GROUP ANNUAL
REPORT AND
ACCOUNTS
2023
A LEADING
INTERNATIONAL
FOOD AND AGROTECH
COMPANY
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GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
Statement of the Board
of Directors
Independent Auditor’s
Report
Consolidated Financial
Statements
Notes
Chair’s Introduction to
Corporate Governance
Corporate Governance Report
Board of Directors
Audit & Risk Committee
Report
Nominations and Remuneration
Committee Report
Sustainability & International
Affairs Committee Report
Management Report
Key Contacts & Advisors
Financial Calendar
Glossary of Terms
STRATEGIC
REPORT
Measuring our Success
and Progress
Chair’s Statement
CEO’s Statement
We are MHP
Strategy & Purpose
Value Creation
Key Performance Indicators
Financial and Operational
Review
Alternative Performance
Measures
Risk Management
MHP’s Growth Pillars
TCFD Disclosures
Non-Financial and
Sustainability Information
Statement
S
T
N
E
T
N
O
C
pp. 4-106
STRATEGIC
REPORT
Measuring our Success and Progress
Chair’s Statement
CEO’s Statement
We are MHP
Strategy & Purpose
Value Creation
Key Performance Indicators
Financial and Operational Review
Alternative Performance Measures
Risk Management
MHP’s Growth Pillars
TCFD Disclosures
Non-Financial and Sustainability Information Statement
GOVERNANCE
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FINANCIAL
STATEMENTS
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SHAREHOLDER
INFORMATION
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MEASURING OUR
SUCCESS AND PROGRESS
STRATEGIC
REPORT
Measuring our
Success and Progress
FINANCIAL HIGHLIGHTS
REVENUE
US$ million
+14% y/y
EXPORT REVENUE
US$ million
+13%
y/y
EXPORT REVENUE AS
A % OF TOTAL REVENUE
ADJUSTED EBITDA1
US$ million
+16%
y/y
60%
61%
3,021
2023
2,642
2022
1,807
2023
1,601
2022
2023
2022
445
2023
384
2022
NET DEBT
US$ million
NET DEBT/LTM
EBITDA RATIO
3.22
2.47
WAR-RELATED COSTS2
2023
35
US$ million
1,101
2023
1,237
2022
2023
2022
2022: US$ 69 million
1 Adjusted EBITDA is net of IFRS 16
2 Excluding losses on impairment of property,
plant and equipment
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION STRATEGIC AND OPERATIONAL HIGHLIGHTS
STRATEGIC
REPORT
Measuring our
Success and Progress
RESILIENCE AND
INNOVATION
INTERNATIONAL
DIVERSIFICATION
OUR CULINARY
TRANSFORMATION
Our operations continued to run
at 100% capacity utilisation and
we continued to export to over 70
countries despite War-related and
other complex logistics-related
challenges.
Formation of joint venture in Saudi Arabia,
strengthening food security in the region
and expanding our global outreach.
Establishment of a ready-to-eat production
line at Perutnina Ptuj in Slovenia.
Expansion of culinary product SKUs.
OUR APPROACH TO RESPONSIBLE BUSINESS
OVERSIGHT AND
STRATEGY
EMBEDDING ESG INTO OUR
OPERATIONS
SUSTAINABLE
PRACTICES
We are establishing an operational
sub-committee to the Sustainability &
International Affairs Committee (“S&IA
Committee”), which will comprise of
Top Management.
Adoption of a Group-wide OKR to
implement and develop tools and practices
to ensure MHP’s sustainable development.
We achieved GLOBALG.A.P. and ISSC
certification at a combined total of ten
of our sites for our sustainable poultry
production and farming practices.
S&IA
Committee
Report on
page 139.
S&IA
Committee
Report on
page 139.
Growth Pillar
4 on page
78.
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5
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION PEOPLE
WE WORK FOR UKRAINE
STRATEGIC
REPORT
Measuring our
Success and Progress
SUPPORT FOR OUR
WORKFORCE
SUPPORT FOR THE PEOPLE
OF UKRAINE
SUPPORT FOR VETERANS
Full payment of salaries of our
2,380 mobilised employees.
Comprehensive support for our
28,788 employees based in Ukraine,
and their families.
Cultural, social, and economic initiatives
and the provision of humanitarian aid for the
people of Ukraine.
Establishment of an extensive and award-
winning rehabilitation and reintegration
programme for demobilised employees and
other veterans.
PLANET
Growth Pillar
2 on page
65.
Growth Pillar
3 on page
76.
Growth Pillar
3 on page
76.
CARBON TRUST
ACCREDITATION
GHG EMISSIONS - UKRAINE
ENERGY MANAGEMENT -
UKRAINE
Carbon Trust accreditation in relation
to our Ukrainian poultry production.
Scope 1 emissions, tonnes: 362,323 tonnes,
+3% y/y (2022: 353,413 tonnes)
Total energy from renewable sources:
2,081 TJ, -4% y/y (2022: 2,159 TJ)
Scope 2 emissions: 237,776
tonnes, +8% y/y
(2022: 220,985 tonnes)
Growth Pillar
6 on page
92.
Of which biogas: 1,934 TJ,
+30% y/y (2022: 1,483 TJ)
Growth Pillar
6 on page
92.
Growth Pillar
6 on page
92.
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WATER USAGE
CLIMATE CHANGE STRATEGY
SOLAR POWER - UKRAINE
Ukraine water usage: 15.1 million m3
European Operating Segment water
usage: 2.0 million m3
Start of project with the EBRD aimed at
putting in place a robust, science-based
Group-wide Climate Change
Policy in 2025e.
Installation of 3.9 MW capacity of solar
plants contributing to energy security in
Wartime.
Growth Pillar
6 on page
92.
TCFD
Disclosures
on page 102.
Growth Pillar
6 on page
92.
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6
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION STRATEGIC
REPORT
Chair’s Statement
CHAIR’S STATEMENT
Russia’s War of attrition has entered its third
year: a grim milestone. We have seen significant
offensives in southern and eastern territories and
the destruction of infrastructure and loss of life in
all regions. Since the War began until now, more
than 410 defenders have returned as veterans,
and over 300 of these have resumed working for
MHP. We mourn the tragic fate of the 156 MHP
workers who have been killed, captured or are
currently missing due to the War. Our workforce
and the people of Ukraine continue to endure
invasion’s physical and psychological
the
effects, whilst remaining steadfastly resolute
and determined.
The Group’s liquidity position is strong yet this
position is nuanced. Ukrainian capital controls
restrict MHP to service its debt obligations,
which means that currency held in Ukraine may
not be sent offshore and there is no visibility on
when these restrictions will be lifted. Offshore
cash is subject to repatriation rules instituted
by the National Bank of Ukraine (NBU). Recent
rules set in autumn 2023, if not changed in
the nearest term, create more challenging
operational environment for the Company,
especially for further coupon payments. More
information can be found in the Financial &
Operational Review on page 35.
War continues to have a major impact on
Company operations. Irregular and frequent
drone and rocket attacks against civilian, energy
and other
infrastructure targets continue,
presenting us with a challenging and disruptive
logistical environment, driving additional other
War-related costs.
reflects
Our FY 2023 performance
the
resilience and agility of our business model and
the tremendous efforts of our workforce. We
expect 2024 to be another difficult year as we
continue to operate in an uncertain and highly
challenging environment.
Despite War, the Group’s progress continues in
many areas:
→ our culinary transformation;
→ our global outreach, including the formation
of a joint venture in the Kingdom of Saudi
Arabia that will expand MHP’s international
reach as well as supporting the Kingdom’s
Food Security Programme, Vision 2030; and
→ our approach to responsible business.
OUR PEOPLE
I want to express my deepest thanks to our
people for their continued commitment and
dedication
in the face of adversity. They
have adjusted to the new normal and bravely
risen to the challenges presented daily. I am
tremendously proud of the way our workforce
has responded to the disruptions and of what
the Group is achieving. The provision of support
and stability to our Ukrainian workforce of
28,788 people and their families remains a
top priority, and MHP has adopted many new
internal policies and approaches to look after
and protect employees and their families who,
in turn, have responded positively.
last year
the exceptional
I highlighted
contribution from our Chief Executive, Yuriy
Kosyuk, since the outbreak of War. Yuriy
continues to lead with optimism and energy
and to be an ever-present and visionary leader
during these turbulent times.
I remain grateful to the Board’s Non-Executive
Directors and to the team of Executive
Directors for their continued support and
special contributions during Wartime. The
Non-Executives continue to be instrumental in
rallying international support and in providing
leadership to ensure that a multitude of
challenging and uncertain issues are addressed
promptly and effectively. More information on
the Board’s contribution and interaction with
stakeholders can be found in the Sustainability
& International Affairs (“S&IA”) Committee
Report on page 139 and the Corporate
Governance Report on page 111.
SUPPORT FROM OUR
STAKEHOLDERS AND
PARTNERS
With so many restrictions and challenges due to
the War, I would like to thank the international
for their unwavering
financial community
support and continued backing of MHP.
FOLLOWING THE GROUP’S ROBUST FY 2023
PERFORMANCE AND TREMENDOUS EFFORTS TO
MAINTAIN OPERATIONS, PRODUCTION AND SALES
VOLUMES, THE GROUP IS FUNDED TO MAINTAIN
OPERATIONS AND BUSINESS CONTINUITY.
STRATEGIC
REPORT
Chair’s Statement
I would also like to recognise the support from
our Note Holders in October and November
2023 in the Tender Offer for our US$ 500
million 7.75% Guaranteed Notes due May
2024; and in October 2023, from international
and development finance
institutions, the
International Development Finance
U.S.
Corporation,
Finance
for
Corporation, and the European Bank
Reconstruction and Development, to provide
facilities of up to US$ 480 million in aggregate.
This comprises up to US$ 400 million for
liability management (the 2024 notes) and
US$ 80 million for different CAPEX projects,
including ESG-linked.
International
the
ongoing business operations, the Directors
have decided not to declare a final dividend for
the 2023 financial year. No final dividend was
declared for the 2022 financial year.
CORPORATE GOVERNANCE
The Group recognises the
importance of
strong corporate governance in line with good
international practice. MHP is a GDR issuer
listed on London Stock Exchange’s Standard
Segment and yet it aims to comply as far as
possible with the more onerous UK Corporate
Governance Code 2018 provisions required of
the Exchange’s Premium Segment.
MHP remains an important ‘cog’ in global food
security and this support has enabled us to
continue to operate and supply both domestic
and international markets with essential food
staples. A
thriving Ukrainian agricultural
sector is critical for sustaining the country
and is equally important to global agricultural
supply chains that have been disrupted by
Russia’s invasion. We hope that this support
will continue in the future, in spite of the
challenges of War.
The Group has also continued to receive
significant support from many international
partners and stakeholders. For more information
on our engagement with stakeholders, see
Growth Pillar 1 on page 60.
DIVIDENDS
Given the uncertainties of War, and the resulting
need to preserve liquidity to support the Group’s
In
him
February
extensive
agribusiness, emerging markets,
In March 2023, we welcomed Oscar
Chemerinski to the Board as an Independent
Non-Executive Director. Mr Chemerinski
experience
brings with
in
and
sustainability.
2024, Mr
Chemerinski was appointed Chair of the Audit
& Risk Committee, replacing John Grant who
will continue as a member of the Audit & Risk
Committee until he retires from the Board,
expected in summer 2024. Further information
on the Board, including a Board Skills and
Diversity Matrix, can be found in the Corporate
Governance Report on page 118 and in the
Nominations and Remuneration Committee
(“NRC”) Report on page 135.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION MANAGEMENT OF
WAR-RELATED RISKS
infrastructure of Ukraine,
There are ongoing risks to the Group’s
operations due to recurring attacks on the
critical
including
agricultural infrastructure. The Group responds
immediately to adverse operational impacts,
ensuring it is ready to take all actions necessary
to rebuild, restore and restart production in the
shortest time possible. For more information,
see Risk Management on page 50 and the Audit
& Risk Committee Report on page 127.
OUR APPROACH TO
RESPONSIBLE BUSINESS
The Group’s approach to responsible business
is deeply rooted in the Group’s transformation
to a world-leading sustainable food producer
and is a key tenet of our strategy. Whilst
never welcomed, adversity often presents
opportunities, and the Group has capitalised
upon these to make rapid advances over the
past 18 months in a broad range of areas through
the implementation of different sustainable
projects. Please see also Growth Pillars 4 and 6.
Despite the War, the Group continues to look
for opportunities to develop its governance
in line with good practice. During the year,
the S&IA Committee adopted new terms of
reference which reflect the Board’s increasing
focus on the Group’s approach to responsible
business. Further information can be found in
that Committee’s Report on page 139.
We are increasingly embedding ESG into our
operations as demonstrated by developments
during the year: the decision to establish
an operational sub-committee to the S&IA
Committee which consists of Top Management
representatives, and the goal of which will be to
consolidate the importance of ESG and provide
the vision over the medium to longterm; the
centralisation of our environmental protection
function, which
is developing governance
and working with municipalities; and the
increasing incorporation of ESG-related OKRs
into management performance targets. These
are all important steps in the right direction
and highlight the Group’s commitment to
responsible business.
During 2023,
following our work with
Alltech E-CO2, MHP received Carbon Trust
accreditation
its Ukrainian
in relation to
poultry production: a significant achievement,
particularly during Wartime.
international
MHP is proud of its record of adhering to the
industry standards of
highest
animal welfare and product quality including
the appropriate EU regulations and Directives.
This has continued during the War, and we aim
to be an industry leader in this important area.
MHP’s facilities are also regularly inspected
by the State Service of Ukraine on Food Safety
and Consumer Protection. MHP adheres to
the principle “prevention of disease is more
effective than treatment”, and has tight controls
over the use of antibiotics for the treatment of
poultry stock.
We remain committed to transparency in both
our financial and non-financial reporting and
are working with consultants and our auditors
towards the implementation of the requirements
of the new Corporate Sustainability Reporting
Directive (“CSRD”) from FY 2025.
THE PLANET AND OUR
JOURNEY TO NET ZERO
Our Net Zero 2030 target remains. However,
given the ongoing significant challenges and
impediments caused by the War in Ukraine, and
potential policy changes driven by Ukraine’s
path towards EU accession, the Group may
revisit this target in due course. Meanwhile,
we are taking innovative steps in several areas
to expedite our Net Zero journey. For more
information see Growth Pillar 6: Planet on
page 92.
We are also committed to putting in place a
robust and Group-wide climate change policy.
During the year, we started a project with the
EBRD focussed on the TCFD framework, and
our aim is to put science-based targets in place
in 2025. For more information see the TCFD
Disclosures on page 102.
GLOBAL PARTNERSHIPS
AND DEVELOPMENTS
continue
accelerate
to monitor opportunities
We
and expand our culinary
to
transformation, both organically
and by
acquisition, particularly in the UK, the EU, and
MENA, and in relation to “value added” products.
MENA remains one of the key markets for MHP
and an exciting prospect. In September 2023,
the Group signed a joint venture agreement with
Tanmiah Food Company, a leading Saudi Arabia-
based provider of fresh poultry, processed
poultry, and other processed-meat products to
the MENA region. The Group continues to look
at other opportunities in the region, in particular
in value-added products, including processed
meat and culinary products, and Client Bsiness
Development (“CBD”) solutions to the food
service industry.
For more information on strategy, including
future partnerships and M&A, see Strategy &
Purpose on page 18.
OUTLOOK
War conditions dictate significant uncertainty
within Ukraine making forward projections
highly challenging. Recent unfavorable debate
around the EU elections has added another level
of complexity in relation to Ukraine’s market
access into the EU. Given the circumstances
caused by War, the Board is confident that MHP
has a strong Top Management team and resilient
workforce who are focussed on delivering our
strategy.
Dr John Rich
Executive Chair, MHP Board
02 May 2024
STRATEGIC
REPORT
Chair’s Statement
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION CEO’S STATEMENT
STRATEGIC
REPORT
CEO’s Statement
2023 WAS A DIFFICULT YEAR FOR UKRAINE AND ITS PEOPLE.
MHP FACED, AND HAS CONTINUED TO OPERATE IN, AN
EXTREMELY VOLATILE AND UNCERTAIN ENVIRONMENT.
I AM ENORMOUSLY PROUD OF AND GRATEFUL TO OUR
EMPLOYEES: FOR THEIR COLLECTIVE RESILIENCE, AND THEIR
STAUNCH COMMITMENT TO MAINTAINING OPERATIONS
AND ENSURING DOMESTIC FOOD SECURITY. OUR PEOPLE
EPITOMISE WHAT REMAINS CORE TO MHP AS A DYNAMIC
INTERNATIONAL COMPANY WITH A UKRAINIAN HEART.
depend on the rent paid by the Company. In
Ukraine, MHP employs over 28,000 individuals,
works with thousands of enterprises, and
supports over 500 entrepreneurs operating under
franchise agreements in partnership with MHP.
Supporting our mobilised colleagues and
re-integrating our veterans back into civilian life
is a key part of our strategy and a focus of specific
Company programmes. Our message remains
clear: even in the most challenging and difficult
times, the MHP family will continue doing its
utmost to support and provide assistance to our
workforce, our communities, and the people of
Ukraine as a whole.
transformation
Our absolute priority must remain providing
food security for Ukraine and support to the
domestic economy. However, despite
the
numerous and deep challenges of the War,
MHP’s
to a world-leading
sustainable food producer continues. MHP is
increasingly recognised as evolving the food
culture in Ukraine, offering more high-quality
and tasty convenience foods, ready-to-cook
and ready-to-eat meals. We are a sought-after
strategic partner and the industry players we
cooperate and share knowledge with place high
value on our strategic vision, industry expertise
and innovative technologies. At the same time,
MHP continues to provide the world with
important and necessary proteins and food, such
as sunflower and soybean oils, grains, chicken
meat and chicken products.
Our collective perseverence during such difficult
times is paramount. Our continued operations
and revenues directly benefit a large share of
Ukrainian society. The land on which MHP
operates is owned by more than 130,000 small
landowners whose livelihoods during the War
OPERATIONAL UPDATE
and
The War presents new
significant
challenges on an almost-daily basis. At the date
of publication, all our production facilities in
Ukraine continue to operate at full capacity. We
can give no assurance that this will remain the
case and that our production facilities and the
infrastructure that we use will not be a target of
damaging attacks. Financially, we have incurred
substantial War-related direct costs since the
start of the conflict. In 2023, these amounted
to US$ 35 million (2022: US$ 69 million)1 and
included community support donations, the
write-off of inventories and biological assets, and
other specific War-related expenses.
Outside of our main facilities in Ukraine, our
operations in the Balkans, Perutnina Ptuj (“PP”),
are not directly affected by the War as they are
largely independent from an operational and
supply chain perspective.
Exports remain crucial to our continued ability
to carry out our operations, and we pursue a
diversified export strategy. Maintaining our
current exports to over 70 countries within an
extremely challenging environment is made
possible by our innovative and agile approach
to
logistics. We navigate significant and
continuous disruption along several key export
channels and regions. Black Sea export routes
continue despite the unilateral withdrawal
by Russia in July 2023 of the Black Sea Grain
Initiative; regular targeting of Ukrainian ports
infrastructure
and other
by Russian drones and rockets makes the
situation extremely volatile. In the Red Sea,
the targeting of ships by Houthi militia has
increased
internationally.
Recurring strikes at the Polish border together
with similar problems at the borders
in
Hungary, Romania and Slovakia continue to
increase the costs of delivering poultry meat
to the EU with our fleet of trucks having to
transport-related
transport costs
WHEN RUSSIA INVADED UKRAINE, WE
IMMEDIATELY SET OUT OUR PRIORITIES: TO
CARE FOR OUR PEOPLE, TO MAINTAIN FOOD
SECURITY, AND TO SUPPORT UKRAINE.
STRATEGIC
REPORT
CEO’s Statement
use alternative, longer routes. We adapt our
approach to the given situation and remain
nimble. We have swiftly changed the mode
of transport or route when required, just one
example being the diversion of our fleet of
trucks through other countries due to border
strikes. We have changed our
grain-trading business model
to rent and insure ships direct,
enabling us to better manage
our risk profile.
PAGE 92
Growth Pillar 6:
Planet
We remain grateful for the EU’s
recognition
continued
that
to
fight Russian aggression,
alongside crucial military aid, it
is also essential to maintain Ukraine’s macro-
economic stability. Since the beginning of
Russia’s full-scale
invasion, the temporary
trade regime between the EU and Ukraine has
been a vital financial and commercial lifeline
for our country. This support directly enables
Ukrainian companies, including MHP, to sustain
commercial activities, preserve jobs, pay taxes,
and raise much-needed foreign currency.
Russian attacks specifically target critical
Ukrainian infrastructure, and the availability of a
continuous and stable energy supply remains a
major risk factor for our operations. The recent
devastating attacks on Ukrainian thermal power
plants, as well as the March and April attacks on
transmission stations, have crippled Ukraine’s
electricity grid. We equipped our key sites with
diesel generators and continue to operate two
biogas facilities to produce electricity, industrial
steam, and heating to mitigate the impact of
power outages on operations. However, we
understand that energy crisis has approached all
businesses and citizens in Ukraine.
While finding solutions to the near-term
challenges of War, we also look to
the future. Our Eco Energy division is
focussed on finding new and effective
energy technology for the improvement
of
the
efficiency
development of energy independence
and security. Since the start of the
War, we have invested in solar power:
we now have 3.9 MW capacity across
seven units with modern battery
energy storage systems (“BESS”) of 0.5 MW
capacity at our Culinary Centre in Kyiv. For more
information on our energy strategy in relation to
our achievement of Net Zero see Growth Pillar
6: The Planet on page 92.
energy
and
FY23 PERFORMANCE
The Group maintained a strong performance
in 2023 with revenue and adjusted EBITDA
increasing 14% and 16% y/y respectively. This
was achieved despite the significant challenges
of War and is testament to the Group’s business
model, the tireless efforts of our workforce, and
our ability to implement innovative responses
to
the dynamic and uncertain operating
environment, in particular minimising disruption
to production and logistics.
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1 Without loss on impairment of property, plant and equipment
11
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION CULTURE AND VALUES
We are an international business with Ukraine
at its heart. Our culture and Values unite us
and drive the way we work, our behaviours,
and our decision-making, as demonstrated by
the courage of our employees and the support
provided to the people of Ukraine.
now has a very active CBD programme that runs
across all our consumer businesses, through which
we work with customers to develop products and
solutions for the food services industry. We are
actively deepening our co-operation with food
services groups in Ukraine, where we are able to
deliver a stable supply of local products (e.g. to the
McDonald’s chain of restaurants).
The Senior Management
team
worked together during the year
to define these Values. We will
begin to implement the Values in
2024, aiming to reach out to the
whole organisation by 2025. More
information can be found in Growth
Pillar 2: Our People and their
Wellbeing on page 65.
in partnership with
MHP,
its charitable
foundation “MHP-Gromadi”, remains highly
responsive to the Ukrainian people’s needs. For
more detailed information, see Growth Pillar 3:
Our Role in Society & Our Licence to Operate
on page 76.
We are proud that MHP is being recognised
for its stand-out business culture, winning a
Business Culture Award in 2023 for the Best
CSR / Corporate Sustainability Initiative for
support of military personnel, veterans, and
their families. More information can be found
in Growth Pillar 3: Our Role in Society & Our
Licence to Operate on page 76.
MHP’S CULINARY
TRANSFORMATION
While managing the continued War-related
disruption to our day-to-day operations, our
transformation to a culinary company remains
fundamental to our future and continues despite
setbacks, led by our world-leading Culinary Centre
in Kyiv. The share of Group revenue from value-
added (non-commodity) products has increased
y/y and you can see the results of this progress
throughout this Integrated Report. The Group
PAGE 65
Growth Pillar 2:
Our People and
their Wellbeing
Outside Ukraine, PP continues to
transform and expand its operations
in line with its strategy. The focus
has been on expanding production,
optimising processes to increase
efficiency and profitability, plus
the development of value-added
products both organically and by
acquisition, all of which PP has
successfully achieved in line with
the Group’s strategy. In March 2023, PP acquired
a Slovenian facility for the production of ready-
to-eat meals, strengthening its position in the
HoReCa market and expanding its capabilities.
For an overview of the Group’s Culinary
Ecosystem, further developments in our HoReCa
and retail routes to market, and developments at
PP, see Value Creation on page 23
and Growth Pillar 4: Responsible
Food Production, page 78.
OUR PEOPLE AND
COMMUNITY: MHP AS
A PILLAR OF STABILITY
In 2023, MHP contributed an
estimated US$ 164 million
in
taxes to the Ukrainian state budget, making
it the largest taxpayer across the food and
agricultural sector. This is alongside the US$ 21
million the Group allocated to corporate social
responsibility initiatives, including support for
demobilised individuals and their families.
Our contribution to and support for our people
and our communities is embedded within the
Group’s DNA. Never has this support been more
STRATEGIC
REPORT
CEO’s Statement
important than during the ongoing conflict, and
MHP is committed to do its utmost to help
maintain stability and security in uncertain
times. Our support measures have evolved as the
War has unfolded, needs have changed, and we
have better understood the current and future
requirements. We now have several specific
and structured programmes in place that are
designed to broaden our reach and serve as a
"safety net" for our employees and communities
during Wartime.
Over half a million Ukrainians have been called
to serve and have joined the country’s armed
forces to protect our land and our future. As
of the end of 2023, this includes 2,380 MHP
employees who have been mobilised to the
Armed Forces of Ukraine, the Territorial
Defence, and the National Guard and means
that 8% of employees have received military
training. We mourn the tragic fate of the 125
MHP workers who have been killed, captured or
are currently missing due to the War.
To effectively support and care for mobilised
employees and returning veterans, alongside
their families and communities, MHP has
developed a brand new initiative called
"MHP Standing Together" which
provides a comprehensive support
network with tailored programmes for
soldiers, veterans, and their families.
Through the
initiative, MHP also
supports the communities where our
operations are located. It is the most
comprehensive CSR programme in
Ukraine.
PAGE 78
Growth Pillar 4:
Responsible Food
Production
We provide the families of servicemen and
returning veterans with medical, financial,
psychological and legal support to help them
deal with the everyday problems they face. We
also keep in close contact with the families of
deceased and missing defenders, providing
financial and legal assistance to help them
receive the compensation they are entitled to.
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12
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION MHP has continued to pay in full the wages of its
employees that have been called up to defend
Ukraine, with over US$ 31.9 million spent thus far.
MHP has also ensured sufficient financial resources
are allocated to providing support for veterans
and their families now and in the future, with an
additional UAH 100 million set aside in 2024.
INTERNATIONAL EXPANSION
As part of MHP’s
international expansion
strategy, we are actively seeking ways to leverage
our industry-leading technology and production
experience. We have long been present in the
MENA region as a reliable supplier of food
products. We have now taken the first step
to establishing a production footprint in the
region through our partnership with Tanmiah
Food Company in Saudi Arabia. We continue
actively seeking opportunities to expand our
MENA presence, particularly in the areas of meat
processing, value-added and culinary products.
We continuously evaluate options to increase
our physical footprint in key international and
EU markets through value-add acquisitions, with
a focus on meat processing and culinary product
verticals. The MHP team has developed industry-
leading technologies and processes allowing us to
identify material inefficiencies and realise latent
potential in our markets. Since our Slovenian
acquisition of Perutnina Ptuj in 2019, we have
not only markedly
increased organic growth
at the company, but we achieved substantive
improvement in operating margins, along with
general operational upgrades. The robust Perutnina
Ptuj results that you can see in this report clearly
demonstrate our ability to unlock value in new
markets in general and the EU in particular.
At the end of 2023, MHP entered into an
agreement to acquire 81% of corporate rights
in business engaged in poultry farming and
meat processing in Albania for an estimated
consideration of EUR 16.8 million (equivalent
of US$ 18.1 million). Completion of this
transaction is subject to approval by relevant
regulatory bodies.
INNOVATION AND TECHNOLOGY
Innovation drives everything we do across all
our businesses, and allows us to achieve results.
Our response to the War has been underpinned
by our collective willingness to find new
solutions and embrace new ways of doing things.
Our innovation experts are integrated across
all business operations driving continuous
improvements in our products, services, and
processes.
We continue to digitise and automate decision
making
in our agricultural operations on
the journey to making our production more
sustainable. We have partnered with GeoPard
Agriculture to introduce precision agriculture
analytics to our operations. We have also
partnered with the Digital Agro 360° Business
Intelligence Farming dashboard.
OUTLOOK
The Company is not in a position to state any
outlook with confidence due to the continuous
risks of operating in War conditions and with
major facilities in regions under assault by
Russia. The heavy March bombings of civilian
infrastructure and energy facilities were a stark
reminder that the whole of the territory of
Ukraine is under threat, and extensive military
operations are not confined to the front line.
What I can say, however, is that we will continue
to do our utmost as a team and as a business
to remain strong and agile, to push innovation
ever further and to carry out our business to
the highest international standards. Crucial
to maintaining food security and stability in
Ukraine, the Group will remain at the heart of
our communities and support our people and
their families as their needs change and the
situation develops.
Yuriy Kosyuk
CEO and Founder, MHP
02 May 2024
STRATEGIC
STRATEGIC
REPORT
REPORT
CEO’s Statement
MHP HAS PAID IN FULL
THE WAGES OF ITS
MOBILISED EMPLOYEES,
WITH OVER
> US$ 31.9
MILLION
GOVERNANCE
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FINANCIAL
STATEMENTS
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SHAREHOLDER
INFORMATION
SPENT THUS FAR
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13
13
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION WE ARE MHP
STRATEGIC
REPORT
We are MHP
OUR PURPOSE
OUR CULTURE
WHO WE ARE
WHAT WE DO
We are a leading international
food and agrotech company,
and the largest producer of
poultry, culinary and processed-
meat products, and grains and
vegetable oils in Ukraine.
We provide our customers with
high quality, sustainable proteins,
food products and culinary
solutions that are safe and
responsibly produced.
Our cultural identity and five core Values
drive the way we work, our behaviours,
and our decision making.
Honesty and
Transparency
Partnership
Constant
Development
Purpose-driven
Responsibility
OUR VISION
To be a world-leading
sustainable food producer.
OUR STRATEGY
Strategy &
Purpose
page 18
We are driving long-term
growth and value creation
with our continued
international diversification, our
culinary transformation, our leadership
and innovation, and our focus on
responsible business.
WE WORK FOR
UKRAINE
PAGE 76
Growth Pillar 3:
Our Role in Society
& Our Licence to
Operate
We are playing
a leading role in
domestic and international food security
and in the provision of humanitarian aid
during the War in Ukraine.
RESPONSIBLE
BUSINESS
Our robust commitment
to responsible business
continues. Our approach is set
out in our six growth pillars.
page 60
STAKEHOLDER
ENGAGEMENT
page 76
OUR ROLE IN SOCIETY
& OUR LICENCE TO OPERATE
page 84
BUSINESS CONDUCT
page 65
OUR PEOPLE & THEIR
WELLBEING
page 78
RESPONSIBLE FOOD
PRODUCTION
page 92
THE PLANET
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14
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION WHERE WE OPERATE
OUR BUSINESS MODEL
STRATEGIC
REPORT
We are MHP
We are an international company with
headquarters in Ukraine, operations
in Ukraine and the Balkans, and
distribution centres in the UAE, Saudi
Arabia, the Netherlands and the UK;
we export to over 70 countries.
GROUP REVENUE BY
DESTINATION 2023
POULTRY EXPORT
VOLUMES BY DESTINATION
2023
integrated and operate
We are vertically
through
four Business Segments. Our
transformation to a culinary company reflects
the accelerating changes in the food production
landscape as consumer preferences shift to
sustainable food choices and higher value-
added products.
45%
EU
REVENUE BY BUSINESS
SEGMENT 2023
40%
Domestic
60%
Export
34%
MENA
13%
CIS
7%
Africa
1%
Asia and other
WE EXPORT TO
70+
COUNTRIES
GROUP EXPORT
BY PRODUCT 2023
54%
Poultry &
Related
Operations
57%
Poultry and
processed meat
20%
Vegetable Oil
Operations
8%
Agriculture
Operations
18%
European
Operating
Segment
33%
Vegetable oil and
related products
8%
Grain
2%
Other agriculture
products
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION MHP UKRAINE
PERUTNINA PTUJ
We are MHP
OUR BUSINESS MODEL1
STRATEGIC
REPORT
Land on long-term lease in Ukraine with a
harvest of 2.6m tonnes of grain
351,600
hectares
LAND
3,858
hectares
Land on long-term lease in the Balkans
48,007 tonnes of
soybean oil produced
3 production facilities
2 breeding complexes with
551m hatching eggs produced
445,838
tonnes of sunflower
oil produced
SUNFLOWER
AND SOYBEAN
PROTEIN
1,315
tonnes of soybean
oil produced
c. 1.9
million tonnes
produced
100%
in-house
production
100%
in-house
production
FODDER
PRODUCTION
BREEDING
HATCHING
c. 0.3
million tonnes
produced
99%
in-house
production
83%
in-house
production
1 facility in Serbia
3 facilities in Slovenia,
1 in Croatia and 1 in Serbia
4 locations,
90m hatching eggs produced
(Slovenia, Croatia, Bosnia &
Herzegovina and Serbia)
Hatchery of day old chicken:
4 locations (Slovenia, Croatia,
Bosnia & Herzegovina,
and Serbia)
3 vertically-integrated poultry
complexes, from hatching to
rearing and processing
c. 8.4
million per week
POULTRY
PRODUCTION
c. 1.3
million per week
4 locations, 14% in-house
production (Slovenia, Croatia,
Bosnia & Herzegovina, and Serbia)
22 production facilities
7 solar panel units
3.9 MW
9 distribution centres
in Ukraine
100%
in-house
processing
40,775
tonnes
17 MW
2 biogas plants
432
vehicles
1,555
(outlets owned
and franchised)
SLAUGHTERHOUSES
MEAT-
PROCESSING
ECO ENERGY
DISTRIBUTION
100%
in-house
processing
46,555
tonnes
1 MW
1 biogas plant
88
vehicles
RETAIL
188
franchise outlets
1 Production volumes are for FY 2023 unless stated otherwise.
2 Due to severe hostilities in the Donetsk region, MHP has had to cease operations
at “Ukrainian Bacon”since April 2022
5 facilities
(2 in Slovenia, 1 in Croatia,
1 in Bosnia & Herzegovina,
1 in Serbia)
6 production facilities
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4 solar panel units
1.0 MW
9 distribution centres
in the Balkans
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION MAJOR BRANDS
STRATEGIC
REPORT
We are MHP
Meat
Chilled
Ukraine
• Whole
• Parts
• Minced
• Sliced
• Ready to eat
Meat
Chilled
Ukraine
• By-products
• Whole
• Minced
• Formed
Meat &
Culinary
Frozen
Ukraine
• Whole
• Parts
• Marinated
• Formed
Meat
Chilled
Ukraine
Meat &
Culinary
Chilled
Frozen
Ukraine
Export
Meat
Frozen
Export
• Parts
• By-products
• Whole
• Parts
• Minced
• Whole
• Parts
Meat &
Convenience
Frozen
Export
• Whole
• Parts
• Marinated
• Minced
• Formed
• Ready to cook
Umbrella food solution for HoReCa
Meat,
Culinary,
Vegetable and
Convenience
Chilled
Frozen
Export
• Whole
• Parts
• Minced
• Sous vide
• Food solutions
Umbrella food solution for HoReCa
Meat,
Culinary,
Vegetable and
Convenience
Chilled
Frozen
Export
• Ready to cook
• Ready to eat
• Supplementary
products
(e.g. mustard,
mayonnaise,
ketchup)
Processed
meat
Chilled
Ukraine
• Sausages
• Smoked
chicken
• Pate
• Ready to eat
• Ready to cook
• Ready to eat
• Ready to cook
Processed
meat &
Convenience
Chilled
Frozen
Ukraine
Processed
meat
Chilled
Ukraine
Meat
Chilled
Frozen
Ukraine
Export
• Parts
• Minced
• By-products
• Ready to eat
• Formed
Convenience
Dried meat
Ukraine
• Ready to eat
• Snacks
Convenience
Dried meat
Ukraine
• Ready to eat
• Snacks
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION STRATEGY & PURPOSE
STRATEGIC
REPORT
Strategy & Purpose
OUR PURPOSE-DRIVEN STRATEGY IS COMPRISED OF FOUR PILLARS. DESPITE THE IMMEDIATE CHALLENGES OF
WARTIME, WE HAVE MADE SIGNIFICANT PROGRESS DURING 2023 ON KEY STRATEGIC OBJECTIVES.
OUR NEAR-TERM STRATEGY CONTINUES TO EVOLVE IN RESPONSE TO WAR. OUR IMMEDIATE PRIORITIES REMAIN
ENSURING THE SAFETY AND WELLBEING OF OUR WORKFORCE; SUPPORTING UKRAINE AND ITS PEOPLE; AND
SECURING FOOD SECURITY.
STRATEGIC PILLAR
STRATEGIC
OBJECTIVE
BUSINESS
SEGMENT
FOCUS
HOW WE WILL ACHIEVE OUR
OBJECTIVE
WHAT WE ACHIEVED IN 2023
International
diversification
International
diversification
and expansion
The expansion of existing and entry
into new export markets through market
targeting and increased sales of higher
margin, value-added products. These sales
in turn drive our culinary transformation.
Entry into new markets including Canada and
countries in sub-Saharan Africa.
Expansion and further penetration of existing
markets including MENA (in particular, Iraq and
UAE), sub-Saharan Africa, the EU, the UK, and CIS
countries through the sale of both chicken meat
and value-added items including pre-prepared,
pre-cooked, ready-to-cook (“RTC”), and ready-to-eat
(“RTE”) products.
Expansion in the strategic neighbouring country
of Moldova through the relaunch of a portfolio
of chilled products and supply to domestic and
international retailers and HoReCa.
BUSINESS SEGMENT KEY:
Poultry and Related
Operations Segment
Vegetable Oil Operations
Agriculture Operations
European Operating
Segment (“PP”)
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION
STRATEGIC PILLAR
STRATEGIC
OBJECTIVE
BUSINESS
SEGMENT
FOCUS
HOW WE WILL ACHIEVE OUR
OBJECTIVE
WHAT WE ACHIEVED IN 2023
STRATEGIC
REPORT
Strategy & Purpose
International
diversification (cont.)
Expansion of
international
sales and
distribution
network
Launch of new international sales branches
and distribution offices, and the potential
establishment of joint ventures.
The continued expansion and
strengthening of our Client Business
Development (“CBD”) programme,
collaborating with, and creating solutions
and value for, our international clients
in areas including product development,
business models, supply chains, and
customer service.
M&A
opportunities
and strategic
partnerships
Continue to monitor and explore M&A
opportunities in the UK, EU, and MENA.
Continued development of our CBD programme
across all regions.
In CIS, we exported our first products for
McDonalds from Ukraine to Azerbaijan and started a
collaboration with KFC Kazakhstan.
In Europe, we implemented 27 CBD projects during
the year and, of note, began to supply pre-cooked
products to Tesco in Eastern Europe. In the UK, we
launched an Innovation & Development Kitchen,
strengthening our relationships with customers
and providing R&D opportunities and new
product solutions. To date, this has resulted in the
development of 23 new value-added SKUs.
In MENA, 26 new CBD projects were implemented
during the year, including the commencement of
the development and supply of chicken nuggets for
KFC. We also received approved supplier status for
Texas Chicken and Buffalo Wild Wings.
We signed a joint venture (“JV”) agreement with
Tanmiah Food Company, a leading Saudi Arabia-
based provider of poultry and processed-meat
products to the MENA region. MHP will have a 45%
share of the JV, and an initial investment of US$7
million is planned by the Company. The JV will
include farming operations with a capacity of more
than one million parent stock which is expected to
produce approximately 175 million hatching eggs per
annum. The development of the JV is on track.
BUSINESS SEGMENT KEY:
Poultry and Related
Operations Segment
Vegetable Oil Operations
Agriculture Operations
European Operating
Segment (“PP”)
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION
STRATEGIC PILLAR
STRATEGIC
OBJECTIVE
BUSINESS
SEGMENT
FOCUS
HOW WE WILL ACHIEVE OUR
OBJECTIVE
WHAT WE ACHIEVED IN 2023
STRATEGIC
REPORT
Strategy & Purpose
Our culinary
transformation
Continued
transformation
to a culinary
company
Leadership and
innovation
Become the
undisputed
leader in the
agricultural
market of
Ukraine
Brand promotion
and development
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.
CBD training for all sales teams.
Our retail network in Ukraine (including both
owned and franchised stores) grew to 1,555 outlets
(2022: 1,525) and now includes: 255 “MeatMarket”
convenience stores (2022: 179); 184 “DonerMarket”
gyro fast food stores (selling shawarma and other street
food) (2022: 98); and 259 “Fresh Food” retail stores
(2022: 182) as we have continued to upgrade the format
of our “Nasha Ryaba” stores to “Fresh Food”.
page 27
Acquisition by PP of a value-added production
facility in Slovenia, establishing a new brand for
RTC and RTE foods called “PP Perfect Professional”,
strengthening PP’s position in the HoReCa market.
Expansion of culinary product SKUs.
We partnered with GeoPard Agriculture to introduce
precision agriculture analytics to our operations.
We have also partnered with the Digital Agro 360°
Business Intelligence Farming dashboard.
Ensure high efficiency crop production
through higher yields and optimisation of
cost control as well as improved resource
management strategies. Central to this will
be the upgrading of agricultural machinery
and the digitisation of production and
harvesting processes including the use of
technology including Artificial Intelligence
(“AI”) for real-time analysis, forecasting and
facilitation of decision making.
Ensure the stability of the Group’s landbank.
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 and categories.
We recruited a new Head of Marketing.
Oleh Shmuliaiev and his team will be responsible
for the development of over 15 Company brands, the
introduction of new products and categories, and
the creation of optimal offers for consumers.
BUSINESS SEGMENT KEY:
Poultry and Related
Operations Segment
Vegetable Oil Operations
Agriculture Operations
European Operating
Segment (“PP”)
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION
STRATEGIC PILLAR
STRATEGIC
OBJECTIVE
BUSINESS
SEGMENT
FOCUS
HOW WE WILL ACHIEVE OUR
OBJECTIVE
WHAT WE ACHIEVED IN 2023
STRATEGIC
REPORT
Strategy & Purpose
Leadership and
innovation (cont.)
Continuous
improvement
A focus on responsible
business
A commitment to continuous improvement
and increased production efficiency
across all business segments through
sustainable and high product quality;
increased efficiency and productivity;
decreased cost; reduced waste; employee
satisfaction; customer satisfaction;
innovation and modernisation.
Continued focus on innovation across everything
we do.
Successful and dynamic management of War-related
challenges including an extremely complex logistics
environment to enable the continued export to over
70 countries.
page 38
Continuous
improvement
and innovation
in responsible
business
A drive for continuous improvement in all
areas of responsible business including
biosecurity standards; leading international
environmental standards; health and safety
standards; and animal welfare practices,
including our antibiotic-free programme.
Following our work with Alltech E-CO2, we received
Carbon Trust accreditation in relation to our
Ukrainian poultry production.
page 95
We achieved GLOBALG.A.P. and ISCC certification
at a combined total of ten of our sites for our
sustainable farming practices.
page 81
An additional seven sites achieved ISO 50001
certification for best practice in energy management:
all 11 of our main operations now have the
accreditation.
page 98
We started a project with the EBRD with the aim of
putting in place a robust, science-based Group-wide
climate change policy.
page 54
We established an Environmental Protection Team, a
centralised team of ecologists.
page 92
BUSINESS SEGMENT KEY:
Poultry and Related
Operations Segment
Vegetable Oil Operations
Agriculture Operations
European Operating
Segment (“PP”)
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION
STRATEGIC PILLAR
STRATEGIC
OBJECTIVE
BUSINESS
SEGMENT
FOCUS
HOW WE WILL ACHIEVE OUR
OBJECTIVE
WHAT WE ACHIEVED IN 2023
STRATEGIC
REPORT
Strategy & Purpose
A focus on responsible
business (cont.)
People and
workforce
Development of the Group’s approach to
people, including provision of a healthy
and safe workplace and an environment
that enables every employee to develop
their skills to their maximum potential.
We elaborated upon and defined MHP’s Values.
page 23
The Board approved the Group’s Diversity
Statement.
page 136
We put in place an ongoing reskilling programme
for employees and an extensive rehabilitation
programme for War veterans.
page 138
Alternative
energy projects
Expand alternative energy projects
including solar, biogas and biomethane, and
biomass with carbon capture and storage,
resulting in carbon sequestration.
We continued to operate our two biogas facilities in
Ukraine, with a combined capacity of 17 MW energy.
MHP Eco Energy continued to invest in research
into the upgrade and liquefaction of biomethane.
page 96
We invested in 3.9 MW capacity of solar plants in
Ukraine.
page 11
We began a year-long study in Ladyzhyn (Vinnytsia
region) looking at the viability of the installation of
wind turbines.
page 96
BUSINESS SEGMENT KEY:
Poultry and Related
Operations Segment
Vegetable Oil Operations
Agriculture Operations
European Operating
Segment (“PP”)
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION
VALUE CREATION
STRATEGIC
REPORT
Value creation
WAR IN UKRAINE CONTINUES AND MAY ESCALATE FURTHER. AS OF THE DATE OF THIS REPORT, ALL OF OUR
PRODUCTION FACILITIES IN UKRAINE CONTINUE TO OPERATE AT FULL CAPACITY, BUT WE CAN GIVE NO
ASSURANCE THAT THIS WILL REMAIN THE CASE OR THAT THE PRODUCTION FACILITIES AND INFRASTRUCTURE
THAT WE USE MAY NOT BECOME A TARGET OF NEW ATTACKS. THE INFORMATION BELOW MUST BE READ IN THE
CONTEXT OF THIS HIGHLY CHALLENGING AND UNPREDICTABLE OPERATING ENVIRONMENT.
HOW WE CREATE VALUE
OUR CUSTOMER-CENTRIC AND INNOVATION-DRIVEN APPROACH
DRIVES VALUE CREATION
OUR CULINARY TRANSFORMATION
Our business model has evolved and, since
2019, we have been transforming from a raw
materials provider to an international and
innovation-driven company specialising in
the development of culinary solutions. For
more information, see the case study on
page 27.
OUR APPROACH TO RESPONSIBLE
BUSINESS
We have a Group-wide approach
to
responsible business and our Purpose is
directly linked to six Growth Pillars that
guide us as we pursue our strategy. For more
information on our Growth Pillars, see pages
60 to 101.
SUSTAINABLE FINANCIAL HEALTH
Our businesses have a long track
record of revenue and cash generation
providing a solid platform for value
creation.
SUSTAINED INVESTMENT AND
INNOVATION
MARKET AND PRODUCT
DIVERSIFICATION
Sustained and broad investment, including
extensive R&D programmes, by both
MHP Ukraine and PP enables continuous
efficiency improvements, cost controls,
and fosters our innovative culture. Our
ongoing investment in and commitment
to international joint ventures furthers our
growth and diversification.
We are always looking at new initiatives
on product development and for new
markets for our products and now sell to
over 70 countries.
SUPPORT FOR UKRAINE
We remain highly responsive to the
Ukrainian people’s needs and will
continue to work tirelessly to support
them through a range of economic,
social and cultural initiatives. For more
information, see Growth Pillar 3 on
page 76.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION THE VALUE WE CREATE
WE STRIVE TO MAKE A POSITIVE CONTRIBUTION TO THE WORLD AROUND US;
NEVER HAS THIS BEEN MORE OF A PRIORITY THAN DURING WARTIME
STRATEGIC
REPORT
Value creation
CUSTOMERS
We work with our customers to provide high quality,
sustainable proteins, food products and culinary
solutions.
COMMUNITIES
We build relationships with suppliers and
customers and support the communities
around us.
OUR PEOPLE
ENVIRONMENT
We are building a culture in which people
realise their potential.
We aim to conduct our activities in an
environmentally responsible manner, and to
meet the global challenges presented by climate
change. Our operations support the circular
economy and the elimination of waste in the
poultry production process.
INVESTORS
We strive to generate positive returns for our
shareholders and bondholders through financial rigour
and effective management of our financial resources.
Despite the impact of War, we remain steadfastly
committed to meeting all our financial obligations.
PARTNERS
Through our joint ventures and other partnerships,
we are committed to integrating our collective
strengths to catalyse transformative change in
Ukraine and worldwide, and to work to ensure
food security.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION WHAT SETS US APART
OUR VERTICALLY-INTEGRATED STRUCTURE AND CULINARY
ECOSYSTEM ARE SIGNIFICANT DIFFERENTIATORS
STRATEGIC
REPORT
Value creation
VERTICALLY-INTEGRATED STRUCTURE
MODERN PRODUCTION ASSETS
MHP Ukraine and PP operate vertically-integrated business
models, owning and operating each of the key stages of the chicken
production process. Our structure differentiates us from our peers,
and enables us to effectively control production costs and to reduce
both 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.
Extensive investment has enabled us to employ modern,
state-of-the-art production assets. We believe our
chicken complexes are among the most efficient and
biosecure in the world.
CULINARY ECOSYSTEM
PEOPLE
Our culinary ecosystem is driving our
culinary transformation and the creation of
customer value. More information on our
ecosystem is set out on page 27.
We have a highly skilled and knowledgeable workforce,
and an experienced, strong and innovative management
team, and we are committed to continuously investing
in training and development.
STRONG BRANDS
CULTURE
Our brands at both MHP Ukraine and PP have high
recognition with a reputation for quality and innovation.
We strive to create a business culture in which
our employees embrace new challenges, have the
confidence to establish new ways of doing things, and
the bravery to capitalise on new opportunities. Our
positive, “can do” culture is driving transformation
across all four of MHP’s business segments and
has been routinely demonstrated by our collective
resilience and response to Wartime challenges.
More information
on our major
brands is set out
on page 17.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION OUR CULINARY ECOSYSTEM IS DRIVING OUR CULINARY
TRANSFORMATION AND THE CREATION OF CUSTOMER VALUE
STRATEGIC
REPORT
Value creation
CULINARY CENTRE
RETAIL OUTLETS
CULINARY EXPERTS
Our Culinary Centre in Kiev is the
core of culinary expertise in Ukraine
and an important platform for B2B,
HoReCa and B2C development.
Our focus is on changing consumer
preferences and the sale of food from
franchised and owned stores close to
the consumer.
Leading culinary experts are
responsible for culinary direction and
product development.
PARTNERSHIPS
INVESTMENTS
CULINARY SOLUTIONS
We continue to develop strategic
partnerships with players in the food
industry with the goal of bringing
MHP closer to the customer.
We invest in businesses that expand
our culinary expertise and product
portfolio.
Product development is focussed
on ready-to-eat (“RTE”) and ready-
to-cook (“RTC”) products and the
application of modern technologies.
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26
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION CASE STUDY: MHP’S
TRANSFORMATION INTO
A CULINARY COMPANY
In 2023, MHP continued to evolve as a culinary
company and aims to be a food industry leader
in Ukraine. We aim to achieve this by producing
high quality and delicious food products that
enable people to invest their time in the things
that matter most to them such as family, hobbies,
education, leisure, and relaxation. We focus on
the production of products in formats such as
ready-to-cook (prepared for cooking), pre-cooked
(semi-prepared), and ready-to-eat
(ready for
consumption).
MHP has developed several culinary brands and
regularly launches new products that aim to cater
for diverse tastes and needs.
MHP’s products are prepared using the latest
food technologies and apply rigorous quality
controls at each production stage ensuring
compliance with best practice and regulatory
safety and hygiene requirements.
In 2023, MHP increased the number of retail
outlets to 1,555 (2022: 1,525), mainly due to the
growth of DonerMarket outlets (2023: 184),
“Fresh Food” outlets (2023: 259) and MeatMarket
convenience stores (2023: 255).
DEVELOPMENT ACTIVITIES
RELATING TO MHP’S CULINARY
BRANDS IN 2023
MHP’s culinary brands have proved to be
resilient to the challenges presented by the War
in Ukraine and during 2023 the numbers of stores
and establishments have increased significantly.
This has been driven by a number of factors
including consumer demand, the cooperation
of business partners, and MHP’s focus on
maintaining food security.
THE CULINARY CENTRE AND
THE CULINARY SCHOOL
A key element of our approach is the development
of and investment in the Culinary Centre and the
new Culinary School.
The Culinary Centre opened in 2021 and is a unique,
state-of-the-art facility that addresses all stages of
the production process from exploring the initial
idea though to undertaking customer tasting.
