Interim report H1 2018

Transcription

1 Interim report H1 2018

2 Highlights Goodvalley improved operational efficiency in Q and continued to invest in stable renovations to increase capacity and efficiency going forward, while simultaneously making headway with the Goodvalley brand and name launch. The Group delivered strong operational performance and stable underlying business development across segments during the quarter, while the financial performance was impacted by lower volumes sold in the Pig segment. We were pleased to record strong operational performance in the second quarter driven by our continued efforts to enhance efficiency across the Group. The financial results for the quarter were affected by the long-term investments in building a stronger business by upgrading our facilities and launching our new branded products in Poland in August. While these accelerated investments in the future combined with the drought in Europe this summer and expectations of unfavourable pig and feed price developments for the remainder of 2018 entailed an adjustment of our outlook earlier this month, we are proud that we still expect to deliver very strong results under challenging market conditions, says CEO Tom Axelgaard. Contact information Tom Axelgaard, CEO, Hans Henrik Pauk Pedersen, CFO tel.: Conference call A conference call for investors, analysts and other stakeholders will be conducted in English by CEO Tom Axelgaard and CFO Hans Henrik Pedersen on 21 August 2018 at 1 PM (CET). The conference call can be followed live via this link, and participants may dial telephone numbers provided at our corporate website to ask questions. Q Group revenue declined to DKK 374 million (Q2 2017: DKK 421 million) due to lower pig prices and temporarily reduced capacity following stable renovations. Goodvalley s Adjusted* EBITDA came to DKK 83 million (Q2 2017: DKK 132 million), corresponding to an Adjusted EBITDA margin of 22.2% (Q2 2017: 31.2%). Pig segment revenue declined to DKK 263 million (Q2 2017: DKK 307 million) following lower prices and volumes mainly due to temporary reduced capacity in connection with stable renovations in Ukraine and lower finisher capacity in Poland, entailing an Adjusted EBITDA of DKK 68 million (Q2 2017: DKK 112 million). Revenue from the Food segment was slightly down to DKK 192 million (Q2 2017: DKK 202 million), while EBITDA improved to DKK 2 million (Q2 2017: DKK -1 million). The Arable segment generated revenue of DKK 9 million (Q2 2017: DKK 0 million) and moderately lower EBITDA of DKK 11 million (Q2 2017: DKK 13 million) due to reduced yield expectations in Poland following the dry Summer period. The Energy segment s production was stable, generating revenue of DKK 19 million (Q2 2017: DKK 17 million) and EBITDA of DKK 3 million (Q2 2017: DKK 3 million). H Group revenue declined to DKK 725 million (H1 2017: DKK 786 million) and Adjusted EBITDA came to DKK 156 million (H1 2017: DKK 221 million) corresponding to an Adjusted EBITDA margin of 21.5% (H1 2017: 28.1%). Pig segment revenue declined to DKK 510 million (H1 2017: DKK 571 million), and Adjusted EBITDA came to DKK 125 million (H1 2017: DKK 186 million). Revenue from the Food segment was stable at DKK 381 million (H1 2017: DKK 382 million), and EBITDA was DKK 8 million (H1 2017: DKK 0 million). The Arable segment lifted revenue to DKK 17 million (H1 2017: DKK 0 million) and generated a lower EBITDA of DKK 16 million (H1 2017: DKK 20 million). The Energy segment s production was stable, generating revenue of DKK 37 million (H1 2017: DKK 37 million) and EBITDA of DKK 9 million (H1 2017: DKK 11 million). OUTLOOK: The Group maintains its recently adjusted outlook for the fullyear, expecting revenue of DKK 1,400-1,550 million and Adjusted EBITDA of DKK million against previous expectations of revenue of DKK 1,550-1,700 million and Adjusted EBITDA of DKK million, cf. company announcement no. 11/2018. *In this report, Adjusted EBITDA refers to EBITDA adjusted for herd price changes and non-recurring items, cf. page 4. Page 2

3 Financial highlights DKK million Q Q H H Income statement Revenue Total income Gross profit EBITDA Adjusted EBITDA EBIT Financial items, net (8) (53) (18) (67) Profit for the period Adjusted* profit DKK million Q Q H H Financial ratios Gross margin 27.6% 46.6% 31.1% 39.7% EBITDA margin 19.6% 41.9% 23.5% 35.0% Adjusted EBITDA margin 22.2% 31.2% 21.5% 28.1% EBIT margin 11.3% 34.6% 15.2% 27.2% Free cash flow / Revenue (11.0%) 10.4% (5.5%) 7.1% Cash conversion 53.1% 55.5% 53.3% 51.1% Capex (68) (30) (109) (62) NIBD/Adjusted EBITDA LTM Equity ratio 46.8% 47.2% 46.8% 47.2% ROIC 8.9% 11.0% 8.9% 11.0% Cash flow FTE end of period 2,301 2,327 2,301 2,327 Operating activity Investing activity (85) (29) (123) (57) Free cash flow (41) 44 (40) 56 Share ratios Earnings per share, DKK Financing activity Goodvalley Bond Obligor Group* Balance sheet Non-current assets 1,864 1,942 1,864 1,942 Net working capital Invested capital 2,463 2,540 2,463 2,540 Total assets 2,819 2,940 2,819 2,940 Equity 1,318 1,388 1,318 1,388 Net interest-bearing debt 1,142 1,178 1,142 1,178 *In this report, Adjusted profit refers to profit for the period adjusted for non-recurring items, herd price changes and exchange rate adjustments in financial items. Revenue Total income EBITDA Adjusted EBITDA Net interest bearing debt 1,144 1,010 1,144 1,010 Adjusted EBITDA LTM NIBD/Adjusted EBITDA LTM * Bond Obligor Group consists of: Goodvalley A/S, Finansax ApS, Goodvalley Agro SA, Goodvalley Sp. Z o.o. and Goodvalley Ukraine LLC. Page 3

