505
1,489
126
(110)
(275)
1,230
648
1.90
1 Calculated as cash used for purchases of property, plant and equipment plus cash used for purchases of other
non-current assets.
2 Calculated as net cash from operating activities plus cash used in investing activities plus cash used in financing
activities.
1 Net of IFRS 16 adjustments: as if any lease that would have been treated as an operating lease under IAS 17, as was
in effect before 1 January 2019, is treated as an operating lease for the purposes of this calculation. In accordance
with covenants in MHP’s bond and loan agreements, these data exclude the effects of IFRS 16 on accounting for
operating leases.
2 Indebtedness under trade credit facilities that is required to be repaid within 12 months of drawdown is excluded
for the purposes of this calculation.
Cash flow from operations for 2022
amounted to US $479 million (2021: US$
370 million). The higher cash generation
compared to EBITDA is mainly attributable
to a non-cash IAS 41 gain/(loss) on
revaluation of crops that will be realized
in Cash
next year. Despite
obtained from operations, MHP needed
to invest it in working capital.
increase
The investment in working capital is mostly
related to:
• An increase in trade accounts receivable
for sunflower oil due to longer settlement
periods as a result of increased delivery
periods as well as lower advances
received for grains and meat;
• Higher volumes of oils as at the end
of 2022 designated for sale as well as
increased investments in fertilizers and
fuel before the spring sowing campaign.
In 12M 2022 total CAPEX was 12% higher
compared to 2021 and amounted to US$ 160
million. The increase in CAPEX year-on-year
is mainly attributable to the expansion of
operations and modernization of Perutnina
Ptuj production facilities. (including facilities
for environmental friendly production and
compliance) as well as the War-resilience
CAPEX (barges to facilitate exports, diesel
generators etc).
As of 31 December 2022, MHP’s cash and
cash equivalents amounted to US$ 300
million. Net debt remained broadly stable
y/y at US$ 1,237 million, compared to US$
1,230 million as at 31 December 2021, but
increased compared to US$ 1,186 as at 30
September 2022.
As of 31 December 2022, the share of long-
term debt in the total outstanding debt
remained unchanged at 98%.
The Net Debt / LTM adjusted EBITDA (net
of IFRS 16) ratio was 3.22 as of 31 December
2022, higher than the limit of 3.0 defined
in the Eurobond agreement.
To reiterate the principles underlying
its approach to balance sheet structure
and funding mix, the Company remains
committed
robust
liquidity position as well as sustainable
debt leverage.
to maintaining a
The Company’s debt management
strategy extends to both
its private
and public debt instruments. While the
Company’s bond, loan and revolving credit
facilities remain largely unchanged from
before the War, the Company expects to
manage its debt portfolio proactively in
response to evolving market conditions,
subject to the NBU restrictions.
44
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
FINANCIAL AND OPERATIONAL REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
CURRENCY RISK
As a hedge for currency risks, revenue
from the exports of grain, sunflower and
soybean oil, sunflower husks and chicken
meat which, are denominated in US Dollars
and Euros, are more than sufficient to cover
debt service expenses. Export revenue for
12M 2022 amounted to US$ 1,601 million or
61% of total revenue (US$ 1,265 million or
53% of total sales in 12M 2021).
DIVIDENDS
Taking into account the current risks
and uncertainties following the Russian
invasion of Ukraine, and the resulting
need to preserve liquidity to support the
Company’s ongoing business operations
and to help sustain the population of the
country, the Board of MHP has decided
that no dividends are likely to be paid for
as long as the war continues.
SUBSEQUENT EVENTS
FACILITY AGREEMENT
WITH THE EBRD
In February 2023, the Group entered into
a facility agreement with the European
Bank for Reconstruction and Development
(EBRD) in the amount of US$ 100 million
(EBRD - US$ 90 million and a third party
lender - US$ 10 million). The loan is for the
purposes of financing the needs of the
Poultry and Related Operations Segment.
It is a seasonal loan, secured by sunflower
seeds and oil stocks, with maturity in
August 2023, and will be used to finance
the purchase of sunflower seeds and other
operational expenses associated with
production of sunflower oil and related
products. The loan includes a number of
covenants and other terms and conditions,
including a requirement that the Group
maintain certain financial ratios consistent
with those
in the Group's Eurobond
agreements. The loan also contains a
number of reporting requirements.
APPOINTMENT OF A NEW
NON-EXECUTIVE DIRECTOR
Mr. Oscar Chemerinski was appointed as
an Independent Non-Executive Director
at the EGM held on 7 March 2023.
FORWARD-LOOKING
STATEMENTS
The 2022 Annual Report and Accounts
might contain forward-looking statements
that refer to future events or forecast
financial indicators for MHP SE. Such
statements do not guarantee that these
are actions to be taken by MHP SE in the
future, and estimates can be inaccurate
and uncertain. Actual final indicators
and results can considerably differ from
those declared in any forward-looking
statements. MHP SE does not intend to
change these statements to reflect actual
results.
45
ANNUAL REPORTAND ACCOUNTS 2022
STRATEGIC
REVIEW
BUSINESS REVIEW
MEASURES OF FINANCIAL PERFORMANCE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
MEASURES OF FINANCIAL
PERFORMANCE
MHP HAS INCLUDED CERTAIN MEASURES IN THIS REPORT THAT ARE NOT MEASURES
OF PERFORMANCE UNDER IFRS, INCLUDING EARNINGS BEFORE INTEREST, TAXATION,
DEPRECIATION AND AMORTISATION (“EBITDA”) AND LAST TWELVE MONTHS’ EBITDA
(“LTM EBITDA”) BOTH AT A CONSOLIDATED AND AT A SEGMENT LEVEL.
Adjusted EBITDA, LTM Adjusted EBITDA
and Segment Adjusted EBITDA are
presented in this Report because the
Directors consider them to be important
supplemental measures of the Group’s
financial performance. Additionally, the
Directors believe these measures are
frequently used by investors, analysts and
stakeholders to evaluate the efficiency
of the Group’s operations and its ability
to employ its earnings for the repayment
of debt, capital expenditure and working
capital requirements.
MHP defines Adjusted EBITDA as
income
profit for the year before
tax expense, finance costs, finance
income, depreciation and amortisation
expense, impairment of goodwill and
property, plant and equipment net
foreign exchange gain/loss, and net
other expenses. Depreciation and
amortisation expenses are components
of both cost of sales and selling, general
and administrative expenses
in the
consolidated financial statements.
The introduction of IFRS 16 on Leases
from January 2019 led to adjustments to
the financial statements. MHP has chosen
to present Adjusted EBITDA for 2021 and
2022 both before and after adjustment for
IFRS 16.
LTM Adjusted EBITDA (net of IFRS 16) is
defined as Adjusted EBITDA (net of IFRS
16) for the prior 12 consecutive months
ending on such date of measurement;
LTM Adjusted EBITDA
is calculated
as if acquisitions of subsidiaries had
occurred on the first day of the prior 12
consecutive months ending on such date
of measurement.
LTM Adjusted EBITDA excludes the effects
of IFRS 16 on accounting for operating
leases. Adjusted EBITDA is derived by
adjusting EBITDA (as defined above) for
losses/gains on impairment/reversal of
46
Net debt is defined as bank borrowings,
bonds issued and lease obligations less
cash and cash equivalents. Net debt (net
of IFRS 16) is defined as Net debt less the
effects of lease liabilities recognised under
IFRS 16. The Group believes that net debt
is commonly used by securities analysts,
investors and other interested parties in
the evaluation of a company’s leverage.
In MHP’s bond and
loan agreement
the definitions Adjusted
covenants
EBITDA, LTM Adjusted EBITDA and Net
debt exclude the effects of IFRS 16 on
accounting for operating leases. They are
calculated as if any lease that would have
been treated as an operating lease under
IAS 17 (as was in effect before 1 January
2019) is treated as an operating lease.
impairment of goodwill and property, plant
and equipment net losses on disposals
of subsidiaries, other expenses, net and
foreign exchange (loss)/gain. The Group
believes that this measure is more useful
in evaluating the financial performance
of the Company and its subsidiaries than
traditional EBITDA due to the exclusion
of items that Management considers not
to be representative of the underlying
operations of the Group.
statements
The Group’s Segment measure in the
is
consolidated financial
defined as “Segment result” and represents
operating profit by Segment before
unallocated corporate expense, being the
Segment measure reported to the chief
operating decision maker for the purposes
of resource allocation and assessment
of Segment performance. Within the
the
Strategic and Business Reviews,
reported Segment result is adjusted for the
amount of depreciation and amortisation
per Segment in order to present “Segment
Adjusted EBITDA” to external users, which
MHP feels is a more commonly-used
external metric familiar to investors.
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
MEASURES OF FINANCIAL PERFORMANCE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
Adjusted EBITDA is not a measure of
MHP’s operating performance under
IFRS, and should not be considered
as an alternative to profit for the year,
operating profit, segment result or any
other performance measures derived in
accordance with IFRS or as an alternative
to cash flow from operating activities or
as a measure of MHP’s liquidity. Such
measures presented in this Annual Report
may not be comparable to similarly titled
measures of performance presented
by other companies, and should not
be considered as substitutes for the
information contained in the consolidated
financial statements.
RECONCILIATION OF NET DEBT
Calculation of net debt was aligned
with definitions used for the purpose of
assessment of compliance with debt
covenants provided in the respective loan
agreements. Thus, the accrued interest
which has been included previously as
part of the carrying amount of bank
borrowings, bonds issued and finance
lease obligations has been excluded from
the amount of total debt.
RECONCILIATION OF ADJUSTED EBITDA
AS OF 31 DECEMBER 2022 AND 2021, NET DEBT WAS AS FOLLOWS:
US$ THOUSAND
2022
(Loss)/profit for the year from continuing operations
(230,937)
Income tax
Finance cost
Finance income
Depreciation and amortisation expense
EBITDA
Impairment of goodwill and property,
plant and equipment
Other expenses
Forex Loss/(Gain)
ADJUSTED EBITDA
47
ADJUSTED EBITDA (net of IFRS 16)
(28,078)
154,705
(6,033)
158,906
48,563
29,242
-
365,018
442,823
383,926
2021
396,795
6,914
150,424
(10,531)
192,858
US$ THOUSAND
Bank borrowings
Bonds issued
2022
293,831
2021
225,062
1,382,981
1,376,820
Lease obligations
229,323
281,250
Total debt
1,906,135
1,883,132
736,460
Cash and cash equivalents
(300,489)
(275,237)
10,607
2,867
(40,466)
709,468
647,814
Net debt
Effect of IFRS 16
1,605,646
1,607,895
(216,607)
(268,919)
Trade credit facilities
(152,215)
(110,086)
Net debt (net of IFRS 16)
1,236,824
1,228,890
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
MEASURES OF FINANCIAL PERFORMANCE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
SEGMENT
PERFORMANCE
US$ THOUSAND
POULTRY & RELATED
OPERATIONS SEGMENT
GRAIN GROWING
OPERATIONS SEGMENT
MEAT-PROCESSING &
OTHER AGRICULTURAL
OPERATIONS SEGMENT
EUROPEAN OPERATING
SEGMENT
ELIMINATIONS
CONSOLIDATED
YEAR ENDED 31 DECEMBER 2022
External sales
1,886,814
157,612
134,099
463,501
-
2,642,026
Sales between business
segments
55,234
338,425
470
-
(394,129)
-
Total revenue
1,942,048
496,037
134,569
463,501
(394,129)
2,642,026
SEGMENT RESULTS
198,324
88,480
72,130
61,398
4,030
3,796
44,886
20,139
270,454
149,878
7,826
65,025
Depreciation and
amortisation
Segment adjusted EBITDA
before unallocated
expenses
Unallocated expenses
Unallocated depreciation
and amortisation
ADJUSTED EBITDA
48
-
-
-
335,720
157,463
493,183
(51,803)
1,443
442,823
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
RISK MANAGEMENT
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
RISK MANAGEMENT
Since 24 February 2022, the environment
in which MHP operates has changed
significantly as a result of the Russian
invasion of Ukraine. The Group now
faces a wide range of substantive War-
related challenges, which are subject to
unpredictable and rapid change, so must
continuously assess levels of risk and
evaluate the actions required to protect
its operations and market position. Failure
to manage these issues could have a
substantial adverse impact on our business,
as we strive to maintain operations while
achieving our strategic goals and delivering
sustainable
performance.
Accordingly, we have continuously adapted
our risk management processes and
embedded these throughout the Company
in order to align risk management, strategy
and performance across all entities and
enable agile decisions in response to the
changing circumstances.
financial
RISK OVERSIGHT
The Audit & Risk Committee monitors
the effectiveness of the Company’s
risk management and control systems
by means of regular updates from
Management, reviews of the key findings
of the external and internal auditors, and
an annual review of the risk management
process. Results are reported regularly to
the Board, which has overall responsibility
for risk management. The Internal Audit
function provides objective assurance to
the Management team and to the Audit &
Risk Committee on the effectiveness of
risk management and helps Management
risk
to continuously
management framework and processes.
improve
its
49
RISK MANAGEMENT
FRAMEWORK
of
to
approach
(Committee
The Company’s
the
identification and assessment of risks,
and the response to risks, is based on best
business practices and the international
COSO
Sponsoring
Organisations of the Treadway Commission)
Enterprise Risk Management Framework.
The COSO Framework enables us to
identify, classify, assess and manage the
risks that the Company faces in order to
provide reasonable assurance regarding
the achievement of the Company’s strategy
and objectives.
The implementation and functioning of
our Risk Management Policy is supported
by training programmes for management
and employees that emphasise open
communication, with every employee
sharing responsibility for identifying and
managing risks.
PRINCIPAL RISKS
War-related
risks are by definition
substantive and, in the extreme, could
even be existential for the Company. While
the war continues, these therefore are the
most significant threats to MHP's business
continuity and accordingly are profiled at
the top of the following table of Principal
Risks. As many of these risks are outside
the Group’s control, the ongoing crisis
has driven MHP to become a more agile
company, with systematic, fast-paced, and
dynamic analysis of risks and consequent
implementation of mitigating actions. This
has forced the pace of development and
change, enhancing the Company's ability
and preparedness to respond to future
challenges.
As an example of the Company’s approach
to risk mitigation, in the fourth quarter
of 2022 a number of concerted missile
attacks on Ukrainian power infrastructure
caused significant disruption, resulting in
prolonged energy shortages across the
country. MHP's risk mitigation capabilities
were demonstrated by the fact that, after
a short break, its facilities were able to
resume operations at near full capacity,
with the intermittent national grid supply
supported by MHP's own biogas plants
backed up by diesel generators.
The principal risks the Group is facing
are listed in the table below. The list
is not exhaustive and additional risks
and uncertainties not currently known
to us, or that we currently deem to be
immaterial, may also materially adversely
affect our business, financial condition,
or results. We therefore remain vigilant
and proactive in identifying and mitigating
risks to ensure the continuity of our
operations.
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
RISK MANAGEMENT
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
THE PRINCIPAL RISKS AND UNCERTAINTIES THE GROUP IS FACING ARE SHOWN BELOW1
PRINCIPAL RISK
HOW WE MANAGE THE RISK
TOP 5 WAR-RELATED RISKS
1. Missile attack on slaughter and production
facilities or fodder complexes
Energy disruption. Adoption of a balanced energy mix composed of the national grid, electricity from MHP biogas plants, and back-up diesel generators.
Fire hazard. Fire engines stationed in production areas; provision of uninterrupted water supply; contractual agreements with the State Emergency Services
guaranteeing urgent arrival in case of fire.
Explosion hazard. Development of strict procedures to avert the risk of explosion and minimise the potential impact.
Destruction/breakdown of equipment or processing and manufacturing facilities. Increased warehousing of spare parts and equipment in storage facilities
remote from production sites; reservation of funds for restoration of property; emergency reconstruction protocols for plant and other key facilities.
Production stoppage. In the most severe situations, poultry breeding and hatching may be reduced and, where unavoidable, livestock thinned.
Financial impact. The Company has modelled a number of scenarios and analysed potential cost reductions, operating an agile business strategy.
2. Interruption to electricity supply
Meat Processing facilities. Reduction of electricity consumption across the entire MHP supply chain.
Supply of products to customers. Greater focus on chilled poultry meat products and planned expansion of European freezing capacity.
Payment processing centre/distribution centre. Power generators are employed as back up in the case of supply outage or disruption.
3. Economic impact of the War on usual
commercial levers
Vigilant monitoring. Monitoring all aspects of the markets in which MHP is present, coupled with production reduction scenarios and alternative options
for receiving and processing payment transactions.
Sufficient credit lines. Facilities were put in place prior to the invasion to cover liquidity risks.
4. Repeated blocking of grain exports by sea
Contract performance. Triggering of force majeure provisions, contract cancellation or changing delivery routes.
Increased cost of land delivery. Agile delivery matrix utilising a mixture of trucks, rail and, where available, shipping.
5. Disruptions in supply of production raw
materials and resources
Supply contracts. Network of reliable and diverse suppliers selected.
Petroleum stocks. Increased through renting additional storage facilities.
Compound feed ingredients and additives. Increased warehousing capacity to store raw materials in right conditions. Minimised travel time and loading /
unloading time at transshipment centres and ports.
50
1 As of the date of the 2022 Annual Results release, 11 April 2023
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
RISK MANAGEMENT
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
PRINCIPAL RISK
HOW WE MANAGE THE RISK
OTHER WAR-RELATED RISKS
Loss of access to leased land, offices and
production facilities in the occupied territories
Loss of storage facilities and stocks
of produced goods and inventories
Absence or loss of employees resulting
in disruption of business processes
This geopolitical risk is largely outside of MHP’s control.
Where possible, mitigating factors may include the relocation of operations.
Adaptation of our business model, logistics and supply routes.
Additional storage facilities.
See Growth Pillar 2: Our People and Their Wellbeing on pages 63 to 74.
Mitigations to ensure that employee welfare is protected and strengthened include: evacuating employees deemed most at risk from dangerous areas to safer
“hubs”; ensuring no concentration of critical employees in one location, with back-up critical functions organised; training employees on defencive measures
on how they to behave and protect themselves in the War; building of shelters for employees; providing physical and psychological support to employees; and
changing motivation schemes to recognise and reward employees who ensure continuity of production and logistics.
Disruption of logistics routes in Ukraine
See CEO’s Statement and Growth Pillar 2: Our People and Their Wellbeing on pages 18 and 63 respectively.
Business planning was adjusted to a month-by-month, then three-month, then six-month process.
Mitigating actions include: drawing on, training and/or re-skilling of volunteers, retailers, and drivers; expanding our fleet of trucks; adapting supply chains to the
new constraints; actions to ensure adequate stocks of all critical resources.
Inability to conduct export activities
See CEO’s Statement on page 18.
Rapid adaptations to our business model and logistics routes.
Detailed contingency plans have been designed and are in place to maintain exports using as many routes as are available at any point in time.
Potential cyber-attack, loss of data and
disruption of business processes
See Growth Pillar 5: Business Conduct on pages 87 to 93.
Detailed contingency plans have been designed to respond to cyber-attack and the potential unavailability of IT systems.
Mitigations include the application of Microsoft’s latest security solutions in MHP’s cloud infrastructure to ensure that MHP’s systems detect and respond to
information security events that indicate a possible compromise.
BUSINESS RISKS
Fluctuations in prices for grains and related
products required for production input
Fluctuations in demand for and market prices
of chicken meat
MHP drives cost efficiency across all its businesses, supported by its vertically-integrated business model. MHP’s grain growing operations produce internally
100% of the corn required for poultry feed production. The Company adopts different approaches for improving feed recipes and the structure of feed so as
to optimise cost and increase the feed conversion ratio at the same time.
Although adversely affected by the reduction in Ukraine’s population during 2022, demand for chicken in the domestic market is expected to remain strong
as chicken meat is the most affordable kind of meat from both a price and diet perspective. MHP products are available for purchase through different sales
channels at all times and the Company offers competitive trade terms to its customers. MHP’s domestic strategy and in particular its focus on higher value-add
products are drivers for increasing the Company’s profitability from chicken meat sales in Ukraine.
In international markets, MHP continues to benefit from its strategy of geographic diversification of exports combined with product mix optimisation and a
focus on customised products for new potential markets.
Failure to implement growth strategy
and expansion into export markets
MHP has in place a long-term strategy for the Group’s expansion into diversified export markets. In spite of War-related disruption to exports during 2022,
MHP continues to export to over 70 international markets.
Outbreaks of Avian Influenza and other
livestock diseases
To ensure the well-being of livestock at MHP’s facilities, the Company has implemented high biosecurity standards and systems supplemented by a set of
preventive veterinary-sanitary and hygiene measures.
Inefficient procurement and an increase
in production costs
MHP strives to continually improve its procurement procedures and production processes. The procurement of strategic items is centralised with a high level
of regulation and control. KPIs are set and are closely monitored with a view to decreasing the costs of production.
51
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
RISK MANAGEMENT
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
PRINCIPAL RISK
HOW WE MANAGE THE RISK
BUSINESS RISKS (continued)
Occurrence of a material product quality
or product safety incident
MHP prioritises product safety and quality in line with international best practice and applicable regulations. It maintains robust quality and safety management
systems and has an excellent track record in this area.
Fluctuations in commodity prices such as gas,
fuel and energy
MHP tightly monitors and controls its gas, fuel and energy costs. Energy price risks are mitigated by a priority focus on developing renewable sources of energy
and a continued increase in the use of co-generation and alternative energy technology.
Lack of highly-qualified staff at strategic level
and production enterprises
MHP works to maintain positive relationships with employees and strives to build upon its reputation as a high-quality, responsible employer of choice.
Inefficient procurement and an increase
in production costs
MHP strives to continually improve its procurement procedures and production processes. The procurement of strategic items is centralised with a high level
of regulation and control. KPIs are set and are closely monitored with a view to decreasing the costs of production.
ENVIRONMENTAL RISKS
Global climate change
MHP endeavors to conduct all its activities in an environmentally-responsible manner and to meet the global challenges presented by climate change.
A key tenet of the Company’s Sustainable Environmental Policy is to become carbon neutral by 2030. In 2021, MHP partnered with an independent third party
Alltech E-CO2 to audit greenhouse gas emissions and recomend measures to further reduce greenhouse gas emissions. There is also a target to achieve
carbon accreditation with the Carbon Trust and develop a strategy for carbon neutrality in 2023.
Irrational water use
There is a range of preventive and monitoring approaches to ensure rational water consumption and to prevent pollution of surface waters and groundwater
aquifers at MHP.
Deforestation and conversion of high-carbon
lands into agricultural land, including drainage
of peat bogs
FINANCE RISKS
Fluctuations in foreign exchange rates
MHP is committed to zero deforestation and zero conversion of high-carbon lands to agricultural land.
MHP’s Sustainable Environmental Policy sets a number of objectives to contribute to sustainable development of the country at all locations, where the
Company has got its operations.
The majority of MHP’s borrowings are denominated in US$. The resulting exposure is effectively hedged by the generation of around 61% of total revenue
in US$ in 2022 from the export of sunflower and soybean oils, chicken meat and grain. The hard currency revenue allows MHP to service dollar-denominated
obligations subject to the NBU regulations.
Fluctuations in interest rates
MHP monitors its interest rate exposure and analyses the potential impact of interest rate movements on its net interest expenses.
Of MHP’s debt portfolio, 99% is at fixed interest rates, the majority being in the form of fixed-rate Eurobonds. Bank borrowings are mostly from foreign banks
or Ukrainian subsidiaries of international banks at rates lower than those available from Ukrainian banks.
Credit risk
MHP has a diversified pool of customers. The amount of credit allowed to any one customer or group of customers, including supermarkets and franchisees,
is strictly controlled.
Liquidity risk
Inefficient investments
52
Credit risks are managed by security provisions included in agreements with customers. At foreign subsidiaries of MHP, an insurance company is involved to
approve the credit limit and to insure against risk of non-payment.
MHP maintains efficient budgeting and cash management processes to ensure that adequate funds are available to meet its business requirements. MHP adopts
a flexible CAPEX programme enabling capital projects to be deferred if necessary. MHP holds cash balances in hard currency on correspondent accounts.
MHP has developed and implemented procedures to ensure due process in this area. The Evaluation of Investment Projects procedure requires that the
Investment Committee approves investment projects. All of the Company’s investment projects are documented with a formal investment appraisal report and
financial model which are jointly approved by the Investment Committee. All major investment decisions require approval by the Board.
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
RISK MANAGEMENT
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
PRINCIPAL RISK
HOW WE MANAGE THE RISK
STAKEHOLDER RELATIONS RISKS
Local communities and NGOs
Investor and other stakeholder relations
COMPLIANCE RISKS
MHP is in regular dialogue with its local communities and other stakeholders in the regions in which it operates. The Company aims to conduct these relationships
sensitively and with mutual respect.
MHP maintains an experienced and well-resourced communications and investor relations team that is supported by a national and international network of
professional advisors. The team ensures that information about the Company is distributed in a timely manner, is accurate and up-to-date. MHP also monitors
external commentary about its activities to ensure that any inaccuracies are addressed promptly. A qualitative measurement of the Company’s image is
performed on a regular basis and monitored by its senior management team and the Board.
Legal and regulatory risk
MHP’s management team actively monitors regulatory developments in the countries in which the Group operates.
Bribery and corruption
COMPLIANCE RISKS
Failure to comply with the covenants
under loan agreements
BUSINESS CONTINUITY RISK
MHP maintains robust anti-bribery and corruption policies and procedures, including a Code of Ethical Conduct, which are regularly reviewed and monitored
by the Audit & Risk Committee.
MHP has developed and follows control procedures to monitor compliance with covenants.
Failure of IT systems could materially affect
MHP’s business
A full set of measures has been implemented across the Company to reduce the risk of IT system failure. Detailed contingency plans have been designed to
respond to cyber-attack and the potential unavailability of IT systems.
53
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
MHP’S GROWTH PILLARS
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
MHP’S GROWTH
PILLARS
THIS SECTION OUTLINES THE ASPECTS OF MHP'S BUSINESS THAT HAVE BECOME A
TOP PRIORITY SINCE THE INVASION ON 24 FEBRUARY 2022. THE CRISIS NECESSITATED
A SWIFT REASSESSMENT OF MHP'S ESTABLISHED METHODS OF ADDRESSING
THE SIX GROWTH PILLARS SET OUT BELOW. THIS LED TO SIGNIFICANT CHANGES,
REFINEMENTS, REDESIGNS, AND THE INTRODUCTION OF VARIOUS DIFFERENT ACTIVITIES
AND PROCESSES. AT THE SAME TIME WAS ACHIEVED AMIDST EXCEPTIONALLY DIFFICULT
LOGISTICAL CHALLENGES, THE NEED TO CONTINUE BUSINESS OPERATIONS, AND THE
URGENCY OF SAFEGUARDING MHP'S EMPLOYEES AND, WHERE APPROPRIATE, THE
GENERAL PUBLIC. THROUGHOUT AT THE SAME TIME, THE GROUP ALSO CONTINUED
TO PLAY ITS PART IN MAINTAINING THE COUNTRY'S FOOD SECURITY.
Many aspects of MHP’s vital work
local communities
within Ukraine’s
during the war in 2022 were and will
continue to be conducted in partnership
with
the MHP-Gromadi Foundation
(“MHP-Gromadi” or “the Foundation”),
MHP’s charitable foundation. Further
information can be
the
(https://
Foundation’s
mhpgromadi.org.ua).
found at
website
Despite
these significant challenges,
its
MHP has successfully advanced
established commitments and plans in
several areas, such as addressing climate
change, enhancing business conduct
mechanisms, and offering opportunities
for employee growth and development.
These commitments and developments
will remain a priority for MHP throughout
the duration of the War and beyond.
DESPITE THE WAR, MHP
HAS SUCCESSFULLY
ADVANCED ITS
ESTABLISHED
COMMITMENTS AND
PLANS IN SEVERAL
AREAS DURING THE YEAR
54
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
MHP’S GROWTH PILLARS
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
MHP conducted
regular stakeholder
engagement activities to establish
its
to sustainability, create a
approach
sustainability framework and prioritise its
sustainability-related activities. Despite
the challenges created by the War, the
principles and commitments recorded
below, which were fixed prior to 24
February 2022, remain in place and will
continue to be refined and developed
over time.
OUR SIX GROWTH PILLARS
STAKEHOLDER
ENGAGEMENT
OUR PEOPLE
AND THEIR
WELLBEING
pages 59 to 62
pages 63 to 74
OUR ROLE IN
SOCIETY
AND OUR LICENCE
TO OPERATE
RESPONSIBLE
FOOD
PRODUCTION
pages 75 to 77
pages 78 to 86
The activities relating to the Six Growth
Pillars are delivered and assessed through
our strategy and policies, management
systems and processes, performance
and
measurement
engagement with stakeholders.
and monitoring,
GRI TABLE
MHP’s 2022 GRI table, which cross-
references the information within this
report, is available for download from
the MHP website (https://mhp.com.ua/
en/mhp-se/financial-reports).
OUR APPROACH
WHY
AREAS OF
FOCUS
(GROWTH
PILLARS)
HOW
Our purpose is to provide our customers with high quality, sustainable proteins, food products and culinary
solutions that are safe and responsibly produced.
Stakeholder
Engagement
Our People and
Their Wellbeing
Our Role in
Society and
Our Licence to
Operate
Responsible
Food Production
Business
Conduct
The Planet
Strategy and Policy Design
Continuous Management Systems Development
Rigorous Performance Measurement and Monitoring
REPORTING
GRI
TCFD
International Standards and
Guidelines
THE PLANET
pages 94 to 106
ALIGNING OUR SUSTAINABILITY
FRAMEWORK
BUSINESS
CONDUCT
pages 87 to 93
We support global stakeholder initiatives
(including those set up by governments,
regulators, the financial and investment
communities, and NGOs) to bring greater
transparency and consistency to how the
business world approaches sustainability
and discloses its performance.
Clearly our steps to develop MHP’s
approach have been affected by the
War. However, we remain committed to
achieving best practice and carefully
monitoring the development of global
including those relating to
standards
climate change.
Key aspects of our approach include:
•
identifying
the United Nations
Sustainable Development Goals as the
appropriate sustainability framework to
align MHP’s approach to;
• attending and closely following the
outcomes of COP26 and considering
the recommendations; and
• developing our data collection to
enable us to report, applying the
Global Reporting Initiative.
55
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
MHP’S GROWTH PILLARS
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
ALIGNMENT WITH THE UN SUSTAINABLE DEVELOPMENT GOALS
United
Nations
The
Sustainable
Development Goals (“UN SDGs”) were
designed to provide a shared blueprint for
achieving peace, prosperity and wellbeing
for people and the planet, now and in the
future.
MHP’s responsible business strategy is
closely aligned with the UN SDGs and the
Group aims to contribute constructively
to positive global change. MHP aligns its
activities with all seventeen of the UN
SDGs.
MHP leverages its products and services,
workforce, investments and stakeholder
engagement activities to drive a process of
innovation and continuous improvement.
UN GOALS
MHP'S IMPACT AND CONTRIBUTION
1
2
NO POVERTY
ZERO HUNGER
4
5
QUALITY EDUCATION
GENDER EQUALITY
56
END POVERTY IN ALL ITS FORMS EVERYWHERE
MHP plays an active and important role in the communities where its operations are based. It works with local stakeholders to improve
infrastructure, develop education and health, and to provide economic and employment opportunities. MHP’s role in its communities
within Ukraine has become particularly important since the commencement of the War. This is discussed throughout this Report.
END HUNGER, ACHIEVE FOOD SECURITY AND IMPROVED NUTRITION AND PROMOTE SUSTAINABLE AGRICULTURE
One of MHP’s main priorities following the invasion was to achieve and continuously maintain food security for the population of
Ukraine. Our efforts to achieve this are discussed throughout this Report.
MHP was one of the first Ukrainian companies to be verified by audit and permitted to label its products as antibiotic-free “Class A”, in
accordance with the standard “Voluntary requirements for poultry farms with poultry technology and production of poultry products
without the use of antimicrobial agents and/or without antimicrobial agents”.
All 37 of the Company’s labs undertake around 6,000 methods of analysis to study feed and raw materials, to achieve microbiological
and chemical parameters, and to ensure strict compliance with veterinary, biosafety and hygiene standards at all MHP facilities. All
livestock in Ukraine and the European Operating Segment have been vaccinated to prevent the presence of viral pathogens in poultry.
SUPPORT HEALTH AND WELLBEING
Since the War began, MHP has prioritised the health, safety and wellbeing of its employees and the population of Ukraine. The Group
adopted a similar approach at the start of the global COVID-19 Pandemic in 2020 and made considerable efforts to support and assist
its workforce and their families. Health and safety at all the Group’s sites are important priorities that receive considerable management
attention.
ENSURE INCLUSIVE AND EQUITABLE QUALITY EDUCATION AND PROMOTE LIFELONG LEARNING OPPORTUNITIES FOR ALL
MHP provides meaningful and productive work and training for all of its employees and has continued to do this since the outbreak of
the war in Ukraine. MHP also supports many educational and learning activities within the communities where the Group is based.
ACHIEVE GENDER EQUALITY AND EMPOWER ALL WOMEN AND GIRLS
A strong area of focus for MHP is the creation of employment opportunities at all levels for women. The War in Ukraine has underpinned
the importance of this focus. Job flexibility and the requirement to keep MHP Ukraine operating during the war has underlined why this
approach is important to business continuity and long-term success.
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
MHP’S GROWTH PILLARS
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
UN GOALS
MHP'S IMPACT AND CONTRIBUTION
6
7
CLEAN WATER AND SANITATION
ENSURE AVAILABILITY AND SUSTAINABLE MANAGEMENT OF WATER AND SANITATION FOR ALL
The registers of wells and mineshafts for water at every MHP enterprise are regularly updated. Close attention is paid at all of MHP’s
businesses to ensuring that business activities do not contaminate natural water resources and reduce the availability of water for the
use of local communities.
AFFORDABLE AND CLEAN ENERGY
ENSURE ACCESS TO AFFORDABLE, RELIABLE, SUSTAINABLE AND MODERN ENERGY FOR ALL
Over the last few years, MHP has increasingly been focussing on its own renewable energy generation through the construction of biogas
plants at its facilities in Ukraine. This approach has supported the Group’s site facilities since the war began because it has enabled MHP to
continue its activities during energy shortages, especially after the very significant and sustained attacks in the second half of 2022.
DECENT WORK AND
ECONOMIC GROWTH
8
PROMOTE SUSTAINED, INCLUSIVE AND SUSTAINABLE ECONOMIC GROWTH, FULL AND PRODUCTIVE EMPLOYMENT AND
DECENT WORK FOR ALL
MHP prioritises providing workplaces that are welcoming and free of discrimination, bullying and harassment.
9
6
INDUSTRY INNOVATION
AND INFRASTRUCTURE
MHP’s rates of pay compare favourably to other large employers in Ukraine and elsewhere. The Group sees itself as an important
contributor to economic growth and stability within the communities where it operates and works closely with local stakeholders to
ensure that everyone benefits from the economic wealth generated by the Group’s activities.
Since the beginning of the war, MHP has been cooperating closely with Ukrainian authorities and other stakeholders to support the
effective operation of the economic infrastructure as it relates to the Company. The Group has supported its workforce and local
communities in a wide variety of ways to shield them from the economic impacts that have occurred.
BUILD RESILIENT INFRASTRUCTURE, PROMOTE INCLUSIVE AND SUSTAINABLE INDUSTRIALISATION, AND FOSTER INNOVATION
Technological innovation and infrastructure development is at the heart of many of MHP’s activities as the Group seeks to drive
creativity, efficiency and change throughout its businesses. A prime example is the creation of the Innovation Department with the goal
of transforming MHP from a commodity company into a customer-focussed culinary company. In 2022, this development took another
step forward with the integration of our innovation experts into the Group’s Business Segment verticals. See also the Nominations and
Remuneration Committee Report on page 133.
Innovation and workforce flexibility have been some of the key features in the Group’s response to the challenges presented to it by the
war in Ukraine and have contributed significantly to the Group continuing its operations in a largely uninterrupted manner.
10
REDUCE INEQUALITIES
REDUCE INEQUALITY WITHIN AND AMONG COUNTRIES
MHP is committed to providing equal opportunities for everyone who works for the Group and aims to set high employment standards
within the countries in which it operates.
57
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
MHP’S GROWTH PILLARS
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
UN GOALS
MHP'S IMPACT AND CONTRIBUTION
SUSTAINABLE CITIES AND
COMMUNITIES
11
MAKE CITIES AND HUMAN SETTLEMENTS INCLUSIVE, SAFE, RESILIENT AND SUSTAINABLE
MHP works with its stakeholders to develop and protect the communities where the Group’s operations are based. These responsibilities
became a particularly important priority to the management team as a result of the global COVID-19 Pandemic and the invasion of Ukraine.
12
RESPONSIBLE CONSUMPTION
AND PRODUCTION
ENSURE SUSTAINABLE CONSUMPTION AND PRODUCTION PATTERNS
As a global company exporting to more than 70 countries, MHP’s approach to marketing is consistent with the International Chamber of
Commerce’s Marketing and Advertising Code and its framework for responsible food marketing communications and labelling. MHP is
committed to sustainable production and in particular to reducing its carbon footprint through the increased use of renewable energy.
13
CLIMATE
ACTION
14
LIFE BELOW WATER
15
LIFE ON LAND
TAKE URGENT ACTION TO COMBAT CLIMATE CHANGE AND ITS IMPACTS
MHP’s environmental policy includes a net zero emissions commitment by 2030. In recent years, the Group has taken a number of steps to
reduce the effects of its activities on the environment and to reduce its greenhouse gas emissions. These have included the construction
of biogas facilities which use waste generated by MHP’s other activities, and a consistent focus on energy use reduction activities.
CONSERVE AND SUSTAINABLY USE THE OCEANS, SEAS AND MARINE RESOURCES FOR SUSTAINABLE DEVELOPMENT
None of MHP’s sites are located close to oceans or seas. MHP uses shipping facilities to export its products and its suppliers are
required to adhere to the environmental requirements of the Group’s Business Partner Code of Conduct. This is available for download
from the main MHP website (www.mhp.ua).
PROTECT, RESTORE AND PROMOTE SUSTAINABLE USE OF TERRESTRIAL ECOSYSTEMS, SUSTAINABLY MANAGE FORESTS,
COMBAT DESERTIFICATION, AND HALT AND REVERSE LAND DEGRADATION AND HALT BIODIVERSITY LOSS
MHP prioritises the protection of the environment where the Group’s sites are located and strives to address the global challenge
presented by climate change.
PEACE, JUSTICE AND
STRONG INSTITUTIONS
16
PROMOTE PEACEFUL AND INCLUSIVE SOCIETIES FOR SUSTAINABLE DEVELOPMENT, PROVIDE ACCESS TO JUSTICE FOR ALL
AND BUILD EFFECTIVE, ACCOUNTABLE AND INCLUSIVE INSTITUTIONS AT ALL LEVELS
MHP has a robust approach to responsible business conduct and a zero-tolerance approach to bribery and corruption. MHP published
a revised Code of Ethics and a Supplier Code of Ethics in 2021.
Since the commencement of the war on 24 February 2022, everyone at MHP has been working hard to play their part in protecting the
democratic integrity of Ukraine and the wellbeing of its citizens.
17
PARTNERSHIP FOR THE GOALS
STRENGTHEN THE MEANS OF IMPLEMENTATION AND REVITALISE THE GLOBAL PARTNERSHIP FOR SUSTAINABLE DEVELOPMENT
MHP conducts regular dialogue with a variety of stakeholders about its approach to sustainable development. During 2022, these
activities have included working with many internal and external stakeholders as MHP takes those steps towards protecting Ukraine and
its population that are appropriate to a company operating in a war-torn country.
58
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 1: STAKEHOLDER ENGAGEMENT
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
GROWTH PILLAR 1
STAKEHOLDER
ENGAGEMENT
THE COMMENCEMENT OF RUSSIA’S INVASION OF UKRAINE ON 24 FEBRUARY 2022 MEANT
THAT MHP HAD TO IMMEDIATELY REVISE ITS APPROACH TO STAKEHOLDER ENGAGEMENT
AND PLAY AN ACTIVE ROLE IN ADDRESSING THE IMPLICATIONS OF THE CRISIS.
THE IMPORTANCE OF STAKEHOLDER
ENGAGEMENT DURING A TIME OF WAR
MATERIALITY
ASSESSMENT
MHP’s Board and Senior Management Team
recognised straightaway that effective
stakeholder
communications
the
engagement were essential
success of the Company’s response to the
Russian aggression.
and
to
They immediately resolved that the Group’s
top four wartime stakeholder engagement
priorities were to:
1. Support the needs of employees;
2. Address the needs of communities in
different parts of Ukraine;
3. Address the additional requests for
information from financial partners and
the investment community; and
4. Work with other stakeholders to maintain
food security and personal safety for the
Ukrainian population.
The Board and Senior Management Team
consider the results of the Company’s
efforts in this regard to be outstanding
and many features of these activities are
discussed throughout this Report.
59
Of particular note are successes in:
• maintaining high levels of communication
and engagement, which has been
central to MHP’s efforts to successfully
maintain its ongoing activities through
working with a wide variety of internal,
national and international stakeholders;
in successful ongoing
negotiations with banks, bondholders
and shareholders to maintain MHP’s
liquidity and activities during
the
emergency;
• participating
• cooperating with a wide variety of
internal and external stakeholders in
Ukraine to maintain food security for
everyone;
• applying
communication
channels,
social media,
to maintain communication with
employees
families
particularly at the commencement of
the war;
various
including
their
and
• working with
internal and external
stakeholders to organise the evacuation
of 600 employees and their families at
the start of the War, rehousing them
and then setting up two new “hubs” to
enable them to continue to work;
• partnering with internal and external
stakeholders to maintain IT integrity and
security, and enabling ongoing internal
and external communications; and
• working with
internal and external
stakeholders to maintain a wide variety
activities
of community
encourage
across Ukraine
international stakeholders to provide
resources and support to the Ukrainian
population during the war.
support
and
In previous years, MHP has conducted a
stakeholder materiality exercise to ensure
that it fully understands the views of its
stakeholders in relation to its recent,
current and future activities. Details of
this approach can be found in the 2021
Sustainability Report which is available for
download from the MHP website. Clearly
this approach had to be changed as a
result of the outbreak of the war. MHP’s
stakeholder engagement activities are
now focussed primarily on the top four
priorities listed to the left of this page.
This approach will continue until the end
of the War and will be adapted to the
changing circumstances that the Russian
aggression has created and will create
going forward. Over and above the top
four wartime priorities, work continued
across
stakeholder
all
engagement.
areas
of
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 1: STAKEHOLDER ENGAGEMENT
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
STAKEHOLDER
ENGAGEMENT
HIGHLIGHTS
STAKEHOLDER
WORKFORCE
MHP has a dedicated and experienced
workforce that is committed to, and is a
key element in, achieving MHP’s aims and
objectives. Taking care of our people is a
top priority.
The table below sets out how each
stakeholder group was understood and
addressed, drawing out highlights of the
Group’s activities during the year.
KEY STAKEHOLDER ISSUES
HOW MHP ENGAGES
2022 HIGHLIGHTS
• A shared vision of MHP’s commitment to the
country during the war;
• Design of tailored programmes to address
the specific needs created by the war;
• Personal and family welfare and security;
• Regular two-way communication;
• Health and wellbeing, taking into account the
special circumstances created by the war;
• Clear communication of Company and
management goals;
• A conducive workplace featuring diversity,
inclusion, flexibility, responsible business
practice and clear communication;
• Provision of ongoing employment.
• Training, education and mentoring;
• Programmes for the development of
innovative thinking;
• Corporate volunteering;
• Grievance mechanism;
• Regular surveys.
COMMUNITIES AND NGOS
• Wellbeing, personal safety and food security
• Stakeholder Engagement Plan adapted for
MHP’s reputation and business continuity
are supported by its aim to be a proactive
and supportive member of its local
communities and a good neighbour.
during the war;
the special circumstances of the war;
• Transparency, clear communication and
• Joint activities with MHP-Gromadi to
opportunities to engage;
support local communities;
• Development and support of local
• Grievance mechanism;
infrastructure and services;
• Local employment opportunities.
• Regional recruiting programme;
• Medical assistance in the village programme;
• Regular public meetings;
• Regular investment in public infrastructure in
partnership with local stakeholders.
• Substantial two-way communication
resources were applied to ensure ongoing
communications and work activities during
the war;
• Communications played an important
role in maintaining morale, organising
the evacuation and rehousing of 600
employees and their families, organising
their return to work, and the setting up
of two new “hubs” following the outbreak
of War.
• A large number of community support
activities have been conducted during
the War. These include arranging business
grants for start-ups and re-location,
building bomb shelters and putting up
tents, providing access to social services,
healthcare and counselling, providing
poultry and grain, boosting morale through
cinema screenings including on the front
line, encouraging food self-sufficiency
through the sowing of seeds, charging
batteries and generators, building up
heating stocks in preparation for blackouts
and power cuts, and cleaning local parks
and schools.
CUSTOMERS, BUSINESS PARTNERS AND
SUPPLIERS
MHP’s ongoing and uninterrupted business
continuity relies on the strength and
maintenance of its relationships with its
customers, suppliers and business advisors.
• Business continuity during the war;
• Adaptation of business methods and logistics
during the War;
• Fair business conduct, terms and conditions;
• MHP’s approach and performance relating to
biosecurity, product quality, environmental,
health and safety matters;
• Adaptation and redesign of communication
channels to take into account the difficult
circumstances created by warfare;
• Working with a variety of stakeholders
to ensure ongoing food security for the
population of Ukraine;
•
Interaction via the tender platform;
• Dedicated staff teams to interact with
customers, suppliers and business advisors;
• Working with a variety of stakeholders, both
domestically and internationally, to ensure
ongoing business activities at MHP’s sites.
• Provision of questionnaires;
• Transparency, clear communication channels
• Participation in regular customer due
and opportunities to engage.
diligence processes.
60
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 1: STAKEHOLDER ENGAGEMENT
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
STAKEHOLDER
KEY STAKEHOLDER ISSUES
HOW MHP ENGAGES
2022 HIGHLIGHTS
SHAREHOLDERS, FINANCIERS AND THE
INVESTMENT COMMUNITY
MHP’s ongoing access to capital and
liquidity depends on maintaining strong and
lasting relationships with investors, debt
providers, financiers and financial analysts.
GOVERNMENTS AND REGULATORS
MHP’s licence to operate is dependent on
its relations with government and regulators
and operating within the applicable laws
and regulations.
• Ongoing liquidity and solvency of the Group;
• Provision of regular access to senior
• Successful negotiation with and
• Regular access to management and
management and IR personnel;
information during the War;
• Regular provision of conference calls for the
• Financial and share price performance;
investment community;
• Credit rating;
• Strategy;
• Risk management;
• Environmental, social and governance
(“ESG”) approach and performance;
• Transparent, regular and proactive
communication and reporting.
• Quarterly results, trading updates, and ad
hoc announcements;
• One-to-one meetings with investors and
financiers;
• Annual general meeting;
• Dedicated IR section on the Company’s
website;
• Annual financial and non-financial reports;
• Site visits;
•
Investor surveys.
unprecedented support from bondholders
to ensure ongoing liquidity and MHP’s
capital base;
• Regular and ongoing dialogue with
shareholders and the finance community
to ensure ongoing support and full
understanding of MHP’s stability during the
duration of the armed aggression;
• Since April 2022, publication of monthly
operational trading updates in addition to
the Group’s normal reporting schedule.
• Close partnership arrangements with
business to protect and support the
population and ensure food security during
the hostilities;
• Adherence to applicable laws and
regulations;
• Support and cooperation with local
economic development agencies;
•
Investment into infrastructure, education and
medical facilities;
• Transparency, clear communication channels
and opportunities to engage.
• Regular dialogue to establish population
needs and requirements during the War and
to design plans to address them;
• Regular meetings with local government;
• Participation in local infrastructure, health
and education projects;
• Close cooperation with local regulators
over matters such as maintenance of
strict bio-security, health and safety and
environmental matters.
• Successfully working with local and national
authorities to undertake a wide variety of
community support projects to assist the
population of Ukraine during the war;
• Working with international authorities and
governments to facilitate the export of the
Group’s products during the War. For more
information, see the Sustainability and
International Affairs Committee Report on
page 135.
MEDIA
An important element of all of MHP’s key
stakeholder relations is that the media
reports timely and accurate information
about its activities.
• How MHP is working to support the
population and the country;
• Receipt of timely, complete and up-to-date
news and information about MHP’s activities;
• Design of communication activity to address
the special circumstances created by the
armed aggression;
• Company websites;
• Contact information for the media;
• Regular distribution of Company news and
• MHP has successfully used mainstream
and social media throughout the War to
maintain communications with a wide
variety of internal and external stakeholders
despite the challenging circumstances.
• Transparency, clear communication channels
information;
and opportunities to engage.
• Availability of Senior Management for media
interviews and briefings;
• Site visits for the media.
61
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 1: STAKEHOLDER ENGAGEMENT
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
SECTION 172 STATEMENT
Section 172 of the UK Companies Act
2006 requires each Director of the
Company to act in the way he or she
considers, in good faith, would most likely
promote the success of the Company for
the benefit of its members as a whole.
In this way, Section 172 requires a Director
to have regard, among other matters,
to the:
INTERESTS OF THE COMPANY’S
EMPLOYEES
LIKELY CONSEQUENCES OF ANY
DECISIONS IN THE LONG TERM
NEED TO FOSTER THE COMPANY’S
BUSINESS RELATIONSHIPS WITH
SUPPLIERS, CUSTOMERS, AND OTHERS
IMPACT OF THE COMPANY’S OPERATIONS
ON LOCAL COMMUNITIES AND THE
ENVIRONMENT
DESIRABILITY OF THE COMPANY
MAINTAINING A REPUTATION FOR HIGH
STANDARDS OF BUSINESS CONDUCT
NEED TO ACT FAIRLY BETWEEN
MEMBERS OF THE COMPANY
In discharging its Section 172 duties,
the Board has regularly considered the
factors set out above and the views of
key stakeholders. By considering MHP’s
objectives and commitment to responsible
business,
its strategic
priorities, the Board aims to ensure that
its decisions are consistent, predictable,
and always in the best interests of the
business.
together with
Further details of the Board’s activities can
be found in the Corporate Governance
Report on pages 116 to 118. This includes
how the Board reaches its decisions; the
matters discussed and debated during the
year; the stakeholder considerations that
were central to those discussions; and
how the Board fosters MHP’s relationships
with customers, suppliers and other
stakeholders. Other relevant information
can be found at MHP’s main corporate
website at www.mhp.ua.
62
THE BOARD AIMS TO ENSURE THAT ITS DECISIONS ARE
CONSISTENT, PREDICTABLE, AND ALWAYS IN THE BEST
INTERESTS OF THE BUSINESS
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 2: OUR PEOPLE AND THEIR WELLBEING
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
GROWTH PILLAR 2
OUR PEOPLE AND
THEIR WELLBEING
THE WAR HAS HIGHLIGHTED THE IMPORTANCE OF OUR PEOPLE AS MHP’S
MOST VALUABLE ASSET. MHP’S ABILITY TO CONTINUE ITS OPERATIONS DESPITE
THE EXTRAORDINARY DIFFICULTIES POSED BY THE WAR IS DIRECTLY ATTRIBUTABLE TO
ITS WELL-ESTABLISHED CULTURE OF BUSINESS COLLABORATION AND CO-OPERATION.
OUR COMMITMENT
MANAGEMENT APPROACH
We are building a culture in which people
realize their potential.
Everybody at MHP strives to achieve
the goal of zero fatalities and zero health
and safety incidents resulting in injury
or adversely affecting the health of
employees.
includes
MHP’s human resources management
approach has four main elements:
• strategic workforce planning;
• efficient human resources management.
optimal
This
structures,
leadership
improving
ability skills at all levels, building a high
performance culture, predicting and
mitigating human resources risks, and
building a productive corporate culture
based on Company values;
designing
• talent acquisition management; and
• dedication to personal development
and growth.
MHP’s Management Team prizes diversity
as one of the Group’s greatest strengths.
Everyone is aware that the success of the
business depends on the collective skills,
backgrounds and experiences of all team
members. MHP strives to create a trusting
and productive workplace by treating
63
everybody with dignity and respect and
by promoting diversity and inclusion.
MHP’s Group companies aim to hire and
employ a workforce that represents the
communities in which the companies are
based.
MHP also promotes equal opportunities
in recruitment, career development and
financial benefits. The Group partners with
both universities and vocational schools
to recruit talent.
The HR strategy is set centrally in alignment
with the Group’s overall strategy, and
is then adjusted as appropriate to each
country. HR management processes are
aligned with the international standard ISO
9001:2015. MHP personnel management
systems at facilities outside Ukraine
comply with the ISO 9001:2015 standard.
To maintain this culture, MHP’s HR
team is also guided by the principle of
transparency in working with staff.
MHP AIMS TO BUILD A
CULTURE WHERE EACH
AND EVERY PERSON’S
WELFARE, HEALTH AND
SAFETY AND WELLBEING
MATTERS
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 2: OUR PEOPLE AND THEIR WELLBEING
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
HEALTH AND SAFETY
MHP implements a risk-based approach
to occupational health and safety matters
the appropriate
in accordance with
international standards.
This approach enables MHP’s management
to:
•
identify potential safety issues and
assess the risks associated with them;
• assess the effectiveness of existing
safety measures and take improvement
action where necessary;
• maintain a culture of safety awareness
throughout the Group’s businesses;
• maintain management systems that
prevent accidents, occupational injuries
and diseases and employee exposure to
hazardous substances;
• motivate everyone to always maintain
safe working conditions; and
• regularly update MHP’s management
industry best
line with
in
systems
practice.
the
in February
invasion
Following
2022, an urgent management priority
was to ensure that employee welfare
In
was protected and strengthened.
particular MHP’s management
team
ensured that international occupational
safety standards were maintained whilst
uninterrupted work patterns and ongoing
production continued. This was achieved
through additional health and safety
training to ensure workforce safety under
the prevailing new conditions. Particular
attention was paid to supporting employee
mental health during the year.
MHP has a detailed occupational health
and safety policy which is available for
download (www.mhp.ua). The policy was
last updated in May 2020, is regularly
reviewed and is signed by the Chairman,
Chief Executive Officer and Chief Financial
Officer. The Board of Directors has overall
responsibility for occupational health and
safety at MHP.
HEALTH AND SAFETY POLICY HIGHLIGHTS
Highlights of the occupational health &
safety policy include:
• a commitment
implement an
to
effective occupational health and
safety management programme;
• a requirement for each MHP business
to maintain a performance monitoring
programme managed by qualified
professionals, and which meets the
criteria of need, relevance, validity and
effectiveness;
• a statement that the achievement of
a healthy and safe workplace is the
responsibility of everyone who works
for MHP;
• a requirement that all MHP’s businesses
conduct effective communication with
employees concerning health and safety
matters;
• a requirement that all MHP’s businesses
conduct regular health and safety risk
assessments in line with the applicable
regulations and industry best practice;
and
• a requirement that all MHP’s businesses
provide regular health and safety training
for everyone who works at the Group.
