KSG AGRO : HYFR

KSG Agro

INTERIM REPORT

January - June 2023

KSG Agro S.A.

Société Anonyme

24, rue Astrid

L-1143 Luxembourg

R.C.S. B 156.864

UNAUDITED INTERIM CONDENSED

CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED 30 JUNE 2023

TABLE OF CONTENTS

Interim Management Report
Principal Activities	1
Impact of the War Events in Ukraine	1
Operational Highlights	1
Financial Highlights	2
Plans for the Future	2
Subsequent Events	2
Business and Financial Risks	3
Corporate Governance	4
Transactions with Related Parties	7
Unaudited Interim Condensed Consolidated Financial Statements
Unaudited Interim Condensed Consolidated Statement of Financial Position	9
Unaudited Interim Condensed Consolidated Statement of Comprehensive Income	10
Unaudited Interim Condensed Consolidated Statement of Cash Flows	11
Unaudited Interim Condensed Consolidated Statement of Changes in Equity	12
Notes to the Unaudited Interim Condensed Consolidated Financial Statements	13-19

KSG Agro S.A.

Interim Management Report

for the six months ended 30 June 2023

PRINCIPAL ACTIVITIES

KSG Agro S.A., separately referred to as "KSG Agro" or the "Company" and together with its subsidiaries referred to as the "Group", remains among the largest vertically integrated agricultural groups in the Dnipropetrovsk region of Ukraine, present in all major sectors of the agricultural market, including production, storage, processing and sale of agricultural products. Its key operating activities are breeding of pigs, processing of pork and production of wheat and sunflower.

IMPACT OF THE WAR EVENTS IN UKRAINE

On 24 February 2022, Russia started a full-scale invasion of Ukraine. Because the Group's key assets and operations are in Ukraine, the Group might be significantly affected by these events. Management's analysis of the risks and uncertainties surrounding the Invasion, as well as management's strategy and actions to mitigate those risks, are outlined in Note 7 to the interim condensed consolidated financial statements. The outcome of the Invasion, however, is impossible to predict at this time.

Since the start of the Russian Invasion, no fighting occurred in close vicinity to the Group's assets. The Group's pig farm and its crop fields are located in the centre of Ukraine, which hasn't seen any fighting yet.

As at the date of this report, the Group had successfully completed its summer harvesting campaign and does not expect significant interruptions to its production cycle in the near future.

Where possible, the judgments and estimates used in the accompanying financial statements were updated to reflect the impact of the ongoing war events. However, adopting a more conservative approach, management only considered the events that had an unfavourable effect on such judgments and estimates.

OPERATIONAL HIGHLIGHTS

The Group continues to implement its simple strategy of focusing on three winter crops, two summer crops and pigs of a single breed. The Group's products, being basic food products, are always in demand, and remain in especially high demand in 2023, during war time.

In the first half of 2023, the Group exported 4.2 thousand tonnes of grain crops (wheat, corn, barley), mainly to Asia and Africa. Export deliveries were made within the framework of the existing grain corridor through the ports of Odesa and the Odesa region.

During late May to early June, the Group completed the sowing of sunflower on an area of 7.3 thousand hectares and is currently engaged in chemical and mechanical soil treatment using mechanical cultivators and rotary harrows. The crops appear to be in good condition.

The sowing campaign was carried out as planned, without major interruptions from the war activities.

Earlier in June, the Kakhovka Dam on the Dnipro River was destroyed as a result of the war, flooding the areas downstream and drying up several irrigation canals upstream. While the Group partly relied on water supplied from those canals, those supplies were not essential to the Group's operations. The Group switched to alternative sources of water and does not anticipate water shortages in the near future. None of the Group's locations are downstream from the Dam and hence were not affected by the flooding.

As at the date of this report, the Group has completed its harvesting campaign of winter crops. The yields were 3 tons per hectare for barley, 2.5 tons per hectare for rapeseed, and 5 tons per hectare for wheat.

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KSG Agro S.A.

Interim Management Report

for the six months ended 30 June 2023

FINANCIAL HIGHLIGHTS

Consolidated financial results of the Group for the six months ended 30 June 2023 and 2022 were as follows:

	Six months	Six months	Change, %
In thousands of US dollars	2023	2022
Revenue	7,406	6,022	+23%
Gain/(loss) on biological transformation, net	192	1,636	-88%
Cost of sales	(5,804)	(5,604)	+4%
Gross profit	1,794	2,054	-13%
Operating profit	936	1,484	-37%
Depreciation and amortisation	676	737	-8%
EBITDA	1,612	2,221	-27%
Profit for the period	1,040	858	+21%

Revenue in 2023 was comparably larger, due to lower sales in the first quarter of 2022, which were heavily affected by the start of the Russian Invasion of Ukraine. Just like the prior year, in 2023 the Group used more of its own grain for feed production instead of purchasing it (to decrease reliance on outside suppliers of feed components during wartime), but in 2023 the Group also started exporting crops, thereby increasing the volume of sales as compared to 2022.

Details by segment are disclosed in Note 12 to the interim condensed consolidated financial statements.

PLANS FOR THE FUTURE

The Board is currently formulating a new development strategy to expand the Group's activity in the European Union, with a clear target to have the majority of the Group's assets and revenues in the EU within the next 3 to 5 years. This could be achieved through a series of mergers and acquisitions, and financed by a mix of own and borrowed funds, including additional issues of shares.

The Board does not plan to dispose of the Group's existing assets in Ukraine. On the contrary, the focus of the new strategy is to expand and invest, thereby reducing the potential risks of investing only in Ukraine and mitigating the negative effects on the Group's business of the current macroeconomic situation in Ukraine.

SUBSEQUENT EVENTS

All significant events that occurred after the end of the reporting period are described in Note 15 to the interim condensed consolidated financial statements.

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