4 Financial performance GROUP BUSINESS DEVELOPMENT Goodvalley continued to deliver strong operational performance and generate solid KPIs in the second quarter of the year as the Group increased the number of pigs sold per sow to 31.4 (Q2 2017: 30.9) in Q and 32.1 (H1 2017: 30.9) in H compared to the same periods in Goodvalley maintained a strong feed conversion ratio of 2.74 (Q2 2017: 2.73) in the quarter and 2.74 for the half year (H1 2017: 2.74). The ongoing stable renovations in Ukraine progressed to plan and will be completed during 2018 to increase capacity and contribute to a further strengthening of the Group s overall operational efficiency. These efforts in combination with lower capacity at the Group s farms in Poland and a decrease in pig prices entailed lower revenue and earnings in the second quarter and the first half of INCOME STATEMENT Revenue In Q2 2018, revenue came to DKK 374 million (Q2 2017: DKK 421 million) following a decline in volumes sold in the Pig segment as well as lower average pig prices. These developments were partly offset by slightly higher revenue in the Arable segment and stable performance in the Energy segment. Total income amounted to DKK 446 million (Q2 2017: DKK 536 million) in Q following fair value gains of DKK 68 million (Q2 2017: DKK 107 million). H revenue amounted to DKK 725 million (H1 2017: DKK 786 million), and total income was DKK 856 million (H1 2017: DKK 943 million). Cost of goods sold The cost of goods sold was stable at DKK 343 million (Q2 2017: DKK 340 million) in Q2 2018, which was negatively impacted by higher cost in the Arable segment caused by challenging weather conditions and the expansion of the Group s land bank in Ukraine as well as increased costs in the Pig segment related to ongoing stable renovations. The quarter was positively impacted by lower costs in the Pig segment as a result of the decrease in volumes. In H1 2018, cost of goods sold was stable at DKK 630 million (DKK 631 million). SG&A Sales, general and administrative expenses increased to DKK 30 million (Q2 2017: DKK 20 million) in Q2 2018, mainly relating to the strengthening of the Group s organisation and brand, entailing higher salary cost for administrative functions and increased branding costs as well as elevated costs for IT projects. In H1 2018, the Group s SG&A amounted to DKK 56 million (H1 2017: DKK 37 million). The launch of the Goodvalley brand and name progresses to plan and is expected to entail total costs of approximately DKK 20 million during 2018 of which DKK 6 million is included in H1 figures. REVENUE, DKK MILLION Q Q Q Q Q Q DKK million Q Q H H DKK million Q Q H H ADJUSTED EBITDA MARGIN, % Revenue Change in fair value Grants and other income TOTAL INCOME EBITDA Herd price adjustment 10 (45) (14) (54) Adjusted EBITDA ADJUSTED EBITDA MARGIN 22.2% 31.2% 21.5% 28.1% % 31.1% 31.2% 25.6% 25.5% 20.7% 22.2% EBITDA margin 19.6% 41.9% 23.5% 35.0% Q Q Q Q Q Q Page 4