HIGHLIGHTS OF THE GROUP’S HUMAN RESOURCES
POLICIES ARE SET OUT BELOW
MHP UNDERTAKES ALL NECESSARY
STEPS AND HAS RELEVANT PROCEDURES
IN PLACE TO COMPLY WITH RELEVANT
CURRENT REMUNERATION LEGISLATION
MHP VALUES EACH EMPLOYEE AND WILL
SUPPORT EVERYONE TO FULLY REALISE
THEIR POTENTIAL
MHP BUILDS TRANSPARENT
RELATIONSHIPS WITH ALL STAFF AND
PROTECTS THE PRIVACY OF EVERY
EMPLOYEE
MHP ENSURES THAT THE PRINCIPLE
OF EQUAL OPPORTUNITIES APPLIES
ACROSS THE GROUP
64
MHP PROHIBITS DISCRIMINATION BASED
ON PERSONAL CHARACTERISTICS THAT
ARE NOT RELATED TO WORKPLACE
ACTIVITIES OR TO THE PERFORMANCE
OF DUTIES
MHP PROHIBITS THE USE OF CHILD
LABOUR, FORCED LABOUR AND SLAVERY
MHP ADHERES TO THE PRINCIPLE
OF FREEDOM OF ASSOCIATION
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 2: OUR PEOPLE AND THEIR WELLBEING
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
EMPLOYEE NUMBERS
AND GENDER DATA
At 31 December 2022, 28,2981 employees
worked for MHP in Ukraine (61% male,
39% female). In the European Operating
Segment, the total number of employees
at that date was 4,247 (44% male, 56%
female).
1) A number of employees of MHP Ukraine, including
those undertaking multiple disciplines.
EMPLOYEE DATA - EMPLOYMENT TENURE
EMPLOYEE DATA - GENDER
UKRAINE
2022
UKRAINE
2021
UKRAINE
2020
Total
Male
Female
Total
Male
Female
Total
Male
Female
28,298
17,262
11,036
27,366
15,935
11,431
26,766
16,202
10,564
UKRAINE
2022
UKRAINE
2021
UKRAINE
2020
Total
28,298
Total
27,366
Total
26,766
65
Permanent
27,016
Permanent
26,794
Permanent
26,136
%
95
%
98
%
98
Temporary
1,282
Temporary
572
Temporary
630
%
61
39
%
58
42
%
61
39
%
5
%
2
%
2
EUROPEAN OPERATING SEGMENT
Total
Male
Female
4,247
1,869
2,378
EUROPEAN OPERATING SEGMENT
Total
Male
Female
3,965
1,745
2,220
EUROPEAN OPERATING SEGMENT
Total
Male
Female
3,883
1,618
2,074
EUROPEAN OPERATING SEGMENT
Total
4,247
Permanent
4,162
EUROPEAN OPERATING SEGMENT
Total
3,965
Permanent
3,882
EUROPEAN OPERATING SEGMENT
Total
3,692
Permanent
3,618
%
44
56
%
44
56
%
44
56
%
98
%
95
%
98
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 2: OUR PEOPLE AND THEIR WELLBEING
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
EMPLOYEE DATA – FULL/PART-TIME
UKRAINE
2022
Total
28,298
Full employment
Male
Female
16,987
10,956
27,943
Total
Male
Female
27,366
Full employment
15,935
11,431
27,366
UKRAINE
2021
UKRAINE
2020
Total
26 766
Full employment
Male
Female
15,919
10,217
26,136
EMPLOYEE DATA – EMPLOYMENT LEVEL
%
99
%
98
%
98
Part time
179
176
Part time
265
306
Part time
283
347
%
1
%
2
%
2
EUROPEAN OPERATING SEGMENT
Total
Male
Female
4,247
Full employment
1,911
2,336
3,459
EUROPEAN OPERATING SEGMENT
Total
Male
Female
3,965
Full employment
1,646
2,107
3,753
EUROPEAN OPERATING SEGMENT
Total
Male
Female
3,883
Full employment
1,708
2,085
3,793
%
81
%
95
%
98
Part time
354
434
Part time
12
63
Part time
18
72
%
19
%
5
%
2
UKRAINE
EUROPEAN OPERATING SEGMENT
YEAR
MANAGERS
PROFESSIONALS
OTHER
Number
2022
2021
2,462
2,331
2020
2,046
%
9
9
8
Number
5,056
4,645
4,278
%
18
17
16
Number
20,780
20,390
20,442
%
73
74
76
MANAGERS
Number
79
75
70
%
2
2
2
PROFESSIONALS
Number
710
658
566
%
17
17
15
OTHER
Number
3,458
3,218
3,247
%
81
81
83
66
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 2: OUR PEOPLE AND THEIR WELLBEING
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
EMPLOYEE DATA - AGE
UKRAINE
EMPLOYEES
AGED UNDER 30
YEAR
2022
2021
2020
Number
5,111
4,798
5,086
%
18
18
19
EMPLOYEE DATA - RECRUITMENT
AGED BETWEEN
30 AND 50
Number
16,447
15,497
15,524
%
58
57
58
AGED OVER 50
EMPLOYEES
AGED UNDER 30
EUROPEAN OPERATING SEGMENT
Number
6,740
7,071
6,156
%
24
25
23
YEAR
2022
2021
2020
Number
568
505
459
%
13
13
12
AGED BETWEEN
30 AND 50
AGED OVER 50
Number
2,235
2,031
2,040
%
53
51
52
Number
1,444
1,429
1,384
%
34
36
36
UKRAINE
YEAR
2022
2021
2020
Vinnytsia
Region
Volyn Region
Dnipropetrovsk
Region
Donetsk
Region
Ivano-
Frankivsk
Region
Kyiv and Kyiv
Region
Lviv Region
Sumy Region Cherkasy
TOTAL
2,440
3,613
2,809
46
59
43
762
820
443
88
837
714
100
123
94
2,687
2,251
1,448
97
141
99
81
127
151
Region
2,744
3,086
2,076
9,045
11,057
7,877
EUROPEAN OPERATING SEGMENT
YEAR
Slovenia
Croatia
2022
2021
2020
337
340
569
162
189
135
Bosnia /
Herzegovina
141
132
80
Serbia
Macedonia
Romania
Austria
TOTAL
454
241
201
0
2
3
1
0
1
2
1
0
1,097
905
989
67
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 2: OUR PEOPLE AND THEIR WELLBEING
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
TRAINING AND DEVELOPMENT
that
MANAGERIAL PROFESSIONAL
DEVELOPMENT
MHP has always placed great emphasis on
training and development. Management
believes
the development of
professional skills adds significant value
and contributes to:
• professional and personal development
of employees, which helps maintain a
continuous flow of talent;
improving task performance through
the acquisition of new skills and
qualifications; and
•
• role flexibility through reskilling and the
acquisition of new experience.
training and development
In 2022,
activities continued and were largely
uninterrupted by the war. 574 employees
received professional training during the
year averaging 28 hours per participant (up
50% on 2021).
The main areas of focus for professional
training were:
•
legislative requirements (for instance in
connection with workforce health and
safety);
• technological development; and
• obtaining professional qualifications
improved their
(79 key specialists
qualifications during the year).
In 2022, MHP worked with a variety of
educational partners in the delivery of
workforce professional training. These
included the Odesa National University
of Food Technologies and the National
University of Bioresources and Nature
Management.
68
Management training though the People
Management 2.0 programme continued
DEVELOPMENT OF EMPLOYEE
ASSESSMENT MECHANISMS
MHP recently introduced a new system
of comprehensive personal assessment
which involves the creation of individual
development plans with the participation
of the employee, their line manager and
the HR team. 374 employees participated
in this process in 2022.
commenced,
the outcomes of
In addition, five management development
designed
programmes
to address
the
assessments. Around 100 managers took
part, drawn from across the business. On
average each programme comprises 100
hours of training over a five-to-eight-month
period in the form of workshops, working
in project teams, coaching and individual
consultations.
to
MHP’s comprehensive approach
personnel evaluation continued in 2022.
More than 5,000 people were assessed
and pass ratings
increased by 20%
compared to 2021. 275 employees at
senior, middle and specialist management
levels were assessed using additional
tools including 360 degree performance
evaluation, assessment centre analysis,
the use of personal and professional
diagnostics, and hard skills testing.
during 2022. 398 employees participated
in the six modules with an average of 85
training hours per participant.
TRAINING AND DEVELOPMENT FOR
OTHER PARTS OF THE WORKFORCE
3,277 employees took part in training
events in 2022 (a fourfold increase on
2021). Average participation was 6.5 hours
per participant during the year.
Despite the disruption caused by the war,
the corporate training team continued to
organise training events for employees
involving both domestic and overseas
training partners. An example of this
continuity is the activities which took
place in April and May 2022 when 710
employees were involved in events that
addressed topics such as:
• task management;
• supporting workforce teams;
• designing business processes
to
address the rapidly changing business
environment;
• crisis communications;
• managing business growth;
• conducting remote leadership in crisis
situations;
• successful
aspects
of
business
behaviour; and
• harnessing
influence.
the positive power of
Given the circumstances created by the
war, emphasis has been placed on online
training since the middle of the year.
language
MHP
launched an English
in Autumn 2022.
learning programme
200 employees joined this project with
the cost being shared equally between
the Company and the employee.
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 2: OUR PEOPLE AND THEIR WELLBEING
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
OCCUPATIONAL HEALTH AND SAFETY
MAINTAINING THE SAFETY AND
WELLBEING OF THE WORKFORCE
AFTER THE OUTBREAK OF WAR
At 08:00 on 24 February 2022, MHP’s
Senior Management Team assembled at
the Kyiv HQ and promptly established
three Group priorities. One of these was
to prioritise the safety of our people.
The Kyiv HQ was immediately closed and
the team realised that the first steps must
include the identification of colleagues,
and their families, who were at greatest
risk of death and injury, particularly
those who lived in or around Irpen, Bucha
and Kyiv. As a result, MHP promptly
arranged evacuation buses to transport
around 900 employees and their families
to safer parts of Ukraine.
In addition, the Management Team
prioritised communication with employees
and their families to ensure that everyone
in the war,
understood MHP’s role
evacuation measures, salary payment
plans, assistance to families and victims,
and the availability of volunteer assistance.
reactively
developed
following
MHP’s people management processes
were
and
quickly
the outbreak of
the war according to the changing
circumstances, and broadly consisted
of three phases: the rescue period; the
back-to-work period; and the adjusting
to new circumstances period.
69
RESCUE PERIOD
(24 FEBRUARY TO 15 MARCH)
Around 700 employees and
family
members who were evacuated were
moved to a “hub” in the Vinnytsya region
and provided with accommodation. A
separate hub was set up in western Ukraine
to enable continuous business operations
and, in particular, to enable ongoing IT
and finance functions. February salaries
were paid early to support everyone in the
business. We commenced the delivery of
psychological support programmes for
everyone on 6 March.
•
An urgent assistance package was set up
for people who were particularly affected
by the war. Key benefits include:
• a promise to preserve the roles and
salaries of employees who join the
Ukrainian armed forces;
immediate payment of UAH 100,000
to the family of deceased employees.
MHP also pays monthly benefits for ten
years amounting to the average monthly
salary of the deceased employee;
immediate payment of UAH 100,000
to employees following the death of
a close family member because of
the War;
•
• a pledge to cover the full cost of
for
treatment
employees injured as a result of the
war; and
rehabilitation
and
• the provision of financial assistance
due to the loss of working capacity (for
example a disability) caused by the war
(UAH 150,000 to 300,000).
BACK-TO-WORK PERIOD
(15 MARCH TO MID-MAY)
By 15 March, employees had been placed
in locations that were as safe as could be
practically achieved. Management felt
it was important that people returned to
work for their own personal wellbeing,
the maintenance of mental health, and
to enable the business to play a full role
in supporting the country during the war,
in particular maintaining food security.
To facilitate this an adaptive approach to
salary payment for the duration of the war
was devised and put in place.
During this period, many employees
remarkable degree of
exhibited a
flexibility and preparedness to reskill or
retrain. By the end of March, a significant
part of the workforce had returned to
full-time work.
ADJUSTING TO NEW CIRCUMSTANCES
PERIOD (MID-MAY ONWARDS)
On 16 May, MHP re-opened its offices at
the Kyiv HQ and around 80% of employees
returned. Business planning, which had
commenced the annual review process
at the start of 2022, was adjusted at the
start of the war to become a month-
by-month planning process. By the end
of March, this shifted to a three-month
planning process and, in June, to a six-
month horizon. Senior Management
is now looking at a 12-month planning
horizon for 2023.
INSTALLATION OF FIRE-FIGHTING
FACILITIES
MHP established a voluntary fire brigade
following the outbreak of military action.
This initiative increased the protection
of MHP facilities particularly in view of
the remoteness of some of its locations
and the importance of maintaining the
country’s food security. Six teams were
established providing 24-hour, 7-days-a-
week cover supported by three new fire
engines and the appropriate fire-fighting
equipment.
A number of additional preventative
measures were taken to ensure employee
safety. These included:
• the provision of extensive fire-fighting
training for MHP’s teams and selected
members of the workforce;
• the provision of workforce civil
protection training with the State
Emergency
other
Service
emergency services;
and
• development,
and
protection of fire-fighting water
sources; and
maintenance
inspections of fire-fighting
• periodic
readiness and
to ensure
facilities
workforce protection.
SENIOR MANAGEMENT
IS NOW LOOKING AT A
12-MONTH PLANNING
HORIZON FOR 2023
ANNUAL REPORTAND ACCOUNTS 2022
STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 2: OUR PEOPLE AND THEIR WELLBEING
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
ORGANISATION OF ENTERPRISE SAFE
SHELTERS
Safe shelters have been provided at
MHP’s sites to provide protection during
air raids along with the development of
procedures and action plans to ensure
safe evacuation. The shelters have been
equipped with first aid facilities and
medicines at a cost of UAH 8.1 million and
with gas masks and respirators at a cost
of UAH 870,000.
INCIDENT INFORMATION – UKRAINE
Despite the difficulties presented by the
war, MHP’s Ukraine-based sites reported
a significant decrease in health and safety
incidents during 2022. This was a result of
a termination of operations at “Ukrainian
Bacon” because of the development of
the War in Ukraine as well as continuous
improvement and best international practice
implementation at all of MHP’s Ukraine-
based sites.
is that
Unfortunately, three incidents occurred
during the year which led to employee
fatalities. In these circumstances, the
procedure
internal and state
investigations are conducted in relation to
each incident and the findings are shared
around the organisation to ensure that
corrective action is taken, risk is minimised
and similar cases are avoided in the future.
SAFE SHELTERS HAVE
BEEN PROVIDED AT
MHP’S SITES TO PROVIDE
PROTECTION DURING
AIR RAIDS ALONG WITH
THE DEVELOPMENT
OF PROCEDURES
AND ACTION PLANS
TO ENSURE SAFE
EVACUATION
about
information
INCIDENT INFORMATION – EUROPEAN
OPERATING SEGMENT
incidents
The
presented below has been changed
and updated from the previous reports.
Please take it into account. The statistics
include data on sickness absence due to
work-related injury for a period of 4 to 6
months (i.e. Total number of accidents),
as well as shorter absences due to work-
related injuries.
In 2022, there were no fatalities at
Perutnina Ptuj Group.
INCIDENT INFORMATION
UKRAINE
Lost time due to health and safety
incidents (hours)
Lost time due to health and safety
incidents (days)
Fatalities
High-severity incidents
Low-severity incidents
Total number of incidents
Lost working time frequency ratio
(person/hour)
Fatal accident ratio
2022
9,891
1,174
3
9
10
22
0.73
0.14
70
2021
17,097
2020
3,160
1,822
392
1
12
26
39
1.03
0.03
0
5
7
12
0.45
0
EUROPEAN OPERATING SEGMENT
Lost time due to health and safety
incidents (hours)
Lost time due to health and safety
incidents (days)
Fatalities
High-severity incidents
Low-severity incidents
Total number of incidents
Lost working time frequency ratio
(person/hour)
Fatal accident ratio
2022
6,720
2021
7,360
2020
6,240
840
920
0
2
8
10
1.22
0
0
2
9
11
0.83
0
780
0
3
113
116
7.62
0
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 2: OUR PEOPLE AND THEIR WELLBEING
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
HEALTH AND SAFETY EXPENDITURE
AND TRAINING DATA
INVESTMENT IN EMPLOYEE HEALTH AND SAFETY
UKRAINE
EUROPEAN OPERATING SEGMENT
2022
97.955
2021
118.352
2020
66.245
0.02 – 4.7
0.05 – 8.2
0.6 – 4.6
2022
2021
2020
Total expenditure (EUR)
125,642
113,642
108,705
Expenditure on modern certified PPE
(EUR)
1,141,423
1,097,494
1,067,819
46.621
43.344
26.712
2.791
1.902
1.069
EUROPEAN OPERATING SEGMENT
2022
2,610
2021
2,715
2020
1,580
Safety training hours
14,852
15,045
8,203
Number of employees
2022
1,449
1,108
2021
1,519
2020
1,633
1,288
1,201
Total expenditure (UAH millions)
Financing of occupational health and
safety measures as a percentage of the
payroll
Expenditure on modern certified PPE
(UAH millions)
Training for employees in occupational
health and safety departments
(UAH millions)
SAFETY TRAINING DATA
UKRAINE
Number of employees participating in
training at special training centres
Number of employees participating in
training at MHP sites
71
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 2: OUR PEOPLE AND THEIR WELLBEING
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
INTERNAL AUDITS AND INSPECTIONS
THE GROUP’S
INTERNAL SAFETY
AUDIT MECHANISM
IS FOCUSSED ON THE
IDENTIFICATION OF
POTENTIAL RISKS AND
ADDRESSING THEM
PROMPTLY
through
MHP’s internal safety audit mechanisms
were established in 2017. The system is
designed to support MHP’s other safety
management activities
the
identification of potential safety risks and
addressing them promptly. MHP is also
the subject of regular safety audits by the
Ukraine government’s State Employment
Service (unfortunately, regular external
audits stopped because of the War in
Ukraine, however, regular internal cross
facilities audits were in place in 2022).
The European Operating Segment’s
faciltities are under the relevant authorities
governance on a regular basis.
INTERNAL AUDIT AND INSPECTION DATA
UKRAINE
Number of State Employment Service inspections
Employee prosecutions following state inspections
Number of MHP internal audits conducted
EUROPEAN OPERATING SEGMENT
Number of state safety inspections
Employee citations following state inspections
Number of MHP internal audits conducted
2022
2021
2020
0
0
45
16
28
42
1
0
9
2022
2021
2020
15
44
162
7
43
161
10
30
168
72
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 2: OUR PEOPLE AND THEIR WELLBEING
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
OCCUPATIONAL HEALTH
DATA
In recent years, no cases of occupational
diseases have been recorded within the
MHP Group. This has been achieved
through close monitoring of working
conditions at each location. Features of
these management systems include:
WORKFORCE HEALTH MONITORING
ON A REGULAR BASIS
REGULAR LABORATORY TESTING AND
INSTRUMENTATION CONTROL OF
WORKING CONDITIONS
REDUCTION OF POTENTIALLY
HARMFUL ASPECTS OF
WORKPLACE FEATURES
(FOR EXAMPLE NOISE AND DUST)
SUPPLY OF PERSONAL PROTECTION
EQUIPMENT (PPE)
A PROGRAMME OF TECHNOLOGICAL
IMPROVEMENT
WORKPLACE NOISE AND DUST DATA
UKRAINE
EUROPEAN OPERATING SEGMENT
Workplaces with noise in excess of local
law / level established by IFC (85dBA)
Number of people at workplaces with noise
in excess of local law / level established by
IFC (85dBA)
Workplaces with dust concentration in
excess of local law / level established by IFC
Number of people at workplaces with dust
concentration in excess of local law / level
established by IFC
2022
2021
2020
328/107
318/45
154/53
4,292/1,561
4,330/514
4,875/1,606
96/61
110/33
66/36
818/452
1,194/297
1,113/365
Workplaces with noise in excess of local
law / level established by IFC (85dBA)
Number of people at workplaces with noise
in excess of local law / level established by
IFC (85dBA)
Workplaces with dust concentration in
excess of local law / level established by IFC
Number of people at workplaces with dust
concentration in excess of local law / level
established by IFC
2022
44/107
2021
43/45
2020
44/53
310/1,561
335/514
328/1,606
19/61
19/33
16/36
84/452
84/297
84/365
73
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 2: OUR PEOPLE AND THEIR WELLBEING
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
KEY ACHIEVEMENTS
IN 2022
Despite significant challenges created
by the War, 2022 saw the following key
achievements:
• The creation and implementation of a
revised talent management system for
the Company including improvements
to personnel assessments, training and
development;
• Vacancies
in Ukraine continued
to
be filled promptly. 90% were filled in
accordance with the requirements of the
relevant business departments. This was
supported by the introduction of improved
recruitment processes;
• A Group-wide employee
recognition
system was implemented through the
award of MHP Stars;
• A competitor
remuneration strategy
was implemented as part of the review
of all salary grades to ensure fair and
competitive remuneration levels;
included
the merger of
• Key structural changes were implemented.
the
These
export sales function with the customer
business development department and
organisational changes in the sustainable
development, horticulture and Perutnina
Ptuj HR departments;
PLANS FOR 2023
IMPLEMENTATION OF AN ELECTRONIC
WORKFORCE MEDICAL SYSTEM AND THE
ALIGNMENT OF THE WORKFORCE HEALTH
AND FIRE SAFETY MANAGEMENT SYSTEM
WITH THE GLOBAL G.A.P. CERTIFICATION
REQUIREMENTS
THE DESIGN OF A WORKFORCE
PROGRAMME THAT WILL ENABLE
EMPLOYEES TO RETURN TO WORK
AFTER THEY HAVE BEEN SERVING IN
THE UKRAINE ARMED FORCES
• The organisation of shelters at MHP
enterprises: for personnel to stay during air
alarms and and the provision and storage
of basic necessities within the shelters to
ensure they have everything they need;
and
• At MHP’s enterprises in both Ukraine and
tin the European Operating Segment in
the Balkans, the Group met objectives
in the areas of workplace safety and fire
prevention.
AN IMPROVED SUCCESSION
CULTURE WILL BE DEVELOPED
ACROSS MHP’S BUSINESSES
A NEW MHP UKRAINE
RECRUITMENT WEBSITE WILL
BE LAUNCHED
THE EFFICIENCY OF INTERNAL
PERSONNEL MANAGEMENT
PROCESSES WILL BE IMPROVED
EUROPEAN OPERATION SEGMENT
• To complete the risk assessment
audit for all workplaces;
• To implement the occupational
health and safety policy for the PP
Group;
• To carry out regular and ongoing
training;
• To harmonise external systems of
professional OH&S and fire safety
functions;
• To keep OH&S committees and
occupational health and safety and
fire safety officers up to date; and
• To carry out an evacuation drill.
74
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 3: OUR ROLE IN SOCIETY AND OUR LICENCE TO OPERATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
GROWTH PILLAR 3
OUR ROLE IN SOCIETY
AND OUR LICENCE TO
OPERATE
OUR COMMITMENT
MANAGEMENT APPROACH
POLICY HIGHLIGHTS
importance on
MHP places great
relationships with
maintaining strong
local stakeholders, recognising that these
connections are critical to the long-term
success of the business.
that everyone within
At the start of the war on 24 February 2022,
MHP’s Board and Senior Management
Team resolved that it was absolutely
the
essential
organisation did everything necessary to
support the people of Ukraine, maintain
food security and contribute to keeping
everyone
in the country as safe as
possible. The Team believes that the
survival of MHP is clearly tied to the
survival of Ukraine as a sovereign nation
and the wellbeing of its citizens. Thus, the
Company’s strategy during the War has
been centred around this core theme.
MHP works with a wide variety of
stakeholders to enable effective community
development through financial and “in-
kind” contributions. MHP’s activities
include volunteering and the provision
of products and services, supporting
internally displaced persons in creating
conditions for their
in
territories of Ukraine, ensuring their
basic needs: food, safety and jobs. More
details can be found in the Stakeholder
Engagement section on page 59. Following
the commencement of the War, MHP’s
Management Team placed particular focus
on assisting the population of Ukraine,
maintaining food security, supporting
infrastructure, wellbeing and morale.
life activities
In 2022, MHP continued to operate
its community development approach
through centralised activities and a focus
on working in partnership with other
international donors
large businesses,
and national Ukrainian charities. This step
enabled the participating organisations to
share and develop their own expertise.
MHP regularly updates its Stakeholder
Interaction Plan which is available for
download from the main corporate
website (www.mhp.ua).
MHP IS FOCUSSED ON
SUPPORTING UKRAINE,
MAINTAINING FOOD
SECURITY, SUPPORTING
INFRASTRUCTURE,
WELLBEING AND MORALE
MHP’s community development policy
focusses on five principles of respect.
These are:
1. Respect for the law;
2. Respect for sustainable development;
3. Respect for human rights;
4. Respect for diversity; and
5. Respect for the environment.
All potential aid or charity support
recipients are subject to a mandatory
confidential compliance check before a
project is supported.
MHP regularly assesses the impact and
effectiveness of the implementation of
social projects through regular dialogue
with the organisations it supports, with
employees, local communities and other
stakeholders.
75
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 3: OUR ROLE IN SOCIETY AND OUR LICENCE TO OPERATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
MHP’S SUPPORT STRATEGY
AND ACTIVITIES DURING
THE WAR
The work that MHP’s team has been
conducting has been partly an extension of
existing community activities but it has
also been sensitive and highly responsive to
the rapidly changing wartime circumstances.
This ensures that the efforts and activities
of the team are being channelled in the
most effective ways possible.
Much of this activity has been coordinated
through Charitable Organisation “MHP-
Gromadi Foundation”, which declares its
initiatives as Sustainable Development
Fund. More
this
its activities can be
organisation and
found at its LinkedIn pages and website
(https://mhpgromadi.org.ua).
information about
The Foundation’s expenditure has grown
significantly since 2017 (UAH 11 million) and
rose by UAH 178 million in 2021 to UAH
297 million in 2022. The Foundation’s 2023
budget is UAH 334 million.
For more than six years, MHP-Gromadi
has been engaged in the development of
villages and small towns of Ukraine. This
activity was extended significantly following
the outbreak of the war.
During 2022, the following priorities were
identified:
• providing support to ensure the safety
of the population and the defence of
the country;
• delivery of assistance and support for
micro-enterprise projects to support
local communities;
• delivery of financial, material and
logistical support for a variety of social
programmes; and
• facilitation of communication with a
variety of local and national stakeholders.
KEY ACHIEVEMENTS
DURING 2022
MAINTENANCE OF FOOD SECURITY
About 12,000 tonnes of MHP-produced
food worth more than UAH 973 million has
been distributed. This has been sent to
residents who live in war zones, defenders
and rescuers,
local communities that
have been badly affected by the war,
hospitals and maternity homes, charitable
institutions that care for vulnerable people
and internally displaced persons.
SUPPORT FOR MEDICAL INSTITUTIONS
UAH 20 million was allocated to the
purchase of modern emergency vehicles
within United24, the framework of the
global
initiative of the President of
Ukraine. Five brand-new ambulances with
an estimated cost US$ 100,000 each were
provided to support the activities of the
medical profession during the War.
A Ministry of Defence medical institution
in the Kyiv region also received a modern
tow truck worth UAH 1.2 million from
MHP-Gromadi. The vehicle will assist with
the repair and maintenance of medical
vehicles provided for military personnel.
SUPPORT FOR INTERNALLY
DISPLACED PERSONS
MHP-Gromadi provided food for 300,000
internally displaced persons at around
100 different facilities located around
the country. Over 10,000 children were
provided with baby food (the recently
launched KOKO brand) and personal
hygiene products. Two accommodation
shelters were provided and equipped in
the Cherkasy and Vinnytsia regions.
76
FINANCIAL SUPPORT FOR
ACCOMMODATION SHELTERS
MHP-Gromadi provided financial support
for the provision of 75 accommodation
shelters located in facilities previously
used for education and medical care.
These are in small settlements in eight
regions of Ukraine. The total financial
support allocated to date is approximately
UAH 6.6 million. This support has
continued up to date.
UAH
20 M
WAS ALLOCATED TO THE
PURCHASE OF MODERN
EMERGENCY VEHICLES
WITHIN UNITED24
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 3: OUR ROLE IN SOCIETY AND OUR LICENCE TO OPERATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
CASE STUDY
COMMUNITY PROJECTS
DURING 2022
contest
ENCOURAGING BUSINESS
INNOVATION TO ADDRESS THE
EFFECTS OF THE WAR
MHP-Gromadi organised a business
innovation
encourage
entrepreneurship to address the negative
economic consequences of the invasion.
A large number of thoughtful and creative
applications were received and, to date,
around UAH 5 million has been allocated
to 62 projects. These projects have received
their funding and are being developed.
to
A second competition was organised
to encourage business projects that
solve
issues.
local energy security
12 entrepreneurs from six regions of
Ukraine have already received funding
for their initiatives totalling approximately
UAH 1.1 million.
A third “Seeds for Victory” project in
cooperation with a Ministry of Agrarian
Policy and Food of Ukraine and other
Ukrainian NGOs was launched in support
of business solutions that increase the
local communities,
food security of
develop cultivation and processing
facilities for the storage of agricultural
products,
local
employment. Funds amounting to UAH
2.5 million have been provided to support
this initiative.
increasing
thereby
77
A “Seeds for Victory” project financial
support in cooperation with UN Global
Compact in Ukraine was also awarded to
two other business initiatives. The first
enabled restoration of the production
capacities of a quail farm at which the
premises were damaged by military
operations in the Kyiv region. The second
supported the development of dairy
production in the Ivano-Frankivsk region.
Finally, another innovation project aimed
at supporting a wide variety of social
projects that address the effects of the
war has supported 102 initiatives so far
with total funding provided amounting to
UAH 8.2 million.
CULTURAL SUPPORT TO IMPROVE
MORALE
The latest national cinema tour provided
by MHP-Gromadi commenced on 6 August
and ended on 31 October. This year it was
called “Cinema for Victory!”. Its purpose was
to improve morale, assist with the delivery
of motivational messages for people within
the armed forces, and support internally
displaced persons and local communities.
1,306 film screenings took place at 177
locations within 18 regions of Ukraine.
MHP-Gromadi also supported the Kozak
System music group's tour called “Let's
Sing for Victory”. The tour comprised
street concerts which have been taking
place since May. The events are free and
held in open spaces with close interaction
between the performers and the audience.
CARE FOR THE ENVIRONMENT
MHP-Gromadi and the Company have
also been organising efforts to improve
the environment within cities and
towns affected by the war within eight
regions and the city of Kyiv. Almost 800
employees have participated in activities
which have included cleaning park areas,
MHP-GROMADI AND
THE COMPANY HAVE
ALSO BEEN ORGANISING
EFFORTS TO IMPROVE THE
ENVIRONMENT WITHIN
CITIES AND TOWNS
AFFECTED BY THE WAR
WITHIN EIGHT REGIONS
AND THE CITY
OF KYIV
squares, and the streets of the towns
where they live. Local residents have also
been taking part.
OTHER MHP-GROMADI ACTIVITIES
These included:
• financial and material assistance to
families who were affected by injury or
death as a result of the war;
• design and execution of a seed sowing
campaign to encourage communities
to grow their own food. 115,000 seed
packs were distributed in 2022;
• supply of mental health support for
people affected by the war;
• support for building and restoring
agricultural projects damaged during
the war to improve food security;
• supply of technological assistance
to the Ukrainian state enabled aid to
be transferred aid to injured military
personnel; and
logistical support and the supply of
equipment to assist the countrywide
defence activities.
•
ANNUAL REPORTAND ACCOUNTS 2022
STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 4: RESPONSIBLE FOOD PRODUCTION
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
GROWTH PILLAR 4
RESPONSIBLE
FOOD PRODUCTION
OUR COMMITMENT
MANAGEMENT APPROACH
MHP will always maintain industry-leading
standards of product safety and quality at
all of its enterprises.
MHP will reduce its use of antibiotics in
the production process to further improve
the world-class safety standards which all
of the Group’s businesses already apply.
Animal welfare will continue to be a top
priority at all of the Group’s production
sites.
MHP will continue to regularly train
and educate its employees about the
importance of animal welfare.
The Board and Senior Management regard
this area of MHP’s activities as essential to
the success and reputation of the business,
and MHP is proud of its exemplary record in
relation to product quality and safety.
A key feature is the MHP Quality Service.
This function has a vertical management
struction headed by the Director of
Technology, Quality and Food Safety, of
which Quality Control Division comprises
four sub-divisions:
01
QUALITY
MANAGEMENT
AND CERTIFICATION
DEPARTMENT
02
TECHNICAL
REGULATION
DEPARTMENT
04
COMPLAINTS AND
COMPLIANCE
DEPARTMENT
03
CONTROLLING
DEPARTMENT
MHP’s facilities include 37 state-of-the-
art laboratories that monitor safety and
quality. This management system structure
is designed to ensure that regular and
uninterrupted controls and monitoring
are in place at every stage of production.
The European Operating Segment uses
an integrated management system that
combines quality management systems,
food safety management systems, and
systems.
environmental management
Product quality and safety are also
carefully monitored within MHP’s
transportation systems.
regularly
facilities
MHP’s production
undergo
internal and external audits
and State regulatory checks to ensure
compliance with the law and MHP’s own
rigorous
internal requirements. These
are conducted by representatives of
the Department of Technology, Quality
and Food Safety. At least once a year,
enterprises also conduct their own self-
inspections. MHP requires suppliers and
contractors to align with its product quality
and safety approach, and has implemented
supplier approval standards which must
be passed before
they commence
business with the Group. Since 2021, these
assessments have been conducted using
the SAP Ariba system which assists in
standardising and controlling the process
across all MHP’s businesses.
Animal welfare
is a key priority for
everyone at MHP. The Group’s approach
is underpinned by five animal welfare
commitments.
ALL ANIMALS UNDER MHP’S CARE ARE:
FREE FROM THIRST,
HUNGER AND
MALNUTRITION
FREE FROM
DISCOMFORT
FREE FROM
INJURY OR
DISEASE
FREE FROM FEAR
AND DISTRESS
FREE TO DISPLAY
NORMAL
PATTERNS OF
BEHAVIOUR
Everyone at MHP
is responsible for
ensuring that this approach and the Animal
Welfare Policy is adhered to at all times.
78
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 4: RESPONSIBLE FOOD PRODUCTION
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
POLICY HIGHLIGHTS
MHP’s approach to product quality and
safety is governed by its Product Quality
and Safety Policy which applies to all of
its businesses. MHP's aprouch to animal
welfare is governed by its Animal Welfare
Policy. Both Policies are available for
download from the main Group website
(www.mhp.ua). The Policies are authorised
by the Board, regularly reviewed, and
communicated to all employees.
PRODUCT QUALITY
AND SAFETY POLICY
ANIMAL WELFARE POLICY
ACCESS CONTROL
MHP WILL ADHERE
TO ALL APPLICABLE
LAWS AND
REGULATIONS,
MUTUALLY AGREED
GUIDELINES WITH
CUSTOMERS AND
CONSUMERS, AND
GLOBAL BEST
PRACTICE
MHP WILL REGULARLY
REVIEW AND DEVELOP
ITS PRODUCT
QUALITY AND SAFETY
PROCEDURES IN
LINE WITH LEADING
INDUSTRY
DEVELOPMENTS
MHP WILL CONDUCT
A PRODUCT QUALITY
AND SAFETY
STRATEGY REVIEW
AS PART OF EACH
ANNUAL PLANNING
PROCESS
79
MHP WILL CONDUCT
CONTINUOUS
ANALYSIS OF THE
QUALITY AND SAFETY
OF ITS PRODUCTS
ANTIBIOTICS WILL
ONLY BE USED UNDER
THE STEWARDSHIP
OF THE STATE
VETERINARIANS
FLOCKS WILL BE
REARED ON THE
FLOOR WITH NO
USE OF CAGED
SYSTEMS
MHP WILL CONDUCT
REGULAR TRAINING
AND EDUCATION
ACTIVITIES WITH
ITS EMPLOYEES TO
ENSURE THEY ARE
FULLY CONVERSANT
WITH THE COMPANY’S
PRODUCT QUALITY
AND SAFETY
STANDARDS
MHP WILL REGULARLY
ENGAGE WITH
INTERESTED MATERIAL
STAKEHOLDERS
ABOUT PRODUCT
QUALITY AND SAFETY
MHP’S SITES WILL
ALWAYS PROVIDE AN
ENVIRONMENT THAT
MEETS THE NATURAL
NEEDS OF ANIMALS
MHP WILL NOT USE
EQUIPMENT THAT
MAY INJURE ANIMALS
WHEN HANDLING
THEM
STOCKING DENSITIES
WILL MEET EU ANIMAL
WELFARE STANDARDS
MHP’S SITES WILL NOT
USE ANAESTHETICS
OR ANALGESICS
VETERINARY
CARE WILL BE
PROVIDED ONLY BY
PERSONNEL HOLDING
THE RELEVANT
PROFESSIONAL
QUALIFICATIONS
MHP WILL ENSURE
ANIMALS ARE
PROTECTED
FROM HARM AND
STRESS DURING
TRANSPORTATION
POULTRY REARING
WILL ALWAYS BE
CARRIED OUT IN AN
ENVIRONMENT THAT
MEETS INDUSTRY
BEST PRACTICE
AND REGULATORY
REQUIREMENTS
(RELATING TO
MATTERS SUCH AS
SPACE, LIGHT, HEAT,
FOOD AND WATER
AVAILABILITY)
MHP PROHIBITS THE
USE OF ANY GROWTH
PROMOTERS
MHP PROHIBITS
ALL SURGICAL
INTERVENTION
SLAUGHTER WILL BE
CARRIED OUT USING
ONLY METHODS
THAT DO NOT CAUSE
PAIN OR STRESS TO
ANIMALS
MHP WILL PURSUE
A STRATEGY OF
REDUCING THE USE
OF ANTIMICROBIAL
AGENTS
MHP WILL USE THE
BEST AVAILABLE
TECHNOLOGY TO
MONITOR ANIMALS
AND THEIR REARING
CONDITIONS
An important element of MHP’s approach
to product quality and safety is the control
of access to its sites and production
facilities. MHP’s rigorous management of
this aspect is particularly important to the
maintenance of hygiene, product security,
safety and integrity.
inspected, and performance
to
MHP’s systems are maintained
international standards, regularly reviewed
is
and
carefully measured and reviewed. Particular
attention in recent years has been paid to
digitisation and automation to reduce the
possibility of human error.
Access to MHP’s production facilities
is strictly controlled, granted only to
authorised persons, and close inspection
of the records of new employees is made
before access is granted by a Director or
responsible person. Company vehicles are
closely monitored using satellite and digital
technology, and MHP’s sites are monitored
around the clock applying security systems
international standards.
maintained to
MHP’s approach to this important area
extends to its supply chain and the standards
that suppliers are expected to apply.
rigorous approach
to access
MHP’s
its European
control also applies to
Operating
similar
procedures are adopted towards site access,
security, inspection and access.
Segment
where
PRODUCT LABELLING
Product labelling is a fundamental aspect
of the maintenance of product security,
safety and quality, and is particularly
important to MHP’s relationships with
its customers. Addressing this area
effectively is one of the main functions
of the Department of Technical Regulation
which ensures that MHP adheres to the
appropriate regulatory and customer
requirements.
MHP’s systems provide accurate, reliable
and clear information about the food
product to the consumer. MHP did not
receive any complaints about its product
labelling in Ukraine in 2022.
the applicable
Poultry products produced at Perutnina
Ptuj's facilities are labelled in accordance
legislation on
with
the provision of food
information to
consumers. Information is indicated by
the name of the product and located on
the package. Traceability is also clearly
communicated to consumers by information
on the product declaration.
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 4: RESPONSIBLE FOOD PRODUCTION
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
EMPLOYEE TRAINING
CONSUMER FEEDBACK
Regular employee training about quality
and safety matters is conducted at all
Company sites. This includes education
about the requirements of regulatory and
international best practice standards and
the Company’s own internal standards
and procedures.
MHP encourages consumers to provide
feedback on product quality and safety
through a variety of contact channels.
This area is clearly an important element
of MHP’s safety and quality control and
procedures, and is closely monitored
throughout all of its businesses.
In 2022, the appropriate specialists in the
quality service successfully completed
external training on the requirements of
the updated version of the BRC Global
Standard (“BRCGS”) Food Safety Issue 9.
In 2022, the European Operating Segment
received no significant complaints, and
the number of complaints as a percentage
of total production was 0.094% (2021:
0.13%).
80
and
In Ukraine, feedback about product
is processed
safety
quality
through the CRM (Client Relationship
Management) Service Cloud system
which was
in 2021. This
system ensures that all communications
are registered, inspected and actioned
to identity the root cause, corrective
actions, and areas for improvement.
introduced
The system contains a number of
consumer feedback facilities such as a
hotline and a centralised mailbox.
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 4: RESPONSIBLE FOOD PRODUCTION
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
MANAGEMENT SYSTEM CERTIFICATIONS
MHP aligns its products with a wide range of international product and management
system certifications relating to quality, hygiene and safety. A comprehensive list is
recorded below.
GMP & HACCP - STORAGE OF
OIL SEEDS AND GRAINS
GMP+B2
BRCGS FOOD SAFETY – OIL
PRODUCTION AND MEAT
PROCESSING
The following sites or subsidiaries
in Ukraine are accredited for good
management practices (“GMP”) which
are rules that set requirements for
production organisation and control.
(Hazard
They are also HACCP
Analysis and Critical Control Points)
accredited. These are requirements
that ensure that MHP produces
products that are safe and of high
quality for consumers.
•
Andriyashivsky Elevator Branch of
Urozhaina Kraina LLC
• Urozhayna Kraina LLC
•
Yampil Elevator Branch of
Zernoproduct PJSC
Branch of the Limited Liability
Company MHP-Agrokryazh
Vendychansky Elevator
Branch of Zahid-Agro MHP LLC
Voskresintsivsky Elevator
Novomoskovsk branch of Oril-
Leader PJSC (Reclamation)
Novomoskovsk branch of Oril-
Leader PJSC (Kitaygorod)
Novomoskovsk branch of Oril-
Leader PJSC (Rokytne)
Perspectives Branch of
Zernoproduct PJSC
•
•
•
•
•
•
is an
international
This
food
safety certification. The following
subsidiaries, sites or branches have
achieved this accreditation.
OIL PROCESSING FACILITIES
PrJSC Myronivsky Plant of
•
Manufacturing Feeds and Groats
• Katerynopil Elevator LLC
•
Vinnytsia Poultry Complex LLC
(Fodder Complex)
MEAT PROCESSING FACILITIES
• Myronivka Poultry Complex PJSC
• Vinnytsia Poultry Complex LLC
•
(Slaughter House)
Lehko (separate subdivision
of PrJSC Myronivsky Plant of
Manufacturing Feeds and Groats)
• Foodservice LLC (legal name of
the MHP Culinary Centre)
• Myronivska PJSC Poultry Farm
Processing Complex Branch
• Vinnytsia Poultry Complex LLC
• Katerynopil Elevator LLC
(production of oil)
GMP+B3
• MHP Food Trading LLC
ISO 22000:2018 - PROCESSING OF
POULTRY MEAT AND BEEF
following subsidiaries have
The
ISO 22000 certification which
is an
food safety
management accreditation.
international
HALAL CERTIFICATION
is a voluntary certification
This
for the production of products
in line with Islamic customs. The
following meat-processing sites have
this accreditation.
•
•
Myronivska PJSC Poultry Farm
(broiler chicken processing
complex)
Vinnytsia Poultry Complex LLC
(processing complex)
• Lubnimyaso LLC
•
Lehko (separate subdivision of
Myronivska PJSC)
KOSHER CERTIFICATION
•
Myronivska PJSC (production of
cereals and feed)
• Katerynopil Elevator LLC
• Kaliniv Elevator Zernoproduct
PJSC
• Yagotyn Elevator Agro-S Branch
• Oril-Leader PJSC
• Lubnimyaso LLC
81
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 4: RESPONSIBLE FOOD PRODUCTION
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
ANIMAL REARING
Approximately 73% of MHP’s Ukrainian
broilers are COBB chickens. Their features
include low-feed conversion, a welfare-
friendly growth rate, and an ability to thrive
on low-density nutrition. The remaining
27% are ROSS chickens, the world’s most
popular broiler. Their characteristics also
include a welfare-friendly growth rate and
feed efficiency.
POULTRY-REARING DATA (UKRAINE)
The European Operating Segment rears
broilers that comprise approximately 84%
ROSS and 16% COBB.
Turkeys are also reared in the European
Operating Segment (50% BUT Big 6 breed
and 50% Converter breed).
2022
2021
2020
Total placed (heads)
439,839,157
460,068,517
427,436,298
Liveability (%)
96.3
97.2
96.5
Total slaughtered (heads)
423,680,615
447,125,097
412,667,628
Slaughtered weight (tonnes)
999,591
1,034,786
998,867
ANTIBIOTIC REDUCTION AND PRODUCT LABELLING
The table below shows the planned and
actual (estimated for 2023) percentages
of MHP’s flocks that are participating
reduction
in
the Group’s antibiotic
programme. MHP seeks to minimise the
use of antibiotics through greater use
of organic acids and probiotics in the
production process.
PROGRESS IN MHP’S ANTIBIOTIC-REDUCTION PROGRAMME (UKRAINE)
2023e
2022
2021
2020
2019
Planned (%)
Achieved or estimated (%)
80
70
60
60
50
63
30
50
15
20
ANIMAL WELFARE
STANDARDS AUDITS
MHP has an open and transparent
approach to farm audits which are
conducted regularly, both on a prearranged
and an unannounced basis. All 37 of the
Company’s labs undertake around 6,000
methods of analysis to study feed and raw
materials, to achieve microbiological and
chemical parameters, and to ensure strict
compliance with veterinary, biosafety and
hygiene standards at all MHP facilities.
in
In-house audits are conducted
accordance with the annual plan. These
internal audits are run by competent
members of the MHP team selected from
Company sites other than the one to be
audited. External audits are conducted
by independent agencies DG SANTE (the
European Commission’s Directorate-
General for Health and Food Safety) and
the State Consumer Service.
In connection with military aggression on
the part of Russia, checks by DG SANTE
were not carried out in 2022. The activity
at the enterprises is carried out under
the supervision of an official doctor of
veterinary medicine, as well as through
periodic inspection of facilities by the
State Service of Ukraine on Food Safety
and Consumer Protection.
BIOSECURITY
All livestock in Ukraine and the European
Operating Segment have been vaccinated
to prevent the presence of routine viral
pathogens in poultry.
All of MHP’s facilities and management
practices have rigorous controls for the
prevention of Avian Influenza and other
harmful pathogens.
The activity at the enterprises is carried
out under the supervision of an official
doctor of veterinary medicine, as well as
through periodic inspection of facilities
by the State Service of Ukraine on Food
Safety and Consumer Protection.
ANTIBIOTIC-FREE LABELLING
MHP was one of the first Ukrainian
companies to be verified by audit and
its products with
permitted to
label
82
antibiotic-free “Class A” in accordance
with the country’s regulatory standard.
In 2022, there were 89 inspections at
the enterprises. There were no recorded
cases of non-compliance with the laws,
regulations and standards that MHP
adheres to in Ukraine and in the European
Operating Segment.
In 2022, there were 89 inspections at
the enterprises. There were no recorded
cases of non-compliance with the laws,
regulations and standards that MHP
adheres to in Ukraine and in the European
Operating Segment.
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 4: RESPONSIBLE FOOD PRODUCTION
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
THE DEPARTMENT OF
CREATING CONSUMER
LOVE
In 2022, the Department of Creating
Consumer Love was created and
launched a fresh approach to creating new
products.
The aim is to have a single mechanism for
collecting and reviewing ideas, tracking
each stage of the product life cycle from
idea submission to product launch, and
synchronising the tasks and roles of each
participating specialist at each stage.
KEY ACHIEVEMENTS
IN 2022
•
•
The process of raw material supplier
approval was digitised in the SAP Ariba
system.
The requirements of the BRC Global
at
Standard were
Foodservice LLC.
implemented
• Start of culinary transformation at
Perutnina Ptuj.
• Over 80 culinary SKUs launched.
MHP CULINARY CENTRE
PLANS FOR 2023
implemented
2022, MHP
the
In
requirements of the BRC Global Standard
food service manufacturing
at
company Foodservice LLC (legal name of
the MHP Culinary Centre).
the
The Culinary Centre’s purpose
is to
introduce ready-to-cook and ready-to-
eat food to Ukraine. Its facilities include:
•
• five open kitchens;
•
a sensory analysis laboratory;
an industrial kitchen;
a kitchen-studio;
an R&D facility; and
a pizza production line.
•
•
More information can be found in a case
study on page 84.
83
UKRAINE
EUROPEAN OPERATION SEGMENT
1. To certify LLC “Foodservice”
(MHP Culinary Centre) in
compliance with the requirements
of the BRCGS Food standard.
2. To certify Vinnytsia Poultry
Complex (poultry rearing) in
compliance with the requirements
of the Global G.A.P. standard in
order to confirm the implemented
Animal Welfare requirements.
3. Further improvement in quality and
safety management and controls
across MHP enterprises in Ukraine.
Slovenia: “Antibiotic Free”
recertification.
Croatia: Certification with a new
standard “Proven quality of poultry
meat”.
Serbia:
• product quality and safety
assurance (internal and external
monitoring), successful audits,
continuous renewal of IFS FOOD,
ISO 22000, HACCP, HALAL
certificates;
• customer satisfaction survey
once a year.
Bosnia-Herzegovina:
•
•
IFS standard certification;
implementation of planned
internal and external audits for
HALAL, HACCP (rev. 2020),
ISO 9001 and ISO 14001;
• continuous monitoring and
application of valid legislation
in the production process;
• continuous monitoring and
application of valid legislation
in the production process.
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 4: RESPONSIBLE FOOD PRODUCTION
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
CASE STUDY
MHP'S CULINARY CENTRE
Our extensive MHP team, which consists
of brand chefs, food engineers, chefs,
marketing and innovation specialists, as
well as tasters, take on new challenges
every day and constantly develop and
improve our products. Our mission is
to grow, develop, and change Ukrainian
culinary culture whilst maintaining our
status as an innovative market leader.
MHP's Culinary Centre is a unique, state-
of-the-art facility which first opened
its doors in June 2021. The Culinary
Centre, spans all stages of the product
development process, from exploring the
initial idea and testing its scalability on
production lines to undertaking consumer
tasting in its sensory analysis laboratory.
The mission of the Culinary Centre is to
introduce and propagate the concepts
of Ready to Cook (RtC) and Ready
to Eat (RtE) food across Ukraine. The
centre combines everything necessary
to provide the highest quality expert
input on culinary issues. The centre is
used to test concepts-from generating
ideas, developing a prototype, producing
mini-batches or industrialising culinary
solutions, and conducting master classes
and other training events.
MHP’s CULINARY CENTRE includes:
A SENSORY ANALYSIS LABORATORY
5 OPEN KITCHENS
A STUDIO KITCHEN
R&D FACILITIES
INDUSTRIAL KITCHEN
PIZZA PRODUCTION LINE
84
CULINARY SCHOOL (CURRENTLY UNDER CONSTRUCTION)
ANNUAL REPORTAND ACCOUNTS 2022
STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 4: RESPONSIBLE FOOD PRODUCTION
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
SENSORY ANALYSIS
LABORATORY
laboratory
is
The sensory analysis
designed and operates in accordance with
best-in-class international standards. To
ensure the highest quality of sensory
analysis we introduced a testing program
to select and examine candidates to
become experts
in sensory analysis
and calibration (in compliance with the
ISO 13300-1:2006) with the training
programme to be initiated in 2023.
Over the past year the laboratory has provided us with significant experience and
learning opportunities. Utilising sensory methods and techniques such as blind tasting
we have been able to:
1. FORMALISE AND REFINE THE SELECTION OF WINNING RECIPES
When developing new products and searching for new combinations of flavours,
ingredients and technologies at the final stage of recipe development, sensory analysis
is used as a decision-making tool when calibrating the final version of the recipe.
The capabilities of the software allow you to analyse the organoleptic parameters of
product samples made according to different recipes and choose the best option that
received the highest number of points from the expert tasting panel.
2. SELECT OF SUPPLIERS IN THE TENDER
An individual approach to the development of questionnaires for professional
comparative tastings with the involvement of suppliers' representatives in the tasting
panel, and the analysis of the results using special software greatly facilitates the
selection of a supplier and guarantees impartiality.
3. COMPARE OF COMPETITIVE PRODUCTS ON THE MARKET
When developing a concept for creating a new product or a new technology, the first
stage is a comparative assessment of a competing product for example the pizza
market. In this case a thorough analysis of the organoleptic parameters of the dough,
filling, and sauces enabled the team of chefs and food engineers to develop perfect
competitive products.
85
The company's marketing service is also a
constant user of the laboratory's services
and capabilities. Tasting panels are arranged
in close cooperation with marketers to
provide
future marketing
for
purposes. Recruiting agencies are used to
form the tasting panels, taking into account
the taster's profile from the consumer
category, which includes age, gender, social
status, preferences and so on.
insights
the organisation and
Examples are
execution of comparative tastings of meat
snacks and fruit snacks with an analysis of
the packaging concept.
Other cases include the organisation and
conduct of a tasting of shawarma and pizza
for a retail chain and the development of
a new menu for La Strava brand.
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 4: RESPONSIBLE FOOD PRODUCTION
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
INDUSTRIAL KITCHEN
PIZZA PRODUCTION LINE
CULINARY SCHOOL
The Pizza Shop is a new facility in the
culinary centre which was commissioned
in the fall of 2022 and today produces more
than 15 stock-keeping units (“SKUs”)of
various pizzas with a capacity of 400 pieces
per hour. Despite the industrial scale, we
adhere to the concept of maintaining strict
controls and the utmost standards at all
stages; and our food engineers and brand
chef work daily to improve the offering.
A culinary school
is planned to be
commissioned in 2023. It will include an
educational institution with specialised
training equipment, a transformable pop-
up restaurant that can be used to host
dinners, conduct culinary exams and act
as a themed restaurant for testing potential
formats. The school will have a room that
can be transformed into a lecture hall for
an audience of 100 seats. MHP employees
will teach students various culinary skills,
including how to be a meat sommelier.
The Industrial Kitchen Is a state of the art and
designed production facility with the most
modern equipment, a unique production line
and experienced chefs. Being a high-end
culinary production line, industrial kitchen
is focused at the creation of high-quality
restaurant dishes. Our professionals make
their ideas come true by using the most up-
to-date tools, techniques and equipment.
The main spot at our Industrial kitchen Is
Its Innovative Hiperbaric system, which
allows to produce pascalized products, in
more details – cycle of treatment under
high pressure (High Pressure Processing)
ensuring an extended shelf life. The industrial
kitchen's packaging equipment system has
two high-performance units (Multivac and
Ulma) for food packaging and we are one of
the first companies to use SKIN packaging
system for ready-to-eat meals in Ukraine.
expertise of
food engineers, chefs,
marketing teams and other specialists who
work collaboratively to develop the best
products.
The main function of the studio kitchen
is to host events, with streaming facilities
available in an additional studio. It can also
be used to hold cultural events. As well
as boasting modern studio facilities, the
studio is equipped with some of the best
professional cooking equipment.
MHP used the studio to
launch a
culinary YouTube channel to encourage
the population of Ukraine to continue
cooking, despite the challenges of the War.
The channel featured both external and
MHP chefs.
OPEN KITCHENS
The MHP Culinary Centre showcases
to customers our unique
ideas and
our
expertise. Our
demonstrate
experienced
the
have
employees
knowledge and background that allows us
to provide unique culinary expertise for
the Ukrainian market.
There are six open kitchens that host
chefs specialising in each specific area:
catering, street food, pizzeria, HoReCa
(hotel, restaurant, catering), dark kitchen
(optimised for delivery businesses), and
studio kitchen. The equipment located in
these kitchens allows you to create and refine
new recipes whilst refining existing ones.
86
The key to the success of the development
is the extensive experience and in-depth
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 5: BUSINESS CONDUCT
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
GROWTH PILLAR 5
BUSINESS CONDUCT
OUR COMMITMENT
MANAGEMENT APPROACH
MHP strives to conduct its business
responsibly with all its stakeholders.
MHP’s Board of Directors closely
business
the Company’s
monitors
conduct progress and performance.
Responsibility for this aspect of the
business is divided between the Audit &
Risk Committee Public Relationsnd the
International Affairs
Sustainability and
Committee.
The MHP Code of Ethics is approved by the
Board. Responsibility for its implementation
is assigned to the Compliance Officer.