The Culinary Centre’s purpose is to design and
test new culinary products and it is playing a
central role in the transformation of MHP into a
culinary company. Its facilities include:
→ A sensory analysis laboratory;
→ Five open kitchens;
→ A kitchen-studio;
→ An industrial kitchen and R&D facility; and
→ A pizza production line.
In 2023, MHP opened the Culinary School. The
school's activities are focused on the internal
needs of the Company: training for MHP
employees (functions related to the culinary
direction, such as Procurement, Marketing,
CBD etc.), own retail. Also, one of the vectors
of activity is to support the development of
the culinary division of our Company with the
involvement of its own pop-up space, in which a
series of thematic and image events are planned.
TRAININGS AT MEATMARKET
STORES
At MeatMarket training store future meat
sommeliers learn operational standards and guest
service standards and are trained in cooking,
dish completion, working in each store area, and
interacting with consumers. Further learning is
provided through interaction with MHP’s brand
chefs to educate trainees on culinary trends,
product tasting, and providing hospitality.
MEATMARKET
The MeatMarket network was
significantly
expanded in 2023, and opened the second highest
number of new food retailer stores in Ukraine
during the year. The brand is now rated as one of
the top five leaders in the food retail market based
on the number of new store openings, national
coverage, and regional reach. MeatMarket stores
are now present in 20 regions of Ukraine and can
be found in both small towns and large cities. The
highest concentration of outlets can be found in the
Kirovohrad, Sumy, Odesa and Zakarpattia regions.
KULINATOR CHATBOT
During 2023, MHP launched a culinary chatbot
called Kulinator. It uses artificial intelligence to
make cooking easier and more enjoyable. Kulinator
can suggest a recipe based on the ingredients that
are available at home or suggest recipes for people
who want to try something new.
MHP’S UKRAINIAN CHICKEN BRAND
MHP’s Ukrainian Chicken brand has
achieved a top 10 recognition among
Ukrainians for showing loyalty to the country
during the War in Ukraine. It is recognised
as supporting the country’s defenders
with food, supplying assistance to medical
institutions, and assisting support facilities
for older people and children.
DONERMARKET
MHP developed the DonerMarket format,
in collaboration with its business partners, in
2020. The original setup focussed on sales from
small cafes. In 2023, this format was expanded
to cater for a variety of other locations including
cafes with seating, small areas in MeatMarkets,
convenient compact sales points, shopping
centre facades, and a mobile doner truck.
STRATEGIC
REPORT
Value creation
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27
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION 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.
STRATEGIC
REPORT
Key Performance
Indicators
GROUP REVENUE
GROUP EXPORT REVENUE
GROUP ADJUSTED EBITDA1
58%
53%
53%
61%
60%
27%
18%
18%
16%
15%
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2,056
2019
1,911
2020
2,372
2021
2,642
2022
3,021
2023
1,186
2019
1,016
2020
1,265
2021
1,601
2022
1,807
2023
376
2019
340
2020
648
2021
384
2022
445
2023
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Group Revenue, US$m
Export Revenue, US$m
% of total revenue
Adjusted Group EBITDA1, US$m
Adjusted Group EBITDA margin1, %
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1 Adjusted EBITDA (net of IFRS 16) and Adjusted EBITDA margin
(net of IFRS 16) since 2019
28
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION KEY PERFORMANCE
INDICATORS (CONTINUED)
STRATEGIC
REPORT
Key Performance
Indicators
REVENUE, US$M
EXPORT REVENUE, US$M
ADJUSTED EBITDA (NET OF IFRS 16), US$M
HOW WE CALCULATE IT
As reported.
Revenue to destinations outside country of production.
Adjusted EBITDA (net of IFRS 16) 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.
WHY WE MEASURE IT
To ensure we are successful in growing the business.
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.
To track the underlying performance of the business.
2023 PROGRESS
Revenue was up 14% y/y mainly driven by an increase in
sunflower oil and poultry meat sales volumes.
Export revenue was up 13% y/y mainly driven by increased sales of
poultry meat and vegetable oils.
Adjusted EBITDA (net of IFRS 16) was up 16% y/y mainly due to increased
exports of poultry, increased poultry prices for processed meat, increased
vegetable oil sales, and a strong performance at Perutnina Ptuj. However,
this was significantly offset by a weaker performance for the Agriculture
Operations Segment.
STRATEGY IN WAR
The Company's strategy remains unchanged but rapid adaptations
were made to our business model during the year 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 the survival of the business by adapting supply
chains in order to maintain production and distribution, while
managing the inevitable increase in costs.
CHANGE IN PRESENTATION OF
SEGMENT INFORMATION
In order to accurately reflect the diverse nature
of the Group’s business operations and improve
the granularity of reporting, MHP has, since Q3
2023, implemented changes to its presentation
of business segment information.
These changes include:
→ the introduction of a new Vegetable Oil
Operations Segment;
→ the
inclusion of meat processing and
other meat (previously reported within the
Meat Processing and Other Agricultural
Operations segment) in the Poultry and
Related Operations Segment; and
→ combining
operations
grain-growing
(presented as separate segment in 2022)
cattle
farming
and milk
(previously
presented within the Meat Processing and
Other Agricultural Operations segment)
into a revised reportable segment called
Agriculture Operations.
The corresponding segment information for
the year ended 31 December 2022 has been
restated to ensure comparability.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION KEY PERFORMANCE
INDICATORS BY SEGMENT
STRATEGIC
REPORT
Key Performance
Indicators
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 2022-2023 WAS SIGNIFICANTLY
IMPACTED BY THE WAR IN UKRAINE.
ADJUSTED EBITDA1
ADJUSTED EBITDA MARGIN1
Adjusted Group EBITDA1, US$m
Agriculture Operations, US$m
Poultry & Related Operations
Poultry & Related Operations, US$m
European Operating Segment, US$m
Vegetable Oil Operations
Vegetable Oil Operations, US$m
496
435
91
6
80
63
99
319
202
2023
71
2022
Agriculture Operations2
2022
European Operating Segment
Adjusted Group EBITDA margin1
2023
13%
15%
19%
14%
19%
13%
1%
17%
15%
15%
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1 Adjusted EBITDA is net of IFRS 16 and excluding unallocated expenses: 2022 – US$ 51 m, 2023 – US$ 51 m
2 Adjusted EBITDA margin of Agriculture operations is calculated by using total segment revenue
30
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION POULTRY AND RELATED
OPERATIONS SEGMENT
SALES AND EXPORT VOLUMES – POULTRY
REVENUE AND ADJUSTED EBITDA1
Sales,
thousand tonnes
Exports,
thousand tonnes
Exports (as % of
sales volumes)
2019
2020
2021
2022
2023
670
357
698
374
704
402
658
368
692
397
53%
54%
57%
56%
57%
Revenue, US$m
Adjusted EBITDA,
US$m
Adjusted EBITDA margin
2019
2020
2021
2022 2
2023 2
1,368
281
1,298
194
1,607
267
1,525
202
1,643
319
21%
15%
17%
13%
19%
SALES – PROCESSED POULTRY MEAT
Sales,
thousand tonnes
2019
2020
2021
2022
55
53
53
37
2023
38
STRATEGIC
REPORT
Key Performance
Indicators
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1 Adjusted EBITDA (net of IFRS 16)
2 Change in presentation of segment information, please take into account
31
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION VEGETABLE OIL
OPERATIONS SEGMENT
SUNFLOWER OIL
SOYBEAN OIL
STRATEGIC
REPORT
Key Performance
Indicators
Sales, thousand tonnes
Revenue, US$m
2019
2020
2021
2022
2023
REVENUE
2019
2020
2021
2022
2023
384
331
207
273
467
312
283
309
464
606
Sales, thousand tonnes
2019
2020
2021
2022
2023
52
41
45
41
51
ADJUSTED EBITDA AND EBITDA MARGIN1, 2
Adjusted EBITDA, US$m
Adjusted EBITDA margin
2022
71
2023
80
15%
13%
1 Adjusted EBITDA (net of IFRS 16)
2 Change in presentation of segment information, please take into account
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION AGRICULTURE
OPERATIONS SEGMENT
PRODUCTION OF GRAINS
YIELDS
Harvest, thousand
tonnes
2019
2,408
2020
1,707
2021
2022
2,597
1,935
2023
2,558
REVENUE AND ADJUSTED EBITDA1
Revenue, US$m
Adjusted EBITDA,
US$m
2019
2020
2021
20222
20232
268
60
134
97
188
338
189
99
227
6
Corn, t/ha
Wheat, t/ha
Sunflower, t/ha
2019
2020
2021
2022
2023
9.4
6.4
3.6
5.6
5.1
2.8
10.0
5.9
3.2
7.2
5.5
2.5
9.9
6.6
3.1
STRATEGIC
REPORT
Key Performance
Indicators
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1 Adjusted EBITDA is net of IFRS 16
2 Change in presentation of segment information, please take into account
33
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION EUROPEAN OPERATING
SEGMENT (PP)
SALES
REVENUE AND ADJUSTED EBITDA
STRATEGIC
REPORT
Key Performance
Indicators
Poultry, thousand
tonnes
Meat-processing
products, thousand
tonnes
20191
2020
2021
2022
2023
51
30
63
39
73
40
74
43
81
47
Revenue, US$m
Adjusted EBITDA2,
US$m
Adjusted EBITDA
margin2
20191
2020
2021
2022
2023
271
42
335
53
401
63
464
63
545
91
15%
14%
16%
16%
17%
ADJUSTED EBITDA MARGIN2
17% 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)
in 2023
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION FINANCIAL
AND OPERATIONAL
REVIEW
OPERATIONAL HIGHLIGHTS
POULTRY PRODUCTION
VOLUMES IN UKRAINE
INCREASED BY 3% Y/Y TO
MHP UKRAINE’S
AVERAGE POULTRY MEAT PRICE
WAS STABLE Y/Y AT
POULTRY MEAT EXPORT
VOLUMES FROM UKRAINE
INCREASED BY 8% Y/Y TO
718,644
TONNES
(2022: 697,071 tonnes)
Poultry production volumes at PP
increased by 6% y/y to 131,021 tonnes
(2022: 124,040 tonnes).
US$ 1.95
PER KG
(2022: US$ 1.95 per kg)
excluding VAT
The average price of poultry meat
produced by PP increased by 6% y/y
to EUR 3.54 per kg
(2022: EUR 3.33 per kg).
396,923
TONNES
(2022: 368,380 tonnes)
mainly driven by increased sales
volumes to the EU and UK as well
as stable sales in the MENA region
to support Ukrainian agriculture
during Wartime despite significant
logistical challenges.
STRATEGIC
REPORT
Financial & Operational Review
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION STRATEGIC
REPORT
Financial & Operational Review
FINANCIAL HIGHLIGHTS
REVENUE INCREASED BY 14% Y/Y TO
US$ 3,021
MILLION
(2022: US$ 2,642 million)
driven by a recovery in export levels,
continued strong demand in Ukraine,
continued development of culinary
products, a stable price environment and
MHP’s success in minimising disruption to
production. Operational and financial results
in 2022 were significantly more affected by
disruption in the early stages of the War,
setting a low bar for year-on-year comparison.
EXPORT REVENUE INCREASED
BY 13% Y/Y TO
US$ 1,807
MILLION
(2022: US$ 1,601 million);
representing 60% of Group revenue.
(2022: 61% of Group revenue)
OPERATING PROFIT INCREASED
BY 33% Y/Y TO
US$ 339
MILLION
(2022: US$ 255 million)
and operating margin increased
from 10% to 11%.
The increase in operating profit
and margin was driven by the increase
in revenue and by lower War-related
costs y/y.
ADJUSTED EBITDA (NET OF IFRS 16)
INCREASED BY 16% Y/Y TO
US$ 445
MILLION
(2022: US$ 384 million);
adjusted EBITDA margin (net of IFRS 16)
remained stable at 15%.
NET PROFIT OF
US$ 142
MILLION
(2022: net loss of US$ 231 million)
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primarily reflects a US$ 40 million
non-cash foreign exchange loss in
2023 (2022: US$ 365 million non-cash
foreign exchange loss).
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION FINANCIAL OVERVIEW
(IN MLN. US$,
UNLESS INDICATED
2023
2022
% CHANGE1
OTHERWISE)
Revenue
3,021
IAS 41 standard gain/
(loss)
Gross profit
Gross profit margin
War-related expenses2
Operating profit
Operating profit margin
Adjusted EBITDA
Adjusted EBITDA
margin
Adjusted EBITDA (net
of IFRS 16)
Adjusted EBITDA
margin (net of IFRS 16)
Net profit /(loss)
Net profit/(loss) margin
(48)
639
21%
(35)
339
11%
508
17%
445
15%
142
5%
1 pps – percentage points
2 Without loss on impairment of property, plant and equipment
2,642
(128)
608
23%
(69)
255
10%
443
17%
384
15%
(231)
-9%
14%
63%
5%
-2pps
-49%
33%
1pps
15%
-
16%
-
161%
14pps
CHANGE IN PRESENTATION OF
SEGMENT INFORMATION
To accurately reflect the diverse nature of the Group’s
business operations and improve disclosure, MHP has,
since Q3 2023, implemented changes to its presentation
of business segment information, including:
→ the introduction of a new Vegetable Oil Operations
Segment, which represents production and sales of
vegetable oil and related products. In 2022, these
activities were included in the Poultry and Related
Operations Segment as by-products of mixed
fodder production for poultry.
→ the inclusion of meat processing and other meat
(previously reported within the Meat Processing
and Other Agricultural Operations Segment) in the
Poultry and Related Operations Segment, given
that the meat processing and other meat operations
represent less than 10% of the Group`s revenue
and have similar characteristics to the poultry
operations.
→ combining grain-growing operations (presented as
a separate segment in 2022) and milk cattle farming
(previously included within the Meat Processing
and Other Agricultural Operations Segment) into
a revised reportable segment called Agriculture
Operations.
The corresponding segment information for the year
ended 31 December 2022 has been restated to ensure
comparability. Overviews of each of the Business
Segments are provided below ahead of the respective
Segment’s financial and operational results.
STRATEGIC
REPORT
Financial & Operational Review
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION SEGMENT PERFORMANCE
POULTRY AND RELATED OPERATIONS
STRATEGIC
REPORT
Financial & Operational Review
OVERVIEW
US$ 1,643
MILLION REVENUE
718,644
TONNES OF POULTRY
PRODUCED
40,775
TONNES OF PROCESSED
MEAT PRODUCED
2023 POULTRY AND RELATED
OPERATIONS EXPORT
BY REGION IN TONNES, %
2023 REVENUE
BY DESTINATION, %
45%
EU
44%
Ukraine
34%
MENA
13%
CIS
7%
Africa
1%
Asia and other
56%
Export
We are the leader in the poultry market in
Ukraine and one of the leaders in the highly
fragmented meat-processing market in Ukraine.
We sell our products both in Ukraine and export
to over 70 countries worldwide. We produce,
process, and sell chicken meat (fresh and frozen,
whole and cuts); processed-meat products,
including sausage and salami; pre-prepared
and culinary products (marinated chicken, and
ready-to-eat and ready-to-cook convenience
food, including restaurant-grade products); and
other poultry-related products.
We supply our products
to nationwide
supermarket chains and franchise outlets, and
our three largest brands by revenue are Nasha
Riaba™, Bashchisky™ and Ukrainian Chicken™.
Our operations
three vertically-
include
integrated poultry complexes, two breeding
complexes, and two facilities for the preparation
of processed-meat products, one of which is
managed in partnership with a local processed-
meat producer.
WE SELL OUR PRODUCTS
BOTH IN UKRAINE AND
EXPORT TO OVER
70
COUNTRIES
WORLDWIDE
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION POULTRY AND RELATED OPERATIONS
(continued)
SALES AND PRICES
POULTRY MEAT1
2023
2022
Sales volume, third party tonnes
691,981
658,053
Export sales, third party tonnes
396,923
368,380
Domestic sales, third party tonnes
295,058
289,673
%
CHANGE2
5%
8%
2%
Export sales, % of total sales
Average price per 1 kg net of VAT,
US$
57%
1.95
56%
1pps
1.95
-
1 Poultry meat consists of raw and unprocessed parts of chicken, meat after minor processing,
meat after grinding, and chicken meat with the addition of spices (marinated meat)
2 pps – percentage points
EXPORT SALES VOLUMES OF
PROCESSED POULTRY MEAT
INCREASED BY
37%
Y/Y
PROCESSED POULTRY MEAT1
2023
2022
Sales volume, third party tonnes
37,628
36,969
Export sales, third party tonnes
6,102
4,464
Domestic sales, third party tonnes
31,526
32,505
The total volume of poultry meat sold in 2023 increased by 5% y/y to
691,981 tonnes (2022: 658,053 tonnes) due to an 8% y/y increase in
export sales mainly driven by increased sales volumes of chicken to the
EU and whole chicken to the MENA region.
Export sales, % of total sales
Average price per 1 kg net of VAT,
US$
16%
2.94
12%
2.53
%
CHANGE2
2%
37%
-3%
4pps
16%
The average price remained stable y/y at US$ 1.95 per kg.
1 Processed meat consists of meat after significant processing (e.g. added supplements like vegetables
or breading), pre-cooked and ready-to-eat meat
2 pps – percentage points
1.9
MILLION TONNES
OF FODDER PRODUCED
Export sales volumes of processed poultry meat increased by 37% y/y in
2023 to 6,102 tonnes (2022: 4,464 tonnes). The average price increased
by 16% y/y to US$ 2.94 per kg (2022: US$ 2.53 per kg) driven mainly by an
increase in raw material prices (spices, packaging, and other components)
driving up product prices, as well as by a positive change in product mix.
THE TOTAL SALES
VOLUME OF POULTRY
MEAT SOLD IN 2023
INCREASED BY
5%
Y/Y
STRATEGIC
REPORT
Financial & Operational Review
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION POULTRY AND RELATED OPERATIONS (continued)
STRATEGIC
REPORT
Financial & Operational Review
FINANCIAL RESULT AND TRENDS
(IN MLN. US$, UNLESS INDICATED OTHERWISE)
Revenue
- Poultry meat²
- Processed poultry meat
- Complementary products and other sales
IAS 41 standard gain
Gross profit
Gross margin
War-related expenses
Adjusted EBITDA
Adjusted EBITDA margin
Adjusted EBITDA (net of IFRS 16)
Adjusted EBITDA margin
(net of IFRS 16)
1 pps – percentage points
² Revenue from poultry meat includes sales of offal, which is not
included in the sales volume and prices of poultry meat data
2023
1,643
1,402
111
130
15
402
24%
(17)
321
20%
319
19%
2022
1,525
1,328
93
104
13
318
21%
(38)
204
13%
202
13%
% CHANGE1
8%
6%
19%
25%
15%
26%
3pps
-55%
57%
7pps
58%
6pps
In 2023, Segment revenue increased by 8% y/y
due to an increase is the sales volumes of poultry
meat and processed meat and an increase in
average prices for processed meat.
Adjusted EBITDA (net of IFRS 16) increased
58% y/y to US$ 319 million, mainly due to higher
gross profit and lower War-related expenses.
Gross profit in 2023 increased 26% y/y to
US$ 402 million mainly driven by higher sales
volumes of both poultry meat and processed
meat on export markets and by increases in
prices for processed meat.
REVENUE
INCREASED BY
8%
Y/Y
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION VEGETABLE OIL OPERATIONS
OVERVIEW
US$ 606
MILLION REVENUE
493,845
TONNES OF VEGETABLE OIL PRODUCED
We produce and sell edible vegetable oils and related products
including sunflower husks for use as bedding in chicken rearing
sheds, and sunflower pellets for animal feed. Our facilities include
one soybean crushing plant and three sunflower crushing plants
in Ukraine. Our customers are mainly international traders, an
important source of hard currency revenue.
SALES
Sales volume of sunflower oil,
third party tonnes
Sales volume of soybean oil,
third party tonnes
Total volume of vegetable oil,
third party tonnes
2023
2022
%
CHANGE
466,926
272,807
71%
50,766
40,845
24%
517,692
313,652
65%
In 2023, MHP’s sales of sunflower oil increased by 71% y/y to 466,926
tonnes, mainly driven by an increase in production of sunflower cake due
to additional crushing capacity, a change in the recipe, and the partial
restoration of logistics routes when compared with the prior year.
Sales of soybean oil increased by 24% y/y to 50,766 tonnes, with
the increase due to a relative decrease y/y in War-related logistics
disruption.
FINANCIAL RESULT AND TRENDS
(IN MLN. US$,
UNLESS INDICATED OTHERWISE)
2023
2022
%
CHANGE1
Revenue
- Vegetable oil
- Related products2
Gross profit
Gross margin
Adjusted EBITDA
Adjusted EBITDA margin
Adjusted EBITDA (net of IFRS 16)
Adjusted EBITDA margin
(net of IFRS 16)
1 pps – percentage points
2 Related products consist of meal, cake, and husk
606
565
41
79
13%
82
14%
80
13%
464
448
16
69
15%
71
15%
71
15%
31%
26%
156%
14%
-2pps
15%
-1pps
13%
-2pps
Revenue increased by 31% y/y to US$ 606 million (2022: US$ 464 million)
driven by the increased sales volumes of both sunflower and soybean oils.
Adjusted EBITDA (net of IFRS 16) increased by 13% y/y to US$ 80 million
(2022: US$ 71 million) driven by the increase in sales volumes.
REVENUE INCREASED
BY
31%
Y/Y
STRATEGIC
REPORT
Financial & Operational Review
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41
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION AGRICULTURE OPERATIONS
OVERVIEW
2023 CROPPED AREA,
HECTARES
2023 REVENUE
BY DESTINATION
STRATEGIC
REPORT
Financial & Operational Review
US$ 227
MILLION REVENUE
2.6
MILLION TONNES
OF CROPS PRODUCED
346,767
Harvested area
361,500
Landbank
30%
Domestic1
70%
Export
HARVEST RESULTS
20232
20222
Production
volume
Cropped
land
Production
volume
Cropped
land
in tonnes
in hectares
in tonnes
in hectares
Corn
1,346,620
135,516
1,088,476
151,850
Wheat
267,038
40,283
224,391
40,711
Sunflower
185,225
60,415
159,357
62,585
Rapeseed
122,544
33,065
104,849
27,520
Soya
Other3
185,375
58,832
109,240
44,953
451,162
18,656
248,334
13,129
Total
2,557,964
346,767
1,934,647
340,748
We are one of the leading grain
cultivation businesses in Ukraine,
growing crops for export and
to produce fodder to support
the Group’s chicken and cattle
production. We also raise cattle
to produce beef, as well as milk
and other dairy products. We
operate three fodder production
complexes and own cattle farms
and dairies located across Ukraine.
We lease agricultural land located
primarily in the highly fertile black
soil regions of Ukraine. In 2023,
landbank constituted
our total
approximately 361,500 hectares
of land, representing one of the
largest land portfolios in Ukraine.
In 2023, we harvested over
346,000 hectares of land in Ukraine
and gathered around 2.6 million
tonnes of crops, 32% higher y/y,
mainly due to favourable weather
conditions during
the harvest
season. Our average yields remain
well above the average for Ukraine
for all crops due to operational
efficiency and employment of best
practices.
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1 Crops used by the Group to process and produce feed meal for the Group’s chicken and cattle production.
2 Includes only land managed by the Agriculture Operations Segment.
3 Including barley, rye, sugar beet, sorghum and other, and excluding land left fallow as part of crop rotation.
42
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION AGRICULTURE OPERATIONS (continued)
STRATEGIC
REPORT
Financial & Operational Review
YIELDS
Corn
Wheat
Sunflower
Rapeseed
Soya
2023
2022
MHP’s average1
Ukraine’s average1
MHP’s average1
Ukraine’s average1
tonnes per hectare
tonnes per hectare
9.9
6.6
3.1
3.7
3.2
7.8
4.8
2.4
2.9
2.7
7.2
5.5
2.5
3.8
2.4
6.6
4.1
2.2
2.9
2.4
FINANCIAL RESULT AND TRENDS
(IN MLN. US$, UNLESS INDICATED OTHERWISE)
2023
2022
% CHANGE
Revenue
IAS 41 standard loss
Gross profit
War-related expenses
Adjusted EBITDA
Adjusted EBITDA (net of IFRS 16)
227
(63)
26
(3)
63
6
189
(143)
108
(6)
153
99
20%
56%
-76%
-50%
-59%
-94%
The limited export capabilities as a result of
both continuous rocket strikes on Ukrainian
ports infrastructure and the termination of the
“Grain Deal” by Russia had a negative effect on
the Segment’s performance. However, it should
be noted that these events will have a limited
impact on the overall Group performance, as
the substantial majority of grains and oilseeds
(excluding some rapeseed and some wheat) are
consumed internally.
1 MHP yields are net weight, Ukraine yields are bunker weight.
Agriculture Operations Segment’s revenue in
2023 increased 20% y/y to US$ 227 million
(2022: US$ 189 million) mainly driven by a
higher volume of grain sales due in turn to
higher yields y/y.
The significant decrease in both domestic
and international grain prices, combined with
increased logistics costs due to the impact of
War, led to a steep decline in 2023 adjusted
EBITDA (net of IFRS 16) for the Segment.
SEGMENT REVENUE
INCREASED
20%
Y/Y
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43
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION EUROPEAN OPERATING SEGMENT (PP)
OVERVIEW
STRATEGIC
REPORT
Financial & Operational Review
US$ 545
MILLION REVENUE
131,021
TONNES OF POULTRY PRODUCED
48,221
TONNES OF PROCESSED MEAT PRODUCED
We produce and sell chicken meat and
processed meat products,
supplying
products to 18 European countries. We
in Slovenia,
have production assets
Croatia, Serbia, Bosnia & Herzegovina, and
distribution companies in Austria, North
Macedonia, and Romania. We have one
biogas facility in Slovenia. Our largest brand
by revenue is Poli.
2023 REVENUE
BY DESTINATION
75%
The Balkans
25%
Export
SALES AND PRICES
FINANCIAL RESULT AND TRENDS
POULTRY
MEAT1
2023
2022
%
CHANGE
(IN MLN. US$,
UNLESS INDICATED
2023
2022
OTHERWISE)
%
CHANGE1
Sales volume,
third party tonnes
Price per 1 kg net
VAT, EUR
80,520
74,316
8%
Revenue
545
464
17%
3.54
3.33
6%
IAS 41 standard gain
-
Gross profit
132
Gross margin
24%
24%
2
113
-100%
17%
-
1 Poultry meat consists of raw and unprocessed parts of chicken, meat
after minor processing, meat after grinding, and chicken meat with the
addition of spices (marinated meat)
In 2023, poultry meat sales volumes for the
European Operating Segment increased by 8% y/y
to 80,520 tonnes. This was driven by an increase
in production volumes of poultry meat, both fresh
and frozen. The average price per 1 kg (net VAT)
increased by 6% y/y to EUR 3.54 (2022: EUR 3.33).
PROCESSED
MEAT1
2023
2022
%
CHANGE
Sales volume,
third party tonnes
Price per 1 kg net
VAT, EUR
46,555
43,277
8%
3.33
3.09
8%
1 Includes sausages and convenience foods
Meat processing product sales were up by 8% y/y
to 46,555 tonnes in 2023 (2022: 43,277 tonnes)
due to an increase in production volumes of
sausages and convenience products. The average
price per one kg increased by 8% y/y to EUR 3.33.
Adjusted EBITDA
93
65
43%
Adjusted EBITDA
margin
Adjusted EBITDA
(net of IFRS 16)
Adjusted EBITDA
margin (net of IFRS 16)
1 pps – percentage points
17%
14%
3pps
91
63
44%
17%
14%
3pps
In 2023, the European Operating Segment’s gross
profit increased by 17% y/y to US$ 132 million (2022:
US$ 113 million) predominantly due to the decrease
in grain input costs which in turn reduced production
costs.
Adjusted EBITDA (net of IFRS 16) amounted to US$
91 million for 2023 (2022: US$ 63 million) in line
with gross profit. Adjusted EBITDA margin (net of
IFRS 16) increased to 17% from 14%.
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44
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION CURRENT GROUP CASH FLOW
(IN MLN. US$)
2023
2022
Cash from operations
Change in working capital
Net Cash from operating activities
Cash used in investing activities
Including:
CAPEX1
Cash from financing activities
Total change in cash2
377
61
438
(228)
(212)
(86)
124
478
(340)
138
(174)
(159)
57
21
1 Calculated as cash used for purchases of property, plant and equipment
2 Calculated as net cash from operating activities plus cash used in investing activities
plus cash used in financing activities
Cash flow from operations before
changes in working capital for 2023
declined to US$ 377 million (2022: US$
478 million), mainly due to interest
payments of US$ 178 million in 2023
compared to US$ 126 million in 2022.
The change in working capital y/y is
mainly attributable to:
→ the return of stocks of chicken
meat and vegetable oil
to
normal levels from the unusually
high levels in 2022, caused by
disrupted logistics due to War
activities, which have since
partly recovered due to both the
“Grain Deal” and diversification
of delivery routes by the Group;
investment
raw
materials during 2023 (including
energy supplies, fertilisers, plant
protection materials, and animal
→ lower
in
STRATEGIC
REPORT
Financial & Operational Review
feed components) compared
with 2022 due to the relative
stabilisation of the Ukrainian
risk of
economy and
disruptions in supply; and
lower
→ stable amounts of trade accounts
receivable compared to significant
growth in sunflower oil and chicken
meat receivables during 2022.
In 2023, total CAPEX amounted to
US$ 212 million and mainly related
to maintenance and modernisation
projects, the development of new
products within
the Ukrainian
operations, and the expansion of
Perutnina Ptuj’s production facilities.
The increase from US$ 159 million in
2022 reflects higher investments in
cost optimisation and culinary strategy
projects, as well as purchases of diesel
generators for the mitigation of the
impact of possible power outages.
DEBT STRUCTURE AND LIQUIDITY
(IN MLN. US$)
DECEMBER
DECEMBER
SEPTEMBER
2023
2022
2023
31
31
30
Total Debt1, 2
LT Debt1
ST Debt1
Trade credit facilities2
Cash and bank deposits
Net Debt1,2
LTM Adjusted EBITDA1
Net Debt / LTM Adjusted
EBITDA1,2
1,537
1,141
499
(103)
(436)
1,101
445
2.47
1,537
1,507
182
(152)
(300)
1,237
384
3.22
1,547
1,025
604
(82)
(446)
1,101
438
2.51
and
As of 31 December 2023, MHP’s
cash
equivalents
cash
amounted to US$ 436 million, of
which US$ 311 million was held by
the Group’s subsidiaries outside
Ukraine. Under the repatriation
rules instituted by the National
Bank of Ukraine (“NBU”), the
equivalent amounts of such cash
and cash equivalents would need
to be repatriated to Ukraine
within six months of recognition
of
foreign currency proceeds
from exports from Ukraine, which
limits the Group’s ability to utilise
such cash and cash equivalents for
repayment of indebtedness. At the
same time, on 10 November 2023,
the NBU established a maximum
settlement period of 90 calendar
days for repatriating cash resulting
from the export of a specified list
of agricultural products.
The Net Debt / LTM Adjusted
EBITDA (net of IFRS 16) ratio was
2.47 as of 31 December 2023, well
below the limit of 3.0 defined in
the Eurobond agreement.
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 the 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 should
be excluded for the purposes of this calculation.
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45
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION On 25 September 2023, MHP SE launched an
invitation to the holders (the “Noteholders”) of
its US$ 500 million 7.75% Guaranteed Notes
due 10 May 2024 (the “Notes”) to tender for
purchase for cash any and all of the US$ 500
million aggregate principal amount of Notes
outstanding.
On 9 November 2023, MHP SE accepted
for purchase all validly traded Notes in the
amount of US$ 151 million with the aggregate
principal amount of Notes outstanding following
completion of the Tender Offer.
On 10 November 2023, Noteholders who validly
tendered their Notes were paid the consideration
of US$ 850 per US$ 1,000 principal amount of
the Notes (with total consideration paid US$
128 million) and, on the same date, Notes in the
amount of US$ 151 have been cancelled. Finance
income in the amount US$ 22 million was
recognized as a result of the Notes repurchase
(Note 12).
As of 31 December 2023, the share of long-term
debt in the total outstanding debt decreased
to 74% as the first US$ 500 million Eurobond,
which is due for repayment in May 2024, is now
classified as short-term.
The Company’s debt management strategy
extends to both its private and public debt
instruments. The Company expects to proactively
manage its debt portfolio in response to evolving
market conditions, subject to NBU restrictions.
DIVIDENDS
Considering 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 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
On 5 January 2024, MHP SE launched an
invitation to the holders of its US$ 349
million 7.75% Guaranteed Notes due 10
May 2024 to tender for purchase for cash
any and all of the US$ 349 million aggregate
principal amount of Notes outstanding.
On 22 January 2024, MHP SE accepted
for purchase all validly traded Notes in
the amount of US$ 138 million with the
aggregate principal amount of Notes
outstanding following completion of the
Tender Offer US$ 211 million.
On 23 January 2024, Noteholders who
validly tendered their Notes were paid the
consideration of US$ 950 per US$ 1,000
principal amount of Notes (with total
consideration paid US$ 131 million) and,
on the same date, Notes in the amount of
US$ 138 million were cancelled.
On 29 December 2023, the Group entered
into an agreement to acquire 81% of corporate
rights in business engaged in poultry farming
and meat processing in Albania for an
estimated consideration of EUR 16.8 million
(equivalent of US$ 18.1 million). Completion
of this transaction is subject to approval by
relevant regulatory bodies.
On 15 April 2024, the Group entered into a
share purchase agreement to acquire 100%
of the corporate rights in business engaged in
meat processing in Ukraine for an estimated
consideration of EUR 14.0 million (equivalent
of US$ 15.1 million). Up to the date of
authorization of these financial statements,
the Group made payment of EUR 3.5 million
for 24.9% of respective corporate rights. This
transaction is expected to be completed by
the end of the 2024 but remains subject to
certain conditions, including approval by
relevant regulatory bodies.
STRATEGIC
REPORT
Financial & Operational Review
THE BOARD HAS
DECIDED THAT NO
DIVIDENDS ARE LIKELY
TO BE PAID FOR AS LONG
AS THE WAR CONTINUES
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46
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION ALTERNATIVE
PERFORMANCE MEASURES
STRATEGIC
REPORT
Alternative Performance
Measures
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.
EBITDA is defined as profit for the year before
income tax expense, finance costs, finance
income, and depreciation and amortisation
expenses. Depreciation
amortisation
expenses are components of both cost of sales
and selling, general and administrative expenses
in the consolidated financial statements.
and
is derived by adjusting
Adjusted EBITDA
EBITDA (as defined above) for losses/gains on
impairment/reversal of impairment of goodwill
and property, plant and equipment net losses
on disposals of subsidiaries, and net 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.
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 2022 and 2023 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.
to the chief operating decision maker for the
purposes of resource allocation and assessment
of Segment performance. Within this Strategic
Report, the 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.
Net debt is defined as bank borrowing (excl.
trade credit facilities), 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.
LTM Adjusted EBITDA excludes the effects of
IFRS 16 on accounting for operating leases.
The Group’s Segment measure
the
consolidated financial statements is defined
as “Segment result” and represents operating
profit by Segment before unallocated corporate
expense, being the Segment measure reported
in
In MHP’s bond and loan agreement covenants,
the definitions Adjusted 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.
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47
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION 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 Integrated 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
in the consolidated
contained
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 2023 AND 2022,
NET DEBT WAS AS FOLLOWS:
US$ MILLION
2023
2022
US$ MILLION
2023
2022
PROFIT/(LOSS) FOR THE YEAR
Income tax
Finance cost
Finance income
Depreciation and amortisation expense
EBITDA
Impairment of goodwill and property,
plant and equipment
Forex Loss
ADJUSTED EBITDA
ADJUSTED EBITDA (net of IFRS 16)
142
31
163
(37)
169
468
-
40
508
445
(231)
Bank borrowings
Bonds issued
Lease liabilities
TOTAL DEBT
Cash and cash equivalents
NET DEBT
Effect of IFRS 16
Trade credit facilities
NET DEBT (net of IFRS 16)
(28)
155
(6)
159
49
29
365
443
384
379
294
1,239
1,383
256
229
1,874
1,906
(436)
(300)
1,438
1,606
(234)
(217)
(103)
1,101
(152)
1,237
STRATEGIC
REPORT
Alternative Performance
Measures
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48
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION SEGMENT PERFORMANCE
STRATEGIC
REPORT
Alternative Performance
Measures
US$ MILLION
External sales
Sales between
business segments
Total revenue
SEGMENT RESULTS
Depreciation and
amortisation
SEGMENT ADJUSTED
EBITDA BEFORE
UNALLOCATED
EXPENSES
Unallocated expenses
Unallocated
depreciation and
amortisation
ADJUSTED EBITDA
US$ MILLION
External sales
Sales between
business segments
Total revenue
SEGMENT RESULTS
Depreciation and
amortisation
SEGMENT ADJUSTED
EBITDA BEFORE
UNALLOCATED
EXPENSES
Unallocated expenses
Unallocated
depreciation and
amortisation
ADJUSTED EBITDA
POULTRY & RELATED
OPERATIONS SEGMENT
VEGETABLE OIL
OPERATIONS SEGMENT
AGRICULTURE
OPERATIONS SEGMENT
EUROPEAN
OPERATING SEGMENT
ELIMINATIONS
CONSOLIDATED
YEAR ENDED 31 DECEMBER 2023
1,643
10
1,653
238
84
321
606
170
776
77
4
82
227
207
434
6
56
63
545
-
545
72
22
93
-
(387)
(387)
-
-
-
3,021
-
3,021
393
166
559
(54)
3
508
POULTRY & RELATED
OPERATIONS SEGMENT
VEGETABLE OIL
OPERATIONS SEGMENT
AGRICULTURE
OPERATIONS SEGMENT
EUROPEAN
OPERATING SEGMENT
ELIMINATIONS
CONSOLIDATED
YEAR ENDED 31 DECEMBER 2022
1,525
9
1,534
131
73
204
464
114
578
69
2
71
189
344
533
91
62
153
464
-
464
45
20
65
-
(467)
(467)
-
-
-
2,642
-
2,643
336
157
493
(52)
2
443
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49
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION 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
financial 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.
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
to continuously improve its risk management
framework and processes.
RISK MANAGEMENT
FRAMEWORK
The Company’s approach to the identification
and assessment of risks, and the response
to risks, is based on best business practices
and the international COSO (Committee of
Sponsoring Organisations of the Treadway
Commission) Enterprise Risk Management
Framework. The COSO Framework enables us
to identify, classify, assess, manage and report
on 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 are therefore 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.
STRATEGIC
REPORT
Risk Management
The list of Principal Risks 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.
PAGE 127
See The Audit &
Risk Committee
Report
THE COSO FRAMEWORK
ENABLES US TO
IDENTIFY, CLASSIFY,
ASSESS, MANAGE AND
REPORT ON THE RISKS.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION THE PRINCIPAL RISKS AND UNCERTAINTIES THE GROUP IS FACING ARE SHOWN BELOW
PRINCIPAL RISK
HOW WE MANAGE THE RISK
TOP 5 WAR-RELATED RISKS
Missile attack on production facilities and
storage containing produce
Energy disruption. Adoption of a balanced energy mix composed of the national grid, electricity from MHP biogas
plants, and back-up diesel generators.
STRATEGIC
REPORT
Risk Management
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.
Additional storage facilities and storage approach. Adaptation of our business model, new logistics and supply routes,
accumulation of stock held outside Ukraine.
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.
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.
Repeated blocking of grain exports by sea
and land
Sufficient credit lines. Facilities are available to cover liquidity risks.
Increased cost of land delivery. Agile delivery matrix utilising a mixture of truck, rail and, where available, shipping.
Provision of conditions in export contracts that will allow extending the performance periods.
Ensuring availability of railway stock for export across borders (including containers).
Ensuring availability of warehouses for storing surplus goods.
Revision of the structure of sowing areas with the aim of focussing on crops for intra-Group consumption.
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 optimum conditions.
Minimised travel time and loading / unloading time at transshipment centres and ports.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION THE PRINCIPAL RISKS AND UNCERTAINTIES THE GROUP IS FACING ARE SHOWN BELOW
PRINCIPAL RISK
HOW WE MANAGE THE RISK
STRATEGIC
REPORT
Risk Management
OTHER WAR-RELATED RISKS
Military actions in the countries to which we
export goods (e.g. Israel)
Loss of access to leased land, offices and
production facilities in the occupied
territories
Absence or loss of employees resulting in
disruption of business processes
Lack of human resources for investment
projects
Lack of qualified personnel for the launch
of new investment projects, in particular the
construction of new facilities (a large number
of specialists serve in the Armed Forces) and
installation/adjustment of new equipment
(foreign specialists refuse to go to Ukraine).
Work with lawyers on amending the contracts to minimise the risks of product loss.
This geopolitical risk is largely outside MHP’s control.
Where possible, mitigating factors may include the relocation of operations.
Actions 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 defensive measures including how 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.
See also Growth Pillar 2: Our People and Their Wellbeing on pages 65 to 75.
When making a decision regarding the purchase of new production equipment and/or construction projects, work
with the supplier to understand the installation process and configuration, and launch online in Ukraine or through the
training of MHP specialists abroad.
Reservation of MHP-qualified specialists so that they are available for overseas travel to undertake the above training.
Lack of human resources for production
Reservation of key employees (qualified specialists).
The outflow of qualified specialists
Recruitment and training of students to compensate for the outflow of employees.
Ongoing recruitment initiatives.
Disruption of logistics routes in Ukraine
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.
See also CEO’s Statement and Growth Pillar 2: Our People and Their Wellbeing on pages 10 and 65 respectively.
Inability to conduct export activities
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.
See also CEO’s Statement on page 10.
Potential cyber-attack, loss of data and
disruption of business processes
Detailed contingency plans have been put in place 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.
See also Growth Pillar 5: Business Conduct on page 84.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION THE PRINCIPAL RISKS AND UNCERTAINTIES THE GROUP IS FACING ARE SHOWN BELOW
PRINCIPAL RISK
HOW WE MANAGE THE RISK
STRATEGIC
REPORT
Risk Management
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
agriculture 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.
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.
Implementing our growth strategy and
expansion into export markets
MHP has in place a long-term strategy for the Group’s expansion into diversified export markets with basic poultry
products as well as RTC and RTE products. In spite of War-related disruption to exports during 2023, MHP continues to
export to over 70 international markets.
See also Strategy & Purpose on page 18.
Outbreaks of Avian Influenza and other
livestock diseases
To ensure the wellbeing 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.
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.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION THE PRINCIPAL RISKS AND UNCERTAINTIES THE GROUP IS FACING ARE SHOWN BELOW
PRINCIPAL RISK
HOW WE MANAGE THE RISK
STRATEGIC
REPORT
Risk Management
ENVIRONMENTAL RISKS
Global climate change
MHP endeavours 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 Environmental Policy is to become carbon neutral by 2030, subject to the uncertainties
due to the impact of War. The Group has achieved carbon accreditation with the Carbon Trust and began a process of
identifying relevant metrics and targets on both climate change mitigation and adaptation. The Group expects to make
substantial progress in 2024. This initiative is part of the Group’s commitment to sustainable practices and its strategy to
reduce its environmental footprint. The Group also plans to engage with stakeholders, including employees, customers,
and suppliers, to raise awareness about climate change and promote sustainable practices. Furthermore, the Group will
monitor and report its progress towards achieving these targets to ensure transparency and accountability.
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
MHP is committed to zero deforestation and zero conversion of high-carbon lands to agricultural land.
MHP’s Environmental Policy sets a number of objectives to contribute to sustainable development of Ukraine at all
locations where the Company has operations.
FINANCE RISKS
Cross-border payments
Ukrainian capital controls and regulations set out by the National Bank of Ukraine (“NBU”) dictate that foreign currency
proceeds generated from exports but originating in Ukraine must be brought back to Ukraine within specific timeframes:
90 days for exports of grains and vegetable oils, and 180 days for exports of chicken meat. Furthermore, in accordance
with the regulations there are constraints on cross-border payments pertaining to capital movements, debt installments,
and interest. These restrictions pose challenges for MHP’s debt servicing capabilities as they hinder the Company’s
utilisation of offshore funds.
Fluctuations in foreign exchange rates
Fluctuations in foreign exchange rates are, of course, unpredictable and subject to a multitude of external factors,
including, but not limited to, ongoing developments in War, the provision of financial aid to Ukraine and geopolitical
shifts, as the ongoing War leads to significant uncertainties.
Fluctuations in interest rates
MHP monitors its exposure to interest rates and assesses the potential implications of interest rate fluctuations on its
net interest expenses. The majority of MHP’s debt is structured with fixed interest rates.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION THE PRINCIPAL RISKS AND UNCERTAINTIES THE GROUP IS FACING ARE SHOWN BELOW
PRINCIPAL RISK
HOW WE MANAGE THE RISK
STRATEGIC
REPORT
Risk Management
FINANCE RISKS (CONTINUED)
Credit risk
MHP has a diversified pool of customers. The amount of credit extended to any one customer or group of customers,
including supermarkets and franchisees, is strictly controlled.
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.
Liquidity risk
Unavailability of loans, inability to refinance
debts in 2024.
The availability of loans for the refinancing of debt in 2024 is subject to the fulfilment of certain covenants. MHP
maintains efficient budgeting and cash management protocols to guarantee sufficient funds are on hand both to fulfill
its operational needs and ensure its covenant obligations are met. The Company also implements a flexible CAPEX
programme, allowing for the postponement of capital projects if required. Further details regarding the covenants can be
found in Note 29 on page 197.
Inefficient investments
MHP has established and enacted procedures to ensure proper oversight in this domain. The Evaluation of Investment
Projects procedure mandates that the Investment Committee approves the majority of investment projects. For
significant Company investments under the CAPEX programme, formal investment appraisal reports and financial models
are prepared, and these documents are jointly endorsed by the Investment Committee. The Board approves the annual
CAPEX programme in line with the annual Budget.
STAKEHOLDER RELATIONS RISKS
Local communities and NGOs
Investor and other stakeholder relations
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.
See also Growth Pillar 1: Stakeholder Engagement on page 60.
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 Top Management and the Board.
See also Growth Pillar 1: Stakeholder Engagement on page 60.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION THE PRINCIPAL RISKS AND UNCERTAINTIES THE GROUP IS FACING ARE SHOWN BELOW
PRINCIPAL RISK
HOW WE MANAGE THE RISK
COMPLIANCE RISKS
Legal and regulatory risk
MHP’s Management team actively monitors regulatory developments in the countries in which the Group operates.
See also Growth Pillar 5: Business Conduct on page 84.
Bribery and corruption
MHP maintains robust anti-bribery and corruption policies and procedures, including a Code of Ethics, which are
regularly reviewed and monitored by the Audit & Risk Committee. MHP also monitors compliance to the established
policies and procedures.
Failure to comply with the covenants under
loan agreements
BUSINESS CONTINUITY RISK
See also Growth Pillar 5: Business Conduct on page 84.
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.
See also Growth Pillar 5: Business Conduct on page 84.
STRATEGIC
REPORT
Risk Management
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION MHP’S GROWTH PILLARS
STRATEGIC
REPORT
MHP’s Growth Pillars
SINCE 2022, MHP HAS BEEN REPORTING ON ITS SIX GROWTH PILLARS TO DEMONSTRATE HOW IT
IS DELIVERING ON ESG. THE GROUP CONTINUES TO SUCCEED IN PROGRESSING ITS ESTABLISHED
COMMITMENTS IN VARIOUS AREAS INCLUDING ADDRESSING CLIMATE CHANGE, TRAINING AND
DEVELOPING ITS WORKFORCE, MAINTAINING ITS STAKEHOLDER ENGAGEMENT AND COMMUNICATIONS,
AND PROVIDING OPPORTUNITIES FOR DEMOBILISED EMPLOYEES.
THESE FUNDAMENTAL COMMITMENTS WILL CONTINUE THROUGHOUT 2024 AND BEYOND.
ALIGNING OUR SUSTAINABILITY
FRAMEWORK
and
adapted
MHP has maintained
its
sustainability approach to address the War. The
Group is committed to achieving best practice
and carefully monitors the development of
global standards including those relating to
climate change.
Key aspects of our approach include:
→ Identifying the United Nations Sustainable
Development Goals as the appropriate
sustainability framework for MHP to align
its approach;
→ Closely following the outcomes of COP28
and considering the recommendations;
→ Preparing to align with evolving reporting
requirements
being
including
developed by the EU and the United
Kingdom; and
those
→ Developing data collection to enable us
to report, applying the Global Reporting
Initiative, evolving regulatory reporting
requirements and best practice.
global
supports
initiatives
sustainability
MHP
stakeholder
including those set
up by governments, regulators, financial and
investment communities, and NGOs to enhance
transparency and consistency in sustainability
practices and the disclosure of performance.
regular
stakeholder engagement
Through
activities, MHP has established its approach
to sustainability, created a sustainability
framework and prioritised relevant activities.
the
Despite challenges created by War,
principles and commitments codified before
the invasion remain intact and will continue to
be refined and developed over time.
DESPITE THE
WAR, MHP HAS
SUCCESSFULLY
ADVANCED ITS
ESTABLISHED
COMMITMENTS AND
PLANS IN SEVERAL
AREAS DURING
THE YEAR
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION OUR SIX GROWTH PILLARS
Our sustainability framework consists of
Six Growth Pillars.
These activities are delivered and assessed
through our strategy and policies, management
systems
performance
measurement and monitoring, and engagement
with stakeholders.
processes,
and
GRI TABLE
MHP’s 2023 GRI table, which cross-references
the information within this Report, is available for
download from MHP’s website (www.mhp.ua).
STRATEGIC
REPORT
MHP’s Growth Pillars
Stakeholder Engagement
GRI TABLE
Our People and Their
Wellbeing
Our Role in Society and
Our Licence to Operate
Responsible Food
Production
Business Conduct
The Planet
PAGE 60
PAGE 65
OUR APPROACH
WHY
AREAS OF
FOCUS
(GROWTH
PILLARS)
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
PAGE 76
HOW
Strategy and Policy Design
Continuous Management Systems Development
Rigorous Performance Measurement and Monitoring
REPORTING
GRI
TCFD
International Standards and
Guidelines
The following matrix highlights how each of the
17 SDGs are addressed under each of the six
Growth Pillars. Further information is included
in each Growth Pillar section of this Report.
PAGE 78
PAGE 84
PAGE 92
ALIGNMENT WITH THE UN
SUSTAINABLE DEVELOPMENT
GOALS
The United Nations 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 and
activities are closely aligned with the UN SDGs.
The Group aims to contribute constructively to
positive global change. MHP aligns its activities
with all seventeen UN SDGs.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION MHP’S GROWTH PILLARS AND THEIR ALIGNMENT WITH THE UN SDG’S
UN SDG’S
MHP’S GROWTH PILLARS
STAKEHOLDER
ENGAGEMENT
OUR PEOPLE
AND THEIR
WELLBEING
OUR ROLE IN
SOCIETY AND
OUR LICENCE TO
OPERATE
RESPONSIBLE
FOOD
PRODUCTION
BUSINESS
CONDUCT
THE PLANET
STRATEGIC
REPORT
MHP’s Growth Pillars
1
2
4
5
6
7
8
6
NO POVERTY
ZERO HUNGER
QUALITY EDUCATION
GENDER EQUALITY
CLEAN WATER AND SANITATION
AFFORDABLE AND CLEAN ENERGY
DECENT WORK AND
ECONOMIC GROWTH
INDUSTRY INNOVATION
AND INFRASTRUCTURE
10
11
REDUCE INEQUALITIES
SUSTAINABLE CITIES AND
COMMUNITIES
12
RESPONSIBLE CONSUMPTION
AND PRODUCTION
13
CLIMATE
ACTION
14
15
16
17
LIFE BELOW WATER
LIFE ON LAND
PEACE, JUSTICE AND
STRONG INSTITUTIONS
PARTNERSHIP FOR THE GOALS
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION GROWTH PILLAR 1:
STAKEHOLDER ENGAGEMENT
STRATEGIC
REPORT
Growth Pillar 1:
Stakeholder engagement
immediately revise
The commencement of War In Ukraine meant
that MHP had to
its
approach to stakeholder engagement and play
an active role in addressing the crisis. Group,
Top Management and Senior Management
immediately
the Group’s
stakeholder engagement priorities were to:
resolved
that
SUPPORT THE NEEDS OF EMPLOYEES
ADDRESS THE NEEDS OF COMMUNITIES
IN DIFFERENT PARTS OF THE COUNTRY
PROVIDE REGULAR UPDATES TO
FINANCIAL PARTNERS AND THE
INVESTMENT COMMUNITY
WORK WITH OTHER STAKEHOLDERS
TO MAINTAIN FOOD SECURITY
AND PERSONAL SAFETY FOR THE
UKRAINIAN POPULATION
This approach has evolved as, at the time
the War continues and
of publication,
unfortunately shows no sign of ending within
the near future.
