© 2024 Alpha Spread Limited. All Rights Reserved.
www.alphaspread.com is not operated by a broker, a dealer, or a registered investment adviser. Under no circumstances does any information posted on www.alphaspread.com represent a recommendation to buy or sell a security. The information on this site, and in its related newsletters, is not intended to be, nor does it constitute, investment advice or recommendations. The information on this site is in no way guaranteed for completeness, accuracy or in any other way. In no event shall Alpha Spread Limited be liable to any member, guest or third party for any damages of any kind arising out of the use of any content or other material published or available on www.alphaspread.com, or relating to the use of, or inability to use, www.alphaspread.com or any content, including, without limitation, any investment losses, lost profits, lost opportunity, special, incidental, indirect, consequential or punitive damages. Past performance is a poor indicator of future performance.
You don't have any saved screeners yet
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, thank you for standing by, and I would like to welcome you to MHP's Q1 2021 Results Call. [Operator Instructions] So without further ado, I would now like to pass the line to MHP. Anastasiya, the floor is yours.
Hello, everyone. Good afternoon, and good morning. Thank you for joining us today for MHP's conference call dedicated to MHP's financial results for the first quarter of 2021. As usual, I have to tell you in advance that some of the things we discuss today are forward-looking statements. Please take it into consideration. I encourage you to use today's press release with our financial statement for the detailed information. One thing I would like to draw your attention to is that starting from this quarter report, MHP will also provide comparison of the results to the previous quarter in poultry, meat processing and European operating segments. Grain growing segment is not included because of seasonality effects. We believe that this approach in disclosure of our results will bring our stakeholders additional value and convenience. As well as better understanding of trends. On today's call, on today's call, we have CFO of MHP, Viktoria Kapelyushnaya, she will present financial results of the company and by segment. And myself, Anastasiya Sobotyuk, Director of Investor Relations. I will lead you through the presentation. After the presentation, we will be glad to answer your questions. I hope that everybody is ready, so we can start presentation of the first quarter of '21 start -- straight away.Slide #4, please. Let me start from general overview of the first quarter to first of all, I would like to confirm that MHP continues to take proper care about its over 30,000 employees across 11 countries. We take COVID-19 pandemic seriously. We put in place monitor and revised measures that enable our people and the company to operate safely and responsibly. Therefore, fulfilling our company's central role as a food producer during this challenging period for everyone. Second, since the first outbreak of avian influenza in Ukraine, middle of December 2020. MHP's facilities until now and taking into account our prudent bio security measures in place, have not been and will not be adversely affected. So despite these 2 big challenges, MHP continued to evolve, advance and implement its strategy, working at full capacity across all business segments. Let me add few words about macro conditions in Ukraine. Despite difficult and turbulent Q1 2021 because of the third wave of COVID-19 in Ukraine and the strict lock down, retail sales decreased by over 7% and GDP decreased by 2% year-on-year. However, the government expects real GDP growth to be around 5% year-on-year. Ukrainian currency devalued by 4%, with the forecast for Ukrainian Hryvnia to USD exchange rate at 29% on average in 2021. Annual inflation accelerated to around 7% year-on-year, driven mainly by food, utilities, transport and education cost increase. Being one of the biggest grain producers, traders, in the world and taking into account current weather conditions as well as current wholegrain prices, expectations for 2021 harvesting campaign in Ukraine is strong and positive. Let me finish here and come back to the company's results. Let's go on Slide #6 of the presentation. That was absolutely challenging start of the year and the actual expected results. Taking into account significant increase in grain and fodder prices since Q4 2020, and challenges mentioned previously, MHP as well as other food producers in Ukraine and worldwide, we're trying its best to get a good financial performance.As a result of our efforts and strategy implementation, our revenue remained stable year-on-year and constituted USD 447 million, of which output revenue was 49%, around $217 million. However, lower by 8% year-on-year due to the avian influenza restrictions on exports since December 2020, mainly. EBITDA was around USD 57 million, 37% lower year-on-year, and EBITDA margin constituted 13%. Let's go on Slide #7. Slide #7 shows our financial results by segment. As you can see from the table, the mass majority of revenue in Q1 2021 came from poultry and related operations, around 70%, and the European operating segment, around 20%. Traditionally, due to seasonality effects, but also because of the historically low harvest in 2020, contribution to the revenue from grain growing segment in the first quarter was quite low, around 2% only in Q1 2021. At the same time, poultry, grain growing and the European operating segments contributed to the most to the company's EBITDA, 56%, 23% and 21%, respectively. Meat processing operations and other agro segment's contribution still remains the lowest both to the revenue and EBITDA of MHP. However, with the prospects to increase taking into account current transformation of the company and culinary strategy implementation. Let's have a closer look at each business segment on our next slide. Here, I pass my words to Viktoria.