All employees are required to comply
with the Company’s Code of Ethics and
compliance policies, and policies related
to gifts, business entertainment, conflict
of interest, anticorruption.
MHP’S BOARD OF
DIRECTORS CLOSELY
MONITORS PROGRESS
AND PERFORMANCE IN
THE COMPANY’S BUSINESS
CONDUCT
This process resulted in the adoption
of MHP Compliance Roadmap in which
key strategic and operational goals were
identified.
In 2022, the Ethics and Compliance
Programme was again updated to manage
effectively the new challenges presented
by the Russian invasion to Ukraine.
MHP aims to apply a “Zero-Tolerance”
approach towards corruption.
87
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 5: BUSINESS CONDUCT
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
ETHICS HELPLINE
The Code of Ethics also includes details
of MHP’s Ethics Helpline. The Helpline can
be accessed by dialling 7-4-77 in Ukraine,
by email or via the helpline section on
MHP’s website (www.mhp.ua).
All employees are encouraged to use the
facility if:
• they are in need of protection or support;
they have been exposed to poor
•
treatment such as harassment or
bullying within the workplace;
they suspect wrongful behaviour,
such as corruption or fraud, has been
committed or is about to occur; and
they
or
recommendations about how MHP
can improve its business conduct.
suggestions
have
•
•
POLICY HIGHLIGHTS
CODE OF ETHICS
MHP published its first Group-wide Code
of Ethics in 2017. An updated version
was published in 2021 and is available
for download from the MHP website
(www.mhp.ua).
The revised Code of Ethics is built around
three strategic priorities: protection;
security; and trust. The protection section
outlines the purpose and function of
the MHP Ethics Helpline, explains when
to contact it, and how the subsequent
processes operate. The security section
explains MHP’s anti-bribery and corruption
approach and highlights the Declaration
of Integrity with which all MHP’s business
partners are required to comply. The trust
section explains what employees should
explain, what employees should expect
from MHP, and what MHP expects from
its employees.
MHP has a detailed set of policies to address
responsible business matters including the
Code of Ethics. These are regularly reviewed,
communicated
to all employees and
available for download from MHP’s website.
A COMMITMENT TO PROMOTE A ZERO-
TOLERANCE CULTURE TOWARDS BRIBERY,
CORRUPTION AND UNETHICAL BUSINESS
BEHAVIOUR
MHP’S LEADERSHIP WILL PROMOTE A CULTURE
OF ADHERENCE TO THE APPLICABLE LAWS
AND REGULATIONS, AND ENSURE THAT THE
WORKFORCE HAS SUFFICIENT KNOWLEDGE OF
THESE REQUIREMENTS
MHP WILL PROVIDE THE APPROPRIATE LEVEL OF
WORKFORCE TRAINING ABOUT ITS APPROACH
AND REQUIREMENTS IN RELATION TO BUSINESS
CONDUCT MATTERS, AND THE REQUIREMENTS
OF ITS POLICIES
WORKFORCE MEMBERS WILL RECEIVE REGULAR
COMMUNICATIONS ABOUT THEIR OBLIGATION
TO INFORM THE COMPANY ABOUT ACTUAL OR
IMMINENT BREACHES OF LAWS, REGULATIONS
OR COMPANY POLICIES
WORKFORCE MEMBERS ARE REQUIRED TO
INFORM THE COMPANY IMMEDIATELY IF THEY
BECOME AWARE OF ACTUAL OR IMPENDING
PERSONAL CONFLICTS OF INTEREST
THE ACCEPTANCE OR PROVISION OF GIFTS AND
ENTERTAINMENT IS PROHIBITED EXCEPT WHERE
THEY FALL WITHIN GENERALLY ACCEPTED
NOTIONS OF HOSPITALITY
MHP WILL PROVIDE REPORTING FACILITIES
TO ENABLE MATTERS OF CONCERN TO BE
REPORTED TO SENIOR MANAGEMENT IN
CONFIDENCE
MHP WILL NOT CONDUCT BUSINESS WITH OR
PROVIDE BENEFITS TO STATES, ENTITIES OR
INDIVIDUALS THAT ARE SUBJECT TO SANCTIONS,
AND WILL NOT PROVIDE ASSISTANCE OR
FACILITATE SANCTIONS AVOIDANCE
MHP WILL SELECT SUPPLIERS THAT COMPLY
WITH ITS RESPONSIBLE BUSINESS APPROACH IN
RELATION TO MATTERS SUCH AS ENVIRONMENT,
CLIMATE CHANGE, WORKFORCE, COMMUNITIES,
HEALTH AND SAFETY, BUSINESS CONDUCT AND
HUMAN RIGHTS
88
THE COMPANY DOES NOT MAKE POLITICAL
DONATIONS
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 5: BUSINESS CONDUCT
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
MHP BUSINESS PARTNER
CODE OF CONDUCT
MHP also maintains and distributes
a Business Partner Code of Conduct
which is available for download from the
MHP website (www.mhp.ua). An updated
version was published and distributed
during 2021.
The Partner Code of Conduct outlines
MHP’s expectations in relation to its
suppliers and business partners, and also
what they should expect from MHP.
89
•
•
•
•
•
•
Key principles outlined
include:
•
in the Code
in
listen to
requirement
to be open
MHP’s willingness to
its
partners, to learn, and to progress and
improve together;
MHP’s support for
local Ukrainian
the
manufacturers, particularly
agricultural sector, and support for
their further development;
MHP’s desire for mutual co-operation
to develop strengths and opportunities
and, in particular, for exploring and
expanding opportunities to export to
countries where MHP operates and
intends to operate;
MHP’s
for business
to ongoing
partners
innovation and the use of state-of-the-
art new technologies;
MHP’s
for business
requirement
partners to work as a team to achieve
joint success and improve product
quality;
fairness and strict compliance with
the highest standards of ethics and
integrity; and
continuous
importance
the
in
the
improvement
Development Goals,
Sustainable
minimising
impact,
adopting a proactive social stance, and
implementing international standards
established within
framework
of the European Green Deal and
other important global and regional
agreements.
environmental
relation
the
to
of
CONFLICT OF INTEREST
MANAGEMENT
The Compliance Office works closely
with business management to ensure
consistent and rigorous maintenance of
MHP’s business conduct policies.
These activities
include addressing
conflicts of interest through the provision
of compliance advice,
training and
outreach throughout the Group.
The activities of the Compliance Office
include:
•
the
most
establishing a solid framework for
disclosure of any personal conflict of
interest;
mapping
common
occurrences and registering the risks
of situations arising exposing MHP to
organisational conflicts of interest;
introducing a mandatory conflict of
interest disclosure form, addressing
regular and ad hoc occurrences;
regular
the
to
communications
obligations.
of
relating
staff
their
delivery
•
•
•
TAXATION
MHP's tax affairs are managed by the
Financial and Economic department,
which, if necessary, seeks the support of
professional advisers. MHP has no official
tax policy.
In practice, the Company's approach is
to comply with relevant and appropriate
legal requirements. An example is the
Tax Code of Ukraine
(“the Code”).
MHP complies with the Code transparently
and reports monthly on VAT, quarterly on
income tax, and annually on corporate
taxes. All
income
enterprises of the Company are subject
to audit by the State Tax Service in
accordance with the schedule of tax
inspections.
tax and other
MHP continues to invest in the economy
of Ukraine. In 2022, MHP paid almost UAH
4.6 billion in the form of tax assessments
and contributions. UAH 1.026 billion was
transferred to the national budget for the
year. UAH 2.038 billion was transferred
to local budgets. The amount of the
single social contribution (“SSC”) for the
mandatory state social insurance of the
Company's workers was UAH 1.534 billion.
MHP CONTINUES TO
INVEST IN THE ECONOMY
OF UKRAINE, PAYING
ALMOST UAH 4.6 BILLION
IN TAXES DURING 2022
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 5: BUSINESS CONDUCT
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
ADDRESSING IT ISSUES
CREATED BY THE WAR
CREATING A PAPERLESS
ENVIRONMENT
In 2021, MHP implemented Microsoft’s
latest security solutions in MHP’s cloud
infrastructure. This facility ensures that
MHP’s systems detect and respond to
information security events that indicate a
possible compromise of user credentials,
the presence of ransomware, suspicious
activity and other malicious actions.
The onset of War presented many
challenges to the ongoing maintenance
and security of MHP’s IT systems.
These have been successfully addressed
and have continued to support the
organisation’s ongoing business activities.
In particular:
•
the IT Department was tasked with
recovery
delivering an operational
plan within 33 hours of the system
going down as a result of the Russian
aggression. The IT team was relocated
from Kyiv to a different location in
Ukraine and successfully delivered on
the objective;
following a new working practice
approach, 210 colleagues have moved
to online working from home as their
responsibilities do not require close
contact with other colleagues to carry
out their duties;
ongoing steps are being taken to ensure
close monitoring of MHP’s IT system
integrity and prevent cyber-attack.
•
•
A CENTRALISED PROCESS FOR
MONITORING INFORMATION SYSTEM
EVENTS WITH A VIEW TO IDENTIFYING
CYBER THREATS. THIS COVERS THE HEAD
OFFICE AND MHP GROUP ASSETS THAT
USE CENTRALISED IT SERVICES
During the year, MHP continued to
implement
its electronic document
circulation plans but changed the focus
to encourage the creation of a paperless
environment.
scope
created
included
The
project
documentation
the
by
accounting and HR functions and the
creation of a single electronic archive
for storing documents.
The project’s main aims are to:
•
risks
change workforce attitudes towards
the use of paper and document storage;
associated with
decrease
document loss;
create administrative time savings; and
reduce costs and create environmental
benefits.
•
•
•
At the end of 2022, approximately 60% of
MHP’s documentation was transferred to
the new system. The project rollout will
continue in 2023.
IT SECURITY AND
DEVELOPMENT
MHP places significant emphasis on
the conduct of an ongoing programme
of technological development to both
maintain IT security and to develop the
efficiency of MHP’s businesses.
MICROSOFT SECURITY SOLUTIONS
VULNERABILITY MANAGEMENT TO
IDENTIFY AND ELIMINATE WEAKNESSES
IN THE COMPANY'S IT SYSTEMS. THIS
REDUCES THE LIKELIHOOD OF IT
SYSTEMS BEING HACKED THROUGH
VULNERABILITIES IN SOFTWARE AND
OPERATING SYSTEMS
to
training
Additionally, MHP has been conducting
increase user
employee
awareness of information security and to
ensure that employees are aware of their
role and responsibility for compliance with
information security requirements. The
aim is to create a Group-wide information
security culture on an ongoing basis.
90
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 5: BUSINESS CONDUCT
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
SUPPLY CHAIN MANAGEMENT
MHP values its business partners because
they are an integral part of creating value
for customers. In recent years, MHP has
been focussing on increasing the number
of farmers that it works with in Ukraine
in order to provide an equitable share of
economic benefits across the country.
UKRAINE
SUPPLIER TYPE
Fertilisers
Plant protection materials
Agricultural machinery
Spare parts for agricultural machinery
IT technology
Fuels and lubricants
Gas
Laboratory kits
Laboratory materials
Veterinary products
Disinfectants and detergents
Overalls and disposable clothing
Personal protective equipment
Chemical products
Bio-additives and spices
Packaging materials
Day-old chicks
91
Large %
SUPPLIERS
Medium %
Small %
Domestic
Non-
Domestic
Domestic
Non-
Domestic
Domestic
Non-
Domestic
12
0
0
0
0
0
17
4
50
5
7
4
5
5
17
8
0
11
18
14
6
22
15
33
0
0
4
0
0
0
0
5
0
100
6
6
3
1
0
0
0
25
13
25
12
24
19
16
19
18
0
14
18
63
10
11
30
17
0
0
1
0
0
0
0
0
1
0
23
6
3
1
0
0
0
71
37
65
81
72
76
79
56
73
0
34
52
17
82
67
55
33
0
0
0
0
0
0
0
3
0
0
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 5: BUSINESS CONDUCT
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
SUPPLY CHAIN MANAGEMENT (CONTINUED)
The PP Group follows the quality, safety,
and traceability requirements of the
Company’s quality and environmental
policies. It selects its suppliers objectively
and transparently by taking into account
quality, reliability, and the best and
most efficient commercial terms, which
include price and payment terms and
environmental matters.
PP’s purchasing strategy is committed
to act in accordance with legislation,
implemented
rules, and principles of
international, national and other standards
- including ISO 9001, ISO 14001, HACCP,
BRC, IFS, HALAL, PPR, McDonalds, IK,
Antibiotic-free breeding and others.
The PP Group also requires its suppliers
to comply with its corporate responsibility
approach in relation to matters such as
the environment, climate change, people,
local communities, health and safety,
business conduct, and human rights.
We evaluate our suppliers on a yearly
basis with surveys and questionnaires.
One of the evaluation criteria relates to
environmental management, and in this
way, we try to influence their approach to
responsible environmental management.
high
in place which, prior
PP has rigorous quality management
to
systems
procurement,
quality
impose
requirements for purchased materials.
These materials must comply with
the requirements of ISO and HACCP
standards, BRC and IFS standards. All
materials supplied must also ensure
compliance with halal requirements.
EUROPEAN OPERATING SEGMENT (“PP”)
SUPPLIER TYPE
Fertilisers
Seeds
Fuels and lubricants
Gas
Laboratory materials
Veterinary products (medicine and vaccines)
Disinfectants and detergents
Spices and additives
Packaging materials
Day-old chicks
Work protection
Corn
Wheat
Soya (meal, bean, cake)
DDGS (Dried distillers grains with solubles)
Soya oil
Corn oil
Premixes
Amino acids
Large %
SUPPLIERS
Medium %
Small%
Domestic
Non-
Domestic
Domestic
Non-
Domestic
Domestic
Non-
Domestic
38
29
27
50
0
24
3
7
18
0
5
10
10
21
25
13
75
33
25
0
0
0
0
0
0
0
7
14
27
0
5
5
46
75
37
0
17
41
13
14
20
20
0
31
8
28
19
13
11
36
16
15
0
24
25
0
17
0
0
0
0
8
0
0
16
10
40
0
2
1
0
0
13
0
0
17
49
57
53
30
80
42
84
33
25
7
79
46
67
18
0
13
0
33
0
0
0
0
0
12
3
5
9
14
13
5
1
1
0
0
0
0
17
0
92
The share of domestic suppliers decreased by two percentage points in 2022 (84% in 2022, 86% in 2021, 89% in 2020).
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 5: BUSINESS CONDUCT
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
MARKETING APPROACH
MHP’S MARKETING STRATEGY REFLECTS THE FOLLOWING PRINCIPLES:
MHP strives for responsible marketing of
all products and brands in both domestic
and international markets.
moderate food consumption as part of
a healthy, active and balanced lifestyle,
focussing on family values.
The Company has a history of aligning its
business strategy with the Sustainable
Development Goals, its business goals
and MHP’s values.
This approach is the basis for creating
marketing strategies that meet marketing
goals and support the Group’s reputation.
The Company encourages and supports
MHP's approach to marketing, as a
global company operating in more than
70 countries,
is consistent with the
International Chamber of Commerce's
Marketing and Advertising Code and its
framework for responsible food marketing
communications. The Group adheres
to these guidelines
its marketing
communications.
in
LEGAL AND RELATED MATTERS
from
In 2022, the Group did not receive
any complaints
third parties
(counterparties) or government agencies
about breaches of client privacy or
information. No material breaches of the
Company’s approach to anti-bribery and
corruption policies were noted during
2022.
In addition, in 2021, the AMCU opened an
investigation in relation to possible signs
of violation of the law on the protection of
economic competition by the Company
during its acquisition of Lubnimyaso LLC
(manufacturers of meat products under
the Skott Smeat trademark), without
obtaining the appropriate permission.
The Anti-Monopoly Committee of Ukraine
(“AMCU”) opened an investigation into
the Company’s market position in Ukraine
in June 2019. At the time of publication
of this Report, the process has not been
concluded. MHP believes that it has
always adhered to the relevant parts of
the Company’s policy framework and
Ukraine’s laws regarding anticompetitive
activity. For the last four years, MHP has
been actively maintaining communications
with the AMCU, promptly providing all
necessary
in accordance
with official requests or the committee’s
requirements.
information
93
MHP believes that this asset purchase
does not
require a concentration
permit. Information and documentary
substantiation were provided to the
AMCU in official responses to requests.
The Company believes that after a
detailed study of all the materials, this
investigation will be closed.
Investigations
ongoing.
into both cases are
PRINCIPLE 1
PRINCIPLE 2
MHP’S MARKETING WILL BE
TRUTHFUL AND ACCURATE, AND
NOT MISLEADING
PRINCIPLE 4
MHP’S ONLINE MARKETING
ADHERES TO THE TERMS OF COPPA
IN UKRAINE (UKRAINE ONLINE
PRIVACY PROTECTION ACT),
INCLUDING OBTAINING PARENTAL
PRIOR CONSENT TO COLLECT
INFORMATION FROM CHILDREN
PRINCIPLE 5
MHP’S MARKETING ACTIVITY
IS PERMITTED TO SUPPORT
EDUCATIONAL PROGRAMMES FOR
CHILDREN UNDER 12 YEARS OLD IN
UKRAINE. ANY BRAND PRESENCE IN
THESE PROGRAMMES WILL SIMPLY
INDICATE AND ACKNOWLEDGE
FINANCIAL SUPPORT OR
SPONSORSHIP AND WILL NOT BE
USED FOR ADVERTISING PURPOSES
MHP WILL NOT ADVERTISE IN ANY
MEDIA THAT IS SPECIFICALLY
PROVIDED FOR CHILDREN AGED
UNDER 12 YEARS OLD, INCLUDING
SHOWS, PRINT MEDIA, WEBSITES,
SOCIAL NETWORKS, MOVIES, AND
SMS / EMAIL MARKETING
PRINCIPLE 3
MHP’S BRANDS WILL BE PRESENTED
IN A WAY THAT ENCOURAGES
HEALTHY EATING HABITS AND A
BALANCED, HEALTHY LIFESTYLE
ACHIEVEMENTS IN 2022
MHP’s IT security and use of technology
were an important element of the Group’s
successful business continuity strategy
and swift adaptation
following the
outbreak of the war on 24 February 2022.
PLANS FOR 2023
MHP plans to introduce an e-course on
ethical behaviour for all MHP employees.
Additionally the Management Team plans
to promote awareness of the Ethics
Helpline facility.
The rollout of MHP’s electronic document
circulation project will continue
to
progress the aim of creating a paperless
environment.
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 6: THE PLANET
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
GROWTH PILLAR 6
THE PLANET
OUR COMMITMENT
MANAGEMENT
APPROACH
its
recognises
MHP
environmental
responsibilities and its role in ensuring
its business activities meet the
that
in
expectations of
addressing the global climate change
challenge.
its stakeholders
MHP’s Board is responsible for ensuring
that the requirements of the Group’s
Environmental Policy are adhered to
and that the Policy itself is reviewed
every three years. Every MHP facility in
Ukraine has a full-time environmental
officer who oversees environmental
performance and reports to MHP’s Chief
Environmental Officer.
Environmental management structures
differ in the European Operating Segment.
In Serbia, Austria, North Macedonia
and Romania, Management implement
MHP’s Environmental Policy. In Croatia
and Slovenia, an Environmental Officer
reports to the local Committee on Quality
and Environmental Management.
MHP’S BOARD IS
RESPONSIBLE FOR
ENSURING THAT
THE REQUIREMENTS
OF THE GROUP’S
ENVIRONMENTAL POLICY
ARE ADHERED TO
94
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 6: THE PLANET
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
POLICY HIGHLIGHTS
Environmental
Policy was
MHP’s
the Chairman, Chief
authorised by
Executive Officer, Chief Financial Officer,
Chief Operating Officer and the Deputy
CEO when it was formalised in September
2020. It is available for download from the
sustainable development section of the
Group website.
KEY FEATURES OF THE
ENVIRONMENTAL POLICY INCLUDE
THE FOLLOWING COMMITMENTS:
COMPLIANCE WITH THE APPLICABLE
ENVIRONMENTAL LEGISLATION AND
INTERNATIONAL INDUSTRY BEST PRACTICE
REQUIREMENTS AT ALL TIMES
A PLAN TO ENSURE THAT THE COMPANY’S
ACTIVITIES ARE CARBON NEUTRAL OVERALL
BY 2030 (FOR FURTHER COMMENTARY ON THE
ACHIEVEMENT OF THIS GOAL BY 2030, PLEASE
SEE THE CHAIR’S STATEMENT ON PAGE 15)
ENVIRONMENTAL AND CLIMATE CHANGE
CONSIDERATIONS ARE INTEGRATED INTO ALL
MAJOR BUSINESS DECISIONS
DELIVERY OF A STRATEGY THAT ENSURES
CONTINUOUS IMPROVEMENT OF MHP’S
ENVIRONMENTAL MANAGEMENT PERFORMANCE
THE PREVENTION OF ADVERSE EFFECTS ON
THE ENVIRONMENT AS A RESULT OF MHP’S
ACTIVITIES
DELIVERY OF A PROGRAMME TO CONTINUALLY
REDUCE WASTE GENERATION
PERFORMANCE OF A PLAN TO REDUCE
FRESHWATER CONSUMPTION AND DISCHARGES
OF WATER
DELIVERY OF A PROGRAMME THAT ENSURES
THAT WATER DISCHARGES ARE FREE OF
HARMFUL POLLUTANTS
DELIVERY OF A STRATEGY TO PRESERVE AND
CONSERVE BIODIVERSITY IN THE AREAS WHERE
MHP OPERATES
DEVELOPMENT AND MAINTENANCE
OF COMPREHENSIVE ENVIRONMENTAL
PERFORMANCE RECORDS ADDRESSING MATTERS
SUCH AS WASTE, WATER USE AND DISCHARGES,
EMISSIONS AND ENVIRONMENTAL INCIDENTS
MHP WILL MAINTAIN REGULAR DIALOGUE WITH
ITS STAKEHOLDERS ABOUT ITS ENVIRONMENTAL
APPROACH, MANAGEMENT AND PERFORMANCE
DELIVERY OF A PLAN TO REDUCE THE USE OF
ENERGY FROM NON-RENEWABLE SOURCES
THROUGH INCREASED USE OF RENEWABLE
ENERGY
MHP WILL PROVIDE REGULAR TRAINING AND
EDUCATION TO ITS EMPLOYEES ABOUT THE
COMPANY’S EXPECTATIONS AND REQUIREMENTS
RELATING TO ENVIRONMENT AND CLIMATE
CHANGE MATTERS
95
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 6: THE PLANET
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
ADDRESSING THE ENVIRONMENTAL AND ENERGY
SECURITY CHALLENGES PRESENTED BY THE WAR
IN UKRAINE
its
green
Despite
the numerous environmental
and energy security challenges brought
about by the war in Ukraine, MHP has
remained steadfast in its commitment
to
and
decarbonisation programme. Throughout
this period, the Group has continued to
integrate new technologies and pursue
site certification, all the while ensuring that
its facilities remain operational with minimal
disruption due to procurement of generators.
transformation
Among the major hurdles faced by MHP
is the energy shortage resulting from the
War. However, the Management Team
foresaw this challenge early on and
implemented a
range of measures
to maintain business operations with
interruptions. Thanks to this
minimal
proactive approach, MHP has managed
to navigate this issue successfully and
maintain its reputation as a reliable and
sustainable industry leader.
THE PROACTIVE APPROACH TO ENSURING ENERGY SECURITY INCLUDED:
SOURCING A VARIETY OF DIESEL
GENERATORS WHICH ARE NOW USED
FOR ELECTRICITY GENERATION AT ALL
OF MHP’S SITES
ENSURING THAT MHP HAS ADEQUATE
SUPPLIES OF DIESEL, PETROL AND
NATURAL GAS FOR THE 2022/23 WINTER
PERIOD
APPLYING ENERGY STORAGE
TECHNOLOGY FOR SOME SMALLER
AGRICULTURAL ENTERPRISES AND
RETAIL OUTLETS. THE LONGER-TERM
AIM IS TO EVOLVE THIS FOR LARGER
SCALE PURPOSES AND THE MHP TEAM
IS CURRENTLY INVESTIGATING THIS
PROSPECT WITH BUSINESS PARTNERS
IN EUROPE, AMERICA AND SOUTH
KOREA. THIS OPTION WILL REDUCE THE
REQUIREMENT TO USE DIESEL AND HAVE
CONSEQUENT EMISSION BENEFITS
96
MHP HAS CONTINUED TO OPERATE ITS
TWO BIOGAS FACILITIES TO PRODUCE
ELECTRICITY, INDUSTRIAL STEAM
AND HEATING IN UKRAINE
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 6: THE PLANET
CASE STUDY
INTERNATIONAL SUSTAINABILITY
AND CARBON CERTIFICATION
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
first
steps
started
towards
The
2022
International Sustainability and Carbon
on
(“ISCC”)
Certification
21 February 2022, but the process for
obtaining this certification was delayed
by both the Russian military action
and the necessity to source a new
auditor. However, the achievement of
this important step in 2022 was a clear
indication of the Group’s determination
to maintain planned business operations
and its commitments to sustainability and
climate change despite the interruptions
caused by the War.
It became necessary to replace the initial
chosen auditor following the outbreak
of the War because of the auditor’s
connections with Russia. A new audit
process was quickly designed supported
by the Polish offices of Bureau Veritas
to achieve this important objective and
support the planned export of oil. The
initial timetable envisaged certification of
rapeseed and corn by 1 July, sunflower and
soybean oil by 1 October, and sunflower
husks by 1 December.
Subsequently
it became possible to
accelerate the certification project and
expand its planned scope. The following
MHP entities now hold this certification in
relation to the production of the following
raw materials and products.
97
MHP FOOD TRADING LLC
(ISSUED 10 JUNE 2022)
• Corn
• Rapeseed
• Sunflower
• Sunflower oil
• Sunflower husks
• Soybean
• Soybean oil
• Soybean husks
KATERYNOPIL ELEVATOR LLC
(ISSUED 23 JUNE 2022)
• Corn
• Rapeseed
• Sunflower
• Sunflower oil
• Sunflower husks
• Soybean
• Soybean oil
• Soybean husks
VINNYTSIA POULTRY COMPLEX LLC
(ISSUED 19 MAY 2022)
• Sunflower
• Sunflower oil
• Sunflower husks
ANNUAL REPORTAND ACCOUNTS 2022
STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 6: THE PLANET
GREENHOUSE GAS
EMISSIONS
SOURCES AND METHOD OF CALCULATION
The following sources were applied in the
calculation of greenhouse gas emissions:
GLOBAL WARMING POTENTIAL (“GWP”)
WITH IEA – CO2 EMISSIONS FROM FUEL
COMBUSTION HIGHLIGHTS (2013 EDITION)
IFC CARBON EMISSIONS ESTIMATOR
TOOL (“CEET”) – FURTHER INFORMATION
IS AVAILABLE AT WWW.IFC.ORG
IPCC FIFTH ASSESSMENT REPORT
(“INTERGOVERNMENTAL PANEL ON
CLIMATE CHANGE”)
The financial control method was applied
in compiling this data.
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
SCOPE 1 - DIRECT GREENHOUSE GAS EMISSIONS
UKRAINE
METRIC TONNES OF CO2e
2022
2021
2020
Combustion of natural gas
195,883
212,491
165,289
Diesel fuel use
145,529
148,446
142,464
Gasoline fuel use
Use of compressed/liquefied gas,
propane, butane, methane and their
mixtures
7,820
4,181
8,335
4,401
8,464
5,211
TOTAL
353,413
373,673
321,428
The noted reduction was the result of energy efficiency measures which are
carried out as part of the implementation and requirements of the ISO 50001
energy management standard.
EUROPEAN OPERATING SEGMENT
METRIC TONNES OF CO2e
Combustion of natural gas
Diesel fuel use
Gasoline fuel use
Liquefied natural gas combustion
Coal combustion
Fuel oil combustion
TOTAL
2022
17,839
6,752
303
1,878
2,726
1,754
2021
16,281
6,556
288
2,390
2,242
3,600
2020
12,178
6,083
241
1,537
1,991
3,799
31,252
31,357
25,829
A lower corn harvest led to a requirement for less drying leading to the small fall in emissions.
98
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 6: THE PLANET
BIOGAS PRODUCTION
EMISSIONS
from biomass combustion
Emissions
(shown separately from the Scope 1
emissions, as in previous years) are shown
in the table below.
SCOPE 1 – DIRECT GREENHOUSE GAS
EMISSIONS FROM COMBUSTION OF BIOGAS
UKRAINE
METRIC TONNES OF CO2e
Combustion of biomass
2022
77,246
Combustion of sunflower husk and pellets
53,099
2021
80,097
54,199
2020
103,342
47,309
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
RESOURCE EFFICIENCY
MHP pays considerable attention to
reducing the quantity of materials used in
the production process and packaging of
products.
MATERIAL USED
UKRAINE
TONNES
Non-renewable
Renewable
2022
374,131
2021
419,194
2020
317,801
4,409,221
4,180,192
4,027,223
TOTAL
130,345
134,296
150,651
TOTAL
4,783,353
4,599,386
4,345,024
SCOPE 2 – INDIRECT GREENHOUSE GAS
EMISSIONS – USE OF ELECTRICITY
The location-based method was chosen
to calculate
indirect greenhouse gas
emissions (Scope 2). Ukraine does not
provide the electricity consumer with
a choice of differentiated electricity by
origin.
UKRAINE
METRIC TONNES OF CO2e
2022
2021
2020
Scope 2 emissions
220,985
237,776
232,302
TOTAL
220,985
237,776
232,302
The notable Scope 2 reduction was the result of energy reduction measures introduced
as part of adherence to the energy management standard ISO 50001.
EUROPEAN OPERATING SEGMENT
TONNES
Non-renewable
Renewable
TOTAL
2022
19,747
245,574
265,321
2021
24,524
259,037
283,561
2020
19,986
248,774
268,760
The European Operating Segment aims to lower the quantity of materials used for
environmental and cost saving reasons. These savings measures account for the noted
reduction.
99
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 6: THE PLANET
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
ENERGY MANAGEMENT
In recent years, MHP has been following
from non-
a strategy of switching
renewable to renewable energy through,
in particular, the construction of its own
biogas production facilities. MHP intends
to increase its use of renewable energy
in the future principally through further
development of its biogas production
facilities and the reduction of its diesel
usage through increased use of energy
storage technology.
ENERGY CONSUMPTION FROM NON-RENEWABLE AND RENEWABLE SOURCES
ENERGY CONSUMPTION
EUROPEAN OPERATING SEGMENT
TJ
Electricity
Thermal energy (generated by biogas
plant)
TOTAL ENERGY CONSUMPTION
% FROM RENEWABLE SOURCES
2022
233
18
251
7
2021
229
19
248
8
2020
212
22
234
9
The European Operating Segment plans to install photovoltaic panels on some of the
buildings located in Croatia. This will lower purchased energy consumption and increase
the percentage from renewable sources.
UKRAINE
TJ
Natural gas
Diesel
Petroleum
Compressed / liquefied gas
Electricity
TOTAL FROM NON-RENEWABLE
SOURCES
Biogas
Sunflower husk combustion
2022
3,504
1,978
112
71
1,768
7,433
1,031
676
TOTAL FROM RENEWABLE SOURCES
1,707
TOTAL ENERGY CONSUMPTION
9,140
% FROM RENEWABLE SOURCES
19
2021
3,802
2,018
119
75
1,902
7,916
1,065
626
1,691
9,607
18
2020
2,957
1,936
121
88
1,858
6,960
1,370
580
1,950
8,910
22
Although progress has been slowed by the War in Ukraine, MHP Ukraine is gradually
shifting energy use from non-renewable to renewable sources and introducing energy
saving measures. This led to the y/y change noted in the above table.
100
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 6: THE PLANET
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
The fall
in steam production at the
European Operating Segment (2.1%) was
due to technical
issues experienced
during the year.
BIOGAS PRODUCTION
PERFORMANCE
BIOGAS PRODUCTION PERFORMANCE
UKRAINE
kWh
2022
2021
2020
Biogas produced
294,944,656
314,031,146
272,038,980
Electricity produced
120,927,309
128,752,770
111,535,982
Heat produced
123,829,564
131,893,081
114,201,964
EUROPEAN OPERATING SEGMENT
kWh
2022
2021
2020
Biogas produced
22,332,478
22,992,417
21,952,000
Electricity produced
7,499,836
7,493,893
7,029,966
Heat produced
5,074,247
5,184,600
7,733,000
SALE OF ENERGY
UKRAINE
TJ
Energy sales – Ukraine
2022
398
Energy sales – European Operating Segment
27
TOTAL ENERGY SALES
425
2021
429
27
456
2020
372
25
397
MHP’s sales in Ukraine have been affected
by the war. The European Operating
Segment aims to upgrade the production
process at its biogas plant in 2023 which
is expected to increase energy available
for sale.
101
CONVERSION RATES APPLIED:
4.184 joules = 1kWh = 3.6 megajoules (“MJ”)
1 tonne (steam) = 2.256 MJ
1 tonne (liquefied gas) =45.980 MJ
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 6: THE PLANET
WATER MANAGEMENT
One of MHP’s main environmental
priorities is to reduce the consumption of
water. All of MHP’s water use is regularly
monitored and metering units are subject
to regular inspection and maintenance.
accurate monitoring
ensures
of
groundwater use and ensures that there is
no impact on the resources available for
local communities.
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
In 2021, the environmental specialists
at each site updated the Register of
Wells. This exercise included recording
the physical
information
location of underground water sources,
flow rate, physical condition, need for
repair, and water intake. This procedure
relating
to
None of
the operations of MHP’s
businesses affect the water balance in
the regions where the Group operates.
Each enterprise strictly adheres to the
the
appropriate
restrictions on the use of land plots
adjacent to coastal strips.
regulations
including
TOTAL WATER USE
UKRAINE
CUBIC METRES
Surface water
Ground water
EUROPEAN OPERATING SEGMENT
2022
2021
2020
CUBIC METRES
2022
2021
2020
7,056,687
6,741,560
6,981,570
Subterranean water
1,305,125
1,258,150
1,295,668
6,301,030
7,111,377
6,878,128
Municipal and other wastewater systems
714,675
662,458
574,484
Wastewater from third-party organisations
439,820
438,000
439,200
TOTAL
2,019,800
1,920,608
1,870,152
Municipal and other water supply systems
254,576
250,888
249,617
TOTAL
14,052,113
14,541,825
14,548,515
in water use by MHP
in
The fall
production caused by the War. Energy saving measures have also reduced the use of
water in MHP’s operations.
in Ukraine occurred because of the fall
The European Operating Segment aims to minimise water use but used greater quantities
in 2022 due to plant investment. The benefits of this capex is expected to be seen in
future figures.
102
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 6: THE PLANET
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
WASTEWATER
MANAGEMENT
last few years, MHP has
Over the
been working on developing its use of
leading technology in its treatment of
enterprises
All MHP
wastewater.
strictly adhere to current regulatory
requirements.
WASTEWATER DISCHARGES
UKRAINE
CUBIC METRES
2022
2021
2020
CUBIC METRES
2022
2021
2020
EUROPEAN OPERATING SEGMENT
Discharged via pipes to municipal
treatment plants
312,421
594,289
730,655
Discharged from pipes to own wastewater
plants
1,143,383
1,033,250
1,001,226
72,213
85,960
84,050
Discharged to public sewage systems
126,275
109,214
157,230
Discharged to waste pits with removal to
municipal wastewater treatment plants
Released to surface water after treatment
at MHP plants
4,506,253
4,408,033
4,462,842
Discharged to filtration fields
327,961
326,210
322,934
Discharged to a non-flow through septic
tank
17,027
16,132
14,766
Discharged into lagoons
167,170
172,574
152,582
Discharged to subterranean water
213,993
244,697
259,643
TOTAL
5,218,848
5,414,492
5,600,481
TOTAL
1,667,848
1,575,867
1,585,447
Wastewater discharges in Ukraine always meet the approved regulatory volume standards
and are conducted after the required treatments under State permits. All of MHP’s
locations prioritise ensuring that discharges do not pollute local water sources.
The European Operating Segment continues to invest in wastewater treatment and
new treatment plants commenced operations in Slovenia and Serbia in 2022. Further
investments in line with industry best practice will continue in 2023.
103
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 6: THE PLANET
WASTE MANAGEMENT
All of MHP’s enterprises comply with
the Group’s Environmental Policy and
with the appropriate waste management
regulations. They have all implemented an
effective waste management accounting
system
including for the disposal of
hazardous waste. Contractors involved
in the disposal of hazardous waste are
regularly checked to ensure that they have
the appropriate regulatory certifications.
The Group is focussed on developing its
waste management processes to prioritise
reuse and participate
in the circular
economy.
TOTAL WASTE BY TREATMENT METHOD
UKRAINE
CUBIC METRES
Reuse
Composting
Isolation of valuable components
Combustion
Disposal to landfill
Storage at MHP enterprises
2022
47,579
1,947
41
2021
63,017
3,283
59
13,469
16,308
7,663
3,691
11,412
2,484
2020
81,143
7,269
102
987
11,754
4,432
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
EUROPEAN OPERATING SEGMENT
TONNES
Reuse
Composting
Isolation of valuable components
Combustion
Disposal to landfill
2022
1,736
13,967
25,754
0
0
2021
1,410
10,348
27,505
0
0
2020
1,407
10,146
19,479
0
0
Storage at PP enterprises
11,000
11,000
11,000
Transferred to contracted third parties
26,471
28,867
24,096
Transferred to contracted third parties
2,644
2,175
1,824
TOTAL
100,861
125,430
129,783
TOTAL
55,101
52,438
43,856
The noted falls are the result of reduced production following the outbreak of War in
Ukraine.
104
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 6: THE PLANET
CASE STUDY
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
CIRCULAR ECONOMY CREATES
NEW PRODUCTS AND MARKET OPPORTUNITIES
MHP has always paid close attention
to the importance of circular economy
ensuring
impacts and
related
opportunities are addressed by the use
of technology and innovation.
that
the
2015, MHP prioritised
From
development of creative circular economy
management methods, working closely
with different business partners. The aim
was to achieve zero waste from animal
production and to create a separate
business area. In particular, MHP worked
with the Ukraine government and pet
food producers, initially to enable excess
chicken meat and bone meal to be used
within pet food production. Further
applying
developments
followed,
to meet
research and expertise
customer requirements. This included
the processing of blood, feathers and
soft tissue for the production of blood
meal and additionally, feather meal,
poultry feed meal and fat for use in the
pet food industry. High quality levels are
maintained by minimising the conversion
time required to turn waste into the
finished product (typically only six hours
at MHP).
Ongoing research is a feature of this
business area to ensure the finished
product is of the highest quality and meets
105
evolving customer requirements. A feature
has been knowledge-sharing with other
feed producers, as well as the ongoing
examination of other alternative markets
such as fish feed meal (aquaculture) and
biodiesel production.
Future plans
include expanding the
geography of pet food sales into markets
where MHP can be competitive and
address a particular niche. Potential
exists in the Middle East, Asia and the
Pacific region.
GROUP SALES VOLUMES
OF RENDERING PRODUCTS, 2017-2022
SALES VOLUMES
OF RENDERING
PRODUCTS
INCREASED BY
317%
FROM 2017 TO 2022
2017
2018
2019
2020
2021
2022
9.3
11.5
25.4
31.5
37.9
38.8
Thousand tonnes
FROM 2017 TO 2022,
OVER 155,000 TONNES OF
ANIMAL PROTEINS AND
ANIMAL FATS WERE SOLD
GENERATING OVER US$
100 MILLION IN REVENUE
THE TOTAL NUMBER
OF COUNTRIES
TO WHICH RENDERING
PRODUCTS ARE
EXPORTED
27
ANNUAL REPORTAND ACCOUNTS 2022
STRATEGIC
REVIEW
BUSINESS REVIEW
GROWTH PILLAR 6: THE PLANET
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
WORKING WITH
STAKEHOLDERS
KEY ACHIEVEMENTS
IN 2022
•
• MHP maintained energy security at its
Ukraine sites despite the significant
challenges which were presented by
the War.
In partnership with industry experts,
the
MHP has
scope and accuracy of its greenhouse
gas emission measurements. This is
an ongoing process that is viewed
as a programme of continuous
improvement.
further developed
• Four Ukraine sites achieved ISO 50001
(energy management) certification.
the Starynska Nova
These were
breeding complex,
the Vinnytsia
the Myronivka
Fodder Complex,
Fodder Complex and the Katerynopil
Fodder Complex.
PLANS FOR 2023
The following sites in Ukraine plan
(energy
ISO 50001
to achieve
management) certification:
• Myronivsky Meat Processing Plant
Lehko (MMPP);
• Oril Leader – broiler complex;
• Peremoga Nova – breeding
complex.
MHP plans to achieve Carbon Trust
certification following a verification
and clarification process.
the
in which
to enable
MHP works closely with a variety of
stakeholders to develop its environmental
local
approach and
communities
its operations
are based to enter into regular dialogue
its environmental performance.
about
An example is the participation of MHP’s
Chief Ecologist in a variety of important
environmental
in Ukraine.
initiatives
In 2017, he became a member of the
Committee on Environmental Safety
of Animal Husbandry of the Ukrainian
Association of Agroecologists. In 2018, he
became a member of the South Bug River
Basin Council which is an organisation
tasked with ensuring that the second-
longest river in Ukraine is free of pollution.
In 2020, he also became a member of
the Committee on Industrial Ecology
and Sustainable Development of the
European Business Association.
MHP continued to partner with Alltech
E-CO2 during the year to develop a
new, reliable and accurate model for
the measurement and management of
greenhouse gas emissions for MHP’s
activities in Ukraine. This has borne fruit
and the Company is currently awaiting
Carbon Trust verification.
MHP also partnered with the Ukrainian
Government’s Department of Financial
Control to develop a model for the
accounting of tractor fleet waste which
was adopted at MHP’s businesses within
the country.
106
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
BUSINESS REVIEW
TCFD DISCLOSURES
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
TASKFORCE ON CLIMATE-
RELATED FINANCIAL
DISCLOSURES (“TCFD”)
MHP’S APPROACH TO
CLIMATE CHANGE
MHP understands that climate change
presents the Group with a range of
risks and opportunities. Its approach to
climate change is reported in greater
detail within Growth Pillar 6 on pages 94
to 106 of this Report.
PURPOSE OF THIS STATEMENT
As part of this Statement MHP has
reviewed and considered TCFD’s All
Sector Guidance as well as the additional
guidance provided in the 2021 TCFD
Annex. MHP has also considered the
recommendations for agriculture, food
and forest products organisations that are
contained with the Guidance.
This Statement outlines MHP’s existing
reporting
alignment with
recommendations,
with
explanations of how MHP intends to
extend its alignment in the future.
the TCFD
together
Statement
to
highlights MHP’s
The
commitment
addressing climate
change. Stakeholders and readers of this
Statement will appreciate that the War
in Ukraine has significantly delayed the
Group's progress in this area.
This Statement is provided in line with
the compliance requirements of Listing
Rule 9.8.6R(8) of
the UK Financial
Conduct Authority.
107
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
TCFD DISCLOSURES
ALIGNMENT WITH THE TCFD
RECOMMENDATIONS
MHP’s approach
to climate change
is evolving and the Group intends to
enhance its reporting as its approach
matures and develops. This Section sets
out steps already taken as well as steps
planned in 2023 and beyond.
MHP has considered its “consistent or
not consistent” obligation under the
UK Financial Conduct Authority Listing
Rules, and has detailed its position at
the end of 2022 in relation to the 11
TCFD recommendations in the table to
the right. Where sections are marked
“not consistent”, further explanation is
provided beneath the table.
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
THE 11 TCFD RECOMMENDATIONS - AND THE GROUP’S POSITION AT THE END OF 2022
Governance
Page
Describe the board’s oversight of climate-related risks and opportunities
Describe management’s role in assessing and managing climate-related risks and opportunities
Strategy
Describe the climate-related risks and opportunities the organisation has identified over the short,
medium, and long term
Describe the impact of climate-related risks and opportunities on the organisation’s businesses,
strategy, and financial planning
Describe the resilience of the organisation’s strategy, taking into consideration different climate-
related scenarios, including a 2-degree centigrade or lower scenario
Risk management
Describe the organisation’s processes for identifying and assessing climate-related risks
Describe the organisation’s processes for managing climate-related risks
Describe how processes for identifying, assessing, and managing climate-related risks are
integrated into the organisation’s overall risk management
Metrics and targets
Disclose the metrics used by the organisation to assess climate-related risks and opportunities in
line with its strategy and risk management process
Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas (“GHG”) emissions and the
related risks
Describe the targets used by the organisation to manage climate-related risks and opportunities
and performance against targets
Progress
Consistent
Not consistent
Not consistent
Consistent
Not consistent
Not consistent
Not consistent
Not consistent
Not consistent
Not consistent
Not consistent
108
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
TCFD DISCLOSURES
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
THE GROUP PLANS TO CONDUCT FURTHER ANALYSIS
USING DIFFERENT CLIMATE-RELATED SCENARIOS TO
DEVELOP ITS CLIMATE CHANGE STRATEGY AND RISK
MANAGEMENT APPROACH
SECTIONS MARKED AS “NOT CONSISTENT”
is a topic
Although climate change
that is addressed at Board level, the
Group has not yet incorporated it into
its management procedures, including
formal procedures that are supported by
key performance indicators, targets, and
a strategy that is specifically designed to
address climate change. MHP is planning
to introduce a more
formal
approach
although the timing
of this is likely to
be impacted by the
competing requirements presented by
the War in Ukraine.
See Principal Risks
and Uncertainties
on page 50
MHP is currently in the early stages of
assessing Group-wide climate change
risk. Climate change has already been
identified as a principal risk. The Group
plans to conduct further analysis using
different climate-related scenarios to
develop its climate change strategy and
risk management approach. The Group
109
intends to investigate the performance
of this exercise in 2023 although timing
may be affected by the War. This
progress will enable MHP to add more
depth to the Group’s risk analysis and
risk management processes and enable
more thoughtful consideration of climate
in the organisation’s
change matters
strategic and financial planning.
to
reduce
impacts
Some years ago, MHP identified significant
its climate
opportunities
through
and environmental
the design and construction of biogas
facilities and the reuse of sunflower
husks for renewable energy generation.
The outbreak of War
in the region
has further highlighted the importance
of
in strengthening
these
energy security.
facilities
The Management Team intends to pursue
expansion of its biogas facilities once the
war ends.
MHP has reported Scope 1 and Scope
2 emissions over the seven years since
2015, and has consistently developed its
methodology and data accuracy since the
initial calculations were made.
MHP has not yet attempted to calculate
its Scope 3 emissions or to set detailed
targets due to a variety of reasons not
least including the War in Ukraine, the
significant difficulties in obtaining this
information from MHP’s supply chain,
and logistical challenges. This aspect of
MHP’s approach to climate change will be
re-examined after the war is resolved.
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
TCFD DISCLOSURES
GOVERNANCE
MHP’s Chief Executive Officer
is
responsible for the executive management
of MHP’s businesses
its
approach to climate change, strategy
delivering
and
implementation,
performance against plans.
including
MHP’s Board governance systems include
the regular review of Board composition
and performance to ensure that the
required knowledge levels and skill set
(including climate change matters) are
maintained. More information is available
in the Corporate Governance Report on
page 116.
Board’s
Sustainability
and
The
International
Committee
Affairs
addresses MHP’s approach to responsible
including climate change.
business
The Audit & Risk Committee regularly
considers business risks including ESG-
related
includes
risks. This process
consideration of potential or actual risks
to the business.
Climate change has been identified by
MHP’s risk management systems as a
principal risk. Related climate change
matters were considered from time-to-
time during the year (for instance, the use
of MHP’s biogas facilities during the War).
More frequent environmental reporting
will be considered following the end of
the War. This step will enable regular
monitoring of climate change-related
performance and the
introduction of
more specific goals and targets. It will also
facilitate a more detailed examination and
Board monitoring of environmental risks
and opportunities, including those that
relate to climate change.
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
RISK MANAGEMENT
Climate risks are evaluated using MHP’s
common risk assessment approach which
includes consideration of qualitative
criteria and likelihood of occurrence.
These outcomes are incorporated into
the risk assessment procedures which
are performed regularly at each of MHP’s
enterprises. Climate change has been
identified as a principal risk.
MHP has not yet conducted a qualitative
and quantitative climate change scenario
assessment to support and guide its climate
change approach going forward. MHP
intends to investigate the performance of
this exercise in 2023 although timing may
be affected by the War. This would clearly
support MHP’s climate change-related risk
assessment processes and improve their
effectiveness.
STRATEGY
METRICS AND TARGETS
MHP’s previous announcement of a
target to become carbon neutral by 2030
will be reviewed at the end of the war.
MHP will also examine the introduction
of other targets including those relating
to emissions intensity as part of the
post-war development of its approach to
climate change.
To date, MHP has not performed climate
change scenario analysis and will consider
the performance of this exercise in 2023,
subject to any limitations that may be
imposed on the conduct of this exercise
by the War in Ukraine.
A number of years ago, MHP identified that
significant cost saving and environmental
benefits could be created
through
renewable energy generation, processing
its waste to create biogas.
information on
Further
the energy
generated in 2022 is available on page
101 of this Report. This method has also
contributed significantly to MHP’s energy
security since the outbreak of War on
24 February 2022. MHP continues to
investigate this opportunity and intends to
expand its renewable energy generation
following the end of the War.
110
gas
greenhouse
emissions
MHP’s
calculations are conducted annually.
Emissions data and the methodology
applied are recorded on pages 98 to 99
of this Report.
As stated above, MHP does not currently
collect Scope 3 data. When the War
finishes, MHP will investigate expanding
its emissions data to include Scope 3, and
the use of appropriate intensity metrics
to monitor emissions performance and
enable evaluation of robust target setting
over and above the existing 2030 carbon
neutral goal.
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
NON-FINANCIAL INFORMATION STATEMENT
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
NON-FINANCIAL
INFORMATION STATEMENT
MHP’S APPROACH TO
TRANSPARENCY
to
is committed
MHP
transparent
reporting and disclosure of its financial
and non-financial performance,
risks
and opportunities where this information
is relevant to shareholders and other
key stakeholders. MHP supplies this
information in line with the reporting
requirements contained
in Sections
414CA and 414CB of the UK Companies
Act 2006.
The table and other information in this
section are provided to assist readers
of this Report to understand MHP’s
approach, policies and performance.
No material breaches of policy were
identified during 2022.
regularly enters
into dialogue
MHP
with investors and other stakeholders
about its responsible business approach
and performance.
Further information can also be found
at MHP’s corporate websites (www.mhp.
com.cy and www.mhp.ua).
111
HIGHLIGHTS
BUSINESS MODEL
An explanation of MHP’s
business model.
For further information
see pages 28 to 31
WAR IN UKRAINE
An explanation of how MHP has
addressed the War which commenced
on 24 February 2022.
For further information
see pages 4 to 6.
GROWTH PILLARS
An explanation of MHP’s approach to
sustainability and alignment with the UN
Sustainable Development Goals.
For further information
see pages 54 to 106
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS REVIEW
NON-FINANCIAL INFORMATION STATEMENT
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
SUMMARY
DESCRIPTION
FURTHER INFORMATION, POLICIES AND OUTCOMES
Business model
Principal risks
Environmental
matters
Employees
Respect for
human rights
Other social
matters –
stakeholder
engagement
Other social
matters –
responsible food
production
Anti-bribery and
corruption
MHP creates value by applying the six key elements of its business model. They have been adapted to address the War in
Ukraine and they are:
• Transformation to a culinary company
• Responsible business
• Sustained investment in innovation, business efficiency and R&D
•
International marketplace
• Sustainable financial health
• Support for Ukraine
MHP operates within dynamic environments and markets which are subject to constant change and have clearly been
affected by the War in Ukraine. MHP must be able to respond to these challenges. A failure to manage these changes and
risks could have an adverse impact on the business and the achievement of MHP’s goals and targets.
Business model
Pages 28 to 31
Growth Pillars
Pages 54 to 106
Culinary transformation
Pages 21 and 22
Principal risks and uncertainties
Pages 49 to 53
MHP recognises its environmental responsibilities and its role in ensuring that its business activities meet the expectations
of its stakeholders in addressing the global climate change challenge.
Growth Pillar 6: The Planet
Pages 94 to 106
The War has highlighted the importance of MHP’s people as its most valuable asset. MHP’s ability to continue its operations
despite the extraordinary difficulties posed by the war is directly attributable to its well-established culture of business
collaboration and co-operation.
Growth Pillar 2: Our People and Their Wellbeing
Pages 63 to 74
Human rights are the basic freedoms that everyone should enjoy regardless of matters such as faith, creed, race, origin,
gender, age, disability, sexuality and other diversity matters. Following the commencement of the War, MHP’s Management
Team placed particular focus on assisting the population of Ukraine, maintaining food security, supporting infrastructure,
wellbeing and morale. In 2022, MHP also continued to operate its community development approach through centralised
activities and a focus on working in partnership with other large businesses, international donors and national Ukrainian
charities.
The commencement of the war on 24 February meant that MHP had to immediately revise its approach to stakeholder
engagement and play an active role in addressing the crisis. Group and Senior Management immediately resolved that the
Group’s stakeholder engagement priorities were to:
• Support the needs of employees;
• Address the needs of communities in different parts of the country;
• Address the additional requests for information from financial partners and the investment community; and
• Work with other stakeholders to maintain food security and personal safety for the Ukrainian population.
MHP will always maintain industry-leading standards of product safety and quality at all of its enterprises. MHP will reduce
its use of antibiotics in the production process to further improve the world-class safety standards which all of the Group’s
businesses already apply. Animal welfare will continue to be a top priority at all of the Group’s production sites. MHP will
continue to regularly train and educate its employees about the importance of animal welfare.
Growth Pillar 3: Our Role in Society and Our
Licence to Operate
Pages 75 to 77
Growth Pillar 1: Stakeholder Engagement
Pages 59 to 62
Growth Pillar 4: Responsible Food Production
Pages 78 to 86
MHP’s Board of Directors closely monitors the Group's business conduct progress and performance. Responsibility for
this aspect of the business is divided between the Audit & Risk Committee and the Sustainability and International Affairs
Committee. The Group's has also established an internal Compliance Committee.
Growth Pillar 5: Business Conduct
Pages 87 to 93
The Ethics and Compliance Programme was reviewed and updated as a result of the unique challenges presented to the
business by the global COVID-19 Pandemic. This process resulted in the adoption of a new MHP Compliance Roadmap in
which key strategic and operational goals were identified.
MHP has established management systems to both deter and detect any acts of corruption.
Non-financial
KPIs
MHP’s key performance indicators (“KPIs”) do not currently include non-financial KPIs. However, non-financial data is
monitored by the Board and Senior Management Team to ensure compliance with stakeholder and regulatory expectations
relating to ESG matters.
Performance highlights
Page 7
MHP at a Glance, Responsible Business
Page 10
112
ANNUAL REPORTAND ACCOUNTS 2022 01
02
GOVERNANCE
04
05
I
W
E
V
E
R
C
G
E
T
A
R
T
S
I
I
W
E
V
E
R
S
S
E
N
S
U
B
I
114
Chair’s Introduction
to Corporate Governance
116
Corporate Governance Report
119
Board of Directors
127 Audit & Risk Committee Report
133 Nominations and Remuneration
Committee Report
135 Sustainability and International Affairs
Committee Report
137 Management Report
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
F
I
I
I
N
O
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
CHAIR’S INTRODUCTION TO CORPORATE GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
CHAIR’S INTRODUCTION TO
CORPORATE GOVERNANCE
ON BEHALF OF THE BOARD, I AM PLEASED TO PRESENT OUR CORPORATE GOVERNANCE
REPORT (“THE REPORT”) FOR THE YEAR ENDING 31 DECEMBER 2022. THE REPORT SETS
OUT OUR APPROACH TO GOVERNANCE, DESCRIBES THE IMPORTANT AREAS OF FOCUS
OF THE BOARD’S ACTIVITIES DURING THE YEAR AND HIGHLIGHTS HOW THE BOARD AND
ITS COMMITTEES OPERATE.”