5 Financial performance GROUP EBITDA Goodvalley s Adjusted EBITDA declined to DKK 83 million (Q2 2017: DKK 132 million) in Q2 2018, corresponding to an Adjusted EBITDA margin of 22.2% (Q2 2017: 31.2%). EBITDA decreased to DKK 73 million (Q2 2017: DKK 176 million), and the Group s EBITDA margin came to 19.6% (Q2 2017: 41.9%). In H1 2018, Goodvalley s Adjusted EBITDA amounted to DKK 156 million (H1 2017: DKK 221 million), corresponding to an Adjusted EBITDA margin of 21.5% (H1 2017: 28.1%). The Group reported EBITDA of DKK 170 million (H1 2017: DKK 275 million) and an EBITDA margin of 23.5% (H1 2017: 35.0%). EBIT In Q2 2018, EBIT amounted to DKK 42 million (Q2 2017: DKK 146 million), corresponding to an EBIT margin of 11.3% (Q2 2017: 34.6%). EBIT amounted to DKK 110 million (DKK 214 million) in H1 2018, corresponding to an EBIT margin of 15.2% (H1 2017: 27.2%). DKK million Q Q H H ADJUSTED PROFIT The Group s Adjusted* profit came to DKK 37 million (Q2 2017: DKK 92 million), corresponding to an Adjusted profit margin of 9.8% (Q2 2017: 21.8%). H Adjusted profit came to DKK 63 million (H1 2017: DKK 126 million), corresponding to an Adjusted profit margin of 8.7% (H1 2017: 16.9%). DISCONTINUED OPERATIONS Following the initiation of a sales process end 2017 for the Group s discontinued activities in Krasnodar, Russia, Goodvalley is negotiating with potential investors for the transfer of all activities with a view to completing the sales process in The net result from discontinued operations amounted to DKK 0 (Q2 2017: DKK -4 million) in Q and DKK -4 million (H1 2017: DKK -10 million) in H At the 30 June the carring amount of net assets held for sale equal DKK 0. BALANCE SHEET Goodvalley s balance sheet amounted to a total of DKK 2,819 million (H1 2017: DKK 2,940 million) at 30 June OPERATING CASH FLOW, DKK MILLION Goodvalley s net working capital was DKK 599 million (H1 2017: DKK 598 million) at 30 June The Group s invested capital was DKK 2,463 million (H1 2017: DKK 2,540 million) at 30 June 2018, and the return on invested capital (ROIC) decreased to 8.9% (H1 2017: 11.0%) driven by lower LTM earnings. Total equity was DKK 1,318 million (H1 2017: DKK 1,388 million) at 30 June 2018, and the equity ratio was stable at 47% (H1 2017: 47%). At 30 June 2018, Goodvalley s net interest-bearing debt was DKK 1,142 million (H1 2017: DKK 1,178 million), and the Group s financial gearing ratio was 3.1 (H1 2017: 3.2). EVENTS AFTER THE BALANCE SHEET DATE On 10 August 2018, Goodvalley adjusted its outlook for 2018 to revenue of DKK 1,400-1,550 million and Adjusted EBITDA of DKK million against previous expectations of DKK 1,550-1,700 million and Adjusted EBTDA of DKK million. ROIC, % Net profit Herd price adjustment 10 (45) (14) (54) Exchange rate adjustment (7) 21 (11) 20 Non recurring items Adjusted profit ADJUSTED PROFIT MARGIN 9.8% 21.8% 8.7% 16.0% Net Profit margin 9.1% 21.1% 12.2% 17.5% 20 0 Q Q Q Q Q Q Q Q Q Q Q Q *In this report, Adjusted profit refers to profit for the period adjusted for non-recurring items, price changes of herd on stock and exchange rate adjustments in financial items. Page 5

6 Financial performance PIG Goodvalley s Pig segment sold 27,717 tonnes of pork (Q2 2017: 29,329 tonnes) in Q and generated revenue of DKK 263 million (Q2 2017: DKK 307 million) comprised of external revenue from sales of live pigs as well as internal revenue from effect, entailing a decline in the meat-to-feed ratio to 7.13 (Q2 2017: 7.81). The Group s total number of sows was 41,169 at end of Q (Q2 2017: 41,731). PIG PRICE, DKK/KG AND MEAT TO FEED RATIO sales to Goodvalley s Food segment, accounting in total for 55% Adjusted EBITDA decreased to DKK 68 million (Q2 2017: DKK of Group revenue before segment eliminations (Q2 2017: 58%). Revenue was affected by a decline in slaughter pig volumes sold in Poland and Ukraine as well as substitution in the prod- million) corresponding to an Adjusted EBITDA margin of 25.9% (Q2 2017: 36.5%). The decrease was driven mainly by lower pig prices and higher segment overhead for labor, spare parts and uct mix towards weaner sales due to temporary reduction of capacity at the Group s farms. Total income came to DKK 250 other costs from the renovation of farms in Ukraine related in part to the Group s Global GAP certification, which was completed 0 Q Q Q Q Q Q million (Q2 2017: DKK 355 million) and includes negative fair value price changes as compared to the same quarter in 2017 in Q2 2018, as well as other ongoing improvements expected to be completed during The decrease was partly offset SOWS BY COUNTRY, % as well as other income. by lower feed consumption by fewer slaughter pigs raised as well as a significant increase in efficiency as Goodvalley sold 12% The segment s performance was adversely impacted by a de pigs per sow (Q2 2017: 30.9) and maintained a strong feed crease in the average pig price to DKK per kilo (Q2 2017: DKK per kilo) in Q2 2018, whereas a lower feed price of DKK 1.59 per kilo (Q2 2017: DKK 1.64 per kilo) had a positive conversion ratio of 2.74 (Q2 2017: 2.73). EBITDA was DKK 58 million in Q (Q2 2017: DKK 157 million). 34% 54% POLAND UKRAINE RUSSIA DKK million Q Q H H PIGS SOLD, THOUSAND TONNES (LIVE WEIGHT) External revenue Internal revenue REVENUE Change in fair value (9) Other income (4) 4 (4) 5 27 TOTAL INCOME EBITDA ADJUSTED EBITDA Q Q Q Q Q Q Adjusted EBITDA margin 25.9% 36.5% 24.5% 32.5% Page 6

