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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, welcome to the PJSC Myronivsky Hliboproduct Financial Results for Fourth Quarter and 12 Months 2018 Conference Call and Webcast. Today's speakers would be Iryna Bublyk, Head of Investment Planning Department of MHP; and Viktoria Kapelyushnaya, CFO. Dear speakers, the floor is yours. Please go ahead.
Good afternoon, everyone. Thank you for joining us today for MHP's conference call dedicated to our financial results for the fourth quarter and full year of 2018. My name is Iryna Bublyk. I'm Head of Investment Planning Department of MHP. Together with our CFO, Viktoria Kapelyushnaya, we will lead you through the presentation. For your information, Anastasiya Sobotyuk, Director of Investor Relations is currently enjoying her short maternity leave and she promised to rejoin the team soon, early in June this year. I hope that everybody is ready, so we can start our call now.Let's start from macro fundamentals, Page #4. During 2018, macro conditions in Ukraine have been improving and GDP growth accelerated to 3.4% year-on-year. Annual inflation decelerated to around 10% with relatively stable currency ratio during the year. [ Several notes ] about consumption of meat in Ukraine. Per capita meat consumption increased by about 1 kilo driven by poultry and pork consumption growth. Beef continued to decline due to consumer preferences and affordability. The cut in the grain harvest in 2018, Ukraine gives its one of the record harvest, which resulted in over 70 million tonnes of grain in total of which around 70% expect to be exported. And -- which this result in grain growing operations in 2018, were also significantly above compared to last year's, mainly because of strong yield of cotton.Coming back to the company's results, let's go to Slide #6. In 2018, MHP demonstrated good financial performance with revenue growth driven mainly by an increase in production volume of chicken meat due to launch of Phase 2 of the Vinnytsia poultry complex and strong harvest of crops. So in figures MHP generated a revenue of almost $1.7 billion, 21% high year-on-year, with export revenue share almost 60% of total revenue. EBITDA $450 million was relatively stable year-on-year with EBITDA margin 29%. Net profit for the period is $128 million compared to profit $230 million in 2017. Key factors affected net profit were: first, extra financial expenses related to [indiscernible]; second, higher depreciation due to reevaluation of assets at the end of 2017; and new assets launching during the year of 2018; and third, deferred tax expenses in 2018 instead of deferred tax benefits in 2017.Now let me pass my voice to Viktoria, who will lead you through the financial results in details.
Thank you, Iryna. Good afternoon, everyone. Let's discuss now financial results for full year in more detail. Slide #7 shows our financial results by segment. Poultry operation remains our key segment. It's usually and during the 2018 generate majority of total revenue about involved 80% and around 60% of company's EBITDA. Grain segment generates 12% of total revenue of third parties but has a significant share in company EBITDA; it's about 30% due to extremely great harvest that we gathered this year, mostly corn. As you know, majority of grain produced is used internally to feed our chickens.Others sold in the smaller segment, as agriculture operation, generated around 10% of consolidated revenue and contribute 4% to consolidated EBITDA. Main components of this segment are meat processes and convenient food production. Our export operation continue to develop impressively in 2018 and generate about 60% of total revenue, $925 million, 26% higher compared to the 2017, mostly due to the higher volume and price as for chicken meat. We will discuss the development of all our segment more deeply on the next slide.Please move to the next, Slide #8. Poultry segment performance. During the 2018, we increased our production volumes by 9% due to the launch of new poultry [ complex ] in -- on Vinnytsia poultry farm as well as due to increased average rate per head of chicken produced on Myronivka and Vinnytsia