Thank you, Anastasiya. Good afternoon, everyone. Let me give you more color to our poultry segment, Slide #8. Avian influenza in Ukraine during the first quarter led to temporary ban of exports from Ukraine into EU. In order to mitigate the adverse impact on MHP's operations and profitability, the management of the company decided to increase production of small chicken and export more to MENA market. Sales to MENA region increased from 31% to 54% of total export sales year-on-year, mainly driven by increased sales to Saudi Arabia. All MHP's poultry production facilities in Ukraine have been operating during the first quarter at full capacity. Despite the difficulty of COVID-19 and avian influenza export sales volume remained at the same level year-on-year. On the domestic market, we increased sales of chilled meat compared to the last year but it was offset by a slightly decreased sales of frozen chicken meat in Ukraine due to the lower production and sales in the year.Total revenue in poultry segment increased by 3% year-on-year, driven mostly by an increase in price in domestic market, which was offset by a decrease in sales volume of chicken meat and vegetable oil. Export price decreased by 5% in average mainly driven by product and geographic change in export sales, increased sales of small chicken to MENA and decreased sales of chicken fillets to EU. Because of significant increase in grain and protein product price since the fourth quarter 2020, market price of chicken in Ukraine began to increase starting from December. In Q1, poultry price and domestic market in USD increased by 15% year-on-year with further increase in price in Q2, greatly compensating increased production costs. As you may know, since the fourth quarter 2020, all food products worldwide have been facing a challenging situation with increase in grain price because of different international drivers. At MHP, poultry production costs increased approximately by 25% in dollars term, as a result of unexpected significant growth of grain, protein price after bad harvest in Ukraine. Financial result of poultry segment in Q1, [indiscernible] in Q4 last year. At the same time, the decline of results compared to the same period of last year occurred because the increase in poultry cost was only partially compensated by gradual increase in poultry price. Adjusted EBITDA, which was IAS 41 standard, per 1 kilo was $0.20, which was more than 40% lower compared to the last year, but around 80% higher versus our results in Q4 last year. Let's move to the next slide, Slide #9. External grain segment revenue amounted $9 million. The decrease in revenue was mainly due to the low volumes of crops sold in 2021 as a result of weaker harvest of 2020. EBITDA of grain segment in the first quarter of the year, mainly comprises grain sales of poultry segment for internal consumption, as mainly poultry feed components. Regarding our winter crops. All our winter crops are currently in good condition. This year, MHP is going to harvest around 355,000 hectares. MHP 2021 spring sowing campaign has been finalized. Let's go to the Slide #10. Meat processing and the agriculture business performed relatively stable year-on-year. Volumes on convenience food production grew slightly by 3%, supported by continued new product development program. Meat-processing product volume decreased around 3%, mainly in the traditional storage segment. We expect to change volume dynamics to positive further in 2021, following the wide range of new products introduction to the market. Segment revenue remained materially unchanged at amount around $36 million. Adjusted EBITDA amounted $4 million decreased compared to the last year as a result of lower return earning from meat processing products due to the higher poultry costs, which was only partially compensated by an increase in price. Let's go to the Slide #11. Following this strategy of poultry production growth and increasing facility capacity. Slide #11 about Perutnina Ptuj results. Following the strategy of poultry production growth and increased facility capacity utilization in Serbia and Croatia poultry sales of European operations segment in the Q1 increased by 6%. Meat processing product sales remained almost unchanged compared to the same period last year. Average poultry price slightly decreased 20%, price of meat processing products was relatively stable. European operating segment generated around $90 million group revenue and $12 million of EBITDA in the Q1. Adjusted EBITDA in Q1 increased by 9% year-on-year, mainly due to increased capacity and increased production. And in dollar term, EBITDA growth is also affected by depreciation of euro against dollar year-on-year. The management is very -- in general is very satisfied with the result of Perutnina Ptuj operation. A few words about our cash flow and liquidity position, Slide #12. Cash from operations decreased mainly in line with decrease in EBITDA. An additional impact was due to the change in fair value of biological assets and agricultural produce which represented noncash adjustment. Net cash from operating