7 Financial performance PIG In H1 2018, the Pig segment reported sales of 55,716 tonnes of pork (H1 2017: 59,437 tonnes), revenue of DKK 510 million (H1 2017: 571 million) and Adjusted EBITDA of DKK 125 million (H1 2017: DKK 186 million), corresponding to an Adjusted EBITDA margin of 24.5% (H1 2017: 32.5%). EBITDA was DKK 139 million (H1 2017: DKK 239 million). PIGS SOLD PER SOW, HEADS Q Q Q Q Q Q FEED CONVERSION RATIO, KG (WHOLE HERD) Q Q Q Q Q Q Page 7

8 Financial performance FOOD The Food segment comprises the Polish slaughterhouse and food processing plant, constituting the final stage in Goodvalley s vertically integrated business model. In Q2 2018, the Food segment sold 13,015 tonnes of pork (Q2 2017: 11,924 tonnes), generating revenue of DKK 192 million (Q2 2017: DKK 202 million) and accounting for 40% of Group revenue before segment eliminations (Q2 2017: 38%). The product mix was stable with 56% of total tonnes sold deriving from sales of deboned meat, 25% from processed products and 19% from sales of MAP (Modified Atmosphere Packaging) products. 80% of revenue was generated in Poland, 10% in other EU countries, and 10% in other countries. EBITDA improved to DKK 2 million (Q2 2017: DKK -1 million) in Q2 2018, corresponding to an EBITDA margin of 0.9% (Q2 2017: -0.3%). The increase was driven mainly by lower input prices and an increase in volumes sold, which was partly offset by delayed contracts with a few customers. In H1 2018, the Food segment sold 25,967 tonnes of pork (H1 2017: 24,575 tonnes), generating revenue of DKK 381 million (H1 2017: DKK 382 million) and EBITDA of DKK 8 million (H1 2017: DKK 0 million), corresponding to an EBITDA margin of 2.1% (H1 2017: 0%). DISTRIBUTION CHANNELS, (Q2 2018) (Q2 2018) 8% 21% 4% 8% 59% RETAIL EXPORT INDUSTRIAL PROCESSORS WHOLESALE OTHER SALES SPLIT, PER % TONNES (Q2 2018) % (Q2 2018) 19% 25% 56% DEBONED PROCESSED MAP SALE OF PORK, THOUSAND TONNES TONNES 15 DKK million Q Q H H REVENUE Other income TOTAL INCOME EBITDA 2 (1) EBITDA margin 0.9% (0.3%) 2.1% 0.0% 0 Q Q Q Q Q Q Page 8

9 Financial performance ARABLE The Arable segment generated revenue of DKK 9 million (Q2 2017: DKK 0 million) in Q comprised of external revenue from sales of crops and internal revenue from sales of crops for feed and energy production. The Arable segment accounted for 2% of Group revenue before segment eliminations (Q2 2017: 0%). Total income came to DKK 89 million (Q2 2017: DKK 67 million) in Q and includes revenue and the change in fair value of Goodvalley s crops in progress at the balance sheet date as well as grants and other income. The increase is mainly driven by an increase in the Group s total arable land to approximately 34,500 hectares following the acquisition of PE Galytski Agrarni Investytsii in Ukraine in April 2018, adding 6,500 hectares of leasehold farmland in the Ivano-frankivsk region. EBITDA declined to DKK 11 million (Q2 2017: DKK 13 million) in Q as the dry summer period in Poland reduced yield expectations, entailing a negative impact on the fair value of the Group s crops in progress. In H1 2018, the Arable segment generated revenue of DKK 17 million (H1 2017: DKK 0 million) and EBITDA of DKK 16 million (H1 2017: DKK 20 million). DKK million Q Q H H External revenue Internal revenue REVENUE Change in fair value Grants and other income TOTAL INCOME EBITDA EBITDA margin (%) n.a. n.a. n.a. n.a. Page 9

10 Financial performance ENERGY The Energy segment consists of nine biogas plants of which eight are situated in Poland and one in Ukraine. Goodvalley produced 14.9 GWh electricity (Q2 2017: 15.8 GWh) in Q and improved revenue to DKK 19 million (Q2 2017: DKK 17 million) from external sales of electricity and internal sales of heat and electricity to Goodvalley s Pig and Food segments. The Energy segment s external revenue was DKK 13 million (Q2 2017: DKK 13 million). The segment s EBITDA was DKK 3 million (Q2 2017: DKK 3 million), corresponding to an EBITDA margin of 15.0% (Q2 2017: 16.3%), and efficiency was 79%. In H1 2018, Goodvalley produced 31.4 GWh electricity (H1 2017: 32.2 GWh), generating stable revenue of DKK 37 million (H1 2017: DKK 37 million) and EBITDA of DKK 9 million (H1 2017: DKK 11 million), corresponding to an EBITDA margin of 23.7% (H1 2017: 28.9%). PRODUCED ELECTRICITY, GWH Q Q Q Q Q Q EFFICIENCY, % Q Q Q Q Q Q DKK million Q Q H H External revenue Internal revenue REVENUE Grants and other income TOTAL INCOME EBITDA EBITDA margin (%) 15.0% 16.3% 23.7% 28.9% Page 10