poultry farms.Currently 3 new brigade for growing chicken are operating in Vinnytsia, and we are going to put into operation additional 3 brigade in 2019 to continue our production growth. Revenue overall in poultry increased by 18% year-on-year driven by chicken meat sales volume growth and high prices. Growth in revenue was mostly achieved since start of our export growth strategy, which is focused on marketing targeting. We continue to concentrate, enrolled each product to the most favorable market and this give us the 30% growth of exports volumes and 7% growth in export price.In general, during 2018 our average sales price increased by 12%. Average poultry production cost in the last year expectedly increased by around 17% increase in the [ total ] year-on-year, reflecting higher price of poultry income and packaging materials and utilities as well as higher payroll cost. Gross profit of Poultry segment increased by 3%, while at the same time EBITDA decreased by 15%, reflecting mostly change in government grants. We received $53 million in 2017. It's [indiscernible] without government grant effect to have comparable basis, EBITDA of Poultry segment would have almost the same trend in 2018. Adjusted EBITDA before 41 standard effect per 1 kilo last year was $0.5 per kilo, reached around 15% low compared to the average of 2017. Let's move to the Slide #9. External Grain segment revenue last year amounted $180 million. The increase compared to the last year was mainly attributable to impressive high harvest in 2018. Harvest we did in 2018 amounted to 2.6 million tonnes in total by more than 30% higher compared to the previous year, due to the record yield of corn, 10.9 tonnes per hectare, it's net rate. EBITDA include effect on revelation grains on the stock constitute $150 million by -- more than 59% higher compared to the previous year. Based on high yield across all crops, but especially corn. In line with the yield increase, EBITDA per 1 hectare last year increased to $416.Let's proceed to the Slide #10. Other Agricultural segment historically, generally is the smallest part of our financial results. The key business of segment are meat processing and convenience food production. This segment generate revenue $130 million by 12% higher compared to the previous year, mostly due to the higher price of meat processing product and driven by increase in price of poultry. EBITDA is $16 million last year, was 16% lower compared to the 2017, mainly due to the lower result of cattle and milk operations.Go on to the Slide #11. If you [indiscernible] our cash flow growth and liquidity position, net cash generated from operational activity before working capital investment was $306 million, but 8% lower compared to the same period to previous year, reaching the line with EBITDA trend if we include effect of noncash 41 standard. A [indiscernible] in working capital during the 2018 is mostly related to high investment in stock of sunflower seed at the end of 2018 compared to the amount at the beginning of the year as well as increase in biological assets due to increase of poultry production capacity. Total CapEx last year was $230 million and it raised more than previous year, 2017, due to intense investment in Vinnytsia second-phase project. Regarding the debt. At the end of the year, the period, the company's total debt was $1.3 billion and net debt about $1.1 billion. 90% of total debt is long-term debt, about 90% of which are Eurobonds. Our average rate -- interest rate currently is around 7%. Insurance of liquidity at the end of December, we had about $210 million in cash, mostly in dollars. Net debt-to-EBITDA ratio of the quarter-end was 2.5x versus Eurobond covenant 3. Almost all our debt is denominated in foreign currency mostly in dollars. Current risk in our keys are naturally hedged by a significant share of export sales, having 60% of revenue, more than $900 million, when the dollar is denominated export revenue during the last year. This will recover it, all our debt service expenses and other payments in foreign currency. Our currency balance remains strongly positive. And now I give the floor to Iryna to give our current business update and outlook.