activities amount to minus $36 million in Q1 compared to minus $39 million last year, mainly due to the changes in working capital -- seasonal changes in working capital. Use of fund in working capital during Q1 was mostly related to first of all, investment in inventory corn, sunflower, soya designed for internal consumption until the next harvest as well as higher grain price, in Q1 compared to the same period last year. Secondly, investment in inventories related primarily to grain growing entities in respect of forthcoming spring sowing campaign, third, increase in VAT receivable, which is expected to be reimbursed in the second quarter. Total CapEx in Q1 amounted around $23 million, mainly related to modernization products, new product development, maintenance of Perutnina Ptuj production facility further development. Total CapEx in this year is expected around $130 million. Regarding debt, by the end of the period, the company total debt was nearly $1.5 billion, net debt around $1.3 billion. 90% of total debt is long-term debt, 96% of which is Eurobond. Our average weighted interest rate currently is below 7. In terms of liquidity at the end of March, we had around about $140 million in dollars -- or in cash, mostly in dollars. Due to the challenges in 2020 and early 2021, which resulted in decrease in EBITDA, net debt-to-EBITDA ratio reached 4.28 versus Eurobond covenant 3.0. We expect it to increase [indiscernible] to EBITDA since the second quarter of this year, which accordingly to our forecast, will potentially reduce the ratio to 3 and even possible below. Trailing around 50% of our revenue, more than $200 million, mostly in dollars [indiscernible] during the first quarter, we fully covered all our debt service expenses and other payments in foreign currency. Our currency balance as usual remains strongly positive. And now, I give the floor to Anastasiya for update and outlook.
Thank you, Viktoria. So we are on Slide #13 of the presentation. And in summary, I would like to say that MHP continues to implement and evolve its strategy in order to run business smoothly and efficiently. First of all, we continue to transform and culinary campaign is progressing. A new concept of meat market 2.0 version, which is a combination of sales of meat and culinary products has been launched together with our franchisees, additional 100 meat markets are planned to be opened by the year-end. MHP R&D center is planned to be launched this June. And the new product development, mini MHP facilities and demo format for partners will be launched as you understand very soon. Second, as usual, and taking into account current quarter price challenge, particularly. MHP continues to work on production efficiency increase group-wide. Third, we continue to explore M&A opportunities and different partnership cooperation around the world. And finally, MHP sets a target to become a carbon-neutral company by 2030. And as one of our steps forward and at the moment, together with [Altec] we are on our way to calculate MHP CO2 and its equivalent impact across all business segments, separately and together. So what do we expect going forward? Definitely, we expect poultry prices in our major markets to continue its growth driven by grain price increase. We expect visibly improving trends to impact more favorably on our business over the next several months. Prices both in the domestic and international markets are expected to remain strong for the balance of the year. We expect grain prices, although unusually volatile recently, so -- have been increasing, and we see that they have been increasing substantially since the second half of 2020 and this strengthening trend is currently expected to continue. And definitely, we see the gradual scaling of culinary transformation. Before we start Q&A session, I would like to say that taking into account volatile grain market, it is too early to predict an improved outlook for the full year and how exactly it will be realized by the end of the year. But we are currently optimistic that MHP will at least meet current expectations in 2021. Strong farming results should compensate for weaker profitability and then provide MHP for some upside to our full year EBITDA outlook. Thank you very much. We are ready for questions.
[Operator Instructions] Our first question comes from Mr. Daniel Zaczkiewicz from Barclays.
I have a couple of questions, if it's okay. First, if I could ask about the product mix. You've obviously shifted to smaller chickens aimed for the MENA markets. How big a shift back to the larger chicken sales to the EU? And do you expect we'll see in the next few quarters? And then could I ask about your self-sufficiency in the key feed products at present. And following the weak harvest, how to be self-sufficient still currently and how might that improve going forward? And then you mentioned about returning to 3x net leverage. I didn't quite hear when you expect that to happen? Also, if you could just maybe give us an idea of where you expect your -- you currently expect your full year EBITDA to run? That would be great.