11 Outlook Based on year-to-date performance as well as our current expectations for the rest of the year, we maintain our recently adjusted outlook for the financial year 2018 for the Group as a whole as announced in company announcement no. 11/2018 on 10 August Goodvalley expects to generate revenue of DKK 1,400-1,550 million and Adjusted EBITDA of DKK million. The outlook is impacted by the drought in Europe during the summer and based on assumptions for 2018 of a higher cost of feed in the Pig segment and lower performance in the Arable segment, alleviated to some extent by the Group s geographical diversification. Goodvalley s financial performance for the year is furthermore expected to be affected by lower revenue and Adjusted EBIT- DA in the Pig segment driven by ongoing stable renovations and the Group s decision to expand production of pigs raised without antibiotics ( RWA ) as well as expectations of an average market price for slaughter pigs of DKK 11.1 per kilo in 2018 against previous expectations of DKK 11.2 per kilo. In addition, the Group expects higher marketing expenses following a decision to accelerate its launch of own Goodvalley branded products in Poland based on positive feedback from consumers. The outlook for 2018 is furthermore based on fixed exchange rates as well as the prevailing economic situation in Goodvalley s markets. The outlook represents our current expectations for the development in the Group s revenue and Adjusted EBITDA, and Goodvalley s EBITDA may thus deviate significantly from this outlook. DKK MILLION PREVIOUS OUTLOOK 2018 OUTLOOK (prior to adjustment 10 August) REVENUE 1,550-1,700 1,400-1,550 ADJUSTED EBITDA This report contains forward-looking statements reflecting Goodvalley s current forecasts of future events, operational performance and financial results. Such statements are subject to uncertainty as factors within and beyond Goodvalley s control may cause actual performance and results to differ materially from the forecasts in this report. Such factors include, among other things, the fair value of pigs, global and local market prices of pork meat, changes in consumer preferences and demand, consumer purchasing power, competition, any outbreak of animal diseases or epidemics, the supply of utilities, development in financial markets and changes or amendments to legislation, regulation or the political situation in Goodvalley s markets. See also the section on risk management and note 4.2 to the annual financial statements for FINANCIAL CALENDAR NOVEMBER 2018: INTERIM REPORT Q Page 11

12 Management statement The the Board of Directors and Executive Board have today reviewed and approved the Interim Report of Goodvalley A/S and subsidiaries ( the Group ) for the period 1 January 30 June The Interim Report has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union and additional Danish requirements for listed companies. Furthermore, the Interim Report has been prepared in accordance with the accounting policies set out in the Group s Annual Report for The Interim Report has not been audited or reviewed by the Group s independent auditor. In our opinion, the accounting policies used are appropriate and the overall presentation of the interim consolidated financial statements give a true and fair view of the Group s assets, liabilities and financial position as at 30 June 2018 and of the results of the Group s operations and cash flows for the period 1 January - 30 June Executive Board Tom Axelgaard Hans Henrik Pauk Pedersen Kristian Brokop Chief Executive Officer Chief Financial Officer Chief Operating Officer Board of Directors Anders Christen Obel Niels Rauff Hansen Anders Bundgaard Chairman Vice Chairman We further consider that the Management Commentary (on page 2 11) includes a true and fair description of the development and performance of the Group, the results for the period and the financial position, as well as a description of the principal risks and uncertainties that the Group faces in accordance with Danish requirements for listed companies. Jens Jørgen Nielsen Erling Bech Poulsen Helle Okholm Apart from the information set out in the Interim Report, there have been no changes to the Group s significant risks and uncertainties that have not been disclosed in the Annual Report Page 12

13 Financial Statements Page 13

14 Statement of comprehensive income INCOME STATEMENT DKK MILLION Q Q H H Revenue Change in fair value of biological Assets Grants and other income TOTAL INCOME Cost of goods sold (COGS) (343) (340) (630) (631) GROSS PROFIT SG&A (30) (20) (56) (37) EBITDA STATEMENT OF COMPREHENSIVE INCOME DKK MILLION Q Q H H Profit for the year Items that may be reclassified subsequently to profit or loss Exchange adjustments of foreign enterprises (25) 40 (35) 19 TOTAL COMPREHENSIVE INCOME Comprehensive income is attributable to: Owners TOTAL Depreciation and amortisation (31) (30) (60) (61) PROFIT BEFORE FINANCIAL EXPENSES AND TAX Financial income Financial expenses (16) (33) (32) (49) Exchange rate adjustments 7 (21) 11 (20) PROFIT BEFORE TAX Income tax PROFIT OF CONTINUING OPERATIONS Profit /(loss) for the year of discontinued operations - (4) (4) (10) PROFIT Profit / loss is attributable to: Owners TOTAL Page 14