Thank you, Viktoria. To conclude the presentation let's talk a bit about the outlook for current year of 2019. If you see from the relevant presentation, 2018 was another year of focusing term of capacity in sales growth and put in place a basement for further development. In February 2019, in line with our strategy of further expansion and growth outside of Ukraine, we completed the acquisition of Slovenian poultry and meat processing company, Perutnina Ptuj.For 2019, we set several targets to become even more efficient across all of our business segments. As you know, due to vertical integrated business model high efficient sales production sides and generations based on our unique experience and knowledges and which is the lowest cost producer of chicken meat. Our target is to maintain this status and continue to be the most efficient producer of poultry meat both in Ukraine, and at our newly acquired capacities in Balkan region. Second, our investments into Vinnytsia poultry complex Phase 2 proceeds in line with the time and budget. Several additional area and sites will be put into operations in 2019, which will allow MHP to add around 100,000 tonnes of poultry meat to our current capacity, 620,000 meat per year. On top of that, acquisition of Perutnina Ptuj will add around 80,000 tonnes of poultry meat per year of which about 40% it is processed and sold [indiscernible] related products across all Balkan countries. Both our export plans are developed in line with our operational growth in 2019, which is expected to result in more than 350,000 tonnes of poultry meat export in current year. Our new biogas complex in Vinnytsia, with total capacity 12 megawatts, which had started operations at the end of 2018, we will start to generate electricity in the second quarter of 2019 and expected to reach full capacity till the year-end or early next year.We are confident that as our vertical integrated business model, we will continue to deliver strong financial results, supported by a significant and growing share of hard currency revenues from export of chicken, vegetable oils and grains. Now we are ready to open Q&A session. Operator, please go ahead with Q&A.
[Operator Instructions] Our first question comes from [indiscernible].
Okay. I have a few question I'd like to ask. So first of all, what pricing dynamics do you see in the local Ukrainian markets, in terms of poultry prices? I was also a little bit surprised by the bond issuance expense of $30 million. Why is it so high is the question I have. And on tax, the reversal from tax benefit to tax expense, do you mind giving a little bit more information on this? And also, what is the guidance for CapEx for 2019?
First of all, thank you for your question. We start with -- question by question. Regarding our trend and situation on domestic market. Yes, this year we have planned to slightly increase our sales volume on the domestic market, and we suppose that we can increase our price by around 6% since January this year. At the beginning of the year we always try to be very conservative. Regarding the second question about one-off, more than $30 million regarding our issue of Eurobond. Last year, you know that we did not issue a new Eurobond. We provide transaction, which exchange maturity of our previous Eurobond. At the same time -- with the both our Eurobonds with maturity in 2020 we strive more than -- about 110%, yes. That is why we need to pay more one-offs for this exchanged maturity. While at the same time, last year, we issue new Eurobond with very attractive coupon. I would like to remind you that our coupon for 8-year is worth less than 7%. Regarding our -- the second -- third question about tax expenses, yes, please explain what you mean. Tax expenses?
So I mean you had a -- if I'm not mistaken around 2017 tax benefit of -- on the P&L of $70 million and that's the worst...
Yes, you're completely right. Last year in -- no, not last year, previous -- in 2017, we had probability of last noncash deferred tax, $27 million. This year, we've had opposite situation. We've had noncash expenses -- around tax expenses, around $10 million, which is why you can see this so big difference in taxes. But I would like to emphasize, this is a noncash, it's a different tax, it is not real money, it is not tax payment, it is different taxes. And regarding your third question about CapEx for 2019. Our CapEx for 2018 (sic) [ 2019 ] will be around $150 million, exclude the amount which we paid for Perutnina. Yes, $150 million includes maintenance CapEx and CapEx so which we dedicated to Vinnytsia second phase.
Okay. And are you going to [indiscernible]? Sorry, could I just ask another question?
Very quickly, yes thank you. Very quickly, yes. Very quickly.
Would you in the -- at some point disclose what you paid for Perutnina?
Yes, we cannot say to exactly amount because our final amount will depend on financial result of 2018. And it's now just in preparations, financial reports of Perutnina 2018 because of -- yes.
Our next question comes from Andrew Howell from Citi.
So just a few questions for me. First, the picking up on the question on Perutnina Ptuj, I think we're all going to have a little trouble pronouncing that for a little while until we get used to it. Maybe you could just talk a little bit -- I know you can't say how much you paid for it, but in terms of what you are expecting out of this asset, giving a sense, firstly, of the production, well you said production 80,000 tonnes. What is the production growth that you could see potentially coming from this? Is there some -- an asset that you plan on investing in significantly and growing beyond its current production level. And then, maybe give a sense of the relative profitability of this company compared with your core operations at MHP. Do you expect this to be dilutive to your overall margin? And also, where do you see that going in terms of the potential to affect the profitability of that company? So that's my first question. And the second one is also on profitability, but more looking back, was it the past year -- there was a fair amount of margin compression that happened, and I would like to get a sense of were there some one-off in that, which brought the EBITDA per kilo down, close to $0.50? In particular, looking at payroll cost, those did rise a lot, almost 40% year-on-year. What was the reason for that? Is this just cost pressures you're seeing across the board? Or is there some specific reasons? And how do we think about that margin, EBITDA per kilo, in 2019 and beyond?