Yes. Thank you for your question. First of all, regarding the calculation about product mix. As I told in the first quarter, yes, we could not export to Europe due to the ban. And regarding our next 3 quarters, we would like to keep balance. Yes, you're completely right, we slightly decreased maybe compared to the first quarter, we decreased our production and sales to small chicken because we would like -- yes, because we would like to provide and to sell some fillet to Europe. In general, maybe if you know, we try for the MENA overall, through the sales -- export sales diversification.Yes, that is why we -- now we understand that it is a good situation to MENA region, but at the same time, we don't want to concentrate only in 1 region. Yes. That is why mix will be and even current in the second quarter, mix -- current mix, it is different compared to the first quarter. Regarding our self-sufficiency, yes. Yes, if you think about last year, it seems to me, last year, it was the worst year in our history regarding with the harvest. Yes. And last year, yes, you're completely right. Spring harvest 2020, MHP we don't -- we are not self-sufficient in corn, and we bought corn, especially in the Q1. Regarding harvest 2021, now we expect that as previously, every year, our harvest of corn every year was approximately 1.3 million tonnes, 1.2 million tonnes, even sometimes 1.1 million tonnes. Now our expectation, yes, the same figure. Yes. Yes. But we understand some weather, unfortunately, unfortunately, weather conditions, yes, can bring to us sometimes the benefit. Sometimes no, no negative net -- yes, disadvantages. Because in general, except just 2020, harvest 2021, we always -- we were always -- had competition in corn.Regarding our -- yes, third question about our leverage, our expectation by the end of this year. We expect that our leverage will be around 3. And to your question how we achieve this. It will -- it depends on our business and our financial results in grain segment. Because you understand the current price of grain is even higher than price during the fourth quarter last year. And -- but unfortunately, we have some total -- regarding yield per hectare. Yes, and this is right -- yes. And we will have much clear picture about our -- exactly our financial results in grain segment in the second quarter because yes, because now [indiscernible] must happen. But anyway, some -- we have some risk regarding -- yes, risk regarding yield per hectare and risk regarding price.
Our next question comes from [Gabriel] from [GBS Investments].
Thanks for your presentation, and I guess a bit related to the previous question. But essentially, if you could give us a little bit more color on the grain prices and as a result, the poultry prices because, obviously, the EBITDA contraction was quite large. So to some extent, poultry prices didn't keep up to the big increase in grain prices. So just wondering if you can give us a bit more color on what are the plans in the short term. So whether you think we will see an upward adjustment in poultry prices in the second and third quarter. And if as a result, how much of the EBITDA gap, which we have in the first quarter will be closing relatively soon in the next couple of quarters?
Thank you for your question. It's a very interesting question about grain price, yes. And you understand that our financial result in grain segment, it really depends on price of grain, especially price of corn and sunflower seed. Because the biggest part of corn is consumed internally, and we recognize in our calculation in our financial report at market price which usually happens during the harvesting time. But we try to be conservative and we put price -- more than current price, approximately by 20%. And yes, we have the very wide -- our expectation, wide range of EBITDA in grain segment, yes, in grain segment. Because EBITDA -- yes -- it depends, it is 1 issue yes, regarding price and second issue about yield per hectare. But you understand, yes, clear calculation, yes, just about for example price. Because price, previously, during the 5 years previously, except 2020, average price of corn was $130. Yes, current price of corn is approximately $220, $240. It is just simple calculation, yes, how it is influenced to EBITDA per hectare is $90 multiply [indiscernible] $700 EBITDA per hectare. Yes, it's technical calculation. Okay, why in general, for example, last year, we generated around $100 per EBITDA -- total amount EBITDA in grain segment with very low yield to quarter and variable yield. Potentially here with price which equals the same as last year, potentially, our EBITDA in poultry, sorry, not in poultry, in grain can be around $180 million. Yes, which is good, yes, but with a good yield. This is a very big difference. And a lot of uncertainty now to speak. But yes, it is very encouraging. Regarding your second question regarding price of chicken, yes, let's say, total presentations in Ukraine, for example, since January, price of chicken in domestic market increased approximately by 18%. The same -- completely -- trend how to increase other food products, yes, a lot of different food products. Yes. But at the same time, [indiscernible] cost since the fourth quarter increase was around 25%. Yes, that is why and our expectation that price will continue to increase in domestic market. Because we understand that a lot of our competitors, not just in poultry treatment and in beef and in milk and in the pork segment, they generate not so interesting financial results. Yes, they also struggle because price of grain now is very high. It is our expectation that price of wheat will continue to increase. What do we see on export market? Yes, we see such price of quarters for example, increased approximately by 40%. If you compare current situation with price 6 months ago. And for example, in MENA region we see that price increased, but not so significant, but anyway, which is it now increasing by, yes, in the last figures by maybe 10%, 15%, 20%. And we understand that everywhere the whole price of wheat will continue to grow this current price of grain. And in all our history, during our history, we had a lot of examples and a lot of cases while after increasing price of grain, price of meat increased -- has increased, but with some lag in size, what we have right now.