THE IMPORTANCE OF
STAKEHOLDER ENGAGEMENT
DURING THE WAR
and
From
the outset, MHP’s Board and Top
Management Team immediately realised that
effective communications
stakeholder
engagement were essential to the success of the
Company’s response to the War. Due to the nature
and longevity of the War these requirements have
evolved and have been subject to often sudden
and unpredictable change. MHP’s Directors and
Top Management Team consider that the conduct
of these activities has been outstanding and has
played a significant part in MHP’s ongoing and
successful efforts to meet the many challenges
presented by War.
They include:
→ Maintaining MHP’s
through
successful ongoing negotiations with a
number of different capital providers;
liquidity
→ Working with a wide variety of internal and
external stakeholders in Ukraine to maintain
food security for everyone;
→ Applying various communication channels
including
to maintain
social media
communication with employees and their
families and evolving this approach because
of the War’s longevity;
→ Working with
and external
internal
stakeholders to provide the necessary
support to employees and their families;
→ Working with
and external
internal
stakeholders to maintain IT reliability and
security to ensure the integrity of MHP’s
communications;
→ Working with a wide variety of internal,
national and international stakeholders to
enable MHP’s export activities to continue
despite changing and evolving logistical
challenges; and
→ Working with
and external
internal
stakeholders to maintain a wide variety
of community support activities across
Ukraine and to encourage international
stakeholders to provide resources and
support to the Ukrainian population during
the War.
MATERIALITY ASSESSMENT
In previous years, MHP conducted a stakeholder
materiality exercise to ensure that it fully
understands the views of its stakeholders in
relation to recent, current and future activities.
Details of this approach can be found in the
2021 Sustainability Report which is available
for download from the Group website. Clearly
this approach had to be changed following
the outbreak of the War. MHP’s stakeholder
engagement activities are currently focussed
on the priorities listed above. This will continue
until the War ends and will continue to be
adapted due to the changing circumstances that
the Russian invasion has created.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION STAKEHOLDER ENGAGEMENT HIGHLIGHTS
STRATEGIC
REPORT
Growth Pillar 1:
Stakeholder engagement
THE TABLE BELOW SETS OUT HOW EACH KEY STAKEHOLDER AREA OF INTEREST IS UNDERSTOOD AND HOW THIS
WAS ADDRESSED IN 2023 INCLUDING HOW MHP’S BOARD OF DIRECTORS PARTICIPATED IN THESE ACTIVITIES
WORKFORCE
MHP has a dedicated and experienced workforce that is committed to, and is a key factor in, achieving MHP’s aims and objectives. Taking care of our
people is a top priority.
KEY STAKEHOLDER ISSUES
HOW MHP ENGAGES
→ A shared vision of MHP’s commitment to the country during the War;
→ Design of tailored programmes to address the special needs created by the
→ Personal and family welfare and security;
→ Health and wellbeing, taking into account the special circumstances created
War;
→ Regular two-way communication;
by the War;
→ Clear communication of Company and management goals;
→ A conducive workplace featuring diversity, inclusion, flexibility, responsible
→ Training, education and mentoring;
business practice and clear communication;
→ Provision of ongoing employment for MHP employees during the War,
including demobilised employees.
→ Programmes for the development of innovative thinking;
→ Corporate volunteering;
→ Re-skilling programme;
BOARD INVOLVEMENT HIGHLIGHTS
→ Grievance mechanism (MHP Ethics Line via www.mhp.ua);
→ Employment of external advisory services (e.g. psychologists) to address
issues caused by the War;
→ Regular surveys.
2023 HIGHLIGHTS
→ Supervisory involvement of the executive members of the Board;
→ Substantial communication resources were applied to ensure ongoing
→ Regular discussion of workforce matters at Board meetings and Board
Committee meetings;
→ Regular reporting of workforce information to the Board as part of internal
reporting processes.
communications and two-way dialogue during the War;
→ Communications played an important role in maintaining a positive collective
mindset and ensured that MHP’s management were able to address issues as
and when they arose.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION COMMUNITIES
MHP’s reputation and business continuity are supported by its aim to be a proactive and supportive member of its local communities and a responsible
neighbour.
KEY STAKEHOLDER ISSUES
HOW MHP ENGAGES
→ Wellbeing, personal safety, and food security during the War;
→ Transparency, clear and regular communication and opportunities to engage;
→ Regular dialogue to discuss community issues with regard to MHP’s operations;
→ Development and support of local infrastructure and services;
→ Local employment opportunities.
→ Delivery of a Stakeholder Engagement Plan as a basis adapted for the special
circumstances of the War in line with CSR Department OKRs to meet
stakeholder expectations and to maintain a strong collaboration;
→ Joint activities with MHP-Gromadi to support local communities;
→ Grievance mechanism (MHP Ethics Line via www.mhp.ua);
→ Regional recruiting programme.
BOARD INVOLVEMENT HIGHLIGHTS
2023 HIGHLIGHTS
→ Supervisory involvement of the executive members of the Board.
→ MHP successfully carried out its strategy of working with a variety of national
and international partners to deliver a wide variety of support to the Ukrainian
population to alleviate the effects of the War (see Growth Pillar 3 on pages
76 to 77).
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.
KEY STAKEHOLDER ISSUES
HOW MHP ENGAGES
→ Business continuation during the War;
→ Adaptation and redesign of communication channels to take into account the
→ Adaption of business methods and logistics during the War;
→ Fair business conduct, terms and conditions;
special circumstances created by the War;
→ Interaction via tender platform;
→ MHP’s approach and performance relating to biosecurity, product quality,
→ MHP’s Business Partner Code of Conduct (available via www.mhp.ua);
environmental, health and safety and social matters;
→ Dedicated staff teams to interact with customers, suppliers and business
→ Transparency, clear communication channels and opportunities to engage.
advisors;
→ Provision of questionnaires;
→ Participation in regular customer due diligence processes.
BOARD INVOLVEMENT HIGHLIGHTS
2023 HIGHLIGHTS
→ Supervisory executive director involvement in the maintenance of engagement
→ Working with a variety of stakeholders to ensure ongoing food security for the
with this key group of stakeholders.
population of Ukraine;
→ Meeting international, regulatory and customer standards on matters such as
quality and safety;
→ Working with a variety of stakeholders both domestically and internationally
to ensure ongoing business activities at MHP’s sites.
STRATEGIC
REPORT
Growth Pillar 1:
Stakeholder engagement
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION SHAREHOLDERS, FINANCIERS AND THE INVESTMENT COMMUNITY
MHP’s ability to meet its financial obligations and maintain liquidity depends on maintaining strong and lasting relationships with investors, debt
providers, financiers and financial analysts.
KEY STAKEHOLDER ISSUES
HOW MHP ENGAGES
→ Ongoing liquidity and solvency of the Group;
→ Provision of regular access to Top Management and IR personnel;
→ Regular access to Management and information during the War;
→ Regular provision of conference calls for the investment community;
→ Financial and operational performance;
→ Quarterly, six-monthly and annual results announcements;
→ Credit rating;
→ Strategy;
→ Risk management;
→ One-to-one meetings with investors and financiers;
→ Annual general meeting;
→ Dedicated IR section on the Company’s website;
→ Environmental, social and governance approach and performance;
→ Annual financial and Non-Financial Reports;
→ Transparency, regular and proactive communication and reporting.
→ Investor surveys.
BOARD INVOLVEMENT HIGLIGHTS
2023 HIGHLIGHTS
→
→
Board members played a key role in guiding the conduct of negotiations with
capital providers during 2023;
Board members provide an important point of contact for investors during the
period of War in Ukraine.
→
→
Successful conclusion of new finance arrangements with international
development finance institutions and settlements with a large proportion of
bondholders;
Regular and ongoing dialogue with the finance community to ensure ongoing
support and full understanding of MHP’s status during the duration of the War.
GOVERNMENTS AND REGULATORS
MHP’s licence to operate is dependent on its compliance with the
applicable laws and regulations.
KEY STAKEHOLDER ISSUES
HOW MHP ENGAGES
→ Adherence to applicable laws and regulations;
→ Regular dialogue with local government to establish population needs and
→ Support and cooperation with local economic development agencies;
→ Transparency, clear communication channels and opportunities to engage.
requirements during the War and to design plans to address them;
→ Close cooperation with local regulators over matters such as maintenance of
strict bio-security, health and safety and environmental matters.
BOARD INVOLVEMENT HIGHLIGHTS
2023 HIGHLIGHTS
→ MHP’s Board members supervised contact with governmental organisations in
Ukraine and elsewhere during 2023;
→ The Board of Directors receives regular reports on regulatory compliance
→ MHP and its community partners continued to successfully work with local
and national authorities to undertake a wide variety of community support
projects to assist the population of Ukraine during the War;
across the Group.
→ MHP conducted dlalogue with governments and regulators to address
logistical issues during the War.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION MEDIA
An important element of all MHP’s key stakeholder relations is that the
media disseminates accurate information about its activities.
KEY STAKEHOLDER ISSUES
HOW MHP ENGAGES
→ How MHP is working to support the population and the country;
→ Design of innovative methods of communication during the time of War which
→ Receipt of timely, complete and up-to-date news and information about
MHP’s activities;
are appropriate to both parties;
→ Company websites;
→ Transparency, clear communication channels and opportunities to engage.
→ Regular distribution of Company news and information;
→ Availability of Top Management for media interviews and briefings.
BOARD INVOLVEMENT HIGHLIGHTS
2023 HIGHLIGHTS
→ MHP’s Executive Chairman regularly acts as a spokesperson.
→ MHP continued to use mainstream and social media effectively to maintain
communications with a wide variety of internal and external stakeholders
despite the challenging circumstances in Ukraine.
S 172 STATEMENT AND
STAKEHOLDER ENGAGEMENT
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:
→ Likely consequences of any decisions in the
long term;
→ Interests of the Company’s employees;
→ The need to foster the Company’s business
relationships with suppliers, customers, and
other material stakeholders;
→ The impact of the Company’s operations on
local communities and the environment;
→ The desirability of the Company maintaining
a reputation for high standards of business
conduct; and
→ The 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, together with
its
strategic priorities, the Board aims to ensure
that its decisions are consistent, predictable,
and always in the best interests of the business.
Further details of the Board’s activities can
be found in the Governance section of this
Report on pages 108 to 145 and within the
Stakeholder Engagement Highlights on pages
60 to 64. This engagement table on those pages
includes how the Board reaches its decisions;
the matters discussed and debated during
the year; the stakeholder considerations that
were central to those discussions; highlights
of Board stakeholder engagement activity 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.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION GROWTH PILLAR 2:
OUR PEOPLE AND THEIR WELLBEING
The War in Ukraine that commenced in February 2022 underlined that MHP’s people and their wellbeing are MHP’s greatest asset. MHP’s achievement
in continuing to operate despite the significant difficulties that were presented to its business operations was clearly linked to the established culture of
interaction, cooperation, and adherence to MHP’s values.
OUR COMMITMENT
MHP aims to build a culture where everyone’s welfare, health and safety, and wellbeing matters within a workplace that is welcoming for everyone.
Everyone at MHP strives to achieve
the goal of zero fatalities and health
and safety incidents resulting in injury
or adversely affecting the health of
employees.
We will care for and support
demobilised employees and support
their health and wellbeing.
MHP is a first-class employer and
provides industry-leading training and
development opportunities for all
employees.
OUR PEOPLE
POLICY HIGHLIGHTS
MHP’s human resources policy framework is
designed to provide a best-practice framework
to facilitate its commitments to its employees.
→ 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 will build transparent relationships
with all staff and will protect the privacy of
every employee;
→ MHP will ensure that the principle of equal
opportunities applies across the Group;
→ 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; and
→ MHP adheres to the principle of freedom of
association.
→ Dedication to personal development and
growth; and
→ The Board of Directors has overall
responsibility for human resource issues
at MHP under the Sustainability and
International Affairs Committee.
MANAGEMENT APPROACH
MHP’s human resources management approach
has five main elements:
→ Strategic workforce planning;
→ Efficient human resources management.
This includes designing optimal structures,
raising the level of leadership ability at
in the organisation, building
all levels
a performance management
culture,
predicting and mitigating human resources
risks and building a productive corporate
culture-based Company values;
→ Talent acquisition management;
MHP’s Management Team values 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 everyone
with dignity and respect, and by promoting
diversity and inclusion.
MHP Group companies aim to hire and employ
a workforce that represents the communities
where they live and work.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION
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 Group’s human resources (“HR”) strategy
is set centrally and is aligned with the Group’s
overall strategy, duly adjusted accordingly
to each country. HR management processes
are also aligned with international standard
ISO 9001:2015. MHP personnel management
systems at its 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.
BUILDING A CORPORATE CULTURE
BASED ON MHP’S VALUES
MHP’s Five Core Values (Partnership, Purpose-driven,
Constant Development, Responsibility, Honesty
and Transparency) are explained on page 14. The
development of a strong corporate culture is essential
to MHP’s ongoing success and is an important
element in enabling it to adapt to changes, challenges
and opportunities and conduct its business according
to its values. A strong understanding of MHP’s culture
throughout the business enables employees to
interact effectively, execute optimal decisions and
contribute to MHP’s sustainability commitments.
MHP’s values underpin its corporate culture,
and this approach brings a variety of important
benefits to the business. These include:
→ Resilience to Crisis Situations
Challenges and crisis situations are addressed
more effectively through the establishment
of clear principles. Consequently, important
issues are addressed optimally and
in
accordance with good business practice.
→ Talent Attraction and Retention
discernible
and
strong
A
based
encourages
culture
attracts
long-term
talent
values-
and
retention.
→ Innovation and Competitiveness
A strong and discernible values-based
culture
innovation, adaptability
to changing market conditions and greater
competitiveness.
inspires
→ Customer Loyalty and Brand Reputation
Clear values encourage and maintain customer
relationships and develop brand value through
strengthening and protecting reputation.
During 2023, MHP conducted 14 strategic sessions
for its management team to strengthen their
understanding of and commitment to its Values.
The table records that 251 Ukraine-based managers
from 13 departments took part in these activities.
DEPARTMENT
NUMBER OF
PARTICIPANTS
Production
Quality
Procurement
Agriculture
Logistics
Human Resources
Information Technology
Finance
CBD
CLC
Retail
Corporate Social
Responsibility and
Energy Innovations
Security
TOTAL
51
13
8
40
12
21
5
14
20
14
14
19
20
251
ADDRESSING THE EFFECTS
OF THE ONGOING CONFLICT
All MHP’s activities continued successfully
throughout 2023 and into 2024 despite the
many challenges that its operations in Ukraine
were presented with. Most of MHP’s business
in
development projects were suspended
February 2022 but re-commenced towards the
end of that year. One of the effects was that
over 200 further people were employed in Kyiv,
requiring the provision of new office space.
The challenges related to the workforce and
MHP’s response to this are widely viewed as a
best-in-class example for other organisations
to follow, both within Ukraine and elsewhere.
Key aspects of the Group’s approach have
been its understanding that effective and
regular communication with all parts of
the workforce are key to understanding
and addressing the effects of the conflict.
Innovation and adaptation have also been
important aspects of maintaining MHP’s
activities and this approach will continue for
the duration of the War.
support
to
the Ukrainian
the
Increased mobilisation
requirements of
armed
forces presented difficulties during 2023 in
maintaining the required employee numbers.
A significant proportion of the pre-War
population will not return to the country until
War has ended and therefore a traditional
recruitment approach will not solve this issue.
MHP has therefore adopted an approach which
focusses on in-house investment in the training
and development of young people to address
these issues. Additionally, employee retention
and recruitment has been encouraged by the
payment of the regular annual pay increase in
April and a second 10% increase on 1 October
2023. Significant investment has also been
made
improving the working
environment both at agricultural and office
facilities.
into further
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION
Approaching 2,900 (as of the end of April)
MHP employees have been mobilised and are
now part of the Ukrainian armed forces. MHP
continues to remunerate these staff members
in full: in 2023 the cost was approximately US$
19.2 million.
Around 200 demobilised employees have
returned to work at MHP. The Company has
designed a rehabilitation programme to support
these people in addressing their individual
mental and physical needs.
MENTAL HEALTH
Ongoing dialogue with employees throughout
the year has highlighted that one of the key
issues for the workforce was the psychological
challenges that the ongoing conflict presented
as people realised its potential longevity and
the fact that it was unlikely to end soon. In
2023, MHP became one of the first companies
in Ukraine to create a Mental Health Division
which comprises 14 psychology specialists.
They are present throughout MHP’s locations
in Ukraine and support all employees including
those returning from mobilisation.
4,500 individual consultations were conducted
in 2023 in response to significant demand.
Courses were also designed and conducted
on both a face-to-face basis and online. These
addressed issues such as mental wellbeing and
the management of stress and they received
very positive employee feedback. At the end
of 2023, MHP was in the process of recruiting
around twenty new employees to coordinate
this activity and expand the specialist team.
DIVERSITY AND INCLUSION
MHP has a long track record of providing equal
opportunities for women and this approach
extends to senior management levels where the
top grades are trending up in terms of numbers
of women. This is not only due to the numbers
of men being mobilised but importantly also
due to a concerted focus on employing and
promoting more women in senior positions.
Talent Council
the conduct of
requires
formal meetings where all possible internal
candidates within a department are presented
by their managers and a discussion is facilitated
about their competency, performance and
potential assessment, Individual Development
Plan performance and career options. The
outcomes include a short-list for new roles and
recommendations for individual staff personal
development.
Its approach to providing opportunities for
disabled people was extended in 2023 as MHP
provided opportunities for employee veterans
returning from the conflict. At Board level MHP,
supported by its advisors, continues to strive to
improve female representation.
FOCUS ON INTERNAL
CANDIDATES FOR MANAGEMENT
POSITIONS
Talent Council was successfully piloted in the
Customer Development Department in 2022
and extended to the Agricultural Department
and part of the Human Resources Department
in 2023. Five Talent Council meetings were held
during the year resulting in many managerial
vacancies being filled by internal candidates.
DEVELOPMENT OF EMPLOYEE
ASSESSMENT MECHANISMS
In 2023 a new internal assessment approach
called Talent Council was launched. It is a
systematic, data-based,
and motivational
approach to talent management based on three
main principles:
→ From within: for any middle management
vacancy, an internal candidate should be
considered first;
→ Cross channel and cross expertise: MHP
aims to drive and proactively provide a
diverse employment experience for all
MHP employees; and
In 2023, MHP expanded the system of
comprehensive personal assessment which
involves the creation of Individual Development
Plans with the participation of the employee,
line management and the HR team. 606
senior, middle and specialist level employees
participated (2022: 374).
include performance evaluations,
Features
assessment centre analysis, competency-based
interviews, the use of personal and professional
diagnostics and hard skills testing.
→ Data-based:
this
ensures
transparency in performance assessment
and career decisions.
approach
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION EMPLOYEE DATA
At 31 December 2023, 28,7881 employees worked for MHP in Ukraine (60% male, 40% female) and in the European Operating Segment
there were 4,667 employees (44% male, 56% female).
EMPLOYEE NUMBERS AND GENDER DATA
UKRAINE
EUROPEAN OPERATING SEGMENT
2023
Male
Female
2022
Male
Female
2021
Male
Female
Total
28,788
17,311
11,477
Total
28,298
Total
17,262
11,036
27,366
15,935
11,431
%
60
40
%
61
39
%
58
42
2023
Male
Female
2022
Male
Female
2021
Male
Female
EMPLOYEE DATA – EMPLOYMENT TENURE
Total
Total
Total
4,667
2,072
2,595
4,247
1,869
2,378
3,965
1,745
2,220
%
44
56
%
44
56
%
44
56
UKRAINE
EUROPEAN OPERATING SEGMENT
2023
Total
Permanent
28,788
28,043
2022
Total
Permanent
28,298
27,016
2021
Total
Permanent
27,366
26,794
%
97
%
95
%
98
Temporary
745
Temporary
1,282
Temporary
572
%
3
%
5
%
2
2023
Total
Permanent
4,667
3,753
2022
Total
Permanent
4,247
4,162
2021
Total
Permanent
3,965
3,882
%
80
%
98
%
98
Temporary
914
Temporary
85
Temporary
83
%
20
%
2
%
2
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1 Number of employees of MHP Ukraine, including those undertaking multiple disciplines.
68
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION EMPLOYEE DATA – FULL/PART TIME
UKRAINE
EUROPEAN OPERATING SEGMENT
2023
Total
28,788
Male
16,730
Female
10,834
2022
Total
28,298
Male
16,987
Female
10,956
2021
Total
27,366
Male
15,605
Female
11,266
Full
employment
27,564
Full
employment
27,943
Full
employment
26,871
%
96
%
99
%
98
Part-
time
581
643
Part-
time
179
176
Part-
time
330
165
%
4
%
1
%
2
2023
Total
4,667
Male
1,982
Female
2,576
2022
Total
4,247
Male
1,515
Female
1,944
2021
Total
3,965
Full
employment
4,558
Full
employment
3,459
Full
employment
%
98
%
81
%
Male
1,740
Female
2,150
3,890
98
Part-
time
90
19
Part-
time
354
434
Part-
time
12
63
EMPLOYEE DATA – EMPLOYMENT LEVEL
UKRAINE
EUROPEAN OPERATING SEGMENT
YEAR
MANAGERS
PROFESSIONALS
OTHER
YEAR
MANAGERS
PROFESSIONALS
OTHER
Number
%
Number
2023
2022
2021
2,672
2,462
2,331
9
9
9
5,580
5,056
4,645
%
20
18
17
Number
20,536
20,780
20,390
%
71
73
74
Number
%
Number
2023
2022
2021
82
79
75
2
2
2
738
710
658
%
16
17
17
Number
3847
3458
3232
%
2
%
19
%
2
%
82
81
81
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION
EMPLOYEE AGE DATA
UKRAINE
EUROPEAN OPERATING SEGMENT
EMPLOYEES
AGED
AGED BETWEEN
UNDER 30
30 AND 50
AGED
OVER 50
EMPLOYEES
AGED
AGED BETWEEN
UNDER 30
30 AND 50
AGED
OVER 50
Year
2023
2022
2021
Number
5,005
5,111
4,798
%
17
18
18
Number
16,033
16,447
15,497
%
56
58
57
Number
7,750
6,740
7,071
%
27
24
25
Year
2023
2022
2021
Number
748
568
505
%
16
13
13
Number
2424
2,235
2,031
%
52
53
51
Number
1495
1,444
1,429
%
32
34
36
EMPLOYEE RECRUITMENT DATA
UKRAINE
YEAR
EASTERN REGION
WESTERN REGION
CENTRAL REGION
SOUTHERN REGION
TOTAL
2023
2022
2021
610
850
1,657
438
243
323
7,107
7,952
9,077
66
-
-
8,221
9,045
11,057
EUROPEAN OPERATING SEGMENT
YEAR
SLOVENIA
CROATIA
BOSNIA/
HERZEGOVINA
SERBIA
MACEDONIA
ROMANIA
AUSTRIA
TOTAL
2023
2022
2021
486
337
340
146
162
189
197
141
132
615
454
241
1
0
2
0
1
0
0
2
1
1,445
1,097
905
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION
In 2023, training and development activities
were significantly expanded. 3,154 employees
received professional training in 2023 (2022:
574) averaging 24 hours per participant (2022:
28) reflecting a focus on greater efficiency. In
2023, MHP Ukraine’s workforce as a whole
received over 75,000 hours’ professional
training, almost 5 times more than in 2022.
Examples of training supplied by educational
institutions include:
→ Agricultural
operator
Ladyzhyn
qualifications
Professional College of Vinnytsia National
Agrarian University (137 people were trained
including 9 women);
machinery
from
the
→ Veterinary qualifications from the Bila
Tserkva National Agrarian University (54
people) and Ukrainian State University of
Chemical Technology (22 people);
→ Oil-press
department
qualifications
from the Bila Tserkva National Agrarian
University (65 people);
→ Laboratory worker training from the Odesa
National University of Technology
(15
people); and
→ 478 people who work on poultry farms
received training on subjects such as
microcontrollers, electronics, electrical
(210 people), hydro and
engineering
(136 people),
automation
pneumatic
(52 people),
computer aided design
equipment maintenance
(40 people),
controller programming (24 people) and
sensors, mechatronics and robotics (16
people). Other professional management
training included food quality and safety
(331 people) and forklift truck driving (132
people including 54 women).
In 2023, recruitment also took place in these
Ukrainian regions (no prior year comparators
are available).
REGION
NUMBER
Chernhiv Region
Kharkiv Region
Ternopil Region
Khmeknytskii Region
Odesa Region
Poltava Region
Zakarpattya Region
Zaporrizhya Region
Zhytomyr Region
Other
2
19
27
96
66
119
15
4
17
85
TRAINING AND DEVELOPMENT
MANAGERIAL PROFESSIONAL
DEVELOPMENT
MHP has always placed important emphasis
on training and development. Management
believes that the development of professional
skills adds significant value and contributes to:
→ Professional and personal development of
employees to 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.
1 SAP SuccessFactors
2 SAP SuccessFactors Learning Management System
OTHER TRAINING
AND DEVELOPMENT
A wide variety of training and development
activities were conducted for other parts of the
workforce. These include:
→ Soft skills training for approximately 5,500
people
(including people management,
public speaking, receiving and addressing
feedback, and team building);
→ 190 managers
received development
training from external experts;
→ 400 employees received online and face-
to-face English language training;
→ A large proportion of employees now have
Individual Development Plans and 315
employees now have these recorded in the
SAP SF1 system; and
→ The e-learning system SAP SF LMS2 has been
operating at MHP since 2022. It provides
a variety of facilities including induction
training for new employees, familiarisation
programmes for matters such as information
security, compliance and MHP product and
trademark training courses. In 2033 more
than 2,900 employees became users of
the SAP SF LMS system. More than 7,200
e-courses have been completed.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION OCCUPATIONAL
HEALTH & SAFETY
MANAGEMENT APPROACH
AND POLICY
MHP’s approach to health and safety is
built around the following principles. MHP
commits to:
→ Provide a unified approach
the
management of occupational health and
safety systems, industrial and transport
in accordance with best global
safety
practices
requirements of
the
international standards;
and
to
→ Comply with national legislative norms in
the field of occupational health and safety,
industrial and transport safety;
→ Develop among employees a sense of
responsibility and a high culture in the field
of occupational health and safety;
→ Systematically monitor and assess risks, as
well as effectively manage them;
→ Include
the goals and objectives of
occupational health and safety, industrial
and transport safety in OKRs, business
plans, strategies, and processes;
→ Communicate openly and transparently on
issues of occupational health and safety and
industrial transport safety;
→ Extend these commitments to suppliers and
business partners; and
→ The Board of Directors has overall
responsibility for health and safety at MHP
under the Sustainability and International
Affairs Committee.
following
An urgent management priority was to ensure
that employee welfare was maintained and
strengthened
the outbreak of
War in February 2022 and which is ongoing.
MHP’s management team has ensured that
international occupational safety standards are
maintained whilst uninterrupted work patterns
and ongoing production continued.
MHP has a detailed twenty-page occupational
health and safety policy which is available
for download (www.mhp.com.ua). The policy
is regularly reviewed and approved by the
Chairman, Chief Executive Officer and Chief
Financial Officer. The Board of Directors has
overall responsibility for occupational health
and safety at MHP.
MHP implements a risk-based approach to
occupational health and safety matters
in
accordance with the appropriate 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 MHP’s businesses;
→ Maintain management
that
prevent accidents, occupational
injuries
and diseases, and employee exposure to
hazardous substances;
systems
→ Motivate everyone to maintain safe working
conditions at all times; and
→ Regularly update MHP’s management
systems in line with industry best practice.
HEALTH AND SAFETY
MEASURES TO ADDRESS
THE WAR IN UKRAINE
During 2023, MHP instigated various measures to
protect employees from the health and safety risks
associated with the ongoing conflict. One of the
key measures was the establishment of an in-house
fire brigade and the development of enhanced
processes to deal with incidents involving fire
with a focus on evacuation, addressing the fire,
restoration and bringing employees back to work.
These health and safety measures are under
constant review and were extended in 2023 with
the provision of further safe shelters to limit air
attack risks and the development of additional
tailored evacuation processes which address
the circumstances at each MHP site in Ukraine.
As a result of these processes an ambulance was
purchased for the site at Ladyzhyn to support the
services provided by local medical authorities.
INCIDENT INFORMATION –
UKRAINE
Despite the difficulties presented by War, MHP’s
Ukraine sites exhibited a significant decrease in
health and safety incidents during 2023. This was
the result of a focus on continuous improvement
and best international practice at all Ukraine sites.
Unfortunately, two incidents occurred during
the year which led to employee fatalities. In
these circumstances, the procedure is that
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.
STRATEGIC
REPORT
Growth Pillar 2:
Our people and their wellbeing
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION INCIDENT INFORMATION
UKRAINE
EUROPEAN OPERATING SEGMENT
2023
2022
2021
2023
2022
2021
STRATEGIC
REPORT
Growth Pillar 2:
Our people and their wellbeing
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)
21
6
7
15
1.9
Fatal accident ratio
0.05
6,866
9,891
17,097
813
1,174
1,822
3
9
10
22
0.73
0.16
1
12
26
39
1.03
0.03
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
7,760
6,720
7,360
970
840
920
0
3
7
10
1,21
0
0
2
8
10
1.22
0
0
2
9
11
0.83
0
1 2 fatalities, of which one is MHP’s employee and another one is an employee of a contractor.
HEALTH AND SAFETY EXPENDITURE, TRAINING AND INSPECTION DATA
INVESTMENT IN EMPLOYEE HEALTH AND SAFETY
UKRAINE
EUROPEAN OPERATING SEGMENT
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)
2023
2022
2021
2023
2022
2021
102,243
97,955
118,352
0.4-3.0
0.02-4.7
0.05 – 8.2
Total expenditure
(EUR)
Expenditure on modern
certified PPE (EUR)
125,642
125,642
113,642
1,172,299
1,141,423
1,097,494
69,220
46,621
43,344
3,100
2,791
1,902
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73
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION
SAFETY TRAINING DATA
UKRAINE
EUROPEAN OPERATING SEGMENT
Number of employees
participating in training
at special training centres
Number of employees
participating in training
at MHP sites
2023
2022
2021
2023
2022
2021
3,446
2,610
2,715
Safety training hours
Number of employees
1,351
2,163
1,449
1,108
1,519
1,288
13,913
14,852
15,045
STRATEGIC
REPORT
Growth Pillar 2:
Our people and their wellbeing
INTERNAL AUDIT INSPECTIONS
MHP’s internal safety audit mechanisms were established in 2017. The
system is designed to support MHP’s other safety management activities
through 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.
State Employment Service inspections were not conducted during 2022
because of the War in Ukraine and were reinstated in 2023.
INTERNAL AUDIT AND INSPECTION DATA
UKRAINE
EUROPEAN OPERATING SEGMENT
2023
2022
2021
2023
2022
2021
Number of State
Employment Service
inspections
Employee prosecutions
following State
inspections
Number of MHP internal
audits conducted
2
0
0
0
465
45
16
28
42
Number of state safety
inspections
Employee citations
following state
inspections
19
48
15
44
Number of internal audits
conducted
180
162
7
43
161
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION OCCUPATIONAL HEALTH DATA – UKRAINE
→ Regular laboratory testing and instrumentation control of working
In recent years, no cases of occupational diseases were recorded at any
MHP sites in Ukraine. This has been achieved through close monitoring
of working conditions at each location. Features of these management
systems include:
conditions;
→ Workforce health monitoring on a regular basis;
→ Reduction of potentially harmful aspects of workplace features
(for example noise and dust);
→ Supply of personal protection equipment; and
→ A programme of technological improvement.
STRATEGIC
REPORT
Growth Pillar 2:
Our people and their wellbeing
WORKPLACE NOISE AND DUST DATA
UKRAINE
EUROPEAN OPERATING SEGMENT
2023
2022
2021
2023
2022
2021
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
428/144
328/107
318/45
3,182/1,004
4,292/1,561
4,330/514
82/9
96/61
110/33
1,243/193
818/452
1,194/297
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
42/98
44/107
43/45
302/1,502
310/1,561
335/514
12/49
19/61
19/33
84/380
84/452
84/297
KEY ACHIEVEMENTS IN 2023
PLANS FOR 2024
Despite significant challenges created by the continuing War, 2023 saw
the following key achievements:
→ Embedding MHP’s Values within its corporate culture.
→ Transforming the challenges presented by War into opportunities to
develop and strengthen MHP’s position within the markets in which
it operates.
→ Managing mental health amongst the workforce with the approach
being recognised as a leading business initiative within Ukraine.
→ MHP will continue a project to ensure that everyone fully
understands its core values throughout the business. The aim is to
complete this process in 2025.
→ MHP will continue to monitor the effects of the War on the workforce
in Ukraine and will undertake and design measures to successfully
address them.
→ MHP will continue to review and address the health and safety challenges
presented by the War and adapt its activities to address them.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION GROWTH PILLAR 3:
OUR ROLE IN SOCIETY AND OUR LICENCE TO OPERATE
STRATEGIC
REPORT
Growth Pillar 3:
Our role in society and
our licence to operate
OUR COMMITMENT
Since its inception, MHP has believed that a key aspect of its purpose is its role in the communities in which it operates.
Ensuring the provision of high-quality
food, goods and services to achieve
food security.
Encouraging economic development
through the facilitation of
entrepreneurship and generating local
employment.
Contributing to economic growth
and generating taxation revenue for
local and national governments.
Supporting healthcare provision and
infrastructure development.
STRATEGY
MANAGEMENT APPROACH
MHP’s role
in society has become more
complex as a result of the War in Ukraine.
The importance of MHP’s focus on ethical
behaviour,
activities
sustainable business
and the delivery of social justice has been
underlined and has been a key aspect of the
Group’s efforts to address economic instability,
supply chain disruption and rapidly changing
circumstances. MHP believes that a strong
community is achieved by unity within the
population. This is reflected in shared values,
effective collective efforts and collaboration
MHP’s community strategy
is specifically
designed to foster and support this.
MHP carefully plans
its social activities
through its well-resourced corporate social
responsibility team to ensure that its strategy is
executed effectively and resources efficiently
managed. During 2023, MHP divided its social
programme activity into planned and scheduled
programmes, and those that were quickly
organised to address urgent social needs that
were created by the War.
A wide variety of activities took place including:
→ Organising and arranging volunteering;
→ Distribution of free or reduced costs MHP
products and services;
→ Participation in and support of existing local
initiatives;
→ Promoting
inclusivity of demobilised
members of the Ukrainian armed forces; and
→ Fostering economic growth by supporting
start-ups and small businesses.
Much of this work was conducted in partnership
with local businesses, local government and with
other corporate donors, and through Charitable
Foundation (“MHP-Gromadi”). MHP-Gromadi’s
activities were recently audited by PwC. The
review concluded that the organisation has
high standards of financial management and
transparent disclosure.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION POLICY HIGHLIGHTS
In 2023, MHP-Gromadi revised
its policy
structure to, in particular, address the following
areas:
→ The scope of operations, method and focus
on community development;
→ Fundraising, fund allocation, and related
areas of reporting;
→ Governance, board
composition
and
roles, mission and vision, commitments to
integrity, and the maintenance of ethical
standards;
→ Compliance with the appropriate legal and
regulatory frameworks.
HIGHLIGHTS OF MHP’S
COMMUNITY ACTIVITIES
IN 2023
→ Since the beginning of the War
in
Ukraine, MHP has provided US$ 46.5
million in humanitarian aid support and
paid approximately US$ 19.2 million in
salaries to mobilised employees. MHP has
continued to pay its mobilised employees
in full and will continue to do so for the
duration of the War. US$ 937,671 has
also been provided to support injured
employees and the families of deceased
mobilised employees.
→ Demobilised
and
other
employees
veterans have been supported through the
development of employment opportunities
to aid the progress of reintegration into
society. These activities were conducted
in partnership with the Ukrainian Veterans
Foundation and the Ministry of Veterans
Affairs and included assistance with the
development of agricultural projects to
support family members and the family
members of defenders.
→ Seed distribution was continued
to
encourage people in local communities
to grow their own food and
increase
food security. Approximately
national
147,000 families in 13 regions and within
144 communities were supported in 2023
→ MHP continued
to encourage
through the receipt of seed packs which
contained instructions to support their use.
local
economic development to support local
communities and counter the negative
economic consequences that have been
created by War. The aim is to encourage
entrepreneurship through the design of a
grant scheme to support the best business
ideas. All participants were supported by an
expert MHP team. This work included the
delivery of training programmes, provision
of financial support, and legal assistance.
These activities took place in 11 regions of
Ukraine. A total of 1,471 grant applications
were submitted and 229 projects received
financial support. The total financial support
including co-financing supplied in 2023 was
US$ 1,208,000.
→ The destruction of the Kakhovka HPP in
June 2023 caused widespread flooding and
destruction along the lower Dnipro river in
Kherson Region and thousands of families
were displaced. MHP worked with local and
national government and NGOs to provide
humanitarian aid and food for people
affected by this catastrophic event.
→ “Cinema For Victory”, a national cinema tour
aimed at improving morale, motivation and
providing support for displaced persons,
continued in partnership with the Office of
the President of Ukraine and the state film
agency. During 2023, 518 screenings took
place in 20 regions of Ukraine. 74 of the
screenings were attended by well-known
participants in the films including actors,
producers and other filmmakers.
→ Support for a variety of medical programmes
in conjunction with the medical authorities
in Ukraine. These included medical check-
ups for children across the country to address
the effects of the War on their health. This
work was conducted in partnership with
the National Children’s Hospital In Kyiv. In
2023 approximately 3,000 children received
12,000
individual consultations. Older
people were supported by the provision
of a specially equipped mobile treatment
STRATEGIC
REPORT
Growth Pillar 3:
Our role in society and
our licence to operate
vehicle which travelled around the country
and focussed on isolated areas and villages.
250 small towns and villages were visited
and approximately 17,000 consultations
were conducted.
→ The risk presented by missile attacks
presents obvious challenges to Ukraine’s
schools and the conduct of uninterrupted
face-to-face
teaching. MHP has been
supporting the construction of underground
shelters that meet the requirements of the
Ministry of Education. During 2023, 19
shelters in four different regions were built
with the support of MHP-Gromadi.
AWARDS AND ACCREDITATIONS
and
accreditations
The related activities of MHP and MHP-
Gromadi were acknowledged by a number
of
in 2023.
awards
These include:
→ An award from the UK Global Compact in
Ukraine to MHP-Gromadi recognising the
delivery of medical treatment of children
around Ukraine in partnership with the
National Children’s Hospital;
→ MHP was awarded the top CSR ranking
in the CSR Index 2023 produced by CSR
Ukraine; and
→ MHP-Gromadi received five stars
(the
highest rating) in the National Charity
Compass of Ukraine rankings organised
by the Association of Philanthropists of
Ukraine.
PLANS FOR 2024
support
The Group will continue to work closely with
the Ukrainian authorities and other national
stakeholders
the
to proactively
Ukrainian population in meeting the rapidly
changing challenges presented by the ongoing
War and to encourage economic development
and social change. These activities will focus on
the maintenance of food security, the delivery
of humanitarian aid when required, economic
and social development, healthcare provision,
and infrastructure improvement.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION GROWTH PILLAR 4:
RESPONSIBLE FOOD PRODUCTION
STRATEGIC
REPORT
Growth Pillar 4:
Responsible food production
OUR COMMITMENT
MHP is a global industry leader in product
quality, safety and hygiene and maintains
consistently high animal welfare standards:
these are a top priority at all its production
sites.
MANAGEMENT APPROACH
A key feature of MHP’s approach is its
strategy to reduce the use of antibiotics in
the production process.
All employees involved in the production
process receive regular training and
education about the importance of animal
welfare.
A key feature of MHP’s approach to responsible food production is the role of the Quality & Development Department. The Department has a vertical
management structure, headed by the Director of Quality & Development, and is responsible for ensuring that MHP’s quality and safety standards are maintained
and developed in line with the expectations of all its key stakeholders.
The MHP Quality Service has four divisions and the scope of responsibilities for each is recorded below.
QUALITY MANAGEMENT AND
CERTIFICATION
→ Analysis and implementation of the
requirements of customers, regulators,
and international quality and safety
management standards;
→ Inspection and approval of raw material
suppliers;
→ Conducting regular supervisory site audits;
→ Monitoring production quality and safety
data; and
→ Developing processes and procedures
as part of an ongoing programme of
innovation and improvement.
TECHNICAL REGULATION
AUDITING ACTIVITIES
→ Auditing the stores of MHP’s Ukraine
partners to ensure compliance with
MHP’s quality and safety standards and
regulatory requirements; and
→ Regular inspection of distribution
centres managed by MHP’s business
partners to ensure compliance with
MHP’s quality and safety standards and
regulatory requirements.
→ Maintenance and development of
a digital information trail recording
product manufacture details;
→ Product labelling; and
→ Validation of product expiry dates.
COMPLAINTS AND COMPLIANCE
→ Investigation of, monitoring and
actioning of, customer and consumer
claims and complaints; and
→ Monitoring and addressing any data
recording quality and safety standards
breaches ensuring that causes are
addressed robustly, promptly, and
effectively.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION ANIMAL WELFARE POLICY
The Animal Welfare
Policy is available
for download from
the Group website
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
STRATEGIC
REPORT
Growth Pillar 4:
Responsible food production
POLICY HIGHLIGHTS
MHP’s approach to product quality and safety
is governed by its Product Quality and Safety
Policy. MHP’s approach to animal welfare is
governed by its Animal Welfare Policy. Both
policies are available for download from the
Group website (www.mhp.ua), are authorised by
the Board, regularly reviewed, and communicated
to all employees.
PRODUCT QUALITY AND SAFETY POLICY
MHP will conduct regular
training and education
activities with its employees
to ensure that they are
fully conversant with the
Company’s product quality
and safety standards
MHP will regularly review
and develop its product
quality and safety procedures
in line with leading industry
developments
MHP will adhere to all
applicable laws and
regulations, mutually
agreed guidelines with
customers and consumers,
and global best practice
MHP will conduct
continuous analysis of the
quality and safety of its
products
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
MHP prohibits all surgical
intervention
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
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
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 conduct a product
quality and safety strategy
review as part of each annual
planning process
MHP prohibits the use of any
growth promoters
MHP will use the best available
technology to monitor animals
and their rearing conditions
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION CASE STUDY: PILOT BLACK
SOLDIER FLY LABORATORY
The use of non-conventional feed ingredients
such as insects has the potential to increase
farming efficiency, reduce greenhouse gas
emissions, and produce more sustainable
feed. The prominence of non-conventional
feed to rear animals is expected to increase
because of global warming,
reduced
availability of water, and the reduction in
arable farmland. Black soldier fly larvae
(“BSFL”) are known for their capacity to
reduce the amount of production waste and
are a potential alternative feed ingredient in
different monogastric animal diets including
poultry. BSFL is thought to have the potential
to replace up to 15% of the conventional feed
ingredients in broiler diets.
In 2023, MHP established a pilot laboratory
in partnership with LIVIN Farms Agrifood,
an Austrian company. The project has been
applying waste from MHP’s production
activities to cultivate BSFL with specified
protein and fat characteristics.
The project has designed a poultry feed recipe
which combines BSFL with conventional
feed for use both internally within MHP and
for external sale. Further developments are
planned in 2024 and beyond.
ACCESS CONTROL
A key aspect of MHP’s approach to product
quality and safety is the control of access to its
sites and production facilities.
regularly
MHP’s rigorous systems are maintained to
international standards,
reviewed
and maintained and performance is monitored
and measured. A continuous programme of
digitisation and automation has been conducted
in recent years, Access is strictly controlled and
is only available to authorised persons.
Company vehicles are closely monitored using
satellite and digital technology and MHP’s sites
are monitored around the clock applying security
systems maintained to international standards.
Directorate-General for Health and Food Safety).
These activities are currently suspended and will
resume when the War has ended.
EMPLOYEE TRAINING ON
PRODUCT QUALITY AND
SAFETY MATTERS
Regular training and development for all involved
employees is a feature of the MHP production
process. These activities include ensuring that
everyone understands
requirements of
regulatory and international best practice standards
and MHP’s own standards and guidelines.
the
In 2023, the appropriate specialists in the Quality &
Development Department successfully completed
externally-provided training on pathogen monitoring
and control and international packaging standards.
MHP’s approach extends to its supply chain and the
standards that suppliers are expected to maintain.
PRODUCT LABELLING
INTERNAL AND EXTERNAL AUDIT
MHP’s production facilities regularly undergo internal
and external product quality and safety audits to
ensure full compliance with MHP’s audits and ensure
full compliance with MHP’s standards, customer
requirements, laws of Ukraine and other countries.
Internal inspections are conducted by the Quality
& Development Department. External audits are
conducted by third-party certification organisations.
Robust product labelling procedures ensure
the maintenance of product security, safety and
quality, and this aspect of MHP’s business is a
particularly important element of its relationships
with its customers and consumers.
MHP’s comprehensive labelling systems are the
responsibility of the Technical Regulation division,
and the Company complies with best practice and the
appropriate regulatory and customer requirements.
MHP’S LABORATORIES
BIOSECURITY
At least annually, each MHP production site
conducts its own internal inspection process. All
37 of MHP’s laboratories undertake around 6,000
analysis methods to study feed and raw materials to
achieve microbiological parameters and to ensure
strict compliance with MHP’s own standards,
industry best practice and the relevant national
and international regulatory requirements.
Prior to the outbreak of the War in Ukraine in
February 2022, MHP’s production facilities
in Ukraine were also regularly audited by
(the European Commission’s
DG SANTE
All livestock in Ukraine is vaccinated to prevent
the presence of pathogens in poultry.
All MHP’s production facilities in Ukraine have
rigorous and robust controls to prevent avian influenza
infection and exclude other harmful pathogens.
The maintenance of biosecurity at MHP’s
production sites
is supervised by qualified
MHP veterinary professionals at each location.
Periodic facility inspection is also conducted by
the State Service of Ukraine on Food Safety and
Consumer Protection.
STRATEGIC
REPORT
Growth Pillar 4:
Responsible food production
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION MANAGEMENT SYSTEM CERTIFICATIONS
A comprehensive list of management system certifications is recorded below for MHP in Ukraine.
STRATEGIC
REPORT
Growth Pillar 4:
Responsible food production
GMP & HACCP – STORAGE OF OIL
SEEDS AND GRAINS
GMP+B2
ISO 22000:2018 - PROCESSING OF
POULTRY MEAT AND BEEF
sites or
following
subsidiaries
The
in Ukraine are accredited
for good
management practices (“GMP”) which are
rules that set requirements for production
organisation and control. They are also
HACCP (Hazard 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
→ Kaliniv Elevator Zernoproduct PJSC
→ Yagotyn Elevator Agro-S Branch
→ Myronivska Poultry Farm PJSC
→ Vinnytsia Poultry Complex LLC
→ Katerynopil Elevator LLC
(production of oil)
The following subsidiaries have ISO
22000:2018 certification which is an
international food safety management
certification.
GLOBALG.A.P. INTEGRATED FARM
ASSURANCE
The Ukraine sites or subsidiaries
listed below are GlobalG.A.P. are
certified according to requirements of
GlobalG.A.P. standard. GlobalG.A.P.
rules set out requirements for an
integrated
production
agricultural
management system and encourage
the adoption of commercially viable
farm assurance schemes that promote
sustainable
the
agriculture
minimisation of agro-chemical inputs.
and
→ Myronivska Poultry Farm
Processing Complex PJSC
→ Vinnytsia Poultry Complex LLC
GLOBALG.A.P. – COMPOUND FEED
MANUFACTURING
→ PrJSC Myronivsky Plant of
Manufacturing Feeds and Groats
→ Katerynopil Elevator LLC
→ Vinnytsia Poultry Complex LLC
(fodder complex)
→ Oril-Leader PJSC
→ Lubnymyaso LLC
BRCGS FOOD SAFETY – OIL
PRODUCTION AND MEAT
PROCESSING
This is an international 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
(slaughterhouse)
→ Lehko (separate subdivision
of PrJSC Myronivsky Plant of
Manufacturing Feeds and Groats)
→ MHP Foodservice LLC (legal name
of the MHP Culinary Centre)
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION MANAGEMENT SYSTEM CERTIFICATIONS
ANIMAL REARING
STRATEGIC
REPORT
Growth Pillar 4:
Responsible food production
KOSHER CERTIFICATION
→ Myronivska PJSC (production of cereals and feed)
→ Katerynopil Elevator LLC
→ Vinnytsia Poultry Complex LLC (fodder complex)
HALAL CERTIFICATION
This is a voluntary certification for the production of products
in line with Islamic customs. The following meat-processing
sites have this certification.
→ Myronivska PJSC Poultry Farm (broiler chicken
processing complex)
→ Vinnytsia Poultry Complex LLC (processing complex)
→ Lubnymyaso LLC
→ Lehko (separate subdivision of Myronivska PJSC)
→ PrJSC Myronivsky Plant of Manufacturing Feeds and
Groats
→ Katerynopil Elevator LLC
→ Vinnytsia Poultry Complex LLC (fodder complex)
Approximately 70% 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 30% are ROSS
chickens, the world’s most popular broiler. Their characteristics also include
a welfare-friendly growth rate and feed efficiency. The European Operating
Segment rears broilers that comprise approximately 96% ROSS and 4%
COBB. Turkeys are also reared in the European Operating Segment (92.8%
BUT Big 6 breed and Converter breed).
POULTRY-REARING DATA
UKRAINE
2023
2022
2021
TOTAL PLACED (HEADS)
457,092,113
439,839,157
460,068,517
LIVEABILITY (%)
95.9
96.3
97.2
TOTAL SLAUGHTERED
(HEADS)
SLAUGHTERED WEIGHT
(TONNES)
438,443,556
423,680,615
447,125,097
1,042,944
999,591
1,034,786
The livability decrease to 95.9% is driven by significant adverse impact on
the flock at the growing facilities due to the strong winds (roofs were blown
up, birds were lost etc).
USE OF ANTIBIOTICS
MHP has been systematically reducing its use of antibiotics since 2019.
The Group seeks to minimise the use of antibiotics through greater use of
organic acids and probiotics in the production process.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION KEY ACHIEVEMENTS IN 2023
PLANS FOR 2024
MHP Foodservice LLC achieved the BRCGS
international food standard certification
Vinnytsia Poultry Complex is expected to
be certified as being in accordance with the
GMP+ standard
Further work will be undertaken to educate
MHP’s Quality & Development Department
specialists about pathogen prevention
PrJSC Myronivsky Plant of Manufacturing
Feeds and Groats, Katerynopil Elevator
LLC, and Vinnytsia Poultry Complex
LLC (fodder complex) were certified as
achieving the GlobalG.A.P. – compound feed
manufacturing - standard
Myronivska PJSC Poultry Farm Processing
Complex Branch and Vinnytsia Poultry
Complex were certified as achieving the
GlobalG.A.P. – poultry breeding – standard
The design of an optimal poultry feed recipe
including BSFL in partnership with LIVIN
Farms Agrifood
STRATEGIC
REPORT
Growth Pillar 4:
Responsible food production
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION GROWTH PILLAR 5:
BUSINESS CONDUCT
OUR COMMITMENT
MHP strives to conduct its business responsibly with all its stakeholders.
MANAGEMENT APPROACH
MHP consistently conducts its operations
responsibly, adhering to the legal requirements
and regulations of the countries in which it
conducts business. In practice, this means
that all employees are educated to be aware
of and are mindful of these requirements as
they conduct their responsibilities, and of
the impact that non-compliance will have on
MHP’s reputation and ability to conduct its
business. Any breach of applicable laws, codes
of conduct, or internal regulations is strictly
prohibited, and a zero-tolerance approach
is taken towards instances of bribery and
corruption.
MHP’s Board of Directors closely monitors
the Company’s business conduct progress
and performance. The MHP Code of Ethics
is approved and updated by the Compliance
Officer in cooperation with Top Management
and the Board. All staff members must promptly
report any breaches of the Company’s Code of
Ethics and compliance policies.
MHP’s central compliance team oversees the
global compliance management system and
collaborates with all MHP’s businesses to identify
potential compliance risks and ensure systematic
and proactive risk detection and assessment.
This information is applied to formulate tailored
measures. Business partners are also assessed
to ensure that potential compliance risks are
identified and addressed.