15 Balance sheet ASSETS DKK MILLION H H Goodwill Other intangible assets INTANGIBLE ASSETS Land and buildings 997 1,100 1,011 Leasehold improvements Plant and machinery Other fixtures and fittings, tools and equipment Property, plant and equipment in progress PROPERTY, PLANT AND EQUIPMENT 1,631 1,708 1,618 Non-current asset investment FINANCIAL ASSET INVESTMENTS Biological assets - basic herd BIOLOGICAL ASSETS NON-CURRENT ASSETS 1,864 1,942 1,833 Biological assets - sales herd Biological assets - Arable, crop production Inventories BIOLOGICAL ASSETS AND INVENTORIES Trade receivables Receivables from associates Other receivables Prepayments RECEIVABLES Cash at bank and in hand LIABILITIES AND EQUITY DKK MILLION H H Share capital Other reserves Reserve for exchange adjustments (526) (458) (491) Retained earnings 1,306 1,301 1,218 Capital and reserves attributable to owners 1,318 1,374 1,265 Non-controlling interests TOTAL EQUITY 1,318 1,388 1,265 Bond debt Provision for deferred tax 5-5 Other provisions Credit institutions Subordinated loan from Polen Invest A/S Deferred income LONG-TERM LIABILITIES 1,123 1,160 1,139 Credit institutions Subordinated loan from Polen Invest A/S Trade payables Other provisions Other payables Deferred income SHORT-TERM LIABILITIES Liabilities of disposal group classified as held for sale LIABILITIES 1,501 1,554 1,486 LIABILITIES AND EQUITY 2,819 2,940 2,751 Assets held for sale CURRENT ASSETS ASSETS 2,819 2,940 2,751 Page 15

16 Statement of changes in equity H DKK MILLION SHARE CAPITAL RESERVE FOR EXCHANGE ADJUSTMENTS RETAINED EARNINGS E Q U I T Y O W N E R S NON-CONTROLLING INTERESTS TOTAL EQUITY EQUITY AT 1 JANUARY (491) 1,218 1,265-1,265 Net profit for the year Other comprehensive income - (35) - (35) - (35) COMPREHENSIVE INCOME FOR THE YEAR - (35) Payments of dividends EQUITY AT 30 JUNE (526) 1,306 1,318-1,318 H DKK MILLION SHARE CAPITAL RESERVE FOR EXCHANGE ADJUSTMENTS RETAINED EARNINGS E Q U I T Y O W N E R S NON-CONTROLLING INTERESTS TOTAL EQUITY EQUITY AT 1 JANUARY (477) 1,164 1, ,232 Net Profit for the year Other comprehensive income COMPREHENSIVE INCOME FOR THE YEAR Payments of dividends EQUITY AT 30 JUNE (458) 1,301 1, ,388 Page 16

17 Statement of cash flows STATEMENT OF CASH FLOWS DKK MILLION Q Q H H PROFIT/(LOSS) Adjustments: Financial income and expenses Currency losses (5) 28 (9) 51 Depreciation and amortisation Other adjustments (28) Change in working capital (31) (85) (62) (109) CASH FLOWS FROM OPERATING ACTIVITIES BEFORE FINANCIAL INCOME AND EXPENSES STATEMENT OF CASH FLOWS DKK MILLION Q Q H H Proceeds from borrowings 102 1, ,213 Repayments of borrowings (89) (983) (110) (1,131) CASH FLOWS FROM FINANCING ACTIVITIES CHANGE IN CASH (28) 163 (28) 138 AND CASH EQUIVALENTS Cash and cash equivalents at opening Exchange adjustment, beginning, (5) 3 (3) (2) cash and cash equivalents CASH AND CASH EQUIVALENTS Financial income received Financial expenses paid (16) (35) (32) (53) CASH FLOWS FROM OPERATING ACTIVITIES Purchase intangible assets (30) - (30) - Purchase property, plant and equipment (68) (30) (109) (62) Change of financial investments Sale of fixed asset investments CASH FLOWS FROM INVESTING ACTIVITIES (85) (29) (123) (57) Page 17