Our next question comes from Mr. Toby Hanson from Boundary Creek.
I had 3 questions. The first was if you could split out the adjusted EBITDA per kilo by domestic and export markets as a sort of a year-on-year development. The second one was just a question on the grain price sales -- sorry, well, the grain sales that you make externally. Do you hedge any of the forward sales prices? Or do you just sell on spot once the harvest is done? And then the third 1 was you spoke about it a little bit just now saying that a lot of your competitors are struggling. It's clear that players like AGRIMAR are being liquidated. Are you planning to acquire any struggling assets either in whole or smaller production facilities?
Thank you for your question. I start from the question #3 about AGRIMAR. You completely right, the player #2 [indiscernible] AGRIMAR. And we don't have any appetite to buy these assets because first, it is very important, and we told a lot of times, the cost of production and efficiency of production, remain our advantages. This is why we understand that we can achieve for high-efficiency only through creating new capacity. We have to create to build state of the art capacity. And we know that facility and the assets, the asset was yes, we know that AGRIMAR during the maybe last 7, I don't know that maybe 7, 5 years did not invest in modernization in maintenance. And we know exactly, but we understand the level of quality of the assets. It is even -- no, it is completely not interesting for us. And other point, even we cannot imagine how it's possible to produce more, maybe if somebody buys this facility. I am sure that needs some time to invest a lot of money, to improve quality, provide -- to provide some modernization of these facilities is going to take time. Regarding second question about hedging cost quarter -- crops, sorry, crops. Yes, we sold our crops in forward contracts. Regarding, for example, rice, some volumes of corn? Yes. Just -- is it not something special for this year because we are -- accordingly, our policy every year and our strategy. Every year, we provided some amount of crops, we usually sell in forward -- with forward contracts.
Would you be able to say -- sorry, would you be able to say what percentage of the harvest is sold forward? Like is it under 10%?
It depends on crops. Regarding -- it depends on crops, some of them approximately 50%, some of them 20%.
Was that 50, 5-0- or 15, 1-5-?
5-0-.
Okay. Sorry. That's very helpful.
Yes, 50%. And the question about export and Ukraine, yes, EBITDA per kilo. It's very interesting question because it depends on the same situation, it depends on the market. Because if you compare, for example, current price of MENA regions, when we sell a small chicken per kilo EBITDA in MENA region, and in the high in Ukrainian market. If you calculate, for example, Europe, if you calculate EBITDA per kilo, for example, in Europe, and together with our products we sell in Africa. It is slightly low -- slightly lower than Europe. But what is very important for us. We would like always to keep the balance, yes, we would like -- to keep the balance between export and the Ukrainian domestic market. Because sometimes situation is better via exports depends on regions, and in some periods it is better in Ukraine. But today, I can say it's a very similar, depends on region.
Our next question comes from Mr. [Dmitry] from Jefferies.