First of all, thank you very much for very interesting questions. Regarding the first question about Perutnina. Maybe if you know, during the last 5 years, we would -- have been considering feasibility to buy the right target for MHP for expansion in Europe. And we verified the [indiscernible], we provided this transaction, because Perutnina is a good company, which has very strong brand and that's #1 in Balkans, and which is very important. Yes, Perutnina not just produce chicken meat and they produced a lot of value-added products, so [indiscernible] and convenience food. And first of all, we see a room for improved efficiencies for optimized cost of production chicken mix, which produced in this company. Because Perutnina mostly concentrates -- for production, it is a more mixed processing company, than pure poultry producer, which is a -- yes, today, Perutnina generates around 11% EBITDA margin. We understand how we can improve profitability of this company through provide optimization of cost of production, chicken meat. But at the same time we understand that maybe, it is not possible to achieve the same level of profitability of poultry production in Europe, in Perutnina, the same that we have in Ukraine. But at the same time, we understand the big difference in price between meat which produced in Europe; compare the price of meat which we export from Ukraine. And what is the important part, we see huge potential for growth in Perutnina through creating a new capacity, and we see how we can invest money and we -- first of all, Perutnina, today, has assets not just in Slovenia. Perutnina today has assets in different 4 Balkans countries. And today, Perutnina sells product more than 20 European countries, and we see it is a good [ sales state ] for our expansions in Europe. Regarding the second question, your question about our -- and you stated correctly about decrease our EBITDA per kilo, 2018 compared with 2017, yes? First of all $0.5 per kilo, in a way it is a good level of profitability of a poultry company. And if you look at our profitability and especially, around per 1 kilo compared to the other poultry companies in the role you can see that our figure is impressive high compared with the other profitability of these other companies. And there -- yes, you are completely right that last year the main driver for decrease in cost of profitability and it was -- increased our cost of production [ more so ] than increase -- not just payroll cost, this is the same as Perutnina cost and utility cost. And if you look in the future, we see that our level of profitability per 1 kilo remains at the same level. We expect it is the normalization level for profitability in Poultry segment, it will be $0.5 per kilo.
And just, specifically, on payroll. Could you give a sense of how much of that is hiring new people? So are you, kind of, scaling up a bit, as part of the [indiscernible] expansion or something? Or is it [indiscernible] wage inflation is so high?
No, no, no -- it is not -- yes, wage inflation, yes. Last year we increased our salary, our wage in company around 30%. Yes, because you know wage has had the problem with immigration. Yes, it's labor immigration from Ukraine. And that is why it is not just MHP. Yes, it is all -- Yes, at the same time, first of all, we have very sleek internal policy, and we would like to have the best people in the company. We would like to be the best company in Ukraine, in the world. That is why we need to hire the best people. That is why we need to pay market price and even market slightly plus salary for employees.
So do you think -- have you reached that? Or is this, sort of, something to momentum that might continue in terms of that cost pressure on wages into 2019?
No, we don't expect so big increase in salaries this year. We don't expect it. Mainly it is the most…
And just one final follow-up question in terms of the Slovenia, are you planning on supplying that factory with meat that you're producing in Ukraine? Is that part of the plan?
No, no. We consider this company has completely separate assets and enterprises, and we will develop and invest in this company, and we consider it a pure poultry -- European poultry producer.
[Operator Instructions] We have a question from Stella Cridge from Barclays.