MHP’S CODE OF ETHICS
The Code of Ethics is available for download from
MHP’s website. It is built around three strategic
priorities: protection; security; and trust.
PROTECTION
MHP believes that every member of its workforce
has the right to be supported if protection and
justice are required. MHP provides the Ethics
Helpline for this purpose. The facility is always
available and can be accessed by telephone, by
email or through the MHP website.
Employee remuneration and promotion takes
into account compliance performance and
severe contraventions, particularly amongst
senior management, are liable to disciplinary
action and dismissal.
Submitted
reports are considered by an
independent supervisor and a formal response
is always provided. Major violations of MHP’s
compliance requirements are always reported
to the Audit & Risk Committee.
SECURITY
MHP commits to the creation and maintenance
of a secure environment for every workforce
member to enable the conduct of transparent
and responsible business at MHP. This priority
has become even more important during the
War in Ukraine and has required significant
focus and innovation to address, for example,
the increased cyber-security threats which it
has brought to the business.
TRUST
family generations and
Many multiple
relatives work at MHP, and the business
plays an important role in society in the areas
where it is based. It is clearly important that
MHP is viewed as a responsible business
partner and a good neighbour by all its
stakeholders. An important element of this
approach is MHP’s management of potential
conflicts of interest.
MHP has a detailed set of policies to address
responsible business matters, including the
Code of Ethics. These policies are regularly
reviewed, receive authorisation
from the
Board, and are communicated to all employees.
They are available for download from MHP’s
website.
STRATEGIC
REPORT
Growth Pillar 5:
Business conduct
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION The Group has a commitment to promote
a zero-tolerance culture towards bribery,
corruption, and unethical business behaviour.
matters such as environment, climate change,
workforce, communities, health and safety,
business conduct and human rights.
STRATEGIC
REPORT
Growth Pillar 5:
Business conduct
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.
receive
Workforce members will
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
The Company does not make political donations.
ETHICS HELPLINE
THE HELPLINE CAN BE ACCESSED BY DIALING 7-4-77 IN
UKRAINE, BY EMAIL, OR VIA THE HELPLINE SECTION ON
MHP’S WEBSITE.
All employees are encouraged to use the facility if:
ETHICS
HELPLINE
Helpline section
on MHP’s website
THEY NEED 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
THEY HAVE SUGGESTIONS OR
RECOMMENDATIONS ABOUT HOW
MHP CAN IMPROVE ITS BUSINESS
CONDUCT
The Helpline is managed by an independent
service provider and staffed by specialists
in their preferred
who address callers
language. Reports can be submitted by
anyone including members of the public.
Alternatively, concerns may be submitted
using other methods such as
through
contacting local compliance teams, Internal
Audit, Human Resources, through
local
management, or by using a designated internal
mailbox at MHP’s enterprises and HQ.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION COMPLIANCE TRAINING AND
COMMUNICATIONS ACTIVITIES
in upholding
MHP assists all employees
integrity and preventing potential violations
by implementing targeted training measures
and communication campaigns based on
identified needs. The Code of Ethics forms the
basis of all compliance training activities and
communication. All new MHP employees are
required to participate in at least one mandatory
compliance training programme.
BUSINESS PARTNER
CODE OF CONDUCT
This is available for download from the MHP
website (www.mhp.ua) and is an important
element of the responsible business approach.
It was revised and updated in 2021.
It outlines MHP’s expectations in
relation to business partner conduct
and explains what business partners
can expect from MHP.
Key principles outlined
in the
Business Partner Code of Conduct
include:
→ MHP’s willingness to listen to
→ MHP’s
its partners, to learn, and to progress and
improve together;
support
local Ukrainian
manufacturers,
the
in
agricultural sector, and support for their
further development;
particularly
for
→ 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 requirement for business partners to
be open to ongoing innovation and the use
of state-of-the art new technologies;
→ MHP’s requirement for business 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
→ The importance of continuous improvement
in relation to the Sustainable Development
Goals, minimising environmental impact,
adopting a proactive social stance, and
implementing
standards
established within the framework of the
European Green Deal and other important
global and regional agreements.
international
ANTI-CORRUPTION AND
CONFLICT OF INTEREST
MHP routinely assesses all its operations for
potential corruption or conflict of interest
risks. Managers and specialists are required
to disclose any conflicts of interest, while
employees receive information about situations
where conflicts of interest may
arise. During the hiring process, the
Company conducts a corruption
risk screening, with a specific
emphasis on candidates with
prior experience in governmental
institutions.
To identify corruption incidents
involving
counterparties, MHP
conducts a comprehensive Know
BUSINESS
PARTNER
CODE OF
CONDUCT
Available for
download from
the MHP website
into account
Your Customer (“KYC”) procedure
before any interactions. In 2023,
taking
the War
in Ukraine, we enhanced our
counterparty screening procedure
to generate notifications and
suspend processes when current
or potential issues are identified.
This process facilitates further risk
assessment and evaluation.
CONFLICT OF
INTEREST
MANAGEMENT
POLICY
Available for
download from
the MHP website
also
anonymous
applies dedicated channels,
MHP
including
the
ones,
identification of corruption risks and potential
misconduct. These channels are open to MHP
employees, suppliers, and third parties, with
all submissions thoroughly reviewed and
for
retaliatory
addressed with the relevant MHP department
and with
action prohibited.
Mandatory education, awareness-raising, and
continuous improvement of an ethically-sound
corporate culture are fundamental elements of
our strategy to prevent unethical behaviour
among employees.
Our Executive Management team ensures that
it stays regularly informed about changes in
anti-corruption legislation, the introduction of
new sanctions, and key compliance measures
into the Company's operational
integrated
activities. Our anti-corruption practices and
efforts to enhance a culture of transparency and
integrity are yielding strong positive results.
CONFLICT OF INTEREST
MANAGEMENT
MHP’s Compliance Office works closely with
Management to ensure that the requirements
of MHP’s Conflict of Interest Management
Policy (“the Policy”) are maintained. The Policy
is available for download from the MHP website
(www.mhp.ua).
The Policy applies to all employees and
requires each member of staff to make an annual
declaration. The approach is not to prohibit
potential conflicts of interest but
to highlight and manage
them
effectively.
requires
declaration
encompasses
The
interests and those of
personal
family members and close associates.
It
submission of
information about relationships with
other companies and organisations,
the role of the employee in making
business decisions in relation to third-party
goods and services, and any agricultural land
interests held or maintained.
the
STRATEGIC
REPORT
Growth Pillar 5:
Business conduct
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION TAXATION
In common with many multi-national
enterprises, MHP’s activities are subject to
the jurisdiction of several different taxation
regimes. These matters are addressed by the
Finance and Tax Departments supported by
experienced professional advisors.
Towards the end of 2023, MHP began setting
up a centralised tax function and tax control
framework to address Group tax affairs.
MHP ALWAYS ADHERES TO THE RELEVANT TAX
REGULATIONS OF THE COUNTRIES WHERE IT
OPERATES AND COMPLIES WITH THE NECESSARY
REQUIREMENTS RELATING TO PAYMENT,
DOCUMENTATION, DISCLOSURE, AND AUDITING.
MHP’S TAX APPROACH IS BUILT AROUND THE FOLLOWING KEY
PRINCIPLES
ZERO TOLERANCE FOR RULE
VIOLATIONS OR TAX FRAUD
ALIGNMENT OF TAX PAYMENTS
WITH VALUE CREATION IN EACH
RESPECTIVE COUNTRY IN WHICH IT
OPERATES
COLLABORATIVE ENGAGEMENT
WITH TAX AUTHORITIES
EMPHASIS ON TRANSPARENCY,
ADHERING TO VERIFIABLE
COMPLIANCE AND REPORTING
STANDARDS
CONSISTENCY OF TAX
CONSIDERATIONS WITH
BUSINESS ACTIVITIES, PROCESSES,
AND REQUIREMENTS
MHP adheres to the principle of paying owed
taxes in every country in which it operates based
on the statutory requirements established by
respective governments. The payment of taxes
in an appropriate amount is a fundamental
aspect of our responsible business approach.
MHP's tax payments contribute significantly to
funding social and economic activities where it
operates. MHP always adheres to the relevant
tax regulations of the countries where it operates
and complies with the necessary requirements
relating to payment, documentation, disclosure,
and auditing.
MHP is a significant contributor to the economy
of Ukraine. In 2023, MHP made UAH 6.03 bn
(2022: UAH 4.6 bn) of tax payments. UAH 1.544
bn (2022: 1.026 bn) was transferred to the state
budget and UAH 2.531 bn (2022: 2.038 bn) to
local budgets. The amount of the single social
contribution (“SSC”) for the mandatory state
social insurance of the Company’s employees
was UAH 1.952 bn (2022: 1.534 bn).
STRATEGIC
REPORT
Growth Pillar 5:
Business conduct
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION SUPPLY CHAIN MANAGEMENT
MHP’s business partners are essential to the delivery of quality and value to its customers.
MHP focusses on local business partnerships to provide an equitable share of economic benefits.
STRATEGIC
REPORT
Growth Pillar 5:
Business conduct
The table below show MHP’s supplier types.
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
Large %
SUPPLIERS
Medium %
Small %
Domestic
(Ukraine)
Non-Domestic
(imported)
Domestic
(Ukraine)
Non-Domestic
(imported)
Domestic
(Ukraine)
Non-Domestic
(imported)
11
0
0
1
0
0
17
0
0
1
8
3
2
3
18
11
0
11
13
14
10
14
14
8
1
0
7
2
0
3
5
5
0
100
7
14
4
1
0
0
9
0
0
4
4
2
2
12
44
19
0
14
33
62
9
43
25
8
4
87
12
6
7
3
8
0
1
0
23
7
3
2
0
0
8
3
13
15
20
56
16
19
29
69
0
34
33
17
77
43
61
50
92
0
61
60
32
74
53
4
0
0
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION SUPPLY CHAIN MANAGEMENT (continued)
STRATEGIC
REPORT
Growth Pillar 5:
Business conduct
EUROPEAN OPERATING SEGMENT (“PP”)
SUPPLIER TYPE
Fertilisers
Seeds
Plant protection products
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
22
29
29
27
50
0
19
2
9
16
20
3
1
2
0
0
11
0
0
20
0
0
0
0
0
0
0
0
16
13
15
0
3
3
75
100
11
0
50
40
23
29
42
20
20
0
28
8
16
13
30
13
6
3
0
0
11
0
50
20
0
0
0
0
0
6
0
1
13
10
5
0
1
2
12
0
67
100
0
0
33
42
29
53
30
88
53
86
32
34
30
81
88
89
0
0
0
0
0
20
22
0
0
0
0
6
0
3
14
14
0
3
1
1
13
0
0
0
0
0
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION 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.
STRATEGIC
REPORT
Growth Pillar 5:
Business conduct
MARKETING APPROACH
MHP strives for responsible marketing of all
products and brands in both domestic and
international markets.
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 moderate
food consumption as part of a healthy, active, and
balanced lifestyle, focussing on family values.
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 in its marketing communications.
MHP’S MARKETING STRATEGY REFLECTS THE FOLLOWING PRINCIPLES:
PRINCIPLE 1
PRINCIPLE 3
MHP will not advertise in any media that is
specifically provided for children aged under
12 years old, including shows, print media,
website, social networks, movies and SMS/
email marketing.
MHP’s brands will be presented in a way
that encourages healthy eating habits
and a balanced, healthy lifestyle.
PRINCIPLE 5
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.
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 and will not be used for advertising
purpose.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION IT INFRASTRUCTURE
AND CYBER-SECURITY
MHP has, over several years, prioritised the
digitisation of
its business activities. This
process continued across the business in 2023
and will continue in 2024 and beyond.
CYBER-SECURITY
The conditions created by the War in Ukraine
clearly made robust cyber-security an essential
aspect of MHP’s business activities and this has
been addressed in a variety of evolving ways. In
2023, MHP deployed Fortinet firewalls on all its
large sites to increase network security and ensure
reliability and availability. Other steps included
moving computer resources to locations that are
closer to the source of information generation
such as MHP’s manufacturing facilities. This
facilitated more effective data
leverage,
operational efficiency, and enabled the business
to respond quickly to sudden and unexpected
changes in circumstances.
IT INFRASTRUCTURE DEVELOPMENTS
Set out below are the highlights of MHP’s
infrastructure developments.
→ A data warehouse was constructed
in
Ukraine based on Microsoft best practice
cloud architecture.
infrastructure was
→ The rollout of SAP
continued around
It was
implemented in Croatia and in a new value-
added production facility in Slovenia (see
also the Strategy and Purpose section
on page 18). In Serbia, the SAP rollout
successfully completed the “prepare” and
“explore” phases.
the Group.
→ A pilot project for the introduction of digital
personal time and calendar planning was
introduced at Myronivka slaughterhouse
complex. This includes web applications
with a mobile application for smartphones
and tablets and it was synchronised with the
MHP ERP system. The system also enables
automated staff communications by sending
alerts as text messages.
→ Stage 1 of a digital project for managing
transport logistics and service stations was
launched and implemented at four logistics
distribution centres.
→ E-invoicing was introduced in the Kingdom
of Saudi Arabia, and a Cloud for Customer
(“C4C”) solution was rolled out.
LEGAL AND RELATED MATTERS
In 2023, the Group did not receive any
complaints from 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 2023.
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
regarding anti-competitive
activity. For the last four years, MHP has been
actively maintaining communications with
the AMCU, promptly providing all necessary
information in accordance with official requests
or the Committee’s requirements.
laws
In addition, in 2021, the AMCU opened an
in relation to possible signs
investigation
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. MHP believes that this
asset purchase does not require a concentration
permit.
documentary
substantiation were provided to the AMCU in
official responses to requests. The Company
Information
and
believes that after a detailed study of all the
materials, this investigation will be closed.
Investigations into both cases are ongoing.
PLANS FOR 2024
The following IT infrastructure and cyber-
security activities are planned for 2024.
→ In Ukraine, there are plans to transform
MHP’s systems from traditional wide-area-
network (“WAN”) usage to software-defined
WAN. This will provide all sites with better
and more reliable digital connectivity.
→ A new data governance strategy will be
to guarantee secure data
introduced
throughout the Group.
→ The SAP rollout will continue in Serbia.
MHP plans to implement an ambitious action
plan to bring the Group’s compliance system
in accordance with best practice international
standards, including a global update of the
Group's compliance documents.
In 2024, MHP will take proactive steps towards
raising awareness on prevention of gender-
based and domestic violence. We will revise
our existing worker’s grievance mechanism
with specific considerations related to gender-
based harassment or violence grievances, in
accordance with IFC’s Performance Standards.
By the end of 2024, the establishment of
a Compliance Committee is planned. This
committee will ensure ongoing alignment of the
Group's operational activities with compliance
requirements, as well as the timely review and
amendment of all regulatory documents related
to compliance, including those in accordance
with changes in existing legislation.
The rollout of MHP’s electronic document
circulation project will continue to progress with
the aim of creating a paperless environment.
STRATEGIC
REPORT
Growth Pillar 5:
Business conduct
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION GROWTH PILLAR 6:
THE PLANET
STRATEGIC
REPORT
Growth Pillar 6:
The planet
OUR COMMITMENT
MHP recognises its role in ensuring that its business activities meet the expectations of its stakeholders in addressing the global
climate change challenge and responsible management of environmental matters.
now employed by the parent company, and the
headcount was expanded to ensure MHP’s policy
commitments and stakeholder expectations are
met and that MHP’s environmental management
approach continues to meet best practice
standards.
MHP’S BOARD IS
RESPONSIBLE FOR
ENSURING THAT
THE REQUIREMENTS
OF THE GROUP’S
ENVIRONMENTAL POLICY
ARE ADHERED TO
MANAGEMENT APPROACH
MHP’s Board of Directors is responsible for
ensuring compliance with the requirements of
the Group’s Environmental Policy and that the
Policy is reviewed regularly. It is supported in the
management of its approach to environmental
and climate change matters by the Board’s
Sustainability and International Affairs (“S&IA”)
Committee.
The S&IA Committee has supported the
formation of a climate
risk assessment
team consisting of Senior Management to
encourage buy-in and contribute to the Group’s
sustainability goals and targets. The importance
of departmental ownership will be pivotal
to the success of this initiative. To expedite
this exercise, internal experts will include
representatives from environment, climate,
production, finance, and agronomy.
review, MHP
function
In 2023, following the conduct of a rigorous
its
analytical
environmental
the
Environmental Protection Department. The
existing environmental team members who
were previously employed at subsidiaries are
centralised
formed
and
IN 2023 MHP CENTRALISED ITS
ENVIRONMENTAL FUNCTION AND
FORMED THE ENVIRONMENTAL
PROTECTION DEPARTMENT
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION POLICY HIGHLIGHTS
MHP’s Environmental Policy was authorised by
the Chairman, Chief 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:
STRATEGIC
REPORT
Growth Pillar 6:
The planet
The conduct of a plan to ensure that
MHP’s activities are carbon neutral by
2030.
MHP will deliver environmental programmes
which will aim to consistently reduce waste
generation.
MHP will comply with the applicable
environmental legislation and global industry
environmental best practice at all times.
MHP will design and maintain
programmes which will preserve and
conserve biodiversity in the areas in
which it operates.
MHP will conduct regular dialogue with
its stakeholders about its environmental
approach, management and performance,
and climate change considerations will be
integrated into all major business decisions.
MHP will deliver a plan to reduce the use of
energy from non-renewable sources through
increasing its use of renewable energy.
MHP will deliver a plan that reduces
freshwater consumption and discharges
to water and ensure that any discharges
are free of harmful polluting substances.
MHP will maintain comprehensive
environmental performance data records
that address matters such as waste, water use
and discharges, emissions, energy use and
environmental incidents.
MHP will provide regular training and
education to its employees about MHP’s
expectations and requirements relating to
environmental and climate change matters.
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93
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION DESPITE THE NUMEROUS ENVIRONMENTAL AND
ENERGY SECURITY CHALLENGES BROUGHT ABOUT
BY THE WAR IN UKRAINE, MHP HAS REMAINED
STEADFAST IN ITS COMMITMENT TO ITS GREEN
TRANSFORMATION AND CLIMATE CHANGE
PROGRAMMES
STRATEGIC
REPORT
Growth Pillar 6:
The planet
ADDRESSING THE
ENVIRONMENTAL AND ENERGY
SECURITY CHALLENGES
PRESENTED BY THE WAR IN
UKRAINE
Despite the numerous environmental and energy
security challenges brought about by the War
in Ukraine, MHP has remained steadfast in its
commitment to its green transformation and
climate change programmes. MHP has continued
to
integrate new technologies, pursue site
certification, and ensure that its facilities remain
fully operational with minimal disruption.
One of the most significant ongoing challenges
for MHP is the energy shortages created by the
War. This was anticipated by MHP’s management
team and consequently a wide range of measures
were implemented from the outset of the War
to address these issues and, as a result, business
operations have been maintained with minimal
interruptions. A variety of activities and projects
were undertaken to bolster energy security.
THESE ACTIONS INCLUDE:
Sourcing different types of diesel
generators which are used for electricity
generation at all MHP’s sites.
Ensuring all MHP’s sites have access to
sufficient quantities of diesel particularly
during the winter months.
MHP has continued to operate and develop
its biogas facilities to produce electricity,
steam, and heating at the Ukraine sites where
they are located.
Applying energy storage technology at MHP’s smaller agricultural sites, retail outlets, data
centre, and at the Culinary Centre in Kyiv. Going forward, the aim is to evolve this approach for
use at larger sites and MHP is currently in discussions with business partners in Europe, North
America, and South Korea to achieve this. This approach, when progressed, will reduce the use of
diesel across MHP’s enterprises.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION
CARBON TRUST, GLOBALG.A.P.
AND ISCC ACCREDITATIONS
The Carbon Trust Standard (“the Standard”)
is a world-leading, independent international
certification which recognises best practice and
achievements in carbon reduction.
Companies which achieve the Standard must be
able to provide an accurate assessment of their
carbon footprint, supported by robust data. They
must be able to evidence that they have strong
carbon management processes and demonstrate
continuous improvement.
In September 2023, MHP obtained a certificate
of assurance from Carbon Trust which remains
valid for two years. It evidences that MHP’s
greenhouse gas emissions data in relation to its
poultry production and marketing activities in
Ukraine is in line with the following requirements:
INTERNATIONAL
SUSTAINABILITY AND CARBON
CERTIFICATION (“ISCC”)
The following certifications were
granted in 2023.
MHP PRJSC (ISSUED 6 JUNE 2023)
→ Corn
→ Rapeseed
→ Sunflower
→ Sunflower oil
→ Sunflower husks
→ Soybean
→ Soybean oil
→ Soybean husks
KATERYNOPIL ELEVATOR LLC
(ISSUED X JUNE 2023)
→ Corn
→ Rapeseed
→ Sunflower
→ Sunflower oil
→ Sunflower husks
→ Soybean
→ Soybean oil
VINNYTSIA POULTRY COMPLEX
LLC (ISSUED 15 MAY 2023)
→ Sunflower
→ Sunflower oil
→ Sunflower husks
→ PAS 2050:2011 Specification
the
assessment of the life-cycle greenhouse gas
emissions and services.
for
→ ISO14067:2018 Greenhouse gases, carbon
requirements
products,
for quantification and
of
footprint
and guidelines
communication.
→ Product carbon footprints: Requirements
for Certification v2.0.
→ Product consistency criteria.
In 2023, GlobalG.A.P. certifications were
obtained for three compound feed plants and
two poultry farms following the successful
completion of audit procedures during the
year. See Growth Pillar 4: Responsible Food
Production on page 78 for more information.
MHP FOOD TRADING LLC (ISSUED
5 JUNE 2023)
VINNYTSIA POULTRY COMPLEX
LLC (ISSUED 17 JULY 2023)
→ Corn
→ Rapeseed
→ Sunflower
→ Sunflower oil
→ Sunflower husks
→ Soybean
→ Soybean oil
→ Biogas (input material – manure)
STRATEGIC
REPORT
Growth Pillar 6:
The planet
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION PROGRESS TOWARDS GREATER
USE OF RENEWABLE ENERGY
In 2023, MHP continued to make significant
progress in its journey towards greater use
of renewable energy and reducing the use of
electricity from the grid.
Until recently, MHP’s efforts have been
focussed on biogas production. In 2022, MHP
began to investigate the use of solar energy
for the first time at Odesa. By the end of 2023,
MHP had set up nine different solar powered
facilities in different parts of Ukraine. Several
are hybrid projects
involving both solar
generation and battery storage (battery energy
storage system, “BESS”). The first hybrid
project ensured that MHP’s data centre has
a constant and stable energy supply and the
largest (2.6 MW) was installed at Ladyzhyn
in July 2023. Towards the end of the year,
Ukraine’s first industrial BESS (20 MW) was
installed at the Culinary Centre in Kyiv.
MHP has also been examining wind as a
potential source of energy particularly during
the winter months in Ukraine. At Ladyzhyn, a
wind-monitoring tower was installed at the end
of 2023 to investigate the feasibility of a wind
power scheme and will remain in place for twelve
months. If a positive outcome is achieved, MHP
will proceed with a 60 MW project consisting of
ten wind turbines.
Continued developments and progress at
MHP Eco Energy Company has enabled the
Group to strike up and foster business partner
relationships and to invest in innovative new
energy technologies with the aim of both
further boosting energy security and reducing
greenhouse gas emissions. These activities
include the creation of a laboratory in Kyiv two
years ago to analyse the use of different materials
to produce biogas and biomethane. This project
is part of the European Commission’s Horizon
Europe programme, and MHP’s business
partners include the German Centre for Biomass
Research, and Ellmann Engineering, a German
company. The focus of these activities is the
integration of biogas and green hydrogen to
increase the yield of biomethane produced. The
current plan is to conduct a pilot project before
the end of 2025.
STRATEGIC
REPORT
Growth Pillar 6:
The planet
Use of compressed / liquefied gas, propane, butane, methane, and mixtures
4,069
4,181
4,401
GREENHOUSE GAS EMISSIONS
SCOPE 1 – DIRECT GREENHOUSE GAS EMISSIONS
SOURCES AND METHOD OF CALCULATION
UKRAINE
METRIC TONNES OF CO2-EQUIVALENT
the
IPCC
MHP calculates its greenhouse gas emissions
applying the greenhouse gas protocol outlined
(Fifth Assessment Report),
by
the IFC Carbon Emissions Estimator Tool
(further information at www.IFC.org), and the
International Energy Agency (CO2 Emissions
from Fuel Combustion – 2013 Edition).
Combustion of natural gas
Diesel fuel use
Gasoline fuel use
The financial control method was applied in
compiling this data.
Total
Emissions from biomass combustion (shown
separately from the Scope 1 emissions, as in
previous years) are shown in the table.
The increase in Scope 1 emissions of 2.52% was
due to higher consumption of energy to facilitate
corn drying in the first quarter of 2023, a change in
the use of heating technology in the preparation
of poultry houses for planting and disinfection,
and delays at border crossings leading to greater
use of diesel by MHP’s truck fleet.
EUROPEAN OPERATING SEGMENT
METRIC TONNES OF CO2-EQUIVALENT
Combustion of natural gas
Diesel fuel use
Gasoline fuel use
2023
2022
2021
201,182
195,883
212,491
149,315
145,529
148,446
7,757
7,820
8,335
362,323
353,413
373,673
2023
2022
2021
20,246
17,839
16,281
5,963
6,752
6,556
372
303
288
Use of compressed / liquefied gas, propane, butane, methane, and mixtures
4,160
1,878
2,390
Coal combustion
Fuel oil combustion
Total
1,021
2,726
2,242
950
1,754
3,600
32,712
31,252
31,357
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION GREENHOUSE GAS EMISSIONS
BIOGAS PRODUCTION PERFORMANCE
SCOPE 1 - DIRECT GREENHOUSE GAS EMISSIONS FROM
COMBUSTION OF BIOGAS
UKRAINE
KWH
2023
2022
2021
UKRAINE
METRIC TONNES OF
CO2-EQUIVALENT
2023
2022
2021
Biogas produced
311,971,097
294,944,656
314,031,146
Electricity produced
115,352,217
120,927,309
128,752,770
Combustion of biomass
105,079
111,954
116,000
Heat produced
123,862,185
123,829,564
131,893,081
Combustion of sunflower husk and
pellets
60,246
53,099
54,199
Total
165,325
165,053
170,199
EUROPEAN OPERATING
SEGMENT KWH
2023
2022
2021
Biogas produced
25,476,574
22,332,478
22,992,417
Use of biogas remained stable in 2023 and resulted in an emissions
growth of 0.2%. The prior year figures have been revised to reflect
the greater scope of data capture applied in the 2023 figures.
Electricity produced
7,884,915
7,499,836
7,493,893
Heat produced
5,215,699
5,074,247
5,184,600
STRATEGIC
REPORT
Growth Pillar 6:
The planet
SCOPE 2 – INDIRECT GREENHOUSE GAS EMISSIONS – FROM
USE OF ELECTRICITY
The location-based method was chosen to calculate Scope 2
emissions. Ukraine does not provide the electricity consumer with a
choice of differentiated electricity by origin.
UKRAINE
METRIC TONNES OF
CO2-EQUIVALENT
2023
2022
2021
Scope 2 emissions
227,656
220,985
237,776
Total
227,656
220,985
237,776
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION ENERGY MANAGEMENT
ENERGY CONSUMPTION
In 2023, MHP continued its strategy of switching from non-renewable to
renewable energy, in particular through the construction of its own biogas
production facilities and investment in and roll out of solar power installations.
MHP intends to further increase its use of renewable energy through increased
use of biogas, solar energy, wind, and increased use of energy storage technology.
The adjustments to the biogas prior year figures have been conducted to reflect
the better scope of data capture. MHP is continuing its efforts to improve the
efficiency of electricity generation from biogas.
UKRAINE
TJ
Natural gas
Diesel
Petroleum
Compressed / liquefied gas
2023
2022
2021
3,599
3,504
3,802
2,030
1,978
2,018
111
69
112
71
119
75
SALE OF ENERGY
UKRAINE
TJ
Sales
2023
2022
2021
382
398
429
MHP’s energy sales have been negatively affected as a result of the War in
Ukraine.
CONVERSION RATES APPLIED:
Electricity
1,937
1,768
1,902
Total from non-renewable sources
7,746
7,433
7,916
Biogas
1,394
1,483
1,533
Sunflower husk combination
687
676
626
Total from renewable sources
2.081
2.159
2,159
Total energy consumption
9,827
9,592
10,075
% from renewable sources
21
23
21
4.184 joules = 1kWh = 3.6 megajoules (“MJ”) 1 tonne (steam) = 2.256 MJ
1 tonne (liquefied gas) = 45.980 MJ
EUROPEAN OPERATING SEGMENT
TJ
2023
2022
2021
ENERGY MANAGEMENT CERTIFICATION
Four sites achieved ISO 50001 certification in 2022: the Starynska Nova
breeding complex, the Vinnytsia fodder complex, the Myronivka fodder
complex, and the Katerynopil fodder complex. A further three sites achieved
this certification in 2023: the Myronivsky meat-processing plant, the Oril
Leader broiler complex, and the Peremoga Nova breeding complex.
Electricity
250
Thermal energy (generated by biogas plant)
19
Total energy consumption
% from renewable sources
269
7
233
18
251
7
229
19
248
8
STRATEGIC
REPORT
Growth Pillar 6:
The planet
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION WATER MANAGEMENT
WASTEWATER DISCHARGES
One of MHP’s main environmental priorities is to reduce the consumption
of water. MHP’s water use is regularly monitored, and metering units are
subject to regular inspection and maintenance.
In 2021, the environmental specialists at each site updated the Register of
Wells. This exercise included recording information relating to the physical
location of underground water sources, flow rate, physical condition, need
for repair, and water intake. This procedure ensures accurate monitoring
of groundwater use and ensures that there is no impact on the resources
available for local communities.
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
appropriate regulations including the restrictions on the use of land plots
adjacent to coastal strips.
UKRAINE
CUBIC METRES
2023
2022
2021
Discharged by pipes to municipal
treatment plants
Discharged to waste pits with
removal to municipal wastewater
plants
Released to surface water after
treatment at MHP plants
642,445
312,421
594,289
19,210
72,213
85,690
4,659,003 4,506,253
4,408,033
Discharged to filtration fields
406,920
327,961
326,210
Taken to manure storage facilities
172,956
-
-
Total
5,900,534 5,218,848 5,414,492
STRATEGIC
REPORT
Growth Pillar 6:
The planet
WATER USE
UKRAINE
CUBIC METRES
Surface water
Ground water
Wastewater from third-party
organisations
2023
2022
2021
EUROPEAN OPERATING SEGMENT
CUBIC METRES
2023
2022
2021
7,906,287
7,056,687
6,741,560
7,026.945
6,301,030
7,111,377
-
439,820
438,000
Discharged from pipes to own
wastewater plants
1,117,066
1,143,383
1,033,250
Discharged to public sewage systems
88,625
126,275
109,214
Discharged to a non-flow through
septic tank
33,946
17,027
16,132
Discharged into lagoons
302,621
167,170
172,574
Municipal and other water supply
systems
201,299
254,576
250,888
Total
15,134,531
14,052,113
14,451,825
Discharged to subterranean water
166,973
213,993
244,697
EUROPEAN OPERATING SEGMENT
CUBIC METRES
2023
2022
2021
Subterranean water
1,384,545
1,305,125
1,258,150
Municipal and other wastewater
systems
640,755
714,675
662,458
Total
2,025,300
2,019,800
1,920,608
Water consumption in Ukraine in 2022 fell because of the War in Ukraine.
The rise in 2023 was a result of production increases and the expansion of
irrigated crop production.
Total
1,690,228 1,667,848 1,575,867
Wastewater that is transported to manure storage facilities is shown for
the first time (previously analysed with manure data). This and increased
production volumes resulted in an 13.06% increase in wastewater.
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION WASTE MANAGEMENT
All MHP’s enterprises comply with the Group’s Environmental Policy and
with the appropriate waste management regulations. All the enterprises
have 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.
STRATEGIC
REPORT
Growth Pillar 6:
The planet
TOTAL WASTE BY TREATMENT METHOD
UKRAINE
TONNES
Reuse
Composting
2023
2022
2021
EUROPEAN OPERATING SEGMENT
TONNES
2023
2022
2021
25
47,579
63,017
Reuse
1,536
1,736
1,410
2,680
1,947
3,283
Composting
14,744
13,967
10,348
Recovery, including energy recovery
536,868
41
59
Recovery, including energy recovery
22,219
25,754
27,505
Combustion
0
13,469
16,308
Combustion
Disposal to landfill
25,002
7,663
11,412
Disposal to landfill
0
0
0
0
0
0
Storage at MHP enterprises
3,905
3,691
2,484
Storage at PP enterprises
11,000
11,000
11,000
Transferred to contracted third parties
33,364
26,471
28,867
Transferred to contracted third parties
6,190
9,602
7,522
Total
601,844
100,861
125,430
Total
55,689
55,101
52,438
The overall decrease recorded in this table between 2021 and 2022 was the
result of the effects of the War in Ukraine and the consequent reduction
in production.
On 9 July 2023 waste management regulations changed significantly in
Ukraine. This required certain animal by-products not intended for human
consumption to be categorised as waste. This accounts for the noted
increase in 2023 and comprises, in the main, raw materials for biogas
production. In line with the legislative change the 2023 data records
sludge, manure and flotation waste as “Recovery, including energy
recovery” (previously “Reuse”).
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION KEY ACHIEVEMENTS IN 2023
STRATEGIC
REPORT
Growth Pillar 6:
The planet
MHP achieved energy security for its sites in
Ukraine through a combination of innovative
activities despite the challenges presented by
the War.
MHP made significant progress in its aim to
increase the use of renewable energy through
innovation in the use of solar, wind and
investigating higher biogas yields.
MHP progressed certifications of its sites
in line with international best practice
standards (Carbon Trust, ISCC, ISO 50001,
GlobalG.A.P.).
PLANS FOR 2024
MHP plans to obtain GLOBALG.A.P.
certificates for five sites (three
compound feed plants and two poultry
farms) with a new version of the standard.
MHP will work in partnership with Agreena,
a Danish company, to generate carbon
certificates to reduce tillage and other
sustainable practices in crop production.
MHP will expand the list of sites for CO2
calculations from 4 to 7, undertaking
monitoring and verification by a third party
with appropriate accreditations.
MHP has received a grant from the UK
government for an algae project that is due
to begin in the second quarter of 2024. The
purpose is to investigate the use of algae
to convert biomass into biomethane and to
reduce associated greenhouse gas emissions
through the consumption of CO2 by the algae.
MHP will consider the expansion of its biogas
production facilities and launch production of
biomethane into LPG at Vinnytsia in 2024.
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101
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION TASKFORCE ON CLIMATE-
RELATED FINANCIAL
DISCLOSURES
PURPOSE OF THIS
STATEMENT
MHP’S APPROACH TO CLIMATE
CHANGE
This
is MHP’s third annual statement
which outlines the Group’s alignment
with the Taskforce on Climate-Related
Financial Disclosures (“TCFD”) reporting
recommendations,
with
explanations of how MHP intends to extend
its alignment in the future.
together
The statement addresses the compliance
requirements of Listing Rule 9.8.6.(8) R
which applies to London listed issuers.
MHP’s greenhouse gas emissions (“GHG”)
data for 2023 appears in this Report on pages
96 to 97. Information which addresses the
reporting requirements outlined in s414,
s414CA and 414CB of the UK Companies
Act 2006 is recorded on page 145.
As part of this statement MHP has
reviewed and considered TCFD’s All Sector
Guidance (2021 TCFD Annex). MHP has
also considered
recommendations
the
for agriculture, food and forest product
organisations that are explained within the
Guidance.
The emphasis of the additional Guidance
is to provide more granular and explicit
disclosures. This is aligned with MHP’s aim
of progressing its transparency concerning
climate change over time.
that
climate
MHP understands
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 92 to 101 of this Report.
to ensure
is working to better understand
its
MHP
the
environmental
footprint
sustainable delivery of
its products. The
approach is guided by the activities of the
Intergovernmental Panel on Climate Change
(“IPCC”), the UN Framework Convention on
climate change. It is also informed
by a number of regulatory and
stakeholder initiatives that aim to
address climate change, reduce and
eliminate global GHG emissions,
and increase transparency.
PAGE 96
For information
on MHP’s Scope
1 and 2 emissions
data and sources
Page 96 and 97 of this Report outlines
MHP’s Scope 1 and 2 emissions data
and sources during 2023.
MHP’s activities also create Scope 3 emissions
(such as those generated by purchased goods
and services). These are not currently reported.
MHP is investigating the development of its
Scope 3 reporting but does not expect to be
able to put in place the processes to report
on this basis until after the end of the War in
Ukraine.
MHP IS WORKING TO
BETTER UNDERSTAND
ITS ENVIRONMENTAL
FOOTPRINT TO
ENSURE THE
SUSTAINABLE
DELIVERY OF ITS
PRODUCTS.
STRATEGIC
REPORT
Taskforce on Сlimate-related
Financial Disclosures
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION 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
statement sets out the steps that have already
been taken as well as steps planned in 2024
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 2023 in relation to the
11 TCFD recommendations in the table. Where
sections are marked “not consistent”, further
explanation is provided beneath the table.
MHP’S APPROACH
TO CLIMATE CHANGE
IS EVOLVING AND
THE GROUP INTENDS
TO ENHANCE ITS
REPORTING AS ITS
APPROACH MATURES
AND DEVELOPS.
11 TCFD RECOMMENDATIONS – MHP’S POSITION AT THE END OF 2023
GOVERNANCE
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 change 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 business, 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 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
STRATEGIC
REPORT
Taskforce on Сlimate-related
Financial Disclosures
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GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION STRATEGIC
REPORT
Taskforce on Сlimate-related
Financial Disclosures
GOVERNANCE
STRATEGY
RISK MANAGEMENT
systems
governance
MHP’s
include
regular review of the Board and Committee
composition to ensure that they have the
necessary combination of skills, experience,
and knowledge. More
is
in the Corporate Governance
included
report on page 111.
information
MHP’s Chief Executive Officer
is
responsible for the executive management
of MHP’s businesses including its approach
to climate change, strategy implementation
and delivering performance against plans.
MHP’s Board of Directors is responsible
for the Group’s approach to climate change.
It is supported in the management of its
approach by the Board’s Sustainability and
International Affairs (“S&IA”) Committee
and
regular
activities
discussion of climate change matters.
include
these
MHP’s previous announcement of a target
to become carbon neutral by 2030 will be
reviewed at the end of the War in Ukraine. 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.
the TCFD
MHP also intends to align its approach more
recommendations
closely with
forest product
food and
for agriculture,
organisations that are explained within the
Guidance within the next two years. The War in
Ukraine may affect the timing of these activities.
achieved
the Group
carbon
In 2023,
accreditation with the Carbon Trust for its
poultry production and marketing activities in
Ukraine. Further details are recorded on page 95
of this Report.
Climate risks are evaluated using MHP’s
common risk assessment approach which
consideration of qualitative
includes
likelihood of occurrence.
criteria and
These outcomes are
into
the risk assessment procedures which
are performed regularly at each of MHP’s
enterprises. Climate change has been
identified as a principal risk.
incorporated
MHP has not yet conducted a qualitative
and quantitative climate change scenario
assessment to support and guide its climate
change approach going forward. In 2024,
the Group expects to make substantial
progress in further understanding its climate
change risks and opportunities and will be
supported in this process by professional
advisors.
METRICS AND TARGETS
The Group is progressing the integration
of climate change into its management
procedures, and in 2024 a Climate Risk
Management Group comprising Senior
Management was formed to encourage buy-
in and contribute to the progression of MHP’s
sustainability goals and targets including
those relating to climate change.
Another important step which took place
in 2023 was the centralisation of the
environmental function and the expansion
of the team headcount. Further information
is recorded on page 92 of the Growth Pillar
6 section of this Report.
MHP has established that significant cost
savings and environmental benefits can be
created through renewable energy generation,
processing its waste to create biogas. Further
information on the energy generated in 2023 is
available on page 96 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 within the short to medium-term.
MHP is also conducting renewable energy
projects with business specialist partners
including wind and solar.
The Group also plans to continue engaging with
stakeholders, including employees, customers,
and suppliers, to raise awareness about climate
change and promote sustainable practices.
greenhouse
MHP’s
emissions
calculations are conducted annually. The
emissions data and methodology applied is
recorded on pages 92 to 101 of this Report.
gas
MHP expects to make substantial progress
in 2024 in identifying relevant metrics and
targets on both climate change mitigation
and adaptation with
the support of
professional advisors.
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.
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104
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION NON-FINANCIAL
AND SUSTAINABILITY
INFORMATION STATEMENT
COMMITMENT TO
TRANSPARENCY
HIGHLIGHTS
STRATEGIC
REPORT
Non-financial and Sustainability
Information Statement
is
to
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 has supplied
this
information in alignment with the reporting
requirements contained in Sections 414,
414CA and 14CB of the UK Companies Act
2006.
The information in the table on the next
page is provided to aid understanding of
MHP’s approach, policies and performance
relating to non-financial and sustainability
matters. No material breaches of policy
were identified during 2023.
It also highlights where further information,
other than that disclosed within this Report,
can be accessed.
MHP regularly conducts dialogue with
investors and other stakeholders about
non-financial and sustainability matters.
More information can be found in the
Stakeholder Engagement section of this
Report.
PERFORMANCE HIGHLIGHTS
PAGE 4
BUSINESS MODEL
An explanation of MHP’s business model
PAGE 16
RISK
A description of the principal risks and
their potential impacts on the business
PAGE 50
SUSTAINABILITY
Information about MHP’s sustainability
approach, policies, management
systems and performance
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PAGE 57
105
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION REPORTING REQUIREMENT
WHICH GOVERN MHP’S
MHP’S IMPACT INCLUDING THE PRINCIPAL
APPROACH
RISKS RELATING TO THESE MATTERS
POLICIES AND STANDARDS
WHERE TO READ MORE IN THE REPORT ABOUT
WHERE TO FIND FURTHER
INFORMATION
Environmental Matters
→ MHP’s Environmental Policy
→ Risk Management pages 50 to 56
→ MHP’s Growth Pillars introduction section
→ mhp.com.ua Sustainable
Development section
pages 57 to 59
→ Growth Pillar 6 pages 92 to 101
Employees
→ MHP’s Five Core Values
page 23
→ MHP’s Code of Ethics
→ Conflict of Interest
Management Policy
→ Chair’s Statement pages 7 to 9
→ MHP’s Growth Pillars introduction section
→ mhp.com.ua Sustainable
Development section
pages 57 to 59
→ Growth Pillar 1 pages 60 to 64
→ Growth Pillar 2 pages 65 to 75
→ Growth Pillar 5 pages 84 to 91
→ mhp.com.ua Corporate Ethics
and Compliance section
STRATEGIC
REPORT
Non-financial and Sustainability
Information Statement
Social Matters
→ MHPs Five Core Values
Human Rights
Anti-Corruption And Anti-Bribery
Description Of The Business
Model
Description Of Principal Risks
And Impact Of Business Activity
Non-Financial Key Performance
Indicators
Climate-Related Disclosures
page 23
→ MHP’s Code of Ethics
→ MHP Business Partner Code
of Conduct
→ MHP’s Stakeholder
Engagement Plan
→ MHP’s Code of Ethics
→ MHP Business Partner Code
of Conduct
→ MHP’s Code of Ethics
→ Conflict of Interest
Management Policy
→ MHP Business Partner Code
of Conduct
→ MHP Integrity Statement
→ Chair’s Statement pages 7 to 9
→ MHP’s Growth Pillars introduction section
→ mhp.com.ua Sustainable
Development section
pages 57 to 59
→ MHP’s Growth Pillars 1 to 6 pages 60 to 101
→ mhp.com.ua Corporate Ethics
and Compliance section
→ MHP’s Growth Pillars introduction section
pages 57 to 59
→ Growth Pillar 3 pages 76 to 77
→ mhp.com.ua Sustainable
Development Section
→ mhp.com.ua Corporate Ethics
and Compliance Section
→ MHP’s Growth Pillars introduction section
pages 57 to 59
→ Growth Pillar 5 pages 84 to 91
→ mhp.com.ua Corporate Ethics
and Compliance Section
→ Our Business Model page 16
→ mhp.com.ua About Company
Section
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→ Risk Management pages 50 to 56
→ Growth Pillars 1 to 6 pages 60 to 101
→ MHP’s Environmental Policy
→ MHP Business Partner Code
of Conduct
→ MHP’s Growth Pillars introduction section
pages 57 to 59
→ Growth Pillar 6 pages 92 to 101
→ TCFD Statement pages 102 to 104
→ mhp.com.ua Sustainable
Development Section
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106
GOVERNANCEFINANCIALSTATEMENTSSHAREHOLDERINFORMATION pp. 108-145
GOVERNANCE
Chair’s Introduction to Corporate Governance
Corporate Governance Report
Board of Directors
Audit & Risk Committee Report
Nominations and Remuneration Committee Report
Sustainability & International Affairs Committee Report
Management Report
STRATEGIC
REPORT
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FINANCIAL
STATEMENTS
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SHAREHOLDER
INFORMATION
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CHAIR’S INTRODUCTION
TO CORPORATE
GOVERNANCE
GOVERNANCE
Chair’s Introduction
to Corporate Governance
ON BEHALF OF THE BOARD, I AM PLEASED TO PRESENT OUR CORPORATE GOVERNANCE REPORT FOR THE YEAR
ENDED 31 DECEMBER 2023. THIS SETS OUT OUR APPROACH TO GOVERNANCE, REPORTS THE IMPORTANT AREAS OF
FOCUS OF THE BOARD’S ACTIVITIES DURING THE YEAR AND DESCRIBES HOW THE BOARD AND ITS COMMITTEES
OPERATE.
DURING THE CONTINUATION OF THE WAR IN UKRAINE, THE BOARD’S
MAIN AREAS OF FOCUS HAVE BEEN AND WILL CONTINUE TO BE:
To maintain the successful continuation
and ongoing development of MHP’s
business activities despite the many and
evolving challenges presented by the
War
To support, guide and advise the
executive management team as
effectively as possible
To ensure food security for the
Ukrainian population
To maintain the Group’s liquidity and
solvency
To ensure the safety, security and
wellbeing of MHPs employees
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108
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT GOVERNANCE AND BOARD
PERFORMANCE
BOARD COMPOSITION AND
SUCCESSION PLANNING
CONDUCT OF BOARD
MEETINGS
GOVERNANCE
Chair’s Introduction
to Corporate Governance
a well-established
approach
MHP has
to governance and continues to look for
opportunities to develop it in line with best
practice. This provides a robust platform
for the Board’s management processes and
decision-making and has played a crucial role in
MHP’s successful approach to maintaining and
expanding its business activities.
The Board welcomed Mr Oscar Chemerinski to
the Board in 2023 and his appointment added
a significant skill set and levels of business
experience. He became Chair of the Audit
& Risk Committee at the beginning of 2024,
replacing John Grant who will continue as a
member of the Audit & Risk Committee until he
retires from the Board at the AGM in June 2024.
Due to the ongoing War, our Board has had to
adapt its meeting format, conducting sessions
either in person or virtually to accommodate
the varying circumstaces of our Board members.
We expect this dual format to continue until
the situation stabilises. MHP has continued
to invest in strengthening its IT infrastructure
to facilitate these requirements and ensure
security and cinfidentiality of virtual meetings.
This allowed efficient levels of communication
between Board members, executive manage-
ment and other stakeholders during the War.
We continue to conduct a phased succession
plan to ensure replenishment of the Board
to maintain and enhance the levels of skills,
knowledge and independence whilst being
mindful of stakeholder expectations concerning
diversity and the relevant guidelines including
the FTSE Women Leaders Review and the
Parker Review. Further information can be found
in my Chair’s Statement on page 7 and in the
Nominations and Remuneration Committee
Report on page 135.
ENGAGEMENT WITH
SHAREHOLDERS,
BONDHOLDERS, FINANCIERS
AND OTHER STAKEHOLDERS
PAGE 135
Nominations and
Remuneration
Committee
Report
The ongoing War in Ukraine continues
to create high levels of concern amongst
the
stakeholders particularly
evolving aspects of the War which, at the
date of this Report, shows no sign of ending.
The Group has maintained open and clear
lines of communication with shareholders,
bondholders, lenders and other stakeholders.
in view of
The Board has played and will continue to play
an essential leadership and advisory role in the
conduct of this dialogue. Highlights during the
year included completion of important new
lending agreements and successful completion
of bondholder tender offers.
HIGHLIGHTS DURING
THE YEAR INCLUDED
COMPLETION OF
IMPORTANT NEW
LENDING AGREEMENTS
AND SUCCESSFUL
DELIVERY OF
BONDHOLDER TENDER
OFFERS
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109
MHP has continued to adapt and conduct its
operations with remarkable speed, innovation
and efficiency. All Board members contributed
effectively throughout the year and provided
leadership to ensure that a multitude of
challenging and uncertain issues were addressed
creatively, rapidly, and effectively.
In recognition of the Group’s commitment
to embedding corporate responsibility in its
operations, the Sustainability and International
Affairs Committee initiated a creation of a sub-
committee comprised of the Company.
This reflects not only the Board’s governance
approach but also a bottom-up drive. The goal
of this sub-committee will be to consolidate
the
importance of ESG and provide the
vision over the medium- to long-term. It will
integrate sustainability principles into the core
strategies and operations of MHP, as well as to
contribute to the creation of long-term value
for all stakeholders, including shareholders,
employees, customers and communities. By
prioritising
responsible
sustainability and
business practices, we aim to enhance our
resilience, reputation and competitiveness in
the global marketplace.
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT MOVING FORWARD
The Board will continue to successfully lead and
advise the business with confidence in 2024 and
beyond despite the uncertainties and challenges
presented by ongoing warfare. The resilience
of the Board and of our workforce means that
we will continue to deliver on the key areas of
focus for as long as combat persists. In addition,
the culture of the Group in this extremely
challenging and uncertain environment has
stood up to the test, as witnessed by
the recent Business Culture Awards –
Best CSR Initiative.
I should like to take this opportunity to
thank my colleagues on the Board and
MHP’s Senior Management Team for
their immense efforts and contributions
to the Group during the year. Everyone
at MHP is 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
Executive Chair, MHP Board
02 May 2024
NON-EXECUTIVE DIRECTOR
INDEPENDENCE DURING
THE WAR
The Board continues to take all steps necessary
to safeguard the interests of all stakeholders.
In 2023 the independent stance of the Non-
Executive Directors was weighed against the
requirement for them to act in the way they
consider that, 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, it has become necessary for the nature of
the activities conducted by the Non-Executive
Directors to change from time-to-time so that
their skills, networks and attributes are drawn on
in ways which, under usual circumstances, might
be viewed as affecting independence through
the conduct of a material business relationship.
The Board continues to believe that these
actions are essential to maintain the stability
and liquidity of the Group for the duration of
the War. They include, for example, guiding
the Management Team in finance negotiations
and maintaining key stakeholder relations.
The involvement of the Independent Non-
Executive Directors in this manner is infrequent
and necessitated by the challenges the Group
focused on as result og the War.
The Group therefore considers that Non-
Executive Director occasional involvement in
this way does not materially affect independence
and that this approach is in the best interests of
the Company, its shareholders, bondholders
and other stakeholders.
independence
The
information within this
Corporate Governance Report and the UK
Corporate Governance Code
compliance
statement has been prepared applying this view
on Non-Executive Directors independence.
GOVERNANCE
Chair’s Introduction
to Corporate Governance
PAGE 9
See recent
business culture
award
MHP HAS A WELL-
ESTABLISHED
APPROACH
TO GOVERNANCE,
WHICH SERVES AS THE
FOUNDATION FOR THE
BOARD’S MANAGEMENT
PROCESSES AND
DECISION MAKING
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FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT CORPORATE GOVERNANCE
REPORT
GOVERNANCE
Corporate Governance Report
DOMICILE AND BACKGROUND
INFORMATION
MHP was originally established in 2006 and
registered in Luxembourg. On 7 August 2017,
the Company converted from a public limited
company (“Societe Anonyme”) into a European
company (“Societas Europaea”).
On 27 December 2017, the Company’s registered
office and central administration was transferred
to Cyprus. MHP is currently registered in the
Cyprus Registry of SE Companies under number
SE 27. The registered address of MHP SE is
16-18 Zinas Kanther Street, Agia Triada, 3035
Limassol, Cyprus.
In December 2017 the Company adopted a
new Memorandum and Articles of Association
to comply with the provisions of company law
within Cyprus. This is available for download at
the Group websites.