18 Note 1 - Accounting principles This interim financial report is prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the EU and additional Danish disclosure requirements for interim reports of listed companies. The accounting policies are unchanged from those applied in the Annual Report for 2017, to which reference is made, besides as stated below. Leasehold rights Payments to take over leases are classified as leasehold rights. Leasehold rights are amortised over the lease term or the useful life if this is shorter. The basis of amortisation is reduced by any write-downs. As described in the Annual Report for 2017, the income statement is presented partly by function in order to better reflect the management of the Group. EBITDA is considered to be a key financial figure for the group stakeholders, why depreciation and amortisation is presented in one line on the face of the income statement. Income statement split by function is illustrated below: GROSS PROFIT FULLY SPLIT BY NATURE: DKK MILLION H H GROSS PROFIT FULLY SPLIT BY NATURE: Gross profit reported Staff expenses SG&A (28) (16) Gross profit by nature INCOME STATEMENT SPLIT BY FUNCTIONS (DEPRECIATION AND AMORTISATION): Revenue Cost of goods sold including depreciation and amortisation (686) (686) GROSS PROFIT Other operating items - - SG&A, including depreciation and amortisation (60) (43) EBIT DEPRECIATION AND AMORTISATION CONSIST OF: Amortisation of intangible assets - - Depreciation of tangible assets (60) (60) TOTAL DEPRECIATION AND AMORTISATION (60) (60) DEPRECIATION AND AMORTISATION ARE ALLOCATED AS FOLLOWS: Cost of goods sold (56) (55) Sales and administrative costs (4) (5) TOTAL DEPRECIATION AND AMORTISATION (60) (60) Goodvalley has implemented all new and amended standards (IFRS) and interpretations (IFRIC) as endorsed by the EU and which are effective for the financial year 1 January 31 December This implementation had no material effect. Page 18

19 Note 2 - Segment information H DKK MILLION PIG ARABLE ENERGY FOOD OTHER NOT ALLOCATED INTERCOMPANY ELIMINATIONS TOTAL Revenue Revenue - Intracompany eliminations - (14) (12) - (3) (210) (239) Change in fair value of biological assets Grants and other income (4) Grants and other income - Intracompany eliminations TOTAL INCOME (207) 856 Cost of goods sold (COGS) (358) (100) (27) (362) (4) - (851) COGS Intracompany eliminations GROSS PROFIT/(LOSS) (14) 226 SG&A (28) (6) (2) (12) (22) - (70) SG&A Intracompany eliminations EBITDA (8) EBITDA before segment eliminations (2) - - Depreciation and amortisation (31) (11) (6) (10) (2) - (60) EBIT 116 (2) 8 (2) (10) Net financials 125 (154) (29) Exchange rate adjustments (9) PROFIT/(LOSS) 116 (2) 8 (2) (10) 116 (134) 92 GEOGRAPHY REVENUE ASSETS DKK MILLION H H H H Poland ,078 1,089 Ukraine Russia Rest of world TOTAL ,747 1,803 Page 19

20 Note 2 - Segment information H DKK MILLION PIG ARABLE ENERGY FOOD OTHER NOT ALLOCATED INTERCOMPANY ELIMINATIONS TOTAL Revenue ,007 Revenue - Intracompany eliminations - - (1) - - (11) (209) (221) Change in fair value of biological Assets (1) Grants and other income Grants and other income - Intracompany eliminations TOTAL INCOME (11) (209) 943 Cost of goods sold (COGS) (371) (75) (25) (372) (1) (844) COGS Intracompany eliminations GROSS PROFIT/(LOSS) (8) 312 SG&A (19) (3) (1) (10) (12) - - (45) SG&A Intracompany eliminations 8 8 EBITDA EBITDA Before segment eliminations Depreciation and amortisation (28) (10) (7) (8) (7) - - (61) EBIT (8) (3) Net financials Exchange rate adjustments (12) (35) (47) (29) 9 (20) PROFIT/(LOSS) (8) (3) (41) (26) 147 Page 20

21 Note 3 - Biological assets BIOLOGICAL ASSETS DKK MILLION BASIC HERD SALES HERD TOTAL HERD 2018 Opening balance as of 1 January Movements: Purchases 2-2 Produced piglets Gain/loss from change in fair value (4) Sales (15) (496) (511) Transfer between groups 11 (11) - Exchange adjustments BIOLOGICAL ASSETS DKK MILLION H H Crop production Opening balance as of 1 January Purchases Gain/(loss) from change in fair value 13 9 Harvest - - Exchange adjustments 2 - CLOSING BALANCE Numbers of Hectares harvested 2,615 3,754 Numbers of Hectares seeded as of closing balance 28,083 24,025 CLOSING BALANCE - VALUES AS OF 30 JUNE Opening balance as of 1 January Movements: Purchases 3-3 Produced piglets Gain/loss from change in fair value Sales (17) (542) (559) Transfer between groups 13 (13) - Exchange adjustments CLOSING BALANCE - VALUES AS OF 30 JUNE The value for produced piglets are calculated as the value of weaners at standard rates. Fair value gains comprises changes as a consequence of biological growth and price changes. Disposals from sales and transfer amounts are calculated using the fair value per unit at the time of the sales or transfer. Transfer between groups covers pigs transferred to own breeding as young females. Herd provided as security for loan from credit institution amounts to DKK 0 million at 30 June 2018 (30 June 2017: DKK 52 million). Page 21