Viktoria, just a couple of questions from my side. If I understand correctly, you have availability under some of the banking facilities for approximately USD 300 million. Can you please elaborate if you can -- if there are any restrictions in the facilities in terms of the financial covenants, et cetera. And you can use them if you have any cash liquidity gap? This is my first question. The second question, apologies if you already replied and you already elaborated on it. But can you provide any estimations for Q2 local prices for poultry and export prices? I understand that it depends on the product mix, et cetera, but maybe some indication of increase in prices that you observed in Q2 versus Q1 will be very helpful. And my last question is regarding biological asset revaluation. So you mentioned during the presentation that you included negative revaluation in Q1, which resulted in some worse results for EBITDA. If possible also to briefly discuss this biological evaluation during Q1, what were the main causes, et cetera, yes.
Pardon me, [Dmitry]. This is Anastasiya. Look, let me start from the third question you raised regarding the biological assets situation. I think we will pause this question and will reply you separately because it requires, I would say, proper explanation, proper communication, just like question and answer. It requires a discussion.
Yes, and the question about $300 million of undrawn line, yes, these amount approximately $200 million, maybe $220 million in undrawn line. That is your question, yes?
Yes. So correct, sorry. Are there any covenant restrictions, et cetera that you're taking in these facilities?
No, no, no. No, we don't have any all covenants. Yes, in all our credit line, we have completely the same package, covenants, which we have with our Eurobonds. Because Eurobond is 90% of our debt. Completely the same. Regarding the second question, yes, about trend right, trend in Ukrainian domestic market. For example, regarding Ukrainian today price higher than price by the end of the first quarter. Domestic price is high approximately by 5%, note by average in the third quarter by the end of third quarter. This is why during the April, we increased our price around by 5%, 6%. Regarding export price, it depends on region. Because, for example, quarters, I'd say, to previous price of quarters in March increased compared to January by 40% and now price is more or less the same in quarter. In MENA price is high by approximately 15% sometimes 20%, not compared to the first quarter, compared to the first quarter, around maybe 10%. And at the same time, we expect that price will continue -- will increase in the MENA region in the near future. And regarding Europe price increased compared to the March because we started the export to Europe by the middle of the March approximately right now, approximately by 10%.
I guess, thank you for this indication. But if I remember correctly back in -- like in February, we discussed that there are some issues in Europe with other stockings and et cetera. So just -- I mean, like 10% increase for Europe and 10% for MENA region is quite significant. Do you see like a significant reversal in this market?
Yes, you're completely right. It's very interesting situation, and especially when I talked about increasing, which is regarding price for fresh meat because we send to Europe not just frozen, and we send a lot of fresh meat, [indiscernible] breast and fillet, and is price regarding [indiscernible] . And maybe you know that just it seems to me 1 month ago and 3 weeks ago, there were a lot of avian cases, not just more than 1 month also, not a lot of but 3 or 4 avian cases in [indiscernible] in Poland. Maybe this is one of the reasons why price today is high.
Our next question comes from Amber Schulz from Rabobank. We registered the question online, but we'll open your telephone line. Please go ahead.We'll go to our next question, which is Ilia Zintchenko from [indiscernible] Intelligence.
I just had a number of quick follow-up questions, specifically in terms with the leverage. So you mentioned that by the end of this year, you expect that the leverage could possibly get below 3. Could you specify by how much specifically? Is it around 2.9 or?
Yes. So, yes, it's very difficult to tell you exact figures right now, yes, because it's totally different. Yes, we understand drivers who can appreciate our leverage. We understand that we have potential for growth our EBITDA in grains segment, but we cannot say now exactly figure. Yes, we will have more confidence maybe in our next conference call in 3 months, yes, because here, we have 2 risks, as I told previously, one regarding the price and the second regarding the yield.
Right. Yes. But in terms with that, I just remember during the previous earnings call back in March, I think the leverage was around 3.66. And as I understand the main strategy to bring down the leverage was by increasing EBITDA. So obviously, the results are sort of reverse to your expectations. So is it possible to give a quick summary and obviously, you mentioned it in some of your points, but just kind of summarize your plan to tackle that issue of bringing down the leverage.
You are completely right. Yes. We expect that we will generate our EBITDA -- yes, you are completely -- and better financial results and higher financial results in farming business.
Okay. And also, if the leverage does go below 3, will you consider issuing a Eurobond?
No, certainly. Just about not right now, yes.
Okay. Okay. And also 1 more question. Are you still thinking about refinancing the 7.75% in May 2024 bond?