Following the outbreak of hostilities on
24 February 2022, the Board’s main areas
of focus have been:
TO MAINTAIN THE GROUP’S LIQUIDITY
AND SOLVENCY
TO ENSURE THE SAFETY, SECURITY, AND
WELLBEING OF MHP’S EMPLOYEES
TO ENSURE THE SUCCESSFUL
CONTINUATION AND ONGOING
DEVELOPMENT OF MHP’S BUSINESS
ACTIVITIES DESPITE THE CHALLENGES
PRESENTED BY THE CONFLICT
TO ENSURE FOOD SECURITY FOR THE
UKRAINIAN POPULATION
114
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
CHAIR’S INTRODUCTION TO CORPORATE GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
GOVERNANCE AND BOARD
PERFORMANCE
MHP has a well-established approach
to governance, which serves as the
foundation for the Board’s management
processes and decision making.
I am pleased to report that, in the wake of
the outbreak of the War in Ukraine, this
approach played a crucial role in MHP’s
successful approach to maintaining
and expanding its business activities. In
response to the many complex logistical
challenges posed by the conflict, MHP
adapted its operations with remarkable
speed and efficiency to meet and
address the Board’s revised key areas
of focus. Board members contributed
effectively to achieving these aims,
playing a key advisory role to the Senior
Management Team, and provided
leadership to ensure that a multitude of
issues were addressed rapidly, promptly,
and effectively.
BOARD COMPOSITION AND
SUCCESSION PLANNING
There were no changes to the Board
during 2022. In the background, a phased
succession plan is being conducted
to ensure replenishment of the Board
to maintain and enhance the levels of
skills, knowledge and independence. At
the same time, the Board is mindful of
stakeholder expectations concerning
diversity and the relevant guidelines
including the FTSE Women Leaders
Review and the Parker Review. Post
year end, Mr. Oscar Chemerinski joined
the Board as an Independent Non-
Executive Director. Further information
can be found in my Chair’s Statement
on page 15 and in the Nominations and
Remuneration Committee Report on
page 133.
115
the Group.
ENGAGEMENT WITH
SHAREHOLDERS, BONDHOLDERS,
FINANCIERS, AND OTHER
STAKEHOLDERS
The Russian military action clearly
created many business uncertainties
and concerns amongst stakeholders
These were
about
exacerbated by the speed of events
and the evolving aspects of War during
2022 and going forward.
In these
circumstances, it was essential that
regular and
the Group maintained
open lines of communication and pro-
its stakeholder
actively conducted
engagement activities (see also new
ways of working below). The Board has
played and will continue to play an
essential leadership and advisory role in
this dialogue and, in particular, played
a key role in the successful discussions
with bondholders, financiers
and
shareholders during 2022.
MEETINGS AND NEW WAYS OF
WORKING
The COVID-19 Pandemic led to many
in
new ways of working for MHP
common with the vast majority of large
businesses around the world. This
included the way the Board and its
Committees work together. Meetings
are now a blend of in-person and
virtual depending on circumstance and
imposed by
logistical constraints
the War. This approach is supported
investment
by
continued
IT
and
infrastructure
these
requirements optimally and ensure
security.
the
strengthening of MHP’s
facilitate
to
developments
considerably
These
assisted the Board in maintaining high
levels of communication between
the
Board members
themselves,
Senior Management Team, and other
stakeholders during the crisis.
In
the
safeguard
NON-EXECUTIVE DIRECTOR
INDEPENDENCE DURING THE
CONFLICT
Following the invasion on 24 February
2022, the Board took all steps necessary
interests of all
to
these extraordinary
stakeholders.
circumstances, the independent stance
of the Non-Executive Directors was
weighed against the requirement for
them to act in the way they consider,
in good faith, would be most likely to
promote the success of the Company for
the benefit of its members as a whole.
As such, from time-to-time it became
necessary for the nature of the activities
the Non-Executive
conducted
Directors
their
to change so
skills, networks, and attributes were
drawn on in ways which, under usual
circumstances, might be viewed as affecting
independence through the conduct of a
material business relationship.
that
by
The Board’s opinion is that these actions
were essential to maintain the stability
and liquidity of the Group in extremely
challenging conditions. They included,
for example, supporting the Management
in finance negotiations and
Team
maintaining key stakeholder relations.
The Group considers that their periodic
this way does not
involvement
materially affect
independence and
that it was done in the best interests of
shareholders, bondholders, and other
stakeholders.
in
independence
The
information within
the UK Corporate
this Report and
Governance Code compliance statement
has been prepared applying this view on
Board independence. It is anticipated
that the involvement of the Independent
Non-Executive Directors
in this way
will be infrequent and will return to its
previous status following the cessation
of the conflict.
MOVING FORWARD
The Board will continue to successfully
lead and advise
the business with
confidence in 2023 and beyond despite
the
challenges
presented by ongoing warfare. We will
continue to deliver on the key areas of
focus for as long as combat persists.
uncertainties
and
I should like to take this opportunity to
thank my colleagues on the Board and
MHP’s Senior Management Team for
their immense and successful efforts
and contributions to the Group during
2022. I am very proud of what we have all
managed to achieve and the way in which
we have all collaborated as part of an
enormous and remarkable team-effort
across the Group.
DR JOHN RICH
Chair
11 April 2023
MHP HAS A WELL-
ESTABLISHED APPROACH
TO GOVERNANCE,
WHICH SERVES AS THE
FOUNDATION FOR THE
BOARD’S MANAGEMENT
PROCESSES AND
DECISION MAKING
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
CORPORATE GOVERNANCE REPORT
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
CORPORATE
GOVERNANCE
REPORT
DOMICILE AND BACKGROUND
INFORMATION
MHP was originally established in 2006
as a company that was registered in
Luxembourg. On 7 August 2017, the
Company converted from a public limited
liability company (“Societe Anonyme”)
into a European company (“Societas
Europaea”).
On 27 December 2017, the Company’s
central
registered
office
administration was
to
Cyprus. MHP is currently registered in
the Cyprus Registry for SE Companies,
under number SE 27 and its registered
office is in Limassol.
and
transferred
In December 2017, the Company adopted
a new Memorandum and Articles of
Association to comply with the provisions
of Cyprus Companies Law. This is available
for download at the Group websites
(mhp.com.cy, mhp.ua).
MHP’s GDRs are listed and traded on the
London Stock Exchange.
The Company’s corporate governance
structures, processes and procedures
are outlined in its Code of Corporate
Governance which is also available for
download at the Group websites.
the highest
to uphold and
The Company aims
standards of
practise
regularly
corporate governance and
its
discusses
its
shareholders,
personnel,
the business community and other
stakeholders
bondholders,
including
government and regulatory agencies.
approach with
Group
STATEMENT OF COMPLIANCE WITH
THE UK CORPORATE GOVERNANCE
CODE 2018
The Board, Senior Management Team and
advisors have been steadily developing
MHP’s corporate governance processes
and procedures over recent years. MHP
aspires to the achievement of best
established
line with
practice
international standards. It regards the UK
Corporate Governance Code 2018 as the
appropriate international benchmark for
its approach. MHP also complies with the
governance requirements of Cypriot law.
in
approval
Recent developments include obtaining
shareholder
new
Directors’ Remuneration Policy at the
end of 2021. MHP continues to seek
ways of strengthening the diversity and
experience of the Board.
for
a
It is the opinion of the Board that, during
2022, the Company complied with the
principles and requirements of the UK
Corporate Governance Code except in
relation to the matters noted below.
MHP REGARDS THE
UK CORPORATE
GOVERNANCE CODE 2018
AS THE APPROPRIATE
INTERNATIONAL
BENCHMARK FOR ITS
APPROACH
2006
7 August 2017
27 December 2017
MHP was registered
in Luxembourg
116
The Company
converted into a
European company
(“Societas Europaea”)
The Company’s registered
office and central
administration was
transferred to Cyprus
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
CORPORATE GOVERNANCE REPORT
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
STATEMENT OF COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE 2018
PROVISION NUMBER
PROVISION REQUIREMENT
EXPLANATION
The Chair should be independent on appointment under the
criteria outlined in Provision 10.
The Board should identify in the annual report each Non-
Executive Director it considers to be independent. Circumstances
which are likely to impair, or could appear to impair, a Non-
Executive Director’s independence include whether a Director has
served on the Board for more than nine years from the date of
their first appointment. A clear explanation should be provided if
the Board nonetheless considers the Non-Executive Director to
be independent.
On his appointment in 2017, the Chair had served on the Board as a Non-Executive
Director since 2006. At the time of his appointment he was also employed by the
International Finance Corporation as a Senior Regional Consulting Agribusiness
Industry Specialist. This role ended over four years ago. After considering the
Chair’s credentials, experience, expertise and independence of thought, it was the
Board’s view that the Chair was independent at the time of his appointment. In 2018,
at the request of the Board, the Chair agreed to support the Chief Executive
Officer with certain specific strategic projects where his extensive knowledge and
expertise is particularly helpful. Subsequently, in March 2019 his role was designated
as Executive Chair and no longer independent. The Board is satisfied that these
arrangements are in the best interests of the Company, its shareholders and other
stakeholders.
John Grant has served as a Non-Executive Director of the Company since 2006
and is the Senior Independent Director. The Board values his business perspective
in view of his extensive experience as a director of a wide range of major public
companies in a variety of business sectors and is satisfied that he possesses the
necessary independence of thought to be regarded as independent.
The Chair should not remain in post beyond nine years from the
date of their first appointment to the Board. To facilitate effective
succession planning and the development of a diverse board, this
period can be extended for a limited time, particularly in those
cases where the Chair was an existing Non-Executive Director on
appointment.
The Chair became a Non-Executive Director in 2006 and was appointed Chair in
2017, at which time the Board was satisfied of his independence of thought and
viewed the appointment as in the best interests of the Company, its shareholders
and other stakeholders. His subsequent adoption of executive responsibilities was
also, and continues to be, viewed as being in the best interests of these parties.
The Board should establish a remuneration committee
of independent non-executive directors, with a minimum
membership of three, or in the case of smaller companies, two. In
addition the Chair of the board can only be a member if they were
independent on appointment and cannot chair the committee.
Before appointment as Chair of the remuneration committee, the
appointee should have served on the remuneration committee for
twelve months.
The Nominations and Remuneration Committee currently comprises Philip J
Wilkinson OBE and John Grant who are both Independent Non-Executive Directors.
The third member is the Executive Chair, Dr John Rich. Philip J Wilkinson OBE is
the Committee Chair. These arrangements are considered by the Board to be in the
best interests of the Company and its material stakeholders.
9
10
19
32
117
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
CORPORATE GOVERNANCE REPORT
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
STATEMENT OF COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE 2018 (CONTINUED)
PROVISION NUMBER
PROVISION REQUIREMENT
EXPLANATION
At the EGM on 28 December 2021, MHP’s shareholders approved a new Directors’
Remuneration Policy which better aligned the interests of the Executive Directors
with those of shareholders. This document defers the setting of a Company policy
in relation to long-term incentives, including share awards, until a later date (not
later than the end of 2023).
Directors’ pensionable salaries are calculated on the basis of salary plus
performance related bonuses in line with local legislation and are in line with
general workforce arrangements. The Company plans to update the Directors’
Remuneration Policy to specifically address this area not later than the end of 2023.
At the EGM on 28 December 2021, the Company’s shareholders approved (over 97%
in favour) a new Directors’ Remuneration Policy which had been formulated with the
assistance of Deloitte, MHP’s remuneration consultant.
In common with many companies from the region, MHP does not currently disclose
individual executive director remuneration data. This policy is regularly reviewed and
discussed with MHP’s shareholders.
36
38
40
Remuneration schemes should promote long-term shareholdings
by executive directors that support alignment with long-term
shareholder interests. Share awards granted for this purpose
should be released for sale on a phased basis and be subject
to a total vesting and holding period of five years or more. The
remuneration committee should develop a formal policy for
post-employment shareholding requirements encompassing both
unvested and vested shares.
Only basic salary should be pensionable. The pension
contribution rates for executive directors, or payments in lieu
should be aligned with those available to the workforce. The
pension consequences and associated costs of basic salary
increases and any other changes in pensionable remuneration, or
contribution rates, particularly for directors close to retirement,
should be carefully considered when compared with workforce
arrangements.
When determining executive remuneration policy and practices,
the remuneration committee should address the following:
• Clarity – remuneration arrangements should be transparent
and promote effective engagement with shareholders and the
workforce;
• Simplicity – remuneration structures should avoid complexity
and their rationale and operation should be easy to understand;
• Risk – remuneration arrangements should ensure reputational
and other risks from excessive rewards, and behavioural risks
that can arise from target-based incentive plans are identified
and mitigated;
• Predictability – the range of possible values of rewards to
individual directors and any other limits or discretions should be
identified and explained at the time of approving the policy;
• Proportionality – the link between individual awards, the
delivery of strategy and the long-term performance of the
company should be clear. Outcomes should not reward poor
performance; and
• Alignment to culture – incentive schemes should drive
behaviours consistent with company purpose, values and
strategy
118
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
BOARD OF DIRECTORS
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
BOARD
OF DIRECTORS
THE MEMBERS OF THE BOARD OF DIRECTORS AT 31 DECEMBER 2022 ARE RECORDED
BELOW. THE INFORMATION INCLUDES CAREER HIGHLIGHTS, INFORMATION ABOUT
THEIR SKILLS AND EXPERIENCE, COMMITTEE MEMBERSHIPS (SEE ALSO KEY BELOW)
AND PERSONAL DETAILS.
CHRISTAKIS TAOUSHANIS
INDEPENDENT NON-EXECUTIVE
DIRECTOR AR
DR JOHN C RICH
EXECUTIVE CHAIR
SI NR
PHILIP J WILKINSON OBE
INDEPENDENT NON-EXECUTIVE
DIRECTOR NR SI AR
YURIY KOSYUK
CHIEF EXECUTIVE OFFICER
ANDRIY BULAKH
DEPUTY CHIEF EXECUTIVE OFFICER
– PEOPLE
COMMITTEE MEMBER KEY
NR
SI
Nominations and
Remuneration Committee
Sustainability and
International Affairs
Committee
AR
Audit & Risk Committee
Chair of Committee
119
Member of Committee
JOHN GRANT
SENIOR INDEPENDENT DIRECTOR
AR
NR
VIKTORIA KAPELYUSHNA
CHIEF FINANCIAL OFFICER
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
BOARD OF DIRECTORS
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
DR JOHN C RICH
EXECUTIVE CHAIR
SI NR
JOHN GRANT
SENIOR INDEPENDENT DIRECTOR
AR
NR
PHILIP J WILKINSON OBE
INDEPENDENT NON-EXECUTIVE
DIRECTOR NR SI AR
CHRISTAKIS TAOUSHANIS
INDEPENDENT NON-EXECUTIVE
DIRECTOR AR
in
is a highly experienced
John Rich
a
senior business executive with
strong background
agribusiness
operations, development banking and
investment. He also contributes to MHP
considerable experience in nutrition and
in the development of animal welfare
and sustainable agriculture.
Nationality: Australian
Appointed to the Board: 2006
Career and prior experience highlights:
• Member of the Australian College of
Veterinary Science and a registered
financial member of the Australian
College of Veterinary Surgeons;
Executive
• 1990-2003:
Austasia
Ltd
conglomerate SE Asia);
Pty
Director,
(agribusiness
John Grant contributes to MHP extensive,
board-level finance, risk management,
strategy, governance and operational
range of
from a wide
experience
international businesses and sectors.
Philip Wilkinson contributes to MHP
extensive experience in the strategic and
commercial leadership of international
the
agribusinesses,
international poultry industry.
in particular
in
Christakis Taoushanis contributes to MHP
over 35 years’ of finance, capital markets
and management experience.
Nationality: Cypriot
Nationality: British
Nationality: British
Appointed to the Board: 2018
Appointed to the Board: 2006
Appointed to the Board: 2020
Career and prior experience highlights:
• Senior Independent Director, Augean
plc, Melrose plc, Pace plc and Wolfson
Microelectronics plc;
• Non-Executive Director, National Grid
plc, Corac Group plc and the Royal
Automobile Club Limited;
• Audit Committee Chair : Augean plc,
Melrose plc, National Grid plc, Pace plc;
Chair:
• Remuneration
Committee
Augean plc, National Grid plc;
Career and prior experience highlights:
• Commercial Director of Arla Foods;
• Poultry
industry: Managing Director
of Grampian Country Food Group,
in 2006 joined 2 Sisters Food Group;
in 2015 joined Inghams, Australia;
• Dairy industry: awarded an OBE in 2003
for Services to the Dairy Industry;
Career and prior experience highlights:
• 35 years of banking experience
including 4 years at Continental Illinois
National Bank of Chicago, 18 years at
HSBC Group in Hong Kong and Cyprus,
and 8 years as Chief Executive Officer
at Cyprus Development Bank.
Current external appointments:
• Non-Executive Director of various
• Advisor to a number of companies
through the private firm, TTEG &
Associates.
• Chair of the National Dairy Council and
regulated and listed companies;
National Dairy Farm Assured Ltd.
• 2013-2022 Chair , British Racing Drivers’
Club;
Current external appointments:
• Director of Red Tractor Poultry Sector
• 1992-1996: Finance Director, Lucas
Board, the British Poultry Council;
Industries plc, LucasVarity plc;
• 1990-1992: Executive Deputy Chair,
Jaguar Cars;
• 1989: Director of Corporate Strategy,
Ford Motor Company.
• Council Member of AVEC, Association
of Poultry Processors and Poultry
Trade in the EU;
• Advisor to the Board of Alltech, USA;
• Advisor to the Board of eggXYt, Israel;
• Chair of BetaBugs, Scotland.
• 1995-2002: Director AN-OSI Pty Ltd
(supply chain management for feedlot
beef, poultry and dairy operations
SE Asia/China);
• 2006-2019
Consulting
Senior
Agribusiness Industry Specialist IFC
and Agribusiness consultant to IFC
invested clients until 2019;
• 2017-2021 Financial Board Advisor to
ADM Capital and Independent Non-
Executive Director at three other
poultry-related companies.
Current external appointments:
• Managing Director of Australian
Agricultural Nutrition and Consulting
Pty Ltd (“AANC”);
• Member of the Food and Agribusiness
Advisory Council of the London-
based Commonwealth Development
Corporation (“CDC”).
120
ANNUAL REPORTAND ACCOUNTS 2022
STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
BOARD OF DIRECTORS
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
YURIY KOSYUK
CHIEF EXECUTIVE OFFICER
ANDRIY BULAKH
DEPUTY CHIEF EXECUTIVE OFFICER –
PEOPLE
VIKTORIA KAPELYUSHNA
CHIEF FINANCIAL OFFICER
Andriy Bulakh contributes to MHP more
than 20 years’ broad management, audit-
ing and consulting experience.
Nationality: Ukrainian
Appointed to the Board:
2021 (joined MHP in 2020)
Career and prior experience highlights:
• Managing Partner and Head of
Consulting (Deloitte Ukraine);
• Master’s Degree
International
Economic Relations, Taras Shevchenko
National University of Kyiv.
in
to
Viktoria Kapelyushna contributes
MHP extensive financial experience
and business acumen gained from over
30 years in the agribusiness and food
production industries.
Nationality: Ukrainian
Joined the Board:
2006 (joined MHP in 1998)
Career and prior experience highlights:
• Diplomas
in Processing Engineering
(1992) and Financial Auditing (1998) from
the Kyiv institute of the Food Industry:
• Deputy and Chief Accountant at the
Ukraine Business Centre for the Food
Industry (“BCFI”).
Yuriy Kosyuk has been Chief Executive
Officer of MHP since he founded the
Company in 1998. He contributes over 30
years’ experience in the agribusiness and
food production industries.
Nationality: Ukrainian
Appointed to the Board:
2006 (joined MHP in 1998)
Career and prior experience highlights:
• 1992: graduated as a process engineer
in meat and milk production from the
Kyiv Institute of the Food Industry;
• 1995: founded the Business Centre for
the Food Industry in Kiev.
121
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
BOARD OF DIRECTORS
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
BOARD EXPERIENCE AND DIVERSITY
The broad range of skills and experience
and the diversity of our Board as of the end
of 2022 are illustrated below.
BOARD NATIONALITIES
PROFESSIONAL EXPERIENCE
3
Ukrainian
2
British
1
Australian
1
Cypriot
7
4
4
4
Finance and
accounting
Agri-
business
Technology and
innovation
Health and
safety
3
External quoted
boardroom
experience
3
Sustainable
agriculture
DIRECTORS WHO SERVED DURING THE
YEAR
The directors who served during the year
were:
• Dr John Rich (Executive Chair )
• John Grant
Independent
(Senior
Director)
• Christakis Taoushanis
Non-Executive Director)
(Independent
• Philip J Wilkinson OBE (Independent
Non-Executive Director)
• Yuriy Kosyuk (Chief Executive Officer)
• Andriy Bulakh (Deputy Chief Executive
Officer - People)
• Viktoria Kapelyushna (Chief Financial
Officer)
Excluding the Chair, there is a balance on
the Board between executive directors
and the directors who the Board considers
to be independent. Further Board details
are set out on pages 119 to 126. This
information includes biographical details
of the Directors.
122
There were no changes in the composition
of the Board during 2022.
led a search
To continue to satisfy the independence
requirements of
the UK Corporate
Governance Code, the Senior Independent
Director
for a new
Independent Non-Executive Director
using the services of an experienced
impacted
search firm. Despite being
recruiting
the complexities of
by
during a period of conflict, the Board
proposed and shareholders appointed
Mr. Oscar Chemerinski in March 2023.
Further
in
the Nominations and Remuneration
Committee Report on page 133.
information can be found
BOARD MEETING ATTENDANCE
AND ARRANGEMENTS DURING THE
CONFLICT
The Board conducted four meetings
during 2022. All
the Non-Executive
attended
Directors and
these meetings. The Chief Executive
Officer attended three of the meetings
where the most material and strategic
decisions were discussed.
the Chair
As a result of the conflict in Ukraine
in February 2022 the
which began
majority of Board meetings were
conducted using a blend of in-person
and conference call
facilities. The
Board of Directors also approved
certain decisions through 17 circular
resolutions.
DIRECTOR
Dr John Rich
John Grant
Christakis Taoushanis
Philip J Wilkinson OBE
Yuriy Kosyuk
Andriy Bulakh
Viktoria Kapelyushna
BOARD MEETINGS ATTENDED /
INVITED
4/4
4/4
4/4
4/4
3/4
4/4
4/4
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
BOARD OF DIRECTORS
PRINCIPAL RESPONSIBILITIES OF THE
BOARD
The Board is responsible for the overall
conduct of the Company’s business and
has the powers, authorities and duties
vested in it by and pursuant to the
relevant Cyprus
laws and regulations
and the Articles of Association of the
Company. MHP’s Articles of Association
the corporate
can be viewed at
websites (mhp.com.cy, mhp.ua).
The Company has a unitary governance
structure and the Board is the ultimate
decision-making body, except for the
powers reserved for the Shareholders’
Meeting by law or as specified in the
Articles of Association (see also Board of
Directors on pages 119 to 126).
The Board has a schedule of matters that
are assigned to it for discussion, debate
and approval in line with the requirements
of the UK Corporate Governance Code
and the applicable laws and regulations.
These include:
• MHP’s strategy, aims and objectives
and review of performance against
those goals;
• Conduct of business and support
for the population during the current
conflict in Ukraine;
• Mergers and acquisitions strategy;
• Sustainability and responsible business
(or “ESG”) strategy and KPIs;
• Budgets, financial and operational
targets;
• Annual, half yearly and quarterly
financial results;
• Annual Report and Accounts;
• Dividend policy;
• Appointments to the Board and removal
of Board members;
• Remuneration of Directors;
• Senior management appointments,
remuneration
and
removals
arrangements;
• Appointments to Board committees;
• Board
senior management
and
succession planning;
• Approval of major capital expenditure
projects, acquisitions and divestments;
• Significant variations in borrowings or
borrowing facilities;
• Financial and risk management policies
and procedures; and
• Appointment and
Company Secretary.
removal of
the
THE BOARD OF DIRECTORS IS ULTIMATELY
RESPONSIBLE FOR THE COMPANY’S GOVERNANCE,
RISK MANAGEMENT AND INTERNAL
CONTROL ENVIRONMENT
123
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
RELATIONSHIP BETWEEN THE CHAIR
AND THE CEO
is
A clear division of responsibilities
maintained between the Chair and the
CEO. The CEO may not carry out the
duties of the Chair and vice versa except
in extraordinary circumstances limited to
no more than 12 months.
The Chair is required to maintain close
relations with the CEO by giving him
support and advice while respecting the
executive responsibilities of the CEO.
The CEO provides the Chair with all the
information required to carry out the role.
ROLE OF THE CHIEF
EXECUTIVE OFFICER
The CEO, Yuriy Kosyuk, reports direct to
the Board. The CEO is entrusted by the
Board with the day-to-day management
of the Company within the strategic
parameters established by the Board.
The CEO oversees the organisation and
efficient day-to-day management of
subsidiaries, affiliates and joint ventures.
The CEO is responsible for the execution
and management of the outcome of all
Board decisions.
The CEO is delegated powers that are not
exclusively reserved to the Board or to
the Shareholders’ Meetings. The CEO can
delegate authority for daily management
to subordinate executives but will retain
ultimate accountability to the Board for
the actions which are conducted during
the performance of the role and the
actions of delegates.
ROLE OF THE CHAIR
The Board elects the Chair from members
that meet the Board’s criteria following
the preparation of a job specification
by the Nominations and Remuneration
Committee.
The Company’s Corporate Governance
Charter excludes the CEO from becoming
Chair.
The Chair, John Rich, is responsible for
the proper and efficient functioning of the
Board. The Chair determines the calendar
of Board meetings and the agenda of
the Board’s meetings after consultation
with the CEO. Prior to each meeting, the
Chair prepares a report and ensures
that Directors receive complete and
accurate information and, to the extent
appropriate, a copy of any presentation
to be made at the Board meeting.
The Chair will also make sure that there
is sufficient time and debate for making
decisions.
The Chair is also responsible for ensuring
that new Directors receive a complete
and tailored induction to the Company
prior to
joining the Board and that
existing Directors continually update their
skills and the knowledge and familiarity
with the Company required to fulfil their
role both on the Board and on Board
Committees.
The Chair represents the Board to
shareholders and the public and chairs
Shareholders’ Meetings.
The Chair serves as the interface between
the Board and major shareholders of
the Company on matters of corporate
governance.
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
BOARD OF DIRECTORS
ROLE OF THE SENIOR INDEPENDENT
DIRECTOR
John Grant has been designated as the
Board’s Senior
Independent Director
since 2014.
NON-EXECUTIVE DIRECTOR
INDEPENDENCE
The independence of each of the Non-
Executive Directors
is considered on
appointment.
Senior
The
Independent Director
is
acts as an advisor to the Chair,
responsible for coordinating the annual
evaluation of the Chair and acts as an
intermediary for the other Directors and
shareholders when required. He provides
an alternative point of contact for
shareholders on matters where the usual
channels of communication are deemed
inappropriate.
In 2022, the Senior Independent Director
participated with management
in a
number of meetings with banks and
professional advisers, mostly concerning
the negotiated deferral of payments to
bondholders (the consent solicitation) as
a result of the situation in Ukraine.
ROLE OF THE NON-EXECUTIVE
DIRECTORS
The Non-Executive Directors bring an
external,
independent perspective to
Board discussions. They offer specialist
advice, constructive challenge and
strategic guidance to the Executive
Directors as well as holding them to
account.
MHP benefits from the broad range
of skills and experience that the Non-
from
Executive Directors
different businesses and fields.
provide
124
year,
Committee
the Nominations
Each
and
(“NRC”)
Remuneration
and the Board consider the facts and
to Director
relating
circumstances
independence (and throughout the year,
as appropriate). This process includes
an assessment of whether each Non-
Executive Director
independent of
Management and any business or other
relationships
could materially
interfere with his or her exercise of
objective, unfettered and independent
judgement or his or her ability to act in the
best interests of the shareholders.
that
is
In making its decision, the Board considers
relationships with Management, major
shareholders, associated companies and
other parties with whom the Company
conducts business.
At 31 December 2022, the Board had seven
directors, three of whom are classified by
the Board as independent.
John Grant has served as a Non-Executive
Director of the Company since 2006 and
has been Senior Independent Director
since 2014. He has therefore served on
the Board for more than nine years from
the date of his first appointment.
He has had extensive experience over
many years as an independent non-
executive director of a wide range of public
and private companies covering a variety
of business sectors. He has been Senior
Independent Director and has chaired the
Audit and/or Remuneration Committees
of several major public companies.
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
APPOINTMENT AND RE-ELECTION OF
DIRECTORS
There is a formal and rigorous procedure
for the appointment of new Directors to
the Board.
The process
for new appointments
and
led by
is
the Nominations
Remuneration Committee which makes
a recommendation to the Board. Any
Member of the Board so appointed shall
hold office only until the next following
annual general meeting and shall then be
eligible for re-election.
In line with the UK Corporate Governance
Code, all members of the Board are
subject to annual re-election by a majority
of shareholders at the Annual General
Meeting. Directors may be re-elected an
unlimited number of times.
Shareholders have the power to appoint
or remove any Board Director at a General
Meeting of the Company.
The Board may also revoke or terminate
Board appointments.
The Board values his broad business
perspective and experience and continues
to be satisfied that he possesses the
necessary independence of character
regarded as
and
independent.
judgement
to be
The Board is satisfied that Christakis
Taoushanis and Philip J Wilkinson OBE
fulfil its independence requirements for
Non-Executive Directors.
Dr John Rich was viewed by the Board
as
independent on appointment as
Chair in 2017. Following the Board’s
request for him to perform certain
executive management
functions his
role was designated as Executive Chair
and the Board does not view him as
independent.
ROLE OF THE COMPANY SECRETARY
The Company Secretary ensures that the
Board receives appropriate and timely
information and provides advice and
support to the Chair, the Board, Board
Committees and senior management on
regulatory and governance matters.
All Directors have direct access to the
advice and services of the Company
Secretary. Directors may also obtain
independent advice as required at the
Company’s expense.
THE BOARD OF DIRECTORS IS ULTIMATELY
RESPONSIBLE FOR THE COMPANY’S GOVERNANCE,
RISK MANAGEMENT AND INTERNAL CONTROL
ENVIRONMENT
ANNUAL REPORTAND ACCOUNTS 2022
STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
BOARD OF DIRECTORS
BOARD EFFECTIVENESS
At the end of each year, the Board and
Committees undertake an assessment
of their own effectiveness. In parallel,
the Non-Executive Directors meet to
discuss and evaluate the performance
of the Executive Chair. The results are
considered by the Board at the first Board
meeting of the following year.
ACCESS TO INFORMATION, ADVICE
AND PROFESSIONAL DEVELOPMENT
that Directors,
The Board ensures
especially Non-Executive
Directors,
have access to independent professional
advice at the Company’s expense where
they
it necessary to discharge
their responsibilities as Directors. Board
Committees are also provided with
sufficient resources to undertake their
duties.
judge
All Directors have access to the advice
and services of the Company Secretary,
who is responsible for ensuring that Board
procedures are complied with.
The Chair is responsible for ensuring that
the Directors receive accurate, timely
and clear information. The Company’s
Executive Management team is obliged
to provide such information and Directors
may seek clarification or amplification
where necessary.
The Chair ensures
that Directors
continually update their skills, knowledge
and understanding of the Company’s
activities in order to fulfil their role
effectively both on the Board and on
Board Committees.
OTHER PROFESSIONAL
COMMITMENTS
Every Director is required to allocate
the time and attention required for the
125
proper fulfilment of his or her duties. This
commitment includes limiting the number
of other professional commitments to the
extent required.
DIVERSITY AND INCLUSION
MHP values its distinctive culture and,
its proactive approach
in particular,
to creating senior management and
development opportunities for women.
MHP believes that a pro-active approach
to diversity and
inclusion supports
innovation, continuous improvement and
increases efficiency.
is also mindful of
The Board
the
recommendations contained within the
FTSE Women Leaders Review (diversity)
and Parker (gender) Review.
The FTSE Women Leaders Review is an
independent, business-led
framework
supported by the UK Government, which
sets recommendations for companies to
improve the representation of Women on
Boards and in leadership positions. The
Review builds on the Hampton-Alexander
and Davies Reviews.
Committee
and
The Board and the Nominations and
(“NRC”)
Remuneration
considered diversity
inclusion
matters as part of the regular assessment
of
the
effectiveness
and
(see also the
appointments process
NRC Report on pages 133 to 134).
Board
The Board has determined that it will not
set specific targets with respect to Board
diversity but recognises the benefits
that this brings to its effectiveness. It
is committed to promoting diversity
throughout the Group.
MHP
that equality
is also committed to ensuring
its
is preserved within
remuneration arrangements for all
workforce throughout the business.
its
CONFLICTS OF INTEREST AND RELATED
PARTY TRANSACTIONS
The Board has formal procedures in
place to manage conflicts of interest.
Each Director is required to inform the
Board of any other directorship, office
including executive
or
positions that are taken up outside the
Company during the term of office.
responsibility,
If, in the opinion of the Board, a conflict
of interest exists, the relevant Director
does not participate in discussions and will
abstain from a Board vote on the affected
matter.
The Company’s Conflict of Interest Pol-
icy covers any transactions
involving
conflicts of interest (whether actual or
potential) of MHP’s Management Team
members, including Directors of subsid-
iaries and branches (“key management”):
• MHP’s line managers who have author-
ity to authorise transactions on behalf
of MHP (“line managers”); and
• Other MHP employees who are
authorised to internally approve any
decisions as significant transactions
based on
and
instructions (“responsible employees”)
or who have power to influence such
decisions.
internal policies
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
In July 2020 the Board approved a
Related Party Transactions Policy, which
tightened controls over all related party
transactions.
RISK
internal
effectiveness at
INTERNAL CONTROL AND
MANAGEMENT
is ultimately
The Board of Directors
responsible for the Company’s governance,
control
risk management,
environment and processes and reviews
their
least annually.
Once identified, risks are evaluated to
establish their potential financial or non-
likelihood of
financial
their occurrence. For risks assessed as
significant, a mitigation action plan
is
determined by the relevant operational
business management team.
impact and the
The summary of key risks is regularly
discussed with MHP’s Management Team
and reported at least annually to the Board
through the Audit & Risk Committee.
The Company has an independent risk
and process management department
whose activities are overseen by the
CFO and reported to the Audit & Risk
Committee.
A summary of the Company’s framework
for managing risks, and the Company’s
key business risks together with the risks
related to War can be found on pages 127
to 132 of this Report.
AT THE END OF EACH YEAR, THE BOARD AND
COMMITTEES UNDERTAKE AN ASSESSMENT
OF THEIR OWN EFFECTIVENESS
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
BOARD OF DIRECTORS
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
CONFIDENTIAL INFORMATION
All Board Directors are required to keep
in
information
confidential
their capacity as Directors and are not
permitted to use it for any other purpose
other than for fulfilling their remit to MHP.
received
DIRECTORS’ INTERESTS
The interests of Directors in MHP’s GDRs
at 31 December 2022 are shown in the
table below.
DIRECTOR
NUMBER
OF GDRs HELD
Dr John Rich
25,000
John Grant
17,000
ENGAGEMENT WITH STAKEHOLDERS
The Board recognises the importance
of regular, effective and constructive
communications with its shareholders
and maintains a dedicated
investor
relations department to facilitate this.
Following the outbreak of the conflict
in Ukraine, the Board endeavoured to
regularly engage with the financial and
investment communities to communicate
its effects on the business and to update
them on actions of the management.
More information about these activities
is recorded in the Chair’s Introduction to
Corporate Governance on page 114.
principal
opportunity
The
for
shareholders to engage with the Board
is at the Annual General Meeting. MHP
its financial results on a
announces
is
quarterly basis. This
appropriate
released
information
through
the
regulatory news services and recorded
on the Company’s websites.
results
announcement
Each
is
accompanied by a conference call with
MHP’s finance and
investor relations
team during which investors and analysts
have the opportunity to discuss and
ask questions about MHP’s performance.
Further information can also be found
in the S172 Statement in Growth Pillar 1:
Stakeholder Engagement on pages 59 to
62.
WORKFORCE ENGAGEMENT
MHP works closely with its workforce
who play an active role in the management
of the business
through day-to-day
dialogue and engagement with the senior
management team. See also Growth
Pillar 2: Our People and their Wellbeing.
Clearly, following the outbreak of the
conflict in Ukraine it became vital that
the Company remained in close contact
with, and supported all, of its workforce.
More information is provided in the War
in Ukraine section on pages 4 to 6 of this
Report.
ANNUAL GENERAL MEETING
The next Annual General Meeting
is
scheduled to take place on 19 June 2023
at 10 am at 16-18 Zinas Kanther Street,
Agia Triada, 3035 Limassol, Cyprus. The
2023 AGM notice will be published in due
course.
DIRECTORS AND OFFICERS
LITIGATION STATEMENT
No member of the Board of Directors or
of MHP’s Senior Management has, for at
least five years:
• Any convictions relating to fraudulent
offences;
• Been a senior manager or a member
of the administrative or supervisory
bodies of any company at the time of, or
preceding, any bankruptcy, receivership
or liquidation; or
• Been subject to any official public
incrimination and/or
sanction by
any statutory or regulatory authority
(including any designated professional
body) nor ever been disqualified by
a court from acting as a member of
the administrative, management or
supervisory bodies of a company,
or from acting in the management or
conduct of the affairs of a company.
MHP WORKS CLOSELY WITH ITS WORKFORCE WHO
PLAY AN ACTIVE ROLE IN THE MANAGEMENT OF THE
BUSINESS THROUGH DAY-TO-DAY DIALOGUE AND
ENGAGEMENT WITH THE SENIOR MANAGEMENT TEAM
126
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
AUDIT & RISK COMMITTEE REPORT
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
AUDIT & RISK
COMMITTEE
REPORT
THE AUDIT & RISK COMMITTEE IS RESPONSIBLE FOR THE INTEGRITY OF THE
GROUP’S FINANCIAL REPORTING AND OVERSEES
INTERNAL FINANCIAL
CONTROLS AND RISK MANAGEMENT PROCESSES. THE COMMITTEE ALSO MAKES
RECOMMENDATIONS TO THE BOARD ON THE APPOINTMENT OF EXTERNAL AND
INTERNAL AUDITORS AND OVERSEES THEIR ACTIVITIES.”
ITS
During the year and as at the date of this
Report members of the Committee and
the number of meetings they have
attended have been as follows:
MEMBER
MEETINGS
ATTENDED
JOHN GRANT
(Chair )
CHRISTAKIS
TAOUSHANIS
PHILIP J
WILKINSON OBE
4/4
3/4
4/4
This Report describes how the Audit & Risk
Committee (the “Committee”) carried out
its responsibilities during the year and how
it addressed significant issues relating to
the Financial Statements.
127
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
AUDIT & RISK COMMITTEE REPORT
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
ROLE AND
RESPONSIBILITIES
The Committee’s role and responsibilities
are set out in its terms of reference, which
can be viewed on the Company’s website
at Annex C of the Corporate Governance
Charter.
the
The Committee recognises its responsibility
for protecting
interests of all
stakeholders with respect to the integrity
of financial information published by the
Company and the effectiveness of the
audit.
The Committee’s primary responsibilities
include:
INTERNAL CONTROLS AND RISK
MANAGEMENT
• overseeing the Group’s processes
for monitoring and managing risk
and reporting to the Board on the
effectiveness of those processes,
including the emergence of potential
new risks;
• keeping under review the
effectiveness of the Company’s
internal financial controls and internal
control and risk management systems;
and
in relation to disclosures required
in the Annual Report, reviewing and
approving statements concerning
internal controls and risk management.
•
128
FINANCIAL AND NARRATIVE
REPORTING
• reviewing and monitoring the
integrity of the Company’s Financial
Statements, including its Annual,
Interim and Quarterly Reports, and any
other formal announcements relating
to its financial performance;
• reviewing and reporting to the Board
on significant reporting issues and
judgements they contain;
• ensuring compliance with relevant
accounting standards and consistency
and appropriateness of accounting
policies, and challenging the validity
of assumptions underlying accounting
estimates and judgements, taking into
account the views of the external
auditors;
• reviewing, challenging and reporting to
the Board on the assumptions underlying
the going concern basis and the longer-
term viability assessment, drawing the
Board’s attention to any qualifications as
necessary, and approving statements to
be included in the Annual Report in
relation to going concern and viability;
and
• reviewing the Annual Report and
Accounts to ensure they are fair,
balanced and understandable, that
they provide the information
necessary for shareholders to
assess the Company’s position and
performance, business model and
strategy, and advising the Board
accordingly.
WHISTLEBLOWING AND FRAUD
• reviewing the adequacy and security
of arrangements for employees
and contractors to raise concerns,
in confidence, about possible
wrongdoing in financial reporting or
other matters, in accordance with the
Company’s whistleblowing policy;
• ensuring that arrangements are in
place for the proportionate and
independent investigation of any
matters raised by whistleblowers and
appropriate follow-up action; and
• reviewing the Group’s systems
and controls for ensuring ethical
behaviour, detecting fraud and
preventing bribery.
INTERNAL AUDIT
• approving the appointment and
removal of the head of internal audit;
• approving the remit of the internal
audit function, ensuring it has
adequate resources and appropriate
access to information to enable it
to perform its function effectively
and in accordance with the relevant
professional standards;
• approving the internal audit plan and
receiving periodic reports on the
results of the internal auditor’s work;
• monitoring Management’s responsive-
ness to the internal auditor’s findings
and recommendations; and
• monitoring and reviewing the
effectiveness of the Group’s internal
audit function in the context of the
Company’s overall risk management
system.
EXTERNAL AUDIT
• reviewing and assessing annually
the independence, objectivity and
effectiveness of the external auditors,
making recommendations to the
Board to be put to shareholders for
approval regarding their appointment,
re-appointment and removal,
and approving the terms of their
engagement;
• ensuring that, at least once every ten
years, the audit services contract is
put out to tender and, in respect of
such tender, overseeing the selection
process;
• reviewing policy and practice
regarding the provision of non-audit
services by the external auditor;
• assessing annually the auditor’s
independence and objectivity taking
account of relevant regulatory
requirements and the relationship
between fees for audit and non-audit
services; and
• reviewing and approving the annual
audit plan, reviewing the findings of
the audit with the auditor and
informing the Board of the outcome of
the audit.
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
AUDIT & RISK COMMITTEE REPORT
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
COMPOSITION
The Committee comprises a minimum
of three non-executive directors, each
of whom is deemed by the Board to be
independent. Two members constitute
a quorum. The Chair of the Committee
is John Grant, who has significant and
relevant financial experience in a wide
range of senior non-executive
roles
including chairing audit committees in a
number of major international businesses
(see biography on page 120). Christakis
Taoushanis (see biography on page 120)
has been a member of the Committee
since November 2018. Philip J Wilkinson
OBE (see biography on page 120) joined
the Committee in June 2020.
The Committee Chair invites the Chief
Financial Officer, the Head of Internal Audit
and senior representatives of the external
auditor to attend meetings as appropriate.
The Committee has the right to invite
any other director or employee to attend
meetings as it considers appropriate.
The Committee meets with the external
auditors at least once a year in the
absence of Management.
reports
The Committee Chair
outcome of meetings to the Board.
the
PERFORMANCE
The performance of the Committee is
assessed annually as part of a formal
internal Board evaluation process. The
2022 evaluation, undertaken towards
the end of the 2022 audit, revealed that
Committee members came to meetings
robust
well prepared and offered
challenge
the
auditors and
that meeting agendas
were structured so as to enable the
Committee to cover effectively all the
matters in its terms of reference, in
addition to considering and responding
to
war-related
challenging
circumstances and additional risks that
arose during the year.
to Management and
the
enabling
timetable,
MEETINGS
least four
The Committee meets at
times a year. The scheduling of meetings
is intended to align with the financial
reporting
the
Committee to review the annual and
quarterly Financial Statements, to agree
the audit plan in advance of the full year
audit, and to maintain oversight of the
Group’s internal controls and processes
throughout
the
Committee met four times. Member
attendance at these meetings is shown
in the table on page 122. During the year,
because of war-related travel restrictions,
a number of members and
invitees
necessarily attended certain meetings
by video conference.
the year.
In 2022,
129
KEY ACTIVITIES DURING THE YEAR
In addition to matters relating to the
2022 Financial Statements (see below),
other key activities addressed by the
Committee during the year included:
• considering the financial implications
for the Group of the Russian invasion
of Ukraine in February 2022 and the
associated risks, ensuring appropriate
and accurate communication to the
financial markets throughout the year
and advising the Board accordingly;
• working with Management and the
auditors to mitigate as far as possible
the logistical challenge of producing
the
in
unusually challenging circumstances;
in view of the highly uncertain outlook,
particularly in the months following the
Russian invasion, supporting the Board
in considering how best to preserve
required financial
reports
•
liquidity for the Group while continuing
to supply food within Ukraine and
relationships
positive
maintaining
with bondholders, banks and other
stakeholders; and
• considering
readiness
the Group’s
for increased reporting requirements,
particularly in relation to climate change
and sustainability in the context of the
recommendations and recommended
disclosures of the Task Force on
Climate-related Financial Disclosures
(“TCFD”).
SIGNIFICANT ISSUES RELATING TO
THE 2022 FINANCIAL STATEMENTS
The Committee undertook the following
recurring activities in relation to the 2022
financial statements:
• considered and approved the auditor’s
independence and fee;
• reviewed and agreed the scope of
work to be undertaken by the external
auditor;
• considered
the external auditor’s
review of the interim financial report
and their report on the audit of the full
year results;
• reviewed the annual and quarterly
Financial Statements and Annual
Report to ensure they were fair,
balanced and understandable and
provided the information necessary for
shareholders to assess the Company’s
position and performance, business
model and strategy, and advised the
Board accordingly;
• considered the processes in place for
the valuation of assets, including the
reasonableness and consistency of
assumptions; and
• reviewed the effectiveness of the
risk management and
Company’s
internal controls.
addition,
the Committee
In
gave
particular consideration to significant
issues and risks relating to the 2022
financial
are
statements,
shown on the next page.
which
THE COMMITTEE
COMPRISES A MINIMUM
OF THREE NON-
EXECUTIVE DIRECTORS,
EACH OF WHOM IS
DEEMED BY THE BOARD
TO BE INDEPENDENT
ANNUAL REPORTAND ACCOUNTS 2022
STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
AUDIT & RISK COMMITTEE REPORT
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
SIGNIFICANT ISSUE OR RISK CONSIDERED
HOW THIS WAS ADDRESSED BY THE COMMITTEE
GOING CONCERN
The Russian invasion of Ukraine on 24 February 2022 resulted in serious
disruption throughout Ukraine, with devastating consequences which
continue to the date of this Report. This has created a highly unusual degree
of uncertainty not just in Ukraine but also in global markets, making it more-
than-usually difficult to predict the future. In addition, financial markets are,
at least until the situation stabilises, effectively closed to Ukrainian entities.
This necessitates a particular focus on MHP’s ability to maintain operations
and to continue to meet its liabilities as they fall due.
Throughout 2022, the Committee was kept informed by Management on a range of financial forecasts covering various War
scenarios, the associated risks and the actions taken to mitigate them. The Company’s responses to the crisis enabled it to
restore almost full utilisation of production capacity in the second half of the year, and strong global prices largely offset
significant cost increases, such that adequate profitability has been maintained.
In March 2022, holders of the Group’s US$ 1.4 billion of Eurobonds agreed, through a consent solicitation process, to defer
for a period of 270 days semi-annual coupon payments due in the March-May period, thus helping to preserve liquidity at
a time of extreme uncertainty. Subsequent bond coupons, and the deferred payments, have been paid on their due dates.
Nonetheless, in view of the continuing War situation, there remains some uncertainty over the ability of MHP to continue
to service its debts in full, either because of restrictions that may be imposed by the National Bank of Ukraine or further
adverse War developments.
The Committee is of the opinion that, if necessary, the Company will be able to negotiate acceptable arrangements with
bondholders, banks and other lenders to enable it to continue to meet its liabilities as they fall due at least for the next 12
months from the date of this Report. Accordingly, it accepted Management’s recommendation and recommended to the Board
that the Financial Statements should be prepared on a going concern basis, while acknowledging a material uncertainty. The
Committee also agreed that there had been full and proper disclosure of the going concern matter in the report and accounts.
EY concluded that the going concern assumption was appropriate and that the related disclosure was adequate but, in
view of war-related uncertainties, and as required by ISA 570 (revised), they would add to their report a separate section to
emphasise a material uncertainty relating to an event or condition that may cast significant doubt on the entity’s ability to
continue as a going concern.
REVENUE RECOGNITION
There is a presumed risk of overstatement of revenue due to fraud.
The Committee, having discussed revenue recognition processes with Management and reviewed the tests and analyses
conducted by EY, was satisfied that adequate processes and controls were in place to manage the risk of overstatement
of revenue.
VALUATION OF BIOLOGICAL ASSETS AND AGRICULTURAL PRODUCE
Forecasting models used to determine the fair value of biological assets
and agricultural produce require extensive management judgements and
the use of complex models. There is a risk of misstatement due to incorrect
assumptions or estimates.
The Committee reviewed the assumptions and judgements applied by Management and discussed with EY the adequacy of
internal controls around the valuation process and the tests and analyses they had performed to assess the reasonableness
of input data and the accuracy of calculations.
VALUATION AND IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS
WITH INDEFINITE USEFUL LIFE
The Committee challenged Management’s assumptions and analysis underlying their review of potential impairment in
respect of goodwill and the intangible assets of Perutnina Ptuj, and reviewed the audit work undertaken by EY.
Testing of impairment of goodwill is inherently subjective as calculation of
value in use of the relevant asset or cash generating unit (“CGU”) requires
judgements and assumptions regarding future cashflows and the appropriate
discount rate. As a consequence of the War in Ukraine, there is a heightened
risk that certain facilities in Ukraine may be impaired.
VALUATION OF PROPERTY, PLANT AND EQUIPMENT
The Group applies the revaluation model for property, plant and equipment.
This requires revaluations to be performed with sufficient regularity to
demonstrate that the carrying values do not differ materially from fair values.
The Group uses an independent external appraiser to undertake valuations
when required.
Discount rates used to calculate fair values of assets increased sharply in 2022, largely due to the effect of the War on
market interest rates. Although the cash generating units (CGUs) concerned continued to perform well in 2022, and
management expects them to continue to perform well in 2023 and beyond, the Committee accepted management’s
recommendation that the goodwill carrying value of the Ukraine grain growing CGU be written down by US$ 1.9 million.
The Committee accepted Management’s recommendation that revaluations would be performed for all fixed asset groups
carried at revalued amounts. It reviewed the methods and assumptions adopted by Management and independent appraisal
experts to calculate fair values and ensured that disclosures in the Financial Statements were appropriate.
COMPLIANCE WITH BOND AND BANK COVENANTS
Compliance with covenants included in bond and bank debt agreements is
an important ongoing focus for the Committee. If the Consolidated Leverage
Ratio of Net Debt to LTM-adjusted EBITDA (as defined in the Eurobond
indenture agreements) exceeds 3.0 to 1 the Group is not permitted to make
certain restricted payments or to pay dividends in excess of US$ 30 million.
The Committee noted that the Consolidated Leverage Ratio had weakened from 1.90 to 1 as at 31 December 2021 to 3.22 to
1 as at 31 December 2022. As the Consolidated Leverage Ratio was below 3 to 1 from 30 June 2021 until 31 December 2022,
no restrictions were in effect since publication of the Group’s six-month 2021 results on 9 September 2021. Restrictions will
come into effect again on publication of the full year 2022 results on 11 April 2023.
The Committee confirmed that full and proper disclosure had been made in the Financial Statements in respect of the
covenants.
130
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
AUDIT & RISK COMMITTEE REPORT
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
EXTERNAL AUDIT
INTERNAL AUDIT
APPOINTMENT OF EXTERNAL
AUDITOR AND ASSESSMENT OF
EFFECTIVENESS
Ernst & Young (“EY”) was appointed as
the external auditor of the Company
with effect from the 2020 financial year,
replacing the previous auditor Deloitte,
following a comprehensive tender and
selection process in the fourth quarter
of 2019. The Committee assessed the
effectiveness of EY following completion
of their audit of the 2021 and 2022
accounts and concluded that it was
satisfied with the quality, integrity and
effectiveness of their work.
NON-AUDIT SERVICES
A policy is in place covering engagement
of the external auditor for the supply
of non-audit services to ensure that its
independence and objectivity are not
impaired. This requires the Audit & Risk
Committee to approve all non-audit
services in advance of the service being
fees
provided. Cumulative non-audit
are reviewed periodically at scheduled
meetings of the Committee. A breakdown
of fees earned by the external auditor
for audit and non-audit services can
be found in Note 8 to the Financial
Statements.
It is the Committee’s intention to ensure
future non-audit services are provided
by a number of different firms both to
protect independence of the external
audit and ensure best quality and best
value provision of non-audit services.
AUDITOR INDEPENDENCE AND
OBJECTIVITY
The Committee has a policy and
in place to ensure that
procedures
131
account of the resources available and
required, the experience and expertise of
personnel and the quality of service
delivered. The Committee concluded
is
that
continuing to deliver the level of service
required, notwithstanding the operational
challenges resulting from the War.
Internal Audit
function
the
auditor
independence and objectivity
are never compromised. These include
approval requirements for engagement
of the external auditor for non-audit
services, periodic review of the cost
of non-audit services provided by the
external auditor and requirements for
rotation of the audit partner every seven
years. Each year, the auditor is required
to provide to the Committee evidence
of how it believes its independence and
objectivity have been maintained. Based
on these requirements and procedures,
the Committee remains confident that
independence and objectivity
auditor
have been and will be maintained.
The Company has an in-house Internal
Audit function whose primary purpose
is to provide independent assurance to
Management and the Committee, and
hence the Board, on the Company’s risk
management and control environment.
includes all
Internal Audit coverage
the Company’s operations, resources,
services and responsibilities to other
bodies, with no department or business
unit of the Company being exempt from
review.
Internal Audit responsibilities include:
• examining and evaluating the adequacy
of the Company’s system of internal
control;
• assessing the reliability and accuracy of
information provided to stakeholders;
• assessing compliance with statutory
and regulatory requirements;
• assessing compliance with Company
policies and procedures;
• ensuring that the Company’s assets
for and
are properly accounted
safeguarded;
• assessing
the
efficiency
and
effectiveness with which resources
are employed;
liaising with external auditors in audit
planning and assisting the external
auditors as required; and
investigating any instances of fraud,
irregularity or corruption.
•
•
The Internal Audit programme is approved
annually by the Committee and the Head
of
reports findings
periodically to the Committee.
Internal Audit
least annually,
At
the Committee
considers the role and effectiveness of
taking
the
Internal Audit
function,
THE COMMITTEE
ASSESSED THE
EFFECTIVENESS
OF EY FOLLOWING
COMPLETION OF THEIR
AUDIT OF THE 2021 AND
2022 ACCOUNTS
THE INTERNAL AUDIT
PROGRAMME IS
APPROVED ANNUALLY BY
THE COMMITTEE
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
AUDIT & RISK COMMITTEE REPORT
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
RISK MANAGEMENT AND
INTERNAL CONTROL
Risks
and Uncertainties
Principal
section on pages 50 to 53 of this Annual
Report.
In spite of the disruption and dislocation
of personnel, no incidents of significant
control weaknesses or failures were
identified at any time during the year.
