Q2 and H1 2011 Financial Results

PRESS RELEASE

August 18, 2011, Kyiv, Ukraine

MHP S.A.

Unaudited Financial Results for the Second Quarter and Six Months Ended 30 June 2011

MHP S.A. ("MHP" or the "Company", LSE ticker: "MHPC"), one of the leading agro-industrial companies in Ukraine, focusing on the production of poultry and the cultivation of grain, today announces its unaudited results for the second quarter and the six months ended 30 June 2011.

Key operational highlights

Poultry and related operations

o During the first half of the year all the Company's chicken production facilities continued to operate at full capacity.

o Consumer demand for chicken remained high and the Company was able to sell close to 100% of the chicken meat produced.

o The Company's share of industrially produced chicken in Ukraine in H1 2011 was around 50%.

o The volume of chicken meat sales to external customers in H1 2011 increased by 8% year-on-year to 182,100 tonnes due to more effective use of existing capacity.

o The average chicken meat price for Q2 2011 was 9% higher compared to Q1 2011, and increased slightly by 1% to UAH 13.97 compared to Q2 2010. In H1 2011 the chicken meat price increased by 2% to UAH 13.44 compared to UAH 13.13 in H1 2010.

o The average price of sunflower oil in H1 2011 increased by 57% to US$ 1,303 per tonne (H1 2010: US$ 830 per tonne).

Grain growing

o In total, in 2011 the Company expects to harvest crops from 60% more land in its grain growing segment compared with 2010.

o MHP's current yields of wheat (5.0 tonnes per hectare) and rape (2.8 tonnes per hectare) are close to twice Ukraine's average.

Other agriculture

o Sausage and cooked meat production volumes increased from 14,200 tonnes in H1 2010 to 17,300 tonnes in H1 2011. The substantial volume growth was driven by increased production at Ukrainian Bacon in accordance with the Company's strategy of growing its meat processing operations.

o The Company's market share of Ukraine's sausage and cooked meat products in Ukraine was around 10%.

Vinnytsia - new green field expansion project

o Construction work on the Vinnytsia project, which commenced as announced previously in May 2010, is running to schedule and on budget.

o Production of Phase 1 is expected to be launched in the beginning of 2013 and reach its full capacity of 220,000 tonnes of poultry per annum in 2015.

Key financial highlights

Q2 2011 highlights

o Revenue increased by 26% to US$ 281 million (Q2 2010: US$ 223 million).

o EBITDA increased by 21% to US$ 101 million (Q2 2010: US$ 84 million).

o Consolidated EBITDA margin increased quarter-by-quarter from 23% in Q1 2011 to 36% in Q2 2011, but remained quite stable year-on-year (Q2 2010: 37%).

o Net income remained stable at US$ 67 million despite the operating profit growth due to effect of non-cash foreign exchange losses/gains driven by increase in Euro to Dollar exchange-value correlation.

H1 2011 highlights

o Revenue increased by 25% to US$ 527 million (H1 2010: US$ 423 million).

o EBITDA increased by 19% to US$ 158 million (H1 2010: US$ 133 million)

o Consolidated EBITDA margin remained high at 30%, at approximately same level compared to the same period last year (H1 2010: 31%).

o Net income decreased by 16% to US$ 86 million (H1 2010: US$ 102 million) despite the operating profit growth due to effect of non-cash foreign exchange losses/gains driven by increase in Euro to Dollar exchange-value correlation.

Commenting on the results, Yuriy Kosiuk, Chief Executive Officer of MHP, said:

"I am very happy to be able to say that the Company has continued to perform strongly in the first half of 2011, with robust revenue and EBITDA growth and the maintenance of our sector-leading margins. Once again, we have reaped the benefits of our vertically integrated business model, where we combine poultry production with grain growing, as we have remained protected against grain price inflation.

Poultry prices growth in H1 2011 was rather modest, nevertheless, in line with world poultry price dynamics. Now our prices for chicken meat are steadily increasing again. Our expectations regarding grain segment results are favorable due to the significant land expansion in 2010 and strong grain prices.

I am also pleased to provide you today with an update on this year's harvests. The harvest of early crops, such as rape and wheat proceeded well and resulted in good yields, which, as usual, are much higher than the Ukrainian average. Meanwhile, initial observations indicate that our sunflower and corn harvests will also produce good yields.

I am also delighted that during the period Yuriy Logush joined the business as Vice President of our Consumer Products Division. Yuriy Logush has a wealth of relevant experience, having been on Kraft's Board of Management for Central and Eastern Europe, Middle East, Africa for nine years, and he will focus on optimising our marketing strategy both in Ukraine and abroad.