Yes, yes, yes. We did say we provide a lot of refinancing in our history, the 5, regarding 5 or 6, yes, and that is why I don't expect any -- yes, I don't expect any changes in our strategy. Yes. Yes, we will refinance, yes.
Our next question comes from Ksenia Mishankina from Loomis. We can see that Ksenia has typed in her question. Partly may have already been answered. How do you see your debt dynamics going forward? What is your leverage limit on your current ratings?
Yes. First of all, yes, I would like to explain situation about our limitation, leverage, yes. Yes, we don't have any -- yes. Yes, we have limitations that we just cannot attract more debt? Yes. But yes -- but at the same time, we don't have any maintenance covenants. And this is why. And yes, and I and I'm sure -- not, I'm sure. I think that our leverage by the end of the first quarter is high, and we expect that our leverage will decrease. Yes. And if you think about limitation regarding our rate in the year, I think that it will be around 4.5 look like this.
Our next question comes from [Henry Mark Paul] from [CRLS] Okay. So I think we will -- we have a couple of text questions right now, which I will start reading. The first one is with regards to the merger, can you please provide more color on the reasons and impact of the merger with Raftan Holding Bank, Hemiak Investments Limited and Eledem Investments Limited, how will these affect the P&L and balance sheet of the company?
Thank you very much for the question. It is an absolutely technical transaction, right? We've been relocating from Luxembourg to Cyprus several years ago. And at the time, we've reconsidered the structure, right? And we understood that because of the different transactions, historically, MHP has been creating different -- separate companies for different reasons, right? And therefore, in order to cut the cost because anyway, we incurred legal cost, operational cost et cetera. We just decided to merge all the companies with no impact -- adverse impact on P&L or balance sheet of the company. So it's absolutely technical.
Okay. We have a few more text questions. I just read out the first 3. Given the current market conditions, have you sourced all the grain needs grain needs for the rest of the year? Second question, how much additional unutilized credit facilities; and number three, what level of peak net leverage.
Yes, until, yes, you are completely right. If you think about sourcing all the grain needs, yes, until the new harvest? Yes. How much additional unutilized credit -- yes, I told around $200 million, $220 million, a level of peak net leverage. We think the leverage by the end of the first quarter, it was our peak.
Okay. Our next additional text questions. EBITDA expectations for 2021. Any comments on land reform laws currently passed and potential acquisitions of land?
Regarding our expectations, yes. Yes, at this stage, it is most likely that EBITDA will be a number start to increase forth. But we cannot yet state where in this range. We are right now, as I told, in the second half, in the conference call in 3 years -- in 3 months, sorry, we are more confident in exact figures. We explained a lot of times today that the clear figures vary, it depends on our results in the business. Yes. Regarding reform law, yes, land reform, yes, we don't expect any big difference in our company. Because unfortunately, unfortunately, it is a very controversial issue for our company. Cannot buy land, since the total -- July this year. Yes, we cannot -- the company in general cannot buy. And this is why we will continue to lease land.
Yes. If I can add then, from the July 1 of this year, only private individuals will be able to buy land, and they are restricted to 200 hectares of land and only since the 1 January 2024, Ukrainian domiciled companies will be able to buy land with limit to 10,000 hectares of land. As you know, MHP is a Cyprus domiciled company. And therefore, we are not allowed to buy land in Ukraine. So as Viktoria said, we will continue with the long-term lease.
Another text question, what is the outstanding amount of related party loans? And what is the repayment schedule?
Yes, by the end of the quarter and today. And until to date, the total amount of related party loans, 53 -- sorry, $56 million.
The final text questions. [Operator Instructions] The final follow-up question on text we have is, can you clarify if the leverage incurrence covenant is 3.0x.
Yes. That's right. So if we are talking about the net debt-to-EBITDA leverage, max incurrence. It is 3x. That's right. The additional -- and additional budget of $200 million. Yes. Leverage is 3.0, and additional debt is approximately $200 million.
Okay. I am seeing no further questions at this point. I'll pass the line back to the management team for their concluding remarks.
Thank you very much, everyone. It was a very good conference call. And thank you very much for the questions. Of course, we remain at your disposal. And please free to send your questions to me, to our team or give me or us a call. Thank you very much. Have a nice day. Bye-bye.
Thank you. We'll be concluding the call.