JOHN GRANT Chair, Audit & Risk
Committee
11 April 2023
FOLLOWING THE
OPERATIONAL
DISRUPTION THAT
RESULTED FROM THE
RUSSIAN INVASION OF
UKRAINE IN FEBRUARY
2022, THERE WAS A
NECESSARY SHIFT IN
EMPHASIS TO PRIORITISE
MANAGEMENT OF WAR-
RELATED RISKS
monitors
Committee
the
The
effectiveness of the Company’s risk
management and control systems through
regular updates
from Management,
reviews of the key findings of the
external and internal auditors and an
annual review of the risk management
process and risk matrix. Results are
reported regularly to the Board, which
has overall
risk
management.
responsibility
for
The annual review covers key risks that
could potentially impact the achievement
of the Group’s strategic and financial
risks and changes
objectives. New
in existing risks are
identified on a
continuous basis. A risk scoring system
is used to help quantify both the
probability and potential impact of each
major risk after the effect of mitigating
actions, to assess residual risks against
the Company’s risk appetite and to
risk management
prioritise
actions.
approach
identification and assessment
to the
of risks, and the response to risks, is
based on best business practices and
international COSO Enterprise Risk
Management standards.
further
The Company’s
Following the operational disruption that
resulted from the Russian invasion of
Ukraine in February 2022, there was a
necessary shift in emphasis to prioritise
management of war-related risks. These
included workforce safety, protection
resolving
of Company
supply chain challenges affecting both
the delivery of essential supplies and
the distribution of production. For
the
further
information, please see
facilities and
132
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
NOMINATIONS AND REMUNERATION COMMITTEE REPORT
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
NOMINATIONS AND
REMUNERATION
COMMITTEE REPORT
THIS REPORT DESCRIBES HOW THE NOMINATIONS AND REMUNERATION
COMMITTEE CARRIED OUT
ITS RESPONSIBILITIES DURING THE YEAR. THE
NOMINATIONS AND REMUNERATION COMMITTEE (“NRC” OR “THE COMMITTEE”)
IS RESPONSIBLE FOR MAKING RECOMMENDATIONS TO THE BOARD ON THE
APPOINTMENT OF DIRECTORS AND FOR DETERMINING THE REMUNERATION
OF EXECUTIVE DIRECTORS.”
ROLE AND RESPONSIBILITIES
The Committee’s role and responsibilities
are set out in its Terms of Reference, which
can be viewed on the Company’s website
in the Corporate Governance Charter
(Annex E). Further details regarding the
Committee’s composition, areas of focus
in 2022 and diversity approach are set out
next page.
MEMBER
PHILIP J
WILKINSON OBE
(Chair)
DR JOHN RICH
JOHN GRANT
133
NO OF MEETINGS
4/4
4/4
4/4
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
NOMINATIONS AND REMUNERATION COMMITTEE REPORT
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
• Following
•
• A
by
the
consideration
Committee during the year, the Group
has drafted a Diversity Statement
which is due to be approved by the
Board in 2023. This Statement sets out
our commitment to creating an equal
and inclusive working environment for
people of all backgrounds.
In 2021, I reported on progress with
the compensation review. MHP had
intended to implement a new “Pay
Philosophy” for senior management
and the Group had begun exploring
a Senior Management
Incentive
Programme linked to the Group’s five-
year strategy. Progress has of course
been slowed by the conflict, and the
review will be further developed during
2023 and presented to the Committee
for approval.
further
the
compensation exercise was a review
of all salary grades, producing a
new schedule for all Segments and
departments. This was due to be
completed and presented
the
Committee during 2022. MHP was
implementing the
on the verge of
outcome of the first of these reviews
in the Production Department when
component
to
of
the invasion took place. Since then,
for obvious reasons, the work has been
put on hold and will be resurrected
when normality returns.
• The Committee has been kept
informed of, and supports, initiatives
to realign technical expertise and
to
senior management structures
better underpin planned strategic
developments. Progress in identifying
key experts and managerial
roles
within the Group was made during
2022. Specifically, experts from the
Innovation
previously
centralised
into
Department were
the Segment verticals, becoming
innovation business partners. This
integration is expected to streamline
innovation
the
Group’s ongoing food and agrotech
transformation.
• This exempts
from military
them
duties as they are key workers in the
food supply chain, providing essential
nutrition for the People of Ukraine.
absorbed
expedite
and
PHILIP J
WILKINSON
OBE
Chair, Nominations and
Remuneration Committee
11 April 2023
COMPOSITION
The Committee comprises a minimum
Independent Non-Executive
of three
Directors. The Chair of the Company may
also serve as a member. The Chair of the
Committee is Philip J Wilkinson OBE, an
Independent Non-Executive Director.
The Company Secretary acts as secretary
to the Committee. On occasion, the
Committee invites the Chief Executive,
the Chief Financial Officer or Deputy
CEO, People to attend discussions where
their input is required.
The Committee meets not less than twice
a year. During 2022, the Committee met
four times. Members’ attendance is shown
in the table above. One meeting was held
by video conference as a consequence of
the War.
AREAS OF FOCUS IN 2022
The focus of the Committee was impacted
by the War. In practice this means that
over and above the corporate governance
points a standard NRC reports on, the
Committee has been kept informed of,
and supports, certain workforce-related
initiatives in response to the conflict.
an
search
The principal matters considered by the
Committee in 2022 are set out below.
• The
additional
for
Independent Non-Executive Director
was initially put on hold following the
outbreak of War. Nevertheless, the
recruitment process continued and
Mr. Oscar Chemerinski was appointed
Independent Non-Executive
as an
Director at the EGM held on 7 March
2023. Further information is given in the
Chair ’s Statement on page 15 and more
detail can be found online.
THE DIRECTORS’ REMUNERATION POLICY WAS
ADOPTED IN DECEMBER 2021 AND CAN BE FOUND HERE:
MHP.UA/EN/MHP-SE/CODES-AND-POLICIES
134
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
SUSTAINABILITY AND INTERNATIONAL AFFAIRS COMMITTEE REPORT
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
SUSTAINABILITY AND
INTERNATIONAL AFFAIRS
COMMITTEE REPORT
INTERNATIONAL
IS
THE
RESPONSIBLE FOR SETTING THE STRATEGY AND OBJECTIVES OF THE
COMPANY’S SUSTAINABILITY AND INTERNATIONAL AFFAIRS EFFORTS.”
SUSTAINABILITY AND AFFAIRS COMMITTEE
MEMBER
NO OF MEETINGS
PHILIP J WILKINSON OBE
(Chair)
4/4
DR JOHN RICH
4/4
the
ROLES AND RESPONSIBILITIES
The role and responsibilities of the
International Affairs
Sustainability and
Committee (“SI” or “the Committee”,
International
formerly known as
Government Relations and Public Afffairs
Committee) are set out in its Terms of
Reference which can be viewed on the
in the Corporate
Company’s website
(Annex F). This
Governance Charter
Report describes how the Committee
carried out its responsibilities during the
year and how it addressed political and
industry concerns.
responsible
The Committee
for
is
developing the Company’s approach to
sustainability and international affairs and
reflecting the changing business and
135
political environment in which the Company
operates. This includes reviewing and
providing input to Management on the
invasion,
Company’s response to the
and
responsible business matters,
anticipating and preparing the reaction
of the Company to any other potential
crisis management situations stemming
from political and operational issues that
may arise.
COMPOSITION
least
The Committee comprises at
two Board members. The Chair of the
Committee is Philip J Wilkinson OBE. Mr.
Wilkinson has significant and relevant
experience in international agricultural
chaired
politics,
agricultural sector boards and holds
historically
has
non-executive
several
directorships
and advisory positions in global agri-
businesses (see biography on page 120).
The other member of the Committee is Dr
John Rich (see biography on page 120).
The Committee has the right to invite
any other director or employee to attend
meetings as it considers appropriate.
Roberto Banfi has advised the Committee
on a consultancy basis since he formally
stood down from the Board and from this
Committee on 9 February 2021. At the end of
2022, Mr. Banfi retired from his consultancy
activities. I would like to thank Mr. Banfi for
his contribution, his wise counsel and for
sharing his wealth of industry knowledge. We
wish him and his family well in his retirement.
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
SUSTAINABILITY AND INTERNATIONAL AFFAIRS COMMITTEE REPORT
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
MEETINGS IN THE YEAR
The Committee meets at least twice a year.
A meeting may be convened at any time by
the Chair of the Committee, the Chair of
the Board or the Chief Executive Officer
to consider any matters falling within the
Committee’s Terms of Reference. Four
meetings were held during the year, two
of which were held by video conference
due to the impact of the War.
COMMITTEE PROGRESS AND
ACHIEVEMENTS TO DATE
INTERNATIONAL GOVERNMENT
RELATIONS
In what can only be described as the most
difficult of years arising from the full-scale
invasion of Ukraine by Russian forces in
February 2022, we have been able to draw
some comfort from the depth and breadth
of the network of contacts and preparatory
work undertaken by the Company both in
advance of and since the invasion.
The Group has engaged with international
industry experts and office holders to
the professionalism of
demonstrate
our business in terms of supply chain
management, stockmanship disciplines,
and animal welfare practices. These
efforts have paid dividends. In the EU,
complex discussions with officials enabled
the Company to transit product from
Ukraine via the EU to EU ports for onward
shipment to third countries, which would
not have been possible under normal
circumstances. Black Sea ports have been
closed for much of the year due to Russian
blockades. However, product for export
has been granted passage via the EU
provided it is in sealed containers which
are inspected for seal integrity at the point
of entry to and departure from the bloc.
This has enabled exports to continue,
albeit in lower volumes and at a higher cost.
136
THE GROUP HAS ENGAGED WITH INTERNATIONAL
INDUSTRY EXPERTS TO DEMONSTRATE THE
PROFESSIONALISM OF OUR BUSINESS IN TERMS
OF SUPPLY CHAIN MANAGEMENT, STOCKMANSHIP
DISCIPLINES, AND ANIMAL WELFARE PRACTICES
and trials are currently taking place. To
this end the SI’s view is that MHP should
seriously consider the implications of
this initiative and contribute its views
to the industry debate.
PUBLIC AFFAIRS
I referred in last year’s report to one of
global society’s largest challenges, that
of carbon emissions. I am pleased to
report that by working with our partner
Alltech E-CO₂ albeit in the most difficult
of circumstances, MHP is now awaiting
Carbon Trust verification. This follows the
submission of information on the Group’s
carbon footprint which is the outcome
of over a year’s diligent work by those
involved. The team anticipates questions
of clarification from the Carbon Trust but
is optimistic of a positive outcome in the
first half of 2023.
PHILIP J
WILKINSON
OBE
Chair, Sustainability
and International
Affairs Committee
11 April 2023
the Middle East,
In
international
government relations efforts have also
facilitated concessions being made on
imported products normally exported
directly from Ukrainian ports (currently
blockaded).
been
Products
despatched from EU ports to the Middle
East provided product integrity has been
maintained during transit through the EU.
have
As touched upon in my 2021 report, Free
Trade status was granted, meaning that no
quotas and no tariffs are levied on products
exported from Ukraine to the EU and the
UK. This will be reviewed by both the EU
and UK Governments in July 2023. If there
are no tangible signs of the War ending
soon, the Group will explore the possibility
of this concession continuing beyond
July 2023.
into 2023,
Last year, I noted the high levels of Avian
Influenza (“AI”) across Europe towards the
end of 2021. In 2022, we experienced the
highest incidence on record and at the
time of writing this trend looks set to
impacting global
continue
supply chains. As I reported in 2021, our
procedures for managing infected premises
were approved by both the EU and UK
veterinary authorities enabling trade to
continue as normal from unaffected zones.
Given the prevalence of AI, the industry
globally is discussing the possibility of
vaccination against this specific virus
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
MANAGEMENT REPORT
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
MANAGEMENT
REPORT
INFORMATION WITHIN THIS REPORT
THE
IS ALIGNED WITH THE REPORTING
REQUIREMENTS OF THE UK COMPANIES ACT 2006, THE UK DISCLOSURE AND
TRANSPARENCY RULES, THE UK LISTING RULES, AND CYPRUS COMPANIES LAW
(CAP 113) (PRINCIPAL ACTIVITIES AND REVIEW OF THE BUSINESS).
PRINCIPAL ACTIVITIES AND REVIEW
OF THE BUSINESS
MHP Group is a leading food and agrotech
company that has, since the outbreak of
the conflict in Ukraine, played a leading
role in supporting the Ukrainian population
with access to food during the crisis.
MHP Ukraine and Perutnina Ptuj in the
Balkans operate vertically
integrated
business models, owning and operating
each of the key stages of chicken
production processes. The business
models support the circular economy
with
the processing of biological
production waste into clean energy and
organic fertiliser. Detailed information on
the Group’s four business segments and
the business model is set out in the
Segment Overview and Our Business
Model sections on pages 20 and 28
respectively.
businesses as effectively as possible
and to support the population with
access to food and nutrition. MHP’s
remain
long-term strategic objectives
unchanged and are set out in the Our
Purpose and Strategy section on page 11.
Detailed
information on the Group’s
performance during the year can be found
in the Key Performance Indicators section
and the Financial and Operational Review
on pages 33 and 38 respectively.
MHP’S PURPOSE
The Company’s purpose is to provide its
customers with high quality, sustainable
proteins, food products and culinary
solutions that are safe and responsibly
produced. For further information about
the Group’s purpose and vision, see the
MHP at a Glance and Our Purpose and
Strategy sections on pages 10 and 11.
During 2022, the principal activities of
the Group remained unchanged year-
they were clearly
on-year, although
materially affected by the War in Ukraine
that commenced in February 2022. Until
the conflict ceases, MHP’s objectives
in Ukraine are to continue operating its
FUTURE DEVELOPMENTS
The outlook is difficult to determine due to
uncertainty over the duration and impact
of the War. The Group has endeavoured
to continue operations as usual yet any
stability the Group attempts to maintain is
fragile due to factors outside our control.
137
DURING 2022, THE PRINCIPAL ACTIVITIES OF THE
GROUP REMAINED UNCHANGED YEAR-ON-YEAR,
ALTHOUGH THEY WERE CLEARLY MATERIALLY
AFFECTED BY THE WAR IN UKRAINE THAT COMMENCED
IN FEBRUARY 2022
Within that context, the Directors are
cautiously optimistic that, following the
conclusion of the conflict, there will be
opportunities for growth at MHP Ukraine
and Perutnina Ptuj, both internationally
and domestically.
SUBSEQUENT EVENTS
As a result of the ongoing conflict, MHP
has experienced significant disruption and
operational issues in its Ukraine-based
businesses which continued after the
year-end and will continue until the
conflict ends. These matters
are
described in detail in the War in Ukraine
section on page 4.
All subsequent events are disclosed in the
Financial and Operational Review section
on page 38 and in Note 40 on page 216 of
this Report.
DIVIDEND POLICY
In March 2013, the Board of Directors
approved the adoption of a dividend
policy that maintains a balance between
the need to invest in further development
and the right of shareholders to share
the net profits of the Company.
Taking into account the current risks
and uncertainties following the Russian
invasion of Ukraine, and the resulting
need to preserve liquidity to support the
Company’s ongoing business operations
and to help sustain the population of the
country, no dividend is likely to be paid
while the conflict continues.
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
MANAGEMENT REPORT
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
significant
investment
RESEARCH AND DEVELOPMENT
Sustaining
in
R&D and innovation is fundamental to
the Group’s long-term growth strategy
including its transformation to a culinary
company and the development of a
culinary ecosystem to create customer
value. At the same time, it underpins
the development of our responsible
approach to society, our workforce, the
environment, and animal welfare.
to
During the year, despite the ongoing
conflict, MHP continued
invest,
where possible, in R&D, driven by our
innovation business partners who are now
integrated across all business operations.
Our focus on innovation spans three
broad categories: product development;
services; and business models and
partnerships.
PRODUCT
DEVELOPMENT
BUSINESS
MODELS AND
PARTNERSHIPS
SERVICES
BUSINESS REVIEW AND RISKS
A review of the Group’s performance
and the key risks and uncertainties which
face the business, as well as details on
likely developments, can be found in the
Financial and Operational Review on page
38, the Principal Risks and Uncertainties
section on page 50, and the Audit & Risk
Committee Report on page 127.
138
Group
initiated
CORPORATE RESPONSIBILITY
REPORTING AND ESG DIALOGUE
corporate
The
responsibility reporting in 2015 and issued
a separate Corporate Responsibility
Report (Non-Financial Report) annually
until 2021. This Report is MHP’s first
integrated report and includes information
for MHP’s material stakeholders; it applies
the latest applicable Global Reporting
Initiative’s (“GRI”) reporting framework
(Core Compliance).
responded
MHP has historically participated
in
a number of ESG research exercises
conducted by specialist investor research
agencies and
to
readily
questions and information requests from
shareholders concerning
this aspect
of its activities. Whilst the War is being
fought, the ESG research agencies do not
require these exercises to be completed.
Once the War is concluded, the Group will
resume this level of dialogue.
FINANCIAL REPORTING PROCESS
MHP has a comprehensive financial
review cycle which includes a detailed
annual budgeting process. The annual
budget and the business plan, upon
which the budget is based, are reviewed
and approved by the Board of Directors.
Major commercial and financial risks are
assessed as part of the business planning
is a comprehensive
process. There
system of financial
reporting, with
monthly performance reports and regular
forecast updates presented to the Board
of Directors.
and
policies
At a Group level, MHP has in place common
accounting
procedures
and closing.
reporting
on financial
Management monitors the publication of
new reporting standards and works closely
with the external auditors in evaluating in
advance the potential impact of changes
in these standards.
Director was appointed post year end,
see the Chair’s Statement on page 15.
BRANCHES
MHP does not have any branches.
SHARE CAPITAL
The authorised share capital as of 31
December 2022 and 2021 was EUR 221,540
thousand represented by 110,770,000
shares with par value of EUR 2 each.
As at 31 December 2022, the Group had a
direct holding of 3,731,792 treasury shares
represented by an equal number of GDRs.
All shares have equal voting rights and
rights to receive dividends, which are
payable at the discretion of the Company.
There was no change in share capital
during the year ended 31 December 2022
(Note 26, page 200).
DIRECTORS AND THEIR INTERESTS
The Directors that served during the year
ended 31 December 2022 appear on page
122. Details of Directors’ Interests in the
Company’s GDRs are found on page 126 of
the Corporate Governance report. Note
1 to the Financial Statements on page
155 reports the details of the controlling
interest in the Company’s ordinary shares.
responsible
POWERS OF DIRECTORS
The Directors are
for
managing the business of the Company
and may exercise all the powers of the
Company, subject to the provisions of the
Company’s Articles of Association. Powers
relating to the issuing of shares are also
included in the Articles of Association.
CHANGES TO THE BOARD
There were no changes to the Board of
Directors in 2022. A new Non-Executive
management
administrative
accompanying
COMPENSATION OF KEY
MANAGEMENT PERSONNEL
the Group’s
Total compensation of
personnel,
key
in selling, general
included primarily
in
expenses
and
consolidated
the
statements of profit and loss and other
comprehensive
income, amounted to
US$ 14.0 million and US$ 16.9 million
for the years ended 31 December 2022
and 2021 respectively. Compensation
of key management personnel consists
of contractual salary and performance
bonuses.
totalled
Key management personnel
20 and 22 individuals at 31 December
2022 and 2021 respectively, including 3
independent non-executive directors at
31 December 2022 and 2021 respectively.
table below shows
The
remuneration of Board members.
the
total
DIRECTOR
Executive
Chair
NEDs
Executive
Directors
2022
US$ 000
2021
US$ 000
571
696
597
6,164
696
6,497
SHARE OPTIONS
At the date of this Report, neither the
Company nor PJSC MHP has a share
option plan and no share options have
been granted to Directors, members
of MHP’s Senior Management or
employees.
ANNUAL REPORTAND ACCOUNTS 2022
STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
MANAGEMENT REPORT
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
AUDITOR APPOINTMENTS
Ernst & Young was appointed as the auditor
of the Company with effect from the 2020
financial year, replacing the previous auditor
Deloitte, following a comprehensive tender
and selection process in the fourth quarter
of 2019. The auditor position is regularly
reviewed by the Audit & Risk Committee.
AUDITORS’ REMUNERATION AND
INDEPENDENCE
Remuneration to the auditors amounted
to US$ 904,000 for the year ended
31 December 2022 (2021: US$ 1,018,000),
including both audit and non-audit
services. Statutory audit fees amounted
to US$ 866,000 for the year ended
31 December 2022 (2021: US$ 855,000);
fees for tax advisory services US$ 9,000
(2021: US$ 86,000); and fees for other
non-audit services US$ 30,000 for the
year ended 31 December 2022 (2021:
US$ 77,000).
The Company has rules and processes
in place to ensure the
independence
of the auditors, including non-audit fee
limitations set by the Board, and prior
approvals by the Audit & Risk Committee
to ensure any services provided are
compatible with the independence of the
auditors.
INTERNAL AUDIT
The Company maintains an internal audit
function. The Head of Internal Audit has
the right of access to the Audit & Risk
the Chair. Further
Committee
details can be found in the Audit & Risk
Committee Report on page 127.
and
GOING CONCERN
invasion of Ukraine on
The Russian
in material
24 February 2022 resulted
for the Company, many
uncertainties
of which continue as of the date of this
Report. Having reviewed updated financial
forecasts, the Directors agreed with the
recommendation of the Audit & Risk
Committee which accepted Management’s
recommendation that, at the time of the
approval of the financial statements, it
was appropriate
the going
concern basis in preparing the financial
statements of the Group.
to adopt
DISCLOSURE OF INFORMATION TO
AUDITORS
is aware, all
As far as each Director
information relevant to the audit of the
Group’s consolidated financial statements
has been supplied to the Group’s auditors.
Each Director has taken all steps that
they ought to have taken in their duty as
Director to make themselves aware of any
relevant audit information and to establish
that the Group’s auditors are aware of
that information.
POLITICAL DONATIONS
The Group did not make any political
donations
political
incur
or
expenditure during the year.
any
ADDITIONAL DISCLOSURES
According to the terms of the Senior Notes,
the Company may be required to offer to
repurchase the Senior Notes from holders
if a change in control occurs as a result of
a takeover bid. At the date of this Report,
no takeover bids have been made for the
Company’s shares.
There are no agreements between the
Company and its Directors or employees
providing for compensation on loss of
office or employment (whether through
resignation, purported
redundancy or
otherwise) that would occur because of a
takeover bid.
139
information that
OTHER RELEVANT INFORMATION
WITHIN THIS REPORT
is relevant to
Other
the Management Report, and which is
incorporated by reference into this Report,
can be located on the pages recorded in
the table below.
SECTION
PAGE
NUMBER
THE COMPANY HAS
RULES AND PROCESSES
IN PLACE TO ENSURE THE
INDEPENDENCE OF THE
AUDITORS
Segment Overview
Purpose and Strategy
Our Business Model
Corporate Governance
Report
KPIs
Financial and
Operational Review
Principal Risks and
Uncertainties
Measures of Financial
Performance
20
11
28
116
33
38
50
46
The Company has chosen, in accordance
the UK
with Section 414 C(11) of
Companies Act 2006, and as noted in this
Management Report, to include certain
matters in its Strategic Report that would
otherwise be required to be disclosed in
this Management Report. A non-financial
information statement in line with Section
414CA and 414CB of the UK Companies
Act 2006 can be found on page 111.
ANNUAL REPORTAND ACCOUNTS 2022 01
02
I
W
E
V
E
R
C
G
E
T
A
R
T
S
I
I
W
E
V
E
R
S
S
E
N
S
U
B
I
03
E
C
N
A
N
R
E
V
O
G
FINANCIAL
STATEMENTS
142 Statement of the Board of Directors
143 Independent Auditor’s Review
149 Consolidated Financial Statements
155 Notes to Financial Statements
05
I
N
O
T
A
M
R
O
F
N
I
R
E
D
L
O
H
E
R
A
H
S
STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
CONTENTS
STATEMENT OF THE BOARD OF DIRECTORS’ RESPONSIBILITIES
FOR THE PREPARATION AND APPROVAL OF THE CONSOLIDATED
FINANCIAL STATEMENTS AS OF AND FOR THE YEAR
ENDED 31 DECEMBER 2022 .............................................................................................................142
INDEPENDENT AUDITOR’S REPORT ............................................................................................ 143
CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR ENDED 31 December 2022
Consolidated statement of profit or loss and other comprehensive income .....................149
Consolidated statement of financial position ............................................................................. 151
Consolidated statement of changes in equity ........................................................................... 152
Consolidated statement of cash flows ......................................................................................... 153
Notes to the Consolidated financial statements ....................................................................... 155
1. Corporate information ............................................................................................................... 155
2. Summary of significant accounting policies .........................................................................156
3. Changes in the group structure ...............................................................................................174
4. Critical accounting judgments and key sources of estimation uncertainty .................174
5. Segment information ...................................................................................................................177
6. Revenue ......................................................................................................................................... 180
7. Cost of sales ................................................................................................................................. 181
8. Selling, general and administrative expenses ....................................................................... 181
9. Other operating income ............................................................................................................ 182
10. Other operating expenses ........................................................................................................ 182
11. Deferred income ......................................................................................................................... 182
12. Finance costs ............................................................................................................................... 182
13. Income tax .................................................................................................................................... 183
14. Property, plant and equipment ............................................................................................... 185
15. Right-of-use assets .....................................................................................................................189
16. Intangible assets ...........................................................................................................................189
17. Goodwill ......................................................................................................................................... 190
18. Non-current financial assets .................................................................................................... 191
19. Biological assets ...........................................................................................................................192
20. Inventories .....................................................................................................................................195
21. Agricultural produce ...................................................................................................................195
22. Taxes recoverable and prepaid ................................................................................................195
23. Trade accounts receivable ........................................................................................................196
24. Other current financial assets ..................................................................................................199
25. Cash and cash equivalents........................................................................................................199
26. Shareholders’ equity ................................................................................................................. 200
27. Non-controlling interests ......................................................................................................... 200
28. Bank borrowings ..........................................................................................................................202
29. Bonds issued ................................................................................................................................203
30. Lease liabilities.............................................................................................................................206
31. Other current liabilities ..............................................................................................................206
32. Related party balances and transactions .............................................................................206
33. Operating environment .............................................................................................................208
34. Contingencies and contractual commitments ....................................................................209
35. Dividends ...................................................................................................................................... 210
36. Fair value of financial instruments .......................................................................................... 210
37. Risk management policies .........................................................................................................212
38. Pensions and retirement plans ................................................................................................ 215
39. Earnings per share .......................................................................................................................216
40. Subsequent events ......................................................................................................................216
41. Authorization of the consolidated financial statements ...................................................216
141
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
STATEMENT OF THE BOARD OF DIRECTORS’ RESPONSIBILITIES FOR
THE PREPARATION AND APPROVAL OF THE CONSOLIDATED FINANCIAL
STATEMENTS AS OF AND FOR THE YEAR ENDED 31 DECEMBER 2022
On behalf of the Board:
The Board of Directors is responsible for the preparation
of the consolidated financial statements that give a true
and fair view of the consolidated financial position of MHP
SE (the “Company”) and its subsidiaries (the “Group”) as of
31 December 2022 and of the consolidated statements of
profit or loss and other comprehensive income, changes
in equity and cash flows for the year then ended, and
notes to the consolidated financial statements, including
a summary of significant accounting policies.
In preparing the consolidated financial statements, the
Board of Directors is responsible for:
• properly selecting and consistently applying account-
ing policies;
• presenting information, including accounting policies,
in a manner that provides relevant, reliable, comparable
and understandable information;
• providing additional disclosures when compliance with
the specific requirements in the International Financial
Reporting Standards (“IFRS”) are insufficient to enable
users to understand the impact of particular transac-
tions, other events and conditions on the Group’s con-
solidated financial position and financial performance;
• making an assessment of the Group’s ability to contin-
ue as a going concern.
The Board of Directors, within its competencies, is also
responsible for:
• designing, implementing and maintaining an effective
and sound system of internal controls over financial re-
porting, throughout the Group;
• maintaining adequate accounting records that are suf-
ficient to show and explain the Group’s transactions
and disclose with reasonable accuracy at any time the
consolidated financial position of the Group, and which
enable them to ensure that the consolidated financial
statements of the Group comply with IFRS;
• maintaining statutory accounting records in compli-
ance with local legislation and accounting standards in
the respective jurisdictions;
• taking such steps as are reasonably available to them to
safeguard the assets of the Group; and
• preventing and detecting fraud and other irregularities.
The consolidated financial statements of the Group as of
and for the year ended 31 December 2022 were authorized
for issue by the Board of Directors on 11 April 2023.
BOARD OF DIRECTORS' RESPONSIBILITY STATEMENT
In accordance with DTR4.1 on Annual Financial Reporting,
providing for the disclosure and transparency requirements
for issuers whose transferable securities are admitted
to trading on a UK Recognised Investment Exchange,
we, the members of the Board of Directors, responsible
for the preparation of the annual consolidated financial
statements of MHP SE for year ended 31 December 2022,
hereby declare that to the best of our knowledge:
a) the consolidated financial statements, prepared in
International Financial Reporting
accordance with
Standards (IFRS) adopted by the EU, give a true and
fair view of the assets, liabilities, financial position and
profit of the Company and the undertakings included in
the consolidation taken as a whole; and
b) the Management Report includes a fair review of the
development and performance of the business and the
position of the Company, and the undertakings included
in the consolidation taken as a whole, together with a
description of the principal risks and uncertainties that
they face.
142
Yuriy Kosyuk
Director
John Grant
Director
Viktoriia Kapeliushna
Director
John Clifford Rich
Director
Philip J Wilkinson
Director
Andriy Bulakh
Director
Christakis Taoushianis
Director
Oscar Chemerinski
Director
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
SHAREHOLDER
INFORMATION
INDEPENDENT AUDITOR’S REPORT
Ernst & Young Cyprus Ltd
Jean Nouvel Tower
6 Stasinou Avenue
1060 Nicosia
P.O. Box 21656
1511 Nicosia, Cyprus
Tel: +357 22209999
Fax: +357 22209998
ey.com
TO THE MEMBERS OF MHP SE
REPORT ON THE AUDIT
OF THE CONSOLIDATED
FINANCIAL STATEMENTS
Opinion
We have audited the consolidated financial statements
of MHP SE (the “Company”), and its subsidiaries (the
“Group”), which comprise the consolidated statement
of financial position as at 31 December 2022, and the
consolidated statements of profit or loss and other
comprehensive income, changes in equity and cash flows
for the year then ended, and notes to the consolidated
financial statements, including a summary of significant
accounting policies.
In our opinion,
the accompanying consolidated
financial statements give a true and fair view of the
consolidated financial position of the Group as at
31 December 2022, and of its consolidated financial
performance and its consolidated cash flows for the year
then ended in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European
Union and the requirements of the Cyprus Companies
Law, Cap. 113.
Basis for Opinion
We conducted our audit in accordance with International
Standards on Auditing (ISAs). Our responsibilities under
those standards are further described in the Auditor’s
Responsibilities for the Audit of the Consolidated
Financial Statements section of our report. We remained
independent of the Group throughout the period of our
appointment in accordance with the International Ethics
Standards Board for Accountants’ International Code of
Ethics for Professional Accountants (including International
Independence Standards) (IESBA Code) together with the
ethical requirements that are relevant to our audit of the
consolidated financial statements in Cyprus, and we have
fulfilled our other ethical responsibilities in accordance
with these requirements and the IESBA Code. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
Material Uncertainty Related to Going Concern
We draw attention to Note 2 to the consolidated financial
statements, which indicates that the Group's operations
are negatively affected by the Russian federation`s
military invasion of Ukraine, with the magnitude of further
developments or the timing of their cessation being uncertain.
The Group incurred a net loss of USD 230,937 thousand during
the year ended 31 December 2022. These conditions, along
with other matters as set forth in Notes 2 and 33 indicate the
existence of a material uncertainty that may cast significant
doubt on the Group's ability to continue as a going concern.
Our opinion is not modified in respect of this matter.
Key audit matters incorporating the most significant
risks of material misstatements, including assessed
risk of material misstatements due to fraud
Key audit matters are those matters that, in our professional
judgment, were of most significance in our audit of the
consolidated financial statements of the current period. In
addition to the matter described in the Material Uncertainty
Related to Going Concern section of our report, we have
determined the matters described below to be the key
audit matters to be communicated in our report. These
matters were addressed in the context of our audit of
the consolidated financial statements as a whole, and
in forming our opinion thereon, and we do not provide a
separate opinion on these matters. For each matter below,
our description of how our audit addressed the matter is
provided in that context.
We have fulfilled the responsibilities described in the
Auditor’s responsibilities for the audit of the consolidated
financial statements section of our report, including in
relation to these matters. Accordingly, our audit included
the performance of procedures designed to respond to
our assessment of the risks of material misstatement of
the consolidated financial statements. The results of our
audit procedures, including the procedures performed
to address the matters below, provide the basis for our
audit opinion on the accompanying consolidated financial
statements.
143
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
SHAREHOLDER
INFORMATION
INDEPENDENT AUDITOR’S REPORT
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
REVENUE RECOGNITION
The total amount of revenue recognised in 2022 was USD 2,642,026 thousand. Revenue recognition
was one of the matters of most significance in our audit since the amount of revenue is material to
the consolidated financial statements and due to a large number of transactions and management
judgment involved in the interpretation of contract terms, identification of performance obligations and
timing of revenue recognition.
Information on the accounting policy for revenue recognition is disclosed in Note 2 of the consolidated
financial statements and disclosures related to revenue are included in Note 6 of the consolidated
financial statements.
We considered the Group’s accounting policy in respect of revenue recognition.
We assessed the design and operating effectiveness of relevant internal controls over revenue
recognition process, including IT-dependent manual controls.
We analysed sales contracts terms and assessed the moment of transfer of control over goods and
services. On a sample basis, we compared the date of transfer of control over goods and services with
the date of revenue recognition. We also tested, on a sample basis, data of transaction records in the
system to their respective customer contracts, underlying invoices and cash receipts.
On a sample basis, we obtained confirmations of sales and accounts receivable balances from
customers.
We tested a sample of revenue transactions recognised shortly before and after the year end and
assessed the period these transactions relate to.
We performed analytical procedures in respect of revenue that included, among others, the analysis of
monthly sales to detect unusual fluctuations and reconciliation with comparative information for prior
periods.
We assessed disclosures in respect of revenue included in the notes to the consolidated financial
statements.
144
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
SHAREHOLDER
INFORMATION
INDEPENDENT AUDITOR’S REPORT
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
VALUATION OF BIOLOGICAL ASSETS AND AGRICULTURAL PRODUCE
The Group measures biological assets at fair value less costs to sell in accordance with IAS 41
Agriculture and IFRS 13 Fair Value Measurement. As at 31 December 2022, the carrying value of
biological assets was USD 197,899 thousand, out of which USD 176,693 thousand was classified within
current assets and USD 21,206 thousand within non-current assets.
Agricultural produce harvested from biological assets is measured at fair value less costs to sell at the
point of harvest in accordance with IAS 41 Agriculture and IFRS 13 Fair Value Measurement. As at 31
December 2022, the carrying value of agricultural produce was USD 361,427 thousand.
The Group assesses the fair value of the biological assets based on the discounted cash flow
technique. The key assumptions and inputs used in the measurement are average meat output, average
productive life, expected yields, expected market prices, estimated future production costs and costs
to sell and discount rates.
The fair value of agricultural produce is determined by reference to market prices at the point of
harvest.
The valuation of biological assets and agricultural produce is one of the matters of most significance in
our audit since the assessment of fair value requires assumptions and management judgement.
Information on the accounting policy and key judgements and estimates for biological assets and
agricultural produce is disclosed in Note 2 and 4 of the consolidated financial statements and
disclosures related to the biological assets and agricultural produce are included in Notes 19 and 21 of
the consolidated financial statements.
We analysed the Group’s accounting policy in respect of biological assets and agricultural produce in
accordance with the requirements of IFRS.
We obtained an understanding of the internal controls surrounding the valuation process for biological
assets and agricultural produce and assessed their design and implementation.
For biological assets, we analysed the valuation methods used by management. Further, we compared
management’s assumptions to the Group’s historical data and, where applicable, to market data and
external benchmarks. We considered the discount rate used, with the support of our internal valuation
specialists.
For agricultural produce, we analysed management’s identification of the principal market, we compared
the prices used by management to the market data. We analysed costs required to sell agricultural
produce and analysed how they are taken into consideration in calculation of fair value less cost to sell.
We tested the mathematical accuracy of the models prepared by management. We also tested
completeness and accuracy of input data, including the physical quantities and crop areas, where
applicable, used in the valuation.
We assessed the disclosures in respect of biological assets and agricultural produce made in the
consolidated financial statements.
145
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
SHAREHOLDER
INFORMATION
INDEPENDENT AUDITOR’S REPORT
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
FAIR VALUE OF PROPERTY, PLANT AND EQUIPMENT
The Group applies the revaluation model to measure carrying value of its property, plant and
equipment. Due to high level of subjectivity in respect of assumptions underlying the assessment
of the fair value of property, plant and equipment this matter was one of the most significance in
our audit. The Group has a process of external valuations, when the value of property, plant and
equipment is being measured by an independent external appraiser.
Information about property, plant and equipment is disclosed in Note 14 to the consolidated financial
statements. Description of the accounting policy and key judgements and estimates is included in
Notes 2 and 4 to the consolidated financial statements.
We assessed the competence, capabilities and objectivity of the external appraiser.
We engaged our internal valuation specialists in the assessment of the valuation methodology used and
the assumptions made by the appraiser and management.
We compared input data used by the external appraiser with internal sources of data and available
industry data.
We analyzed the underlying assumptions by inspecting historical data, available market data and other
evidence provided by management.
We compared the amount of revaluation results recognized in the consolidated financial statements with
the valuation report.
We assessed the disclosures in the consolidated financial statements related to fair value measurement
of the property, plant and equipment.
As at 31 December 2022, the Group had significant balance of goodwill and intangible assets with
indefinite useful life of USD 59,808 thousand and USD 29,688 thousand respectively.
Our procedures included assessment of the assumptions and methodologies used by the Group in its
value-in-use calculation of cash-generating units.
IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIFE
An impairment assessment of goodwill and intangible assets with indefinite useful life is a key audit
matter due to the range of judgements and assumptions used in the impairment model for each CGU,
as well as the significance of the carrying amount of goodwill and intangible assets with indefinite
useful life.
Disclosure relating to the impairment of goodwill and intangible assets with indefinite useful life is
presented in Note 17 and Note 16 to the consolidated financial statements.
We compared the Group's assumptions to externally derived data and our internal information on key
inputs such as projected economic growth, sales volumes, inflation and discount rates.
We analysed, for each cash generating unit, the excess of the recoverable amount over carrying amount.
We tested sensitivity of the value in use to key assumptions. We have involved our internal valuation
experts to analyze the scope of appraisal, the data, application of methods, and the methodology
used in the valuation process and the assumptions made by the Group’s management specialists and
management.
We tested mathematical accuracy of management’s impairment analyses and sensitivity calculations.
We analysed the disclosures related to impairment of goodwill and intangible assets with indefinite useful
life presented in the Notes to the consolidated financial statements.
146
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
SHAREHOLDER
INFORMATION
INDEPENDENT AUDITOR’S REPORT
Reporting on other information
The Board of Directors is responsible for the other
information. The other information comprises information
included in Group’s 2022 Annual Report, but does not
include the consolidated financial statements and our
auditor’s report thereon.
Reporting Standards as adopted by the European Union
and the requirements of the Cyprus Companies Law, Cap.
113, and for such internal control as the Board of Directors
determines is necessary to enable the preparation of
consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Our opinion on the consolidated financial statements does
not cover the other information and we do not express
any form of assurance conclusion thereon.
In connection with our audit of the consolidated financial
statements, our responsibility is to read the other information
identified above and, in doing so, consider whether the other
information is materially inconsistent with the consolidated
financial statements or our knowledge obtained in the audit, or
otherwise appears to be materially misstated. If, based on the
work we have performed, we conclude that there is a material
misstatement of this other information, we are required to
report that fact. We have nothing to report in this regard.
Responsibilities of the Board of Directors and those
charged with governance for the Consolidated
Financial Statements
The Board of Directors is responsible for the preparation
of consolidated financial statements that give a true
and fair view in accordance with International Financial
In preparing the consolidated financial statements, the
Board of Directors is responsible for assessing the Group’s
ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using
the going concern basis of accounting unless the Board of
Directors either intends to liquidate the Group or to cease
operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for
overseeing the Group’s financial reporting process.
Auditor’s Responsibilities for the Audit
of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about
whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud
or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of
assurance, but is not a guarantee that an audit conducted
in accordance with ISAs will always detect a material
misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the
basis of these consolidated financial statements.
As part of an audit in accordance with ISAs, we exercise
professional judgment and maintain professional scepticism
throughout the audit. We also:
•
Identify and assess the risks of material misstatement
of the consolidated financial statements, whether due
to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence
that is sufficient and appropriate to provide a basis
for our opinion. The risk of not detecting a material
misstatement resulting from fraud is higher than for
one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or
the override of internal control.
• Obtain an understanding of internal control relevant
to the audit in order to design audit procedures that
are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness
of the Group’s internal control.
• Evaluate the appropriateness of accounting policies
used and the reasonableness of accounting estimates
and related disclosures made by the Board of Directors.
147
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
SHAREHOLDER
INFORMATION
INDEPENDENT AUDITOR’S REPORT
Auditor’s Responsibilities for the Audit
of the Consolidated Financial Statements
(Continued)
• Conclude on the appropriateness of the Board of
Directors’ use of the going concern basis of accounting
and, based on the audit evidence obtained, whether
a material uncertainty exists related to events or
conditions that may cast significant doubt on the
Group’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are
required to draw attention in our auditor’s report to
the related disclosures in the consolidated financial
statements or, if such disclosures are inadequate, to
modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause
the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content
of the consolidated financial statements, including the
disclosures, and whether the consolidated financial
statements represent the underlying transactions and
events in a manner that achieves a true and fair view.
• Obtain sufficient and appropriate audit evidence regarding
the financial information of the entities or business
activities within the Group to express an opinion on the
consolidated financial statements. We are responsible for
the direction, supervision and performance of the group
audit. We remain solely responsible for our audit opinion.
148
We communicate with those charged with governance
regarding, among other matters, the planned scope and
timing of the audit and significant audit findings, including
any significant deficiencies in internal control that we
identify during our audit.
We also provide those charged with governance with a statement
that we have complied with relevant ethical requirements
regarding independence, and to communicate with them all
relationships and other matters that may reasonably be thought
to bear on our independence, and where applicable, actions
taken to eliminate threats or safeguards applied.
From the matters communicated with those charged with
governance, we determine those matters that were of most
significance in the audit of the consolidated financial statements
of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or
regulation precludes public disclosure about the matter or when,
in extremely rare circumstances, we determine that a matter
should not be communicated in our report because the adverse
consequences of doing so would reasonably be expected to
outweigh the public interest benefits of such communication.
Report on Other Legal Requirements
Pursuant to the additional requirements of the Auditors
Law of 2017, we report the following:
•
In our opinion, based on the work undertaken in the
course of our audit, the consolidated management
report has been prepared in accordance with the
requirements of the Cyprus Companies Law, Cap.
113, and the information given is consistent with the
consolidated financial statements.
•
In light of the knowledge and understanding of the Group
and its environment obtained in the course of the audit,
we are required to report if we have identified material
misstatements in the consolidated management report.
We have nothing to report in this respect.
Other Matters
This report, including the opinion, has been prepared for and
only for the Company’s members as a body in accordance
with Section 69 of the Auditors Law of 2017 and for no other
purpose. We do not, in giving this opinion, accept or assume
responsibility for any other purpose or to any other person
to whose knowledge this report may come to.
The engagement partner on the audit resulting in this
independent auditor’s report is Andreas Avraamides.
Andreas Avraamides
Certified Public Accountant
and Registered Auditor
for and on behalf of
Ernst & Young Cyprus Limited
Certified Public Accountants and Registered Auditors
Nicosia, 11 April 2023
ANNUAL REPORTAND ACCOUNTS 2022
STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
CONTINUING OPERATIONS
Revenue
Net change in fair value of biological assets and agricultural produce
Cost of sales
Gross profit
Selling, general and administrative expenses
Other operating income
Other operating expenses
Loss on impairment of goodwill and property, plant and equipment
Operating profit
Finance income
Finance costs
Foreign exchange (loss)/gain, net
(Loss)/profit before tax
Income tax benefit/(expense)
(Loss)/profit for the year from continuing operations
DISCONTINUED OPERATIONS
Loss for the year from discontinued operations
(Loss)/profit for the year
NOTES
5, 6
5
7
8
9
10
14, 17
12
37
13
3
2022
2021
2,642,026
(127,849)
(1,905,964)
608,213
(254,432)
13,404
(83,268)
(29,242)
254,675
6,033
(154,705)
(365,018)
(259,015)
28,078
(230,937)
-
(230,937)
2,372,262
184,926
(1,812,672)
744,516
(228,183)
11,835
(14,425)
(10,607)
503,136
10,531
(150,424)
40,466
403,709
(6,914)
396,795
(3,457)
393,338
The accompanying notes on the pages 155 to 216 form an integral part of these consolidated financial statements
149
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME (continued)
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
NOTES
2022
2021
OTHER COMPREHENSIVE INCOME
ITEMS THAT WILL NOT BE RECLASSIFIED TO PROFIT OR LOSS:
Increase in revaluation reserve of property, plant and equipment
Deferred tax charged directly to revaluation reserve
Deferred tax on revaluation of property, plant and equipment
ITEMS THAT MAY BE RECLASSIFIED TO PROFIT OR LOSS:
Cumulative translation difference
Other comprehensive (loss)/income
Total comprehensive (loss)/income for the year
(Loss)/profit attributable to:
Equity holders of the Parent
Non-controlling interests
Total comprehensive (loss)/income attributable to:
Equity holders of the Parent
Non-controlling interests
14
13
27
(LOSS)/EARNINGS PER SHARE FROM CONTINUING AND DISCONTINUED OPERATIONS
Basic and diluted (loss)/earnings per share (USD per share)
(LOSS)/EARNINGS PER SHARE FROM CONTINUING OPERATIONS
Basic and diluted (loss)/earnings per share (USD per share)
39
On behalf of the Board:
Chief Executive Officer
Yuriy Kosyuk
Chief Financial Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 155 to 216 form an integral part of these consolidated financial statements
350,770
(81,317)
(58,889)
(325,697)
(115,133)
(346,070)
(225,577)
(5,360)
(230,937)
(337,017)
(9,053)
(346,070)
(2.11)
(2.11)
246,106
-
(26,597)
(2,931)
216,578
609,916
375,511
17,827
393,338
586,558
23,358
609,916
3.51
3.54
150
ANNUAL REPORTAND ACCOUNTS 2022
STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
NOTES
31 DECEMBER 2022
31 DECEMBER 2021
NOTES
31 DECEMBER 2022
31 DECEMBER 2021
ASSETS
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Goodwill
Non-current biological assets
Non-current financial assets
Long-term deposits
Deferred tax assets
Current assets
Inventories
Biological assets
Agricultural produce
Prepayments
Other current financial assets
Taxes recoverable and prepaid
Trade accounts receivable
Cash and cash equivalents
TOTAL ASSETS
EQUITY AND LIABILITIES
Equity
Share capital
Treasury shares
Additional paid-in capital
Revaluation reserve
Retained earnings
Translation reserve
14
15
16
17
19
18
13
20
19
21
24
22
23
25
26
Equity attributable to equity holders
of the Parent
Non-controlling interests
27
Total equity
151
1,855,731
222,917
79,628
59,808
21,206
7,813
3,105
2,434
1,939,607
277,288
97,791
66,382
27,138
28,764
9,904
1,966
2,252,642
2,448,840
413,790
176,693
361,427
367,219
215,459
511,267
29,905
44,572
22,097
68,759
182,900
300,489
1,556,060
3,808,702
284,505
(44,593)
174,022
792,221
1,558,826
(1,337,610)
1,427,371
18,326
1,445,697
16,156
68,151
156,878
275,237
1,654,939
4,103,779
284,505
(44,593)
174,022
811,684
1,557,284
(1,018,514)
1,764,388
29,800
1,794,188
Non-current liabilities
Bank borrowings
Bonds issued
Lease liabilities
Deferred income
Deferred tax liabilities
Other non-current liabilities
Current liabilities
Trade accounts payable
Other current liabilities
Contract liabilities
Bank borrowings
Interest payable
Lease liabilities
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
On behalf of the Board:
28
29
30
11
13
31
28
28, 29
30
117,719
1,382,981
164,071
36,912
123,677
5,081
103,604
1,376,820
204,139
44,593
44,704
6,468
1,830,441
1,780,328
122,576
95,793
30,945
176,112
41,886
65,252
532,564
2,363,005
3,808,702
162,641
93,289
53,584
121,458
21,180
77,111
529,263
2,309,591
4,103,779
Chief Executive Officer
Yuriy Kosyuk
Chief Financial Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 155 to 216 form an integral part of these consolidated financial statements
ANNUAL REPORTAND ACCOUNTS 2022
STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
Balance at 31 December 2020
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transfer from revaluation reserve to retained earnings
Dividends declared by the Parent (Note 35)
Dividends declared by subsidiaries
Non-controlling interests arising in a business combination
Translation differences on revaluation reserve
Balance at 31 December 2021
Loss for the year
Other comprehensive income/(loss)
Total comprehensive income/(loss) for the year
Transfer from revaluation reserve to retained earnings
Dividends declared by subsidiaries
Translation differences on revaluation reserve
SHARE
CAPITAL
284,505
-
TREASURY
SHARES
(44,593)
-
ADDITIONAL
PAID-IN
CAPITAL
174,022
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
284,505
-
(44,593)
-
174,022
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
REVALUATION
RESERVE
RETAINED
EARNINGS
TRANSLATION
RESERVE
(1,020,229)
-
1,715
1,715
-
-
-
-
-
TOTAL
1,237,830
375,511
211,047
586,558
-
(60,000)
-
-
-
1,195,143
375,511
-
375,511
70,240
(60,000)
-
-
(23,610)
1,557,284
(225,577)
648,982
-
209,332
209,332
(70,240)
-
-
-
23,610
811,684
-
207,656
207,656
(49,891)
(1,018,514)
-
1,764,388
(225,577)
-
(319,096)
(111,440)
(225,577)
49,891
(319,096)
-
(337,017)
-
-
-
(177,228)
177,228
-
-
-
-
NON-
CONTROLLING
INTERESTS
16,373
17,827
5,531
23,358
-
-
(10,819)
888
-
29,800
(5,360)
(3,693)
(9,053)
-
(2,421)
-
TOTAL
EQUITY
1,254,203
393,338
216,578
609,916
-
(60,000)
(10,819)
888
-
1,794,188
(230,937)
(115,133)
(346,070)
-
(2,421)
-
Balance at 31 December 2022
284,505
(44,593)
174,022
792,221
1,558,826
(1,337,610)
1,427,371
18,326
1,445,697
On behalf of the Board:
Chief Executive Officer
Yuriy Kosyuk
Chief Financial Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 155 to 216 form an integral part of these consolidated financial statements
152
ANNUAL REPORTAND ACCOUNTS 2022
STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
NOTES
2022
2021
NOTES
2022
2021
INVESTING ACTIVITIES
Purchases of property, plant and equipment
Purchases of other non-current assets
Purchases of intangible assets
Proceeds from disposals of property, plant and
equipment
Proceeds from disposals of assets held for sale
Purchases of non-current biological assets
Acquisition of subsidiaries, net of cash acquired
Government grants received
Prepayments and capitalized initial direct costs
under lease contracts
Investments in short-term deposits
Withdrawals of short-term deposits
Loans provided to employees, net
Loans and finance aid provided to related parties
Loans repaid by related parties
3
11
(159,485)
(140,074)
(450)
(6,020)
5,008
-
(2,809)
-
4,004
(12,459)
(9,483)
8,121
386
(1,096)
-
(2,825)
(12,625)
4,652
2,964
(1,640)
(1,840)
142
(9,737)
(5,563)
433
(1,158)
(3,694)
71,000
Net cash flows used in investing activities
(174,283)
(99,965)
The accompanying notes on the pages 155 to 216 form an integral part of these consolidated financial statements
OPERATING ACTIVITIES
(Loss)/profit before tax
Loss before tax from discontinued operations
Non-cash adjustments to reconcile profit before
tax to net cash flows
Depreciation and amortization expense
Net change in fair value of biological assets
and agricultural produce
Change in allowance for unrecoverable
amounts and direct write-offs
Loss on impairment of goodwill and property,
plant and equipment
Loss on disposal of property, plant and
equipment and other non-current assets
(259,015)
-
403,709
(3,457)
5
5
158,906
127,849
192,858
(184,926)
37,700
(4,059)
14, 17
29,242
10,607
1,511
6,157
Finance income
Finance costs
12
Released deferred (expense)/income
Non-operating foreign exchange gain/(loss), net
Operating cash flows before movements
in working capital
Working capital adjustments
Change in inventories
Change in biological assets
Change in agricultural produce
Change in prepayments made
Change in other financial current assets
Change in taxes recoverable and prepaid
(6,033)
154,705
(673)
365,018
609,210
(161,277)
(54,174)
(59,679)
(3,010)
(2,787)
(23,833)
(10,531)
150,424
711
(40,466)
521,027
(118,568)
(22,908)
(65,785)
(29,997)
(7,800)
(11,647)
Change in trade accounts receivable
(60,202)
(39,656)
Change in contract liabilities
Change in other current liabilities
Change in trade accounts payable
Cash generated by operations
Interest received
Interest paid
Income taxes paid
Net cash flows from operating activities
(10,038)
21,043
13,634
268,887
3,563
(125,676)
(8,311)
138,463
30,651
2,980
17,641
275,938
10,170
(148,051)
(13,258)
124,799
153
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
CONSOLIDATED FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
CONSOLIDATED STATEMENT OF CASH FLOWS (continued)
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
FINANCING ACTIVITIES
Proceeds from bank borrowings
Repayment of bank borrowings
Repayment of lease liabilities
Dividends paid
Dividends paid by subsidiaries to non-controlling shareholders
Consent solicitation payment
Net cash flows used in financing activities
Net increase in cash and cash equivalents
Net foreign exchange difference on cash and cash equivalents
Cash and cash equivalents at 1 January
Cash and cash equivalents at 31 December
NON-CASH TRANSACTIONS
Non-cash repayments of lease liabilities
On behalf of the Board:
NOTES
2022
2021
231,876
(159,725)
(13,883)
-
(392)
(1,222)
56,654
20,834
4,418
275,237
300,489
329,462
(203,335)
(20,536)
(60,000)
(10,842)
-
34,749
59,583
(1,925)
217,579
275,237
9,013
10,793
35
27
25
30
Chief Executive Officer
Yuriy Kosyuk
Chief Financial Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 155 to 216 form an integral part of these consolidated financial statements
154
ANNUAL REPORTAND ACCOUNTS 2022
STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(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 and 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 of
31 December 2022 the Group employed 31,701 people (31
December 2021: 30,890 people).
The primary subsidiaries, the principal activities of the
companies forming the Group and the Parent’s effective
ownership interest as of 31 December 2022 and 2021 were
as follows:
NAME
MHP Lux S.A.
MHP
Myronivsky Plant of
Manufacturing Feeds
and Groats
Vinnytska Ptakhofabryka
Peremoga Nova
Oril-Leader
Myronivska Pticefabrika
Starynska Ptakhofabryka
Zernoprodukt MHP
Katerinopilskiy Elevator
SPF Urozhay
Agrofort
MHP-Urozhayna Krayina
Ukrainian Bacon
MHP-AgroKryazh
MHP-Agro-S
Zakhid-Agro MHP
Perutnina Ptuj d.d.
MHP Food Trading
MHP B.V.
MHP Trade B.V.
