Mohu Mol Zrt., under the Mol Group's management, has announced a staggering financial loss of over 50 billion HUF for the previous fiscal year, a stark contrast to the profit of 5.6 billion HUF reported for 2023. The financial results were disclosed in a recent report prepared according to Hungarian accounting standards, which raised concerns regarding the company's stability in the waste management sector.

However, the financial standing seems less precarious due to an increase in the parent company's capital reserves, rising from 30 billion HUF to 60 billion HUF, effectively bolstering Mohu's capital structure to nearly 90 billion HUF alongside a reserve of approximately 5 billion HUF following the profits from the last fiscal year.

This situation has led to the parent company refraining from dividend distributions.

The waste management concession awarded to Mol in 2022 for a duration of 35 years has begun to impact revenue significantly, with total revenues for the subsidiary increasing nearly 100% from 189 billion HUF to 377 billion HUF year-over-year.

The subsidiary's liabilities experienced a slight decrease from 135 billion HUF to 128 billion HUF.

Notably, the company allocated nearly 33 billion HUF for redeemed bottles and established a reserve of 19 billion HUF for expected future payments.

Their assets are projected to grow from 183 billion HUF to 227 billion HUF in 2024.

The business segments of Mohu further illustrate the challenges faced within the municipal solid waste services, which saw revenues rise from 47 billion HUF in 2023 to 97 billion HUF last year, accompanied by a loss increase from 28 billion HUF to 68 billion HUF.

Analysts attribute this loss primarily to discrepancies between reduced household waste fees and actual operational costs.

Additionally, the sector involving institutional waste also reported a 12 billion HUF loss.

Revenue from Extended Producer Responsibility (EPR) charges increased from 127 billion HUF to 220 billion HUF, but the net profits from the initial fiscal year turned into a 10 billion HUF deficit.

Furthermore, the deposit return scheme (DRS) faced a loss of 9 billion HUF despite generating sales of 10 billion HUF and other revenues amounting to 33 billion HUF.

The annual report's approval by Deloitte is being recognized as a noteworthy achievement, particularly when compared to past precedents like the chaotic fiscal circumstances faced by the National Waste Management Coordination and Asset Management (NHKV) Zrt.

since its inception in 2016.

Experts suggest that the substantial losses reported by Mohu stem from initial expenditures related to the waste management concession.

The profitability noted in the 2023 report has been deemed overly optimistic in hindsight, including earlier projections.

The losses align with previous reports indicating potential multi-billion HUF losses, especially concerning liabilities to group members.

The company remains focused on converting its EBITDA figure into profitability at the earliest opportunity.

Mol has attributed the increase in losses within the waste management sector to the high initial costs associated with the deposit return scheme, which by the year's end had already deployed approximately 3,200 collection machines, processing 6 million bottles and containers daily in the last quarter of the year.

Additionally, agreements for 1,500 manual return points were established.

A trial for kitchen organic waste collection began in 14 towns with 200,000 collection containers placed, alongside 1,100 textile waste collectors distributed throughout the country.

In Esztergom, a waste yard was opened, and out of a hundred new collection vehicles ordered, 41 units were received.

The sector has earmarked 31 billion HUF for investments in 2024. Although the congressional waste management activities align with green goals, achieving sustainable regulation remains a challenge, as highlighted by Mol's CEO Zsolt Hernádi in the company's annual meeting held in April.

The reported loss for Mohu exceeds the international accounting delineation of 20 billion HUF EBITDA and 33 billion HUF operational losses reported within the group's waste management sector as of February 2024. The 429 billion HUF revenue reflected in these reports is indicative of the group's more extensive and profitable waste management activities outside of the concession.

Since its initiation, over two billion PET bottles, cans, and glass products have been reclaimed through the Repont system, with a recovery rate projected to increase to 80% by the first quarter of 2025, significantly up from pre-concession rates of 30%.

Furthermore, approximately 80 billion HUF worth of coupons have been issued as refunds to customers, with about 15-20% of users opting to transfer their amounts to bank accounts or donate to charitable causes.

The responsibility of maintaining the processing machines falls on the retailers, with reports of varying operational conditions across establishments.

The company aims to meet the EU recycling directives, targeting a 65% recycling rate and less than a 10% landfill rate.

Plans include establishing waste yards, constructing a facility capable of processing 360,000 tons of waste annually, increasing the number of textile collection points, and distributing one million selective waste bins free of charge.