MHP’s GDRs are listed and traded on the
London Stock Exchange.
corporate
Company’s
The
governance
structures, processes and procedures are
outlined in its Code of Corporate Governance
which is also available for download at the
Group websites.
to uphold and practice
MHP aims
the
highest standards of corporate governance. It
regularly consults and discusses its approach
with professional
shareholders,
bondholders, investment analysts, its workforce,
governments, and regulators.
advisors,
STATEMENT OF COMPLIANCE
WITH THE UK CORPORATE
GOVERNANCE CODE 2018
MHP’s Board, executive management and
advisors have been
actively developing
MHP’s corporate governance processes and
procedures. The Group is a GDR issuer on
London Stock Exchange and aims to follow best
practice in line with established international
standards. The Board regards the UK Corporate
Governance Code 2018 provisions required by
the LSE's Premium Segment as the appropriate
international benchmark for its approach. MHP
also complies with the governance requirements
of Cypriot law.
Recent developments
include expanding
the remit of one of the Board Committees to
specifically include sustainability. This change
underpins the Board’s commitment to integrate
sustainability robustly within MHP’s corporate
governance.
MHP continues to seek ways to strengthen
the diversity and experience of the Board
and announced the appointment of Mr Oscar
Chemerinki as an independent Non-Executive
Director during the year.
It is the opinion of the Board that, during
2023, MHP 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
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FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT
PROVISION NUMBER
PROVISION REQUIREMENT
EXPLANATION
GOVERNANCE
Corporate Governance Report
9
10
19
32
36
The Chair should be independent on appointment under the
criteria outlined in Provision 10.
identify
The Board should
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 Consultant in Agribusiness Industry. This role ended in 2021.
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 continues to be
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. He intends to retire from the Board at the AGM
in June 2024.
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.
should
promote
schemes
Remuneration
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.
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.
Given the wartime environment and the Group’s need to focus on
War-related considerations, the long-term incentives policy will remain as
approved in 2021, see also NRC Report on page 135.
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FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT PROVISION NUMBER
PROVISION REQUIREMENT
EXPLANATION
GOVERNANCE
Corporate Governance Report
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 previously planned to update the Directors’ Remuneration
Policy to specifically address this area not later than the end of 2023. Given
the wartime environment and the Group’s need to focus on War-related
considerations, the calculation of directors’ pensionable salaries will
remain as approved in 2021, see also NRC Report on page 135.
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.
38
40
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.
remuneration policy and
When determining executive
practices, the remuneration committee should address the
following:
→
→
→
→
→
→
Clarity –
should be
remuneration arrangements
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;
remuneration arrangements should ensure
Risk –
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.
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FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT BOARD OF DIRECTORS
GOVERNANCE
Board of Directors
THE MEMBERS OF THE BOARD OF DIRECTORS AT 31 DECEMBER 2023 ARE RECORDED BELOW TOGETHER WITH
INFORMATION ABOUT EACH MEMBER INCLUDING CAREER HIGHLIGHTS AND AN OVERVIEW OF THEIR SKILLS AND
EXPERIENCE. THIS YEAR, AS PART OF OUR COMMITMENT TO TRANSPARENCY, WE HAVE SUPPLEMENTED THIS
INFORMATION WITH A SKILLS AND DIVERSITY MATRIX.
Dr John Rich
Executive Chair
John Grant
Senior
Independent
Director
Philip J
Wilkinson OBE
Independent
Non-Executive
Director
Christakis
Taoushanis
Independent
Non-Executive
Director
Oscar
Chemerinski
Independent
Non-Executive
Director
Yuriy Kosyuk
Chief Executive
Officer
Andriy Bulakh
Deputy Chief
Executive Officer,
People
Viktoriia
Kapeliushnaya
Chief Financial
Officer
Committee member key
NR
SI
Nominations and Remuneration Committee
Sustainability and International Affairs
Committee
AR
⬜
Audit & Risk Committee
Chair of Committee
Member of Committee
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FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT
DR JOHN RICH
Executive Chair
JOHN GRANT
Senior Independent Director
PHILIP J WILKINSON OBE
Independent Non-Executive Director
GOVERNANCE
GOVERNANCE
Board of Directors
finance,
John Grant brings to MHP extensive, board-
level
risk management, strategy,
governance, and operational experience from
a wide range of international businesses and
sectors.
Nationality: British
Appointed to the Board: 2006
Career and prior experience:
→ Senior
Independent Director, Augean
plc, Melrose plc, Pace plc and Wolfson
Microelectronics plc;
→ Non-Executive Director, National Grid plc;
→ Audit Committee Chair: Augean plc,
Melrose plc, National Grid plc, Pace plc;
→ Remuneration Committee Chair: Augean
plc, National Grid plc;
→ 1989: Director of Corporate Strategy, Ford
Philip Wilkinson contributes to MHP extensive
experience in the strategic and commercial
leadership of international agribusinesses, in
particular in the international poultry industry.
Nationality: British
Appointed to the Board: 2020
Career and prior experience:
→ 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; and
→ Dairy industry: awarded an OBE in 2003 for
Services to the Dairy Industry; Chair of the
National Dairy Council and of the National
Dairy Farm Assured Ltd.
Motor Company;
→ 1990-1992: Executive Deputy Chair, Jaguar
Current roles:
→ Director of Red Tractor Poultry Sector
Cars; and
→ 1992-1996:
Finance Director,
Lucas
Industries plc, LucasVarity plc.
Board;
→ 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;
→ Board member of the British Poultry
Council; and
→ Board member of Paramount 21.
John Rich
is a highly experienced senior
business executive with a strong background in
agribusiness operations, development banking
and investment. He also contributes to MHP
considerable experience in animal production,
and in the development of animal welfare and
sustainable agriculture.
Nationality: Australian
Appointed to the Board: 2006
Career and prior experience:
→ Member of the Australian College of
registered
Veterinary Science and a
financial member of the Australian College
of Veterinary Surgeons;
→ 1990-2003: Executive Director, Austasia
Pty Ltd (agribusiness conglomerate SE
Asia);
→ 1995-2002: Director AN-OSI Pty Ltd
(supply chain management for feedlot beef,
poultry and dairy operations SE Asia/China);
→ 2006-2019: Senior Consulting Agribusiness
Industry Specialist IFC (World Bank Group),
and Agribusiness consultant
IFC-
invested clients until 2020; and
to
→ 2017-2021: Financial Board Advisor to ADM
Capital and Independent Non-Executive
Director at three other poultry-related
companies.
Current roles:
→ Director of Australian Agricultural Nutrition
and Consulting Pty Ltd (AANC);
→ Member of the Food and Agribusiness
Advisory Council of London-based finance
institution, British International Investment
(BII) (formerly CDC);
→ Non-Executive director of Zambeef Product
Limited (Zambia); and
→ Non-Executive Director of Zalar Holdings
(Morocco).
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115
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT CHRISTAKIS TAOUSHANIS
Independent Non-Executive Director
OSCAR CHEMERINSKI
Independent Non-Executive Director
GOVERNANCE
GOVERNANCE
Board of Directors
Christakis Taoushanis contributes to MHP
over 35 years of finance, capital markets and
management experience.
Nationality: Cypriot
Appointed to the Board: 2018
Career and prior experience:
→ 35 years of banking experience including
four 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; and
→ Independent Non-Executive Director
with significant (over 20 years) experience,
including regulated and listed companies.
Current roles:
→ Advisor through his private firm, TTEG &
Associates.
to MHP
Oscar Chemerinski contributes
significant experience
in finance, business
leadership, and strategic thinking, with a
strong background in the food production
and agribusiness sectors, and in International
Development.
Nationality: Argentinian
Appointed to the Board: 2023
Career and prior experience:
→ A graduate of the Universidad de Belgrano
with a Master’s
in Economics and
Accounting (CPA), and of the University of
Chicago with an MBA in Finance;
→ Over 30 years of global exposure to the
private sector, through project finance
and advisory services working with boards,
NGOs, CSOs, governments, MFIs, and
Banks, and including over 20 years with the
International Finance Corporation (IFC);
→ Board member of Cofco International (Hong
Kong); and
→ Board member of Bridge Academies (Kenya).
Current roles:
→ Board member of Hans Merensky Holdings
(South Africa);
→ Board member of Westfalia Fruit (UK);
→ Board member of Copeval (Chile);
→ Board member of ProducePay (Mexico);
→ Board member of Merensky Timber (South
Africa); and
→ Co-Managing Partner, Ballard Partners.
STRATEGIC
REPORT
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FINANCIAL
STATEMENTS
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SHAREHOLDER
INFORMATION
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116
116
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT YURIY KOSYUK
Chief Executive Officer
ANDRIY BULAKH
Deputy Chief Executive Officer, People
VIKTORIIA KAPELIUSHNA
Chief Financial Officer
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 (founded MHP in
1998)
Career and prior experience:
→ 1992: graduated as a process engineer in
meat and milk production from the Kyiv
Institute of the Food Industry; and
→ 1995: founded the Business Centre for the
Food Industry in Kyiv.
Andriy Bulakh contributes to MHP more than
20 years’ broad management, auditing, and
consulting experience.
Since joining the Group, Mr. Bulakh has initiated
implemented a goal-setting
and actively
system for MHP. He is also in the process of
transforming the HR function and increasing
the efficiency of the Group’s processes.
Nationality: Ukrainian
Appointed to the Board: 2021 (joined MHP in
2020)
Career and prior experience:
→ Managing Partner and Head of Consulting
(Deloitte Ukraine); and
→ Master's Degree in International Economic
Relations, Taras Shevchenko National
University of Kyiv.
Viktoriia Kapeliushnaya contributes to MHP
extensive financial experience and business
acumen gained from over 30 years in the
agribusiness and food production industries.
Nationality: Ukrainian
Appointed to the Board: 2006 (joined MHP in
1998)
Career and prior experience:
→ Diplomas in Processing Engineering (1992)
and Financial Auditing (1998) from the Kyiv
Institute of the Food Industry; and
→ Deputy and Chief Accountant at the Ukraine
Business Centre for the Food Industry
(BCFI).
GOVERNANCE
Board of Directors
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117
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT BOARD SKILLS AND DIVERSITY
MATRIX
SKILLSET AND EXPERIENCE
DIVERSITY
The skills and diversity matrix reflects the
balance of knowledge, skills, diversity, and
experience required to establish and deliver the
Group’s strategy and business objectives.
The skills matrix demonstrates that there are no
substantial gaps in the composition of the Board
and ensures robust Board skills diversity. MHP
will continue to monitor the appropriateness
of Board skills for the dynamic markets in
which it operates, and against a backdrop of an
increasing need for expertise and knowledge in
sustainability, innovation, and technology.
Diversity is essential in making the Board
of Directors effective and
the diversity
matrix details the gender, nationality, ethnic
background, and age of each Board member.
Further information about alignment with UK
Listing Rules requirements and MHP’s approach
to Board and executive management diversity is
outlined on page 136.
GOVERNANCE
Board of Directors
NAME
ROLE
DR JOHN
RICH
JOHN
GRANT
OSCAR
CHEMERINSKI
PHILIP J
WILKINSON
OBE
CHRISTAKIS
TAOUSHANIS
YURIY
KOSYUK
ANDRIY
BULAKH
VIKTORIIA
KAPELIUSHNA
Executive
Chair
Senior
Independent
Director
Independent
Non-Executive
Director
Independent
Non-
Executive
Director
Independent
Non-
Executive
Director
Chief
Executive
Officer
Chief Financial
Officer
Deputy
Chief
Executive
Officer –
People
Audit & Risk Committee
Nominations &
Remuneration Committee
Sustainability &
International Affairs
Committee
SKILLSET & EXPERIENCE
Accounting and finance
Agribusiness
Banking and capital
markets
Business strategy
Corporate governance,
legal and regulatory
Technology and
innovation
д
д
д
д
д
д
д
д
д 1
д
д
д
д
д
д 1,2д
д
д
д
д
д
д
д
д 2
д 2
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
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1 In January 2024, Oscar Chermerinski was appointed Chair of the Audit & Risk Committee replacing John Grant
2 Committee Chair
118
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT NAME
ROLE
DR JOHN
RICH
JOHN
GRANT
OSCAR
CHEMERINSKI
PHILIP J
WILKINSON
OBE
CHRISTAKIS
TAOUSHANIS
YURIY
KOSYUK
ANDRIY
BULAKH
VIKTORIIA
KAPELIUSHNA
Executive
Chair
Senior
Independent
Director
Independent
Non-Executive
Director
Independent
Non-
Executive
Director
Independent
Non-
Executive
Director
Chief
Executive
Officer
Chief Financial
Officer
Deputy
Chief
Executive
Officer –
People
SKILLSET & EXPERIENCE (CONTINUED)
Health and safety
Human resources, talent,
and remuneration
External quoted
boardroom experience
Retail
Risk oversight and
management
Responsible business and
sustainability
д
д
д
д
д
д
INTERNATIONAL EXPERIENCE
Africa
Asia
CIS
Europe (including UK)
MENA
Other
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
GOVERNANCE
Board of Directors
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119
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT NAME
ROLE
DIVERSITY
DR JOHN
RICH
JOHN
GRANT
OSCAR
CHEMERINSKI
PHILIP J
WILKINSON
OBE
CHRISTAKIS
TAOUSHANIS
YURIY
KOSYUK
ANDRIY
BULAKH
VIKTORIIA
KAPELIUSHNA
Executive
Chair
Senior
Independent
Director
Independent
Non-Executive
Director
Independent
Non-
Executive
Director
Independent
Non-
Executive
Director
Chief
Executive
Officer
Chief Financial
Officer
Deputy
Chief
Executive
Officer –
People
GOVERNANCE
Board of Directors
R
E
D
N
E
G
I
Y
T
L
A
N
O
T
A
N
I
I
C
N
H
T
E
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
д
ґ
д
д
Male (87%)
Female
(13%)
Not
specified /
prefer not to
say (0%)
Argentinian
Australian
British
Cypriot
Ukrainian
White
British or
other White
(including
minority-
white
groups)
Mixed/
Multiple
Ethnic
Groups
Asian/Asian
British
Asian/Asian
British
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120
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT DR JOHN
RICH
JOHN
GRANT
OSCAR
CHEMERINSKI
PHILIP J
WILKINSON
OBE
CHRISTAKIS
TAOUSHANIS
YURIY
KOSYUK
ANDRIY
BULAKH
VIKTORIIA
KAPELIUSHNA
Executive
Chair
Senior
Independent
Director
Independent
Non-Executive
Director
Independent
Non-
Executive
Director
Independent
Non-
Executive
Director
Chief
Executive
Officer
Chief Financial
Officer
Deputy
Chief
Executive
Officer –
People
GOVERNANCE
Board of Directors
NAME
ROLE
DIVERSITY (CONTINUED)
I
C
N
H
T
E
)
d
e
u
n
i
t
n
o
c
(
AGE
Other ethnic
group,
including
Arab
Not
specified /
prefer not
to say
< 55 years
55 to 65
years
> 65 years
д
д
д
д
д
д
DIRECTORS WHO SERVED
DURING THE YEAR
The directors who served during the year were:
→ Dr John Rich (Executive Chair)
→ John Grant (Senior Independent Director)
→ Philip J Wilkinson OBE (Independent Non-
Executive Director)
→ Christakis Taoushanis (Independent Non-
Executive Director)
→ Oscar Chemerinski
(Independent Non-
Executive Director)
→ Yuriy Kosyuk (Chief Executive Officer)
→ Andriy Bulakh (Deputy Chief Executive
Officer – People)
→ Viktoriia Kapeliushna
(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 114 to 117. This information includes
biographical details of the Directors.
The only change to the Board composition
during the year was the appointment of Oscar
Chemerinski as an Independent Non-Executive
Director in March 2023. He also became a
member of the Audit & Risk Committee and
the Sustainability and International Affairs
Committee.
д
д
д
д
POST YEAR-END BOARD CHANGES
John Grant has indicated his intention to retire
from the Board in 2024 and he stepped down
from his role as Chair of the Audit & Risk
Committee at the beginning of 2024. He was
replaced by Oscar Chemerinski. John Grant will
remain on the Committee until his retirement.
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121
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT BOARD MEETING ATTENDANCE AND
ARRANGEMENTS DURING THE WAR
The Board conducted six meetings during 2023.
All the Non-Executive Directors and the Chair
attended these meetings. The Chief Executive
Officer attended one of the meetings where
the most material and strategic decisions were
discussed.
As a result of the War in Ukraine, the 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 18 circular resolutions.
DIRECTOR
MEETINGS
ATTENDED / INVITED
Dr John Rich
John Grant
Christakis
Taoushanis
Philip J
Wilkinson
OBE
Oscar
Chemerinski
Yuriy Kosyuk
Andriy Bulakh
Viktoriia
Kapeliushna
6/6
6/6
6/6
6/6
5/5
1/6
5/6
6/6
DIVISION OF RESPONSIBILITIES AND BOARD GOVERNANCE FRAMEWORK
GOVERNANCE
Board of Directors
BOARD
The Board is responsible for ensuring there is a robust and transparent governance
framework in place
CHAIR
The Chair 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.
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 the Board Committees.
The Chair represents the
Board to shareholders
and the public and chairs
Shareholders’ Meetings.
CHIEF EXECUTIVE
OFFICER
CHIEF FINANCIAL
OFFICER
SENIOR INDEPENDENT
DIRECTOR
The Chief Financial Officer
is responsible for overseeing
financial-related activities
including the development of
financial strategies, financial
reporting, audit, and risk.
The Senior Independent
Director acts as a sounding
board for the Chair and
can be an intermediary for
the other Directors and
shareholders when required.
They lead the other Non-
Executive Directors in
the annual performance
evaluation of the Chair.
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.
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FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT DIVISION OF RESPONSIBILITIES AND BOARD GOVERNANCE FRAMEWORK (continued)
BOARD (CONTINUED)
The Board is responsible for ensuring there is a robust and transparent governance
framework in place
NON-EXECUTIVE DIRECTORS
COMPANY SECRETARY
Through their broad range of skills
and experience, the Non-Executive
Directors bring judgement, oversight, and
constructive challenge to the Executive
Directors, holding their performance
to account against agreed performance
objectives. They bring an external
perspective to Board discussions as well
as specialist advice and strategic guidance
to the Executive Directors.
The Company Secretary ensures that the Board
receives appropriate and timely information
and provides advice and support to the Chair,
Board, and senior management on regulatory and
governance matters.
BOARD COMMITTEES
The Board has established three Committees to support it in fulfilling its oversight
responsibilities.
AUDIT & RISK
COMMITTEE
NOMINATIONS AND
REMUNERATION
COMMITTEE
This Committee conducts
oversight of financial
reporting, audit, and risk.
The Committee conducts
oversight of Board and
Committee composition,
succession planning and the link
of reward to strategy.
SUSTAINABILITY
AND
INTERNATIONAL
AFFAIRS
COMMITTEE
The Committee is
responsible for developing
the Company’s approach
to sustainability and
international affairs and
reflecting the changing
business and political
environment in which the
Company operates.
PRINCIPAL RESPONSIBILITIES OF THE
BOARD
The primary role of the Board is to lead
MHP in a way that promotes its long-
term sustainable success for the benefit
of all its stakeholders and contributing
optimally to wider society. It provides
strategic leadership and oversight of MHP’s
operations either directly or through the
work of its principal committees.
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 can be viewed at
MHP’s corporate websites (mhp.com.cy,
mhp.com.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.
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.
GOVERNANCE
Board of Directors
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FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT PRINCIPAL RESPONSIBILITIES OF THE
BOARD (CONTINUED)
DIVISION OF RESPONSIBILITIES
These principal responsibilities include:
→ Establishing MHP’s purpose and values
which underpin the culture of the business;
long-term strategy, aims and
objectives and review of performance
against those goals;
→ MHP’s
→ Conduct of business and support for the
population during the current War
in
Ukraine;
→ Mergers and acquisitions strategy;
→ Ensuring that a robust and transparent
governance framework is in place;
→ 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,
removals and remuneration arrangements;
→ Appointments to Board committees;
→ Board and senior management succession
planning;
→ Approval of major capital expenditure
projects, acquisitions and divestments;
A clear division of responsibilities is 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.
There is a clear division of responsibilities
between the leadership of the Board and
the executive
leadership of the business.
The roles of Chair, Chief Executive Officer
and Senior Independent Director are clearly
separated and set out in writing. Their division
of responsibilities, plus the matters reserved
for the Board and the terms of reference for
each principal Committee, ensure that no
single individual can have unfettered powers of
decision-making.
The Board considers the independence of its
Non-Executive Directors annually, based on the
criteria in the UK Corporate Governance Code
and following consideration by the Nominations
and Remuneration Committee.
→ Significant variations
borrowing facilities;
in borrowings or
The Board considers all Non-Executive
Directors to be independent.
→ Financial and risk management policies and
procedures; and
→ Appointment and removal of the Company
Secretary.
The Chair serves as the interface between the
Board and major shareholders of the Company
on matters of corporate governance.
BOARD PROCESSES AND THE ROLE OF
THE COMPANY SECRETARY
The Company Secretary is responsible for
ensuring that Board procedures are complied
with and that the Board receives appropriate
and timely information; and provides advice
and support to the Chair, Board, and senior
management on regulatory and governance
matters.
Board meetings are scheduled well in advance.
Where it is necessary to call meetings at short
notice, efforts are made to find suitable times
when all Directors can attend.
Where this is not possible, Directors are
provided with briefing materials and can discuss
any agenda item with the Chair, Chief Executive
Officer, or relevant Committee Chair.
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 is led by the
Nominations and 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.
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.
GOVERNANCE
Board of Directors
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124
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT
ACCESS TO INFORMATION, ADVICE, AND
PROFESSIONAL DEVELOPMENT
The Board ensures that Directors, especially
to
Non-Executive Directors, have access
the
independent professional
advice
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.
at
judge
All Directors have access to the advice and
services of the Company Secretary.
The Chair is responsible for ensuring that the
Directors receive accurate, timely and clear
information.
MHP’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 to enable them to
fulfil their role effectively both on the Board
and on the Board Committees.
directorship, office, or responsibility, including
executive positions that are taken up outside
the Company during the term of office. 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 Policy
covers any transactions
involving conflict
of interest (whether actual or potential) of
MHP’s Management Team members, including
Directors of subsidiaries and branches (“key
management”):
→ MHP’s line managers who have authority
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 internal
(“responsible
instructions
policies and
employees”) or who have power to influence
such decisions.
In July 2020, the Board approved a Related Party
Transactions Policy, which tightened controls
over all related party transactions.
OTHER PROFESSIONAL COMMITMENTS
INTERNAL CONTROL AND RISK
MANAGEMENT
Every Director is required to allocate the time
and attention required for the proper fulfilment
of his or her duties. This commitment includes
limiting the number of other professional
commitments to the extent required.
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
The Board of Directors is ultimately responsible
for the Company’s governance, risk management,
internal control environment and processes and
reviews their effectiveness at least annually.
Once identified, risks are evaluated to establish
their potential financial or non-financial impact
and the likelihood of their occurrence.
For risks assessed as significant, a mitigation
action plan is determined by the relevant
operational business management team.
GOVERNANCE
Board of Directors
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
50 to 56 of this Report.
CONFIDENTIAL
INFORMATION
PAGES 50 TO 56
Key business risks
together with
the risks related
to War
All Board Directors
are
to
required
confidential
keep
information received
in their capacity as
Directors and are not permitted to use it for
any other purpose other than for fulfilling their
remit to MHP.
MAJORITY SHAREHOLDER AND
DIRECTORS’ INTERESTS IN GDRS
The majority shareholder of MHP SE is Mr.
Yuriy Kosyuk ("Principal Shareholder"), who
owns 100% of the shares of WTI Trading
Limited ("WTI"). This company is the majority
shareholder of MHP SE, owning 59.7% of the
total outstanding share capital.
The interests of the other Directors in MHP’s
GDRs at 31 December 2023 are shown in the
table below.
DIRECTOR
Dr John Rich
John Grant
NUMBER OF
GDRS HELD
25,000
17,000
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125
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT ENGAGEMENT WITH SHAREHOLDERS
AND BONDHOLDERS
The Board recognises the importance of regular,
effective, and constructive communications
its shareholders and bondholders. It
with
maintains a dedicated
relations
department to facilitate this supported by
professional advisors.
investor
Following the outbreak of the War 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
these activities
is recorded in the Chair’s Introduction to
Corporate Governance on page 108.
information about
The principal opportunity for shareholders to
engage with the Board is at the Annual General
Meeting.
the appropriate
MHP announces its financial results on a
quarterly basis. This information is released
through
regulatory news
services and recorded on the Company’s
websites. Each
is
accompanied by a conference call with MHP’s
finance and investor relations team during
which investors and analysts can discuss and ask
questions about MHP’s performance.
results announcement
Further information can also be found in the
S172 Statement in Growth Pillar 1:
Stakeholder Engagement on pages 60
to 64.
WORKFORCE ENGAGEMENT
closely with
its
MHP works
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 on pages 65 to 75.
GOVERNANCE
Board of Directors
Clearly, following the outbreak of the War
in Ukraine it became vital that the Company
remained in close contact with, and
supported all, of its workforce.
ANNUAL GENERAL MEETING
The next Annual General Meeting is
scheduled to take place on 19 June
2024 at 11 am at 16-18 Zinas Kanther
Street, Agia Triada, 3035 Limassol,
Cyprus. The 2024 AGM notice will be
published in due course.
PAGE 65
Growth Pillar 2:
Our People and
their Wellbeing
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 fraud;
→ 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.
PAGE 60
Growth Pillar 1:
Stakeholder
Engagement
MHP WORKS CLOSELY
WITH ITS WORKFORCE
WHO PLAY AN ACTIVE
ROLE IN THE MANAGE-
MENT OF THE BUSINESS
THROUGH DAY-TO-DAY
DIALOGUE AND
ENGAGEMENT WITH THE
SENIOR MANAGEMENT
TEAM
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126
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT AUDIT & RISK
COMMITTEE REPORT
GOVERNANCE
Audit & Risk
Committee Report
THE AUDIT & RISK COMMITTEE IS RESPONSIBLE FOR THE
INTEGRITY OF THE GROUP’S FINANCIAL REPORTING AND
OVERSEES ITS 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.
Oscar Chemerinski
Chair, Audit & Risk
Committee
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
Oscar Chemerinski (Chair) 1
John Grant 2
Christakis Taoushanis
Philip J Wilkinson OBE
5/6
5/6
6/6
6/6
This Report describes how the Committee carried out its
responsibilities during the year and how it addressed significant issues
relating to the 2023 Financial Statements.
1 Oscar Chemerinski was appointed a member of the Committee on 4 April 2023 and succeeded John
Grant as Committee. Chair as from 23 January 2024
2 John Grant stood down as Committee Chair on 23 January 2024 and remains a member of the
Committee
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127
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT ROLE AND
RESPONSIBILITIES
The Committee’s role and responsibilities
are set out in its terms of reference. In line
with best practice, these were last reviewed
in November 2023 and can be viewed on the
Company’s website at Annex C of the Corporate
Governance Charter.
The Committee recognises its responsibility
for protecting the interests of all stakeholders
integrity of financial
with respect to the
information published by the Company and the
effectiveness of the audit.
THE COMMITTEE’S PRIMARY
RESPONSIBILITIES INCLUDE:
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 financial reporting issues and
judgements;
→ ensuring
compliance with
relevant
accounting standards and consistency and
appropriateness of accounting policies,
and challenging the validity of assumptions
underlying
and
judgements, taking into account the views
of the external auditors;
accounting estimates
→ 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
for shareholders
information necessary
to assess the Company’s position and
performance, business model and strategy,
and advising the Board accordingly.
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, review and approve
statements concerning internal controls and
risk management.
Whistleblowing and Fraud
→ reviewing
the adequacy and security
for employees and
of arrangements
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
GOVERNANCE
Audit & Risk
Committee Report
the
→ approving the appointment and, where
necessary, removal of the head of internal
audit;
→ approving
internal
remit of
audit function, ensuring it has adequate
to
resources and appropriate access
information to enable it to perform its
function effectively and in accordance with
the relevant professional standards;
the
→ approving the internal audit plan and
receiving periodic reports on the results of
the internal auditor’s work;
management’s
→ monitoring
siveness
internal
the
findings and recommendations; and
to
respon-
auditor’s
→ monitoring and reviewing the effectiveness
of the Group’s internal audit function in
the context of the Company’s overall risk
management system.
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128
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT External Audit
→ reviewing
and
assessing
objectivity
independence,
annually
and
the
effectiveness of the external auditors,
making recommendations to the Board
to be put to shareholders for approval
re-
regarding
appointment and removal, and approving
the terms of their engagement;
appointment,
their
→ 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;
the
→ assessing
→ reviewing policy and practice regarding
the provision of non-audit services by the
external auditor and, where necessary,
challenging the provision of such services;
auditor’s
annually
taking
independence and objectivity
account
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.
relevant
of
COMPOSITION
The Committee comprises only non-executive
directors, each of whom is deemed by the
Board to be independent, with a minimum of
three members. Two members constitute a
quorum. Until 23 January 2024, the Chair of
the Committee was 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.
PAGE 114
See biographies
on page 114
John Grant as Chair of
As from 23 January 2024, Oscar Chemerinski
succeeded
the
Committee. He also has significant and relevant
financial experience (see biography on page 116)
and was appointed a member of the Committee
on 4 April 2023. Christakis Taoushanis (see
biography on page 116) and Philip J Wilkinson
OBE (see biography on page 115) have been
members of the Committee since November
2018 and June 2020 respectively.
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.
MEETINGS
The Committee meets at least four times a year.
The scheduling of meetings is intended to align
with the financial reporting timetable, enabling
the Committee to review the annual and
quarterly financial statements, to agree the plan
for the full year audit and to maintain oversight
of the Group’s internal controls and processes
throughout the year. In 2023, the Committee
met six times. The attendance of members at
these meetings is shown in the table above.
During the year, because of ongoing War-related
travel restrictions, a number of members and
invitees necessarily attended certain meetings
by video conference.
the
The Committee meets with
external auditors at least once a year in
the absence of Management.
The Committee Chair reports the
outcome of meetings to the Board.
GOVERNANCE
Audit & Risk
Committee Report
PERFORMANCE
the Committee
The performance of
is
assessed annually as part of a formal Board
evaluation process. As in previous years, the
2023 evaluation, undertaken towards the end of
the 2023 audit, took the form of questionnaires
completed by Committee members and other
Committee-meeting participants, followed by
discussion among Committee members only.
The process revealed that Committee members
came to meetings well prepared and offered
robust challenge to Management and the
auditors. The evaluation also confirmed 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 the additional
risks resulting from the ongoing War.
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129
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT KEY ACTIVITIES DURING
THE YEAR
In addition to matters relating to the 2023
financial statements (see below), other key
activities addressed by the Committee during
the year included:
→ considering
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;
ongoing
the
→ supporting the Board in considering how
best to preserve liquidity for the Group while
maintaining positive
relationships with
bondholders, banks and other stakeholders;
→ considering potential further development
of the Group’s reporting of the potential
impacts of climate change in line with
the recommendations and recommended
disclosures of the Task Force on Climate-
related Financial Disclosures (“TCFD”) and
other evolving requirements; and
→ supporting the Board on the identification
and mitigation of cybersecurity risks to the
confidentiality,
integrity and availability
of the Group’s data and systems, and on
actions to safeguard the Group’s assets,
information and reputation.
SIGNIFICANT ISSUES
RELATING TO THE FINANCIAL
STATEMENTS
The Committee undertook
following
recurring activities in relation to the financial
statements:
→ considered and approved the auditor’s
the
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
business
model and strategy, and advised the Board
accordingly;
performance,
and
→ considered the processes
the valuation of assets,
reasonableness
assumptions; and
and
in place for
including the
of
consistency
→ reviewed the effectiveness of the Company’s
risk management and internal controls.
GOVERNANCE
Audit & Risk
Committee Report
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130
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT In addition, the Committee gave particular consideration to the following significant issues and risks relating to the 2023 financial statements:
SIGNIFICANT ISSUE OR RISK CONSIDERED
HOW THIS WAS ADDRESSED BY THE COMMITTEE
GOVERNANCE
Audit & Risk
Committee Report
GOING CONCERN
The Russian invasion of Ukraine in 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 effectively closed to Ukrainian entities, at least until
the situation stabilises. This necessitates a particular focus on MHP’s
ability to maintain operations and to continue to meet its liabilities as
they fall due.
REVENUE RECOGNITION
There is а presumed risk of overstatement of revenue due to fraud.
VALUATION OF BIOLOGICAL ASSETS AND AGRICULTURAL
PRODUCE
Throughout 2023, the Committee was kept informed by Management of the likely impact
of the War on financial forecasts, taking account of various war scenarios, the associated
risks and the actions taken to mitigate them. Actions taken by the Company enabled it
to maintain full utilisation of production capacity throughout the year, and to continue to
deliver adequate profitability and cash generation.
On 20 October 2023, the Company signed agreements with three international financial
institutions to provide up to US$ 400 million of long-term loans to facilitate refinancing of
the US$ 500 million of Eurobonds maturing in May 2024 and to fund certain essential capital
expenditures. On 10 November 2023, following a tender offer, the Group purchased for US$
128 million bonds with a principal value of US$ 151 million. On 23 January 2024, following
a second Tender Offer, Noteholders who validly tendered their Notes were paid the
consideration of US$ 950 per US$ 1,000 principal amount of Notes (with total consideration
paid US$ 131 million) and, on the same date, Notes in the amount of US$ 138 million have
been cancelled. As of the date of this Report, all bond coupons and the payments deferred
in May 2022 have been paid on their due dates. Nevertheless, in view of the continuing War
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 agrees with Management’s view that, if necessary, the Company will continue
to 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 and the related disclosure were appropriate
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.
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.
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.
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131
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT SIGNIFICANT ISSUE OR RISK CONSIDERED
HOW THIS WAS ADDRESSED BY THE COMMITTEE
GOVERNANCE
Audit & Risk
Committee Report
VALUATION AND IMPAIRMENT OF GOODWILL AND INTANGIBLE
ASSETS WITH INDEFINITE USEFUL LIFE
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.
COMPLIANCE WITH FINANCIAL COVENANTS
The Committee challenged Management’s assumptions and analysis underlying their review
of potential impairment in respect of goodwill and intangible assets of Perutnina Ptuj and
reviewed the audit work undertaken by EY. The Committee was satisfied that no impairment
of goodwill or intangible assets with indefinite useful life was required.
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
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 improved from 3.22 to 1
as at 31 December 2022 to 2.47 to 1 as at 31 December 2023. As the Consolidated Leverage
Ratio has been below 3.0 to 1 from 31 March 2023, no restrictions have been in effect since
publication of the Group’s three-month 2023 results on 18 May 2023.
The Committee confirmed that full and proper disclosure had been made in the Financial
Statements in respect of the covenants.
EXTERNAL AUDIT
In addition to matters relating to the 2023
financial statements (see below), other key
activities addressed by the Committee during
the year included:
tender and selection process in the fourth
quarter of 2019. The Committee assessed the
effectiveness of EY following completion of
their audit of the 2022 and 2023 accounts and
concluded that it was satisfied with the quality,
integrity and effectiveness of their work.
APPOINTMENT OF EXTERNAL AUDITOR
AND ASSESSMENT OF EFFECTIVENESS
NON-AUDIT SERVICES
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
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 Committee to approve all non-
audit services in advance of the service being
provided.
Cumulative non-audit fees 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 that
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.
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132
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT AUDITOR INDEPENDENCE AND
OBJECTIVITY
The Committee has a policy and procedures
in place to ensure that 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 7 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,
remains
confident
independence and
objectivity have been and will be maintained.
the Committee
that auditor
INTERNAL AUDIT
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. Internal Audit coverage includes
resources,
all
services and responsibilities to other bodies,
with no department or business unit of the
Company being exempt from review.
the Company’s operations,
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 are
properly accounted for and 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
Internal Audit reports findings periodically to
the Committee.
At least annually, the Committee considers
the role and effectiveness of the Internal
Audit function, taking account of the resources
available and required, the experience and
expertise of personnel and the quality of
service delivered. The Committee concluded
that during 2023 the Internal Audit function
was continuing to deliver the level of service
required, notwithstanding
the operational
challenges resulting from the War.
THE COMMITTEE
ASSESSED THE
EFFECTIVENESS
OF EY FOLLOWING
COMPLETION OF THEIR
AUDIT OF THE 2022 AND
2023 ACCOUNTS
GOVERNANCE
Audit & Risk
Committee Report
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133
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT RISK MANAGEMENT AND
INTERNAL CONTROL
information, please see the Risk Management
section on pages 50 to 56 of this Annual
Report.
GOVERNANCE
Audit & Risk
Committee Report
The Committee monitors 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 responsibility for risk
management.
PAGE 114
See biography on
page 114
In spite of the ongoing disruption
and dislocation of personnel, no
incidents of significant control
failures were
weaknesses or
identified at any time during the
year.
Oscar Chemerinski
Chair, Audit & Risk Committee
02 May 2024
The annual review covers key risks that could
potentially impact the achievement of the
Group’s strategic and financial objectives. New
risks and changes 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 prioritise further risk management actions.
The Company’s approach to the identification
and assessment of risks, and the response
to risks, is based on best business practices
and
international COSO Enterprise Risk
Management standards.
As a result of the operational disruptions since
the Russian invasion of Ukraine in February
2022, there has been a necessary shift in
emphasis to prioritise management of war-
related risks. Specific priorities included the
safety of personnel, protection of Company
facilities and resolving supply chain challenges
affecting both delivery of essential supplies
and distribution of production. For further
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
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134
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT NOMINATIONS AND
REMUNERATION
COMMITTEE REPORT
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.
MEMBER
PHILIP J
WILKINSON OBE (CHAIR)
DR JOHN RICH
OSCAR CHEMERINSKI
NO OF MEETINGS
7/7
7/7
7/7
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 2023, and its approach to diversity and
inclusion are set out below.
COMPOSITION
The Committee comprises a minimum of three
Independent Non-Executive 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 (see
biography on page 115). The other members of
the Committee are the Executive Chair, John Rich
(biography on page 115), and John Grant, Senior
Independent Director (biography on page 115).
On occasion, the Committee invites the CEO, the
Chief Financial Officer or Deputy CEO, People to
attend discussions where their input is required.
MEETINGS IN THE YEAR
The Committee meets not less than twice a year.
During 2023, the Committee met nine times as they
considered business as usual matters plus other
initiatives requiring detailed discussions including
succession planning, a new Pay Philosophy and
the impact of War on the workforce, see below for
further detail. Members’ attendance is shown in
the table above four of which were held by video
conference due to the impact of the War.
GOVERNANCE
GOVERNANCE
Nominations And
Remuneration Committee
Report
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135
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT AREAS OF FOCUS IN 2023
The focus of the Committee continued to be
impacted by War. In practice this means that
over and above the corporate governance
points that the NRC normally reports on, the
Committee has been kept informed of, and
supports, certain workforce-related initiatives
established in response to the War.
The principal matters considered by the
Committee in 2023 are set out below.
BOARD COMPOSITION AND
SUCCESSION PLANNING
MHP continues to conduct a phased succession
plan to ensure replenishment of the Board
to maintain and enhance the levels of skills,
knowledge and independence whilst also being
mindful of stakeholder expectations concerning
diversity and the relevant guidelines.
As has been noted elsewhere in this Report, a
succession plan for the Chair of the Audit & Risk
Committee has been implemented post year-
end with the appointment of a new Chair and
the scheduled retirement from that Committee
and the Board of John Grant, the former ARC
Chair. For detailed information, see the Chair’s
Statement on page 7.
We will also be reviewing the membership of
the NRC in 2024 in light of Mr Grant’s intended
retirement.
The Board has determined that it will not
set specific targets with respect to Board
diversity but recognises the significant benefits
that diversity of gender, social and ethnic
backgrounds bring to Board effectiveness.
Furthermore, the Board
is committed to
promoting diversity throughout the Group.
MHP values
its distinctive culture and
its proactive approach to creating senior
management and development opportunities
for women. MHP believes that a proactive
approach to diversity and inclusion supports
innovation, continuous
improvement and
increases efficiency. The Board is mindful of the
recommendations contained within the FTSE
Women Leaders Review (diversity) and Parker
(gender) Review. With regard to women being
represented in a senior Board position, MHP’s
Chief Financial Officer is female.
The Board reviews its approach to diversity
regularly and considers that it remains diverse,
drawing on the knowledge, skills, and experience
of directors from a range of backgrounds.
It will seek to take opportunities to further
improve the diversity of the Board, where this
is consistent with the skills, experience and
expertise required at a particular point in time.
The Board currently comprises a wide range
of nationalities (Australia, Cyprus, Argentina,
Ukraine, and the United Kingdom). Further
information can be found in the Board Skills and
Diversity Matrix on page 118.
DIVERSITY AND INCLUSION
I reported last year that we were in the process
of drafting a Diversity Statement for Board
approval in 2023. This Statement sets out
our commitment to creating an equal and
inclusive working environment for people of
all backgrounds. I am pleased to confirm that
this has been approved and adopted and can be
found on the Group website here.
The table on the following page provides an
overview of the ethnic diversity of the Board and
executive management team at 31 December
2023.
GOVERNANCE
Nominations And
Remuneration Committee
Report
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136
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT ETHNIC BACKGROUND REPORTING UNDER LR9.8.6R(10)
NUMBER OF BOARD
MEMBERS
PERCENTAGE OF THE
BOARD
NUMBER OF SENIOR
POSITIONS ON THE
BOARD (CEO, CFO, SID,
AND CHAIR)
NUMBER IN
EXECUTIVE
MANAGEMENT1
PERCENTAGE
OF EXECUTIVE
MANAGEMENT
GOVERNANCE
Nominations And
Remuneration Committee
Report
WHITE BRITISH
OR OTHER WHITE
(INCLUDING MINORITY-
WHITE GROUPS)
MIXED/MULTIPLE
ETHNIC GROUPS
ASIAN/ASIAN BRITISH
BLACK/AFRICAN/
CARIBBEAN/BLACK
BRITISH
OTHER ETHNIC
GROUP, INCLUDING
ARAB
NOT SPECIFIED /
PREFER NOT TO SAY
7
-
-
-
-
1
87
-
-
-
-
13
4
-
-
-
-
-
17
-
-
-
-
-
100
-
-
-
-
-
The following table provides a gender identity overview of the Board and executive management team at 31 December 2023.
GENDER IDENTITY REPORTING UNDER LR9.8.6R(10)
NUMBER OF BOARD
MEMBERS
PERCENTAGE OF THE
BOARD
NUMBER OF SENIOR
POSITIONS ON THE
BOARD (CEO, CFO, SID,
AND CHAIR)
NUMBER IN
EXECUTIVE
MANAGEMENT1
PERCENTAGE
OF EXECUTIVE
MANAGEMENT
MEN
WOMEN
NOT SPECIFIED /
PREFER NOT TO SAY
7
1
-
87
13
-
3
1
-
15
2
-
88
12
-
1 To give a more accurate representation of the executive management team, “executive management” includes executive members of the Board of Directors.
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137
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT REMUNERATION
At the EGM at the end of 2021, shareholders
approved a remuneration policy. The document
stated that long-term incentives would be
decided “at a later date but no later than the
end of 2023”. Given the wartime environment
and the Group’s need to focus on War-related
considerations, the long-term incentives policy
and the calculation off directors’ pensionable
salaries will remain as approved in 2021.
See also the Corporate Governance Report
exceptions 36 and 38 on page 112.
I reported in 2022 that we were intending to
implement a new Pay Philosophy for Senior
Management, but that this had been slowed
by the War and we would look to make further
progress in 2023. I am pleased to advise that
all Top Management1 assessments have been
undertaken. A 360-degree programme has
recently been launched supported by a business
simulation exercise that assesses areas such
as leadership skills and strategic thinking.
The outcome
is a comprehensive report
on each participant together with personal
development plans that may be augmented by
external mentors and coaches.
The NRC supported the alignment of Senior
Manager2 Grades A and B’s pay reviews to
1 January, in line with Top Management. The
remainder of the workforce will stay on a
1 April pay review date. Senior Manager A
grades will be rewarded in US$ from 1 January
2024. MHP is committed to ensuring that
equality is preserved within its remuneration
arrangements for all its workforce throughout
the business.
POST YEAR-END
REMUNERATION CHANGES
At the EGM held on 11 March 2024, MHP’s
shareholders approved the remuneration of
four Non-Executive Directors
(Christakis
Taoushanis, Philip J Wilkinson OBE, John
Grant and Oscar Chemerinski) for 2024.
IMPACT OF WAR ON WORKFORCE
informed of workforce
The NRC stays
issues resulting from the War. It has become
increasingly difficult for MHP’s operations
in Ukraine to attract labour as 5.6-6.7 million
civilians3 have left the country since the
outbreak of War and many males aged 27-
60 have been mobilised. MHP Ukraine’s
vacancies are now higher than pre-War
numbers which is driving up wage inflation.
Post-War, the Group believes MHP may need
to recruit from outside Ukraine to fill the
vacancies. The Group’s objective is to balance
not falling behind the salary curve and thereby
losing quality people, at the same time as not
unnecessarily driving wage inflation: we will
continue to monitor the situation.
returning
I am proud to advise that a Post-Traumatic
Stress Disorder Department has been set
up to provide psychological and medical
assessments together with treatments for
colleagues
from mobilisation,
currently over 300 people. MHP has also
formed a Rehabilitation Department for its War
veterans, currently staffed with 20 personnel
including doctors and psychologists. The
Company is proud to be credited by third
parties4 as a role model in this respect. The
Group
is regarded as setting new, high,
standards that other companies are either
adopting themselves or consulting with MHP
in order to learn how they too can support
their War veterans For further information,
please see Growth Pillar 2: Our People and
their Wellbeing on page 65 and Growth Pillar 3:
Our Role in Society and our Licence to
Operate on page 76.
Philip J Wilkinson OBE
Chair, Nominations and Remuneration
Committee
02 May 2024
1 Top Management includes VPs and is the level below the Board
2 Senior Managers are the level below Top Management
3 Source: Centre for Economic Strategy research as of Sept 2023
4 The Group has been recognised as can been seen by awards voted by other businesses in Ukraine and by the Government
GOVERNANCE
Nominations And
Remuneration Committee
Report
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FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT SUSTAINABILITY AND
INTERNATIONAL AFFAIRS
COMMITTEE REPORT
THE SUSTAINABILITY AND INTERNATIONAL AFFAIRS COMMITTEE (”S&IA” OR “THE
COMMITTEE”) IS RESPONSIBLE FOR SETTING THE STRATEGY AND OBJECTIVES OF
THE GROUP’S CORPORATE RESPONSIBILITY AND INTERNATIONAL AFFAIRS EFFORTS.
GOVERNANCE
Sustainability And
International Affairs
Committee Report
MEMBER
PHILIP J
WILKINSON OBE (CHAIR)
DR JOHN RICH
OSCAR CHEMERINSKI
NO OF MEETINGS
5/5
5/5
5/5
ROLES 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
F). These Terms of Reference were adopted
in September 2023 to reflect the Board’s
increasing focus on the Group’s approach to
responsible business.
is also
the Group’s
responsible
approach
for
The Committee
to
developing
international
encompasses
affairs. This
MHP’s relationships with key international
governments,
including
stakeholders
regulators, industry organisations, peer group
companies, capital providers, suppliers and
customers.
COMPOSITION
addresses
Committee
specifically,
The
strategy,
policy, governance, management systems,
performance and performance measurement,
target setting, reporting and communications
relating to sustainability and international
affairs matters. More
the
Committee is responsible for developing the
Group’s approach to sustainability. It aligns with
the United Nations Sustainable Development
Goals and is managed by applying six growth
pillars: Stakeholder Engagement; Our People
and Their Wellbeing; Our Role in Society
and Our Licence to Operate; Responsible
Food Production; Business Conduct; and The
Planet.
in
The Committee comprises
the Chair of
the Board of MHP and at least two other
Non-Executive Directors. The Chair of
the Committee is Philip J Wilkinson OBE.
Mr Wilkinson has significant and relevant
experience
agricultural
politics, has historically chaired agricultural
sector boards, and holds several non-executive
directorships and advisory positions in global
agribusinesses (see biography on page 115). The
other members of the Committee are Dr John
Rich (see biography on page 115) and Oscar
Chemerinski (see biography on page 116).
international
The Committee has the right to invite any other
director or employee to attend meetings as it
considers appropriate. Andriy Bulakh, Deputy
CEO - People, is often invited to attend.
MEETINGS IN THE YEAR
The Committee meets at least quarterly each
year. Five meetings were held during the year,
two of which were held by video conference
due to the impact of the War.
OUR APPROACH TO
RESPONSIBLE BUSINESS
The Group’s approach to responsible business
is a key tenet of its strategy and of the Group’s
transformation to a world-leading sustainable
food producer. Whilst never welcomed,
adversity often presents opportunities, and the
Group has capitalised upon these to make rapid
advances over the past 18 months in a broad
range of areas including energy usage and the
transformation of waste into further processed
stages of biofuel. The Committee is also proud
of the continued evolution of support provided
to our workforce and their families which
reflects our growing business culture.
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FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT
AREAS OF FOCUS IN 2023 AND
ACHIEVEMENTS
SUSTAINABILITY
We are increasingly embedding ESG into our
operations as demonstrated by developments
during the year. These are important steps in
the right direction and highlight the Group’s
commitment to responsible business.
Carbon Trust
In my 2022 Report, I highlighted that the Group
was awaiting validation from the Carbon Trust
and I am delighted to report that we received
validation status on 11 September 2023. The
Group was advised that our poultry emissions
are world-leading. The Carbon Trust particularly
referenced our poultry production due to our
ability to source lower carbon-burdened protein
ingredients through our own supply chain.
For more information on our transition to net
zero including our first steps towards our goal
of Group-wide science-based target setting,
see the TCFD Disclosures on page 102 and
Growth Pillar 6 on page 92. This Report marks
the second year we have reported in line with
the TCFD framework.
Responsible food production
Animal welfare remains a top priority. We are
committed to reducing the use of antibiotics
in our production processes to further improve
the world-class safety standards which are
already applied by all the Group’s businesses.
During the year, we achieved and ISCC
certification at a combined total of ten of our
sites for our sustainable farming practices.
For more information on our approach to
responsible food production see Growth Pillar
4 on page 78.
While MHP has not been directly affected,
outbreaks of Avian Influenza (“AI”) remain a
clear and present danger for the global poultry
inter-governmental
industry. Coordinated
remains
management of these outbreaks
critical.
Ukraine’s accession to the EU would potentially
enable MHP to contribute a more sustainable
supply chain solution to European soybean
requirements.
in
Governance
To date the sustainability challenge has
been embraced by all involved which is
so encouraging
the current difficult
climate. This can be seen in the decision to
establish an operational sub-committee to
the S&IA Committee, the goal of which will
be to consolidate the importance of ESG
and provide the vision over the medium- to
long-term; the centralisation of our Ecology
team, which is developing governance and
working with municipalities; and the increasing
incorporation of ESG-related OKRs (Objectives
& Key Results) into management performance
targets that will be measured at their annual
performance reviews.
The S&IA Committee has supported the
formation of a Climate Risk Management
Group comprising Senior Management
to
encourage buy-in and contribute to the
Group’s sustainability goals and targets. This
is a new arena for many colleagues who are
also managing their day-to-day responsibilities
amidst the stresses and challenges of War. The
importance of departmental ownership will
be pivotal to the success of this initiative. To
expedite this exercise, experts from within
MHP will be actively involved and will include
representatives from environment, climate,
production, finance, and agronomy.
reviewed
the ESG
The Committee has
regulatory requirements for the next five-year
period. These include the latest developments
in global standards, the Corporate Sustainability
Reporting Directive (“CSRD”) together with
its reporting timetable, and the formation of a
Sustainable Standards Board. We are working
with our auditors towards the implementation
of the requirements of CSRD from the Annual
Report for the year ended 31 December 2025
onwards.
Training and development
Since the formation of the S&IA Committee, we
have undertaken two training and development
programmes with Board and Committee
members covering best practice governance
structures and
for
reporting
addressing sustainability and ESG matters at
Committee, Board and Senior Management
Team level. These can then be used to
transparently communicate to stakeholders
across MHP’s suite of investor and other
communication vehicles including this Report.
frameworks
INTERNATIONAL AFFAIRS
Since the invasion of Ukraine, the Group has
faced challenges of doing business that could
not have been foreseen, with historic transport
routes being destroyed. This has created
new challenges and opportunities. Our key
objective is to maintain existing sales markets
as well as to work to find new opportunities for
the sustainable future of the Group. We are
focussing our attention on strengthening the
Group’s position in the domestic market and
the international arena.