I presume from all of your comments about your need to wait for their -- financials of Perutnina to be finalized. I was wondering, if you could give us a rough idea of what you think their pro forma and net leverage would be after the acquisition? And the second question, in terms of working capital. I know that you said there is going to be quite an addition of capacity and, again, in 2019 could we expect -- well, do you have a rough idea of what their working capital accumulation would be, as part of that? That would be great.
Thank you for your question. First of all, regarding our investment in working capital of early in 2018, our expectation -- we expect that finance and working capital will not be more than $40 million. It will assume all of that even though we have invested in [ enough ] in 2018. And regarding our pro forma, as I've been -- our reach after pro forma, our leverage will be around 2.8.
2.8. Okay. That's fantastic. And I saw within the financial statements that you've received $100 million bond and to finance -- part finance the acquisition around cash. In terms of other refinancing plans or any other discussions that you've got going on with regards to addressing short-term debt such as the balance on the Eurobond next year. Do you have anything lined up? Any additions?
Yes, first of all, we say -- told you in our presentations, the 90% of all our debt is long-term debt which matures in 2024, 2026. Yes, we've had just the extra financing short-term debt but anyway we are -- we always -- we always try to be in good shape that is why we -- yes, and that is why we always try to find and we're always open to new refinancing with better terms or these longer terms and with better conditions.
I mean, at this stage are you expecting to pay the -- your bond out of cash? Is that the, kind, of base plan or...
For 2020?
Yes, yes.
Yes. Your question about -- yes, we will take some cash until the same time, yes, maybe with some grown -- from cash and from short-term financing. Today we have very low levels of short-term debt in our balance sheet.
Our next question comes from Sergey Dubin from Harding Loevner.
Yes, several questions, just to start to follow-up on the Slovenian acquisition. So you're saying that you are going to run this as a separate entity based in Europe. You're not going to -- basically use your production from Ukraine. So -- and it's significant lower EBITDA margin. So I'm just wondering, what is the -- why buy this company and incur the cost of acquisition, as opposed to invest that money in growing production in Ukraine, which you're already doing but doing more of that and just continue to export. What are the real benefits that you see that you're not going to be able to achieve without it? So this is the first question. The second is on the capacity. Can you just reiterate what is the capacity additions for this year? And what is expansion CapEx, maintenance CapEx, just break it out? And then, the third, can you provide the figures for export price per kilo and domestic price per kilo that you achieved in 2018? And the evolution of how you think these prices are going to evolve in 2019?
Mr. Sergey, please hold the line, the speaker would be back to you shortly.
Okay.
Dear speakers, you are live. So we have a question.Firstly, Mr. Sergey Dubin, would you mind to repeat the question?
That's fine. So I'm going to ask 3 questions one more time. So the first question is regarding the Slovenian acquisition coming back to the previous question. I'm not clear as to the benefits of this acquisition. Can you outline what is it that you're achieving by buying this asset, what you cannot do without it? That's the first question. But what is the real benefit that you're seeing out of it? The second is with regard to your capacity expansion, can you one more time reiterate your additional capacity that's going to come on soon this year and next year and the total CapEx that's expansionary for these additional capacity as well as maintenance CapEx? And then, the third question, with regard to your export price per kilo and domestic price per kilo, what were these figures in U.S. dollars for 2018? And how do you see the evolution of those in 2019?
First of all, thank you for your questions. And regarding our -- the progression regarding our price, price of export is very interesting question because price of export depends on product and depends with markets. Because now we have a very interesting situation for example, price in MENA region especially in Saudi Arabia in Arab Emirates. For example, year-to-year is higher by around 10%. At the same time, price of Europe is the same in MENA region is a low -- today is a low compared to the last year by around 15%. That is why our expectation about average different situation. In, for example, in Europe current price slightly [ low ] compared to the same price of last year. But anyway, our expectation of average price of the export in 2019 is very equal to the last year through the 2018.