Looking ahead, the quality of our products continues to attract consumers and demand remains high. We are therefore confident of that we will continue to expand in line with our strategy and produce strong results."

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MHP's management will host a conference call for investors and analysts followed by a Q&A session. The dial-in details are:

Date: Thursday, 18 August 2011

Time: 09.00 New York / 14.00 London / 16.00 Kyiv / 17.00 Moscow

Title: MHP - Q2 and H1 2011 Financial Results

International/UK Dial in: +44 (0) 1452 555 566

USA free call: +1 866 966 9439

Russia free call 8108 002 097 2044

Conference ID 88832692

A live webcast of the presentation will be available at:

 https://webconnect.webex.com/webconnect/onstage/g.php?t=a&d=664617113

Alternative URL:

https://webconnect.webex.com/

Click on "Unlisted Events"

Event number: 664 617 113Event password: N/A

For further information please contact:

Financial overview

* Delta in percentage for ratios (% indicators) is calculated as a difference between the ratio in the current reporting period and the ratio in the previous reporting period

Q2 2011 Consolidated Financial Results

Revenue increased by 26% to US$ 281 million (Q2 2010: US$ 223 million) mostly as a result of chicken volume growth, sunflower oil prices increase, and increase both in prices and volumes of processed meat.

EBITDA increased by 21% to US$ 101 million (Q2 2010: US$ 84 million) compared to the same period last year, while EBITDA remained relatively stable at 36% (Q2 2010: 37%).

Net income from continuing operations remained stable at US$ 67 million despite the operation profit growth due to the net effect of non-cash foreign exchange losses/gains of US$ 16 million (US$ 3 million foreign exchange losses in Q2 2011 versus US$ 13 million foreign exchange gains in Q2 2010) related to Euro/USD exchange rate.

H1 2011 Consolidated Financial Results

The dynamics of H1 2011 consolidated financial results are those seen over Q2 2011 period. Revenue increased by 25% to US$ 527 million (H1 2010: US$ 423 million). The reasons of revenue growth are the same as for Q2 2011: increase of chicken volumes, sunflower oil prices increase, increase both in volumes and prices for meat processing products.

EBITDA increased by 19% to US$ 158 million (H1 2010: US$ 133 million), EBITDA margin remained fairly stable at 30% (H1 2010: 31%).

Net income decreased to US$ 86 million (H1 2010: US$ 102 million) despite the operating profit growth due to the net effect of non-cash foreign exchange losses/gains of US$ 34 million (US$ 9 million foreign exchange losses in H1 2011 versus a US$ 25 million foreign exchange gains in H1 2010) related to Euro/USD exchange rate.

Poultry and related operations

Q2 2011 Poultry and related operations segment financial results

In Q2 2011, chicken meat sales volumes to external consumers on an adjusted-weight basis increased by 14% to 97,800 tonnes (Q2 2010: 85,500 tonnes) as a result of production growth due to more effective use of existing capacity as well as due to decrease in stocks.

The average chicken meat sales price increased slightly by 1% to UAH 13.97 per kg (Q2 2010: UAH 13.82 per kg). In Q2 2011 sunflower oil were sold mainly for export andaverage sunflower oil price increased by 60% to US$ 1,301 per tonne (Q2 2010: US$ 811 per tonne).

Demand for chicken meat remained high and the Company sold close to 100% of the chicken produced. Therefore, the segment revenue increased by 20% to US$ 237 million (Q2 2010: US$ 198 million).

Poultry production costs in Q2 2011 rose by approximately 15% compared to Q2 2010 mostly due to the increase in the market price of grain harvested in 2010 and increase in production cost of sunflower meal due to higher sunflower seeds prices. Gross profit decrease by 5% to US$ 59 million (Q2 2010: US$ 62 million), as well as gross profit margin fall from 31% in Q2 2010 to 25% in Q2 2011.

Segment EBITDA decreased by 8% to US$ 64 million (Q2 2010: US$ 70 million), whilst EBITDA margin decreased too (27% in Q2 2011 compared to 35% in Q2 2010). The reason for negative EBITDA dynamic in poultry segment was lower than expected chicken prices growth during the reported quarter, which we expect to be improved in the second half of the year.

H1 2011 Poultry and related operations segment financial results

Chicken meat sales volumes to the third parties on an adjusted-weight basis increased by 8% to 182,100 tonnes in H1 2011 compared to 168,500 tonnes in H1 2010. The average chicken meat sales price increased by 2% to UAH 13.44 per kg (H1 2010: UAH 13.13 per kg). Average sunflower oil prices increased by 57% to US$ 1,303 per tonne (H1 2010: US$ 830 per tonne).