MHP Saudi Arabia Trading
COUNTRY OF
REGISTRATION
Luxembourg
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Slovenia
United Arab
Emirates
Netherlands
Netherlands
Saudi Arabia
MHP Food UK Limited
United Kingdom
YEAR
ESTABLISHED/
ACQUIRED
2018
1998
1998
2011
1999
2003
2004
2003
2005
2005
2006
2006
2010
2008
2013
2013
2015
2019
2016
2014
2018
2018
2021
PRINCIPAL ACTIVITIES
Finance Company
Management,
marketing and sales
Fodder and vegetable
oil production
31 DECEMBER
2022
31 DECEMBER
2021
100.0%
99.9%
100.0%
99.9%
88.5%
88.5%
Chicken farm
Breeder farm
Chicken farm
Chicken farm
Breeder farm
Grain cultivation
Fodder production
and grain storage,
vegetable oil
production
Grain cultivation
Grain cultivation
Grain cultivation
Meat processing
Grain cultivation
Grain cultivation
Grain cultivation
Poultry production
Trading in vegetable oil
and poultry meat
Trading in poultry meat
Trading in poultry meat
Trading in poultry meat
Trading in poultry meat
100.0%
99.9%
99.9%
99.9%
100.0%
99.9%
99.9%
99.9%
99.9%
99.9%
79.9%
51.0%
51.0%
100.0%
100.0%
100.0%
100.0%
100.0%
75.0%
100.0%
100.0%
99.9%
99.9%
99.9%
100.0%
99.9%
99.9%
99.9%
99.9%
99.9%
79.9%
51.0%
51.0%
100.0%
100.0%
100.0%
100.0%
100.0%
75.0%
100.0%
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 (represented by Perutnina Ptuj d.d. together with its
subsidiaries).
155
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation and accounting
The consolidated financial statements have been 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 operating subsidiaries of the Group maintain their
accounting records under local accounting standards.
Local principles and procedures may differ from
those generally accepted under IFRS. Accordingly, the
consolidated financial statements, which have been
prepared from the Group entities’ local accounting
records, reflect adjustments necessary for such financial
statements to be presented in accordance with IFRS.
Basis of preparation
The consolidated financial statements of the Group
are prepared on the basis of historical cost except for
revalued amounts of buildings and structures, grain storage
facilities, production machinery, vehicles and agricultural
machinery, biological assets, agricultural produce, and
certain financial instruments, which are carried at fair
values. Historical cost is generally based on the fair value
of the consideration given in exchange for goods and
services at the date of initial recognition of an item.
Going concern
As a result of the Russian invasion, the Group has
experienced a number of significant disruptions and
operational issues within its business. The Group incurred
a net loss of USD 230,937 thousand in 2022. During
2022 and up to the date of authorization to issue these
consolidated financial statements the Group has analyzed
the observable impact of the War on its business as
described below, but not limited to:
• the Group’s poultry production facilities have not suf-
fered any physical damage;
• certain inventories and biological assets were damaged
and written-off;
• a substantial amount of poultry products was provided
as humanitarian aid to the population of Ukraine; for de-
tails please refer to Note 33 Operating environment;
• MHP continues commercial poultry sales in Ukraine al-
most at the pre-War level, despite domestic deliveries
in some regions having been and continuing to be sig-
nificantly disrupted due to active hostilities;
• during the first half of 2022, export sales reduced signifi-
cantly due to closure of all Ukrainian seaports. Only cer-
tain roads and railways were available for export. Howev-
er, beginning from 22 July, the date of signing of a grain
agreement between the United Nations (UN), Ukraine,
Russia and Turkey, the large-scale demining of Ukraine’s
ports was performed and movement of cargo ships car-
rying grain in the Black Sea was partially renewed. This
allowed the Group to facilitate optimization of certain
export sales of vegetable oils and grain;
• due to lower sales, MHP slightly decreased poultry pro-
duction comparing to the pre-war level, but as at 31 De-
cember 2022 has already returned to normal capacity
utilization;
• operations of “Ukrainian Bacon” (a meat-processing
operation with 34,000 tonnes annual capacity located
in the Donetsk region) were temporarily suspended due
to continuing military attacks and further escalation of
the situation in the Donetsk region;
• during the fourth quarter of 2022, there were severe
power outages in Ukraine caused by Russia's attacks
on Ukrainian power generation and distribution infra-
structure. These outages caused temporary instability
of oilseed processing, poultry and silo operations;
• the Group’s European operations at Perutnina Ptuj have
not been directly affected by events in Ukraine as they
are fully independent and self-sufficient from an oper-
ational and supply chain perspective, and continue to
produce at full capacity;
• for the period after the Russian invasion of Ukraine
more than 1,800 MHP employees joined the Ukrainian
military forces and territorial defence;
• as a result of the disruptions described above, the
Group’s ability to service debt in 2022 was limited, and
156
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Going concern (continued)
negotiations were held with creditors regarding deferral
of debts repayment.
During 2022 and up to the date of authorization to issue
these consolidated financial statements, in response to
these matters, the Group has taken the following actions:
• optimized utilization of production facilities to meet
•
domestic demand and export orders;
inventories were maintained at the normal level during
the year. As a result of these actions, as well as the
relative stabilization of the economic and political
situation in Ukraine, the Group has returned to normal
production capacity;
• established alternative export routes, including by
road and rail, to address the logistical issues caused by
the war and optimized transport costs in the existing
circumstances;
• the Group asked its employees of “Ukrainian Bacon”
(over 1,900 people) and their families to relocate to safer
regions of Ukraine. Some employees were redeployed
to other Group production facilities. Production has
been partly redeployed on the Group`s production sites
in central Ukraine. Full commissioning of all production
which will require additional time and resources, is
planned to be completed by the end of 2023;
• to mitigate the impact of power outages on its business,
the Group equipped its key assets with diesel generators
as well as continued to operate two biogas facilities to
produce electricity, industrial steam and heating;
• MHP has accumulated sufficient seeds, fertilizers, fuel,
pesticides and other inputs required for the 2022 sowing
and harvesting campaigns, as well as the necessary
vehicles, agricultural machinery and human resources.
As a result, the harvesting campaign was 98% complete
as at 31 December 2022, with a small amount of corn
harvested in January 2023;
• the Group has secured forthcoming sowing campaign by
building up the required level of inventories. It is planned
to sow and harvest more than 350,000 hectares of grains
and oilseeds in 2023 (73,000 hectares are represented
by already planted winter crops);
• to preserve cash for operational priorities, on 30
March 2022 the Group received consent from holders
of its Eurobonds to postpone the semi-annual interest
payments due in Spring 2022 on each of its 2024, 2026
and 2029 Notes for a period up to 270 days. As at the
date of publication, all the postponed amounts had
been paid in time (Note 29);
• to comply with consent solicitation restrictions, the
Group has agreed a general postponement of debt
servicing under the loan agreements with the bank
lenders, where the payments were initially scheduled
during the 270-days support period as mentioned
above. During the year ended 31 December 2022,
Management signed legally binding agreements for
relevant bank loans with the total amount of USD 137
million to comply with consent solicitation requirements
(Note 28);
• the Directors have decided not to declare any dividends
for the 2021 and 2022 financial years.
into consideration most
Management have prepared adjusted financial forecasts,
including cash flow projections, for the twelve months
from the date of approval of these financial statements,
likely and possible
taking
downside scenarios for the ongoing business impacts of
the War. The Group considered the impact of conditions
and events described in the Notes 33 and 40 on the
financial forecast.
These forecasts were based on the following key
assumptions:
• the impact of the War on business will continue for the
next 12 months;
• further development of the War will not severely affect
the Group's assets and will allow the Group to have 85%
utilization of poultry production facilities;
• all of the Group’s assets remain safe and in good
condition;
• remaining logistic routes (rail and road) will continue to
be available;
• the Group takes
into consideration restrictions
imposed by the existing indebtedness agreements
(Notes 28 and 29);
• MHP will be able to procure sufficient levels of vitamins
and minerals for production of feed as well as the
required volume of plant protection materials, fuel and
other inputs for grain growing;
157
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Going concern (continued)
• the Group will be able to run the sowing and harvesting
campaign on its entire landbank.
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 on the significant assumptions
underlying management forecasts, the Directors have
concluded that a material uncertainty exists, which
may cast significant doubt about 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 Group applied for the first time certain standards
and amendments which are effective for annual periods
beginning on or after 1 January 2022. The Group has
not early adopted any other standard, interpretation or
amendment that has been issued but is not yet effective.
• Reference to the Conceptual Framework – Amendments
to IFRS 3;
• Property, Plant and Equipment: Proceeds before
Intended Use – Amendments to IAS 16 Leases;
IFRS 1 First-time Adoption of International Financial
Reporting Standards – Subsidiary as a first-time adopter;
IFRS 9 Financial Instruments – Fees in the ’10 per cent’
test for derecognition of financial liabilities;
IAS 41 Agriculture – Taxation in fair value measurements.
•
•
•
Onerous Contracts – Costs of Fulfilling a Contract –
Amendments to IAS 37
The amendments specify that when assessing whether
a contract is onerous or loss-making, an entity needs to
include costs that relate directly to a contract to provide
goods or services including both incremental costs (e.g.,
the costs of direct labour and materials) and an allocation
of costs directly related to contract activities (e.g.,
depreciation of equipment used to fulfill the contract and
costs of contract management and supervision). General
and administrative costs do not relate directly to a contract
and are excluded unless they are explicitly chargeable to
the counterparty under the contract.
These amendments had no impact on the consolidated
financial statements of the Group as there were no onerous
contracts within the scope of these amendments during
the reporting period.
The following standards were adopted by the Group on 1
January 2022:
• Onerous Contracts – Costs of Fulfilling a Contract –
Amendments to IAS 37;
Property, Plant and Equipment: Proceeds before
Intended Use – Amendments to IAS 16 Leases
The amendment prohibits entities from deducting from
the cost of an item of property, plant and equipment, any
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
proceeds of the sale of items produced while bringing
that asset to the location and condition necessary for
it to be capable of operating in the manner intended by
management. Instead, an entity recognises the proceeds
from selling such items and the costs of producing those
items in profit or loss.
These amendments had no impact on the consolidated
financial statements of the Group as there were no sales
of such items produced by property, plant and equipment
made available for use on or after the beginning of the
earliest period presented.
IFRS 1 First-time Adoption of International Financial
Reporting Standards – Subsidiary as a first time
adopter
The amendment permits a subsidiary that elects to
apply paragraph D16(a) of IFRS 1 to measure cumulative
translation differences using the amounts reported in the
Parent’s consolidated financial statements, based on the
Parent’s date of transition to IFRS, if no adjustments were
made for consolidation procedures and for the effects of
the business combination in which the Parent acquired
the subsidiary. This amendment is also applied to an
associate or joint venture that elects to apply paragraph
D16(a) of IFRS 1.
These amendments had no impact on the consolidated
financial statements of the Group as it is not a first-time
adopter.
158
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Adoption of new and revised International Financial
Reporting Standards (continued)
IFRS 9 Financial Instruments – Fees in the ’10 per cent’
test for derecognition of financial liabilities
The amendment clarifies the fees that an entity includes
when assessing whether the terms of a new or modified
financial liability are substantially different from the
terms of the original financial liability. These fees include
only those paid or received between the borrower and
the lender, including fees paid or received by either the
borrower or lender on the other’s behalf.
This amendment had no impact on the consolidated
financial statements of the Group.
IAS 41 Agriculture – Taxation in fair value
measurements
The amendment removes the requirement in paragraph
22 of IAS 41 that entities exclude cash flows for taxation
when measuring the fair value of assets within the scope
of IAS 41.
This amendment had no impact on the consolidated
financial statements of the Group.
Standards and Interpretations in issue but not effective
At the date of authorization of these consolidated financial
statements, the following Standards and Interpretations,
as well as amendments to the Standards were in issue but
not yet effective:
IFRS 17: Insurance Contracts
The standard is effective for annual periods beginning
on or after 1 January 2023 with earlier application
permitted, provided the entity also applies IFRS 9
Financial Instruments on or before the date it first
applies IFRS 17. This is a comprehensive new accounting
standard for insurance contracts, covering recognition
and measurement, presentation and disclosure. IFRS 17
applies to all types of insurance contracts issued, as
well as to certain guarantees and financial instruments
with discretional participation contracts. This standard
is not applicable to the Group as the Group does not
have contracts in scope of IFRS 17.
IAS 1 Presentation of Financial Statements and IFRS
Practice Statement 2: Disclosure of Accounting policies
(Amendments)
The Amendments are effective for annual periods
beginning on or after 1 January 2023 with earlier
application permitted. The amendments provide
guidance on the application of materiality judgements
to accounting policy disclosures. In particular, the
amendments to IAS 1 replace the requirement to disclose
‘significant’ accounting policies with a requirement to
disclose ‘material’ accounting policies. Also, guidance
and illustrative examples are added in the Practice
Statement to assist in the application of the materiality
concept when making judgements about accounting
policy disclosures. The Group is currently revisiting their
accounting policy information disclosures to ensure
consistency with the amended requirements.
IAS 8 Accounting policies, Changes in Accounting
Estimates and Errors: Definition of Accounting Estimates
(Amendments)
The amendments become effective for annual reporting
periods beginning on or after 1 January 2023 with earlier
application permitted and apply to changes in accounting
policies and changes in accounting estimates that occur
on or after the start of that period. The amendments
introduce a new definition of accounting estimates,
defined as monetary amounts in financial statements
that are subject to measurement uncertainty, if they do
not result from a correction of prior period error. Also,
the amendments clarify what changes in accounting
estimates are and how these differ from changes in
accounting policies and corrections of errors. The
amendments are not expected to have a material impact
on the Group’s consolidated financial statements.
159
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Standards and Interpretations in issue but not
effective (continued)
IAS 12 Income taxes: Deferred Tax related to Assets
and Liabilities arising from a Single Transaction
(Amendments)
The amendments are effective for annual periods
beginning on or after 1 January 2023 with earlier application
permitted. The amendments narrow the scope of and
provide further clarity on the initial recognition exception
under IAS 12 and specify how companies should account
for deferred tax related to assets and liabilities arising from
a single transaction, such as leases and decommissioning
obligations. The amendments clarify that where payments
that settle a liability are deductible for tax purposes, it is
a matter of judgement, having considered the applicable
tax law, whether such deductions are attributable for tax
purposes to the liability or to the related asset component.
Under the amendments, the initial recognition exception
does not apply to transactions that, on initial recognition,
give rise to equal taxable and deductible temporary
differences. It only applies if the recognition of a lease
asset and lease liability (or decommissioning liability and
decommissioning asset component) give rise to taxable
and deductible temporary differences that are not equal.
The Group is currently assessing the impact of the
amendments on the consolidated financial statements.
IAS 1 Presentation of Financial Statements:
Classification of Liabilities as Current or Non-current
(Amendments)
The amendments are effective for annual reporting
periods beginning on or after 1 January 2024, with
earlier application permitted, and will need to be applied
retrospectively in accordance with IAS 8. The objective
of the amendments is to clarify the principles in IAS 1 for
the classification of liabilities as either current or non-
current. The amendments clarify the meaning of a right to
defer settlement, the requirement for this right to exist at
the end of the reporting period, that Management intent
does not affect current or non-current classification, that
options by the counterparty that could result in settlement
by the transfer of the entity’s own equity instruments do
not affect current or non-current classification. Also, the
amendments specify that only covenants with which an
entity must comply on or before the reporting date will
affect a liability’s classification. Additional disclosures
are also required for non-current liabilities arising from
loan arrangements that are subject to covenants to be
complied with within twelve months after the reporting
period. The amendments have not yet been endorsed
by the EU. The amendments are not expected to have
a material impact on the Group’s consolidated financial
statements.
IFRS 16 Leases: Lease Liability in a Sale and Leaseback
(Amendments)
The amendments are effective for annual reporting
periods beginning on or after 1 January 2024, with earlier
application permitted. The amendments are intended
to improve the requirements that a seller-lessee uses in
measuring the lease liability arising in a sale and leaseback
transaction in IFRS 16, while it does not change the
accounting for leases unrelated to sale and leaseback
transactions. In particular, the seller-lessee determines
‘lease payments’ or ‘revised lease payments’ in such a way
that the seller-lessee would not recognise any amount of
the gain or loss that relates to the right of use it retains.
Applying these requirements does not prevent the seller-
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
lessee from recognising, in profit or loss, any gain or loss
relating to the partial or full termination of a lease. A
seller-lessee applies the amendment retrospectively in
accordance with IAS 8 to sale and leaseback transactions
entered into after the date of initial application, being
the beginning of the annual reporting period in which
an entity first applied IFRS 16. The amendments have
not yet been endorsed by the EU. The amendments are
not expected to have a material impact on the Group’s
consolidated financial statements.
Amendment in IFRS 10 Consolidated Financial
Statements and IAS 28 Investments in Associates and
Joint Ventures: Sale or Contribution of Assets between
an Investor and its Associate or Joint Venture
The amendments address an acknowledged inconsistency
between the requirements in IFRS 10 and those in IAS 28,
in dealing with the sale or contribution of assets between
an investor and its associate or joint venture. The main
consequence of the amendments is that a full gain or
loss is recognized when a transaction involves a business
(whether it is housed in a subsidiary or not). A partial
gain or loss is recognized when a transaction involves
assets that do not constitute a business, even if these
assets are housed in a subsidiary. In December 2015 the
IASB postponed the effective date of this amendment
indefinitely pending the outcome of its research project
on the equity method of accounting. The amendments
have not yet been endorsed by the EU. The amendments
are not expected to have a material impact on the Group’s
consolidated financial statements.
160
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Standards and Interpretations in issue but not
effective (continued)
Functional and presentation currency
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 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 the rates prevailing on the reporting date.
All realized and unrealized gains and losses arising on
exchange differences are recognised 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 are translated at exchange rates at the
dates of the transactions;
•
• Exchange differences arising on translation for consol-
idation 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 reclassi-
fied to profit or loss;
• All equity items, except for the revaluation reserve, are
translated at the historical exchange rate. The revalu-
ation 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.
The relevant exchange rates were:
CLOSING
RATE AS OF
31 DECEMBER
2022
CLOSING
RATE AS OF
31 DECEMBER
2021
AVERAGE
FOR 2022
AVERAGE
FOR 2021
CURRENCY
UAH/USD
36.5686
32.3684
27.2782
27.2835
UAH/EUR
38.9510
33.9954
30.9226
32.3009
USD/EUR
1.0651
1.0503
1.1336
1.1839
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
Basis of consolidation
The consolidated financial statements incorporate the
financial statements of MHP SE and its subsidiaries.
Control is achieved when the Company:
• has power over the investee;
•
is exposed, or has rights, to variable returns from its in-
volvement with the investee; and
• has the ability to use its power to affect its returns.
The Company reassesses whether or not it controls an
investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control
listed above. Consolidation of a subsidiary begins when
the Company obtains control over the subsidiary and
ceases when the Company loses control of the subsidiary.
Specifically,
income and expenses of a subsidiary
acquired or disposed of during the year are included in
the consolidated statement of profit or loss and other
comprehensive income from the date the Company gains
control until the date when the Company ceases to control
the subsidiary. Profit or loss and each component of other
comprehensive income are attributed to the owners of
the Company and to the non-controlling interests. Total
comprehensive income of subsidiaries is attributed to
the owners of the Company and to the non-controlling
interests even if this results in the non-controlling interests
having a deficit balance.
161
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Basis of consolidation (continued)
All significant intercompany transactions, balances and
unrealized gains or losses on transactions are eliminated on
consolidation, except when the intragroup losses indicate
an impairment that requires recognition in the consolidated
financial statements.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies
used in line with those adopted by the Group.
Accounting for acquisitions
The acquisitions of subsidiaries from third parties
are accounted for using the acquisition method. On
acquisition, the assets, liabilities and contingent liabilities
of a subsidiary are measured at their fair values.
The consideration transferred by the Group is measured
at fair value, which is the sum of the acquisition-date fair
values of the assets transferred by the Group, liabilities
incurred by the Group to the former owners of the acquired
subsidiary and the equity interests issued by the Group in
exchange for control of the subsidiary. Acquisition-related
costs are recognised in the consolidated statement of
profit or loss as incurred.
When the consideration transferred by the Group in
a business combination includes assets and liabilities
resulting from a contingent consideration arrangement, the
contingent consideration is measured at its acquisition-
date fair value and is included as part of the consideration
transferred. Any contingent consideration to be transferred
by the acquirer will be recognised at fair value at the
acquisition date. Contingent consideration that is classified
as equity is not remeasured and subsequent settlement
is accounted for within equity. Contingent consideration
classified as an asset or liability that is a financial instrument
and within the scope of IFRS 9 Financial Instruments, is
measured at fair value with changes in fair value recognised
in the statement of profit or loss in accordance with IFRS 9.
Other contingent consideration that is not within the scope
of IFRS 9 is measured at fair value at each reporting date
with changes in fair value recognised in profit or loss.
Non-controlling interests that are present ownership
interests and entitle their holders to a proportionate share
of the subsidiary’s net assets in the event of liquidation
may be initially measured either at fair value or at the non-
controlling interests’ proportionate share of the recognised
amounts of the subsidiary’s identifiable net assets. The
choice of measurement basis is made on a transaction-by-
transaction basis. Other types of non-controlling interests,
if any, are measured at fair value or, when applicable, on the
basis specified in other IFRS standards.
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
Goodwill is measured as the excess of the sum of the
consideration transferred, the amount of any non-
controlling interests in the acquired subsidiary, and the
fair value of the Group’s previously held equity interest
in the acquired subsidiary (if any) over the net of the
acquisition-date amounts of the
identifiable assets
acquired and the liabilities assumed. If, after reassessment,
the net of the acquisition-date amounts of the identifiable
assets acquired and the liabilities assumed exceeds the
sum of the consideration transferred, the amount of non-
controlling interests in the subsidiary and the fair value
of the Group’s previously-held interest in the subsidiary
(if any), the excess is recognised in the consolidated
statement of profit or loss, as a bargain purchase gain.
Changes in the Group’s ownership interests in subsidiaries
that do not result in the Group losing control over the
subsidiaries are accounted for as equity transactions. The
carrying amounts of the Group’s interests and the non-
controlling interests are adjusted to reflect the changes
in their relative interests in subsidiaries. Any difference
between the amount by which the non-controlling interests
are adjusted and the fair value of the consideration paid or
received is recognised directly in equity and attributed to
owners of the Parent.
In acquisition of a legal entity that does not constitute
a business, the cost of the group of assets is allocated
between the individual identifiable assets in the group
based on their relative fair values.
162
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
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.
The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the liability
takes place either in the principal market for the asset or
liability, or in the absence of a principal market, in the most
advantageous market for the asset or liability. The principal
or the most advantageous market must be accessible by
the Group.
The fair value of an asset or a liability is measured using
the assumptions that market participants would use
when pricing the asset or liability, assuming that market
participants act in their economic best interest.
A fair value measurement of a non-financial asset takes
into account a market participant's ability to generate
economic benefits by using the asset in its highest and
best use or by selling it to another market participant that
would use the asset in its highest and best use.
The Group uses valuation techniques that are appropriate
in the circumstances and for which sufficient data are
available to measure fair value, maximizing the use of relevant
observable inputs and minimizing the use of unobservable
inputs.
All assets and liabilities for which fair value is measured
or disclosed in the financial statements are categorized
within the fair value hierarchy, described as follows, based
on the lowest level input that is significant to the fair value
measurement as a whole:
• Level 1: Quoted (unadjusted) market prices in active
markets for identical assets or liabilities;
• Level 2: Valuation techniques for which the lowest level
input that is significant to the fair value measurement is
directly or indirectly observable;
• Level 3: Valuation techniques for which the lowest level
input that is significant to the fair value measurement is
unobservable.
For assets and liabilities that are recognised in the
financial statements on a recurring basis, the Group
determines whether transfers have occurred between
Levels in the hierarchy by re-assessing categorization
(based on the lowest level input that is significant to the
fair value measurement as a whole) at the end of each
reporting period.
Borrowing costs
Borrowing costs include interest expense, finance charges
on leases and other interest-bearing long-term payables
and debt servicing costs.
Borrowing costs directly attributable to the acquisition,
construction or production of qualifying assets, which are
assets that necessarily take a substantial period of time
to get ready for their intended use or sale, are added to
the cost of those assets, until such time as the assets are
substantially ready for their intended use or sale.
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
Investment income earned on the temporary investment
of specific borrowings pending their expenditure on
qualifying assets is deducted from the borrowing costs
eligible for capitalization.
All other borrowing costs are recognised in the statement
of profit or loss and other comprehensive income in the
period in which they are incurred.
Contingent liabilities and assets
Contingent liabilities are not recognised in the consolidated
financial statements. Rather, they are disclosed in the
notes to the consolidated financial statements unless the
possibility of an outflow of resources embodying economic
benefits is remote. Contingent assets are recognised only
when it has become virtually certain that an inflow of
economic benefits will arise.
Segment information
Segment reporting
is presented on the basis of
Management’s perspective and relates to the parts of the
Group that are defined as operating segments. Operating
segments are identified on the basis of internal reports
provided to the Group’s chief operating decision maker
(“CODM”). The Group has identified its top Management
team as its CODM and the internal reports used by
the top Management team to oversee operations and
make decisions on allocating resources serve as the
basis of information presented. These internal reports
are prepared on the same basis as these consolidated
financial statements.
163
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Segment information (continued)
Based on the current management structure, the Group
has identified the following reportable segments:
• Poultry and related operations;
• Grain growing operations;
• Meat processing and other agricultural operations;
• Europe operating segment.
Reportable segments represent the Group’s principal
business activities. Poultry and related operations
segment include sales of chicken meat, sales of by-
products such as vegetable oil and related products and
other poultry-related products. CODM is considering oil
extraction as a part of mixed fodder production rather
than a separate line of business as primarily quality
and effectiveness of mixed fodder production prevails
over oil output. Grain growing operations include sale
of grain other than feed grains and green-fodder. Meat
processing and other agricultural operations segment
primarily includes sales of other than poultry meat
and meat processing products, feed grains and milk.
The Europe operating segment include sales of meat
processing and chicken meat products in Southeast
Europe.
The Group does not present information on segment
assets and liabilities as the CODM does not review such
information for decision-making purposes.
Non-current assets held for sale and discontinued
operations
Non-current assets and disposal groups are classified as
held for sale if their carrying amount will be recovered
principally through a sale transaction rather than through
continuing use. This condition is regarded as met only when
the asset (or disposal group) is available for immediate
sale in its present condition subject only to terms that are
usual and customary for sales of such asset (or disposal
group) and its sale is highly probable. Management must
be committed to the sale, which should be expected to
qualify for recognition as a completed sale within one year
from the date of classification.
When the Group is committed to a sale plan involving loss
of control of a subsidiary, all of the assets and liabilities
of that subsidiary are classified as held for sale when the
criteria described above are met, regardless of whether
the Group will retain a non-controlling interest in its former
subsidiary after the sale.
Non-current assets (and disposal groups) classified as
held for sale are measured at the lower of their carrying
amount and fair value less costs to sell.
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 and other
comperensive income.
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
Revenue recognition
The Group generates revenue primarily from the sale of
agricultural products to the end customers. Revenue is
measured based on the consideration to which the Group
expects to be entitled in a contract with a customer and
excludes amounts collected on behalf of third parties. The
Group recognises revenue when it transfers control of a
product or service to a customer.
Revenue is adjusted for estimates of known or expected
variable consideration, which includes consumer incentives,
trade promotions, and allowances, such as rebates,
volume-based incentives and other programs. Variable
consideration related to these programs is recorded as a
reduction to revenue based on amounts the Group expects
to pay. These estimates are based on current performance,
historical utilization, and projected redemption rates of
each program. The Group reviews and updates these
estimates regularly until the incentives are realized and the
impact of any adjustments are recognized in the period the
adjustments are identified. Non-monetary exchanges or
swaps of goods which are of similar nature and value are
not treated as transactions which generate revenue.
The Group recognises revenue from the following major
sources:
• chicken meat;
• vegetable oil and related products;
• other poultry related sales (delivery services, sunflower
and soybean meals, sunflower husk and other)
• grain;
• meat processing products and other meat;
• other agricultural operations (milk, feed grains and other).
164
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Revenue recognition (continued)
Revenue is measured based on the consideration to
which the Group expects to be entitled in a contract with
a customer. The Group recognises revenue at a point in
time when it transfers control of a product or service to a
customer.
Government grants
Government grants are recognised as income over the periods
necessary to match them with the related costs, or as an
offset against finance costs when received as compensation
for the finance costs for agricultural producers. When the
grant relates to an asset, the received funds are recorded in
the Group’s consolidated financial statements as deferred
income, which is recognised in profit or loss on a systematic
basis over the useful life of the related assets.
The major part of the Group’s sales are generated from the
wholesale market. Revenue is recognised when control
of the goods has transferred, being when the goods have
been shipped to the wholesaler’s specific location or
delivered to major Ukrainian sea ports. Following delivery,
the wholesaler has full discretion over the manner of
distribution and price to sell the goods, has the primary
responsibility when on-selling the goods, and bears the
risks of obsolescence and loss in relation to the goods.
A receivable is recognised by the Group when the goods
are delivered to the wholesaler as this represents the
point in time at which the right to consideration becomes
unconditional. Under the Group’s standard contract
terms, customers have no right of return.
The Group sells its products for export on various terms,
some of which include shipping and handling costs in the
price of the product. Sales price of products for local
market predominantly includes shipping and handling
costs in the price of the product.
Government grants are not recognised until there is
reasonable assurance that the Group will comply with the
conditions attaching to them and that the grants will be
received.
Property, plant and equipment
All Groups property, plant and equipment are carried at
revalued amounts, being their fair value at the date of
the revaluation less any subsequent depreciation and
impairment losses, except land and other fixed assets
that are carried at historical cost less (for the other fixed
assets) accumulated depreciation.
The historical cost of an item of property, plant and
equipment comprises (a) its purchase price, including
import duties and non-refundable purchase taxes, after
deducting trade discounts and rebates; (b) any costs
directly attributable to bringing the item to the location
and condition necessary for it to be capable of operating
in the manner intended by the management of the Group;
(c) the initial estimate of the costs of dismantling and
removing the item and restoring the site on which it is
located, the obligation for which the Group incurs either
when the item is acquired or as a consequence of having
used the item during a particular period for purposes
other than to produce inventories during that period; and
(d) for qualifying assets, borrowing costs capitalized in
accordance with the Group’s accounting policy.
Subsequently capitalized costs include major expenditures
for improvements and replacements that extend the useful
lives of the assets or increase their revenue generating
capacity. Repairs and maintenance expenditures that do
not meet the foregoing criteria for capitalization are charged
to the consolidated statement of profit or loss as incurred.
For all Groups property, plant and equipment carried at
revalued amounts, the revaluations are performed with
sufficient regularity such that the carrying amount does
not differ materially from that which would be determined
using fair values at the reporting date. If the asset’s carrying
amount is increased as a result of a revaluation, the
increase is credited to equity through other comprehensive
income as a revaluation reserve. However, such increase is
recognised in the consolidated statement of profit or loss
to the extent that it reverses a revaluation decrease of
the same asset previously recognised in the consolidated
statement of profit or loss. If the asset’s carrying amount
is decreased as a result of a revaluation, the decrease
is recognised in the consolidated statement of profit or
loss. However, such decrease is debited to the revaluation
reserve through other comprehensive income to the extent
of any credit balance existing in the revaluation reserve in
respect of that asset.
165
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Property, plant and equipment (continued)
The carrying amount of asset is adjusted by eliminating of
accumulated depreciation against gross carrying amount
and subsequent increase or decrease of gross carrying
amount to fair value.
Depreciable amount is the cost of an item of property,
plant and equipment, or revalued amount, less its residual
value. The residual value is the estimated amount that
the Group would currently obtain from disposal of the
item of property, plant and equipment, after deducting
the estimated costs of disposal, if the asset was already
of the age and in the condition expected at the end of its
useful life.
Depreciation on revalued assets
is charged to the
consolidated statement of profit or loss. The excess
of depreciation charge on the revalued asset over the
depreciation that would have been charged based on the
historical cost of the asset is transferred from revaluation
reserve directly to retained earnings over the assets useful
life. On the subsequent sale or retirement of a revalued
asset, the attributable revaluation surplus remaining in
the revaluation reserve is transferred directly to retained
earnings.
Depreciation of property, plant and equipment is charged
so as to write off the depreciable amount over the useful
life of an asset and is calculated using a straight line
method. Useful lives of the groups of property, plant and
equipment are as follows:
Buildings and structures
Grain storage facilities
Production machinery
Auxiliary and other machinery
Utilities and infrastructure
Vehicles and agricultural machinery
Other fixed assets
5 - 60 years
10 - 60 years
5 - 35 years
5 - 30 years
15 - 60 years
7 - 40 years
3 - 10 years
The residual value, the useful lives and depreciation
method are reviewed at each financial year-end. The effect
of any changes from previous estimates is accounted for
prospectively as a change in an accounting estimate.
The gain or loss arising on sale or disposal of an item
of property, plant and equipment is determined as the
difference between the sales proceeds and the carrying
amount of the asset and is recognised in the consolidated
statement of profit or loss.
Construction in progress comprises costs directly related
to the construction of property, plant and equipment
including an appropriate allocation of directly attributable
variable overheads that are incurred in construction.
Construction in progress is not depreciated. Depreciation
of construction in progress commences when completed
consruction in progress transferred to the relevant class
of property, plant and equipment.
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
Intangible assets
Intangible assets consist primarily of land lease rights,
trademarks and customer relationships which are acquired
in a business combination.
Intangible assets acquired in a business combination
are identified and recognised separately from goodwill
where they satisfy the definition of an intangible asset.
The cost of such intangible assets is their fair value at
the acquisition date.
Intangible assets assessed as having an indefinite useful
life are not amortised and are examined for impairment
annually or more frequently where there is an indication
of impairment. Where the carrying amount of an asset
is greater than the amount that it is estimated to be
recoverable, it is written down to its recoverable amount.
The assessment of indefinite life is reviewed annually
to determine whether the indefinite life continues to be
supportable. If not, the change in useful life from indefinite
to finite is made on a prospective basis.
166
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Intangible assets (continued)
Subsequent to initial recognition, intangible assets
assessed as having finite useful lives are reported at
cost less accumulated amortization and accumulated
impairment losses. Amortization of intangible assets is
recognised on a straight line basis over their estimated
useful lives. The period of estimated useful life of
intangibles is as follows:
Land lease rights
Customer relationship
Trademarks
Other intangible assets
3 - 15 years
20 years
not amortised
3 - 10 years
The amortization period and the amortization method for
intangible assets with finite useful lives are reviewed at
least at the end of each reporting period, with the effect
of any changes in estimate being accounted for on a
prospective basis.
An intangible asset is derecognised on disposal, or when
no future economic benefits are expected from use or
disposal. Gains or losses arising from derecognition of
an intangible asset, measured as the difference between
the net disposal proceeds and the carrying amount of the
asset, are recognised in profit or loss when the asset is
derecognised.
individuals
Right-of-use assets
land
Right-of-use assets mainly represents rent of
from
(Ukrainian citizens) for agricultural
purposes. The Group recognises right-of-use assets at
the commencement date of the lease (i.e., the date the
underlying asset is available for use). Right-of-use assets are
measured at cost, less any accumulated depreciation and
impairment losses, and adjusted for any remeasurement
of lease liabilities. The cost of right-of-use assets includes
the amount of lease liabilities recognized, initial direct
costs incurred and lease payments made at or before the
commencement date less any lease incentives received.
Right-of-use assets are depreciated over the period of
lease term. The depreciation starts at the commencement
date of the lease. The Group recognises depreciation of
right-of-use assets based on the lease term, presented
within cost of goods sold in the consolidated statement
of profit or loss. The average maturity of land lease
agreements is 7 years.
Impairment of tangible and intangible assets other
than goodwill
At each reporting date, the Group reviews the carrying
amounts of its tangible and intangible assets with definite
useful lives to determine whether there is any indication that
those assets have suffered an impairment loss. If any such
indication exists, the recoverable amount of the asset is
estimated in order to determine the extent of the impairment
loss (if any). Intangible assets with indefinite useful lives are
tested for impairment annually or more frequently when
there is an indication that they might be impared.
identifiable cash flows
For the purposes of assessing
impairment, assets
are grouped at the lowest levels for which there are
separately
(cash-generating
units). Recoverable amount is the higher of fair value less
costs to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to their
present value using a pre-tax discount rate that reflects
current market assessments of the time value of money
and the risks specific to the asset.
If the recoverable amount of an asset (or cash-generating
unit) is estimated to be less than its carrying amount, the
carrying amount of the asset (cash-generating unit) is
reduced to its recoverable amount. An impairment loss is
recognised immediately in the consolidated statement of
profit or loss unless the relevant asset is carried at a revalued
amount, in which case the impairment loss is treated as a
revaluation decrease through other comprehensive income.
Where an impairment loss subsequently reverses, the
carrying amount of the asset (cash-generating unit) is
increased to the revised estimate of its recoverable
amount, but so that the increased carrying amount does
not exceed the carrying amount that would have been
determined had no impairment loss been recognised for
the asset (cash-generating unit) in prior years. A reversal
of an impairment loss is recognised immediately in the
consolidated statement of profit or loss, unless the relevant
asset is carried at a revalued amount, in which case the
reversal of the impairment loss is treated as a revaluation
increase through other comprehensive income.
167
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Impairment of goodwill
For the purposes of impairment testing, goodwill is
allocated to each of the Group’s cash generating units
(or groups of cash-generating units) that is expected to
benefit from the synergies of the combination.
A cash-generating unit to which goodwill has been allocated
is tested for impairment annually, or more frequently when
there is an indication that the unit may be impaired. If the
recoverable amount of the cash-generating unit is less than
its carrying amount, the impairment loss is allocated first
to reduce the carrying amount of any goodwill allocated
to the unit and then to the other assets of the unit pro rata
based on the carrying amount of each asset in the unit. Any
impairment loss for goodwill is recognised directly in the
consolidated profit or loss. An impairment loss recognised
on goodwill is not reversed in subsequent periods.
Income taxes
Income taxes have been computed in accordance with
the laws currently enacted or substantially enacted in
jurisdictions where operating entities are located. Income
tax is calculated based on the results for the year as adjusted
for items that are non-assessable or non-tax deductible. It
is calculated using tax rates that have been enacted by the
reporting date.
Deferred tax is accounted for using the balance sheet
liability method in respect of temporary differences
arising from differences between the carrying amount
of assets and liabilities in the consolidated financial
statements and the corresponding tax basis used in the
computation of taxable profit. Deferred tax liabilities are
generally recognised for all taxable temporary differences
and deferred tax assets are recognised to the extent that
it is probable that taxable profits will be available against
which deductible temporary differences can be utilized.
The carrying amount of deferred tax assets is reviewed
at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable
profits will be available to allow all or part of the asset to
be recovered.
Deferred tax liabilities and assets are measured at the
tax rates that are expected to apply in the period in
which the liability is settled or the asset realised, based
on tax rates (and tax laws) that have been enacted or
substantively enacted by the end of the reporting period.
The measurement of deferred tax liabilities and assets
reflects the tax consequences that would follow from
the manner in which the Group expects, at the end of the
reporting period, to recover or settle the carrying amount
of its assets and liabilities.
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
Deferred tax is charged or credited to the consolidated
statement of profit or loss, except when it relates to
items credited or charged directly to equity or other
comprehensive income, in which case the deferred tax is
also dealt with in equity or other comprehensive income.
Deferred tax assets and liabilities are offset when:
• The Group has a legally enforceable right to set off the
recognised amounts of current tax assets and current
tax liabilities;
• The Group has an intention to settle on a net basis, or to
realize the asset and settle the liability simultaneously;
• The deferred tax assets and the deferred tax liabilities
relate to income taxes levied by the same taxation
authority in each future period in which significant
amounts of deferred tax liabilities and assets are
expected to be settled or recovered.
The Group companies that are involved in agricultural
production (those involved in grain and oilseeds growing)
benefit substantially from the status of an agricultural
producer. These companies are exempt from income taxes
and pay the Fixed Agricultural Tax (FAT) instead (Note 13).
Inventories
Inventories are stated at the lower of cost and net
realizable value. Costs comprise raw materials and, where
applicable, direct labour costs and those overheads that
have been incurred in bringing the inventories to their
present locations and condition.
168
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Inventories (continued)
Cost is calculated using the FIFO (first-in, first-out) method.
Net realizable value is determined as the estimated selling
price less all estimated costs of completion and costs to be
incurred in marketing, selling and distribution. Agriculture
related production process results in production of joint
products: main and by-products. A by-product arising
from the process is measured at net realizable value and
this value is deducted from the cost of the main product.
Biological assets and agricultural produce
Agricultural activity is defined as a biological transformation
of biological assets for sale into agricultural produce or
into additional biological assets. The Group classifies
hatchery eggs, live poultry and other animals and
plantations as biological assets.
The Group recognizes a biological asset or agricultural
produce when the Group controls the asset as a result of
past events, it is probable that future economic benefits
associated with the asset will flow to the Group, and the
fair value of the asset can be measured reliably.
Biological assets are stated at fair value less estimated
costs to sell at both initial recognition and as of the
reporting date, with any resulting gain or loss recognised
in the consolidated profit or loss.
Costs to sell include all costs that would be necessary to
sell the assets, including costs necessary to get the assets
to market.
The difference between fair value less costs to sell and
total production costs is allocated to biological assets as
of each reporting date as a fair value adjustment.
The change in this adjustment from one period to another
is recognised as “Net change in fair value of biological
assets and agricultural produce” in the consolidated profit
or loss.
Agricultural produce harvested from biological assets is
measured at its fair value less costs to sell at the point
of harvest. A gain or loss arising on initial recognition
of agricultural produce at fair value less costs to sell is
included in the consolidated profit or loss.
Based on the above policy, the principal groups of biological
assets and agricultural produce are stated as follows:
Biological Assets
(i) Broiler chickens
Broilers comprise poultry held for chicken meat production.
The fair value of broilers is determined by reference to the
cash flows that will be obtained from the sales of 42-day
aged chickens, with an allowance for costs to be incurred
and risks to be faced during the remaining transformation
process.
(ii) Breeders held for hatchery eggs production
The fair value of breeders is determined using the
discounted cash flow approach based on hatchery eggs’
market prices.
(iii) Cattle
Cattle comprise cows and bulls held for regeneration of
livestock population and animals raised for milk and beef
meat production. The fair value of livestock is determined
based on cash flows that will be obtained from sales of
milk, calves and meat during the life of cattle.
(iv) Crops in fields
The fair value of crops in fields is determined by reference
to the cash flows that will be obtained from sales of
harvested crops, with an allowance for costs to be incurred
and risks to be faced during the remaining transformation
process.
169
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Biological assets and agricultural produce (continued)
(v) Hatchery eggs
The fair value of hatchery eggs is determined by reference
to market prices at the point of harvest.
Financial assets and financial liabilities of the Group are
represented by cash and cash equivalents, long-term
bank deposits, bank borrowings, bonds issued and other
financial liabilities. The accounting policies for initial
recognition and subsequent measurement of financial
instruments are disclosed in the respective accounting
policies set out below in this Note.
Agricultural Produce
(i) Dressed poultry, beef and pork
The fair value of dressed poultry, beef and pork is
determined by reference to market prices at the point of
harvest.
(ii) Grain
The fair value of fodder grain is determined by reference
to market prices at the point of harvest.
The Group’s biological assets are classified into bearer and
consumable biological assets depending upon the function
of a particular group of biological assets in the Group’s
production process. Consumable biological assets are
those that are to be harvested as agricultural produce, and
include hatchery eggs and live broiler chickens intended
for the production of meat, as well as pork and meat cows.
Bearer biological assets include poultry held for hatchery
eggs production, milk cows and breeding bulls.
Financial instruments
Financial assets and financial liabilities are recognised
in the Group’s statement of financial position when the
Group becomes a party to the contractual provisions of
the instrument.
liabilities are
initially
Financial assets and financial
recognised at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets
and financial liabilities (other than financial assets and
financial liabilities at fair value through profit or loss) are
added to or deducted from the fair value of the financial
assets or financial liabilities, as appropriate, on initial
recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at fair
value through profit or loss are recognised immediately in
profit or loss.
Financial assets
All recognised financial assets are measured subsequently
in their entirety at either amortised cost or fair value,
depending on the classification of the financial assets.
Classification of financial assets
Debt instruments that meet the following conditions are
measured subsequently at amortised cost (this category
is the most relevant to the Group):
- the financial asset is held within a business model whose
objective is to hold financial assets in order to collect
contractual cash flows; and
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
- the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments
of principal and interest on the principal amount
outstanding.
Debt instruments that meet the following conditions
are measured subsequently at fair value through other
comprehensive income (FVTOCI):
- the financial asset is held within a business model whose
objective is achieved by both collecting contractual
cash flows and selling the financial assets; and
- the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments
of principal and interest on the principal amount
outstanding.
By default, all other financial assets are measured
subsequently at FVTPL.
Financial assets at amortised cost are subsequently
measured using the effective interest (EIR) method and
are subject to impairment.
The effective interest method is a method of calculating
the amortised cost of a debt instrument and of allocating
interest income over the relevant period.
170
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Financial assets (continued)
The amortised cost of a financial asset is the amount at
which the financial asset is measured at initial recognition
minus the principal repayments, plus the cumulative
amortisation using the effective interest method of any
difference between that initial amount and the maturity
amount, adjusted for any loss allowance. The gross
carrying amount of a financial asset is the amortised
cost of a financial asset before adjusting for any loss
allowance.
For all other financial instruments, a financial instrument
that is not credit-impaired on initial recognition is classified
in Stage 1. If the credit risk on the financial instrument
has not increased significantly since initial recognition,
the Group measures the loss allowance for that financial
instrument (Stage 1) at an amount equal to 12-month ECLs.
If the Group identifies a significant increase in credit
risk since initial recognition, the financial instrument is
transferred to Stage 2, but it is not considered to be credit-
impaired, the Group recognises lifetime ECLs. If the Group
determines that a financial asset is credit-impaired, the
asset is transferred to Stage 3 and its ECLs is measured
as a Lifetime ECLs.
Impairment of financial assets
The Group recognises an allowance for expected credit
losses (ECLs) for all debt instruments not held at fair
value through profit or loss. ECLs are estimated as the
difference between all contractual cash flows that are due
to the Group in accordance with the contract and all the
cash flows that the Group expects to receive, discounted
at the original effective interest rate. The amount of
expected credit losses is updated at each reporting date
to reflect changes in credit risk since initial recognition of
the respective financial instrument.
For trade accounts receivable and contract assets, the
Group applies a simplified approach in calculating ECLs.
Therefore, the Group does not track changes in credit
risk, but instead recognises a loss allowance based on
ECLs at each reporting date. The Group has established
a provision matrix that is based on its historical credit
loss experience, adjusted for forward-looking factors
specific to the debtors and the economic environment.
Lifetime ECLs represents the expected credit losses that
will result from all possible default events over the expected
life of a financial instrument. In contrast, 12-month ECLs
represents the portion of lifetime ECL that is expected to
result from default events on a financial instrument that
are possible within 12 months after the reporting date.
Significant increase in credit risk
In assessing whether the credit risk on a financial instrument
has increased significantly since initial recognition, the
Group compares the risk of a default occurring on the
financial instrument at the reporting date with the risk of
a default occurring on the financial instrument at the date
of initial recognition. In making this assessment, the Group
considers both quantitative and qualitative information
that is reasonable and supportable, including historical
experience and forward-looking information that is available
without undue cost or effort. Forward-looking information
considered includes economic situation of countries
and the future prospects of the industries in which the
Group’s debtors operate, obtained from economic expert
reports, financial analysts, governmental bodies, as well
as consideration of various external sources of actual and
forecast economic information that relate to the Group’s
core operations.
Irrespective of the outcome of the above assessment,
the Group presumes that the credit risk on a financial
asset has increased significantly since initial recognition
when contractual payments are more than 30 days past
due, unless the Group has reasonable and supportable
information that demonstrates otherwise.
Low credit risk financial instruments
Despite the foregoing, the Group assumes that the credit
risk on a financial instrument has not increased significantly
since initial recognition if the financial instrument is
determined to have low credit risk at the reporting date. A
financial instrument is determined to have low credit risk
if:
a) the financial instrument has a low risk of default,
b) the debtor has a strong capacity to meet its contractual
cash flow obligations in the near term, and
c) adverse changes in economic and business conditions
in the longer term may, but will not necessarily, reduce
the ability of the borrower to fulfil its contractual cash
flow obligations.
Default definition
The Group considers that default has occurred when a
financial asset is more than 90 days past due unless the
Group has reasonable and supportable information to
demonstrate that a more lagging default criterion is more
appropriate.
171
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Financial assets (continued)
Credit impaired financial assets
A financial asset is credit-impaired (Stage 3) when one
or more events that have a detrimental impact on the
estimated future cash flows of that financial asset have
occurred. Evidence that a financial asset is credit-impaired
includes observable data about the following events:
a) significant financial difficulty of the issuer or the
borrower;
b) a breach of contract, such as a default or past due
event;
c) the lender(s) of the borrower, for economic or contractual
reasons relating to the borrower’s financial difficulty,
having granted to the borrower a concession(s) that the
lender(s) would not otherwise consider;
d) it is becoming probable that the borrower will enter
bankruptcy or other financial reorganisation; or
e) the disappearance of an active market for that financial
asset because of financial difficulties.
Write-off policy
The Group writes off a financial asset when there is
information indicating that the debtor is in severe financial
difficulty and there is no realistic prospect of recovery,
e.g. when the debtor has been placed under liquidation or
has entered into bankruptcy proceedings, or in the case
of trade accounts receivable, when the amounts are over
three years past due, whichever occurs sooner. Financial
assets written off may still be subject to enforcement
172
activities under the Group’s recovery procedures,
taking into account legal advice where appropriate. Any
recoveries made are recognised in the consolidated
statement of profit or loss. Inputs, assumptions and
estimation techniques used by measurement and
recognition of expected credit losses are disclosed in
respective Notes 18 and 23 on financial assets.
Financial liabilities
Initial recognition and measurement
The Group’s financial
liabilities
borrowings,
instruments.
lease
loans and
liabilities and derivative financial
include
Financial liabilities are recognised initially at fair value and
are measured subsequently at amortised cost using the
effective interest method.
The effective interest method is a method of calculating
the amortised cost of a financial liability and of allocating
interest expense over the relevant period. The effective
interest rate is the rate that exactly discounts estimated
future cash payments (including all fees and points paid or
received that form an integral part of the effective interest
rate, transaction costs and other premiums or discounts)
through the expected life of the financial liability, or (where
appropriate) a shorter period, to the amortised cost of a
financial liability.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and
only when, the Group’s obligations are discharged,
cancelled or have expired. The difference between the
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
carrying amount of the financial liability derecognised
and the consideration paid and payable is recognised in
profit or loss.
When the Group exchanges with the existing lender one
debt instrument into another one with the substantially
different terms, such exchange is accounted for as an
extinguishment of the original financial liability and the
recognition of a new financial liability. Similarly, the
Group accounts for substantial modification of terms
of an existing liability or part of it as an extinguishment
of the original financial liability and the recognition of a
new liability. It is assumed that the terms are substantially
different if the discounted present value of the cash
flows under the new terms, including any fees paid net
of any fees received and discounted using the original
effective rate is at least 10 per cent different from the
discounted present value of the remaining cash flows
of the original financial liability. If the modification is
not substantial, the difference between: (1) the carrying
amount of the liability before the modification; and (2)
the present value of the cash flows after modification
should be recognised in profit or loss as the modification
gain or loss.
Trade accounts receivable
Trade accounts receivable is recognised if an amount
of consideration that is unconditional is due from the
customer. Trade accounts receivable that do not contain
a significant financing component are measured at the
transaction price.
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Cash and cash equivalents
Cash and cash equivalents include cash on hand, cash
with banks, deposits and government bonds with maturity
of less than three months from the date of acquisition.
Bank borrowings, corporate bonds issued and other
long-term payables
Interest-bearing bank borrowings, bonds issued and other
long-term payables are initially measured at fair value that is
calculated by taking into account any discount or premium
on acquisition and fees or costs that are an integral part
of the effective interest rate (EIR). They are subsequently
measured at amortised cost using the EIR method, where
amortization is included as finance costs in the statement
of profit or loss. Gains and losses are recognised in profit
or loss when the liabilities are derecognised as well as
through the EIR amortisation process.
Derivative financial instruments
The Group enters into derivative financial instruments to
purchase sunflower seeds and sales of grains. Derivatives
are initially recognised at fair value at the date the
derivative contracts are entered into and subsequently
remeasured to their fair value at the end of each reporting
period. The resulting gain or loss is recognised in profit
or loss immediately.
Trade and other accounts payable
Accounts payable are measured at initial recognition at
fair value, and are subsequently measured at amortised
cost using the effective interest rate method.
and by reducing the carrying amount to reflect the lease
payments made. The Group recognises interest on lease
liabilities and presents it within interest expenses in the
consolidated profit or loss.
Lease liabilities
The Group assesses whether a contract is or contains a
lease, at inception of the contract.
The Group recognises lease liabilities in the consolidated
statement of financial position, initially measured at the
present value of future lease payments. The Group does
not apply the short term and low-value lease exemptions.
The Group measures the lease liability at the present
value of the lease payments that are not paid at the
commencement date, discounted by using the incremental
borrowing rate, because the interest rate implicit in
the lease is not readily determinable. The incremental
borrowing rate is defined as the rate of interest that the
lessee would have to pay to borrow over a similar term,
and with a similar security the funds necessary to obtain
an asset of a similar value to the right of use asset in a
similar economic environment.
The Group remeasures the lease liability (and makes a
corresponding adjustment to the related right-of-use
asset) whenever:
• The lease term has changed or there is a change in the
assessment of exercise of a purchase option, in which
case the lease liability is remeasured by discounting the
revised lease payments using a revised discount rate.
• The lease payments change due to changes in an in-
dex or rate or market rate, in which cases the lease
liability is remeasured by discounting the revised
lease payments using the initial discount rate (un-
less the lease payments change is due to a change in
a floating interest rate, in which case a revised dis-
count rate is used).
A lease contract is modified and the lease modification is
not accounted for as a separate lease, in which case the
lease liability is remeasured by discounting the revised
lease payments using a revised discount rate.
The lease liability is presented as a separate line in the
consolidated statement of financial position. The lease
liability is subsequently measured by increasing the
carrying amount to reflect interest on the lease liability
In the statement of cash flows the Group separates
the total amount of cash paid into a principal portion
(presented within financing activities) and
interest
(presented within operating activities).
173
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
Provisions
Provisions are recognised when the Group has a present
legal or constructive obligation (either based on legal
regulations or implied) as a result of past events, and it
is probable that an outflow of resources will be required
to settle the obligation and a reliable estimate of the
obligation can be made.
revaluation reserve related to those property, plant and
equipment. The total cash consideration amounted to
USD 671 thousand, which was received during 2021.
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.
the carrying amounts of assets and liabilities that are
not readily apparent from other sources. The estimates
and associated assumptions are based on historical
experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed
on an ongoing basis. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if
the revision affects both current and future periods.
3. CHANGES IN THE GROUP STRUCTURE
Discontinued operation
During the year ended 31 December 2021, the Group
disposed of the Ptujska klet, which was involved in wine
production and distribution located in Slovenia, and was
previously presented within Europe Operating Segment.
Net assets as of the date of disposal amounted to USD
4,852 thousand. The total cash consideration amounted
to USD 2,293 thousand, which was received during 2021.
During the year ended 31 December 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
Poultry and Related Operations Segment. The net assets
as of the date of disposal amounted to USD 620 thousand.
Before sale the property plant and equipment included
in the net assets disposed were impaired by USD 4,105
thousand. Impairment was recognized as a decrease in
Acquisitions
On 1 June 2021, the Group acquired a 51% share in the
company Lubnym`yaso LLC, a Ukrainian meat production
plant, whose main economic activity is the production and
sale of beef meat under the trade-mark Scott Smeat. As
of the date of acquisition, the net assets of the acquired
meat production plant amounted to USD 1,800 thousand.