The EU and the UK have been supportive
of Ukraine through the struggle by awarding
Autonomous Trade Measures ("ATMs") to
preserve preferential trade, meaning that
customs duties, quotas and trade defence
mechanisms are suspended on Ukrainian
exports to the EU and the UK. The importance
of maintaining these agreements is a powerful
tool for enhancing the resilience of the
Ukrainian economy. The agreements are due to
be reviewed by the EU by May 2025 and by the
UK Government in 2 years’ time.
Relations between Ukraine and the United
Kingdom remain as strong as ever. Discussions
with a view to the continuation of the Free Trade
Agreement for 2024 are in advanced stages.
GOVERNANCE
Sustainability And
International Affairs
Committee Report
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140
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT We will continue our engagement with the
Ukrainian Government and EU officials in
Brussels with a view to the continuance of
this initiative. Over recent weeks, however,
we have witnessed an element of resistance
from a number of EU agricultural trade bodies
culminating in a meeting on 10 January 2024
between a number of trade bodies and EU
Commissioner Wojciechowski. At this meeting,
the trade bodies expressed their concerns that
EU markets are being detrimentally affected by
the liberalisation of trade and requested that
the Commission revisit this initiative to lessen
the burden on EU producers.
We will make every effort to provide accurate
information to the Ukrainian Government
for onward distribution to the Commission
technical
to ensure
misunderstandings from a volume perspective.
there are no
that
It is encouraging to note that Ukrainian EU
Candidacy Status was advanced to Accession
Status from December 2023 and that open
accession negotiations are now underway.
It was encouraging also to learn that the EU
Council commended the substantial progress
Ukraine has made towards the objectives
underpinning its candidate status, despite the
fact that it is a country under attack.
GOVERNANCE
Sustainability And
International Affairs
Committee Report
commercial
I am pleased to report that relations with the
Kingdom of Saudi Arabia are at a strategic
partner level resulting in our broiler parent
stock
becoming
operational from September 2023. First broiler
hatching eggs were laid at the end of February
2024 whilst additional stocks are being shipped
monthly as new farms come on stream. We are
very optimistic for the future of this commercial
initiative.
venture
The Group is committed to fully engaging
Ukrainian Embassies abroad to assist
in
establishing a network of contacts in third
countries that are of interest to us. MHP
will also participate in foreign visits with the
Ministry of Foreign Affairs to help expedite
these objectives.
Philip J Wilkinson OBE
Chair, Sustainability and
International Afairs Committee
02 May 2024
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141
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT MANAGEMENT REPORT
GOVERNANCE
Management Report
THE INFORMATION WITHIN THIS REPORT 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 (CHAPTER 113).
MHP’S PURPOSE
and
food
sustainable
MHP provides high quality,
proteins,
culinary
products
solutions to its customers in a sustainable and
responsible manner. MHP’s customer-centric
and innovation-driven approach drives value
creation. The Group continues to provide its
products worldwide whilst predominantly
focussing on food security and food supply
to the population of Ukraine notwithstanding
the current risky and challenging operational
environment. For further information see the
We are MHP section on page 14.
PRINCIPAL ACTIVITIES AND
REVIEW OF THE BUSINESS
MHP Group is a leading food and agrotech
company that has, since the outbreak of the War
in Ukraine in February 2022, played a leading
role in supporting the Ukrainian population
with access to food during these terrible times.
Moreover, despite logistics challenges, MHP
continues to serve more than 70 countries of the
world with chicken meat, grains and vegetable
oils, in many cases at its own risk.
with the processing of biological production
waste
into clean energy/fuel and organic
fertiliser.
In order to accurately reflect the diverse
nature of the Group's business operations and
improve the granularity of reporting, MHP has
implemented changes to its presentation of
business segment information.
These changes include:
→ consolidation of all meat production
in the Poultry and Related
operations
Operations Segment;
→ the introduction of a new Vegetable Oil
Operations Segment, which
represents
production and sales of vegetable oil and
related products; and
→ combining grain operations and milk cattle
in the Agriculture Operations
farming
Segment.
Detailed
information on the Group’s four
business segments and the business model
is set out in the Our Business Model section
on page 16 and the Financial and Operational
Review on page 35.
MHP in Ukraine and Perutnina Ptuj in the
Balkans operate vertically integrated business
models, owning and operating each of the key
stages of the chicken production process. The
business models support the circular economy
During 2022-2023, the principal activities
of the Group remained unchanged year-on-
year, although they were clearly significantly
affected by the War in Ukraine. Until the War
ceases, MHP’s objectives in Ukraine are to
continue operating its businesses as effectively
as possible and to support the population with
access to food and nutrition. MHP’s long-term
strategic objectives remain unchanged and are
set out in the Strategy & Purpose section on
page 18.
information
the Group’s
Detailed
performance during the year can be found in the
KPIs section and the Financial and Operational
Review on pages 35 to 46 respectively.
on
FUTURE DEVELOPMENTS
The Executive Management team believes
that, following the cessation of War, there will
be ample opportunities for growth at MHP
Ukraine, both internationally and domestically,
with medium- to long-term market dynamics
remaining favourable.
Perutnina Ptuj, which has been relatively
unaffected by the War in Ukraine, continues to
operate in accordance with its strategy, growth,
and expansion plans.
Information on the Group’s strategy and outlook
may be found in the Strategy and Purpose
section and Chair’s Statement on pages 18 and
7 respectively.
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142
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT SUBSEQUENT EVENTS
significant
As a result of the ongoing War, MHP has
and
experienced
operational
its Ukraine-based
in
businesses which may have continued in 2024
and will continue until the War ends.
disruption
issues
All subsequent events are disclosed in the
Financial and Operational Review section on
page 35 and in Note 40 on page 208 of this
Report.
driven by our innovation function which is
integrated across all business operations.
MHP’s focus on innovation spans three broad
categories: product development; services; and
business models and partnerships.
Many initiatives are being developed and a small
selection includes ECO Energy (alternative
energy projects), Culinary Centre (new product
development), SAP rollout in PP countries of
operation, and precision farming projects like
the GeoPard project.
DIVIDEND POLICY
BUSINESS REVIEW AND RISKS
No dividend is likely to be paid whilst the War
in Ukraine continues. This is due to the risks
and uncertainties the War has created, the
resulting need to preserve liquidity to support
MHP’s ongoing business operations, and MHP’s
obligations in connection with supporting and
sustaining the population of Ukraine.
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 35, the Risk Management section
on page 50, and the Audit & Risk Committee
Report on page 127.
By way of background, 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.
RESEARCH AND DEVELOPMENT
Sustaining significant investment 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. It
also underpins the development of the Group’s
responsible business approach, its sustainability
commitments, the workforce, the environment,
and animal welfare.
During the year, despite the
War, MHP
continued to invest, where possible, in R&D,
NON-FINANCIAL REPORTING
AND ESG DIALOGUE
MHP initiated corporate responsibility or non-
financial reporting in 2015 and issued a separate
Non-Financial Report annually until 2021. This
Report is MHP’s second integrated report and
includes information for all MHP’s material
stakeholders. For clarity, this Integrated Report
includes both MHP Ukraine and PP financial,
operational and limited amount of PP non-
financial data. However, PP will publish its
own standalone Non-Financial Report in June
(https://perutninaptujgroup.com/en/reports).
This non-financial reporting applies the latest
applicable Global Reporting Initiative’s (“GRI”)
(Core Compliance).
reporting
MHP has historically participated in a variety
of ESG research exercises conducted by
research agencies and
specialist
framework
investor
GOVERNANCE
Management Report
readily responded to 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. In the
meantime, ESG agencies continue to publish
their own self-generated research on the Group.
about
the EU CSRD
MHP is in ongoing dialogue with its professional
reporting
advisors
requirements and is preparing to comply with its
related disclosure obligations. MHP’s systems
transformation to align them to produce this
information is being initiated in 2024 ahead of
producing the first CSRD-compliant report in
2026 (covering the year ended 31 December 2025).
This is in line with the European Commission’s
requirements published on 31 July 2023.
FINANCIAL REPORTING
PROCESS
MHP has a comprehensive financial review
includes a detailed annual
cycle which
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
process. There is a comprehensive system of
financial reporting, with monthly performance
reports and regular forecast updates presented
to the Board of Directors.
At Group level, MHP has in place common
accounting policies and procedures on financial
reporting and closing. 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.
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FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT BRANCHES
CHANGES TO THE BOARD
SHARE OPTIONS
GOVERNANCE
Management Report
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.
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.
MHP does not have any branches.
SHARE CAPITAL
The authorised share capital as of 31 December
2023 and 2022 was EUR 221,540 thousand
represented by 110,770,000 shares with par
value of EUR 2 each.
As at 31 December 2023, 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 2023 (Note 39, page 208).
DIRECTORS AND THEIR
INTERESTS
Biographies for the Directors who served during
the year ended 31 December 2023 are set out
on page 114.
Details of Directors’ Interests in the Company’s
GDRs are found on page 125 of the Corporate
Governance Report. Note 1 to the Financial
Statements on page 160 reports the details
of the controlling interest in the Company’s
ordinary shares.
POWERS OF DIRECTORS
The Directors are responsible 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.
Oscar Chemerinski joined the Board in 2023 as
an independent Non-Executive Director. There
were no other changes to the composition of
the Board during the year.
As noted in the Chair’s Statement on page 7,
post year-end, the Audit & Risk Committee
appointed a new Chair. The former Chair is
expected to retire from the Board at the AGM
in June 2024.
COMPENSATION OF KEY
MANAGEMENT PERSONNEL
Total compensation of
the Group’s key
management personnel, included primarily in
selling, general and administrative expenses in
the accompanying consolidated statements of
profit and loss and other comprehensive income,
amounted to US$ 23.6 million and US$ 15.3
million for the years ended 31 December 2023
and 2022 respectively. Compensation of key
management personnel consists of contractual
salary and performance bonuses paid.
Key management personnel totalled 21 and
20
individuals at 31 December 2023 and
2022 respectively, including four and three
independent non-executive directors at 31
December 2023 and 2022 respectively.
The table below shows the total remuneration
of Board members.
DIRECTOR
Executive Chair
NEDs
2023
2022
US$000
US$000
588
771
571
597
Executive Directors
8,249
6,164
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FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT AUDITORS’ REMUNERATION AND
INDEPENDENCE
DISCLOSURE OF INFORMATION
TO AUDITORS
SECTION
PAGE NUMBER
GOVERNANCE
Management Report
Strategy & Purpose
Our Business Model
KPIs
Financial and Operational
Review including Segment
Information
Risk Management
Alternative Performance
Measures
Corporate Governance Report
18
16
28
35
50
47
111
The Company has chosen, in accordance with
Section 414 C(11) of the UK Companies Act
2006, and as noted in this Management Report,
to include certain matters in its Strategic Report
that would otherwise be required to be disclosed
in this Management Report. A non-financial and
sustainability information statement in line with
Section 414CA and 414CB of the UK Companies
Act 2006 can be found on page 102.
Remuneration to the auditors, included in the
Services above, amounted to US$ 1.2 million
for the year ended 31 December 2023 (2022:
US$ 0.9 million). This consists of both audit and
non-audit services, with the statutory audit fees
amounting to US$ 0.9 million for the year ended
31 December 2023 and other assurance services
in the amount of US$ 0.2 million (2022: US$ 0.7
million and US$ 0.2 million respectively), while
the rest of fees relate to tax advisory and other
non-audit services.
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 Committee
and the Chair. Further details can be found in
the Audit & Risk Committee Report on page 127.
GOING CONCERN
In 2023, the Group has continued its operations
in an environment severely affected by the
Russian invasion of Ukraine since 24 February
2022. Having reviewed 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 to adopt the going concern
basis in preparing the financial statements of
the Group.
As far as each Director is aware, all 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
or incur any political expenditure during the
year.
ADDITIONAL DISCLOSURES
If a change in control occurs following receipt
of a takeover bid then according to the terms of
the Senior Notes, the Company may be required
to offer to repurchase the Senior Notes from
holders. 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
resignation, purported
redundancy or otherwise) that would occur
because of a takeover bid.
through
OTHER RELEVANT INFORMATION
WITHIN THIS REPORT
Other information that is relevant to the
Management Report, and which is incorporated
by reference into this Report, can be located on
the pages recorded in the following table.
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145
FINANCIALSTATEMENTSSHAREHOLDERINFORMATIONSTRATEGIC REPORT pp. 147-208
FINANCIAL
STATEMENTS
Statement of the Board of Directors
Independent Auditor’s Review
Consolidated Financial Statements
Notes to Financial Statements
STRATEGIC
REPORT
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GOVERNANCE
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SHAREHOLDER
INFORMATION
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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 2023 .......................................................................................... 148
INDEPENDENT AUDITOR’S REPORT................................................149
CONSOLIDATED FINANCIAL STATEMENTS
AS OF AND FOR THE YEAR ENDED 31 December 2023
Consolidated statement of profit or loss and other comprehensive
income ................................................................................................................155
Consolidated statement of financial position.....................................157
Consolidated statement of changes in equity ................................... 158
Consolidated statement of cash flows ...................................................159
Notes to the Consolidated financial statements .............................. 160
1. Corporate information ......................................................................... 160
2. Summary of material accounting policies..................................... 161
3. Changes in the group structure .........................................................172
4.
Critical accounting judgments and key sources
of estimation uncertainty ....................................................................172
5. Segment information ............................................................................175
6. Revenue...................................................................................................... 177
7. Cost of sales .............................................................................................178
8. Selling, general and administrative expenses .............................178
9. Other operating income ......................................................................178
10. Other operating expenses ..................................................................179
11. Deferred income .....................................................................................179
12. Finance income .......................................................................................179
13. Finance costs............................................................................................179
14. Income tax .................................................................................................179
15. Property, plant and equipment ......................................................... 181
16. Right-of-use assets ............................................................................... 184
17. Intangible assets .................................................................................... 185
18. Goodwill .................................................................................................... 186
19. Non-current financial assets..............................................................187
20. Biological assets .................................................................................... 188
21. Inventories ................................................................................................ 191
22. Agricultural produce ............................................................................. 191
23. Taxes recoverable and prepaid ......................................................... 191
24. Trade accounts receivable .................................................................. 191
25. Other current financial assets ...........................................................194
26. Cash and cash equivalents ..................................................................194
27. Shareholders’ equity .............................................................................194
28. Non-controlling interests ...................................................................195
29. Bank borrowings .....................................................................................197
30. Bonds issued ............................................................................................199
31. Lease liabilities .......................................................................................200
32. Other current liabilities .......................................................................201
33. Related party balances and transactions.......................................201
34. Operating environment ......................................................................202
35. Contingencies and contractual commitments ...........................203
36. Fair value of financial instruments .................................................203
37. Risk management policies .................................................................204
38. Pensions and retirement plans ......................................................... 207
39. Earnings per share .................................................................................208
40. Subsequent events ...............................................................................208
41. Authorization of the consolidated financial statements .......208
FINANCIAL
STATEMENTS
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147
GOVERNANCESHAREHOLDER INFORMATIONSTRATEGIC REPORT
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 2023
FINANCIAL
STATEMENTS
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 2023
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 material accounting policies.
In preparing the consolidated financial statements, the
Board of Directors is responsible for:
→ properly selecting and consistently applying
accounting 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
transactions, other events and conditions on the
Group’s consolidated financial position and financial
performance;
→ making an assessment of the Group’s ability to
continue 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
reporting, throughout the Group;
→ maintaining adequate accounting records that
are sufficient 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
compliance 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 2023 were
authorized for issue by the Board of Directors on 02
May 2024.
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 2023, hereby declare that to the
best of our knowledge:
a) the consolidated financial statements, prepared in
accordance with International Financial Reporting
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.
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
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148
GOVERNANCESHAREHOLDER INFORMATIONSTRATEGIC REPORT INDEPENDENT AUDITOR’S REPORT
FINANCIAL
STATEMENTS
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 2023, 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 material accounting
policy information.
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
2023, 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.
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.
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. These conditions, along with other matters
as set forth in Notes 2 and 34 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.
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.
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149
GOVERNANCESHAREHOLDER INFORMATIONSTRATEGIC REPORT INDEPENDENT AUDITOR’S REPORT
FINANCIAL
STATEMENTS
Independent
Auditor’s Report
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
REVENUE RECOGNITION
The total amount of revenue recognised in 2023 was USD 3,021 million.
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 management judgment is involved in the interpretation of contract terms
and timing of revenue recognition, in particular – close to the end of the
reporting period.
Additionally, revenue is one of the key performance measures of the Group,
giving rise to a potential incentive for revenue to be recognized prior to control
over goods and services been transferred, to achieve performance targets.
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 the revenue recognition process.
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
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150
GOVERNANCESHAREHOLDER INFORMATIONSTRATEGIC REPORT INDEPENDENT AUDITOR’S REPORT
FINANCIAL
STATEMENTS
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 2023, the carrying value of biological assets was USD 187 million,
out of which USD 171 million was classified within current assets and USD 16
million 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 2023, the carrying value
of agricultural produce was USD 370 million.
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 as described above, including those based on the unobservable
inputs, and significant level of management judgement, and, therefore, is
inherently susceptible to the risk of material misstatement.
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 20 and 22 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 IAS 41 and IFRS 13.
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 analysed costs
required to sell biological assets and how they are taken into consideration in the
calculation of fair value less cost to sell. 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 the 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.
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151
GOVERNANCESHAREHOLDER INFORMATIONSTRATEGIC REPORT INDEPENDENT AUDITOR’S REPORT
FINANCIAL
STATEMENTS
Independent
Auditor’s Report
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
IMPAIRMENT OF GOODWILL AND INTANGIBLE ASSETS WITH INDEFINITE USEFUL LIFE
As at 31 December 2023, the Group had significant balance of goodwill
and intangible assets with indefinite useful life of USD 62 million and USD
31 million respectively. As required by IAS 36, management performed an
impairment test for 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 18 to the consolidated
financial statements.
Our procedures included assessment of the assumptions and methodologies used
by the Group in its value-in-use calculation of cash-generating units.
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.
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152
GOVERNANCESHAREHOLDER INFORMATIONSTRATEGIC REPORT INDEPENDENT AUDITOR’S REPORT
FINANCIAL
STATEMENTS
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 2023 Annual Report, but
does not include the consolidated financial statements
and our auditor’s report thereon.
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
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.
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.
→ 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.
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153
GOVERNANCESHAREHOLDER INFORMATIONSTRATEGIC REPORT INDEPENDENT AUDITOR’S REPORT
FINANCIAL
STATEMENTS
Independent
Auditor’s Report
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.
Auditor’s Responsibilities for the Audit of the
Consolidated Financial Statements (сontinued)
→ 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.
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.
Andreas Avraamides
Certified Public Accountant
and Registered Auditor
for and on behalf of
Ernst & Young Cyprus Limited
Certified Public Accountants
and Registered Auditors
Nicosia, 2 May 2024
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154
GOVERNANCESHAREHOLDER INFORMATIONSTRATEGIC REPORT FINANCIAL
STATEMENTS
Consolidated
Financial Statements
CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
(in millions of US dollars, unless otherwise indicated)
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
Profit/(loss) before tax
Income tax (expense)/benefit
Profit/(loss) for the year
The accompanying notes on the pages 160 to 208 form an integral part of these consolidated financial statements
NOTES
5, 6
5
7
8
9
10
18
12
13
37
14
2023
3,021
(48)
(2,334)
639
(270)
19
(49)
-
339
37
(163)
(40)
173
(31)
142
2022
2,642
(128)
(1,906)
608
(254)
13
(83)
(29)
255
6
(155)
(365)
(259)
28
(231)
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155
GOVERNANCESHAREHOLDER INFORMATIONSTRATEGIC REPORT CONSOLIDATED STATEMENT OF PROFIT OR LOSS
AND OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2023
(in millions of US dollars, unless otherwise indicated)
NOTES
2023
2022
FINANCIAL
STATEMENTS
Consolidated
Financial Statements
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
Total comprehensive income/(loss) for the year
PROFIT/(LOSS) ATTRIBUTABLE TO:
Equity holders of the Parent
Non-controlling interests
TOTAL COMPREHENSIVE INCOME/(LOSS) ATTRIBUTABLE TO:
Equity holders of the Parent
Non-controlling interests
EARNINGS/(LOSS) PER SHARE
15
4,14
28
-
-
-
(20)
(20)
122
144
(2)
142
125
(3)
122
351
(81)
(59)
(326)
(115)
(346)
(226)
(5)
(231)
(337)
(9)
(346)
Basic and diluted earnings/(loss) per share (USD per share)
39
1.35
(2.11)
On behalf of the Board:
Chief Executive Officer
Yuriy Kosyuk
Chief Financial Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 160 to 208 form an integral part of these consolidated financial statements
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156
GOVERNANCESHAREHOLDER INFORMATIONSTRATEGIC REPORT
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
FOR THE YEAR ENDED 31 DECEMBER 2023
(in millions of US dollars, unless otherwise indicated)
NOTES
2023
2022
NOTES
2023
2022
FINANCIAL
STATEMENTS
Consolidated
Financial Statements
15
16
17
18
20
19
14
21
20
22
25
23
24
26
27
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
Equity attributable to equity holders
of the Parent
NON-CURRENT LIABILITIES
Bank borrowings
1,885
1,856
Bonds issued
248
223
Lease liabilities
75
62
16
8
2
2
80
60
21
8
3
2
Deferred income
Deferred tax liabilities
Other non-current liabilities
CURRENT LIABILITIES
Bank borrowings
2,298
2,253
Bonds issued
333
171
370
414
177
361
Lease liabilities
Trade accounts payable
Contract liabilities
Interest payable
28
30
Other current liabilities
29
30
31
11
14
29
30
31
29, 30
32
234
891
180
36
123
5
118
1,383
164
37
124
4
1,469
1,830
145
348
76
142
18
22
99
850
176
-
65
123
31
42
96
533
34
30
186
436
22
69
183
300
1,588
3,886
1,556
3,809
285
(45)
174
706
285
(45)
174
792
1,793
1,559
(1,356)
(1,337)
1,557
1,428
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
2,319
3,886
2,363
3,809
On behalf of the Board:
Chief Executive Officer
Yuriy Kosyuk
Chief Financial Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 160 to 208 form an integral part of these consolidated financial statements
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Non-controlling interests
28
10
18
Total equity
1,567
1,446
GOVERNANCESHAREHOLDER INFORMATIONSTRATEGIC REPORT
FINANCIAL
STATEMENTS
Consolidated
Financial Statements
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2023
(in millions of US dollars, unless otherwise indicated)
ATTRIBUTABLE TO EQUITY HOLDERS OF THE PARENT
SHARE
CAPITAL
TREASURY
SHARES
ADDITIONAL
PAID-IN
CAPITAL
REVALUATION
RETAINED
TRANSLATION
RESERVE
EARNINGS
RESERVE
NON-
TOTAL
CONTROLLING
TOTAL EQUITY
INTERESTS
Balance at 1 January 2022
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
285
(45)
174
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance at 31 December 2022
285
(45)
174
Profit/(loss) for the year
Other comprehensive loss
Total comprehensive income/(loss) for the year
Transfer from revaluation reserve
to retained earnings
Non-controlling interests arising
in a business combination
Translation differences on revaluation reserve
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance at 31 December 2023
285
(45)
174
812
-
208
208
(50)
-
(178)
792
-
-
-
(59)
-
(27)
706
1,557
(226)
-
(226)
50
-
178
1,559
144
-
144
59
4
27
(1,018)
-
(319)
(319)
-
-
-
1,765
(226)
(111)
(337)
-
-
-
(1,337)
1,428
-
(19)
(19)
-
-
-
144
(19)
125
-
4
-
1,793
(1,356)
1,557
29
(5)
(4)
(9)
-
(2)
-
18
(2)
(1)
(3)
-
(5)
-
10
1,794
(231)
(115)
(346)
-
(2)
-
1,446
142
(20)
122
-
(1)
-
1,567
On behalf of the Board:
Chief Executive Officer
Yuriy Kosyuk
Chief Financial Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 160 to 208 form an integral part of these consolidated financial statements
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GOVERNANCESHAREHOLDER INFORMATIONSTRATEGIC REPORT
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2023
(in millions of US dollars, unless otherwise indicated)
NOTES
2023
2022
NOTES
2023
2022
FINANCIAL
STATEMENTS
Consolidated
Financial Statements
173
(259)
Purchases of property, plant and equipment
(212)
(159)
INVESTING ACTIVITIES
OPERATING ACTIVITIES
Profit/(loss) before tax
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
5
5
Change in allowance for expected
credit losses 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
Finance income
Finance costs
Released deferred expense
Foreign exchange loss
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 current financial assets
Change in taxes recoverable and prepaid
Change in trade accounts receivable
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
169
48
159
128
10
38
15, 18
-
29
13
2
(37)
163
(1)
40
567
66
(2)
(55)
-
4
35
(3)
(13)
(2)
31
628
11
(178)
(23)
438
1
(6)
155
(1)
365
609
(161)
(54)
(60)
(3)
(3)
(24)
(60)
(10)
21
14
269
3
(126)
(8)
138
Proceeds from disposals of property, plant
and equipment
Purchases of intangible assets
Purchases of non-current biological assets
Prepayments and capitalized initial direct
costs under lease contracts
Government grants received
Withdrawals/(investments) in short-term
deposits
Loans provided
Loans repaid
Divestments/(Investments) in financial assets
7
(4)
(3)
(6)
1
6
(10)
2
(9)
5
(6)
(3)
(12)
4
(1)
(5)
3
-
Net cash flows used in investing activities
(228)
(174)
FINANCING ACTIVITIES
Proceeds from bank borrowings
Repayment of bank borrowings
Repayment of bonds issued
Repayment of lease liabilities
Dividends paid by subsidiaries
to non-controlling shareholders
Consent solicitation payment
Net cash flows used in/(from) 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
26
26
On behalf of the Board:
280
(208)
(128)
(28)
(2)
-
(86)
124
12
300
436
232
(160)
-
(14)
-
(1)
57
21
4
275
300
Chief Executive Officer
Yuriy Kosyuk
Chief Financial Officer
Viktoriia Kapeliushna
The accompanying notes on the pages 160 to 208 form an integral part of these consolidated financial statements
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GOVERNANCESHAREHOLDER INFORMATIONSTRATEGIC REPORT
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”), 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, vegetable oil, and agriculture
operations. The Group’s poultry and related operations
integrate all functions related to chicken production,
including hatching, fodder manufacturing, raising
chickens to marketable age (“grow-out”), processing
and sale of frozen and chilled chicken meat, as well
as processed meat products. Agriculture operations
comprise producing and selling grains and cattle
breeding for milk production. Vegetable oil operations
include the production and sale of vegetable oil, cake,
and husk. As of 31 December 2023 the Group employed
33,169 people (31 December 2022: 31,701 people).
The primary subsidiaries, the principal activities of the
companies forming the Group and the Parent’s effective
ownership interest as of 31 December 2023 and 2022
were as follows:
NAME
COUNTRY OF
REGISTRATION
YEAR
ESTABLISHED/
ACQUIRED
PRINCIPAL
ACTIVITIES
31
DECEMBER
2023
31
DECEMBER
2022
FINANCIAL
STATEMENTS
MHP Lux S.A.
Luxembourg
MHP
Ukraine
2018
1998
Ukraine
1998
Myronivsky Plant of
Manufacturing Feeds
and Groats
Vinnytska
Ptakhofabryka
Peremoga Nova
Oril-Leader
Myronivska Pticefabrika
Starynska
Ptakhofabryka
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Zernoprodukt MHP
Ukraine
Katerinopilskiy Elevator
Ukraine
2005
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
MHP Food UK Limited
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Ukraine
Slovenia
United Arab
Emirates
Netherlands
Netherlands
Saudi Arabia
United
Kingdom
Finance Company
100.0%
100.0%
Management,
marketing and sales
Fodder and vegetable
oil production
99.9%
99.9%
88.5%
88.5%
Chicken farm
100.0%
100.0%
Breeder farm
Chicken farm
Chicken farm
99.9%
99.9%
99.9%
99.9%
99.9%
99.9%
Breeder farm
100.0%
100.0%
Grain cultivation
99.9%
99.9%
Fodder production
and grain storage,
vegetable oil
production
Grain cultivation
Grain cultivation
99.9%
99.9%
99.9%
99.9%
99.9%
99.9%
Grain cultivation
99.9%
99.9%
Meat processing
Grain cultivation
Grain cultivation
Grain cultivation
Poultry production
Trading in vegetable
oil and poultry meat
79.9%
51.0%
51.0%
100.0%
100.0%
79.9%
51.0%
51.0%
100.0%
100.0%
100.0%
100.0%
Trading in poultry meat
100.0%
Trading in poultry meat
100.0%
100.0%
100.0%
Trading in poultry meat
100.0%
75.0%
2011
1999
2003
2004
2003
2005
2006
2006
2010
2008
2013
2013
2015
2019
2016
2014
2018
2018
2021
Trading in poultry meat
100.0%
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).
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT 2. SUMMARY OF MATERIAL
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.
The financial statements of the subsidiaries of the Group
are prepared for the same reporting period as the parent,
using consistent accounting policies. Adjustements are
made to align any dissimilar accounting policies, that
may exist, with the Group`s accounting policies.
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
specific 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
In 2023, the Group has continued its operations in an
environment severely affected by the Russian invasion
of Ukraine since 24 February 2022. In its analysis of
the observable impact of the War and other factors
on its business during the year ended 31 December
2023 and up to the date of authorization to issue
these consolidated financial statements, the Group
considered, among others, the following key events
and conditions:
→ the Group’s poultry production facilities have not
suffered any physical damage and are operating
at full capacity; the only exception is “Ukrainian
Bacon" (meat processing facilty with 34,000 tonnes
annual capacity located in the Konstiantynivka) that
was temporarily suspended due to its proximity to
the front line and continuing military attacks in the
Donetsk region;
→ production and sale volumes have already returned to
pre-war levels in H2 2022 despite a limited capacity
of existing delivery routes and active hostilities in
the southern and eastern regions of Ukraine. As a
result, as of 31 December 2023 and 2022, the Group
operated at its normal capacity utilization after
decline in production during H1 2022;
→ from November 2022 to February 2023, Russia’s
attacks on Ukrainian power generation and
distribution infrastructure led to severe power
outages in Ukraine. These caused temporary
disruption of oilseed processing, poultry and silo
operations during this period;
→ certain inventories and biological assets were
damaged and written off as a result of the military
actions of Russian invaders, as presented in Note 34
Operating environment;
→ for the period after the Russian invasion of Ukraine
more than 2,380 MHP employees joined the
Ukrainian military forces and territorial defence;
→ since the beginning of the war, the Group has
faced the logistic challenges such as export routes`
disruption, increased transportation costs and high
security risks as described in Note 34. The Group
continuously develops and advances its logistic
routes to sustain stable export shipments to the
customers in the current environment;
→ 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 operational and supply chain perspective, and
continue to produce at full capacity;
In response to the above challenges, the Group has:
→ optimized utilization of production facilities to meet
domestic demand and export orders;
→ established alternative export routes, including by
road and rail, to address the logistical issues caused
by the war and other logistic challenges;
→ equipped its key assets with diesel generators and
continued to operate two biogas facilities to produce
electricity, industrial steam and heating to mitigate
the impact of power outages on its business;
→ in view of continuing War-related uncertainties and
the resulting need to preserve liquidity to support the
Group’s ongoing business operations, the Directors
decided not to declare a final dividend for the 2022
financial year. No dividend has been declared for
the year ended 31 December 2023;
→ taking into account its debt maturity profile, the Group
shaped its debt management process in such a way
as to ensure timely servicing of its bonds and other
borrowings as they fall due. In particular, as described
in Note 29, in October 2023, the Company signed
the agreements with three international financial
institutions for USD 400 million facilities to refinance
the bonds maturing in May 2024. Up to the date of
authorization to issue these consolidated financial
statements, the Company early redeemed USD 289
million out of total USD 500 million (Note 30).
Management has prepared adjusted financial forecasts,
including cash flow projections, for the twelve-month
period starting on the date of approval of these
interim condensed consolidated financial statements.
The adjusted forecasts consider potential likely and
downside scenarios for the operations resulting from
the War and other factors described above. The Group
manages its operations by continuously monitoring the
Group`s obligations under the existing debt agreements
and taking required measures to service its debts on
time and in full.
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, in combination
with the influence of other described above factors on
the main assumptions underlying management forecasts,
the Directors have concluded that a material uncertainty
exists, which may cast significant doubt on the Group’s
ability to continue as a going concern, in which case the
Group may be unable to realize its assets and discharge
its liabilities in the normal course of business.
FINANCIAL
STATEMENTS
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT 2. SUMMARY OF MATERIAL
ACCOUNTING POLICIES (continued)
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 2023. The Group has
not early adopted any other standard, interpretation
or amendment that has been issued but is not yet
effective.
The following standards and amendments were adopted
by the Group on 1 January 2023:
→ IFRS 17 Insurance Contracts;
→ Definition of Accounting Estimates - Amendments
to IAS 8;
→ Disclosure of Accounting Policies - Amendments
to IAS 1 and IFRS Practice Statement 2;
→ Deferred Tax related to Assets and Liabilities arising
from a Single Transaction – Amendments to IAS 12;
→ International Tax Reform – Pillar Two Model Rules –
Amendments to IAS 12;
Disclosure of Accounting Policies –
Amendments to IAS 1 and IFRS Practice
Statement 2
The Amendments are effective for annual periods
beginning on or after 1 January 2023 and 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 has
revised disclosures of accounting policies to ensure
consistency with the amended requirements.
Deferred Tax related to Assets and
Liabilities arising from a Single Transaction –
Amendments to IAS 12
The amendments are effective for annual periods
beginning on or after 1 January 2023 and 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 amendments had no impact on the Group’s
consolidated financial statements.
International Tax Reform—Pillar Two Model
Rules – Amendments to IAS 12
The amendments are effective immediately upon
issuance, but certain disclosure requirements are
effective later. The Organisation for Economic Co-
operation and Development’s (OECD) published the
Pillar Two model rules in December 2021 to ensure
that large multinational companies would be subject
to a minimum 15% tax rate. On 23 May 2023, the IASB
issued International Tax Reform—Pillar Two Model
Rules – Amendments to IAS 12. The amendments
introduce a mandatory temporary exception to
the accounting for deferred taxes arising from the
jurisdictional implementation of the Pillar Two model
rules and disclosure requirements for affected entities
on the potential exposure to Pillar Two income taxes.
The Amendments require, for periods in which Pillar
Two legislation is (substantively) enacted but not
yet effective, disclosure of known or reasonably
estimable information that helps users of financial
statements understand the entity’s exposure arising
from Pillar Two income taxes. To comply with these
requirements, an entity is required to disclose
qualitative and quantitative information about its
exposure to Pillar Two income taxes at the end of
the reporting period. The disclosure of the current tax
expense related to Pillar Two income taxes and the
disclosures in relation to periods before the legislation
is effective are required for annual reporting periods
beginning on or after 1 January 2023, but are not
required for any interim period ending on or before
31 December 2023. The amendments have an impact
on the Group’s consolidated financial statements as
discussed in Note 14.
Other new IFRS and amendments to IFRS effective
since 1 January 2023 have no impact on the Group`s
consolidated financial statements.
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 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-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 are not
expected to have a material impact on the Group’s
consolidated financial statements.
FINANCIAL
STATEMENTS
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT 2. SUMMARY OF MATERIAL
ACCOUNTING POLICIES (continued)
STANDARDS AND INTERPRETATIONS
IN ISSUE BUT NOT EFFECTIVE (continued)
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 are not
expected to have a material impact on the Group’s
consolidated financial statements.
IAS 7 Statement of Cash Flows and IFRS 7
Financial Instruments disclosures: Supplier
Finance Arrangements (Amendments)
The amendments are effective for annual reporting
periods beginning on or after January 1, 2024, with earlier
application permitted. The amendments supplement
requirements already in IFRS and require an entity to
disclose the terms and conditions of supplier finance
arrangements. Additionally, entities are required to
disclose at the beginning and end of reporting period the
carrying amounts of supplier finance arrangement financial
liabilities and the line items in which those liabilities are
presented as well as the carrying amounts of financial
liabilities and line items, for which the finance providers
have already settled the corresponding trade payables.
Entities should also disclose the type and effect of non-
cash changes in the carrying amounts of supplier finance
arrangement financial liabilities, which prevent the carrying
amounts of the financial liabilities from being comparable.
Furthermore, the amendments require an entity to disclose
at the beginning and end of the reporting period the range
of payment due dates for financial liabilities owed to the
finance providers and for comparable trade payables that
are not part of those arrangements. 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.
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.
IAS 21 The Effects of Changes in Foreign
Exchange Rates: Lack of Exchangeability
(Amendments)
The amendments are effective for annual reporting
periods beginning on or after January 1, 2025, with earlier
application permitted. The amendments specify how an
entity should assess whether a currency is exchangeable
and how it should determine a spot exchange rate when
exchangeability is lacking. A currency is considered
to be exchangeable into another currency when an
entity is able to obtain the other currency within a time
frame that allows for a normal administrative delay and
through a market or exchange mechanism in which an
exchange transaction would create enforceable rights
and obligations. If a currency is not exchangeable into
another currency, an entity is required to estimate
the spot exchange rate at the measurement date. An
entity’s objective in estimating the spot exchange
rate is to reflect the rate at which an orderly exchange
transaction would take place at the measurement date
between market participants under prevailing economic
conditions. The amendments note that an entity can
use an observable exchange rate without adjustment or
another estimation technique. 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
IFRS 18 – Presentation and Disclosure
in Financial Statements
On 9 April 2024, the IASB issued the IFRS 18 –
Presentation and Disclosure in Financial Statements
which replaces IAS 1 – Presentation of Financial
Statements. IFRS 18 is the result of the IASB’s Primary
Financial Statements project and it becomes effective
for annual reporting periods beginning on or after
January 1, 2027. The new standard has not yet been
endorsed by the EU. Management will analyse the
requirements of the new standard and assess its impact
upon becoming effective.
FUNCTIONAL AND PRESENTATION
CURRENCY
The functional currency of the Ukrainian companies
of the Group is the Ukrainian Hryvnia (“UAH”); the
functional currency of the Cyprus companies and
Luxembourg company of the Group is the US Dollar
(“USD”); the functional currency of the European
companies of the Group is the Euro (“EUR”); the
functional currency of the United Arab Emirates
companies is the Dirham (“AED”); the functional
currency of the UK company is the British Pound
("GBP”); the functional currency of the Saudi Arabia
company is the Saudi Riyal ("SAR”).
Transactions in currencies other than the functional
currency of the entities concerned are treated as
transactions in foreign currencies.
Such transactions are initially recorded at the rates
of exchange ruling at the dates of the transactions.
Monetary assets and liabilities denominated in such
currencies are translated prevailing rates 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.
FINANCIAL
STATEMENTS
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT 2. SUMMARY OF MATERIAL
ACCOUNTING POLICIES (continued)
approximate the results translated at exchange rates
prevailing at the dates of the transactions.
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.
FUNCTIONAL AND PRESENTATION
CURRENCY (continued)
BASIS OF CONSOLIDATION
FAIR VALUE MEASUREMENT
These consolidated financial statements are presented in
US Dollars (“USD”), the Group’s presentation currency,
and all values are rounded to the nearest million, except
when otherwise indicated.
The results and financial position of the Group are
translated into the presentation currency using the
following procedures:
→ Assets and liabilities for each consolidated statement
of financial position presented are translated at the
closing rate as of the reporting date of that statement
of financial position;
→ Income and expenses for each consolidated
statement of profit or loss are translated at exchange
rates at the dates of the transactions;
→ Exchange differences arising on translation for
consolidation are recognised in other comprehensive
income and presented as a separate equity
component. On disposal of a foreign operation, the
component of OCI relating to that particular foreign
operation is reclassified to profit or loss;
→ All equity items except the revaluation reserve
are translated at the historical exchange rate. The
revaluation reserve is translated at the closing rate
as of the statement of financial position date.
For practical reasons, the Group translates items of
income and expenses for each period presented in
the financial statements using the quarterly average
exchange rates if such translations reasonably
The relevant exchange rates were:
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
involvement 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 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 Company’s owners to the non-
controlling interests. The total comprehensive income of
subsidiaries is attributed to the owners of the Company
and the non-controlling interests, even if this results in
the non-controlling interests having a deficit balance.
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.
CURRENCY
UAH/USD
UAH/EUR
USD/EUR
USD/GBP
AED/USD
SAR/USD
CLOSING RATE AS
OF 31 DECEMBER
2023
AVERAGE
FOR 2023
CLOSING RATE AS
OF 31 DECEMBER
2022
AVERAGE
FOR 2022
37.9824
42.2079
1.1112
1.2766
3.67
3.75
36.5750
39.5619
1.0817
1.2434
3.67
3.75
36.5686
38.9510
1.0651
1.2033
3.67
3.75
32.3684
33.9954
1.0503
1.2318
3.67
3.75
Fair value is the price 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
occurs either in the central 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 beneficial 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
considers 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.
FINANCIAL
STATEMENTS
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
2. SUMMARY OF MATERIAL
ACCOUNTING POLICIES (continued)
FAIR VALUE MEASUREMENT (continued)
For assets and liabilities that are recognized in the financial
statements regularly, 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.
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
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.
In order to accurately reflect the diverse nature of
Group’s business operations and improve the granularity
of reporting, from this report MHP has implemented
changes to its presentation of business segmentation
information. These changes include:
→ introduction of a new – Vegetable oils operations
segment, which represents production and sales of
vegetable oil and related products. In 2022, these
activities were included into Poultry and related
operations segment as by-products of mixed fodder
production for poultry;
→ inclusion of meat processing and other meat
(previously reported within Meat processing and
other agricultural operations) in the Poultry and
related operations segment given that the meat
processing and other meat operations represent less
than 10% of the Group`s revenues and have similar
characteristics to poultry operations;
→ combining of grain-growing operations (presented
as separate segment in 2022) and milk cattle farming
(previously presented within Meat processing and
other agricultural operations segment) into a revised
reportable segment - Agriculture operations.
The corresponding segment information for the year
ended 31 Deceber 2022 have been restated accordingly
to ensure comparability.
Based on the current management structure, the Group
identifies the following reportable segments that fairly
represent principal business activities: Poultry and
related operations, Vegetable oils operations, Agriculture
operations, Europe operating segment. For more details
on segmentation refer to Note 5 Segment information.
REVENUE RECOGNITION
Segment reporting is presented on the basis of Management’s
perspective and relates to the parts of the Group that are
The Group generates revenue primarily from selling 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 product or service control 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 that are of similar nature and
value are not treated as transactions that generate revenue.
The Group recognises revenue from the following major
sources:
→ poultry meat and related sales (delivery services,
eggs, meat and bone meal, and other);
→ processed meat and culinary products;
→ vegetable oil and related products (sunflower and
soybean meals, sunflower husk) ;
→ grains, oilseeds and other agriculture products (milk,
catlle, feed grains and other).
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.
A major part of the Group’s sales is 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.
FINANCIAL
STATEMENTS
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT 2. SUMMARY OF MATERIAL
ACCOUNTING POLICIES (continued)
PROPERTY, PLANT, AND EQUIPMENT
any credit balance existing in the revaluation reserve in
respect of that asset.
FINANCIAL
STATEMENTS
REVENUE RECOGNITION (continued)
Contract liability is recognised if a payment is received
from a customer before the Group transfers the related
goods. Contract liabilities are recognised as revenue
when the Group performs under the contract.
Sales price of products for domestic market
predominantly includes shipping and handling costs
in the price of the product. Export sales price may
include the shipping and handling costs depending on
specific incoterms applied.
TAXES RECOVERABLE AND PREPAID
Taxes recoverable and prepaid primarily include value-
added tax (“VAT”) recoverable. VAT recoverable is
reviewed at each reporting date and reduced to the
extent that it is no longer probable that a reimbursement
or VAT liabilities for settlement will be available. The
Group considers that the outstanding amount due from
the state at the reporting date will be either recovered
in cash or reclaimed against the VAT liabilities related
to sales.
PREPAYMENTS
Prepayments are carried at cost excluding VAT less
provision for impairment, when applicable.
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.
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.
All Group 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 Group`s 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 an increase is recognized in the
consolidated statement of profit or loss to the extent
that it reverses a revaluation decrease of the same asset
previously recognized 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 recognized in
the consolidated statement of profit or loss. However,
such a decrease is debited to the revaluation reserve
through other comprehensive income to the extent of
The carrying amount of the asset is adjusted by
eliminating accumulated depreciation against the gross
carrying amount and subsequent increase or decrease
of the gross carrying amount to fair value.
Depreciation on revalued assets is charged to the
consolidated statement of profit or loss. The excess
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 the
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. The 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
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 disposal costs, if the asset
were already of the age and in the condition expected
at the end of its useful life.
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
2. SUMMARY OF MATERIAL
ACCOUNTING POLICIES (continued)
PROPERTY, PLANT, AND EQUIPMENT
(continued)
The residual value, the useful lives, and the depreciation
method are reviewed at each financial year-end. In
particular, the Group considers the impact of health,
safety and environmental legislation in its assessment
of expected useful lives and estimated residual
values. Furthermore, the Group considers climate-
related matters, including physical and transition risks.
Specifically, the Group determines whether climate-
related legislation and regulations might impact either
the useful life or residual values. 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 the 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 recognized 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 construction in progress
is transferred to the relevant class of property, plant,
and equipment.
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 recognized 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 amortized 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 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.
Subsequent to initial recognition, intangible assets
assessed as having finite valuable lives are reported at
cost less accumulated amortization and accumulated
impairment losses. Amortization of intangible assets is
recognized 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 amortized
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 derecognized on disposal or when
no future economic benefits are expected from use or
disposal. Gains or losses arising from the derecognition
of an intangible asset, measured as the difference
between the net disposal proceeds and the carrying
amount of the asset, are recognized in profit or loss
when the asset is derecognized.
RIGHT-OF-USE ASSETS
Right-of-use assets mainly represents the rent of land
from individuals (Ukrainian citizens) for agricultural
purposes as well as trucks, agricultural machinery and
equipment essential for farm operation, also office
buildings, facilities used as culinary centers, warehouses,
and retail store spaces. The Group recognizes 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 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 lease term. The depreciation
starts at the commencement date of the lease. The
Group recognizes depreciation of right-of-use assets
based on the lease term, presented within the cost of
goods sold in the consolidated statement of profit or
loss. The average maturity of land lease agreements is
7 years, 5 years for lease agreements for agricultural
machinery and equipment, 10 years for buildings and
facilities and 4 years for retail store spaces.
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 asset's recoverable
amount is estimated 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 impaired.
To assess impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash
flows (cash-generating units). Recoverable amount is
the higher 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.
In that case, the carrying amount of the asset (cash-
generating unit) is reduced to its recoverable amount.
An impairment loss is recognized 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.
FINANCIAL
STATEMENTS
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT 2. SUMMARY OF MATERIAL
ACCOUNTING POLICIES (continued)
IMPAIRMENT OF TANGIBLE AND INTANGIBLE
ASSETS OTHER THAN GOODWILL (continued)
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
determined had no impairment loss been recognized for
the asset (cash-generating unit) in prior years. A reversal
of an impairment loss is recognized 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.
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 recognized directly in the consolidated
profit or loss. An impairment loss recognized on goodwill
is not reversed in subsequent periods.
The Group assesses whether climate-related risks,
including physical risks and transition risks could have
a significant impact. If so, these risks are included in the
cash-flow forecasts in assessing value-in-use amounts.
INCOME TAXES
Income taxes have been computed by the laws currently
enacted or substantially enacted in jurisdictions where
operating entities are located. Income tax is calculated
based on the year's results 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 regarding 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
recognized for all taxable temporary differences, and
deferred tax assets are recognized 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 realized, 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
how the Group expects, at the end of the reporting
period, to recover or settle the carrying amount of its
assets and liabilities.
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 recognized 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 involved in agricultural production
(those engaged 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 cost and net
realizable value. Costs comprise raw materials and,
where applicable, direct labor costs and overheads
incurred in bringing the inventories to their present
locations and condition.
Cost is calculated using the FIFO (first-in, first-out) method.
Net realizable value is determined as the estimated selling
price less all estimated completion costs and costs to
be incurred in marketing, selling, and distribution. The
agriculture-related production process results in the
production of joint products: main and by-products. A
by-product arising from the process is measured at net
realizable value and deducted from the main product`s cost.
BIOLOGICAL ASSETS AND
AGRICULTURAL PRODUCE
Agricultural activity is defined as a biological
transformation of biological assets for sale into agrarian
produce or into additional biological assets. The Group
classifies hatchery eggs, live poultry, cattle and other
animals and crops in fields 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 minus estimated
costs to sell at both initial recognition and as of the
reporting date, with any resulting gain or loss recognized
in the consolidated profit or loss.
Costs to sell include all costs 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.
FINANCIAL
STATEMENTS
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ACCOUNTING POLICIES (continued)
BIOLOGICAL ASSETS AND AGRICULTURAL
PRODUCE (continued)
The change in this adjustment from one period to
another is recognised as a “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 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 egg production
The fair value of breeders is determined using the
discounted cash flow approach based on hatchery eggs’
and meat market prices.
(iii) Cattle
Cattle comprise cows and bulls held for the regeneration
of the livestock population and animals raised for milk
and beef meat production. The fair value of livestock is
determined based on cash flows 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 obtained from sales of
harvested crops, with an allowance for costs to be
incurred and risks to be faced during the remaining
transformation process.
(v) Hatchery eggs
The fair value of hatchery eggs is determined by
reference to market prices at the point of harvest.
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 and oilseeds
The fair value of fodder grain and oilseeds is determined
by 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 to be harvested as agricultural produce,
including 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 egg production, milk cows, and breeding bulls.
FINANCIAL INSTRUMENTS
Financial assets and liabilities are recognized in the Group’s
statement of financial position when the Group becomes
a party to the contractual provisions of the instrument.
The financial assets and financial liabilities of the Group
are represented by cash and cash equivalents, 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 below in this Note.
Financial assets and financial liabilities are initially
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
are directly attributable to the acquisition of financial
assets or financial liabilities at fair value through profit
or loss are recognized immediately in profit or loss.
FINANCIAL ASSETS
All recognized financial assets are measured
subsequently at either amortized 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 amortized cost (this category
is the most relevant to the Group):
→ the financial asset is held within a business model
whose objective is to have financial assets to collect
contractual cash flows; 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.
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 amortized cost are subsequently
measured using the effective interest (EIR) method and
are subject to impairment.
The effective interest method is a method calculates
the amortized cost of a debt instrument and allocates
interest income over the relevant period.
The amortized 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 amortization 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
amortized cost of a financial asset before adjusting for
any loss allowance.
FINANCIAL
STATEMENTS
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ACCOUNTING POLICIES (continued)
FINANCIAL ASSETS (continued)
Impairment of financial assets
The Group recognizes 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 due to the Group per
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 the
initial recognition of the respective financial instrument.
The Group applies a simplified approach to calculating
ECLs for trade accounts receivable and contract assets.
Therefore, the Group does not track changes in credit
risk but instead recognizes 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.
For all other financial instruments, a financial instrument
not credit-impaired on initial recognition is classified
in Stage 1. Suppose the credit risk on the financial
instrument has not increased significantly since initial
recognition. In that case, 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 credit-impaired, the Group recognizes
lifetime ECLs. If the Group determines that a financial
asset is credit-impaired, the asset is transferred to Stage
3, and its ECLs are measured as Lifetime ECLs.
Lifetime ECLs represent 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 represent the portion of lifetime ECLs
that is expected to result from default events on a
financial instrument that are possible within 12 months
after the reporting date.
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 the 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, and governmental
bodies, as well as consideration of various external
sources of actual and forecast economic information
that relates 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 preceding, 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 chosen to have
low credit risk if:
a) the financial instrument has a low risk of default,
b) the debtor has a solid 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 fulfill 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.
Significant increase in credit risk
In assessing whether the credit risk on a financial
instrument has increased significantly since initial
Credit-impaired financial assets
A financial asset is credit-impaired (Stage 3) when
one or more events that have a detrimental impact
on that financial asset's estimated future cash flows
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 reorganization; 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 information
indicates the debtor has severe financial difficulty. 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. Written-off financial
assets may still be subject to enforcement activities
under the Group’s recovery procedures, taking into
account legal advice where appropriate. Any recoveries
made are recognized 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
19 and 23 on financial assets.
FINANCIAL LIABILITIES
Initial recognition and measurement
The Group’s financial liabilities include loans and
borrowings, lease liabilities, and trade and other
accounts payable.
Financial liabilities are recognized at fair value and
are measured at amortized cost using the effective
interest method.
FINANCIAL
STATEMENTS
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ACCOUNTING POLICIES (continued)
FINANCIAL LIABILITIES (continued)
The effective interest method calculates the amortized
cost of a financial liability and allocates 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 amortized
cost of a financial liability.
Derecognition of financial liabilities
The Group derecognizes financial liabilities when, and
only when, the Group’s obligations are discharged,
canceled, or have expired. The difference between the
carrying amount of the financial liability derecognized
and the consideration paid and payable is recognized
in profit or loss.
When the Group exchanges one debt instrument with
the existing lender into another one with substantially
different terms, such exchange is accounted for as an
extinguishment of the original financial liability and the
recognition of a new one.
TRADE ACCOUNTS RECEIVABLE
Trade accounts receivable are 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.
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
and by reducing the carrying amount to reflect the lease
payments made. The Group recognizes interest on lease
liabilities and presents it within interest expenses in the
consolidated profit or loss.
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 amortized cost
using the EIR method, where amortization is included
as finance costs in the statement of profit or loss. Gains
and losses are recognized in profit or loss when the
liabilities are derecognized as well as through the EIR
amortization process.
TRADE AND OTHER ACCOUNTS PAYABLE
Accounts payable are measured at initial recognition at
fair value and are subsequently measured at amortized
cost using the effective interest rate method.
LEASE LIABILITIES
The Group assesses whether a contract is or contains
a lease at the inception of the contract.
The Group recognizes 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 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 equal 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 the 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 index
or rate or market rate. In these cases, the lease liability is
remeasured by discounting the revised lease payments
using the initial discount rate (unless the lease payments
change is due to a change in a floating interest rate, in
which case a revised discount 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 fixed discount rate.
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).
PROVISIONS
Provisions are recognized when the Group has a
present legal or constructive obligation (either based
on legal regulations or implied) due to past events,
and an outflow of resources will probably be required
to settle the obligation, and a reliable estimate of the
obligation can be made.
FINANCE INCOME AND FINANCE COSTS
The Group’s finance income and finance costs include:
→ Interest income (e.g. on bank deposits and loans
provided);
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
→ Interest expense (e.g. on corporate bonds and bank
borrowings; on obligation under leases);
→ Income/expense from derecognition of financial
assets/financial liabilities.
FINANCIAL
STATEMENTS
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ACCOUNTING POLICIES (continued)
FINANCE INCOME AND FINANCE COSTS
(continued)
Interest income or expense is recognized under the
effective interest method.
The “effective interest rate” is the rate that exactly
discounts estimated future cash payments or receipts
through the expected life of the financial instrument to:
→ The gross carrying amount of the financial asset; or
→ The amortized cost of the financial liability.
In calculating interest income and expense, the effective
interest rate is applies to the gross carrying amount of
the asset (when the asset is not credit-impaired) or to
the amortized cost of the liability. However, for financial
assets that have become credit-impaired subsequent
to initial recognition, interest income is calculated by
applying effective the interest rate to the amortized
cost of the financial asset. If the asset is no longer
credit-impaired, then the calculation of interest income
reverts to the gross basis.
3. CHANGES IN THE GROUP
STRUCTURE
CHANGES IN NON-CONTROLLING
INTERESTS IN SUBSIDIARIES
During the year ended 31 December 2023, the Group
increased its effective ownership interest in MHP Saudi
Arabia Trading to 100% through the purchase of a non-
controlling interest for the amount USD 1.8 million. The
difference between the carrying value of the net assets
acquired and the consideration paid was recognised
directly to retained earnings in the amount of USD
3.6 million. This investing non-cash transaction was
excluded from the consolidated statement of cash flows.
4. CRITICAL ACCOUNTING
JUDGMENTS AND KEY SOURCES
OF ESTIMATION UNCERTAINTY
In applying the Group’s accounting policies described in
Note 2, management must make judgments, estimates,
and assumptions about 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 recognized in the period in which the estimate is
revised if the revision affects both current and future
periods.
CRITICAL JUDGMENTS IN APPLYING
ACCOUNTING POLICIES
The following are the essential judgments, apart
from those involving estimations (see below), that
management has made using the Group’s accounting
policies and have the most significant effect on the
amounts recognized in the consolidated financial
statements.
Going concern
The Group has concluded that applying the going
concern basis of accounting in preparing these
consolidated financial statements is appropriate.
Management exercises significant judgment in the
assessment of the existence of a material uncertainty
related to going concerned 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 doubt the Group’s ability
to continue as a going concern is disclosed in Note 2.
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 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 must make a significant judgment 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 so 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 market
mechanism determines the rates. In substance, non-
contractual changes in lease payments are driven by
competitive forces. Pay changes are based on the average
changes in lease payments in the region, meaning 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 15). At each reporting date, the Group reviews
the carrying amount of items of property, plant, and
equipment accounted for using a revaluation model
to determine whether the amount differs materially
from fair value.
When determining whether to perform a fair value
assessment in a given period, Management considers the
development of macroeconomic indicators, 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 political, legislative
and economic situations, are reviewed.
Based on the results of this review, the management
of the Group concluded that the carrying value of the
property, plant and equipment, accounted for using
revaluation model, as at 31 December 2023 was not
materially different from those which would arise as a
result of new revaluation.
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 a regular 18% income tax. Until 31 December 2021,
the profits of the chicken and egg producers were
non-taxable as these entities had an exempt status for
corporate income tax purposes and were subject to the
fixed agricultural tax, similar to other agribusinesses.
FINANCIAL
STATEMENTS
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4. CRITICAL ACCOUNTING
JUDGMENTS AND KEY SOURCES
OF ESTIMATION UNCERTAINTY
(continued)
CRITICAL JUDGMENTS IN APPLYING
ACCOUNTING POLICIES (continued)
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 shift in the tax status, for certain subsidiaries of
the Group, from non-taxpayer to tax payers by becoming
income taxpayers from 1 January 2022, the Group has
recognized deferred tax liabilities in the amount of USD 81
million as of this date. These deferred tax liabilities of the
Group`s poultry farms arise from temporary tax differences
from property, plant, and equipment measured using the
revaluation model. Accordingly, the resulting deferred
tax liabilities on 1 January 2022 were recognized through
other comprehensive income and presented separately as
Deferred tax charged directly to the revaluation reserve.
Presentation of the expenses as war-related
Several critical assumptions have been used to
determine if the expenses incurred by the Group relate
to war and should be presented accordingly in Note 34.
These assumptions include but are not limited to the
timing of the costs, their nature, prerequisites of their
incurrence, ordinariness, and necessity of expenses, and
the 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.
Impairment of goodwill and intangibles
with indefinite useful lives
As disclosed in Notes 17 and 18, the Group determines
on an annual basis at least 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 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.
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 20).
The impact of potential climate-related matters,
including legislation, climate change, and company
climate objectives, which may affect the fair value
measurement of biological assets and agricultural
produce, has been considered in determining fair value
measurement. The impact of climate-related matters is
not material to the Group’s financial statements.
When assessing impairment of goodwill and intrangible
assets with indefinite useful lives, the Group constantly
monitors climate-related matters affecting the value-
in-use of intangibles and goodwill. As at 31 December
2023, the Group concluded that the climate-related
risks did not have material impact of the value-is-use
amounts for intangibles and goodwill. The Group will
adjust the critical assumptions used in value-in-use
calculations should a change be required in the future.
Determination of incremental borrowing rate
As described in Note 2, the Group uses incremental
borrowing rate as the discounting factor to calculate
lease liability if the rate implicit in the lease is not
readily determinable. The 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 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 crop output;
→ Estimated changes in future sales prices;
→ Projected production costs and costs to sell; and,
→ Discount rate.
During the year ended 31 December 2023 the fair value
of biological assets was estimated using discount factors
of 23.7% and 24.4% (31 December 2022: 25.0% and
42.7%) for non-current and current assets, respectively.
Revaluation of property, plant, and equipment
The latest revaluation of the of buildings and structures,
grain storage facilities, production machinery, utilities
and infrastructure, vehicles and agricultural machinery,
and auxiliary and other machinery has been performed
as of 31 December 2022 with engagement of an
independent appraiser. As stated above, Management
concluded that that the carrying value of these groups
of property, plant and equipment as of 31 December
2023 was not materially different from their fair values,
so that no new revaluation has been required.
During the latest revaluation of property, plant and
equipment at 31 December 2022, the independent
appraiser has performed the valuation according to
International Valuation Standards by applying the
following techniques:
→ depreciated replacement cost for grain storage
facilities;
→ market comparable approach for vehicles and
agricultural 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 construction
materials from the date of their acquisition/
construction/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.
FINANCIAL
STATEMENTS
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT The accounting policies of the reportable segments are
the same as the Group’s accounting policies described
in Note 2 Basis of preparation and accounting policies.
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 resource allocation and assessment of segment
performance.
European operating segment primarily includes sales of
poultry meat and processed meat products produced
by Perutnina Ptuj and its subsidiaries. The CODM
manages this as a single segment because each research,
development, manufacture, distribution, and selling of
chicken meat and meat processing products requires
single marketing strategies, a centralized budgeting
process, and centralized management of production
operations.
The Group does not present information on segment
assets and liabilities as the CODM does not review such
information for decision-making purposes.
4. CRITICAL ACCOUNTING
JUDGMENTS AND KEY SOURCES
OF ESTIMATION UNCERTAINTY
(continued)
Revaluation of property, plant, and equipment
(continued)
The revaluation results using the depreciated replacement
cost and market-comparable approaches were compared
with a revaluation performed using the income approach
to identify the level of economic obsolescence, if any.
As at December 2022, 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 had been
considered in determining the discount factor as an
alternative to incorporating them into the cash flows, the
discount factor would have been approximately 25%. An
increase of 100 basis points in the discount rate would
result in a decrease in the fair value of property plant and
equipment by USD 24 million.
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 years ranged from 10.9% to 11.4%. A decrease in the
terminal growth rate by 100 basis points or in the revenue
growth rates by 100 basis points would lead to a decrease
in the fair value of property, plant, and equipment by
USD 15 million or USD 29 million, respectively. Key
assumptions used for the identification of economic
obsolescence, if any, for the European operating segment
are described in Note 17.
In determining fair value measurement, the impact of potential
climate-related matters, including legislation, climate change,
and company climate objectives that may affect the fair value
measurement of property, plant, and equipment, has been
considered. 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 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.
The Group concluded that, as of 31 December 2023,
climate-related matters had no material impact on the
useful lives of property, plant and equipment.
Deferred tax assets
Deferred tax assets, including those arising from unused
tax losses, are recognized to the extent that they will
probably 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 against existing
deferred tax liabilities and available future tax profits.
The estimation uncertainty, therefore, pertains to the
level of deferred tax assets to be recognized.
5. SEGMENT INFORMATION
The Group’s business is managed worldwide but main
manufacturing facilities and sales offices are located
primarily in Ukraine, Europe and Middle East.
Reportable segments are presented consistent with
the internal reporting to the Group’s chief operating
decision maker (“CODM”).
Segment information is analysed based on 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 poultry meat
→ sales of processed meat
and culinary products
→ sales of other poultry
related products
Vegetable oils
operations segment:
→ sales of vegetable oil and
related products
Agriculture
operations segment:
→ sales of grains and
oilseeds
→ other agricultural
operations (milk, feed
grains and other)
European Operating
Segment:
→ sales of poultry meat and
processed meat products
in Southeast Europe
FINANCIAL
STATEMENTS
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT 5. SEGMENT INFORMATION (continued)
As of 31 December 2023 and for the year that ended, the Group’s segment information from continuing operations was as follows:
YEAR ENDED 31 DECEMBER 2023
POULTRY
AND RELATED
OPERATIONS
VEGETABLE
OILS
OPERATIONS
AGRICULTURE
OPERATIONS
EUROPEAN
OPERATING
SEGMENT
TOTAL
REPORTABLE
SEGMENTS
ELIMINATIONS CONSOLIDATED
External sales
Sales between segments
Total revenue
Segment results
Unallocated corporate expenses
Other expenses, net1
Profit before tax
OTHER INFORMATION:
Additions to property, plant and
equipment2
Depreciation and amortization expense3
Net change in fair value of biological
assets and agricultural produce
1,643
10
1,653
238
130
84
15
606
170
776
77
3
4
-
227
207
434
6
25
56
(63)
545
-
545
72
50
22
-
3,021
387
3,408
393
208
166
(48)
-
(387)
(387)
-
-
-
-
3,021
-
3,021
393
(54)
(166)
173
208
166
(48)
1 Includes finance income, finance costs, foreign exchange loss (net);
2 Additions to property, plant, and equipment in 2023 do not include unallocated additions in the amount of USD 11.2 million;
3 Depreciation and amortization for the year ended 31 December 2023 does not include unallocated depreciation and amortization in the amount of USD 2.9 million.
FINANCIAL
STATEMENTS
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
5. SEGMENT INFORMATION (continued)
As of 31 December 2022 and for the year that ended, the Group’s segment information from continuing operations was as follows:
YEAR ENDED 31 DECEMBER 2022
POULTRY
AND RELATED
OPERATIONS
VEGETABLE
OILS
OPERATIONS
AGRICULTURE
OPERATIONS
EUROPEAN
OPERATING
SEGMENT
TOTAL
REPORTABLE
SEGMENTS
ELIMINATIONS CONSOLIDATED
External sales
Sales between segments
Total revenue
Segment results
Unallocated corporate expenses
Loss on impairment of property,
plant and equipment4
Other expenses, net1
Profit before tax
OTHER INFORMATION:
1,525
9
1,534
131
(18)
Additions to property, plant and
equipment2
Depreciation and amortization expense3
Net change in fair value of biological
assets and agricultural produce
67
73
13
464
114
578
69
(1)
4
2
-
189
344
533
91
(8)
22
62
(143)
464
-
464
45
(2)
63
20
2
2,642
467
3,109
336
-
(467)
(467)
-
(29)
-
156
157
(128)
-
-
-
2,642
-
2,642
336
(52)
(29)
(514)
(259)
156
157
(128)
1 Includes finance income, finance costs, foreign exchange loss (net);
2 Additions to property, plant, and equipment in 2022 do not include unallocated additions of USD 12.3 million;
3 Depreciation and amortization for the year ended 31 December 2022 does not include the unallocated amount of USD 1.4 million.
4 Loss on impairment of property, plant, and equipment for the year ended 31 December 2021 includes an unallocated loss of USD 0.5 million.
FINANCIAL
STATEMENTS
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
5. SEGMENT INFORMATION (continued)
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 2023 and 31 December 2022:
Ukraine
Europe
The Middle East and North Africa (MENA)
2023
1,913
367
8
2,288
2022
1,922
315
2
2,239
The geographic structure of revenue for the years ended 31 December 2023,
and 2022 was as follows:
Export1)
Domestic
2023
1,807
1,214
3,021
2022
1,601
1,041
2,642
1 Includes revenue generated outside of the Group’s production entity residency
The Group’s export sales to external customers by major product types were as
follows during the years ended 31 December 2023 and 2022:
No single customer contributed more than 10% of the Group’s revenue in either
2023 or 2022.
6. REVENUE
Revenue for the years ended 31 December 2023, and 2022 was as follows:
2023
2022
POULTRY AND RELATED OPERATIONS SEGMENT
Poultry and processed meat
Vegetable oil and related products
Grain
Other agricultural products
2023
1,026
597
148
36
1,807
2022
992
458
124
27
1,601
Export sales include revenue from shipping and handling services in the amount of
USD 191 million for the year ended 31 December 2023 (2022: USD 149 million).
Export sales of vegetable oil and related products and export sales of grains are
primarily made to global trading companies. The sales of poultry meat to the most
significant external markets – MENA and EU amounted to 34% and 45% of total
export sales respectively (2022: 34% and 36%).
Advances received from third parties as of 31 December 2022 in the amount of USD
31 million were recognized as revenue during the year ended 31 December 2023.
Advances received from third parties as of 31 December 2021 in the amount of USD
42 million were recognized as revenue during the year ended 31 December 2022.
Chicken meat
Processed meat
Other poultry related sales
VEGETABLE OIL OPERATIONS SEGMENT
Vegetable oil
Oil related products
AGRICULTURAL OPERATIONS SEGMENT
Grain
Other agricultural sales
EUROPEAN OPERATING SEGMENT
Chicken meat
Processed meat
Other agricultural sales
1,402
111
130
1,643
565
41
606
186
41
227
316
164
65
545
1,328
93
104
1,525
448
16
464
157
32
189
266
141
57
464
3,021
2,642
FINANCIAL
STATEMENTS
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
7. COST OF SALES
Cost of sales for the years ended 31 December 2023,
and 2022 was as follows:
For the years ended 31 December 2023 and 2022, the
cost of sales comprised the following:
Poultry and related
operations segment
Vegetable oil operations
segment
Agricultural operations
segment
European operating
segment
2023
2022
1,246
1,140
Costs of raw materials
and other inventory used
Payroll and related
expenses
509
323
Services
Depreciation and
amortization expense
164
91
415
352
2,334
1,906
FINANCIAL
STATEMENTS
Payroll and related expenses include social security
contributions, which amounted to USD 14 million for the
year ended 31 December 2023 (2022: USD 13 million).
Remuneration to the auditors, included in the Services
above, amounted to USD 1.2 million for the year ended
31 December 2023 (2022: USD 0.9 million). This consists
of both audit and non-audit services, with the statutory
audit fees amounting to USD 0.9 million for the year
ended 31 December 2023 and other assurance services
in amount of USD 0.2 million (2022: USD 0.7 million
and USD 0.2 million respectively), while the rest of
fees relate to tax advisory and other non-audit services.
9. OTHER OPERATING INCOME
2023
2022
1,579
1,274
352
255
148
287
204
141
2,334
1,906
Cost of sales included shipping and handling expenses
and was for the years ended 31 December 2023 and
2022 as follows:
Poultry and related
operations segment
Vegetable oil operations
segment
Agricultural operations
segment
European operating
segment
2023
2022
101
105
96
29
9
58
18
9
235
190
Revenue includes shipping and handling costs in the
price of the product.
Social security contributions, included in Payroll and
related expenses above, amounted to USD 52 million
for the year ended 31 December 2023 (2022: USD 46
million).
Other operating income for the years ended 31 December
2023, and 2022 was as follows:
2023
2022
Government grants
Gain on extinguisment of
trade accounts payable
Insurance compensation
Other income
9
7
1
2
19
5
2
2
4
13
8. SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses for the
years ended 31 December 2023, and 2022 were as
follows:
Payroll and related
expenses
Services
Depreciation and
amortization expense
Advertising expense
Representative costs
and business trips
Fuel and other materials
used
Insurance expense
Other
2023
2022
136
119
73
20
15
9
8
3
6
79
18
13
10
7
3
5
270
254
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
10. OTHER OPERATING EXPENSES
12. FINANCE INCOME
14. INCOME TAX
FINANCIAL
STATEMENTS
The Group carries its operations in various jurisdictions,
but most of the Group’s operating entities are located
in Ukraine.
During the year ended 31 December 2023, 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 2023 and 2022 are measured based
on the tax rates expected to be applied to the period
when the temporary differences are expected to reverse.
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 agricultural producers engaged in rearing
chickens, chicken meat, and eggs production are subject
to a regular 18% income tax, as described in Note 4.
The components of income tax expense/(benefit) were as
follows for the years ended 31 December 2023 and 2022:
2023
2022
Current income tax
expense
Withholding tax
Deferred tax expense/
(benefit)
Income tax expense/
(benefit)
24
2
5
31
9
-
(37)
(28)
Other operating expenses for the years ended
31 December 2023, and 2022 were as follows:
Finance income for the years ended 31 December 2023
and 2022 were as follows:
2023
2022
2023
2022
Charity expenses and
community support
donations
Write-off of prepayments
and taxes recoverable and
prepaid
Expected credit losses and
write-off of financial assets
Other operating war-
related expenses
Loss on disposal of
property, plant and
equipment
Provision for claims,
penalties and
indemnification
Written-off inventories
and biological assets
Other expenses
17
25
9
7
7
2
2
-
5
49
7
30
3
4
2
10
2
83
11. DEFERRED INCOME
During the years ended 31 December 2023 and 2022, the
Group received government compensation from the EU
farming subsidies policy and other compensations by the
EU national employment programs, assigned contributions
for employees, and refunds of excise duties in total
amount of USD 7 million and USD 4 million respectively.
Government grants for the construction and
reconstruction of livestock farms and compensation
of the cost of machinery and equipment are presented in
the Statement of Financial Position as deferred income,
which is recognized 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.
Gain on bonds early
redemption (Note 30)
Interest received from
deposits and bank
accounts
Other interest received
Other finance income
22
12
2
1
37
-
3
1
2
6
13. FINANCE COSTS
Finance costs for the years ended 31 December 2023
and 2022 were as follows:
Interest on corporate
bonds
Interest on obligations
under leases
Interest on bank
borrowings
Bank commissions and
other charges
2023
2022
105
109
40
18
3
39
8
2
Total finance costs
166
158
LESS:
Finance costs included
in the cost of qualifying
assets
(3)
(3)
163
155
For qualifying assets, the weighted average capitalization
rate on funds borrowed during the year ended 31
December 2023 was 7,80% (2022: 7.80%).
Interest on corporate bonds for the years ended 31
December 2023 and 2022 includes the amortization of
premium and debt issue costs on bonds issued in USD
6 million and USD 6 million, respectively.
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
14. INCOME TAX (continued)
As of 31 December 2023 and 2022, deferred tax assets
and liabilities comprised:
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 2023 and 2022 was as follows:
DEFERRED TAX ASSETS
ARISING FROM:
2023
2022
Other current liabilities
173
(259)
31
(47)
Current assets
Tax losses
Total deferred tax assets
DEFERRED TAX LIABILITIES
ARISING FROM:
Property, plant and
equipment
Current assets
Total deferred tax
liabilities
Net deferred tax
liabilities
2023
2022
5
-
26
31
4
1
48
53
(152)
(171)
-
(3)
(152)
(174)
(121)
(121)
Accounting profit/(loss)
before tax
Income tax expense/
(benefit) calculated at
rates effective during the
year ended in respective
jurisdictions
TAX EFFECT OF:
Income generated by FAT
payers and other exempt
from income tax
Effect on income tax
generated by non-Ukrainian
companies
Change in unrecognised
deferred tax asset
Withholding tax
Non-deductable expenses
and non-taxable income, net
Translation loss
Income tax expense/
(benefit)
6
2
(5)
3
(6)
2
4
(1)
31
(1)
-
15
0
(28)
Deferred income tax assets and liabilities are offset when
there is a legally enforceable right to cancel 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 2023 and 2022:
Deferred tax assets
Deferred tax liabilities
2023
2022
2
(123)
(121)
2
(124)
(122)
As at 31 December 2023 and 2022 the Group did not
recognize deferred tax asset in respect of tax losses
carried forward in the amount of USD 2.0 million (USD
0.4 million of deferred tax assets), USD 1.8 million (USD
0.3 million 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 as to whether particular companies of
the Group will generate sufficient taxable profits in the
future. According to the Tax Code of Ukraine, there is
no expiration date for accounting tax losses.
As at 31 December 2023 and 2022, the Company did
not recognize deferred tax liability in respect of taxable
temporary differences, associated with investments in
subsidiaries as the Company is able to control the timing
of the reversal of such temporary differences and it is
probable that they will not reverse in the foreseeable future.
The movements in net deferred tax position of the
Group for the years ended 31 December 2023 and 2022
were as follows:
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
2023
2022
(121)
(43)
-
(5)
(81)
37
-
(59)
Translation difference
5
25
Net deferred tax liabilities
as of end of the year
(121)
(121)
The Group has adopted International Tax Reform –
Pillar Two Model Rules (Amendments to IAS 12) and
applied a temporary mandatory relief from deferred
tax accounting for the impacts of the top-up tax and
accounts for it as a current tax when incurred.
Pillar Two legislation has been enacted or substantively
enacted in certain jurisdictions the Group operates,
while in other jurisdictions, including Cyprus where the
Company is registered, it was not yet enacted as at the
date of authoring of these financial statements for issue.
Based on the preliminary assessment, the Group
does not expect a material impact of the Pillar Two
legislation on the consolidated financial statements.
Nevertheless, as the rules are complex, uncertainty
exists and unforeseen outcomes of the Pillar Two
legislation may exceptionally result in additional top-
up tax, subject to future legislation development.
FINANCIAL
STATEMENTS
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT 15. PROPERTY, PLANT AND EQUIPMENT
The following table represents movements in property, plant and equipment for the year ended 31 December 2023:
COST OF FAIR VALUE:
At 31 December 2022
Additions
Transfer from Right-of-use
assets
Transfers
Disposals
Translation difference
At 31 December 2023
ACCUMULATED
DEPRECIATION:
At 31 December 2022
Depreciation charge for the
year
Disposal
Transfers
Transfer from Right-of-use
assets
Translation difference
At 31 December 2023
NET BOOK VALUE
At 31 December 2022
At 31 December 2023
BUILDINGS
GRAIN
LAND
AND
STORAGE
STRUCTURES
FACILITIES
PRODUCTION
MACHINERY
AUXILIARY
UTILITIES
VEHICLES AND
AND OTHER
AND INFRA-
AGRICULTURAL
MACHINERY
STRUCTURE
MACHINERY
OTHER FIXED
CONSTRUCTION
ASSETS1
IN PROGRESS2
TOTAL
31.7
1.7
-
0.2
(0.2)
0.9
34.3
-
-
-
-
-
-
-
863.8
43.7
-
2.4
(4.6)
(20.9)
884.4
-
33.5
(0.4)
0.1
-
(0.8)
32.4
82.3
0.2
-
-
-
(3.1)
79.4
-
5.2
-
-
-
(0.2)
5.0
377.2
70.2
-
6.3
(1.6)
(12.1)
440.0
5.6
38.4
(0.8)
-
-
(0.7)
42.5
31.7
34.3
863.8
852.0
82.3
74.4
371.6
397.5
69.0
14.6
-
0.1
(0.2)
(2.5)
81.0
0.7
7.7
-
-
-
(0.2)
8.2
68.3
72.8
131.8
4.7
-
0.2
(0.1)
(4.9)
131.7
0.6
6.9
(0.1)
-
-
(0.2)
7.2
186.5
24.6
3.1
1.2
(2.9)
(7.4)
205.1
31.8
9.5
-
0.7
(2.4)
(0.9)
38.7
108.4
1,882.5
47.7
216.9
-
(11.1)
(1.7)
(3.2)
3.1
-
(13.7)
(54.1)
140.1
2,034.7
1.8
18.0
33.3
(1.3)
-
0.8
(1.0)
33.6
3.6
(0.4)
(0.1)
-
(0.6)
20.5
-
-
-
-
-
-
-
26.7
128.6
(3.0)
-
0.8
(3.7)
149.4
131.2
124.5
184.7
171.5
13.8
18.2
108.4
1,855.8
140.1
1,885.3
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.
FINANCIAL
STATEMENTS
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
15. PROPERTY, PLANT AND EQUIPMENT (continued)
The following table represents movements in property, plant, and equipment for the year ended 31 December 2022:
BUILDINGS
LAND
AND
GRAIN
STORAGE
STRUCTURES
FACILITIES
PRODUCTION
MACHINERY
AUXILIARY
UTILITIES
VEHICLES AND
AND OTHER
AND INFRA-
AGRICULTURAL
MACHINERY
STRUCTURE
MACHINERY
OTHER FIXED
CONSTRUCTION
ASSETS1
IN PROGRESS2
TOTAL
COST OF FAIR VALUE:
At 31 December 2021
Additions
Transfer from Right-of-use assets
Transfers
Disposals
Revaluation
Impairment loss
Translation difference
At 31 December 2022
ACCUMULATED DEPRECIATION:
At 31 December 2021
Depreciation charge for the year
Disposal
Elimination upon revaluation
Transfers
Transfer from Right-of-use assets
Translation difference
At 31 December 2022
NET BOOK VALUE
At 31 December 2021
At 31 December 2022
34.6
1.6
-
-
(1.1)
-
-
(3.4)
31.7
-
-
-
-
-
-
-
-
951.3
52.7
-
-
(8.1)
94.6
(6.1)
(220.6)
863.8
81.9
29.9
(0.7)
(90.8)
0.2
-
(20.5)
-
102.0
388.0
2.5
-
-
(0.1)
4.7
(0.6)
(26.2)
82.3
-
3.9
-
(3.4)
(0.2)
-
(0.3)
-
38
-
-
(1.8)
55.0
(11.4)
(90.6)
377.2
-
30.7
(0.5)
(21.9)
-
-
(2.7)
5.6
34.6
31.7
869.4
863.8
102.0
82.3
388.0
371.6
81.7
12.8
-
(7.7)
(0.4)
5.0
(2.7)
(19.7)
69.0
0.3
5.6
(0.1)
(4.2)
0.2
-
(1.1)
0.7
81.4
68.3
148.9
4.6
-
1.5
(0.3)
15.9
(0.5)
(38.3)
131.8
17.4
8.6
(0.2)
(20.1)
(0.2)
-
(4.9)
0.6
131.5
131.2
212.1
22.8
4.9
-
(4.1)
9.6
(3.8)
(55.0)
186.5
-
27.8
(0.4)
(25.6)
-
3.3
(3.3)
1.8
212.1
184.7
27.9
6.5
-
6.2
(1.5)
-
-
(7.3)
31.8
20.1
3.5
(0.3)
-
-
-
(5.3)
18.0
7.8
13.8
112.8
25.2
-
-
(1.0)
-
(2.3)
(26.3)
108.4
-
-
-
-
-
-
-
-
2,059.3
166.7
4.9
-
(18.4)
184.8
(27.4)
(487.4)
1,882.5
119.7
110.0
(2.2)
(166.0)
-
3.3
(38.1)
26.7
112.8
108.4
1,939.6
1,855.8
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.
FINANCIAL
STATEMENTS
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182
GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
15. PROPERTY, PLANT
AND EQUIPMENT (continued)
As of 31 December 2023, included within construction
in progress were prepayments for property, plant, and
equipment in the amount of USD 23 million (2022:
USD 28 million).
As of 31 December 2023, included within property, plant
and equipment were fully depreciated assets with the
original cost of USD 19 million (2022: USD 6 million).
As of 31 December 2023, certain of the Group’s property,
plant and equipment with the collateral amount of USD
127 million (2022: USD 101 million) were pledged as
collateral to secure its bank borrowings.
REVALUATION OF PROPERTY,
PLANT AND EQUIPMENT
The latest revaluation of buildings and structures, grain
storage facilities, production machinery, utilities and
infrastructure, vehicles and agricultural machinery and
auxiliary and other machinery has been performed as of
31 December 2022 as described in Note 4.
Based on analysis of fluctuations of the cumulative index
of producer’s prices, the cumulative index of inflation of
construction works, the index of physical depreciation
and the functional currency depreciation, Management
concluded that the carrying value of these groups of
property, plant and equipment was not materially
different from their fair values as at 31 December 2023.
The Group reviews its property, plant and equipment each
period to determine if any indication of impairment exists.
Based on these reviews, there have been no additional
indicators of impairment as of 31 December 2023 comparing
to those indicators existed as of December 2022.
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 the latest regular
valuation procedures amounted to USD 16 million and
360 million respectively. Additionally, during the year
ended 31 December 2022, the Group has recognized an
impairment loss of USD 11 million (in profit or loss) and a
decrease in revaluation reserve of USD 9 million (in other
comprehensive income) in respect of specific property,
plant and equipment of its subsidiary, Ukrainian Bacon,
located in Donetsk region as described in Notes 2 and 34.
The following unobservable inputs were used as at 31 December 2022 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
RANGE OF
UNOBSERVABLE
INPUTS 2022
(AVERAGE)
RELATIONSHIP OF
UNOBSERVABLE
INPUTS TO FAIR VALUE
FINANCIAL
STATEMENTS
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
Production
machinery
Depreciated
replacement
cost method
Market
comparable
approach
Depreciated
replacement
cost method
Depreciated
replacement
cost method
Index of physical
depreciation
0 – 80%
(30.12%)
The higher the index
of physical depreciation,
the lower the fair value
Cumulative index
of inflation of
construction works
1.00– 18.13
(3.29)
The higher the index,
the higher the fair value
Index of physical
depreciation
0 – 80%
(31.16%)
The higher the index
of physical depreciation,
the lower the fair value
Cumulative index
of inflation of
construction works
1.00 – 18.45
(2.93)
The higher the index,
the higher the fair value
Index of physical
depreciation
0 – 80%
(43.68%)
The higher the index
of physical depreciation,
the lower the fair value
Cumulative index
of inflation of
construction works
Index of physical
depreciation
Index of physical
depreciation
1.00 – 19.71
(3.96)
The higher the index,
the higher the fair value
0 – 90%
(41.59%)
0 – 90%
(31.55%)
The higher the index
of physical depreciation,
the lower the fair value
The higher the index
of physical depreciation,
the lower the fair value
Cumulative index of
producer inflation
1.00 – 19.71
(2.51)
The higher the index,
the higher the fair value
VISIT PAGE
Market comparable
approach
0 – 90%
(41.71%)
The higher the index
of physical depreciation,
the lower the fair value
Cumulative index of
producer inflation
1.00–19.71
(3.32)
The higher the index,
the higher the fair value
VISIT PAGE
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183
GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT 15. PROPERTY, PLANT
AND EQUIPMENT (continued)
Had the Group’s property plant and equipment been measured on a historical cost basis, their carrying amount would have been as follows:
FAIR VALUE
HIERARCHY
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
Level 3
Level 2, 3
Level 3
Level 2
Level 3
Level 2, 3
16. RIGHT-OF-USE ASSETS
2023
852
398
125
172
74
73
1,694
2022
864
372
131
185
82
68
1,702
2023
2022
235
175
52
100
23
58
643
249
171
54
81
23
40
618
The following table represents movements in right-of-use assets for the years ended 31 December 2023 and 2022:
LAND
BUILDINGS AND VEHICLES
TOTAL
NET BOOK VALUE:
As of 31 December 2021
Additions
Depreciation charge for the year
Termination of the lease
Reassessment of the lease
Translation difference
As of 31 December 2022
Additions
Depreciation charge for the year
Termination of the lease
Reassessment of the lease
Translation difference
As of 31 December 2023
245
10
(32)
(6)
39
(63)
193
13
(30)
(12)
44
(8)
200
32
12
(6)
(2)
-
(6)
30
30
(9)
(2)
1
(2)
48
277
22
(38)
(8)
39
(69)
223
43
(39)
(14)
45
(10)
248
FINANCIAL
STATEMENTS
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184
GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT 17. INTANGIBLE ASSETS
The following table represents movements in intangible assets for the year ended 31 December 2023:
COST:
As of 31 December 2022
Additions
Disposals
Translation difference
As of 31 December 2023
ACCUMULATED AMORTIZATION:
As of 31 December 2022
Amortization charge for the year
Translation difference
As of 31 December 2023
NET BOOK VALUE:
As of 31 December 2022
As of 31 December 2023
LAND LEASE
RIGHTS
TRADEMARKS
CUSTOMER
RELATIONS
OTHER INTANGIBLE
ASSETS
TOTAL
54
-
-
(2)
52
37
5
(2)
40
17
12
30
-
-
1
31
-
-
-
-
30
31
19
-
-
-
19
4
1
-
5
15
14
28
5
(1)
(1)
31
10
4
(1)
13
18
18
131
5
(1)
(2)
133
51
10
(3)
58
80
75
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
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
Translation difference
As of 31 December 2022
NET BOOK VALUE:
As of 31 December 2021
As of 31 December 2022
72
-
-
(18)
54
42
6
(11)
37
30
17
32
-
-
(2)
30
-
-
-
-
32
30
20
-
-
(1)
19
3
1
-
4
17
15
28
8
(1)
(7)
28
8
4
(2)
10
20
18
152
8
(1)
(28)
131
53
11
(13)
51
99
80
FINANCIAL
STATEMENTS
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185
GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
17. INTANGIBLE ASSETS (continued)
The Group has recognized certain trademarks and
customer relationships as a part of intangible assets
through the acquisition of subsidiaries in previous years.
The remaining useful life of customer relationships was
estimated at 20 years.
The trademarks acquired by the Group mainly consist
of the PP and Topiko poultry meat brands and the
Poli meat processing products brand. The Group
believes that, since trademarks are well-positioned
and recognizable on a stable and mature market, there
are no technical barriers that would limit their lifetime.
As a result of further promotion of the trademarks, the
Group expects obtain economic benefits from them
indefinitely. Accordingly, the trademarks held by 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 trademark values to separate CGUs is
presented below:
SEGMENT
COUNTRY
European
operating
Slovenia
Bosnia and
Herzegovina
Croatia
Serbia
TRADEMARKS
CARRYING VALUE
2023
2022
18
6
5
2
31
17
6
5
2
30
The impairment testing of the value of trademarks
was performed by internal specialists. 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 incorporate the current market
assessment of the risks specific to each CGU, considering
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 separate
CGUs 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 16.9% (2022:
18.1%) was used. An increase of 1,146 basis points in
the weighted average discount rate would result in
impairment in 2023 (2022: 1,048 basis points).
The revenue for the next five years was estimated using
a weighted average 2.4% sales growth rate and 2.1% the
terminal growth rate for revenue beyond this period
(2022: 4.8% and 2.7% respectively). A reduction of
1,583 basis points in the budgeted sales growth would
result in impairment in 2023 (2022: 1,887 basis points).
Weighted average royalty rate used in calculation of
cash flows was set at a level of 2.6% (2022: 2.2%). A
reduction by 81 basis points in the weighted average
royalty rate would result in impairment in 2023 (2022:
83 basis points).
As of 31 December 2023 and 2022 no impairment of
trademarks was identified.
FINANCIAL
STATEMENTS
18. GOODWILL
The following table represents movements in goodwill
for the years ended 31 December 2023 and 2022:
NET BOOK VALUE:
As of 1 January
Impairment recognized
Translation difference
As of 31 December
2023
2022
60
-
2
62
66
(2)
(4)
60
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186
GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT 18. GOODWILL
(continued)
19. NON-CURRENT
FINANCIAL ASSETS
The Group allocates goodwill to individual entities as separate cash-generating units (CGU). A summary of goodwill
allocation to separate CGUs is presented below:
The balances of non-current financial assets were as
follows as of 31 December 2023 and 2022:
SEGMENT
COUNTRY
GOODWILL CARRYING
VALUE
METHODOLOGY ASSUMPTIONS
AND METHODS USED FOR GOODWILL
2023
2022
2023 (2022)
Poultry and related
operations
Ukraine
1
1
European
operating
Slovenia
38
37
Serbia
Bosnia and
Herzegovina
Croatia
4
11
8
62
4
11
7
60
Average sales growth: 5.8%(11.0%)
Terminal sales growth: 5.0% (5.0%)
Discount rate: 16.9% (19.1%)
Projection period: 5 years
Average sales growth: 3.0% (7.0%)
Terminal sales growth: 1.8% (2.1%)
Discount rate: 8.2% (9.9%)
Projection period: 5 years
Average sales growth: 4.4%(8.2%)
Terminal sales growth: 3.0%(3.0%)
Discount rate: 10.8%(13.0%)
Projection period: 5 years
Average sales growth: 2.1%(4.8%)
Terminal sales growth: 2.0%(2.1%)
Discount rate: 15.9%(19.0%)
Projection period: 5 years
Average sales growth: 3.2%(7.3%)
Terminal sales growth: 2.1%(1.8%)
Discount rate: 9.2%(11.1%)
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.
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 of 808 basis points
in the weighted average discount rate to 17.9% would
result in impairment in 2023 (2022: 338 basis points
to 15.0%).
The growth rates and gross margins used for cash flow
extrapolations are supported by industry trends such as
consumer prosperity and dietary trends. The Directors
estimated these inputs based on the past performance
of the cash-generating unit and their expectations of
market development. A reduction by 897 basis points
in the budgeted sales growth or a decrease in gross
margin by 554 basis points would result in impairment
in 2023 (2022: 225 and 1,198 respectively).
As of 31 December 2023, no impairment was identified.
As of 31 December 2022, an impairment of the
outstanding goodwill in the amount of USD 2 million
attributable to the Agriculture segment was recognized
due to lower projected cash flows from operations and
a substantial increase in the discount rate.
Loans provided to third
parties
Loans and finance aid
provided to related
parties (Note 32)
Other financial assets
Less: expected credit
losses
2023
2022
26
24
3
1
(22)
8
3
1
(20)
8
Loans receivable are mainly represented by loans with
a fixed interest rate of 2.5% in US dollars (Effective
Interest Rate of 4.25%) and at a rate of 19% in Ukrainian
hryvnia with maturities as of 31 December 2025, 2026
and 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 loans provided to third parties and loans and finance
aid provided to related parties in amounts of USD 21.5
million and USD 0.4 million, respectively (2022: USD
20.1 million and USD 0.3 million, respectively).
The movement in loss allowance for loan receivables
and other financial assets classified at amortized cost
is detailed below:
2023
2022
1 January
Charged during the year
31 December
(20)
(2)
(22)
(5)
(15)
(20)
FINANCIAL
STATEMENTS
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187
GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT 20. BIOLOGICAL ASSETS
The balances of non-current biological assets were as follows as of 31 December 2023 and 2022:
Milk cows and other non-current bearer biological assets, units
Non-current comsumable cattle and pigs, units
Total non-current biological assets
15.7
5.0
12
4
16
15.2
4.9
17
4
21
THOUSAND UNITS
CARRYING AMOUNT
THOUSAND UNITS
CARRYING AMOUNT
2023
2022
The balances of current biological assets were as follows as of 31 December 2023 and 2022:
THOUSAND UNITS
CARRYING AMOUNT
THOUSAND UNITS
CARRYING AMOUNT
2023
2022
Bearer breeders held for hatchery eggs production, units
Broiler chickens, units
Hatchery eggs, units
Crops in fields, hectare
Cattle, pigs and other consumable current biological assets , units
Total consumable current biological assets
Total current biological assets
4,865
52,239
43,430
78
3,5
65
73
11
21
1
106
171
4,943
53,561
42,041
82
3.5
60
75
11
30
1
117
177
FINANCIAL
STATEMENTS
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188
GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
20. BIOLOGICAL ASSETS (continued)
The following table represents movements in significant biological assets for the years ended 31 December 2023 and 2022:
FINANCIAL
STATEMENTS
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/slaughtering
Translation difference
As of 31 December 2022
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/slaughtering
Translation difference
As of 31 December 2023
MILK
COWS
22.7
11.9
7.1
-
6.9
-
(25.8)
(5.6)
17.2
9.4
5.9
-
5.1
(0.3)
(24.9)
(0.6)
11.8
BREEDERS HELD
FOR HATCHERY EGGS
PRODUCTION
BROILER
CHICKENS
CROPS
IN FIELDS
79.6
126.8
55.1
(156.5)
-
(2.7)
(23.7)
(18.8)
59.8
115.7
57.3
(130.8)
-
(3.9)
(31.3)
(1.7)
65.1
89.3
935.4
453.8
156.5
-
-
(1,538.0)
(21.8)
75.2
957.9
454.5
130.8
-
-
(1,544.0)
(1.9)
72.5
33.6
330.8
93.0
-
-
-
(418.7)
(9.0)
29.7
349.6
0.9
-
-
-
(358.4)
(0.8)
21.0
Information on movements in hatchery eggs and cattle and pig groups has been considered immaterial for disclosure.
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189
GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT 20. BIOLOGICAL ASSETS (continued)
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 calculated 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)
SENSITIVITY OF THE INPUT
TO FAIR VALUE INCREASE/
(DECREASE) USD MILLION
INPUT 5% HIGHER
INPUT 5% LOWER
Crops yield –
tonnes per hectare
The higher the crops yield,
the higher the fair value
2023: 3.8 – 9.9 (6.8)
2022: 3.6 – 7.2 (5.4)
Crops in fields
DCF method
Crops price – per tonne
The higher the market price,
the higher the fair value
2023: USD 114 – 350 (232)
2022: USD 157 – 498 (328)
Discount rate
The higher the discount rate,
the lower the fair value
Number of hatchery eggs
produced by one breeder
The higher the number,
the higher the fair value
2023: 24.4%
2022: 42.7%
2023: 165
2022: 165
Breeders held
for hatchery eggs
production
DCF method
Hatchery egg price –
per egg
The higher the market price,
the higher the fair value
2023: USD 0.24
2022: USD 0.25
Broiler chickens
Cash flows method
Discount rate
The higher the discount rate,
the lower the fair value
Average weight of one
broiler – kg
The higher the weight,
the higher the fair value
Poultry meat price –
per kg
The higher the market price,
the higher the fair value
2023: 24.4%
2022: 42.7%
2023: 2.32
2022: 2.40
2023: UAH 42.09
1.20 EUR*
2022: UAH 40.64
1.39 EUR*
Daily milk yield –
litre per cow
The higher the milk yield,
the higher the fair value
Weight of the cow –
kg per cow
The higher the weight,
the higher the fair value
2023: 20.56 – 22.44 (21.71)
2022: 20.19 – 21.91 (21.40)
2023: 566 – 599 ( 584)
2022: 559 – 587 (570)
Milk cows
DCF method
Milk price – per litre
Meat price – per kg
Discount rate
*data of European operating segment
The higher the market price,
the higher the fair value
2023: UAH 14.03 – 14.54 (14.29)
2022: UAH 12.42 – 12.99 (12.73)
The higher the market price,
the higher the fair value
2023: UAH 21.77 – 35.00 (25.68)
2022: UAH 15.58 – 18.09 (16.77)
The higher the discount rate,
the lower the fair value
2023: 23.7%
2022: 25.0%
3.8
4.4
3.8
4.4
(0.1)
(0.2)
1.2
1.2
4.1
4.3
(0.2)
(0.3)
5.8
6.2
6.3
6.7
0.5
0.8
0.2
0.1
4.4
4.1
0.2
0.1
(0.3)
(0.5)
(3.8)
(4.4)
(3.8)
(4.4)
0.1
0.2
(1.2)
(1.2)
(4.1)
(4.3)
0.2
0.3
(5.8)
(6.2)
(6.3)
(6.7)
(0.5)
(0.8)
(0.2)
(0.1)
(4.4)
(4.1)
(0.2)
(0.1)
0.4
0.5
FINANCIAL
STATEMENTS
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190
GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
21. INVENTORIES
22. AGRICULTURAL PRODUCE
24. TRADE ACCOUNTS RECEIVABLE
The balances of inventories were as follows as of 31
December 2023 and 2022:
The balances of agricultural produce were as follows
as of 31 December 2023 and 2022:
The balances of trade accounts receivable were as
follows as of 31 December 2023 and 2022:
FINANCIAL
STATEMENTS
Components for mixed
fodder production
Other raw materials
Work in progress
Fertilizers
Vegetable oil
Spare parts
Gas and fuel
Mixed fodder
Other inventories
2023
2022
104
157
THOUSAND
CARRYING
THOUSAND
CARRYING
TONNES
AMOUNT
TONNES
AMOUNT
2023
2022
62
44
34
25
21
15
9
19
50
40
50
49
16
26
15
11
333
414
Grain
1,632
243
1,050
224
Chicken
meat
Other
various
crops
59.8
113
70.6
128
14
370
9
361
The fair value of Agricultural produce was estimated
based on market price as of the date of harvest and is
within Level 2 of the fair value hierarchy.
As of 31 December 2023 and 2022 work in progress was
mainly comprised of expenses incurred in cultivating
fields to be planted in the years 2024 and 2023 in amounts
of USD 42 million and USD 38 million, respectively.
As of 31 December 2023, agricultural produce in the
amount of USD 13 million was pledged as collateral to
secure bank borrowings (2022: USD 38 million).
As of 31 December 2023, components for mixed fodder
production mostly consist of sunflower seeds in the amount
of USD 57 million (31 December 2022: USD 96 million),
corn in the amount of USD 10 million (31 December 2022:
USD 20 million), and soybeans in the amount of USD 7
million (31 December 2022: USD 7 million).
Inventory is stated at the lower of cost and net realizable
value. As of 31 December 2023, there were no significant
inventory write-downs to bring them to net realizable
value (2022: USD 3 million).
23. TAXES RECOVERABLE
AND PREPAID
Taxes recoverable and prepaid were as follows as of 31
December 2023 and 2022:
VAT recoverable
Miscellaneous taxes
prepaid
2023
2022
29
1
30
68
1
69
2023
2022
Poultry meat
Processed meat
Vegetable oil
Agriculture
Energy and fuel resources
Other*
132
21
22
14
5
5
Less: expected credit losses
(13)
186
126
19
30
11
5
5
(13)
183
* – includes trade accounts recivables due from related partiens
(Note 33) in total amount of USD 391 thousands as of 31 December 2023
(31 December 2022: USD 106 thousands)
The average credit period for poultry sales is 30 days, and for
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
collectively using a provision matrix and on individually
using different scenarios of the probability of default.
The provision matrix is used by reference to the 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 2023 and as at 31 December 2022.
An individual assessment is used for individually
significant debtors with credit risk characteristics that
are not aligned with others.
As at 31 December 2023, the Group has recognized a loss
allowance of USD 6 million 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.
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191
GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
24. TRADE ACCOUNTS RECEIVABLE
(continued)
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 written-off trade accounts receivable
are subject to enforcement activities.
Ukraine, other products export sales, and European operating
segment as separate financial instruments. It 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.
The following table details the trade accounts receivable risk
profile based on the Group’s provision matrix. It discloses
poultry meat Ukraine, poultry meat export and other products
The following table illustrates the use of a provision
matrix as a risk profile disclosure under the simplified
approach as of 31 December 2023:
FINANCIAL
STATEMENTS
31 DECEMBER 2023
PORTFOLIO ASSESSMENT:
POULTRY MEAT UKRAINE1
ECL rate, %
Estimated total gross carrying amount at default
Lifetime ECL
POULTRY MEAT EXPORT1
ECL rate, %
Estimated total gross carrying amount at default
Lifetime ECL
OTHER PRODUCTS UKRAINE2
ECL rate, %
Estimated total gross carrying amount at default
Lifetime ECL
OTHER PRODUCTS EXPORT3
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 ASSESSMENT4:
ECL rate, %
Estimated total gross carrying amount at default
Lifetime ECL
Estimated total gross carrying amount at default
Total lifetime ECL
TRADE ACCOUNTS RECEIVABLE – DAYS PAST DUE
NOT PAST DUE
< 30
31-90
91-270
>270
TOTAL
9.20%
22.4
(2.1)
0.03%
35.6
-
9.29%
13.6
(1.2)
9.28%
5.0
(0.5)
9.49%
2.1
(0.2)
9.79%
0.3
-
0.07%
0.23%
1.07%
11.0
-
9.45%
4.5
(0.4)
1.9
-
9.71%
1.8
(0.2)
0.6
-
9.91%
0.9
(0.1)
0.00%
0.00%
0.01%
0.13%
1.2
-
0.00%
46.2
-
13.7
-
9.7
-
0.4
-
0.03%
0.23%
0.04%
9.6
-
2.0
-
4.3
-
100%
1.1
(1.1)
100%
0.5
(0.5)
100%
3.6
(3.6)
100%
0.4
(0.4)
100%
0.1
(0.1)
21.11%
0.00%
21.11%
35.22%
45.03%
0.5
(0.1)
-
-
-
-
1.2
(0.4)
4.5
(2.0)
30.9
(3.9)
49.6
(0.5)
24.4
(5.5)
25.4
(0.4)
62.2
(0.1)
192.5
(10.4)
6.2
(2.5)
198.7
(12.9)
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¹ Poultry meat consists only trade accounts receivables from sales of raw poultry meat and other raw poultry components
² Other products Ukraine mostly consists of trade accounts receivables from sales of processed meat and agricultures products (milk, grain, cattle and differenct agricultural services)
³ Other products export mostly consists of trade accounts receivables from sales of vegetable oil and grain
⁴ Individually assessed trade accounts receivable mainly consists of accounts receivable from sales of energy
192
GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
24. TRADE ACCOUNTS RECEIVABLE (continued)
The following table illustrates the use of a provision matrix as a risk profile disclosure under the simplified approach as of 31 December 2022:
FINANCIAL
STATEMENTS
31 DECEMBER 2022
PORTFOLIO ASSESSMENT:
POULTRY MEAT UKRAINE1
ECL rate, %
Estimated total gross carrying amount at default
Lifetime ECL
POULTRY MEAT EXPORT1
ECL rate, %
Estimated total gross carrying amount at default
Lifetime ECL
OTHER PRODUCTS UKRAINE2
ECL rate, %
Estimated total gross carrying amount at default
Lifetime ECL
OTHER PRODUCTS EXPORT3
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 ASSESSMENT4:
ECL rate, %
Estimated total gross carrying amount at default
Lifetime ECL
Estimated total gross carrying amount at default
Total lifetime ECL
TRADE ACCOUNTS RECEIVABLE – DAYS PAST DUE
NOT PAST DUE
< 30
31-90
91-270
>270
TOTAL
9.19%
23.8
(2.2)
0.02%
34.7
-
9.25%
10.8
(1.0)
9.26%
2.8
(0.3)
9.53%
9.67%
0.3
-
0.1
-
0.06%
0.18%
0.79%
16.1
-
9.35%
3.9
(0.4)
4.5
-
9.55%
1.0
(0.1)
0.6
-
9.74%
0.4
-
100%
1.1
(1.1)
100%
0.5
(0.5)
100%
3.8
(3.8)
0.00%
0.00%
0.16%
0.50%
100%
0.4
-
0.01%
42.9
-
32.1
-
0.3
-
0.3
-
0.02%
0.25%
0.47%
7.9
-
1.3
-
0.7
-
-
-
100%
0.1
(0.1)
41.82%
43.61%
46.83%
64.03%
77.38%
0.2
(0.1)
0.1
(0.1)
0.1
(0.1)
3.4
(2.1)
2.0
(1.5)
28.1
(3.6)
56.4
(0.5)
19.9
(5.3)
33.1
-
52.9
(0.1)
190.4
(9.5)
5.8
(3.9)
196.2
(13.3)
1 Poultry meat consists only trade accounts receivables from sales of raw chicken meat and other raw chicken components
² Other products Ukraine consists of trade accounts receivables from sales of processed meat and agricultures products (milk, grain, cattle and differenct agricultural services)
³ Other products export consists of trade accounts receivables from sales of vegetable oil and grain
⁴ Individually assessed trade accounts receivable mainly consists of accounts receivable from sales of energy
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193
GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
24. TRADE ACCOUNTS RECEIVABLE
(continued)
The following table shows the movement in lifetime ECL
that has been recognized for trade and other accounts
receivable by the simplified approach set out in IFRS 9,
in USD thousands:
COLLECTIVELY
INDIVIDUALLY
ASSESSED
ASSESSED
1 January 2022
Charged during the year
Utilised
31 December 2022
Charged during the year
Utilised
(2.9)
(6.8)
0.3
(9.4)
(1.8)
0.8
(12.3)
(1.7)
10.1
(3.9)
1.4
-
31 December 2023
(10.4)
(2.5)
25. OTHER CURRENT
FINANCIAL ASSETS
The balances of other current assets were as follows as
of 31 December 2023 and 2022:
2023
2022
Loans provided to third
parties
Letters of credit
Government bonds
Loans and finance aid
provided to related
parties (Note 32)
Receivables for claims
and indemnification
Short-term bank deposits
Other financial assets
Less: allowance for
expected credit losses
13
8
8
4
2
-
6
(7)
34
8
-
-
4
3
6
6
(5)
22
underlying balances. The expected credit losses relate
to loans provided to third parties, lending and finance aid
provided to related parties, and receivables for claims and
indemnification in amounts of USD 4.3 million, USD 2.1
million and USD 0.4 million, respectively (2022: USD 2.0
million, USD 2.1 million and USD 0.4 million, respectively).