And what was the [indiscernible] price in 2018?
Last year, it was $1.59 per kilo. It's average price, you understand is a price of...
I understand, that it's an average and you export in many countries. I'm just asking for the figure. So it was $1.59 in 2018, is that correct?
Yes.
Yes, and what was the domestic?
Yes, yes. Domestic price is average price because it is approximately $1.35, but at the same time you need to understand that without a lot of very cheap part of the chicken in domestic markets, because it's completely different mix, if you look at the mix of the export and mix of the domestic, it's a different mix. Because in domestic markets, we sell a lot of MDM, and we don't export any MDM for example. That is why it is not correct to compare the price of the meat.
Okay, and did I hear you correctly that you said that -- just one second, just on the domestic side, you said that you saw 6% increase in the first 2 months of the year -- versus last year, is that correct?
Yes, for full year I told about 6% in the full year.
So you expect the full year domestic price to be 6% higher?
Yes, it is our conservative forecast because always the beginning of this year, we try to be very conservative for costs, yes. Regarding for your second question, regarding expansion plan in Ukraine. As told in the presentation this year we will increase our production and sales volume by 100,000 tonnes due to the launch last year with brigade and this year we launch an extra brigade and we will [indiscernible] totally increase our production volume and in 2022, 2023, we will produce this year in 2018 - 2019 sorry - we produce total 714,000 tonne In 2022, we will produce -- 900 -- additional 200,000 tonnes. What we need to invest, yes, what we need to invest? We need to invest only in Vinnytsia complex around $250 million, $270 million during the 2009 (sic) [ 2019 ] the next 3 years. It is clear?
Okay, okay. So you still have to invest $250 million to $270 million and you expect overall from today to 2023. What's the incremental increase in capacity?
Around about 200,000 tonnes.
Okay, I understand. Okay, that's helpful. And then the last question.
It is the question about Perutnina Ptuj, yes? Regard to Perutnina Ptuj. Please repeat your question, for more clear understanding.
This is like the third time I'm saying it, but that's fine.I'm just trying to understand the rationale behind this acquisition because you said that you're not going to use any of the meat -- chicken meat produced in Ukraine to -- and also you're going to run this as an independent entity. We know that has significant lower profitability compared to Ukrainian operation. So what is, obviously, you can produce in Ukraine and export to Europe or to other countries. So I'm just trying to understand what is the rationale, how you're looking at the benefit of this acquisition? And what does it bring to you that you couldn't achieve otherwise?
Yes, I understand. First of all, I said [indiscernible] not just last 2 years, I told [indiscernible] we always try to be very transparent with our investors, potential investor and current shareholders. We always told that we would like to be international company, and we would like to be the player #1 in Europe, and we would like to be producers in European Union because we understand how we can improve profitability -- profitability of European company. And Perutnina Ptuj is very good, very good because that's why our expansion and anyway, please look at different poultry producer in Europe. Yes please look to Britain market and look on German market and Dutch market it doesn't matter. You can see the profitability of producer is around few percent less than 10%, I'm sure. Perutnina Ptuj today have profitability around 11% and what is very important, if you calculate EBITDA per kilo, it will be more than EUR 0.3 per kilo yes, chicken meat, and we -- what is the most important thing we understand how we increase profitability and decrease cost of production, because we understand how we improve production indicator as for example, should really see [indiscernible] and cost of for the convention and yield of [indiscernible] and a lot of different things. That is why we have huge potential to be one of the -- not just one of them, maybe most profitable producer in the European Union. It is our rationality and after we will achieve this target with Perutnina, we understand that we will ready to provide and to provide any acquisition in Europe.
Okay, can you share maybe some targets in ...
I have important point. Perutnina today is not just producer commodity, because if you look at our export on our export capacity, yes, export capability, we sell just commodity chicken but Perutnina today is very, very strong brand. And it's -- and I'm sure that even MHP can learn something from marketing strategy, and why not? It is always a integration it's not just MHP bring to Perutnina some new improvement and increase efficiency, and I am sure that even MHP can long-term interest [indiscernible and value-added production and to the brand.