Poultry and related operations segment revenue rose by 19% to US$ 446 million compared to US$ 375 million in H1 2010.

In line with the Company's expectations the increase of poultry production costs in H1 2011 was approximately 10% year-on-year mainly driven by grain prices increase. Gross profit increased by 5% to US$ 112 million (H1 2010: US$ 106 million), while gross profit margin decreased from 28% in H1 2010 to 25%.

Poultry segment EBITDA remained respectively stable US$ 121 million (H1 2010: US$ 120 million). EBITDA margin decreased from 32% in H1 2010 to 27% in H1 2011 as a consequence of poor dynamic of chicken meat prices during the Q2 2011.

Grain growing operations

The Company's grain growing segment revenue in H1 2011 was mostly generated by the sale of grain, mainly wheat that has already been revalued to market prices in 2010. Due to the harvest cycle, there is a significant seasonality in this division and higher revenue is expected in the second half of the year.

In 2011 MHP expects to harvest by 60% more land (additional 100,000 hectares under control) compared to 2010, which will significantly increase the volumes available for external grain sales. The Company continues to focus on growing 4 main crops: corn, sunflower, wheat and rape.

The financial result in grain growing segment in H1 2011 is mostly related to revaluation of crops in fields according to IAS 41 standard. The principal reason in higher returns anticipated from grain growing operations is due to larger land plots to be cropped in 2011 compared to 2010.

Other agricultural operations

Revenue from Other Agricultural Operations in Q2 2011 increased by 41% to US$ 34 million compared to US$ 24 million in Q2 2010 due to growth of meat processing products revenue as well as fruit and milk sales. In H1 2011 segmental revenue increased by 46% from US$ 45 million to US$ 66 million.

Sales volumes of sausage and cooked meat products increased by 18% to 9,400 tonnes in Q2 2011 compared to Q2 2010 and increased by 22% to 17,300 tonnes in H1 2011 compared to H1 2010 mainly due to Ukrainian Bacon production growth and the increasing consumer demand.

The average sausage and cooked meat prices increased greatly, increased by 14% in Q2 2011 (UAH 19.50 per kg excluding VAT in Q2 2011 compared to UAH 17.08 per kg in Q2 2010) and 11% in H1 2011 (UAH 18.91 per kg in H1 2011 compared to UAH 17.03 per kg in H1 2010).

The gross profit of the segment was US$ 3 million in Q2 2011 (Q2 2010: US$ 1 million) and US$ 6 million in H1 2011 (H1 2010: US$ 2 million). EBITDA also increased considerably, it was US$ 4 million in Q2 2011 (Q2 2010: US$ 1 million) and US$ 8 million in H1 2011 (H1 2010: US$ 3 million). EBITDA margin greatly increased to 12% in Q2 2011 as well as in H1 2011. The key driver for this strong performance was the growth in the amount of meat processing.

MHP is a market leader in meat processing in Ukraine with market share of about 10%. More than 50% of the meat required for sausage production is internally produced chicken meat.

Current Group financial position, cash flow and liquidity

Cash flow from operations before working capital changes was US$ 103 million in H1 2011 (H1 2010: US$ 106), therefore it remained stable compared to the same periods 2010.

The total increase in working capital in H1 2011 was US$ 28 million. The main contributor to the change in working capital was the cost of the annual grain sowing campaign in the grain growing segment.

Total CAPEX in H1 2011 of US$ 138 million was mostly related to the capital intensive Vinnytsia project. Since the start of construction in May 2010, approximately US$ 220 million has been invested in this project.

Vinnytsia - new green field project

Construction work on the Vinnystia project, which commenced as announced previously in May 2010, is running to schedule and on budget. Significant progress has already been made with the poultry farm, fodder complex and infrastructure at the Vinnytsia site. All equipment required for Phase 1 is already contracted and is being dispatched now.

Poultry Farm

·; Construction of the hatchery is 70% complete

·; 2 brigades (chicken rearing zones) with 38 chicken houses in each are 55% complete

·; Construction of the slaughter house for Phase 1 (220,000 tonnes of poultry per annum) is 65% complete

Installation of the equipment will commence in September 2011.