The movement in allowance for expected credit losses
is detailed below:
2023
2022
1 January
Charged during the year
31 December
(5)
(2)
(7)
(5)
-
(5)
26. CASH AND CASH EQUIVALENTS
The balances of cash and cash equivalents were as
follows as of 31 December 2023 and 2022:
2023
2022
CASH AND CASH
EQUIVALENTS AT BANKS
AND ON HAND IN:
US Dollars
Euro
Ukrainian Hryvnia
Bosnia-Herzegovina
Convertible Mark
Pound Sterling
Other currencies
SHORT-TERM DEPOSITS WITH
AN ORIGINAL MATURITY OF
LESS THAN 90 DAYS:
US Dollars
Ukrainian Hryvnia
Euro
136
89
26
19
6
13
66
43
38
82
88
24
5
11
13
47
13
17
Total cash and equivalents
436
300
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
Cash at banks earns interest at floating rates based on
daily bank deposit rates. Short-term deposits with the
original maturity up to three months earn interest at
the respective shotr-term deposit rates.
FINANCIAL
STATEMENTS
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 2023
and 2022 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 C rating
2023
2022
191
157
7
12
71
40
107
60
60
436
31
300
Estimated credit losses relating to cash and cash
equivalents held in Ukrainian state banks with C rating
were immaterial as of 31 December 2023 and 2022.
27. SHAREHOLDERS’ EQUITY
SHARE CAPITAL
As of 31 December 2023 and 2022 the authorized, issued,
and fully paid share capital of MHP SE comprised the
following number of shares:
2023
2022
VISIT PAGE
Number of shares
issued and fully paid
Number of shares
outstanding
110,770,000
110,770,000
107,038,208 107,038,208
*This number of outstanding shares is included in computation of
the weighted average number of shsres used as a denominator in
calculating earnings per share in Note 39
The authorized share capital as of 31 December 2023
and 2022 was EUR 221,540 thousand represented by
110,770,000 shares with a par value of EUR 2 each.
All shares have equal voting rights and rights to receive
dividends, payable at the Company's discretion.
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194
GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
28. NON-CONTROLLING INTERESTS
The table below shows details of non-wholly owned subsidiaries of the Group that have material 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
PROPORTION OF OWNERSHIP
INTERESTS AND VOTING RIGHTS HELD
BY NON-CONTROLLING INTERESTS
PROFIT/(LOSS) ALLOCATED
TO NON-CONTROLLING INTERESTS
ACCUMULATED
NON-CONTROLLING INTERESTS
2023
49.0%
49.0%
11.5%
n/a
n/a
2022
49.0%
49.0%
11.5%
n/a
n/a
2023
(1.4)
(2.4)
(0.7)
2.8
(1.7)
2022
2.1
(1.8)
(2.4)
(3.3)
(5.4)
2023
7.8
4.1
3.5
(5.0)
10.4
2022
9.5
6.6
4.3
(2.1)
18.3
As described in Note 3, during the year ended 31 December 2023, the Group acquired 25% non-controling interest in MHP Saudi Arabia Trading, so the effective ownership
interest of the Group increased to 100%. Respective information about non-controlling interest in this subsidiary was included into line “Other subsidiaries with immaterial
non-controlling interests”.
Summarised financial information regarding each of the Group's subsidiaries with 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 2023 and 2022:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Total equity
ATTRIBUTABLE TO:
Owners of the Group
Non-controlling interest
MHP-AGRO-S
MHP-AGROKRYAZH
MYRONIVSKY PLANT OF
MANUFACTURING FEEDS AND GROATS
2023
35.1
22.4
(38.9)
(9.3)
9.3
1.5
7.8
2022
38.4
21.9
(32.4)
(9.8)
18.1
8.6
9.5
2023
34.0
18.4
(39.6)
(7.4)
5.4
1.3
4.1
2022
26.4
19.1
(27.7)
(7.5)
10.3
3.7
6.6
2023
58.7
99.1
(124.2)
(9.4)
24.2
20.7
3.5
2022
68.2
106.5
(131.8)
(9.7)
33.2
28.9
4.3
FINANCIAL
STATEMENTS
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195
GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
28. NON-CONTROLLING INTERESTS
Summarised statements of profit or loss and other comprehensive income for the years ended 31 December 2023 and 2022:
MHP-AGRO-S
MHP-AGROKRYAZH
MYRONIVSKY PLANT OF
MANUFACTURING FEEDS AND GROATS
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
2023
30.1
(32.9)
(2.8)
(1.4)
(1.4)
(2.8)
(0.3)
(0.3)
(0.6)
(1.7)
(1.7)
(3.4)
2022
30.8
(26.6)
4.2
2.1
2.1
4.2
(1.8)
(1.8)
(3.6)
0.3
0.3
0.6
2023
15.6
(20.4)
(4.8)
(2.4)
(2.4)
(4.8)
(0.2)
(0.1)
(0.3)
(2.6)
(2.5)
(5.1)
2022
23.5
(27.1)
(3.6)
(1.8)
(1.8)
(3.6)
(1.7)
(1.7)
(3.4)
(3.5)
(3.5)
(7.0)
-
(2.4)
-
-
2023
128.6
(135.1)
(6.5)
(5.8)
(0.7)
(6.5)
(1.0)
(0.1)
(1.1)
(6.8)
(0.8)
(7.6)
-
2022
110.8
(130.9)
(20.1)
(17.7)
(2.4)
(20.1)
13.4
1.7
15.1
(4.3)
(0.7)
(5.0)
-
FINANCIAL
STATEMENTS
VISIT PAGE
Summarised cash inflow/(outflow) for the years ended 31 December 2023 and 2022:
MHP-AGRO-S
MHP-AGROKRYAZH
MYRONIVSKY PLANT OF
MANUFACTURING FEEDS AND GROATS
VISIT PAGE
Operating activities
Investing activities
Financing activities
2023
6.4
(2.9)
(3.6)
2022
1.2
(1.8)
(0.7)
2023
1.2
(1.3)
-
2022
(1.4)
(1.3)
-
2023
8.8
(8.8)
-
2022
2.7
(2.7)
-
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196
GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT 29. BANK BORROWINGS
The following table summarizes bank borrowings and credit lines outstanding as of 31 December 2023 and 2022:
CURRENCY
WAIR1
USD’ MLN
WAIR1
USD’ MLN MLM000
2023
2022
NON-CURRENT
CURRENT
Current portion
of long-term bank
borrowings
Total bank borrowings
EUR
USD
USD
USD
USD
EUR
EUR
UAH
EUR
USD
EURIBOR2 + 1,05%
SOFR3 + 3,70%
UIRD5 + 6,76%
7,38%
6,26%
11,85%
EURIBOR2 + 1,05%
SOFR3 + 3,70%
EURIBOR2 + 1.35%
6.06%
SOFR3 + 2.20%
4,32%
EURIBOR2 +2,3%
20,00%4
EURIBOR2 + 1.35%
116
101
17
234
47
-
43
-
13
28
14
145
379
118
-
-
118
57
11
57
26
2
23
-
176
294
1 WAIR represents the weighted average interest rate on outstanding borrowings;
2 According to the terms of the agreement, if market EURIBOR becomes negative, it shall be deemed zero for the calculation of interest expense;
3 The Secured Overnight Financing Rate (SOFR) is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities;
4 Deduction interest amount equal to 3m UIRD UAH 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 2023 3m UIRD rate is equal to 11.18% p.a;
5 Ukrainian Index of Retail Deposit Rates (UIRD) - indicative rate calculated at 15:00 Kyiv time of each Banking Day in the Thomson Reuters system based on nominal rates on time deposits of individuals in US Dollars for a period
of 3 months with interest paid upon the expiration of the deposit agreement, operating in 20 largest Ukrainian banks in the size of the deposit portfolio of individuals.
FINANCIAL
STATEMENTS
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197
GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
29. BANK BORROWINGS (continued)
The Group’s borrowings are drawn from various
banks, mostly from international banks and their
local subsidiaries of international banks in form of
term loans, credit line facilities. Repayment terms of
principal amounts of bank borrowings vary from monthly
repayment to repayment on maturity depending on the
terms of the agreement with each bank.
As of 31 December 2023 and 31 December 2022, the
Group’s bank term loans and credit lines bear either
floating or fixed interest rates.
Term loans and credit line facilities were as follows as
of 31 December 2023 and 2022:
Credit lines
Term loans
2023
2022
103
276
379
152
142
294
Maturity profile of the bank borrowings and credit
lines outstanding as of 31 December 2023 and 2022
was as follows:
Within one year
In the second year
In the third to fifth year
inclusive
After five years
2023
2022
145
49
167
18
379
176
27
84
7
294
As of 31 December 2023, the Group had undrawn
facilities of USD 468 million (2022: USD 37 million).
Most of these undrawn facilities expire during the period
until July 2026.
The Group, as well as its specified subsidiaries, have
to comply with the following maintenance covenants
imposed by the banks providing the loans: EBITDA
to interest expenses ratio, current ratio and liabilities
to equity ratio. Separately, in case of excess of Net
Debt to EBITDA ratio (the Group’s leverage ratio),
there are negative covenants in respect of restricted
payments, including dividends, 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 2023 the Group has complied with
all bank covenants. As of 31 December 2023, the Group’s
leverage ratio decreased to 2.47 to 1, compared with
2.58 and 3.22 to 1 as of 31 March 2023 (unaudited) and
31 December 2022 respectively. Thus, as described in
Note 30, the above restrictions, which were in place
since 31 December 2022, had been lifted from 18 May
2023, the date of publication of unaudited interim
condensed consolidated financial statements for the
period from 1 January 2023 to 31 March 2023.
The Group’s bank borrowings are jointly and severally
guaranteed by MHP, Myronivsky Plant of Manufacturing
Feeds and Groats, Oril-Leader, Peremoga Nova, Starynska
Ptakhofabryka, Zernoproduct MHP, Katerinopilskiy
Elevator, Agrofort, SPF Urozhay, MHP SE, Scylla
Capital Limited, Myronivska Pticefabrika, Ptakhofabryka
Snyatynska Nova, Vinnytska Ptakhofabryka, Zakhid-Agro
MHP, MHP-Urozhayna Krayina.
As of 31 December 2023, the Group had borrowings of
USD 148 million that were secured by property, plant,
and equipment with a collateral amount of USD 127
million (31 December 2022: USD 109 million and USD
101 million, respectively) (Note 15).
As of 31 December 2023, the Group had borrowings
of USD 10 million that were secured by agricultural
produce with a carrying amount of USD 13 million (31
December 2022: USD 31 million and USD 38 million,
respectively) (Note 22).
As of 31 December 2023, the bank short-term deposits
with a carrying amount of USD 19 million (31 December
2022: USD 23 million), was restricted as collateral
to secure issued letters of credit. These amounts are
presented within cash and cash equivalents and the
letters of credit in other current financial assets.
As of 31 December 2023 and 31 December 2022, interest
payable on bank borrowings was USD 2.4 million and
USD 1 million, respectively.
LOAN AGREEMENT WITH INTERNATIONAL
FINANCIAL INSTITUTIONS
With the purpose of refinancing the part of its Eurobond
indebtedness maturing in 2024, on 20 October 2023
the Group signed agreements with three international
and development financial institutions - DFC, IFC
and EBRD - to provide facilities of up to USD 400
million in aggregate. First tranches in total amount
of USD 107 million were received to partially finance
the repurchase of Notes on 10 November 2023, under
a Tender Offer, with a principal amount of USD 151
million for USD 128 million (for details refer to Note 30
Bonds issued). Subsequently, in 2024, second tranches
(USD 113 million) were received to partially finance
the repurchase of Notes on 23 January 2024, under
a Tender Offer, with a principal amount of USD 138
million for USD 131 million (for details refer to Note
30 Bonds issued).
FINANCIAL
STATEMENTS
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198
GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT 30. BONDS ISSUED
Bonds issued and outstanding as of 31 December 2023 and 2022 were as follows:
NON-CURRENT
7.75% Senior Notes due in 2024
6.95% Senior Notes due in 2026
6.25% Senior Notes due in 2029
CURRENT
7.75% Senior Notes due in 2024
Unamortized debt issuance cost
Total bonds issued
CARRYING AMOUNT
NOMINAL AMOUNT
31 DECEMBER
31 DECEMBER
31 DECEMBER
31 DECEMBER
2023
2022
2023
2022
-
543
348
891
348
348
-
1 239
494
541
348
1,383
-
-
-
1,383
-
550
350
900
349
349
(10)
1 239
500
550
350
1,400
-
-
(17)
1,383
As of 31 December 2023 and 2022 accrued interest
payable on bonds issued was USD 19.2 million and USD
41 million, respectively.
6.25% SENIOR NOTES
On 19 September 2019, MHP Lux S.A., a public company
with limited liability (société anonyme) incorporated in
2018 under the laws of the Grand Duchy of Luxembourg,
issued USD 350 million 6.25% Senior Notes due in 2029
at par value. The funds received were used to satisfy and
discharge the 8.25% Senior Notes due in April 2020
for debt refinancing and general corporate purposes.
The Senior Notes are jointly and severally guaranteed on
a senior basis by MHP SE, PrJSC “Oril – Leader”, PrJSC
“Myronivska Pticefabrika”, “SPF “Urozhay” LLC, “Starynska
Ptakhofabryka” ALLC, “Vinnytska Ptakhofabryka” LLC,
“Peremoga Nova” SE, “Katerinopolskiy Elevator” LLC,
PrJSC “MHP”, PrJSC “Zernoprodukt MHP” and PrJSC
“Agrofort”.
indebtedness in excess of Net Debt to EBITDA ratio
as defined by the indenture, restrictions on mergers or
consolidations, limitations on liens and dispositions of
assets and limitations on transactions with affiliates. If
the Group fails to comply with the covenants imposed,
the Trustee or the Holders of at least 25% in principal
amount of outstanding Notes may, upon written notice
to the Group, declare all outstanding Senior Notes to
be due and payable immediately. If a change of control
occurs, the Group shall make an offer to each holder of
the Senior Notes to purchase such Senior Notes at a
purchase price in cash in an amount equal to 100% of
the aggregate principal amount thereof, plus accrued
and unpaid interest and additional amounts, if any.
6.95% SENIOR NOTES
On 3 April 2018, MHP Lux S.A. issued USD 550 million
6.95% Senior Notes due in 2026 at par value. Out of the
total issue amount, USD 416 million were designated
for redemption and exchange of the existing 8.25%
Senior Notes due in 2020.
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
The Senior Notes are jointly and severally guaranteed
on a senior basis by MHP SE, PrJSC “MHP”, PJSC
“Myronivsky Plant of Manufacturing Feeds and Groats”,
PrJSC “Zernoprodukt MHP”, PrJSC “Agrofort”, PrJSC
“Oril-Leader”, PrJSC “Myronivska Pticefabrika”, “SPF
“Urozhay” LLC, “Starynska Ptakhofabryka” ALLC,
“Vinnytska Ptakhofabryka” LLC, “Peremoga Nova” SE,
“Katerinopolskiy Elevator” LLC, Scylla Capital Limited.
Interest on the Senior Notes is payable semi-annually
in arrears in April and October. These Senior Notes are
subject to certain restrictive covenants including, but
not limited to, limitations on the incurrence of additional
indebtedness in excess of Net Debt to EBITDA ratio
as defined by the indenture, restrictions on mergers or
consolidations, limitations on liens and dispositions of
assets and limitations on transactions with affiliates. If
the Group fails to comply with the covenants imposed,
the Trustee or the Holders of at least 25% in principal
amount of outstanding Notes may, upon written notice
to the Group, declare all outstanding Senior Notes to
be due and payable immediately. If a change of control
occurs, the Group shall make an offer to each holder of
the Senior Notes to purchase such Senior Notes at a
purchase price in cash in an amount equal to 100% of
the principal amount thereof, plus accrued and unpaid
interest and additional amounts, if any.
7.75% SENIOR NOTES
On 10 May 2017, MHP SE issued USD 500 million 7.75%
Senior Notes due in 2024 at par value. Out of the total
issue amount, USD 245 million were designated for
redemption and exchange of existing 8.25% Senior
Notes due in 2020.
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.
FINANCIAL
STATEMENTS
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
30. BONDS ISSUED (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 agreements, the consolidated leverage
ratio is tested on the date of incurrence of additional
indebtedness or restricted payment and after giving pro
forma effect to such incurrence or restricted payment
as if it had been incurred or done at the beginning of
the most recent four consecutive fiscal quarters for
which financial statements are publicly available (or
are made available).
As at 31 December 2023 the leverage ratio of the Group
is 2.47 to 1, lower than the defined limit 3.0 to 1. As the
leverage ratio of 3.22 to 1 as at 31 December 2022 was
higher that defined limit, this led to certain restriction
as stated above. Subsequently, the Group improved the
leverage ratio during the first quarter 2023, and as at 31
March 2023 the leverage ratio was 2.58 to 1 as presented
in the unaudited interim condensed consolidated
financial statements for the three months ended 31
FINANCIAL
STATEMENTS
March 2023, published on 18 May 2023. Accordingly,
the Group believes that the aforementioned restrictions
are no longer applicable to the Group from 18 May 2023,
the date of publication of unaudited interim condensed
consolidated financial statements for the three months
ended 31 March 2023.
CONSENT SOLICITATION IN 2022
On 30 March 2022, the Group received consent from the
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 of up to
270 days (the “Support Period”). As a result, the Group
postponed bond interest payments in a total amount of
USD 49 million, and interest on postponed 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 32 million were paid by
the Group on time. The last deferred coupon payment
due in February 2023 in the amount of USD 21 million
was paid on time.
all validly traded Notes in the amount of USD 138
million with the aggregate principal amount of Notes
outstanding following completion of the Tender Offer.
On 23 January 2024 Noteholders who validly tendered
their Notes were paid the consideration of USD 950 per
USD 1,000 principal amount of the Notes (with total
consideration paid USD 131 million) and, on the same
date, the Notes in the amount of USD 138 million have
been cancelled.
31. LEASE LIABILITIES
Long-term lease obligations represent amounts due under
agreements for the leasing of agricultural land, trucks,
agricultural machinery and equipment. As of 31 December
2023, the weighted average interest rates implicit in the
lease were 3.89% (2022: 3.57%), 8.00% (2022: nil) and
20.08% (2022: 18.55%) for lease obligations denominated
in EUR, USD and UAH respectively.
The carrying amount of lease liabilities as at 31 December
2023 includes USD 213 million of land lease liabilities
(2022: USD 205 million).
TENDER OFFER TO REPURCHASE BONDS
The maturity profile of the lease agreements as of
31 December 2023 and 2022 was as follows:
On 25 September 2023 MHP SE launched an invitation
to the holders (the “Noteholders”) of its USD 500
million 7.75% Guaranteed Notes due 10 May 2024
(the “Notes”) to tender for purchase for cash any and
all of the USD 500 million aggregate principal amount
of Notes outstanding. On 9 November 2023 the MHP
SE has accepted for purchase all validly traded Notes
in the amount of USD 151 million with the aggregate
principal amount of Notes outstanding following
completion of the Tender Offer. On 10 November 2023
Noteholders who validly tendered their Notes were paid
the consideration of USD 850 per USD 1,000 principal
amount of the Notes (with total consideration paid USD
128 million) and, on the same date, Notes in the amount
of USD 151 have been cancelled. Finance income in the
amount USD 22 million was recognized as a result of
the Notes repurchase (Note 12).
On 5 January 2024 MHP SE launched an invitation to the
Noteholders of its USD 349 million 7.75% Guaranteed
Notes due 10 May 2024 (the “Notes”) to tender for
purchase for cash any and all of the USD 349 million
aggregate principal amount of Notes outstanding. On
22 January 2024 MHP SE has accepted for purchase
As at 1 January
Cash repayments
of lease liabilities
Non-cash repayments
of lease liabilities1
Foreign exchange
movements
Non-cash additions
and change in terms
Interest charged
Translation difference
As at 31 December
Current portion
of lease liabilities
Long-term portion
of lease liabilities
2023
2022
229
281
(68)
(52)
(7)
(9)
1
2
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69
44
40
(8)
256
39
(76)
229
76
65
180
164
1 Non-cash repayments are represented by grains and other agriculture
produce provided to lessors of land in settlement of lease liabilities.
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
32. OTHER CURRENT LIABILITIES
Other current liabilities were as follows as of 31
December 2023 and 2022:
2023
2022
Accrued payroll and
related taxes
Amounts payable for
property, plant and
equipment
Income tax payable
Provision for claims,
penalties and
indemnification
VAT paybable
Other financial liabilities
75
12
4
2
2
4
67
13
4
3
5
4
99
96
33. RELATED PARTY BALANCES
AND TRANSACTIONS
For the purpose of these financial statements, parties are
considered to be related if one party controls, is controlled
by, or is under common control with the other party or
exercises significant influence over the other party in making
financial or operational decisions. In considering each
possible related party relationship, attention is directed to
the substance of the relationship, not merely the legal form.
Related parties may enter into transactions unrelated
parties might not, and transactions between related
parties may not be effected on the same terms and
conditions as transactions between unrelated parties.
TRANSACTIONS WITH RELATED PARTIES
UNDER COMMON CONTROL
The Group, in the ordinary course of business, enters
into transactions with related parties that are companies
under common control of the Principal Shareholder
of the Group (Note 1) for the purchase and sale of
goods and services and in relation to the provision of
financing arrangements. Terms and conditions of sales
to related parties are determined based on arrangements
specific to each contract or transaction. The terms of the
payables and receivables related to the Group's trading
activities do not vary significantly from the terms of
similar transactions with third parties.
Transactions with related parties during the years ended
31 December 2023 and 2022 were as follows:
IN THOUSAND USD
2023
2022
Loans and finance aid
provided to related parties
Interest charged on loans
and finance aid provided
Sales of goods
Purchases from related
parties
46
1,096
322
571
460
293
36
410
KEY MANAGEMENT
PERSONNEL OF THE
GROUP:
Loans provided
Loans repaid
383
337
720
867
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 1,894 thousand and USD 1,882 thousand as of 31
December 2023 and 2022, respectively.
COMPENSATION OF KEY MANAGEMENT
PERSONNEL
Key management personnel totalled 21 individuals as of
31 December 2023 (31 December 2022: 20 individuals),
including 4 and 3 independent non-executive directors
as of 31 December 2023 and 2022 respectively.
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 23,626 thousand and USD 15,341
thousand for the years ended 31 December 2023 and
2022, respectively. Compensation of key management
personnel consists of contractual salary and performance
bonuses paid.
The balances owed to and due from related parties were
as follows as of 31 December 2023 and 2022:
IN THOUSAND USD
2023
2022
Total compensation of the Group’s non-executive
directors, which consists of contractual salary, amounted
to USD 771 thousand and USD 597 thousand in 2023
and 2022, respectively.
Loans and finance aid
receivable (Notes 19, 25)
Less: expected credit
losses
Loans to key management
personnel (Notes 19, 25)
Less: expected credit
losses
Trade accounts receivable
(Note 24)
Payables due to related
parties
3,815
3,601
(2,101)
(2,117)
1,714
1,484
3,564
3,656
(414)
(276)
3,150
3,380
391
106
53
21
Total compensation of the Group’s Executive Chairman,
which consists of contractual salary, amounted to USD
588 thousand in 2023 (2022: USD 571 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 granted during 2023 and
2022 mainly include loans provided by the Ukrainian
subsidiaries to the Group’s executive directors, which
amounted to USD 383 thousand and USD 720 thousand,
respectively.
FINANCIAL
STATEMENTS
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
34.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,
disruption to economic activity in Ukraine, and
temporary occupation of some territories. Airports
remain closed, and some have been damaged, many
roads and bridges have been damaged or destroyed,
further crippling transportation and logistics.
In 2023, Ukrainian entities continue their business
activity in the challenging economic environment,
facing disruption of supply chains, higher business
costs, and physical destruction of production facilities
and infrastructure (in the energy sector, in particular).
In 2023, consumer inflation decelerated to 5.1% y/y,
according to the inflation report of the National Bank
of Ukraine (hereafter “NBU”). The easing of inflationary
pressure was primarily driven by the large supply of
agricultural produce from the new harvest, in particular
fruits and vegetables, grains, and oilseeds, the recovery
of the energy system from the consequences of Russian
missile attacks, and the decrease in global energy prices.
According to the NBU’s recent forecasts, inflation will
grow up to 6.4% in 2024 and then will decelerate to
3.1% in 2025.
The economy has been recovering throughout the entire
2023 thanks to the high adaptability of businesses and
households to wartime conditions and thanks to the
expansionary fiscal policy supported by large-scale
international financing. In Q4, the growth in real GDP
exceeded expectations, primary due to better harvests
of late crops and the development of alternative export
routes. This created grounds for an improvement in
estimates of real GDP growth for the whole of 2023,
to 5.3%.
The NBU set its key policy rate at 15% effective 15
December 2023 (comparing to the key policy rate of
25% p.a. as at 31 December 2022). Since 15 March 2024,
the key policy rate was further decreased to 14.5%.
Since 22 July 2022 and up October 2023, the exchange
rate remained fixed at UAH 36.57 to the US Dollar. In
October 2023, the NBU moved to a regime of managed
flexibility of the exchange rate, whereby the official
exchange rate is determined by the exchange rate used
for transactions in the interbank foreign exchange market
instead of being fixed by the NBU, as had been the case
since 24 February 2022. At the same time, the NBU
continues to control the situation in the interbank
foreign currency exchange market in an attempt to
better manage the foreign currency structural deficit.
International organizations (such as the IMF, EBRD,
EU, and World Bank), along with individual countries
and charities, are providing Ukraine with financing,
donations, and material support. These disbursements
remain the main source for covering the high budget
deficit, which stands to widen to almost 29% of GDP
in 2023, from 18% in 2022.
The National Bank of Ukraine decreased the maximum
settlement period from 180 to 90 calendar days for
repatriating cash from the export of specific grain
products, including wheat, corn, soy, sunflower,
rapeseed, and vegetable oil (soy, sunflower, and
rapeseed).
The Group considers the following losses and expenses
incurred during the periods ended 31 December 2023
and 2022 to be directly related to or driven by the
continuing war:
IN THOUSAND USD
2023
2022
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
-
11.1
7.8
0.2
17.9
9.9
19.2
12.7
-
24.8
7.5
3.4
34.7
79.8
-
9.5
34.7
89.3
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 the cost of sales and selling,
general and administrative expenses in the consolidated statement of
profit or loss, and other comprehensive income.
On 15 September 2023, the European Commission
decided not to renew the restrictive measures on
Ukrainian exports of wheat, maize, rapeseed, and
sunflower seed to five EU Member States (Bulgaria,
Hungary, Poland, Romania, and Slovakia), which were
adopted since 2 May 2023. According to the reached
agreements, Ukraine introduced an export licensing
system for verifying the export of these four categories
of agricultural products in the EU market.
The “Grain deal” or Black Sea Grain Initiative, which was
signed by Ukraine, the UN, Turkey, and Russia on 22
July 2022, was suspended on 18 July 2023 after Russia
had refused to extend the deal. From the second half of
August 2023 the temporary Black Sea corridor started
to operate with no regular schedule, and with vessels
moving whenever security conditions allow. Since then,
Russia has launched a series of air attacks on Ukraine,
focused, among others, on destroying Danube ports
infrastructure as well as Black Sea ports infrastructure.
The situation remains highly fluid and the outlook is
subject to extraordinary uncertainty.
The blockade of the Polish-Ukrainian border which
commenced in November 2023 and intensified in
January-February 2024, led to additional logistic
challenges. During respective period, Ukraine export
and import volumes dropped and businesses faced a
need to establish alternative logistic routes.
The Government continues to implement measures
to stabilize markets and the economy. International
assistance will remain the main source of capital inflows
to the country in the future. Despite delays in the flow
of international aid at the beginning of the year, it is
expected to resume in the coming months.
FINANCIAL
STATEMENTS
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT 34.OPERATING ENVIRONMENT
(continued)
The Group, working with volunteers, has provided
humanitarian aid (mainly through food supply) to the
people of Ukraine since the beginning of the war.
While the Ukrainian businesses and government
institutions demonstrated a high degree of adaptability
and resilience in the face of challenges brought by the
full-scale military invasion, the related security and
macroeconomic risks remain high and continue to
affect the economic situation in Ukraine. Due to the
unpredictability in the future course of the war and the
uncertainty regarding the timing of its cessation as well as
availability of sustainable international financial support,
other geopolitical and macroeconomic factors, it remains
difficult to estimate the scale and direction of possible
further developments, both negative or positive, in the
operating environment in Ukraine at present.
35. CONTINGENCIES AND
CONTRACTUAL COMMITMENTS
TAXATION AND LEGAL ISSUES
The Group carries its operations in various jurisdictions,
with a significant number of operations in Ukraine.
Ukrainian legislation regarding taxation and other
regulatory matters, including currency exchange control
and customs regulations, is regularly changed and
revisited. Non-compliance with tax laws and regulations
can lead to the imposition of severe penalties and fines.
Management believes that the Group has complied with
all requirements of effective tax legislation.
The Group exports vegetable oil, chicken meat,
and related products and performs intercompany
transactions, which may potentially be in the scope of
the Ukrainian transfer pricing (“TP”) regulations. The
Group has submitted the controlled transaction reports
for the years ended 31 December 2022 and 31 December
2021 meeting the regulatory deadlines.
As of 31 December 2023 and 2022, management
assessed the Group`s possible exposure to tax risks
for a total amount of USD 4 million related to corporate
income tax. No provision was recognized relating to
such possible tax exposure.
Also, as of 31 December 2023, companies of the
Group were engaged in ongoing litigations with tax
authorities in the amount of USD 35 million (2022:
USD 26 million), including USD 6 million (2022: USD
17 million) of litigations with the tax authorities related
to disallowance of certain amounts of VAT refunds
and deductible expenses claimed by the Group. Out
of this amount, USD 5 million as of 31 December 2023
(2022: USD 20 million) relates to cases where court
hearings have taken place and where the court in either
the first or second instance has ruled in favour of the
Group. In addition, the Group maintains disputes with
tax authorities in the amount USD 26 million, which
are not brought to the courts as at 31 December 2023.
Management believes that, based on the past history
of court resolutions of similar disputes upheld by the
Group, it is unlikely that a significant settlement would
arise out of such lawsuits and, therefore, no respective
provision is required in the Group’s financial statements.
CONTRACTUAL COMMITMENTS
ON THE PURCHASE OF PROPERTY,
PLANT, AND EQUIPMENT
During the year ended 31 December 2023, companies
of the Group entered into a number of contracts with
suppliers for the purchase of property, plant and
equipment. These agreements are mainly related to
maintenance and modernization projects, new product
development in Ukraine, and expansion of Perutnina
Ptuj production facilities. As of 31 December 2023, such
purchase commitments amounted to USD 67 million
(2022: USD 33 million).
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. The fair value of
non-current financial assets is measured by discounting
the estimated future cash outflows, with reference to
market interest rates, and it approximates the carrying
value of non-current financial assets.
Set out below is the comparison of carrying amounts
and fair values of the Group’s financial instruments,
excluding those discussed above, in the consolidated
statement of financial position:
CARRYING
AMOUNT
FAIR VALUE
2023
2022
2023
2022
FINANCIAL
LIABILITIES
Bank
borrowings
(Note 29)
Senior Notes
due in 2024,
2026, 2029
(Note 30)
381
295
382
296
1,259
1,424
996
693
The fair value of bank borrowings was estimated by
discounting the expected future cash outflows by a
market rate of interest for bank borrowings, and is within
Level 2 of the fair value hierarchy.
The fair value of Senior Notes was estimated based
on market quotations and is within Level 1 of the fair
value hierarchy.
In determining the fair value of financial instruments, the
impact of potential climate-related matters, including
legislation, climate change, and company climate
objectives, which may affect the fair value measurement
of financial assets and liabilities, has been considered
and found not to be material.
FINANCIAL
STATEMENTS
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT 36. FAIR VALUE OF FINANCIAL INSTRUMENTS (continued)
37. RISK MANAGEMENT POLICIES
FINANCIAL
STATEMENTS
RECONCILIATION OF LIABILITIES ARISING FROM FINANCING ACTIVITIES
The table below details the changes in the Group’s liabilities arising from financing activities, including 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.
BANK
BORROWINGS
BONDS
ISSUED
LEASE
OBLIGATIONS
TOTAL
1,906
(125)
21
69
(7)
169
(121)
(38)
As of 31 December 2022
Cash flow from proceeds/(repayments)
NON-CASH MOVEMENTS
Foreign exchange movements
Non-cash additions and change in terms
Non-cash repayments of lease liabilities1
Finance costs
Reclassification to interest payable
Translation difference
As of 31 December 2023
294
71
20
-
-
18
(18)
(6)
379
1,383
(128)
-
-
-
111
(103)
(24)
1,239
229
(68)
1
69
(7)
40
-
(8)
256
1,874
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
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
Finance costs
Reclassification to interest payable
Translation difference
As of 31 December 2022
225
72
47
-
-
7
(7)
(50)
294
1,377
-
-
-
-
113
(106)
(1)
1,383
281
(52)
2
44
(9)
39
-
(76)
229
TOTAL
1,883
20
49
44
(9)
159
(113)
(127)
1,906
1 Non-cash repayments are represented by grains and other agriculture produce provided to lessors of land as settlement of lease liabilities.
During the years ended 31 December 2023 and 2022,
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 maximizing 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 regularly. Based on the results of this
review, the Group takes steps to balance its overall
capital structure through new share issues and 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 29 and 30), the Group’s target
is to achieve a gearing ratio that is not higher than 2.5.
The Group defines its gearing ratio as the proportion
of total liabilities to total equity.
As of 31 December 2023 and 2022 the gearing ratio
was as follows:
Total Liabilities
Total Equity
Total Liabilities to Equity
2023
2022
2,319
1,567
1.48
2,363
1,446
1.63
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
37. RISK MANAGEMENT POLICIES
(continued)
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.
receivable relates to the top 10 customers, of which 56%
belongs to customers outside of Ukraine (31 December
2022: 25% and 79%, respectively).
FINANCIAL
STATEMENTS
MAJOR CATEGORIES OF ASSETS AND
LIABILITIES CONSIDERED BY THE GROUP
FROM A RISK MANAGEMENT PERSPECTIVE
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 amount of financial assets
disclosed in the table “Major categories of assets and
liabilities considered by the Group from a risk management
perspective” represents the maximum credit exposure.
The Group structures the levels of credit risk it
undertakes by limiting the amount of risk accepted
by one customer or group of customers. The approved
credit period for significant customer groups, including
franchisees, distributors, and supermarkets, is 30 days.
Limits on the level of credit risk by customers are
approved and monitored regularly 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 2023, approximately 21% of trade accounts
The credit risk on liquid funds is limited because almost
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.
LIQUIDITY RISK
Liquidity risk is the risk that the Group will not be able to
settle all liabilities as they fall due. The Group’s liquidity
position is carefully monitored and managed. The Group
has a detailed budgeting and cash forecasting process
to help ensure adequate cash is available to meet its
payment obligations.
The following table details the Group’s financial
liabilities by their remaining contractual maturity. The
table has been drawn up based on the undiscounted cash
flows of financial liabilities using the earliest date the
Group can be required to pay. The table includes both
interest and principal cash flows as of 31 December 2023
and 2022. The amounts in the table may not be equal
to the carrying amounts in the statement of financial
position since the table presents all cash outflows on
an undiscounted basis.
ASSETS:
Cash and cash equivalents
(Note 26)
Trade accounts receivable
(Note 24)
Other current financial
assets (Note 25)
2023
2022
436
300
186
183
34
22
Non-current financial assets
(Note 19)
Long-term bank deposits
8
2
8
3
666
516
LIABILITIES:
Bonds issued (Note 30)
1,239
1,383
Bank borrowings (Note 29)
Lease liabilities (Note 31)
Trade accounts payable
Accrued payroll and related
taxes (Note 32)
379
256
142
294
229
123
75
67
Interest payable
(Note 29, 30)
Amounts payable for
property, plant and
equipment (Note 32)
Income tax payable (Note
32)
Provision for claims,
penalties and
indemnification (Note 32)
VAT payable (Note 32)
Other financial liabilities
(Note 32)
YEAR ENDED 31 DECEMBER 2023
22
42
Bank borrowings
12
13
4
2
2
4
4
3
5
4
2,137
2,167
Bonds issued
Lease liabilities
Trade accounts payable
Other current liabilities
Total
YEAR ENDED 31 DECEMBER 2022
Bank borrowings
Bonds issued
Lease liabilities
Trade accounts payable
Other current liabilities
Total
CARRYING
CONTRACTUAL
LESS THAN
FROM 2ND
AFTER
AMOUNT
AMOUNTS
1 YEAR
TO 5TH YEAR
5TH YEAR
381
1,259
256
142
99
2,137
295
1,424
229
123
96
2,167
439
1,490
510
142
99
2,680
310
1,764
440
123
96
2,733
164
423
76
142
99
904
183
119
65
123
96
586
256
695
230
-
-
19
372
204
-
-
1,181
595
120
1,252
193
-
-
7
393
182
-
-
1,565
582
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT 37. RISK MANAGEMENT POLICIES
(continued)
LIQUIDITY RISK (continued)
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 2023
and 2022, the current ratio was as follows:
Current assets
Current liabilities
2023
2022
1,588
1,556
850
1.87
533
2.92
The reduction of the current ratio as at 31 December
2023 compared to 2022 is principally attributable to the
reclassification of bonds scheduled to mature in May
2024 and totaling to USD 348 million, from long-term
to short-term liabilities. In January 2024, the partial
repurchase of the bonds amounting to USD 138 million
was closed. The repurchase was predominantly financed
by long-term loans from the international financial
institutions (Note 30). The Group plans to settle the
remaining outstanding bonds on their maturity dates.
The repayment is planned to be also partially financed
by additional long-term loan tranches from the same
international financial institutions.
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. However, Management limits exposure to
foreign currency fluctuations to manage currency risk.
The carrying amounts of the Group’s foreign currency-
denominated monetary assets and liabilities as of 31
December were as follows:
2023
2022
USD
EUR
USD
EUR
Assets
Liabilities1
255
107
178
117
1,449
225
1,498
136
Net liabilities
1,194
118
1,320
19
1 Currency-denominated liabilities consist primarily 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 changes in foreign currency rates.
CHANGE IN
FOREIGN
CURRENCY
EXCHANGE
RATES
EFFECT
ON PROFIT
BEFORE TAX,
GAIN/(LOSS)
2023
Increase in USD
exchange rate
Increase in EUR
exchange rate
Decrease in USD
exchange rate
Decrease in EUR
exchange rate
2022
Increase in USD
exchange rate
Increase in EUR
exchange rate
Decrease in USD
exchange rate
Decrease in EUR
exchange rate
10%
10%
2%
2%
20%
20%
2%
2%
(119)
(12)
24
2
(264)
(4)
26
-
FINANCIAL
STATEMENTS
During the year ended 31 December 2023 the Ukrainian
Hryvnia depreciated against the EUR and USD by 7.72%
and 3.72% respectively (2022: depreciated against the
EUR by 20.61% and 25.41% against the USD). As a result,
during the year ended 31 December 2023 the Group
recognised net foreign exchange losses in the amount
of USD 40 million (2022: foreign exchange losses in the
amount of USD 365 million) and cumulative translation
loss of USD 20 million (2022: USD 326 million) in
the consolidated statement of profit or loss and other
comprehensive income.
The currency risk exposure is mitigated by the USD-
denominated cash from sales of sunflower oil, grain, and
chicken meat, which are deemed sufficient for servicing
the Group’s foreign currency denominated liabilities.
Information about export sales is presented in Note 6.
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
37. RISK MANAGEMENT POLICIES
(continued)
LIVESTOCK DISEASES RISK
INTEREST RATE RISK
Interest rate risk arises from the possibility that interest
rate changes will primarily affect borrowings by changing
future cash flows. For variable rate borrowings, interest
is linked to SOFR, EURIBOR or UIRD.
The table below illustrates the Group’s sensitivity to
increases or decreases in interest rates by 1%. The
analysis was applied to interest-bearing bank borrowings
and lease obligations based on the assumption that the
amount of liability outstanding as of the reporting date
was significant for the whole year.
INCREASE/
(DECREASE)
OF FLOATING
RATE
EFFECT
ON PROFIT
BEFORE TAX,
GAIN/(LOSS)
2023
SOFR
SOFR
EURIBOR
EURIBOR
2022
SOFR
SOFR
EURIBOR
EURIBOR
1%
-1%
1%
-1%
1%
-1%
1%
-1%
(1)
1
(2)
2
-
-
(2)
2
The effect of interest rate sensitivity on shareholders’
equity is equal to that on the consolidated statement
of profit or loss.
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. The
Group adopted disease control measures to minimize
and manage this risk. Management is satisfied that its
current risk management and quality control processes
are adequate 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 the expansion of its grain-growing
segment as part of its vertical integration strategy. Also,
it accumulates sufficient commodity stock to meet its
production needs.
38. PENSIONS AND
RETIREMENT PLANS
The Group's employees receive pension benefits
from the government in accordance with the laws and
regulations of their respective jurisdictions.
The Group contributed USD 73 million to the State
Pension Fund for the year ended 31 December 2023,
which is recorded in the Consolidated Statement of
Profit or Loss and Other Comprehensive Income on an
accrual basis (compared to USD 64 million in 2022). The
Ukrainian companies of the Group are not responsible
for providing any additional pensions, post-retirement
healthcare, insurance benefits, or retirement indemnities
to current or former employees, apart from pay-as-you-
go expenses.
According to legislative regulations, collective contracts,
and internal rules, the European Operating Segment
companies are obligated to pay loyalty bonuses
and severance payments to employees upon their
retirement, for which long-term provisions are made.
Provisions are recognised 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 2023 and 2022:
Provisions for severance
payments
Provisions for loyalty
bonuses
2023
2022
4.8
1.0
5.8
3.9
0.9
4.8
The following table represents movements in provisions
for employee benefits for the years ended 31 December
2023 and 2022:
PROVISIONS
FOR
SEVERANCE
PAYMENTS
PROVISIONS
FOR LOYALTY
TOTAL
BONUSES
31 December 2021
Formation
Expenditure
Translation
Differences
31 December 2022
Formation
Expenditure
Translation
Differences
31 December 2023
4.7
0.4
(1.0)
(0.2)
3.9
1.1
(0.4)
0.2
4.8
1.2
0.1
(0.3)
(0.1)
0.9
0.2
(0.1)
-
1.0
5.9
0.5
(1.3)
(0.3)
4.8
1.3
(0.5)
0.2
5.8
FINANCIAL
STATEMENTS
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT
PLANNED ACQUISITIONS IN 2024
On 29 December 2023, the Group entered into an
agreement to acquire 81% of corporate rights in business
engaged in poultry farming and meat processing in
Albania for an estimated consideration of EUR 16.8
million (equivalent of USD 18.1 million). Completion
of this transaction is subject to approval by relevant
regulatory bodies.
On 15 April 2024, the Group entered into a share
purchase agreement to acquire 100% of the corporate
rights in business engaged in meat processing in Ukraine
for an estimated consideration of EUR 14.0 million
(equivalent of USD 15.1 million). Up to the date of
authorization of these financial statements, the Group
made payment of EUR 3.5 million for 24.9% of respective
corporate rights. This transaction is expected to be
completed by the end of the 2024 but remains subject
to certain conditions, including approval by relevant
regulatory bodies.
41. AUTHORIZATION OF THE
CONSOLIDATED FINANCIAL
STATEMENTS
These consolidated financial statements were
authorized for issue by the Board of Directors of MHP
SE on 02 May 2024.
39. EARNINGS PER SHARE
The earnings and weighted average number of ordinary
shares used in calculation of earnings per share are as
follows:
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 (Note 27)
Basic and diluted
(loss)/earnings per
share (USD per share)
2023
2022
144
(226)
144
(226)
107,038,208 107,038,208
1.35
(2.11)
The Group has neither potentially dilutive ordinary
shares nor other dilutive instruments; therefore, the
diluted earnings per share equal basic earnings per share.
40. SUBSEQUENT EVENTS
TENDER OFFER TO REPURCHASE BONDS
AFTER THE REPORTING DATE
As described in Notes 29 and 30, on 23 January 2024
the Group completed the Tender Offer to repurchase
outstanding 2024 Notes with a principal amount of
USD 138 million for consideration of USD 131 million.
This early redemption was mainly financed using the
tranches from the international financial institutions
(Note 29).
FINANCIAL
STATEMENTS
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GOVERNANCESHAREHOLDER INFORMATIONNOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSNotes to the Consolidated Financial StatementsFOR THE YEAR ENDED 31 DECEMBER 2023(in millions of US dollars, unless otherwise indicated)STRATEGIC REPORT pp. 210-212
SHAREHOLDER
INFORMATION
Key Contacts & Advisors
Financial Calendar
Glossary of Terms
STRATEGIC
REPORT
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GOVERNANCE
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FINANCIAL
STATEMENTS
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KEY CONTACTS & ADVISORS
COMPANY REGISTERED OFFICE
16-18 Zinas Kanther Street,
Ayia Triada,
3035 Limassol,
Cyprus
AUDITOR
Ernst & Young Cyprus Limited,
Jean Nouvel Tower,
6 Stasinou Avenue,
1511 Nicosia,
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,
16 Reuterweg,
60323 Frankfurt,
Germany
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
FINANCIAL CALENDAR
ANASTASIYA SOBOTYUK
MHP’s financial calendar
can be found here:
mhp.ua/en/mhp-se/financial-calendar
The calendar is updated to show relevant
events and dates.
Director of Investor Relations,
International Communications
and ESG Compliance
Email: a.sobotyuk@mhp.com.ua
+38 050 339 29 99
+357 99 76 71 26
SHAREHOLDER
INFORMATION
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GOVERNANCEFINANCIALSTATEMENTSSTRATEGIC REPORT GLOSSARY OF TERMS
SHAREHOLDER
INFORMATION
Glossary of terms
AGM
Annual general meeting
AI
AI
Avian Influenza
Artificial Intelligence
AMCU
Anti-Monopoly Committee
of Ukraine
ARC
B2B
B2C
Audit & Risk Committee
Business-to-Business
Business-to-Customer
CO2e
COSO
CSR
CSRD
Carbon Dioxide Equivalent
Committee of Sponsoring
Organisations of the Treadway
Commission
Corporate Social
Responsibility
Corporate Sustainability
Reporting Directive
EBITDA
Earnings before interest, tax,
depreciation and amortisation
GMP
GRI
Good management practices
Global Reporting Initiative
Group
MHP SE and its subsidiaries
Grow-out
The period during which the
broilers are raised
Ha
Hectares
HACCP
Hazard Analysis and Critical
Control Points
HoReCa
HOtel, REtail and CAfe
BESS
Battery Energy Storage System
EBRD
BRCGS
Organisation that harmonises
food safety standards across
the supply chain. Also known
as BRC Global Standard
Broiler
A young chicken raised for meat
BSFL
Black Soldier Fly Larvae
CAPEX
Capital expenditure
CBD
CEO
CFO
CGU
CIS
Client Business Development
Chief Executive Officer
Chief Financial Officer
Cash Generating Unit
Commonwealth of
Independent States
Company MHP SE
CO2
Carbon Dioxide
European Bank for
Reconstruction and
Development
EGM
Extraordinary general meeting
EOS
ERP
ESG
EU
EUR
European Operating Segment
Enterprise Resource Planning
Environmental, Social and
Governance
European Union
Euro
Fodder
Food for livestock
FX
GDR
GFSI
GHG
Foreign Exchange
Global depositary receipt
Global Food Safety Initiative
Greenhouse gases
HQ
HR
IAS
IFC
IFI
IFRS
IR
ISCC
JV
Kg
Headquarters
Human resources
International Accounting
Standards
International Finance
Corporation
International financial
institution
International Financial
Reporting Standards
Investor relations
International Sustainability &
Carbon Certification, a globally
applicable sustainability
certification system
Joint venture
Kilogram
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211
GOVERNANCEFINANCIALSTATEMENTSSTRATEGIC REPORT SAP SF
LMS
SAP Success Factos Learning
Management System
SE
SKU
TCFD
TJ
UAE
UAH
UK
Societas Europaea
Stock keeping unit, or
distinct type of item for sale
Task Force on Climate-Related
Financial Disclosures
Terajoule, a unit of
measurement of energy
United Arab Emirates
Ukrainian Hryvnia
United Kingdom
UN SDGs
(United Nations) Sustainable
Development Goals
US
United States
US$/USD United States Dollar
y/y
VAT
Year-on-year
Value-added tax
KPIs
KSA
kWH
KYC
LTM
Key performance indicators
Kingdom of Saudi Arabia
Kilowatt hour
Know Your Client
Last twelve months
M&A
Mergers and acquisitions
MENA
Middle East and North Africa
region
MJ
MW
NBU
NED
NGO
NRC
OKR
PP
pps
R&D
RTC
RTE
S&IA
Megajoule, a unit of
measurement of energy
Megawatt
National Bank of Ukraine
Non-executive director
Non-governmental
organisation
Nominations and
Remuneration Committee
Objectives & Key Results
Perutnina Ptuj, acquired
during 2019
Percentage Points
Research and development
Ready-to-cook
Ready-to-eat
Sustainability and
International Affairs
(Committee)
SHAREHOLDER
INFORMATION
Glossary of terms
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GOVERNANCEFINANCIALSTATEMENTSSTRATEGIC REPORT GROUP ANNUAL
REPORT AND
ACCOUNTS
2023