Okay, could you maybe share some target or goals in terms of, let's say, for EBITDA, what kind of EBITDA is it going to do this year for 2018? What are you targeting for 2019? What are the some kind of a metrics that you think you can achieve?
Are you speaking about Perutnina?
Yes, yes.
No, I cannot say that, that's an achiever because just the start of managing this enterprise only less than 1 month ago. But I am sure that we can improve EBITDA at minimum by 15% to 20%.
Okay, and how much is it doing roughly?
Of Perutnina?
Yes.
Of Perutnina. Perutnina would be around EUR 30 million -- plus-minus EUR 30 million.
$30 million (sic) [ EUR 30 million ] Okay, and then not to take more time, but just final quick questions. So I don't think it's been asked already, but if you could resolve the trends that you're observing, I know it's still early in the year, but could you have some preliminary outlook for the total EBITDA for MHP for 2019?
You know that I repeat again, just at beginning of the year we always try to be very conservative, that is why we expect that together with Perutnina we will increase EBITDA -- together with Perutnina approximately about 5% and 10%, but it's very conservative for cost.
By 5% to 10%, okay, higher versus 2018.
[Operator Instructions] Our next question comes from Natalia Shpygotska from Dragon Capital.
Couple of questions from my side. Could you please check if I heard correctly that MHP's poultry production cost increased by [ 70% ] year-over-year?
Yes, 17%.
17%, 1-7%.
Okay. How do you expect costs to evolve through 2019?
We expect that this costs will be higher by not so significant by 5%, 10%.
Could you please also update on the current estimate for total Vinnytsia 2 CapEx?
For 2018?
Yes. No, no, no.
The total?
Yes, yes.
For future, yes, total profits and in general for the second stage it will be $450 million. For total second stage.
Yes, and a bit like wider question. Given the recent acquisition of Perutnina and as was said in the company's report that MHP still monitors acquisition possibilities through Europe, Middle East and Africa. Can you please elaborate a bit how do you, MHP's management, expect the company to look like in some 3 to 5 years?
Yes, we continue to consider possibility to buy some different company. Because you understand maybe you remember that we start to discuss about -- in the past of the start to provide research and to look for the right target for us it seems to me 5 years ago. That is why we continue to provide and to continue to consider different possibility, yes, and we understand this is priority to us for our expansion, #1 is Europe, but at the same time, we understand that Vienna is the region of this huge potential for growth, that is why Vienna is interesting to us. We -- that is why now we are ready to consider different proposal and different offerings, not in any way we will continue.
Our next question comes from [ Will Jasmeen ] from Loomis Sayles.
Just wanted to confirm a couple of things. The EBITDA margin on poultry, you said, going forward, you like -- you think is likely to be in the range we've seen this year in terms of $0.50 per kilo, is that correct? Hello, can you hear me?
Hello, sorry, yes, it's correct, it's around $0.50, yes, around $0.50 per kilo.
Do you expect that will be the normal level going forward?
Yes, it's a normal, yes, it's a normal charge from $0.40 to $0.60, yes.
To $0.60, okay, excellent.
Per kilo. From $0.40 to $0.60.
Just a couple of other questions, if I may. Do you have any expectations to make any further acquisitions? Do you think, I know, it's difficult sometimes opportunities arise. But anything that's on the horizon for this year?
No, I don't think it will be happen this year. But anyway, we are ready to consider different possibilities. But I'm not -- I think that for this year, our main task to improve efficiency of our new acquisition of Perutnina. But at the same time, it depends on maybe attractive price or an attractive business model. It depends on targets.
And just a couple of other questions, if I may if you don't mind. The Perutnina acquisition, I think you've guided the EBITDA was around about EUR 30 million, the margin, I think, you said was around 11% EBITDA. What -- where do you think you can take that margin? Did you say you could potentially increase EBITDA by 15% to 20%, is that correct?