Fodder Plant and Grain Storage Facilities

·; Construction of the sunflower seeds silo (200,000 m3) is 95% complete, installation of the equipment is 95% complete

·; Construction of the grain silo (200,000 m3) is 95% complete, installation of the equipment is 85% complete

·; Construction of Fodder Plant and Sunflower Crushing Plant is in progress now

Infrastructure and Social Responsibility

The construction of electric power substation with a capacity of 110 kW is 95% complete, the transmission networks are 80% complete, system of gas supply (45 km) is 80% complete. The construction of water supply systems (60 km) and water treatment station with a capacity of 15 thousand m3 of water per day has been started.

The construction of two independent electric power substations is 95% complete. In addition, as part of the facility, MHP will be constructing 45km of new roads (over 50% complete), 260 new residential apartments, a hostel with a capacity for 800 people and a kindergarten with a capacity for 260 children.

As announced earlier in June 2010, the Company is building additional sites at its Shakhtarska breeding farm for 300 million hatchery eggs production per annum to satisfy Vinnytsia poultry complex needs.

MHP has set up a section on its website dedicated to Project Vinnystia where regular updates will be provided, as well as photographs documenting the stages of the project: http://www.mhp.com.ua/en/node/1082/.

Debt Structure

As of June 30, 2011, the Company's total debt was US$ 818 million with an average weighted cost of debt around 9%. Approximately 70% of the Company's total debt is the Eurobond that matures in April 2015. The Company's total debt is mainly denominated in US dollars.

At the end of H1 2011, MHP had US$ 84 million in cash and short-term bank deposits.

The Net Debt/EBITDA ratio at the end of the period was 2.10 (Eurobond covenant: 2.5).

As a hedge for currency risks, revenue from the export of sunflower oil, sunflower husks and chicken meat are denominated in US Dollars, fully covering debt service expenses.

Outlook

Consumer demand for poultry meat continues to remain high and current chicken prices are around 14% higher compared to the same period of the previous year.

This year the Company expects to harvest crops from 60% more land (an additional 100,000 hectares) compared to 2010. This is expected to lead to a significant increase in our grain production external sales volumes and profitability for the current year.

We continue to increase production volumes of sausages and cooked meat that we produce, whilst also producing a wider range of value-added products at our meat processing plants. Due to the investments made in 2010, the Company increased the meat processing capacity at its Ukrainian Bacon facility and will continue to reap the production benefits during 2011.

The CAPEX program in 2011 is mostly related to construction and beginning of equipment installation on the new Vinnitsa poultry production complex, where the construction is on schedule.

We are confident that we will be able to continue to implement our strategy and keep on delivering strong financial results cementing our position as one of the leading agro-industrial companies in Ukraine and the region.

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Notes to Editors:

About MHP

MHP is the leading producer of poultry products in Ukraine with the greatest market share and highest brand recognition for its products. MHP owns and operates each of the key stages of chicken production processes, from feed grains and fodder production to egg hatching and grow out to processing, marketing, distribution and sales (including through MHP's franchise outlets). Vertical integration reduces MHP's dependence on suppliers and its exposure to increases in raw material prices. In addition to cost efficiency, vertical integration also allows MHP to maintain strict biosecurity and to control the quality of its inputs and the resulting quality and consistency of its products through to the point of sale. To support its sales, MHP maintains a distribution network consisting of 11 distribution and logistical centres, within major Ukrainian cities. MHP uses its trucks for the distribution of its products, which Management believes reduces overall transportation costs and delivery times. MHP also has a leading grain cultivation business growing corn to support the vertical integration of its chicken production and increasingly other grains, such as wheat and rape, for sale to third parties. MHP leases agricultural land located primarily in the highly fertile black soil regions of Ukraine.

Since May 15, 2008, MHP has traded on the London Stock Exchange under the ticker symbol MHPC.

Forward-Looking Statements

This press release might contain forward-looking statements that refer to future events or forecast financial indicators for MHP S.A. Such statements do not guarantee that these are actions to be taken by MHP S.A. in the future, and estimates can be inaccurate and uncertain. Actual final indicators and results can considerably differ from those declared in any forward-looking statements. MHP S.A. does not intend to change these statements to reflect actual results.

MHP S.A.

AND ITS SUBSIDIARIES

Condensed Consolidated Interim Financial Statements

For the six months

ended 30 June 2011

MHP S.A. AND ITS SUBSIDIARIES

Page

On behalf of the Board

The notes on pages 7 to 16 form an integral part of these condensed consolidated financial statements.

On behalf of the Board

The notes on pages 7 to 16 form an integral part of these condensed consolidated financial statements.

On behalf of the Board

The notes on pages 7 to 16 form an integral part of these condensed consolidated financial statements. 