Purchase consideration of the acquired share amounted
to USD 1,840 thousand and was paid in cash. Goodwill
in the amount of USD 921 thousand is attributable to the
expectation that this acquisition will support strategic
transformation to a culinary company through launch of
additional products.
4. CRITICAL ACCOUNTING JUDGMENTS AND KEY
SOURCES OF ESTIMATION UNCERTAINTY
In the application of the Group’s accounting policies,
which are described in Note 2, management is required
to make judgements, estimates and assumptions about
Critical judgements in applying accounting policies
The following are the critical judgments, apart from those
involving estimations (see below), that management has
made in the process of applying the Group’s accounting
policies and that have the most significant effect on
the amounts recognised in the consolidated financial
statements.
Going concern
The Group has concluded that it is appropriate to apply
the going concern basis of accounting in preparing
these consolidated financial statements. Management
exercises significant judgement in assessment of the
existence of a material uncertainty related to going
concern by taking into consideration the effects of the
ongoing War on the Group`s activities. The information
about material uncertainties related to events or
conditions that may cast significant doubt upon
the Group’s ability to continue as a going concern is
disclosed in Note 2.
174
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
4. CRITICAL ACCOUNTING JUDGMENTS AND KEY
SOURCES OF ESTIMATION UNCERTAINTY
(continued)
Determination of variable lease payments
As described in Note 2, the Group measures lease liabilities
at the present value of future lease payments, discounted
using the lessee’s incremental borrowing rate. Future lease
payments consist of both fixed payments (including in-
substance fixed payments) and variable lease payments
that depend on an index or rate, including payments that
vary to reflect changes in market rental rates. Management
are required to make significant judgement in determining
whether variable lease payments depend on an index or
rate. Regardless of the lease payments stated in the lease
contracts, customary business practices complement the
contractual terms in a way that at each particular date the
rate is a market rate. Since the entire market operates on the
basis of expectations of a periodic revision of rates (based
on current market rates), Management has concluded
that the rates are determined by the market mechanism.
In substance, non-contractual changes in lease payments
are driven by competitive forces and changes in payments
are based on the average changes of lease payments in
the region, which means that the variable component of
lease payments depends on a market index.
Revaluation of property, plant and equipment
As described in Note 2, the Group applies the revaluation
model to the measurement of all groups of property, plant
and equipment, except land and other fixed assets (Note
14). At each reporting date, the Group carries out a review
of the carrying amount of items of property, plant and
equipment accounted for using a revaluation model to
determine whether the carrying amount differs materially
from fair value.
indicators
When determining whether to perform a fair value
assessment in a given period, Management considers
development of macroeconomic
including
changes in prices (producer price indices, price indices for
non-residential buildings, transport facilities, utilities and
other engineering structures), inflation rates, GDP growth
rates and changes of the Ukrainian Hryvnia (“UAH”) against
USD and EUR. Also, different internal and external factors
such as changes in political, legislative, economic situation
are reviewed.
Based on the results of this review, Management concluded
that all groups of property, plant and equipment accounted
for using the revaluation model should be revalued as
of 31 December 2022. Accordingly, the Group engaged
independent valuation specialists to assess fair values
of the relevant property, plant and equipment as at 31
December 2022. The key assumptions used to determine
the fair value of the properties are provided in Note 14.
Change in income tax status of certain Group’s
subsidiaries
Starting from 1 January 2022, the change in tax status of
poultry producers has become effective as the respective
amendments to the Tax Code of Ukraine came into
force. As a result, starting from 1 January 2022, profits
of agricultural producers engaged in rearing chickens,
chicken meat and eggs production, are subject to regular
18% income tax. Until 31 December 2021, profits of the
chicken and egg producers were non-taxable as these
entities had exempt status for corporate income tax
purpose and were subject to the fixed agricultural tax,
similar to other agribusinesses.
Management has applied significant
judgment to
consider that the new tax law effected a change in tax
status for the Group`s subsidiaries rather than a change
in tax law or tax rates, and given that there is no specific
guidance in IAS 12 Income tax for when to account for
a change in tax status, significant judgment was applied
in considering the timing of deferred tax recognition.
As the above has caused a change to the tax status,
for certain subsidiaries of the Group, from non-tax
payer to tax payer by becoming income taxpayers from
1 January 2022, the Group has recognized deferred tax
liabilities in the amount of USD 81,317 thousand as of
this date. These deferred tax liabilities of the Group`s
poultry farms arise on temporary tax differences from
property, plant and equipment measured using the
revaluation model. Accordingly, the resulting deferred
tax liabilities at 1 January 2022 were recognized
through other comprehensive income and presented
in a separate line as Deferred tax charged directly to
revaluation reserve.
Presentation of the expenses as war-related
In determining if the expenses incurred by the Group
relate to war and should be presented accordingly in Note
33, several critical assumptions have been used. These
assumptions include but are not limited to timing of the
expenses, their nature, prerequisites of their incurrence,
ordinariness and necessity of expenses, and possibility
of their incurrence in significant amounts during routine
operations during the pre-war period.
Key sources of estimation uncertainty
The following are the key assumptions concerning the
future, and other key sources of estimation uncertainty
at the end of the reporting period that have a significant
risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial
year.
175
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
4. CRITICAL ACCOUNTING JUDGMENTS AND KEY
SOURCES OF ESTIMATION UNCERTAINTY
(continued)
Impairment of goodwill and intangibles with indefinite
useful lives
As disclosed in Notes 16 and 17, the Group determines at least
on an annual basis whether indefinite life intangible assets
and goodwill have been impaired. This requires an estimate
of an asset’s recoverable amount which is the higher of an
asset’s or cash generating unit’s (CGU’s) fair value less costs
of disposal and its value in use and it is determined for an
individual asset, unless the asset does not generate cash
inflows that are largely independent of those from other
assets or groups of assets. Estimating a value-in-use amount
requires management to make an estimate of the expected
future cash flows from the cash generating unit and also to
choose a suitable discount rate and growth rates in order to
calculate the present value of those cash flows.
The Group constantly monitors climate-related matters
affecting the value-in-use of intangibles and goodwill. At
the current time, there no material effects that will impact
the Group. The Group will adjust the key assumptions used
in value-in-use calculations should a change be required.
Determination of incremental borrowing rate
As described in Note 2, the Group uses incremental
borrowing rate as the discounting factor for the purpose of
calculating of lease liability if the rate implicit in the lease
is not readily determinable. Incremental borrowing rate is
determined as the available rate for the Group adjusted
for the specifics of particular lease contracts.
Fair value less costs to sell of biological assets
and agricultural produce
Biological assets are recorded at fair values less costs
to sell. The Group estimates the fair values of biological
assets based on the following key assumptions:
• Average meat output for broilers and livestock for meat
production;
• Average productive life of breeders and cattle held for
regeneration and milk production;
• Expected crops output;
• Estimated changes in future sales prices;
• Projected production costs and costs to sell; and,
• Discount rate.
During the year ended 31 December 2022 the fair value of
biological assets was estimated using discount factors of
25.0% and 42.7% (31 December 2021: 11.2% and 11.5%) for
non-current and current assets, respectively.
Although some of these assumptions are obtained from
published market data, the majority of these assumptions
are estimated based on the Group’s historical and
projected results (Note 19).
In determining fair value measurement, the impact of
legislation,
potential climate-related matters,
climate change, and company climate objectives which
may affect the fair value measurement of biological assets
and agricultural produce has been considered. At present,
the impact of climate-related matters is not material to the
Group’s financial statements.
including
Revaluation of property, plant and equipment
During the year ended 31 December 2022, Management
appointed an
independent appraiser to perform a
revaluation of buildings and structures, grain storage
facilities, production machinery, utilities and infrastructure,
vehicles and agricultural machinery, auxiliary and other
machinery as of 31 December 2022.
The independent appraiser has performed the valuation
in accordance with International Valuation Standards
applying the following techniques:
• depreciated replacement cost for grain storage facilities;
• market comparable approach for vehicles and agricul-
tural machinery; and
• depreciated replacement cost and market comparable
approach, if applicable, for buildings and structures,
utilities and infrastructure, production, auxiliary and
other machinery.
Key assumptions used by the independent appraiser in
assessing the fair value of property, plant and equipment
using the depreciated replacement cost and market
comparable methods were as follows:
• changes in market prices of assets and construc-
tion materials from the date of their acquisition/con-
struction/date of previous valuation to the date of
this valuation;
• external market prices for vehicles and equipment;
• normative and remaining useful lives;
• rates of physical depreciation.
The revaluation results using the depreciated replacement
cost and market comparable approaches were compared
with a revaluation performed using the income approach to
identify level of economic obsolescence, if any. Management
used probability-based discounted cash flow scenarios,
where all possible impacts of war were incorporated in cash
flows, while all CGUs in Ukraine were discounted by a factor
of 19.1%, reflecting risks except for uncertainties related to
the war. If the above impacts and uncertainties would have
been taken into determination of the discount factor as
alternative to incorporating them into the cashflows, such
the discount factor would approximate 25%. An increase
by 100 basis points in the discount rate would result in a
decrease in the fair value of property plant and equipment
by USD 24,226 thousand.
For CGUs in Ukraine, the terminal growth rate of 5.0% was
used for all cash flows beyond the five-year projected
period, while the average revenue growth rates within
the five-year period were in range from 10.9% to 11.4%. A
decrease in the terminal growth rate by 100 basis points
or in the revenue growth rate by 100 basis points would
lead to a decrease in the fair value of property, plant
and equipment by USD 15,765 thousand or USD 29,339
thousand, respectively. Key assumptions used for the
176
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
4. CRITICAL ACCOUNTING JUDGMENTS AND KEY
SOURCES OF ESTIMATION UNCERTAINTY
(continued)
Revaluation of property, plant and equipment
(continued)
identification of economic obsolence, if any, for European
operating segment are described in the Note 17.
In determining fair value measurement, the impact of
potential climate-related matters, including legislation,
climate change, and Company climate objectives which
may affect the fair value measurement of property, plant
and equipment has been considered. At present, the
impact of climate-related matters is not material to the
Group’s financial statements.
Useful lives of property, plant and equipment
The estimation of the useful life of an item of property,
plant and equipment is a matter of management estimate
based upon experience with similar assets. In determining
the useful life of an asset, Management considers the
expected usage, estimated technical obsolescence,
physical wear and tear, the physical environment in
which the asset is operated and other factors (including
climate-related matters). Changes
in any of these
conditions or estimates may result in adjustments for
future depreciation rates.
Deferred tax assets
Deferred tax assets, including those arising from unused
tax losses are recognised to the extent that it is probable
that they will be recovered, which is dependent on the
generation of sufficient future taxable profit. Based on
Management’s assessment, the Group determined it was
appropriate to recognize deferred tax assets on unused
tax losses, which will be utilized in future against existing
deferred tax liabilities and available future tax profits.
177
The estimation uncertainty therefore pertains to the level
of deferred tax assets to be recognised.
5. 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
• culinary products and 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. However, 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
requires single marketing strategies, centralised budgeting
process and centralised management of production
operations.
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
5. SEGMENT INFORMATION
(continued)
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
As of 31 December 2022 and for the year then ended the Group’s segmental information from continuing operations was as follows:
YEAR ENDED 31 DECEMBER 2022
External sales
Sales between segments
Total revenue
Segment result
Unallocated corporate expenses
Loss on impairment of goodwill and property,
plant and equipment 4)
Other expenses, net 1)
Profit before tax from continuing operations
OTHER INFORMATION:
Additions to property, plant and equipment 2)
Depreciation and amortization expense 3)
Net change in fair value of biological assets
and agricultural produce
POULTRY AND
RELATED OPERATIONS
1,886,814
GRAIN GROWING
OPERATIONS
157,612
55,234
1,942,048
198,324
338,425
496,037
88,480
MEAT PROCESSING AND
OTHER AGRICULTURAL
OPERATIONS
134,099
EUROPEAN
OPERATING SEGMENT
463,501
TOTAL REPORTABLE
SEGMENTS
2,642,026
470
134,569
4,030
-
463,501
44,886
394,129
3,036,155
335,720
(8,024)
(7,462)
(11,321)
(1,977)
(28,784)
68,958
72,130
13,008
22,371
61,398
(141,516)
1,844
3,796
(1,231)
62,975
20,139
1,890
156,148
157,463
(127,849)
ELIMINATIONS
-
(394,129)
(394,129)
-
-
-
-
-
CONSOLIDATED
2,642,026
-
2,642,026
335,720
(51,803)
(29,242)
(513,690)
(259,015)
156,148
157,463
(127,849)
1) Include finance income, finance costs, foreign exchange loss, net and other expenses, net.
2) Additions to property, plant and equipment in 2022 do not include unallocated additions in the amount of USD 12,242 thousand.
3) Depreciation and amortization for the year ended 31 December 2022 does not include unallocated depreciation and amortization in the amount of USD 1,443 thousand.
4) Loss on impairment of property, plant and equipment for the year ended 31 December 2022 includes unallocated loss in amount of USD 458 thousand.
178
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
5. SEGMENT INFORMATION
(continued)
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
As of 31 December 2021 and for the year then ended the Group’s segmental information from continuing operations was as follows:
YEAR ENDED 31 DECEMBER 2021
External sales
Sales between segments
Total revenue
Segment result
Unallocated corporate expenses
Loss on impairment of property,
plant and equipment 4)
Other expenses, net 1)
Profit before tax from continuing operations
OTHER INFORMATION:
Additions to property, plant and equipment 2)
Depreciation and amortization expense 3)
Net change in fair value of biological assets
and agricultural produce
POULTRY AND
RELATED OPERATIONS
1,607,067
GRAIN GROWING
OPERATIONS
188,344
67,752
1,674,819
170,424
312,277
500,621
325,812
MEAT PROCESSING AND
OTHER AGRICULTURAL
OPERATIONS
176,264
EUROPEAN
OPERATING SEGMENT
400,587
TOTAL REPORTABLE
SEGMENTS
2,372,262
522
176,786
4,339
-
400,587
48,136
380,551
2,752,813
548,711
(4,635)
(1,832)
(312)
(3,642)
(10,421)
92,663
96,482
13,871
26,247
71,377
169,057
1,267
6,245
(1,096)
24,639
17,436
3,094
144,816
191,540
184,926
ELIMINATIONS
-
(380,551)
(380,551)
-
-
-
-
-
CONSOLIDATED
2,372,262
-
2,372,262
548,711
(32,101)
(10,607)
(102,294)
403,709
144,816
191,540
184,926
1) Include finance income, finance costs, foreign exchange gain, net and other expenses, net.
2) Additions to property, plant and equipment in 2021 do not include unallocated additions in the amount of USD 10,442 thousand.
3) Depreciation and amortization for the year ended 31 December 2021 does not include unallocated amount of USD 1,318 thousand.
4) Loss on impairment of property, plant and equipment for the year ended 31 December 2021 includes unallocated loss in amount of USD 186 thousand.
179
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
5. SEGMENT INFORMATION
(continued)
6. REVENUE
Revenue for the years ended 31 December 2022 and 2021 was as follows:
The Group’s export sales to external customers by major
product types were as follows during the years ended 31
December 2022 and 2021:
Chicken meat and related products
Vegetable oil and related products
Grain
Other agricultural segment products
2022
2021
986,857
448,747
121,706
43,861
1,601,171
769,563
290,230
140,072
65,564
1,265,429
POULTRY AND RELATED OPERATIONS SEGMENT
Chicken meat
Vegetable oil and related products
Other poultry related sales
GRAIN GROWING OPERATIONS SEGMENT
Grain
Export sales includes revenue from shipping and handling
services in the amount of USD 149,074 thousand as for
the year ended 31 December 2022 (2021: USD 70,527
thousand).
MEAT PROCESSING AND OTHER AGRICULTURAL OPERATIONS SEGMENT
Meat-processing products
Other agricultural sales
Export sales of vegetable oil and related products and
export sales of grains are primarily made to global trading
companies. The sales of chicken meat to major markets of
the Group - MENA and EU amounted to 34% and 36% of
total export sales respectively (2021: 38% and 21%).
EUROPEAN OPERATING SEGMENT
Chicken meat
Meat-processing products
Other agricultural sales
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
2022
2021
1,327,741
462,405
96,668
1,886,814
157,612
157,612
102,199
31,900
134,099
305,643
122,565
35,293
463,501
2,642,026
1,223,635
307,541
75,891
1,607,067
188,344
188,344
143,152
33,112
176,264
253,404
121,155
26,028
400,587
2,372,262
The geographic structure of revenue for the years ended 31 December 2022 and 2021 was as follows:
Export1)
Domestic
1) Includes revenue generated outside of the Group’s production entity residency.
2022
2021
1,601,171
1,040,855
2,642,026
1,265,429
1,106,833
2,372,262
Non-current assets (excluding deferred tax assets,
long-term deposits and non-current financial assets)
based on the geographic location of the manufacturing
facilities were as follows as of 31 December 2022 and 31
December 2021:
Ukraine
Europe
The Middle East
and North Africa (MENA)
2022
2021
1,922,334
314,620
2,336
2,148,821
257,967
1,418
2,239,290 2,408,206
No single customer contributed more than 10% amount to
the Group’s revenue in either 2022 or 2021.
180
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
Payroll and related expenses includes social security
contributions which amounted to USD 12,797 thousand
for the year ended 31 December 2022 (2021: USD 12,204
thousand).
Remuneration to the auditors, included in Services above,
amounted to USD 904 thousand for the year ended 31
December 2022 (2021: USD 1,018 thousand). This includes
both audit and non-audit services, with the statutory
audit fees amounting to USD 866 thousand for the year
ended 31 December 2022 (2021: USD 855 thousand),
tax advisory service fees amounting to USD 9 thousand
(2021: USD 86 thousand) and other non-audit services
fees amounting to USD 30 thousand for the year ended
31 December 2022 (2021: USD 77 thousand).
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
6. REVENUE
(continued)
Advances received from third parties as of 31 December
2021 in the amount of USD 41,983 were recognized as
revenue during the year ended 31 December 2022.
Advances received from third parties as of 31 December
2020 in the amount of USD 15,227 were recognized as
revenue during the year ended 31 December 2021.
7. COST OF SALES
Cost of sales for the years ended 31 December 2022 and
2021 was as follows:
Poultry and related operations
segment
2022
2021
1,372,881 1,260,528
Grain growing operations segment
63,121
96,742
Meat processing and other
agricultural operations segment
117,592
157,854
Revenue includes shipping and handling costs in the price
of the product.
For the years ended 31 December 2022 and 2021 cost of
sales comprised the following:
Costs of raw materials and other
inventory used
2022
2021
1,319,715
1,201,855
Payroll and related expenses
286,653
287,210
Depreciation and amortization
expense
Other costs
140,737
172,619
158,859
150,988
1,905,964 1,812,672
Social security contributions, included in Payroll and
related expenses above, amounted to USD 46,023
thousand for the year ended 31 December 2022 (2021:
USD 45,921 thousand).
European operating segment
352,370
297,548
8. SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
1,905,964 1,812,672
Selling, general and administrative expenses for the years
ended 31 December 2022 and 2021 were as follows:
Cost of sales includes shipping and handling expenses
and were for the years ended 31 December 2022 and 2021
as follows:
Poultry and related operations
segment
2022
2021
160,229
75,916
Grain growing operations segment
17,695
19,438
Meat processing and other
agricultural operations segment
2,887
4,420
European operating segment
9,404
8,851
190,215
108,625
Payroll and related expenses
Services
Depreciation and amortization
expense
Advertising expense
Representative costs and business
trips
Fuel and other materials used
Insurance expense
Bank services and conversion fees
Other
2022
2021
119,441
113,377
78,535
55,536
18,169
20,501
12,781
14,363
9,834
8,909
7,226
2,695
1,079
4,672
6,691
2,671
749
5,386
254,432
228,183
181
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
9. OTHER OPERATING INCOME
11. DEFERRED INCOME
12. FINANCE COSTS
Other operating income for the years ended 31 December
2022 and 2021 was as follows:
Government grants
Gain on extinguisment of trade
accounts payable
Insurance compensation
Other income
2022
2021
5,428
2,124
7,405
1,328
1,758
4,094
1,238
1,864
13,404
11,835
10. OTHER OPERATING EXPENSES
Other operating expenses for the years ended 31 December
2022 and 2021 were as follows:
Expected credit losses and write-off
of financial assets
Charity expenses and community
support donations
Written-off inventories and
biological assets
Loss on disposal of property, plant
and equipment
Provision for claims, penalties and
indemnification
Other expenses
2022
36,817
2021
-
24,994
8,105
9,527
-
3,983
992
2,021
1,924
5,926
3,404
83,268
14,425
182
The Ukrainian Government supports domestic agricultural
producers and attracts investments into the agricultural
sector. Also, during the years ended 31 December 2022
and 2021, 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.
Finance costs for the years ended 31 December 2022 and
2021 were as follows:
Interest on corporate bonds
109,201
104,700
Interest on obligations under leases
38,859
45,284
2022
2021
Interest on bank borrowings
Bank commissions and other charges
6,754
3,168
2,163
2,068
157,982
154,215
For the years ended 31 December 2022 and 2021 the
following government grants were received:
Total finance costs
Less:
Finance costs included in the cost
of qualifying assets
(3,277)
(3,791)
154,705
150,424
For qualifying assets, the weighted average capitalization
rate on funds borrowed during the year ended 31
December 2022 was 7.80% (2021: 7.80%).
Compensation received in EU
Compensation of construction and
reconstruction of livestock farms
Compensation of the cost of
machinery and equipment
Other compensations
2022
4,306
1,024
23
75
5,428
2021
5,997
1,514
50
195
7,756
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 in
full. There are no unfulfilled conditions or contingencies
attached to these grants.
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
2. These agriproducts were cultivated on land that such
agricultural manufacturers own or lease, and the
ownership title and leases had been duly registered.
Starting from 1 January 2022, the change in tax status of
poultry producers has become effective as the respective
amendments to the Tax Code of Ukraine came into force.
As a result, starting from 1 January 2022, profits of the
in rearing chickens,
agricultural producers engaged
chicken meat and eggs production, are subject to regular
18% income tax, as described in Note 4.
The components of income tax (benefit)/expense were as
follows for the years ended 31 December 2022 and 2021:
Current income tax expense
Withholding tax
Deferred tax benefit
2022
9,301
-
2021
9,773
8,605
(37,379)
(11,464)
Income tax (benefit)/expense
(28,078)
6,914
12. FINANCE COSTS
(continued)
Interest on corporate bonds for the years ended 31 December
2022 and 2021 includes the amortization of premium and
debt issue costs on bonds issued in the amounts of USD
6,161 thousand and USD 5,821 thousand, respectively.
13. INCOME TAX
The majority of the Group’s operating entities are located
in Ukraine, therefore the effective tax rate reconciliation
is completed based on Ukrainian statutory rates.
During the year ended 31 December 2022, the Group’s
companies that have the status of Corporate Income Tax
(the “CIT”) payers in Ukraine were subject to 18% income
tax. The deferred income tax assets and liabilities as of
31 December 2022 and 2021 are measured based on the
tax rates expected to be applied to the period when the
temporary differences are expected to reverse.
Before 1 January 2022 the majority of the Group companies
that were involved in agricultural production (poultry farms
and other entities engaged in agricultural production) benefit
substantially from the status of an agricultural producer
as these companies were exempt from income taxes and
pay the fixed agricultural tax (FAT) instead. The tax rate for
agricultural producers was calculated as a percentage of
the target-ratio based monetary valuation per hectare of
agricultural land. Agricultural manufacturers were eligible
to apply for a single tax if they meet both the following two
requirements:
1. The share of the entity’s revenue from agricultural
production (i.e. sale of the entity’s cultivated and
processed products) to the total share of its income
equals or exceeds 75 per cent; and
183
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
The reconciliation between (loss)/profit before tax from
continuing operations multiplied by the statutory tax rate
and the tax expense for the years ended 31 December
2022 and 2021 was as follows:
Accounting (loss)/profit before tax
from continuing operations
Loss before tax from a discontinued
operation
Income tax (benefit)/expense
calculated at rates effective during
the year ended in respective
jurisdictions
TAX EFFECT OF:
(Loss)/income generated by FAT
payers and other exempt from
income tax
Effect on income tax generated by
EU companies
Change in unrecognised deferred
tax asset
Withholding tax
Non-deductable expenses and non-
taxable income, net
2022
2021
(259,015)
403,709
-
(3,457)
(47,262)
71,686
2,056
(75,129)
2,627
532
(888)
(3,421)
-
8,605
14,621
3,692
Translation (gain)/loss
768
949
Income tax (benefit)/expense
(28,078)
6,914
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
13. INCOME TAX
(continued)
Derecognition of previously recognised tax losses results
from the reversal of deferred tax liabilities related to
property revaluation that were the source of taxable
income relied on previously to support recognition.
As of 31 December 2022 and 2021 deferred tax assets and
liabilities recognised the following:
DEFERRED TAX ASSETS
ARISING FROM:
Other current liabilities
Current assets
Tax losses
Total deferred tax assets
DEFERRED TAX LIABILITIES
ARISING FROM:
Property, plant and equipment
Current assets
2022
2021
3,397
1,716
3,334
3,129
47,631
29,498
52,744
35,961
(170,977)
(77,647)
(2,681)
-
Total deferred tax liabilities
(173,658)
(77,647)
Net deferred tax liabilities
(120,914)
(41,686)
Deferred income tax assets and liabilities are offset
when there is a legally enforceable right to offset current
tax assets against current tax liabilities and when the
deferred income taxes relate to the same fiscal authority.
The following amounts, determined after appropriate
offsetting, are presented in the consolidated statement of
financial position as of 31 December 2022 and 2021:
Deferred tax liabilities have not been recognised in respect
of unremitted earnings of Ukrainian subsidiaries as the
earnings can be remitted free from taxation currently and
in future years, based on current legislation.
The movements in net deferred tax liabilities for the years
ended 31 December 2022 and 2021 were as follows:
Deferred tax assets
Deferred tax liabilities
2022
2021
2,763
3,018
(123,677)
(44,704)
Unrecognised deferred tax assets
(329)
(1,052)
(121,243)
(42,738)
During the years ended 31 December 2022 and 2021 the
Group did not recognize deferred tax asset in respect of
tax losses in the amount of USD 1,828 (USD 329 thousand
of deferred tax assets), USD 5,851 thousand (USD 1,052
thousand of deferred tax asset), respectively, as the Group
did not intend to deduct the relevant expenses for tax
purposes in subsequent periods, as there are uncertainties
on whether sufficient taxable profits will be generated by
particular companies of the Group in the future. There is
no expiration date of accounting tax losses according to
Tax Code of Ukraine.
Net deferred tax liabilities as of
beginning of the year
Deferred tax charged directly to
revaluation reserve (Note 4)
Deferred tax benefit
Deferred tax on revaluation of
property, plant and equipment
charged directly to other
comprehensive income
Translation difference
Net deferred tax liabilities as of
end of the year
2022
2021
(42,738)
(28,045)
(81,317)
-
37,379
11,464
(58,889)
(26,597)
24,322
440
(121,243)
(42,738)
184
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
14. PROPERTY, PLANT AND EQUIPMENT
The following table represents movements in property, plant and equipment for the year ended 31 December 2022:
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
Cost or fair value:
At 31 December 2021
Additions
Transfer from Right-of-use assets
Transfers
Disposals
Disposal of subsidiary
Revaluation
Impairment loss
Translation difference
At 31 December 2022
Accumulated depreciation:
At 31 December 2021
Depreciation charge for the year
Elimination upon disposal
Elimination upon revaluation
Disposal of subsidiary
Transfers
Transfer from Right-of-use assets
Translation difference
At 31 December 2022
Net book value
At 31 December 2021
At 31 December 2022
BUILDINGS
AND
STRUCTURES
GRAIN
STORAGE
FACILITIES
PRODUCTION
MACHINERY
AUXILIARY
AND OTHER
MACHINERY
UTILITIES AND
INFRASTRUCTURE
VEHICLES AND
AGRICULTURAL
MACHINERY
LAND
OTHER FIXED
ASSETS1)
CONSTRUCTION
IN PROGRESS2)
TOTAL
34,639
1,559
951,315
52,731
101,970
2,491
387,968
38,055
-
-
-
-
(1,068)
(8,162)
-
-
-
-
94,628
(6,098)
-
-
(105)
-
4,707
(631)
-
-
(1,843)
-
55,028
(11,416)
81,662
12,760
-
(7,667)
(377)
-
5,001
(2,725)
(3,405)
(220,587)
(26,125)
(90,557)
(19,699)
148,854
4,556
-
1,465
(270)
-
15,841
(515)
(38,118)
212,135
22,848
4,949
-
(4,099)
-
9,582
(3,787)
(55,118)
27,887
6,545
-
6,202
(1,508)
-
-
-
112,829
25,198
2,059,259
166,743
-
-
4,949
-
(998)
(18,430)
-
-
(2,196)
-
184,787
(27,368)
(7,305)
(26,555)
(487,469)
31,725
863,827
82,307
377,235
68,955
131,813
186,510
31,821
108,278
1,882,471
-
-
-
-
-
-
-
-
-
81,924
29,906
(653)
-
3,894
(8)
-
30,721
(529)
258
5,553
(78)
17,379
8,625
(156)
34
27,769
(393)
(90,809)
(3,440)
(21,810)
(4,239)
(20,093)
(25,592)
-
165
-
(20,517)
16
-
(165)
-
(281)
-
-
-
-
(2,750)
5,632
-
243
-
(1,043)
694
-
(174)
-
(4,986)
595
-
-
3,302
(3,298)
1,822
20,057
3,536
(368)
-
-
(69)
-
(5,175)
17,981
-
-
-
-
-
-
-
-
-
119,652
110,004
(2,185)
(165,983)
-
-
3,302
(38,050)
26,740
34,639
869,391
101,970
387,968
31,725
863,811
82,307
371,603
81,404
68,261
131,475
131,218
212,101
7,830
112,829
1,939,607
184,688
13,840
108,278
1,855,731
1) Other fixed assets include bearer plants, office furniture and equipment;
2) Construction in progress include advances for property plant and equipment, machinery and equipment not in use, construction materials and spare parts, projects in progress.
185
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
14. PROPERTY, PLANT AND EQUIPMENT
(continued)
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
The following table represents movements in property, plant and equipment for the year ended 31 December 2021:
Cost or fair value:
At 31 December 2020
Additions
Transfer from Right-of-use assets
Transfers
Disposals
Disposal of subsidiary
Revaluation
Impairment loss
Translation difference
At 31 December 2021
Accumulated depreciation:
At 31 December 2020
Depreciation charge for the year
Elimination upon disposal
Elimination upon revaluation
Disposal of subsidiary
Transfers
Transfer from Right-of-use assets
Translation difference
At 31 December 2021
Net book value
At 31 December 2020
At 31 December 2021
BUILDINGS
AND
STRUCTURES
GRAIN
STORAGE
FACILITIES
PRODUCTION
MACHINERY
AUXILIARY
AND OTHER
MACHINERY
UTILITIES AND
INFRASTRUCTURE
VEHICLES AND
AGRICULTURAL
MACHINERY
OTHER FIXED
ASSETS1)
CONSTRUCTION
IN PROGRESS2)
TOTAL
922,975
23,526
-
(2,776)
(9,444)
(2,484)
-
-
19,518
95,639
1,427
-
(3,244)
(4)
-
5,088
(181)
3,245
413,912
30,993
-
(48)
(4,848)
(475)
(59,438)
(3,466)
11,338
62,569
13,498
-
9,044
(887)
-
(2,102)
(1,889)
1,429
136,953
6,099
180,060
21,564
-
1,537
(52)
-
(346)
(169)
4,832
11,848
(560)
(6,938)
(20)
2,972
(2,708)
5,917
31,648
8,277
-
(7,064)
(2,888)
(384)
(928)
(1,462)
688
71,347
40,669
-
2,989
(3,552)
-
-
-
1,376
1,952,694
147,570
11,848
-
(30,075)
(3,609)
(54,754)
(10,607)
46,192
LAND
37,591
1,517
-
122
(1,462)
(246)
-
(732)
(2,151)
34,639
951,315
101,970
387,968
81,662
148,854
212,135
27,887
112,829
2,059,259
-
-
-
-
-
-
-
-
-
48,341
35,574
(2,011)
-
(292)
186
-
126
81,924
8,707
8,216
(2)
(17,046)
-
(186)
-
311
-
118,354
40,921
(4,482)
(157,916)
-
(2)
-
3,125
-
9,731
8,475
(609)
(17,593)
(166)
254
-
166
258
9,532
8,454
(36)
(655)
-
(174)
-
258
17,379
58,481
43,023
(3,828)
(103,618)
(7)
-
4,193
1,790
34
20,631
5,248
(1,823)
(4,032)
(282)
(78)
-
393
20,057
-
-
-
-
-
-
-
-
-
273,777
149,911
(12,791)
(300,860)
(747)
-
4,193
6,169
119,652
37,591
34,639
874,634
869,391
86,932
101,970
295,558
387,968
52,838
81,404
127,421
131,475
121,579
212,101
11,017
7,830
71,347
1,678,917
112,829
1,939,607
1) Other fixed assets include bearer plants, office furniture and equipment;
2) Construction in progress include advances for property plant and equipment, machinery and equipment not in use, construction materials and spare parts, projects in progress.
186
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
During the year ended 31 December 2022, impairment
loss (in profit or loss) and increase in revaluation (in other
comprehensive income) as a result of regular valuation
procedures amounted to USD 16,254 thousand and USD
360,259 thousand respectively. Additionally, the Group
reviews its property, plant and equipment each period to
determine if any indication of impairment exists. During the
year ended 31 December 2022, the Group has recognised
an impairment loss of USD 11,114 thousand (in profit or
loss) and decrease in revaluation reserve of USD 9,489
thousand (in other comprehensive income) in respect of
certain property, plant and equipment of its subsidiairy,
Ukrainian Bacon, located in Donetsk region as described
in Notes 2 and 33.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
14. PROPERTY, PLANT AND EQUIPMENT
(continued)
As of 31 December 2022, included within construction
in progress were prepayments for property, plant and
equipment in the amount of USD 28,185 thousand (2021:
USD 24,333 thousand).
As of 31 December 2022, included within property, plant
and equipment were fully depreciated assets with the
original cost of USD 6,009 thousand (2021: USD 22,635
thousand).
As of 31 December 2022, certain of the Group’s property,
plant and equipment with the collateral amount of USD
100,789 thousand (2021: USD 91,931 thousand) were
pledged as collateral to secure its bank borrowings.
Revaluation of property, plant and equipment
During the year ended 31 December 2022, the Group
engaged independent appraisers to perform a revaluation to
revalue its buildings and structures, grain storage facilities,
production machinery, utilities and infrastructure, vehicles
and agricultural machinery, auxiliary and other machinery
as at 31 December 2022. Previous revaluations have been
performed with the engagement of external independent
appraisers as follows: for buildings and structures and
utilities and infrastructure – as at 30 September 2019, and for
other groups of property, plant and equipment accounted
for under the revaluation model – as of 31 December 2021.
The revaluation process conformed to
International
Valuation Standards and was performed using the following
methods and approaches:
• buildings and structures – depreciated replacement
cost method by reference to observable prices in an
active market adjusted by the cumulative index of in-
flation of construction works and index of physical de-
preciation (based on age and condition of buildings and
structures;
• grain storage facilities – depreciated replacement cost
method by reference to observable prices in an active
market adjusted based on age and condition of the fa-
cilities;
• vehicles and agricultural machinery – market compara-
ble approach adjusted based on age and condition of
the machinery;
• production machinery – depreciated replacement cost
method for items of specialized nature and market com-
parable approach adjusted based on age and condition
of the machinery for other items;
• auxiliary and other machinery – depreciated replace-
ment cost method for items of specialized nature and
market comparable approach adjusted based on age
and condition of the machinery for other items;
• utilities and infrastructure – depreciated replacement
cost method by reference to observable prices in an
active market adjusted based on age and condition of
facilities, the fluctuations of the cumulative index of in-
flation of construction works and the index of physical
depreciation.
187
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
14. PROPERTY, PLANT AND EQUIPMENT (continued)
The following unobservable inputs were used to measure Buildings and structures, Utilities and infrastructure, Grain storage facilities, Vehicles and agricultural machinery, Auxiliary and
other machinery and Production machinery:
DESCRIPTION
VALUATION TECHNIQUE(S)
UNOBSERVABLE INPUTS
Buildings and structures
Depreciated replacement
cost method
Utilities and infrastructure
Depreciated replacement
cost method
Grain storage facilities
Vehicles and agricultural machinery
Auxiliary and other machinery
Depreciated replacement
cost method
Market comparable
approach
Depreciated replacement
cost method
Index of physical depreciation
Cumulative index of inflation
of construction works
Index of physical depreciation
Cumulative index of inflation
of construction works
Index of physical depreciation
Cumulative index of inflation
of construction works
Index of physical depreciation
Index of physical depreciation
Cumulative index of producer inflation
Production machinery
Depreciated replacement
cost method
Market comparable approach
Cumulative index of producer inflation
RANGE OF UNOBSERVABLE
INPUTS 2022 (AVERAGE)
0 – 80%
(30.12%)
1.00 – 18.13
(3.29)
0 – 80%
(31.16%)
1.00 – 18.45
(2.93)
0 – 80%
(43.68%)
1.00 – 19.71
(3.96)
0 – 90%
(41.59%)
0 – 90%
(31.55%)
1.00 – 19.71
(2.51)
0 – 90%
(41.71%)
1.00 – 19.71
(3.32)
RELATIONSHIP OF UNOBSERVABLE INPUTS
TO FAIR VALUE
The higher the index of physical depreciation,
the lower the fair value
The higher the index, the higher the fair value
The higher the index of physical depreciation,
the lower the fair value
The higher the index, the higher the fair value
The higher the index of physical depreciation,
the lower the fair value
The higher the index, the higher the fair value
TThe higher the index of physical depreciation,
the lower the fair value
The higher the index of physical depreciation,
the lower the fair value
The higher the index, the higher the fair value
The higher the index of physical depreciation,
the lower the fair value
The higher the index, the higher the fair value
Had the Group’s property plant and equipment been measured on a historical cost basis, their carrying amount would have been as follows:
NET BOOK VALUE UNDER REVALUATION MODEL
NET BOOK VALUE IF CARRIED AT COST
Buildings and structures
Production machinery
Utilities and infrastructure
Vehicles and agricultural machinery
Grain storage facilities
Auxiliary and other machinery
188
FAIR VALUE
HIERARCHY
Level 3
Level 2, 3
Level 3
Level 2
Level 3
Level 2, 3
2022
863,811
371,603
131,218
184,688
82,308
68,261
1,701,889
2021
869,391
387,968
131,475
212,101
101,970
81,404
1,784,309
2022
249,218
170,657
54,583
81,209
23,102
39,608
618,377
2021
338,921
279,710
75,899
178,284
53,348
56,577
982,739
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
14. PROPERTY, PLANT AND EQUIPMENT (continued)
16. INTANGIBLE ASSETS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
There are no restrictions on the distribution of the
revaluation surplus to the shareholders.
The following table represents movements in intangible assets for the year ended 31 December 2022:
LAND LEASE RIGHTS TRADEMARKS CUSTOMER RELATIONS OTHER INTANGIBLE ASSETS
TOTAL
15. RIGHT-OF-USE ASSETS
The following table represents movements in right-of-use
assets for the years ended 31 December 2022 and 2021:
BUILDINGS
AND
VEHICLES
TOTAL
LAND
Net book value:
As of 31 December 2020 173,283
15,865
Additions
33,718
15,287
207,001
31,152
Depreciation charge
for the year
(37,736)
(6,439)
(44,175)
Termination of the lease
(2,589)
(9,712)
(12,301)
Reassessment of the
lease
90,025
125
90,150
Translation difference
5,815
(354)
5,461
As of 31 December 2021
Additions
244,663
9,980
32,625
11,882
277,288
21,862
Depreciation charge
for the year
(31,778)
(6,512)
(38,290)
Termination of the lease
(5,937)
(2,007)
(7,944)
Reassessment of the
lease
38,559
(138)
38,421
Translation difference
(62,750)
(5,670)
(68,420)
As of 31 December 2022
192,737
30,180
222,917
Cost:
As of 31 December 2021
Additions
Disposals
Translation difference
As of 31 December 2022
Accumulated amortization:
As of 31 December 2021
Amortization charge for the year
Disposals
Translation difference
As of 31 December 2022
Net book value:
As of 31 December 2021
As of 31 December 2022
71,881
-
-
(18,262)
53,619
41,635
6,046
-
(11,273)
36,408
30,246
17,211
31,597
-
-
(1,909)
29,688
-
-
-
-
-
31,597
29,688
19,820
-
-
(1,197)
18,623
2,807
918
-
(157)
3,568
17,013
15,055
27,628
7,956
(1,003)
(6,707)
27,874
8,693
4,014
(96)
(2,411)
10,200
18,935
17,674
150,926
7,956
(1,003)
(28,075)
129,804
53,135
10,978
(96)
(13,841)
50,176
97,791
79,628
The following table represents movements in intangible assets for the year ended 31 December 2021:
LAND LEASE RIGHTS TRADEMARKS CUSTOMER RELATIONS OTHER INTANGIBLE ASSETS
TOTAL
Cost:
As of 31 December 2020
Additions
Disposals
Translation difference
As of 31 December 2021
Accumulated amortization:
As of 31 December 2020
Amortization charge for the year
Disposals
Translation difference
As of 31 December 2021
Net book value:
As of 31 December 2020
As of 31 December 2021
69,349
-
-
2,532
71,881
33,929
6,466
-
1,240
41,635
34,505
-
(249)
(2,659)
31,597
-
-
-
-
-
35,420
30,246
34,505
31,597
21,481
-
-
(1,661)
19,820
1,968
1,035
-
(196)
2,807
19,513
17,013
14,837
11,504
(103)
1,390
27,628
7,434
1,208
(71)
122
8,693
7,403
18,935
140,172
11,504
(352)
(398)
150,926
43,331
8,709
(71)
1,166
53,135
96,841
97,791
189
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
17. GOODWILL
The following table represents movements in goodwill for
the years ended 31 December 2022 and 2021:
Cost:
As of 1 January
Acquisitions of subsidiaries (Note 3)
Impairment recognized
Translation difference
As of 31 December
Net book value:
As of 1 January
As of 31 December
2022
2021
66,382
-
(1,874)
70,614
921
-
(4,700)
(5,153)
59,808
66,382
66,382
70,614
59,808
66,382
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
16. INTANGIBLE ASSETS
(continued)
The Group has recognised certain trademarks and
customer relationships as a part of intangible assets
through the acquisition of subsidiaries in previous years.
Customer relationships were identified among customers
of the core products portfolio of acquired subsidiaries.
The remaining useful life of customer relationships was
estimated at 20 years.
The trademarks acquired by the Group mainly consist of PP
and Topiko poultry meat brands and the Poli meat processing
products brand. The Group believes that, since trademarks
are well-positioned and recognizable within a stable and
mature industry, there are no technical barriers that would
limit their lifetime, and as a result of further promotion of
the trademarks, the Group will obtain economic benefits
from them for an indefinite period of time. Accordingly,
the trademarks that belong to the Group are considered
to have an indefinite useful life and thus are not amortized
but tested for impairment by comparing their recoverable
amount with their carrying amount annually.
The Group allocates trademarks to individual entities
as separate cash-generating units (CGU). A summary of
the allocation of trademarks values to separate CGUs is
presented below:
SEGMENT
European
operating
CASH-
GENERATING
UNIT
Slovenia
Serbia
Bosnia and
Herzegovina
Croatia
190
TRADEMARKS
CARRYING VALUE
2022
2021
16,960
18,051
2,142
5,461
2,279
5,812
The impairment testing of the value of trademarks
was performed internally. The recoverable amount of
trademarks of all cash-generating units is determined
based on the value in use method which uses cash flow
projections covering a five-year period.
Discount rates represent the current market assessment of
the risks specific to each CGU, taking into consideration the
time value of money and individual risks of the underlying
assets that have not been incorporated in the cash flow
estimates. The discount rate calculation is based on the
specific circumstances of the Group and its operating
segments and is derived from its weighted average cost of
capital (WACC). The WACC takes into account both debt
and equity. The cost of equity is derived from the expected
return on investment by the Group’s investors. The cost
of debt is based on the interest-bearing borrowings the
Group is obliged to service. Segment-specific risk is
incorporated by applying individual beta factors.
The weighted average discount rate of 18.1% (2021: 16.1%)
was used. An increase by 1,048 basis points in the weighted
average discount rate would result in impairment in 2022
(2021: 588 basis points).
The revenue within five-year period was extrapolated
using a weighted average 4.8% sales growth rate and
2.7% terminal growth rate for revenue beyond this period
(2021: 4.2% and 2.0% respectively). A reduction by 1,887
basic points in the budgeted sales growth would result in
impairment in 2022 (2021: 3,279 basic points).
Weighted average royalty rate used in calculation of cash
flows was set at a level of 2.2% (2021: 2.2%). A reduction
by 83 basis points in the weighted average royalty rate
would result in impairment in 2022 (2021: 77 basis points).
5,125
5,455
29,688
31,597
As of 31 December 2022 and 2021, no impairment of
trademarks was identified.
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
17. GOODWILL
(continued)
The Group allocates goodwill to individual entities as to separate cash-generating units (CGU). A summary of goodwill
allocation to separate CGUs is presented below:
GOODWILL CARRYING VALUE
METHODOLOGY ASSUMPTIONS
AND METHODS USED FOR GOODWILL
2022
2021
2022 (2021)
SEGMENT
Ukraine
CASH-
GENERATING
UNIT
Grain Ukraine
Meat processing and
other agricultural
operations
-
712
2,513
954
Slovenia
37,047
39,448
Serbia
3,842
4,089
European operating
Bosnia and
Herzegovina
10,700
11,388
Croatia
7,507
7,990
59,808
66,382
Average sales growth: 11.0% (-0.1%)
Terminal sales growth: 5.0%(4.9%)
Discount rate: 19.1%(13.6%)
Projection period: 5 years
Average sales growth: 11.0%(4.6%)
Terminal sales growth: 5.0% (4.9%)
Discount rate: 19.1%(13.6%)
Projection period: 5 years
Average sales growth: 7.0% (2.1%)
Terminal sales growth: 2.1%(2.0%)
Discount rate: 9.9% (6.3%)
Projection period: 5 years
Average sales growth: 8.2%(2.6%)
Terminal sales growth: 3.0%(2.0%)
Discount rate: 13.0%(8.1%)
Projection period: 5 years
Average sales growth: 4.8%(2.6%)
Terminal sales growth: 2.1%(2.0%)
Discount rate: 19.0%(11.5%)
Projection period: 5 years
Average sales growth: 7.3%(2.0%)
Terminal sales growth: 1.8%(2.0%)
Discount rate: 11.1%(7.6%)
Projection period: 5 years
The recoverable amount of cash-generating units is determined based on a value in use calculation which uses cash flow
projections based on financial forecasts approved by the Directors.
191
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
The discount rate calculation is based on the specific
circumstances of the Group and its operating segments
and is derived from its weighted average cost of capital
(WACC), adjusted on segment-specific risk by applying
individual beta factors. An increase by 338 basis points in
the weighted average discount rate to 15,0% would result
in impairment in 2022 (2021: 752 basis points to 15.5%).
The growth rates and gross margins used for cash flow
extrapolations are supported by industry trends such as
consumer prosperity and dietary trends. These inputs were
estimated by the Directors based on past performance
of the cash-generating unit and their expectations of
market development. A reduction by 255 basis points in
the budgeted sales growth or reduction in gross margin by
1,198 basis points would result in impairment in 2022 (2021:
1,245 and 628 resprectively).
As of 31 December 2022 an impairment of goodwill in
amount of USD 1,874 thousand attributable to Grain
Growing segment was recognized due to lower projected
cash-flows from operations as well as substantial increase
in the discount rate. As of 31 December 2021, no impairment
was identified.
18. NON-CURRENT FINANCIAL ASSETS
The balances of non-current financial assets were as
follows as of 31 December 2022 and 2021:
Loans provided to third parties
23,968
25,113
2022
2021
Receivables for claims and
indemnification
Loans and finance aid provided to
related parties (Note 32)
Other financial assets
Less: expected credit losses
385
1,757
3,034
4,102
939
(20,513)
2,131
(4,339)
7,813
28,764
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
18. NON-CURRENT FINANCIAL ASSETS
(continued)
19. BIOLOGICAL ASSETS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
Loans receivable are mostly represented by loans with
fixed interest at 2.5% (EIR of 4.25%) with maturities as of
31 December 2025, 31 December 2026 and 31 December
2027.
The Group determines the expected credit loss of other
non-current loan receivables and other financial assets
based on different scenarios of probability of default
and expected loss applicable to each of the material
underlying balances. The expected credit losses relate to
loan provided to the third parties and loans and finance
aid provided to related parties in amount of USD 20,237
thosand and USD 276 thousand respectively (2021: USD
3,942 thousand and 397 thosand respectively).
The movement in loss allowance for loan receivables
and other financial assets classified at amortised cost is
detailed below:
1 January
Charged during the year
31 December
2022
2021
(4,339)
(16,174)
(20,513)
(4,268)
(71)
(4,339)
The balances of non-current biological assets were as follows as of 31 December 2022 and 2021:
THOUSAND UNITS
CARRYING AMOUNT
THOUSAND UNITS
CARRYING AMOUNT
2022
2021
Milk cows
Other non-current bearer biological assets
Total bearer non-current biological assets
Non-current cattle and pigs, units
Total consumable non-current biological
assets
Total non-current biological assets
15.2
5.2
17,239
10
17,249
3,957
3,957
21,206
14.9
4.9
22,746
14
22,760
4,378
4,378
27,138
The balances of current biological assets were as follows as of 31 December 2022 and 2021:
THOUSAND UNITS
CARRYING AMOUNT
THOUSAND UNITS
CARRYING AMOUNT
2022
2021
Breeders held for hatchery eggs production,
units
Total bearer current biological assets
Broiler chickens, units
Hatchery eggs, units
Crops in fields, hectare
Cattle and pigs, units
Other current consumable biological assets
Total consumable current biological assets
Total current biological assets
4,943
53,561
42,041
82
3.5
59,795
59,795
75,204
10,541
29,713
1,328
112
116,898
176,693
4,969
55,310
42,389
62
3.4
79,583
79,583
89,257
11,688
33,565
1,293
73
135,876
215,459
192
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
19. BIOLOGICAL ASSETS
(continued)
The following table represents movements in major biological assets for the years ended 31 December 2022 and 2021:
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
As of 31 December 2020
Costs incurred
Gains arising from change in fair value of biological assets less costs to sell
Transfer to consumable biological assets
Increase due to birth and weight increase
Decrease due to harvest
Translation difference
As of 31 December 2021
Costs incurred
Gains arising from change in fair value of biological assets less costs to sell
Transfer to consumable biological assets
Increase due to birth and weight increase
Decrease due to sale
Decrease due to harvest
Translation difference
As of 31 December 2022
MILK COWS
21,947
12,921
9,593
-
8,765
(31,229)
749
22,746
11,945
7,137
-
6,864
-
(25,772)
(5,681)
17,239
BREEDERS HELD FOR
HATCHERY EGGS
PRODUCTION
70,059
143,927
65,578
(178,613)
-
(23,268)
1,900
79,583
126,772
55,056
(156,495)
-
(2,670)
(23,655)
(18,796)
59,795
BROILER
CHICKENS
67,481
1,010,123
234,694
178,613
-
(1,403,791)
2,137
89,257
935,411
453,817
156,495
-
-
(1,537,988)
(21,788)
75,204
CROPS
IN FIELDS
24,846
323,462
353,464
-
-
(669,029)
822
33,565
330,785
92,983
-
-
-
(418,734)
(8,886)
29,713
Information on movements in hatchery eggs and cattle and pigs groups have been considered immaterial for disclosure.
193
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
19. BIOLOGICAL ASSETS
(continued)
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
Biological assets of the Group are measured at fair value within Level 3 of the fair value hierarchy, except for cattle and pigs that can be measured based on market prices of livestock of
a similar age, breed and genetic merit, and which are therefore measured at fair value within Level 2 of the fair value hierarchy. There were no transfers between any levels during the year.
The following unobservable inputs were used to measure biological assets:
DESCRIPTION
VALUATION TECHNIQUE
SIGNIFICANT UNOBSERVABLE
INPUTS
RELATIONSHIP OF UNOBSERVABLE
INPUTS TO FAIR VALUE
RANGE OF UNOBSERVABLE INPUTS
(AVERAGE)
INPUT 5% HIGHER INPUT 5% LOWER
SENSITIVITY OF THE INPUT TO FAIR
VALUE INCREASE/
(DECREASE) USD THOUSAND
Crops in fields
DCF method
Crops price – per tonne
Crops yield - tonnes per
hectare
Breeders held for hatchery
eggs production
DCF method
Hatchery egg price – per egg
Discount rate
Number of hatchery eggs
produced by one breeder
Discount rate
Average weight
of one broiler - kg
The higher the crops yield,
the higher the fair value
The higher the market price,
the higher the fair value
The higher the discount rate,
the lower the fair value
The higher the number,
the higher the fair value
The higher the market price,
the higher the fair value
The higher the discount rate,
the lower the fair value
The higher the weight,
the higher the fair value
Broiler chickens
Cash flows method
Poultry meat price –
per kg
The higher the market price,
the higher the fair value
Daily milk yield -
litre per cow
Weight of the cow -
kg per cow
Milk cows
DCF method
Milk price – per litre
Meat price – per kg
Discount rate
194
* data of European operating segment
The higher the milk yield,
the higher the fair value
The higher the weight,
the higher the fair value
The higher the market price,
the higher the fair value
The higher the market price,
the higher the fair value
The higher the discount rate,
the lower the fair value
2022: 3.6 – 7.2 (5.4)
2021: 3.0 – 5.5 (4.5)
2022: USD 157 - 498 (328)
2021: USD 255 - 617 (403)
2022: 42.7%
2021: 15.4%
2022: 165
2021: 165
2022: USD 0.25
2021: USD 0.30
2022: 42.7%
2021: 13.6%
2022: 2.40
2021: 2.41
2022: UAH 40.64
3.24 EUR*
2021: UAH 35.80
2.27 EUR*
2022: 20.19 - 21.91 (21.40)
2021: 15.55 – 20.54 (18.28)
2022: 559 - 587 (570)
2021: 550 - 585 (562)
2022: UAH 12.42 – 12.99 (12.73)
2021: UAH 11.91 – 12.58 (12.22)
2022: UAH 15.58 - 18.09 (16.77)
2021: UAH 15.98 – 34.13 (22.97)
2022: 25.0%
2021: 13.6%
4,384
4,962
4,384
4,962
(207)
(116)
1,187
3,148
4,295
5,592
(302)
(182)
6,157
7,888
6,157
7,888
837
1,060
112
222
4,086
5,194
112
222
(475)
(421)
(4,384)
(4,962)
(4,384)
(4,962)
212
116
(1,187)
(3,148)
(4,295)
(5,592)
308
184
(6,157)
(7,888)
(6,157)
(7,888)
(837)
(1,060)
(112)
(222)
(4,086)
(5,194)
(112)
(222)
498
434
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
20. INVENTORIES
21. AGRICULTURAL PRODUCE
The balances of inventories were as follows as of 31
December 2022 and 2021:
The balances of agricultural produce were as follows as of
31 December 2022 and 2021:
Components for mixed fodder
production
Other raw materials
Fertilizers
Vegetable oil
Work in progress
Gas and fuel
Spare parts
Mixed fodder
Other inventories
2022
2021
157,099
192,362
50,531
49,603
49,540
39,580
25,851
15,610
15,043
10,933
44,458
40,969
15,153
40,103
5,057
18,935
6,180
4,002
413,790
367,219
As of 31 December 2022 and 2021 work in progress was
mainly comprised of expenses incurred in cultivating fields
to be planted in the years 2023 and 2022 in amounts of USD
38,216 thousand and USD 39,225 thousand, respectively.
As of 31 December 2022 components for mixed fodder
production mostly consist of sunflower seeds in amount
of USD 95,613 thousand (31 December 2021: USD 59,832
thousand), corn in amount of USD 8,311 thousand (31
December 2021: USD 31,897 thousand) and soybeans in
amount of USD 3,984 thousand (31 December 2021: USD
59,448 thousand).
Inventory is stated at the lower of cost and net realisable
value. As at 31 December 2022 inventory write-downs to
net realisable value in the amount of USD 2,799 thousand
were recognised within cost of sales. No impairment or
reversal of write-downs were made as of 31 December
2021.
THOUSAND
TONNES
CARRYING
AMOUNT
THOUSAND
TONNES
CARRYING
AMOUNT
SEGMENT
Grain
2022
2021
1,050
224,550
1,201
372,343
Chicken meat
70.6
127,908
72.3
128,757
Other various
crops
Other various
meat
8,967
2
9,181
986
361,427
511,267
The fair value of Agricultural produce was estimated based
on market price as of date of harvest and is within Level 2
of the fair value hierarchy.
As of 31 December 2022, agricultural produce in amount of
USD 38,260 thousand was pledged as collateral to secure
bank borrowings (2021: USD 38,188 thousand).
22. TAXES RECOVERABLE AND PREPAID
Taxes recoverable and prepaid were as follows as of 31
December 2022 and 2021:
VAT recoverable
Miscellaneous taxes prepaid
2022
2021
68,063
66,915
696
1,236
68,759
68,151
195
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
23. TRADE ACCOUNTS RECEIVABLE
The balances of trade accounts receivable were as
follows as of 31 December 2022 and 2021:
Chicken meat
Meat processing and convenience
food
Sunflower oil sales
Grain
2022
2021
125,271
124,669
18,220
28,153
29,737
304
3,133
1,874
Due from related parties (Note 32)
106
113
Other agriculture operations
19,696
16,981
Less: expected credit losses
(13,263)
(15,216)
182,900
156,878
The average credit period on sales of poultry is 30 days
and on sales of agricultural goods is 60 days. No interest
is charged on outstanding trade accounts receivable.
The expected credit losses on trade accounts receivable
are estimated on a collective basis using a provision
matrix and on individual basis using different scenarios
of probability of default.
The provision matrix is used by reference to past default
experience of the debtor and an analysis of the debtor’s
current financial position, adjusted for factors that are
specific to the debtors, general economic conditions of the
industry in which the debtors operate and an assessment
of both the current as well as the forecast direction of
conditions at the reporting date.
Thus, due to the worsening of current economic and
political situation in Ukraine as a result of the Russian
invasion, and in order to ensure that expected credit
losses accurately reflects the credit risk of domestic trade
accounts receivable in Ukraine, the credit default swap
rate of 9.18%, was incorporated in calculation of expected
credit losses as at 31 December 2022.
An individual assessment is used for the individually
significant debtors with credit risk characteristics that are
not aligned with others.
The Group has recognised a loss allowance of USD 5,387
thousand against all trade accounts receivable over 270
days past due, which are assessed on a collective basis,
because historical experience has indicated that these
trade accounts receivable are generally not recoverable.
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
There has been no change in the estimation techniques or
significant assumptions made during the current reporting
period. The Group writes off a trade accounts receivable
when there is information indicating that the debtor is in
severe financial difficulty and there is no realistic prospect
of recovery, e.g. when the debtor has been placed under
liquidation or has entered into bankruptcy proceedings,
or when the trade accounts receivable are over 3 years
past due, whichever occurs earlier. None of the trade
accounts receivable that have been written off are subject
to enforcement activities.
The following table details the risk profile of trade
accounts receivable based on the Group’s provision
matrix. It discloses chicken meat Ukraine, chicken meat
export and agricultural Ukraine, agricultural export sales
and European operating segment as separate classes of
financial instruments and applies the simplified approach
to its trade accounts receivable so that the loss allowance
is always measured at an amount equal to lifetime expected
credit losses.
196
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
23. TRADE ACCOUNTS RECEIVABLE
(continued)
The following table illustrates the use of a provision matrix as a risk profile disclosure under the simplified approach as
at 31 December 2022:
31 DECEMBER 2022
NOT PAST DUE
< 30
31-90
91-270
>270
TOTAL
TRADE ACCOUNTS RECEIVABLE – DAYS PAST DUE
PORTFOLIO ASSESSMENT:
Chicken meat Ukraine
ECL rate, %
Estimated total gross carrying amount at default
Lifetime ECL
Chicken meat export
ECL rate, %
Estimated total gross carrying amount at default
Lifetime ECL
Agricultural Ukraine
ECL rate, %
Estimated total gross carrying amount at default
Lifetime ECL
Agricultural export
ECL rate, %
Estimated total gross carrying amount at default
Lifetime ECL
European operating segment
ECL rate, %
Estimated total gross carrying amount at default
Lifetime ECL
Estimated total gross carrying amount at default
Total lifetime ECL
INDIVIDUAL ASSESSMENT:
9.19%
23,776
(2,185)
0.02%
34,769
(7)
9.25%
10,776
(997)
0.00%
442
-
0.01%
42,910
(3)
9.26%
2,796
(259)
0.06%
16,076
(10)
9.35%
3,900
(365)
0.00%
32,119
-
0.02%
7,895
(2)
9.53%
338
(32)
0.18%
4,512
(8)
9.55%
1,012
(97)
0.16%
331
(1)
0.25%
1,322
(3)
9.67%
65
(6)
0.79%
632
(5)
9.74%
401
(39)
0.50%
251
(1)
0.47%
714
(3)
100%
1,100
(1,100)
100%
430
(430)
100%
3,794
(3,794)
100%
4
(4)
100%
59
(59)
ECL rate, %
Estimated total gross carrying amount at default
Lifetime ECL
41.82%
165
(69)
43.61%
133
(58)
46.83%
126
(59)
64.03%
3,339
(2,138)
77.38%
1,976
(1,529)
197
Estimated total gross carrying amount at default
Total lifetime ECL
28,075
(3,582)
56,419
(460)
19,883
(5,292)
33,147
(6)
52,900
(70)
190,424
(9,410)
5,739
(3,853)
196,163
(13,263)
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
The following table shows the movement in lifetime ECL
that has been recognised for trade and other accounts
receivable in accordance with the simplified approach set
out in IFRS 9.
1 January 2021
Charged during the year
31 December 2021
Charged during the year
Utilised
COLLECTIVELY
ASSESSED
INDIVIDUALLY
ASSESSED
(2,535)
(404)
(2,939)
(6,795)
324
(11,987)
(290)
(12,277)
(1,716)
10,140
31 December 2022
(9,410)
(3,853)
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
23. TRADE ACCOUNTS RECEIVABLE
(continued)
The following table illustrates the use of a provision matrix as a risk profile disclosure under the simplified approach as
at 31 December 2021:
31 DECEMBER 2021
NOT PAST DUE
< 30
31-90
91-270
>270
TOTAL
TRADE ACCOUNTS RECEIVABLE – DAYS PAST DUE
PORTFOLIO ASSESSMENT:
Chicken meat Ukraine
ECL rate, %
Estimated total gross carrying amount at default
Lifetime ECL
Chicken meat export
ECL rate, %
Estimated total gross carrying amount at default
Lifetime ECL
Agricultural Ukraine
ECL rate, %
Estimated total gross carrying amount at default
Lifetime ECL
Agricultural export
ECL rate, %
Estimated total gross carrying amount at default
Lifetime ECL
European operating segment
ECL rate, %
Estimated total gross carrying amount at default
Lifetime ECL
Estimated total gross carrying amount at default
Total lifetime ECL
INDIVIDUAL ASSESSMENT:
0.00%
25,864
-
0.095%
32,843
(31)
0.04%
18,606
(7)
0.10%
163
-
0.02%
36,220
(7)
0.01%
3,155
-
0.22%
14,664
(32)
0.11%
7,604
(8)
0.13%
1,017
(1)
0.18%
5,099
(9)
0.06%
124
-
0.58%
3,690
(21)
0.24%
2,126
(5)
1.66%
187
(3)
0.47%
1,459
(7)
0.08%
34
-
1.95%
350
(7)
0.50%
913
(5)
13.00%
35
(5)
4.88%
199
(10)
100%
115
(115)
100%
899
(899)
100%
1,714
(1,714)
100%
-
-
100%
53
(53)
ECL rate, %
Estimated total gross carrying amount at default
Lifetime ECL
34.69%
735
(255)
79.25%
425
(337)
22.4%
1,023
(229)
24.61%
1,593
(392)
98.93%
11,185
(11,064)
Estimated total gross carrying amount at default
Total lifetime ECL
198
29,292
(115)
52,446
(990)
30,963
(1,739)
1,402
(9)
43,030
(86)
157,133
(2,939)
14,961
(12,277)
172,094
(15,216)
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
24. OTHER CURRENT FINANCIAL ASSETS
25. CASH AND CASH EQUIVALENTS
The balances of other current assets were as follows as
of 31 December 2022 and 2021:
The balances of cash and cash equivalents were as follows as of 31 December 2022 and 2021:
Loans provided to third parties
Short-term bank deposits
Receivables for claims and
indemnification
Loans and finance aid provided to
related parties (Note 32)
Other financial assets
Less: allowance for irrecoverable
amounts
2022
2021
8,429
5,901
2,130
14,469
9
2,352
4,223
3,643
6,038
(4,624)
725
(5,042)
22,097
16,156
The Group determines the expected credit loss of loans and
finance aid receivable and other financial assets based on
different scenarios of probability of default and expected
loss applicable to each of the material underlying balances.
The expected credit losses relate to loan provided to third
parties, loans and finance aid provided to related parties
and receivables for claims and indemnification in amounts
of USD 2,069 thousand, USD 2,117 thousand and USD 438
thousand respectively (2021: USD 2,521 thousand, USD
2,521 thousand and USD nill thousand respectively).
The movement in allowance for expected credit losses is
detailed below:
1 January
Charged during the year
31 December
2022
2021
(5,042)
418
(4,624)
(4,340)
(702)
(5,042)
2022
2021
DEPOSIT RATES
USD’ 000
DEPOSIT RATES
USD’ 000
Cash and cash equivalents at banks
and on hand in:
Ukrainian Hryvnia
Euro
US Dollars
British Pounds
Saudi Riyal
Other currencies
Short-term deposits with an original
maturity of less than 90 days:
Ukrainian Hryvnia
US Dollars
Euro
Other currencies
Government bonds:
Ukrainian Hryvnia
Total cash and equivalents
23,611
87,826
80,266
9,677
6,950
15,567
12,661
46,936
16,971
24
-
300,489
8.00-17.00%
0.04%
0.05-2.13%
0.00%
44,535
105,416
91,150
2,611
5,887
14,391
-
-
-
-
11,247
275,237
In accordance with the international rating agency of Moody’s, credit ratings of the banks with which the Group had
accounts opened as of 31 December 2022 and 2021 were as follows:
International banks with A rating
International banks with B rating
Subsidiaries of international banks with A rating
Subsidiaries of international banks with B rating
Ukrainian banks with B rating
Ukrainian banks with C rating
Domestic government bonds (OVDPs) of Ukraine
Other banks without ratings
2022
217,160
6,911
40,109
4,870
-
31,283
-
156
300,489
2021
162,941
30,321
39,702
17,098
9,677
11,247
4,251
275,237
199
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
25. CASH AND CASH EQUIVALENTS
(continued)
27. NON-CONTROLLING INTERESTS
The impairment loss arising on cash and cash equivalent
held in Ukrainian state banks with C rating was immaterial
as at 31 December 2022 and 2021.
26. SHAREHOLDERS’ EQUITY
Share capital
As of 31 December 2022 and 2021 the authorized, issued
and fully paid share capital of MHP SE comprised the
following number of shares:
Number of shares issued and
fully paid
2022
2021
110,770,000 110,770,000
Number of shares outstanding
107,038,208 107,038,208
The table below shows details of non-wholly owned subsidiaries of the Group that have material non-controlling interests:
PROPORTION OF OWNERSHIP
INTERESTS AND VOTING RIGHTS
HELD BY NON-CONTROLLING
INTERESTS
PROFIT/(LOSS) ALLOCATED TO
NON-CONTROLLING INTERESTS
ACCUMULATED
NON-CONTROLLING INTERESTS
NAME OF SUBSIDIARY
MHP-Agro-S
MHP-AgroKryazh
Myronivsky Plant of
Manufacturing Feeds
and Groats
Other subsidiaries with
immaterial non-controlling
interests
2022
49.0%
49.0%
11.5%
n/a
n/a
2021
49%
49%
11.5%
n/a
n/a
2022
2,060
(1,786)
(2,295)
2021
10,427
5,937
(625)
2022
9,504
6,566
4,380
2021
11,625
10,028
4,944
(3,339)
2,088
(2,124)
3,203
(5,360)
17,827
18,326
29,800
The authorized share capital as of 31 December 2022
and 2021 was EUR 221,540 thousand represented by
110,770,000 shares with par value of EUR 2 each.
Summarised financial information in respect of each of the Group's subsidiaries that have material non-controlling
interests is set out below. The summarised financial information below represents amounts before intragroup eliminations.
Summarised statement of financial position as of 31 December 2022 and 2021:
All shares have equal voting rights and rights to receive
dividends, which are payable at the discretion of the
Company.
MHP-AGRO-S
MHP-AGROKRYAZH
MYRONIVSKY PLANT
OF MANUFACTURING FEEDS
AND GROATS
2022
2021
2022
2021
2022
2021
38,388
21,927
(32,390)
(9,813)
18,112
8,608
9,504
55,353
29,137
(49,243)
(11,887)
23,360
11,735
11,625
26,380
19,097
(27,682)
(7,521)
10,274
3,708
6,566
37,157
22,655
(35,667)
(9,332)
14,813
4,785
10,028
68,299
106,467
(131,771)
(9,696)
33,299
28,919
4,380
61,762
117,710
(132,105)
(11,737)
35,630
30,686
4,944
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Total equity
Attributable to:
Owners of the Group
Non-controlling interest
200
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
27. NON-CONTROLLING INTERESTS
(continued)
Summarised statements of profit or loss and other comprehensive income for the years ended 31 December 2022 and 2021:
MHP-AGRO-S
MHP-AGROKRYAZH
2022
30,830
(26,626)
4,204
2,144
2,060
4,204
(1,832)
(1,760)
(3,592)
312
300
612
2021
39,717
(18,440)
21,277
10,850
10,427
21,277
1,098
1,057
2,155
11,948
11,484
23,432
2022
23,472
(27,114)
(3,642)
(1,856)
(1,786)
(3,642)
(1,744)
(1,676)
(3,420)
(3,600)
(3,462)
(7,062)
2021
27,604
(15,496)
12,108
6,171
5,937
12,108
1,664
1,598
3,262
7,835
7,535
15,370
MYRONIVSKY PLANT
OF MANUFACTURING FEEDS
AND GROATS
2022
2021
110,793
(130,797)
(20,004)
(17,709)
(2,295)
(20,004)
13,353
1,731
15,084
(4,356)
(564)
(4,920)
80,144
(85,594)
(5,450)
(4,825)
(625)
(5,450)
25,323
3,281
28,604
20,498
2,656
23,154
(2,421)
(6,425)
-
(2,196)
-
-
Revenue
Expenses
Profit/(loss) for the year
Profit/(loss) attributable to:
Owners of the Group
Non-controlling interests
Total profit/(loss)
OCI attributable to:
Owners of the Group
Non-controlling interests
Total OCI
Comprehensive income
attributable to:
Owners of the Group
Non-controlling interests
Total comprehensive
income/(loss) for the year
Dividends declared to non-
controlling interest
Summarised cash inflow/(outflow) for the years ended 31 December 2022 and 2021:
MHP-AGRO-S
MHP-AGROKRYAZH
Operating activities
Investing activities
Financing activities
201
2022
1,203
(1,799)
(711)
2021
16,252
(1,850)
(12,870)
2022
(1,436)
(1,262)
(5)
2021
8,816
(1,052)
(4,615)
MYRONIVSKY PLANT
OF MANUFACTURING FEEDS
AND GROATS
2022
2,695
(2,714)
(4)
2021
10,310
(2,602)
(6,072)
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
28. BANK BORROWINGS
The following table summarizes bank borrowings and credit lines outstanding as of 31 December 2022 and 2021:
CURRENCY
WAIR 1)
USD’ 000
WAIR 1)
USD’ 000
2022
2021
NON-CURRENT
CURRENT
Current portion of long-term
bank borrowings
Total bank borrowings
EUR
EURIBOR2) + 1.35%
UAH
USD
USD
EUR
EUR
EUR
20.00%4)
SOFR3) + 2.20%
6.06%
EURIBOR2) + 2,3%
4.32%
EURIBOR2) + 1.35%
117,719
117,719
2,456
10,550
56,843
25,564
56,802
23,897
176,112
293,831
EURIBOR2) + 1.23%
SOFR3) + 2.20%
2.00%
103,604
103,604
-
10,550
99,536
-
-
EURIBOR2) + 1.23%
11,372
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
The Group’s borrowings are drawn from various banks
as term loans, credit line facilities. Repayment terms of
principal amounts of bank borrowings vary from monthly,
quarterly, semi-annually repayment to repayment on
maturity depending on the agreement reached with each
bank.
As of 31 December 2022 and 31 December 2021, the
Group’s bank term loans and credit lines bear floating
and fixed interest rates.
Term loans and credit line facilities were as follows as of
31 December 2022 and 2021:
Credit lines
Term loans
2022
2021
152,215
110,086
141,616
114,976
293,831
225,062
121,458
225,062
Bank borrowings and credit lines outstanding as of 31
December 2022 and 2021 were repayable as follows:
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.
3) The Secured Overnight Financing Rate (SOFR) is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities.
4) Deduction interest amount equal to 3m UIRD+5% p.a. will be applied as interest compensation from Government, where 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 hryvnia 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. As of 31 December 2022 3m UIRD rate is equal 11.18% p.a.
202
Within one year
In the second year
2022
2021
176,112
121,458
27,170
13,233
76,456
13,915
In the third to fifth year inclusive
84,041
After five years
6,508
293,831
225,062
As of 31 December 2022, the Group had available undrawn
facilities of USD 36,819 thousand (2021: USD 255,970
thousand). These undrawn facilities expire during the
period ending July 2025.
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
28. BANK BORROWINGS
(continued)
The Group, as well as particular subsidiaries of the Group,
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. 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, comprising
dividends, capital expenditures, additional indebtedness
and restrictions on mergers or consolidations, limitations
on liens and dispositions of assets and limitations on
transactions with affiliates.
As of 31 December 2022 the Group has complied with all
bank covenants. As at 31 December 2022, the Group’s
leverage ratio increased to 3.22 to 1, compared with 1.90 to
1 as at 31 December 2021, leading to the certain restrictions
as stated in Note 29.
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
Ptakhofabryka
Limited, Myronivska
Snyatynska Nova, Vinnytska Ptakhofabryka, Zakhid-Agro
MHP, MHP-Urozhayna Krayina.
Pticefabrika,
As of 31 December 2022, the Group had borrowings of USD
109,258 thousand that were secured by property, plant
and equipment with a collateral amount of USD 100,789
thousand (31 December 2021: USD 75,084 thousand and
USD 91,931 thousand respectively) (Note 14).
As of 31 December 2022, the Group had borrowings of
USD 30,608 thousand that were secured by agricultural
produce with a carrying amount of USD 38,260 thousand
(31 December 2021: USD 30,550 thousand and USD 38,188
thousand respectively) (Note 21).
As of 31 December 2022, the deposit with carrying amount
of USD 23,137 thousand (31 December 2021: USD 2,555
thousand) was restricted as collateral to secure issued letters
of credit.
As of 31 December 2022 and 31 December 2021, interest
payable on bank borrowings was USD 774 thousand and
USD 423 thousand, respectively.
Prolongation of bank borrowings
During the year ended 31 December 2022, the Group agreed
with its bank lenders a general postponement of debt
servicing in respect of bank borrowings in the total amount
of USD 137,000 thousand. This agreement was made in
order to comply with the restrictions on debt servicing as
established by the consent solicitation obtained from the
bondholders (as described in Note 29). In particular, during
the 270-day support period for semi-annual interest
payments on 2024 Notes, the 2026 Notes and the 2029
Notes agreed on 30 March 2022 the Group is committed
to pay not more than USD 12.5 million in the aggregate in
satisfaction of any debt service payments in respect of any
indebtedness of the Group, excluding any interest payment
in respect of any of the 2024 Notes, the 2026 Notes and
the 2029 Notes and the repayment of Indebtedness with
the net proceeds of Permitted Refinancing Indebtedness.
During the year ended 31 December 2022, the Group signed
legally-binding agreements for the above-mentioned
bank borrowings to comply with consent solicitation
requirements.
29. BONDS ISSUED
Bonds issued and outstanding as of 31 December 2022 and 2021 were as follows:
CARRYING AMOUNT
NOMINAL AMOUNT
SEGMENT
31 DECEMBER 2022 31 DECEMBER 2021
31 DECEMBER 2022 31 DECEMBER 2021
7.75% Senior Notes due in 2024
6.95% Senior Notes due in 2026
6.25% Senior Notes due in 2029
Unamortized debt issuance cost
Total bonds issued
494,416
540,707
347,858
-
490,851
538,346
347,623
-
500,000
550,000
350,000
(17,019)
500,000
550,000
350,000
(23,180)
1,382,981
1,376,820
1,382,981
1,376,820
As of 31 December 2022 and 2021 accrued interest on bonds issued was USD 41,112 thousand and USD 20,757 thousand,
respectively.
203
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
29. 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 350,000 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.
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 550,000
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 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
“Starynska Ptakhofabryka” ALLC,
“Urozhay” LLC,
“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 500,000 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 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.
204
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
29. BONDS ISSUED
(continued)
7.75% Senior Notes (continued)
Interest on the Senior Notes is payable semi-annually in
arrears in May and November. 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.
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 agreement, 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 at 31 December 2022 the leverage ratio of
the Group is 3.22 to 1 (31 December 2021: 1.90 to 1), higher
than the defined limit 3.0 to 1. The Group has tested all
the transactions that 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 31 December 2022 and 31
December 2021.
Consent solicitation
On 30 March 2022, the Group received consent from
Holders to postpone the semi-annual interest payments
on each of the 2024 Notes, the 2026 Notes and the
2029 Notes scheduled for Spring 2022 for a period up to
270 days (the “Support Period”). As a result, the Group
postponed bonds` interest payments for a total amount of
USD 49,425 thousand, and postponed interest payments
continued to accrue during the Support Period. As of
31 December 2022 two deferred semi-annual interest
amounts of the 2026 Notes and the 2029 Notes in a
cumulative amount of USD 31,559 thousand were paid by
Group on time. The last deferred coupon payment due
in February 2023 in the amount of USD 20,501 thousand
was paid on time after the reporting date.
As defined by the Consent Solicitation Memorandum,
the Group subject to the following restrictions during the
Support Period:
• the Company and its Restricted Subsidiaries shall not be
able to incur Indebtedness pursuant to the ratio-based
permission for the Incurrence of Indebtedness;
• the “general basket” for the incurrence of Permitted
Debt shall be reduced to USD 10 million in aggregate
principal amount;
• the Company and its Restricted Subsidiaries will be
prohibited from incurring new Liens on existing Indebt-
edness for borrowed money, other than Permitted Re-
financing Indebtedness relating to existing secured In-
debtedness;
• the Company and its Restricted Subsidiaries will be
prohibited from making Restricted Payments other than
payments constituting Permitted Investments;
• the Permitted Investments “general basket” shall not be
available;
• the threshold at which an Affiliate Transaction must be
approved by a majority of the disinterested members of
the Board of Directors shall be reduced to USD 1 million;
• the Group is committed to paying no more than USD
12.5 million in the aggregate in satisfaction of any debt
service payments in respect of any Indebtedness of the
Group, excluding any interest payment in respect of any
of the 2024 Notes, the 2026 Notes and the 2029 Notes
during the Support Period;
• within 25 days of each calendar month end, the Com-
pany will provide a trading update detailing operational
data relating to the Group’s business segments.
205
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
30. LEASE LIABILITIES
31. OTHER CURRENT LIABILITIES
32. RELATED PARTY BALANCES AND TRANSACTIONS
Other current liabilities were as follows as of 31 December
2022 and 2021:
Accrued payroll and related
taxes
Amounts payable for property,
plant and equipment
VAT paybable
Provision for claims, penalties
and indemnification
Other financial liabilities
2022
67,139
2021
65,804
13,258
14,194
5,063
2,494
7,839
95,793
3,215
1,042
9,034
93,289
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
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 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.
Long-term lease obligations represent amounts due under
agreements for the leasing of agricultural land, trucks,
agricultural machinery and equipment. As of 31 December
2022, the weighted average interest rates on lease obligations
were 3.57% (2021: 3.21%) and 18.55% (2021: 17.60%) for lease
obligations denominated in EUR and UAH respectively.
Amount of depreciation charge for right-of-use assets
and additions to right-of-use assets for the year ended 31
December 2022 was USD 38,290 thousand and USD 21,862
respectively (2021: USD 44,175 thousand and USD 31,152
thousand).
The carrying amount of lease liabilities as at 31 December
2022 includes USD 204,864 thousand of land lease
liabilities (2021: USD 254,036 thousand).
The following are maturity analyses of lease payments under
the lease agreements as of 31 December 2022 and 2021:
As at 1 January
Cash repayments of lease
liabilities
Foreign exchange movements
Non-cash additions and change
in terms
Non-cash repayments of lease
liabilities1)
Interest charged
Translation difference
As at 31 December
Current portion of lease
liabilities
Long-term portion of lease
liabilities
2022
2021
281,250
(52,209)
198,499
(66,254)
1,604
43,584
(778)
109,834
(9,013)
(10,793)
38,859
(74,752)
229,323
65,252
45,398
5,344
281,250
77,111
164,071
204,139
1) Non-cash repayments are represented by grains and other agriculture
produce provided to lessors of land as settlement of lease liabilities.
206
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
32. RELATED PARTY BALANCES AND TRANSACTIONS
(continued)
The balances owed to and due from related parties were
as follows as of 31 December 2022 and 2021:
Transactions with related parties
under common control (continued)
Transactions with related parties during the years ended
31 December 2022 and 2021 were as follows:
Loans and finance aid provided
to related parties
Loans and finance aid repaid by
related parties
Interest charged on loans and
financial aid repaid
Interest charged on loans and
finance aid provided
Sales of goods
Purchases from related parties
Key management personnel of
the Group:
Loans provided
Loans repaid
2022
2021
1,096
3,694
-
-
71,000
7,849
293
5,014
36
410
720
867
-
398
1,024
766
Loans and finance aid
receivable
Less: expected credit losses
Loans to key management
personnel
Less: expected credit losses
Trade accounts receivable
(Note 23)
2022
2021
3,601
2,971
(2,117)
1,484
3,656
(276)
3,380
106
(2,521)
450
4,774
(397)
4 377
113
Payables due to related parties
21
25
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 1,882
thousand and USD 2,482 thousand as at 31 December
2022 and 2021 respectively.
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
Compensation of key management personnel
Key management personnel totalled 20 individuals as of
31 December 2022 (31 December 2021: 22 individuals),
including 3 independent non-executive directors as of 31
December 2022 and 2021.
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 15,341 thousand and USD 16,886
thousand for the years ended 31 December 2022 and
2021, respectively. Compensation of key management
personnel consists of contractual salary, compensations
and performance bonuses.
Total compensation of the Group’s non-executive
directors, which consists of contractual salary, amounted
to USD 597 thousand and USD 696 thousand in 2022 and
2021, respectively.
Total compensation of the Group’s Executive Chairman,
which consists of contractual salary, amounted to USD
571 thousand in 2022 (2021: USD 643 thousand).
Loans to key management personnel
The Group has provided several of its key management
personnel with unsecured loans. The loans to key
management personnel provided during 2022 and
2021 mainly include loans provided by the Ukraininan
subsidiaries to the Group’s executive directors which
amounted to USD 720 thousand and USD 1,024 thousand,
respectively.
207
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
33. 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 attack has led, and
continues to lead, to significant casualties, dislocation of
the population, damage to infrastructure and disruption to
economic activity in Ukraine. Sea ports and airports remain
closed and some have been damaged, and many roads
and bridges have been damaged or destroyed, further
crippling transportation and logistics. Economic activity
started to recover due to the liberation of northern regions
and a decrease in the number of regions affected by active
hostilities. Thanks to the rapid adaptation by businesses
and households to the new conditions and improved
results of in the second half of 2022, the decline in real
GDP for the whole 2022 is estimated at 30.3%. According
to the National Bank of Ukraine’s (hereafter “NBU”) most
recent forecast, the NBU expects growth in real GDP to
be weak in 2023 at 0.3%, increasing in 2024 to 4.1%, an
accelerating in 2025 to 6.4%, however, the outlook could
worsen sharply if the conflict lasts longer.
The War caused a disruption of supply chains, a decrease
in supply of some goods, higher business costs, physical
destruction of production facilities and infrastructure (in
the energy sector in particular), and temporary occupation
of some territories. Persistently high energy prices and
record-high inflation in partner countries also fueled price
pressures in Ukraine. Inflation expectations of businesses
and households increased markedly. This was reflected
in deteriorating maturity structure of bank deposits and
higher spending on some durable goods, primarily imported
goods. In the second half of 2022 inflation has stabilized,
although it remains high at 26.6% as of the end of 2022;
according to the NBU recent forecast it will decrease to
18.7% in 2023.
After months of Russia’s blockade of Ukrainian sea ports,
the “Grain deal” was signed by Ukraine, UN, Turkey and
Russia on 22 July 2022, that allowed the movement of
cargo ships carrying grain in the Black Sea. The document
spells out a complex regime that establishes safe channels
through the Black Sea and inspections in Turkey. As of
March 2023, 24.7 million tonnes of agricultural produce
have already been exported through the “grain corridor”,
and overall 44.4 million tonnes of agricultural produce
have been exported from Ukraine during the 11 months of
war (including 9.9 million tonnes of wheat and 18.2 million
tonnes of corn).
The economic consequences are already very serious, the
situation remains highly fluid and the outlook is subject to
extraordinary uncertainty.
The Government has implemented emergency measures
to stabilize markets and the economy, but the country
faces large fiscal and external financing gaps. Ukrainian
authorities have continued to service their external debt
obligations and the country’s payment system remains
operational, with banks open and mostly liquid.
International organizations (IMF, EBRD, EU, World
Bank), along with individual countries and charities,
are providing Ukraine with financing, donations and
material support. In 2022, Ukraine received over USD
32 billion in international assistance, of which over USD
14 billion was in the form of grants. This enabled the
country to finance a larger portion of the consolidated
budget deficit (over 27% of GDP, excluding grants),
and to increase international reserves, to USD 28.5
billion by the end of the year. With already announced
international aid the overall official financing in 2023
could exceed USD 38 billion.
208
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
33. OPERATING ENVIRONMENT
(continued)
In June 2022, the NBU established the key policy rate at
25% p.a. compared with its previous level of 10% p.a. The
updated forecast envisages maintaining this unchanged
at least until Q1 2024. The exchange rate remained fixed
at UAH 29.25 to the US Dollar until 21 July, when it was
increased to 36.57 by the NBU. The NBU has said that
a fixed exchange rate remains an anchor for ensuring
financial stability so the tight monetary conditions will be
maintained. Once the economy and financial system return
to normal operation, the NBU will revert to its traditional
format of inflation targeting with a floating exchange rate.
In Q1 2022 the Government imposed export licensing of
key foodstuffs including wheat, corn, poultry meat, and
sunflower oil. The export licensing for corn and sunflower
oil was cancelled later in Q1 2022, and wheat in Q3 2022.
Since 24 February 2022, the Group has suffered significant
losses as a result of the continuous war in Ukraine. The
Group considers the following expenses incurred during
the year 2022 to be directly related to the war:
Loss on impairment of property, plant
and equipment
Community support donations1)
Write-off of inventories and biological assets1)
Salary to mobilized employees2)
Expected credit losses of trade accounts
receivable and non-current financial assets1)
Other war-related expenses1)
Total amount recognized in profit or loss
Decrease in revaluation reserve
2022
11,114
17,924
9,940
12,653
24,815
3,435
79,881
9,489
89,370
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 been providing
humanitarian aid (mainly through food supply) to the
people of Ukraine since the beginning of the war, despite
logistical challenges. Since the invasion began, MHP has
provided over 12,000 tonnes of poultry products pro bono.
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
34. CONTINGENCIES AND CONTRACTUAL
COMMITMENTS
Taxation and legal issues
Ukrainian tax authorities are increasingly directing their
attention to the business community as a result of the
overall Ukrainian economic environment. The local and
national tax environment is constantly changing and
subject to inconsistent application, interpretation and
enforcement. 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’
include taxes,
tax filings. Such assessments could
penalties and fines, and these amounts could be material.
While the Group believes it has complied with local tax
legislation, significant changes to the tax legislation 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 2020 and 31 December 2021 within the
required deadlines.
As of 31 December 2022, the Group’s management assessed
its possible exposure to tax risks for a total amount of
USD 4,428 thousand related to corporate income tax (31
December 2021: USD 5,658 thousand). No provision was
recognised relating to such possible tax exposure.
209
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
34. CONTINGENCIES AND CONTRACTUAL
COMMITMENTS
(continued)
Taxation and legal issues (continued)
Also, as of 31 December 2022, companies of the Group
were engaged in ongoing litigation with tax authorities for
the amount of USD 25,652 thousand (2021: USD 73,147
thousand), including USD 17,023 thousand (2021: USD
59,670 thousand) of litigations with the tax authorities
related to disallowance of certain amounts of VAT
refunds and deductible expenses claimed by the Group.
Of this amount, USD 20,332 thousand as of 31 December
2022 (2021: USD 48,912 thousand) 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. Management 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, therefore, 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 years ended 31 December 2022 and 2021,
the companies of the Group entered into a number
of contracts with foreign suppliers for the purchase
of property, plant and equipment for development
of agricultural operations. As of 31 December 2022,
purchase commitments amounted to USD 33,022
thousand (2021: USD 30,952 thousand).
35. DIVIDENDS
In view of the uncertainties created by the Russian invasion,
the Directors have decided not to declare final dividends
for 2021 and 2022 financial years.
At the extraordinary general meeting held on 28 April 2021,
the Shareholders of MHP SE approved payment of an
annual dividend from profits of 2020 of USD 0.2803 per
share, equivalent to USD 30,000 thousand. At the meeting
on 17 November 2021, in recognition of the Company`s
exceptional performance in 2021, the Board of Directors
approved the payment of a one-off special dividend
of USD 0.2803 per share, equivalent to USD 30,000
thousand. As at 31 December 2021 dividends were fully
paid to shareholders.
36. 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.
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
2022
2021
2022
2021
FINANCIAL LIABILITIES
Bank borrowings (Note 28)
Senior Notes due in 2024, 2026, 2029 (Note 29)
294,605
1,424,093
225,485
1,397,577
296,294
692,616
225,574
1,389,024
The fair value of bank borrowings was estimated by discounting the expected future cash outflows by a market rate of
interest for bank borrowings of 3.4% (31 December 2021: 1.8%), and is within Level 2 of the fair value hierarchy.
210
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
36. FAIR VALUE OF FINANCIAL INSTRUMENTS
(continued)
The fair value of Senior Notes was estimated based on
market quotations and is within Level 1 of the fair value
hierarchy.
In determining 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.
At present, the impact of climate-related matters is not
material to the Group’s financial statements.
Reconciliation of liabilities arising
from financing activities
The table below details changes in the Group’s liabilities
arising from financing activities, including both cash
and non-cash changes. Liabilities arising from financing
activities are those for which cash flows were, or future
cash flows will be, classified in the Group’s consolidated
statement of cash flows as cash flows from financing
activities.
As of 31 December 2021
Cash flow from proceeds/(repayments)
Non-cash movements
Foreign exchange movements
Non-cash additions and change in terms
Non-cash repayments of lease liabilities1)
Acquisition of subsidiaries
Finance costs
Reclassification to interest payable
Translation difference
As of 31 December 2022
BANK BORROWINGS
BONDS ISSUED
LEASE OBLIGATIONS
TOTAL
225,062
72,151
47,026
-
-
-
7,172
(6,754)
(50,826)
293,831
1,376,820
-
-
-
-
-
113,447
(105,924)
(1,362)
1,382,981
281,250
(52,209)
1,604
43,584
(9,013)
-
38,859
-
(74,752)
229,323
1,883,132
19,942
48,630
43,584
(9,013)
-
159,478
(112,678)
(126,940)
1,906,135
1) Non-cash repayments are represented by grains and other agriculture produce provided to lessors of land as settlement of lease liabilities.
BANK BORROWINGS
BONDS ISSUED
LEASE OBLIGATIONS
TOTAL
As of 31 December 2020
Cash flow from proceeds/(repayments)
104,396
120,054
1,370,999
-
Non-cash movements
Foreign exchange movements
Non-cash additions and change in terms
Non-cash repayments of lease liabilities1)
Acquisition of subsidiaries
Finance costs
Reclassification to interest payable
Translation difference
As of 31 December 2021
414
-
-
595
2,741
(2,227)
(911)
-
-
-
-
106,730
(100,909)
-
225,062
1,376,820
198,499
(66,254)
(778)
109,834
(10,793)
-
45,398
-
5,344
281,250
1,673,894
53,800
(364)
109,834
(10,793)
595
154,869
(103,136)
4,433
1,883,132
1) Non-cash repayments are represented by grains and other agriculture produce provided to lessors of land as settlement of lease liabilities.
211
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
37. RISK MANAGEMENT POLICIES
As of 31 December 2022 and 2021 the gearing ratio was as
follows:
During the years ended 31 December 2022 and 2021 there
were no material changes to the objectives, policies and
processes for managing credit risk, capital risk, liquidity
risk, currency risk, interest rate risk, livestock diseases risk
and commodity price and procurement risk.
Capital management
The Group manages its capital to ensure that entities of
the Group will be able to continue as a going concern
while maximising the return to the equity holders through
maintaining a balance between the higher returns that
might be possible with higher levels of borrowings and
the security afforded by a sound capital position. The
management of the Group reviews its capital structure on
a regular basis. Based on the results of this review, the
Group takes steps to balance its overall capital structure
through new share issues and through the issue of new
debt or the redemption of existing debt.
In addition to the target ratios of the covenants established
under the terms of the bonds issued and bank borrowings
(Notes 28 and 29), the Group’s target is to achieve a gearing
ratio of not higher than 2.5. The Group defines its gearing
ratio as the proportion of total liabilities to total equity.
Total Liabilities
Total Equity
2022
2021
2,363,005
2,309,591
1,445,697
1,794,188
Total Liabilities to Equity
1.63
1.29
Major categories of assets and liabilities considered
by the Group from a risk management perspective
ASSETS:
Cash and cash equivalents
(Note 25)
Trade accounts receivable (Note
23)
Other current financial assets
(Note 24)
Non-current financial assets
(Note 18)
Long-term bank deposits
LIABILITIES:
Bonds issued (Note 29)
Lease liabilities (Note 30)
Trade accounts payable
Bank borrowings (Note 28)
Accrued payroll and related
taxes (Note 31)
Interest payable (Note 28, 29)
Amounts payable for property,
plant and equipment (Note 31)
Provision for claims, penalties
and indemnification (Note 31)
VAT payable (Note 31)
Other financial liabilities (Note 31)
2022
2021
300,489
275,237
182,900
156,878
22,097
16,156
7,813
28,764
3,105
9,904
516,404
486,939
1,382,981
229,323
122,576
293,831
67,139
1,376,820
281,250
162,641
225,062
65,804
41,886
13,258
21,180
14,194
2,494
1,042
5,063
7,839
3,215
9,034
2,166,390
2,160,242
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
The main risks inherent to the Group’s operations are those
related to credit risk, liquidity risk, currency risk, interest
rate and commodity price risk.
Credit risk
The Group is exposed to credit risk which is the risk that
one party to a financial instrument will fail to discharge an
obligation and cause the other party to incur a financial
loss. The Group does not hold any collateral or other credit
enhancements to cover its credit risks associated with its
financial assets. The carrying amount of financial assets
disclosed in the table “Major categories of assets and
liabilities considered by the Group from a risk management
perspective” represent the maximum credit exposure.
The Group structures the levels of credit risk it undertakes
by placing limits on the amount of risk accepted in relation
to one customer or group of customers. The approved
credit period for major groups of customers, which
include franchisees, distributors and supermarkets, is
set up to 30 days.
Limits on the level of credit risk by customer are approved
and monitored on a regular basis by the management of
the Group. Management assesses amounts receivable
from customers for recoverability starting from 30 and
60 days for receivables on sales of poultry meat and
receivables on other sales, respectively. As of 31 December
2022, about 7% (2021: 17%) of trade accounts receivable
comprise amounts due from 12 large supermarket chains,
which have the shortest contractual receivable settlement
period among customers.
The credit risk on liquid funds is limited because the
almost the all counterparties are banks with high credit-
ratings assigned by international credit-rating agencies; a
relatively small portion of cash is held in Ukrainian state
banks on current accounts.
212
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
37. RISK MANAGEMENT POLICIES
(continued)
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.
The following table details the Group’s remaining
contractual maturity for its 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 31 December
2022 and 2021. 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.
Year ended 31 December 2022
Bank borrowings
Bonds issued
Lease liabilities
Trade accounts payable
Other current liabilities
Total
Year ended 31 December 2021
Bank borrowings
Bonds issued
Lease liabilities
Trade accounts payable
Other current liabilities
CARRYING
AMOUNT
CONTRACTUAL
AMOUNTS
LESS THAN
1 YEAR
FROM 2ND
TO 5TH YEAR
AFTER
5TH YEAR
294,605
1,424,093
229,323
122,576
95,793
309,690
1,765,539
439,320
122,576
95,793
2,166,390
2,732,918
225,485
1,397,577
281,250
162,641
93,289
229,766
1,843,888
529,679
162,641
93,289
182,794
119,351
65,067
122,576
95,793
585,581
123,615
98,850
77,954
162,641
93,289
120,227
1,252,438
192,698
-
-
6,669
393,750
181,555
-
-
1,565,363
581,974
92,188
1,329,413
233,731
-
-
13,963
415,625
217,993
-
-
Total
2,160,242
2,859,263
556,349
1,655,332
647,581
The Group’s target is to maintain its current ratio, defined as the proportion of current assets to current liabilities, at the
level of not less than 1.2. As of 31 December 2022 and 2021, the current ratio was as follows:
Current assets
Current liabilities
2022
1,556,060
532,564
2.92
2021
1,654,939
529,263
3.13
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, but Management sets limits on the level of exposure to foreign currency
fluctuations in order to manage currency risk.
213
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
37. RISK MANAGEMENT POLICIES
(continued)
Currency risk (continued)
The carrying amounts of the Group’s foreign currency denominated monetary assets and liabilities as of 31 December
were as follows:
Assets
Liabilties1)
Net liabilities
2022
2021
USD
EUR
USD
EUR
177,509
116,847
140,705
41,883
1,498,217
136,207
1,320,708
19,360
1,513,825
1,373,120
42,395
512
1) Currency denominated liabilities consist mostly of bonds issued and bank borrowings.
The table below illustrates the Group’s sensitivity to a
change in the exchange rate of the Ukrainian Hryvnia
against the US Dollar and Euro. The sensitivity analysis
includes only outstanding foreign currency denominated
monetary items and adjusts their translation at the year-
end for possible change in foreign currency rates.
CHANGE IN
FOREIGN
CURRENCY
EXCHANGE
RATES
EFFECT ON
PROFIT
BEFORE TAX,
GAIN/(LOSS)
20%
20%
2%
2%
15%
15%
15%
15%
(264,142)
(3,872)
26,414
387
(205,968)
(77)
205,968
77
2022
Increase in USD exchange rate
Increase in EUR exchange rate
Decrease in USD exchange rate
Decrease in EUR exchange rate
2021
Increase in USD exchange rate
Increase in EUR exchange rate
Decrease in USD exchange rate
Decrease in EUR exchange rate
214
During the year ended 31 December 2022 the Ukrainian
Hryvnia depreciated against the EUR and USD by 20.61%
and 25.41% respectively (2021: appreciated against the EUR
by 12.34% and 3.65% against the USD). As a result, during
the year ended 31 December 2022 the Group recognised
net foreign exchange losses in the amount of USD 365,018
thousand (2021: foreign exchange gains in the amount of
USD 40,466 thousand) and cumulative translation loss
of USD 297,493 thousand (2021: USD 2,931 thousand)
in the consolidated statement of profit or loss and other
comprehensive income.
The currency risk is mitigated by the existence of USD-
denominated proceeds from sales of sunflower oil, grain
and chicken meat, which are sufficient for servicing the
Group’s foreign currency denominated liabilities and
were as follows during the years, ended 31 December
2022 and 2021:
Chicken meat and related
products
Vegetable oil and related
products
Grain
Other agricultural segment
products
2022
2021
986,857
769,563
448,747
290,230
121,706
140,072
43,861
65,564
1,601,171
1,265,429
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Livestock diseases risk
The Group’s agro-industrial business is subject to risks of
outbreaks of various diseases. The Group faces the risk
of outbreaks of diseases, which are highly contagious
and destructive to susceptible livestock, such as avian
influenza or bird flu for its poultry operations. These and
other diseases could result in mortality losses. Disease
control measures were adopted by the Group to minimize
and manage this risk. Management is satisfied that its
current existing risk management and quality control
processes are effective and sufficient to prevent any
outbreak of livestock diseases and related losses.
Commodity price and procurement risk
Commodity price risk arises from the risk of an adverse
effect on current or future earnings from fluctuations in
the prices of commodities. To mitigate this risk the Group
continues expansion of its grain growing segment, as part
of its vertical integration strategy, and also accumulates
sufficient commodity stock to meet its production needs.
38. PENSIONS AND RETIREMENT PLANS
The employees of the Group receive pension benefits
from the government in accordance with the laws and
regulations of respective jurisdictions.
37. RISK MANAGEMENT POLICIES
(continued)
Interest rate risk
Interest rate risk arises from the possibility that changes in
interest rates will affect primarily borrowings by changing
future cash flows. For variable rate borrowings, interest is
linked to SOFR or EURIBOR.
The below table illustrates the Group’s sensitivity to
increases or decreases of interest rates by 1%. The analysis
was applied to interest bearing liabilities (bank borrowings
and lease obligations) based on the assumption that the
amount of liability outstanding as of the reporting date
was outstanding for the whole year.
2022
SOFR
SOFR
EURIBOR
EURIBOR
2021
SOFR
SOFR
EURIBOR
EURIBOR
INCREASE/
(DECREASE)
OF FLOATING
RATE
EFFECT ON
PROFIT
BEFORE TAX,
GAIN/(LOSS)
1%
-1%
1%
-1%
1%
-1%
1%
-1%
(106)
106
(1,799)
1,799
(106)
106
(1,200)
969
The effect of interest rate sensitivity on shareholders’
equity is equal to that on consolidated statement of profit
or loss.
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
The Group’s contributions to the State Pension Fund
for the year ended 31 December 2022 were USD 64,089
thousand and are recorded in the Consolidated Statement
of Profit or Loss and Other Comprehensive Income on an
accrual basis (2021: USD 58,458 thousand). The Ukrainian
companies of the Group are not liable for any other
supplementary pensions, post-retirement health care,
insurance benefits or retirement indemnities to its current
or former employees, other than pay-as-you-go expenses.
In accordance with the legislative regulations, collective
contract, and internal rules, the companies of the European
Operating Segment are committed to the payment of
loyalty bonuses to employees and severance payments
upon their retirement for which long-term provisions
are made. Provisions are recognized in other operating
expenses in the Consolidated Statement of Profit or Loss
and Other Comprehensive Income and in other non-
current liabilities in the Statement of Financial Position.
The balances of provisions for employee benefits are
presented within other non-current liabilities and were as
follows as of 31 December 2022 and 2021:
Provisions for severance
payments
Provisions for loyalty bonuses
2022
3,846
919
4,765
2021
4,731
1,182
5,913
215
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL STATEMENTS
SHAREHOLDER
INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
38. PENSIONS AND RETIREMENT PLANS
(continued)
The following table represents movements in provisions for employee benefits for the years ended 31 December 2022 and 2021:
31 December 2020
Formation
Expenditure
Translation Differences
31 December 2021
Formation
Expenditure
Translation Differences
31 December 2022
39. EARNINGS PER SHARE
PROVISIONS FOR
SEVERANCE PAYMENTS
PROVISIONS FOR
LOYALTY BONUSES
4,932
272
(85)
(388)
4,731
361
(952)
(294)
3,846
1,328
49
(95)
(100)
1,182
67
(257)
(73)
919
TOTAL
6,260
321
(180)
(488)
5,913
428
(1,209)
(367)
4,765
The earnings and weighted average number of ordinary shares used in calculation of earnings per share are as follows:
FROM CONTINUED OPERATIONS
Loss/(profit) for the year attributable to equity holders of the Parent
(Loss)/earnings used in calculation of earnings per share
Weighted average number of shares outstanding
Basic and diluted (loss)/earnings per share (USD per share)
2022
(225,577)
(225,577)
107,038,208
(2.11)
2021
378,968
378,968
107,038,208
3.54
The Group has neither potentially dilutive ordinary shares nor other dilutive instruments; therefore, the diluted earnings
per share equal basic earnings per share. The denominators used are the same as those detailed above for both basic and
diluted earnings per share from discontinued operations presented in Note 3.
FOR THE YEAR ENDED 31 DECEMBER 2022
(in thousands of US dollars, unless otherwise indicated)
40. SUBSEQUENT EVENTS
Facility agreement with the European Bank
for Reconstruction and Development
In February 2023, the Group entered into a facility
agreement with the European Bank for Reconstruction
and Development (EBRD) in the amount of USD 100 million
(EBRD of USD 90 million and other lender of USD 10 million).
The loan is for the purpose of financing of needs of the
Group's Poultry and related operations segment. This is a
seasonal loan, secured by sunflower seeds and oil stocks
with maturity in August 2023 and will be used to finance
the purchase of sunflower seeds and other operational
expenses associated with production of sunflower oil and
related products. The loan agreement includes a number
of covenants and other terms and conditions, including a
requirement that the Group maintain certain financial ratios
in-line with Bonds. The Group has tested this transaction
and concluded on its compliance with the covenants
as stated in Note 29, defining this new indebtedness as
permitted debt.
41. AUTHORIZATION OF THE CONSOLIDATED
FINANCIAL STATEMENTS
These consolidated financial statements were authorized
for issue by the Board of Directors of MHP SE on 11 April
2023.
216
ANNUAL REPORTAND ACCOUNTS 2022NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
01
02
I
W
E
V
E
R
C
G
E
T
A
R
T
S
I
I
W
E
V
E
R
S
S
E
N
S
U
B
I
03
E
C
N
A
N
R
E
V
O
G
04
S
T
N
E
M
E
T
A
T
S
L
A
C
N
A
N
F
I
I
SHAREHOLDER
INFORMATION
218 Shareholder Information
219 Glossary of Terms
STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER INFORMATION
SHAREHOLDER INFORMATION
KEY CONTACTS & ADVISORS
Company Registered Office
16-18 Zinas Kanther Street,
Ayia Triada,
3035 Limassol,
Cyprus
Company Office
EB 1, Nicolaides Sea View City Block AB,
3-7 Archbishop Makarios III Avenue,
6017 Larnaca,
Cyprus
Registrar
Citigroup Global Markets Deutschland AG
Reuterweg 16 60323 Frankfurt
Germany
Auditor
Ernst & Young Cyprus Limited,
Jean Nouvel Tower,
6 Stasinou Avenue,
1511 Nicosia,
Cyprus
Website
Shareholders are encouraged to visit
our websites to obtain information on
the Company, including its history,
reports, news and press information:
• www.mhp.ua
• www.mhp.com.cy
ANASTASIYA SOBOTYUK
Director of Investor
Relations and International
Communications
Email: a.sobotyuk@mhp.com.ua
+38 050 339 29 99
+38 641 30 72 65
+357 99 76 71 26
FINANCIAL CALENDAR
MHP’s financial calendar can be
found here:
www.mhp.ua/en/mhp-se/
financial-calendar
The calendar is updated to show
relevant events and dates.
218
ANNUAL REPORTAND ACCOUNTS 2022 STRATEGIC
REVIEW
BUSINESS
REVIEW
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER INFORMATION
GLOSSARY OF TERMS
GLOSSARY
OF TERMS
AGM
AI
AI
AMCU
ARC
B2B
B2C
BRCGS
Broiler
CAPEX
CEO
CFO
CGU
CIS
Company
COP 26
COSO
CO2
CO2e
Covid-19
CSR
EBITDA
Annual general meeting
Avian Influenza
Artificial Intelligence
Anti-Monopoly Committee
of Ukraine
Audit & Risk Committee
Business-to-Business
Business-to-Customer
Organisation that harmonises
food safety standards across
the supply chain. Also known
as BRC Global Standard
A young chicken raised for meat
Capital expenditure
Chief Executive Officer
Chief Financial Officer
Cash Generating Unit
Commonwealth of
Independent States
MHP SE
The 2021 United Nations
climate change conference
Committee of Sponsoring
Organisations
Carbon Dioxide
Carbon Dioxide Equivalent
Coronavirus Disease 2019
Corporate Social
Responsibility
Earnings before interest, tax,
depreciation and amortisation
EBRD
EGM
EOS
ERP
ESG
EU
EUR
FOB
Fodder
FX
GDP
GFSI
GDR
GMO
GMP
Greenfield
GRI
Group
Grow-out
GWP
HoReCa
Ha
HR
IAS
European Bank for
Reconstruction and
Development
Extraordinary general meeting
European Operating Segment
Enterprise Resource Planning
Environmental, Social and
Governance
European Union
Euro
Free On Board
Food for livestock
Foreign Exchange
Gross Domestic Product
Global Food Safety Initiative
Global depositary receipt
Genetically Modified
Organisms
Good management practices
Relating to previously
undeveloped sites
Global Reporting Initiative
MHP SE and its subsidiaries
The period during which the
broilers are raised
Global warming potential
HOtel, REtail and CAfe
Hectares
Human resources
International Accounting
Standards
IDP
IEA
IFC
IFI
IFRS
IGR&PA
IR
JV
Kg
KPIs
KSA
LHS
LTM
M&A
MENA
MW
NBU
NED
NGO
NRC
OECD
PP
Internally Displaced Persons
International Energy Agency
International Finance
Corporation
International financial institution
International Financial
Reporting Standards
International Government
Relations & Public Affairs
Committee, now known as the
Sustainability and International
Affairs Committee
Investor relations
Joint venture
Kilogram
Key performance indicators
Kingdom of Saudi Arabia
Left Hand Scale
Last twelve months
Mergers and acquisitions
Middle East and North Africa
region
Megawatt
National Bank of Ukraine
Non-executive director
Non-governmental organisation
Nominations and Remuneration
Committee
Organisation for Economic
Co-operation and Development
Perutnina Ptuj, acquired during
2019
PPE
pps
RTC
RTE
R&D
RHS
UN SDGs
SE
SI
SKU
SPOT
TCFD
TJ
UAE
UAH
UK
UNIC
US
US$/USD
y/y
VAT
Personal Protective Equipment
Percentage Points
Ready-to-cook
Ready-to-eat
Research and development
Right Hand Scale
United Nations Sustainable
Development Goals
Societas Europaea
Sustainability and International
Affairs Committee, formerly
known as the International
Government Relations & Public
Affairs Committee
Stock keeping unit, or
distinct type of item for sale
A contract for immediate
settlement on the spot date
Task Force on Climate-Related
Financial Disclosures
Terajoule, a measurement
of energy
United Arab Emirates
Ukrainian Hryvnia
United Kingdom
Ukrainian Network of Integrity
and Compliance
United States
United States Dollar
Year-on-year
Value-added tax
219
ANNUAL REPORTAND ACCOUNTS 2022