It is correct, increased, but not 15%, 20%. Anyway, as I told you that we understand how we can improve the EBITDA by around [ 50% ] in absolute. Not EBITDA margin, EBITDA in absolute.
Okay, yes, got it. And in terms of...
Absolute not...
Just wanted to confirm, the domestic average price that you gave for chicken -- for poultry, what was that number again? I think your export price your average you said was $1.59 per kilo, what was the domestic price again, please?
$1.35. But it is not -- you understand that it is the price of the mix.
Yes, it's lower. Absolutely.
It's different products, yes. And in Ukraine, we sell a lot of carcasses and MDM for meat processing companies, yes. It is a very low price.
And last question, leverage for 2019, I guess you are just going to guide below 3x, is that right? Or do you expect it be sort of around 2.5x for the end of the year?
Yes. I think that we will have around 2.8x, yes.
Our next question comes from Kiti Pantskhava from Exotix Capital/
I just have a follow-up on Vinnytsia CapEx, wanted to clarify the numbers. I think you mentioned that Vinnytsia production will increase by 200,000 tonnes by 2022. Is it 200,000 from the end of 2018, which was like 618 or is it related to -- relative to any other figure? And also what maintenance CapEx do you expect to see in 2019?
We calculate, 200 base of average monthly capacity yes. If you calculate from today yes, from the annual -- from the capacity of 2018, you yes, not '18, it's -- this year, we will produce 780,000 tonnes chicken meat, includes byproducts. In 2022, we will produce around [ 900 ] or 10,000 or 20,000 tonnes. Because you understand, during the 2009, (sic) [ 2019 ] every month, almost every month we slightly increase, because we launch new brigade and that is why in months we increase our production volume.
So the target by 2022 is 900 more or less?
900, around 900. Maybe slightly higher [indiscernible], but anyway, approximately 900.
Okay. And what about your maintenance CapEx in 2019?
'19, all maintenance CapEx it will be around $50 million or $60 million. Yes, but our -- because, this year we try to decrease our maintenance CapEx. Our usual maintenance CapEx it will be around $70 million, $80 million.
Your next question comes from Konstantin Fastovets from Shaliman Capital (sic) [ Adamant Capital ].
Just wanted to ask, coming back to the income tax. It's -- so it's very volatile from 2017 to 2018, both in terms of what you have on your P&L and in the cash flows. Can you maybe just explain a bit why it's so volatile? How can we -- what can we expect for the coming year? So that's one question and another one, I'm not sure, if you mentioned this already or not. What's your CapEx plans for Perutnina are for this year, if you have already decided that?
Regarding the question of CapEx for Perutnina, and now we have it calculated, but we don't expect this huge CapEx for this year, because this year we will dedicate it to improve efficiency and not for creating the new facility. Regarding your second question, in volatile situation with income tax. Our expectation for this year around 0. Last year in 2017, we have different assets income and this year we have different expenses. That is why it is so big difference.
Yes, and this happened because of what? Because of the difference in income or...
It is noncash. It' not real, yes, you understand -- it's just a front, it is no cash, it is a noncash, it is not real payment taxes and believe me in our financial report we have very clear explanation of this issue. Quickly.
And in terms of cash, do you expect -- when you say 0, is that 0 on the P&L? Or on cash flow for next year?
Yes, it's not 0 -- yes, it is maybe the few million dollars. Very insignificant, few million dollars. It is all about the amount.
Cash or P&L?
Cash, yes.
Both cash and P&L?
Yes, yes, both for 2019.
We have no other question. Dear speakers, back to you for the conclusion.
Okay. Thank you, everyone, for attending our conference call. If you have any further questions, just contact us. Have a good day. Thank you.
Thank you. Bye
Ladies and gentlemen, this concludes our conference call. Thank you all for participating. You may now disconnect.