22 Note 4 - Obligor Group Note 5 - Seasonality BOND TERMS Issuer Security package: Original Guarantors: Status of the bond: Currency: Initial debt amount: Total framework: Goodvalley A/S First ranking security over material assets and share pledges Goodvalley A/S, Finansax ApS, Goodvalley Agro SA, Goodvalley Sp. Z o.o. and Goodvalley Ukraine LLC Senior secured EUR EUR 135 million EUR 270 million The Group s business segments are influenced by seasonal fluctuations relating to the arable segment, where the Group s main activities historically are generated in Q3 based on the harvest. Revenue and operating profit before tax thus vary in the various reporting periods for which reason they are not necessarily indicative of future trends. The results of the individual quarters are therefore not reliable sources in terms of projecting the Group s development and full year earnings. Note 6 - Related parties transactions Other facilities: Super senior RCF up to DKK 125 million, governed under an inter-creditor agreement with bondholders. Basket of DKK 80 million for factoring. Tenor: 4 years Pricing: 3m EURIBOR + 450bps p.a., quarterly interest payments, EURIBOR floor of 0.0 % Rating: Unrated Call options: Non call during the first 24 months, then 50/25/0 % of initial coupon after 24/36/42, month respectively. Incurrence test: NIBD/EBITDA LTM fixed herd price (net leverage) of < 2.75x for any additional debt raised. The Group has obtained a subordinated loan from the Parent company; Polen Invest A/S, with a balance of DKK 108 million at 30 June 2017 (balance at 30 June 2017: DKK 142 million). In H the Group has repaid DKK 5 million (H1 2017: DKK 0) as part of the annual repayment. The Company intend to repay the loan entirely or partly during second half of 2018, if the financial position of the Company allows it. The loan carries interest, and the interest for H amounts to DKK 3 million (H12017: DKK 2 million). Restricted payments: Dividends or cash contributions to Restricted Subsidiaries are payable up to Net Leverage of < 2.75x Information covenant: Annual audited statements, quarterly unaudited reports. General undertakings: Inter alia restrictions on distributions, mergers, demergers, acquisitions, disposals, financial indebtedness, negative pledge, financial support, subsidiary distribution customary for a HY bond. Change of control: Investor put at 101 % Equity claw: 35% Listing of bonds: Trustee: Governing law: Nasdaq Copenhagen. Nordic Trustee. Danish law. Page 22

23 Glossary GENERAL Group Goodvalley A/S, Finansax ApS, Goodvalley Agro SA, Goodvalley Sp. Z o.o. and Goodvalley Ukraine LLC. PRODUCTION ASF African swine fever. Arable stock, WIP The arable stock in the fields which is not yet harvested. Basic herd The part of the pig herd, which consists of sows, maiden gilts and boars. Bio assets Biological assets (mainly pigs and crops). Bioenergy Energy produced based on biological resources. Biosecurity Level of measures taken to prevent infection by contagious diseases. Certificates on biogas Energy units used for calculating extra price for sold kwh on top of market price (based on political decisions). Crop split The split between the different types of crops grown in the fields. Cultivated land Land used for crop production. Efficiency Measurable technical results from the production. Feed conversion ratio Kilo of feed used for one kilo meat produced (live weight). Live weight Weight of the pig before slaughtering and deboning. Modified Atmosphere Pack aging (MAP) A packing method where the products are packed in a sealed and protected atmosphere to increase the period from manufacturing to last sales date. Meat-to-feed ratio Price of one kilo meat (carcass weight) divided by the price of one kilo feed. Oil seeds Crops that contain oil. Typically rape seed, soya and sunflower. Piglets Pigs in farrowing before they are weaned from the sow. Pig price Price per kilo pig meat in carcass weight. Pigs sold per sow Pigs born per sow in period adjusted for mortality rate in the period and annualized. Processed products Meat products which have been cooked, smoked or salted. Raised without antibiotics (RWA) Pigs that have been raised without exposure to antibiotics from birth till slaughter. Sales herd The part of the pig herd that consist of piglets, weaners and slaughter pigs. Carcass weight Weight of the pig in kilos of meat after slaughtering and deboning. Slaughter pigs Pigs from 30 kilo live weight to slaughter (app. 120 kilo). Weaners A pig in the period between weaning from the sow and slaughter pig (approximately kilo). Page 23

24 Our ambition We work for a better tomorrow We will achieve this by these five guiding principles We improve our work environment to be the preferred local workplace We reduce our use of resources and limit our environmental impact We deliver high quality products and aim to improve animal and human health We impact consumer awareness to create a pull towards sustainable food consumption We strengthen our traceability to locate the origin of our products Goodvalley is a vertically integrated food producer with operations within pig farming, slaughtering and meat processing, arable and feed mills as well as biogas production. Headquartered in Denmark, we operate modern facilities with the most advanced technology and farming methods in Poland, Ukraine and Russia. We apply Danish pig farming principles of sustainability and efficiency in countries with less expensive land prices, oversupply of crops, lower labour costs and prospects of meat consumption and pig price increases. This interim report was released through Nasdaq Copenhagen as company announcement no. 13/2018. All trademarks such as trade names and other names and designations highlighted in this report are trademarks protected and owned by Goodvalley A/S Goodvalley A/S