The notes on pages 7 to 16 form an integral part of these condensed consolidated financial statements.

On behalf of the Board

The notes on pages 7 to 16 form an integral part of these condensed consolidated financial statements.

MHP S.A. AND ITS SUBSIDIARIES

NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED 30 JUNE 2011

1. DESCRIPTION OF THE BUSINESS

MHP S.A. (the "Parent" or "MHP S.A."), a limited liability company registered under the laws of Luxembourg, was formed on 30 May 2006. MHP S.A. was formed to serve as the ultimate holding company of PJSC "Myronivsky Hliboproduct" ("MHP") and its subsidiaries. Hereinafter, MHP S.A. and its subsidiaries are referred to as the "MHP S.A. Group" or the "Group". The registered address of MHP S.A. is 5, rue Guillaume Kroll, L-1822 Luxembourg.

The principal business activities of the Group are poultry and related operations, grain growing, as well as other agricultural operations (meat processing, cultivation and selling fruits and producing beef and meat products ready for consumption).The Group's poultry and related operations integrate all functions related to the production of chicken, including hatching, fodder manufacturing, raising chickens to marketable age ("grow-out"), processing and marketing of branded chilled products and include the production and sale of chicken products, sunflower oil, mixed fodder and convenience food products. Grain growing comprises the production and sale of grains. Other agricultural operations comprise the production and sale of cooked meat, sausages, beef, milk, goose meat, foie gras, fruits and feed grains. During the six months ended 30 June 2011, the Group employed over 22,000 people.

During the year ended 31 December 2010 the Group substantially increased its agricultural land bank as part of its vertical integration and diversification strategy through acquisitions of land lease rights.

During the year ended 31 December 2010 the Group also commenced construction of the greenfield Vinnytsya poultry complex.

The Group's operational facilities are located in different regions of Ukraine, including Kyiv, Cherkasy, Dnipropetrovsk, Donetsk, Ivano-Frankivsk, Vinnytsya, Kherson, Sumy, Khmelnitsk regions and Autonomous Republic of Crimea.

The primary subsidiaries and the principal activities of the companies forming the Group as of 30 June 2011 and 31 December 2010 were as follows:

* Effective voting rights in subsidiaries did not differ from effective ownership rights. Direct ownership interest in subsidiaries by the Parent differs from the effective ownership interest due to cross holdings between subsidiaries.

2. BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The condensed consolidated interim financial statements have been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting. The condensed consolidated interim financial statements are prepared on the basis of accounting policies as set forth in the Group's consolidated financial statements as at and for the year ended 31 December 2010. Certain information and footnote disclosures normally included in consolidated financial statements prepared in accordance with International Financial Reporting Standards ("IFRS") have been condensed or omitted. However, such information reflects all adjustments (consisting of normal recurring adjustments), which are, in the opinion of the Group management, necessary to fairly state the results of interim periods. Interim results are not necessarily indicative of results to be expected for the full year. The 31 December 2010 balance sheet was derived from the audited consolidated financial statements.

The functional currency of the Group is the Ukrainian Hryvnia ("UAH"). Transactions in currencies other than the functional currency of the Group are treated as transactions in foreign currencies. Such transactions are initially recorded at the rates of exchange ruling on the dates of the transactions. Monetary assets and liabilities denominated in such currencies are translated at the rates prevailing on the statement of financial position date. All realized and unrealized gains and losses arising on exchange differences are included in the consolidated statement of comprehensive income for the period.

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

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

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

·; Income and expenses for each statement of comprehensive income are translated at exchange rates at the dates of the transactions;

·; All resulting exchange differences are recognized as a separate component of equity.

The following exchange rates were used:

3. RELATED PARTY BALANCES AND TRANSACTIONS

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

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

Transactions with related parties under common control - The Group enters into transactions with related parties in the ordinary course of business for the purchase and sale of goods and services and in relation to the provision of financing arrangements.

The terms and conditions of sales to related parties are determined based on arrangements, specific to each contract or transaction. Management believes that the accounts receivable due from related parties do not require allowance for irrecoverable amounts and that the amounts payable to related parties will be settled at cost. The terms of the payables and receivables related to trading activities of the Group do not vary significantly from the terms of similar transactions with third parties.

The transactions with the related parties during the six months ended 30 June 2011 and 30 June 2010 were as follows:

During the six months ended 30 June 2011 the Group's sales to related parties mainly consisted of sales of poultry production related products.

The balances owed to and due from related parties were as follows as of 30 June 2011 and 31 December 2010: