Ladies and gentlemen, it's a pleasure to have so many of you on today's earnings call for Q2 for Purcari. And despite it being a Friday, I hope we'll have all of you very much focused on our results, because we are very proud of the set of results we are presenting. So today, here's the presenting team, Eugeniu Baltag, Investor Relations Manager, and Victor Arapan, the CFO, will do most of the talking today. But we also have Victor, the CFO, and Victoria Moldovan, our also part of our Investor Relations team, and myself, Vasile Tofan, as chair. And Victor, Eugen, I will kindly ask you to jump to slide eight next.
We are very proud about the track record of growth we have been showing for so many years now. And I'm very proud by the fact that, despite the company getting larger, despite the scale getting larger, and despite the macro environment being so difficult, we actually, even today, in presenting these Q2 results, we continue and accelerating the track record of growth. So, you know, we grew revenues by 30% in the first quarter, and we are proud that in the second quarter, too, that revenue has stayed at that same very high level of 30% expansion versus the last year. So without further ado, I will pass the floor to Eugeniu Baltag, who will take it from here.
And jointly with Victor, will take you through our results, and then we'll open up for questions. Thank you.
Vasile, thank you for introduction, and it is good to see so many people attending our conference call. I want to thank you for your decision to spend with us the two hours of your time in this last Friday of the summer. We have a long agenda, but propose to focus more on operational results, on guidance, and the Q&A session. Once we are here to give you more color on how Purcari Wineries Group has performed during the last three months, and what are the perspectives for the rest of the year. So, yeah, Vasile already had the intro, and indeed, we had a very strong quarter and managed to deliver exceptional well in revenue terms by growing 30% for the second quarter in a row.
As well, we performed very well in profitability, reaching 22% growth in net profit and 15% increase in EBITDA year-on-year basis. However, we have achieved this exceptional performance based on a mix of two things. So first of all, is volume increase, and roughly, please consider, like, two-thirds of our growth comes from volume, and one-third comes from price increases, which were pushed through across the markets. We delivered strong margins above the guidance, with EBITDA margin at 28%. Please recall, our guidance for this KPI was 26%, and net profit margin at 16% being at the top end of the guidance. So in current turbulent environment and geopolitical turmoil, we consider that our first half results to be a very good achievement and an excellent contribution and execution of the entire Purcari team.
Unfortunately, starting with the COVID in 2020, the turbulences have become a new normal, but our affordable luxury model proved to be highly lucrative and adaptive to the new reality. Nevertheless, we have to mention that in the second quarter, we have experienced the highest pressure on the costs from inflation and more expensive wine stock of 2020 and 2021 vintage. But the good news is that we already see first signs of easing and expect certain operational improvements in the second half. As well, we have good news on IR part. Purcari has been maintained in the FTSE Russell Global Micro-Cap Index as of August 2023. We are in the top five best performing companies in that index, with 37% increase year to date.
As well, our shareholders managed to benefit not only from the upside in the share price, but received as well, on eighteenth of August, a dividend amounting 0.55 RON per share. So as well, we moved forward and closer to our ESG targets by increasing our photovoltaic system to an annual, almost 1 MW. Actually, it's 960 kW energy capacity, thus ensuring 40% of our energy requirements for Château Purcari Winery alone, and around 15% for Bostavan Winery and Bardar Winery each. Okay, that being said, I think I will leave the floor to Victor Arapan, the CFO of our group, who will provide additional insights on financial evolution during the first half of 2023. Victoria, could you confirm if Victor Arapan is on the call?
Yes, he is.
Yes. Yes, Eugeniu, I'm here. Thank you, Eugeniu. Hello, everybody. As my colleagues mentioned, the group recorded great performance in the first six months of the year, with the sales and financial performance above or at the top range of the guidance. The group sales in Q2 kept the same pace of growth as in Q1. As a result, we have a great increase in revenue by +30% year-on-year for the recorded period. The gross profit increased by 14% year-on-year, reaching RON 67 million.
It increases slower than sales as cost of production increased on use of stock of expensive bulk wines of 2021 year's vintages, which still have a big share in the production, as well as by more expensive packaging reserves that was made at the end of the previous year to avoid any disruption that could happen in the winter of 2023. For example, the packaging used in first half of 2022 was mainly purchased by the end of 2021 at much lower cost on fear of energetic crisis and tensions at the Ukrainian-Russian border at the time.
The cost of sales increased also because of a higher depreciation expenses, as most of the investments made in 2022 were put into operation by end of previous year, as well, the acquisition of Angel's Estate in Bulgaria in Q4 2022. The total depreciation expenses increased by 38% year-on-year or +3.4 million RON, which led to an increase in the manufacturing costs. We should not also ignore the increase in the second business segment, recycled services, provided by our subsidiary, EcoSmart, in Romania, which increased to a share of 8% in total sales in the reported period, but which has a much lower margin compared to the main segment of the business.
You now see the slide that Eugeniu is showing to you. All these factors led to a decrease in the gross margin from 47% - 41% in the first half of this year. SG&A expenses registered an increase as a share of sales to 23% compared to 22% for the same period of last year. In particular, we have a significant increase in marketing and selling, which increased +52% year in the first half of the year. As last year, the trade and marketing activities were very ununiform due to uncertainties relating to the war in Ukraine. Please note that last year, 76% of trade and marketing activities or expenses were made in the second half of the year.
So, we believe that in the period of nine or 12 months, there will be a more variance in their growth compared to the last year, and, actually, we expect them growing similarly with sales. Other income and expense had not an overall significant impact, you can see. However, on a separate items, we have significant changes, such as increase in interest expenses by 51% from RON 2.1 million - RON 3.1 million, as our borrowings increased by 30% as of 3rd of June, compared with 3rd of June 2022, and of course, on continued increase of EURIBOR rate.
At the same time, as a result of Moldovan leu appreciation against the euro, the group recorded a net Forex gain of RON 1.9 million, while in the first half of 2022, we recorded a net Forex loss of RON 2.8 million. EBITDA and net profit register increased by +15% and +22% respectively, compared to the previous year. The margin in both of both indicators are above or on the top of the range of the guidelines we've presented in February. Eugeniu, please keep it on slide 17. A few words about waste recycling services.
This segment of the services offered by EcoSmart in Romania is still insignificant in the first six months of the year, without significant impact, as I told earlier. The gross margin of EcoSmart business is significantly lower than in the first half of 2022, mainly because of increase in cost of recycling as the national target for recycling of waste and packaging in Romania increased in average by 8%. The sales prices were adjusted later, and we expect that the annual figure of gross margin for this segment of the business will be improved. However, it will be lower than in 2022. Next slide, please, Eugeniu.
You can see or you can assess by yourselves that the group continues to have a very strong financial position over the years, with a low level of indebtedness and optimal liquidity. The decrease of current liquidity ratio as at 30 th June is due to the distribution of dividends in Q2, which increased current liabilities by 22.1 million RON. It should be noted that the group's goal is to maintain the net debt to EBITDA ratio at 1.5 times. You can see that there is a room for sustaining strong growth in the future. So, Eugeniu, the floor is yours for a short overview of sales by markets and brands.
Victor, thank you for the detailed information on financial figures. And now let's see how we have achieved these figures by looking through commercial lens. First of all, the growth we have achieved today is just the tip of the iceberg. So, what is not seen here is a huge amount of work and dedication the entire team put in. But today's results are the effects of a multitude of strategic decisions taken along the time. We are not looking for quick results, but we are looking for sustainable growth. So long story short, you may see Romania had a strong performance, so strong growth for all brands here. We're expanding in the channels. We are adding new SKUs, new regions, new distributors.
Purcari, you know, is usually getting all the credit, but please note that we have other stars in Romania as well. So Crama Ceptura, which grew by 24% year-on-year only in Romania, and Bardar, which increased by 30%. We strongly believe in diversification and increasing revenues funnels. But an example in this respect would be Domeniile Cuza, which grew four times year-on-year, albeit from a smaller base. Moldova as well has performed well. However, we can see that consumer confidence somehow moderates. Nevertheless, Purcari is showing double-digit growth in Moldova as well. But if to speak about, let's say, other brands, for example, we see an almost direct elasticity for mainstream brands such as Bostavan, which was practically flat in the first half.
Bardar grew single digit, and we continue to focus on premiumization with our brandy division. If you look to other markets, I think we can see a silver lining for three markets. For example, Poland, Czech Republic and Slovakia, where there is high pressure on the mainstream wine wines market. So consumer confidence moderates, and there is high sensitivity towards price increases in all three markets. However, we have a promise to our consumers to deliver high quality wine and provide an excellent value for money. So we will not pursue the easy path of providing unsustainable discounts or reducing the quality in the bottle, because this is a one-way ticket. So we are betting on premiumization and adding value in different creative ways to our consumers in these countries.
Nevertheless, in all countries, in Poland, Czech Republic and Slovakia, we registered good growth with Purcari brand, albeit from a smaller base. I would like to mention about Ukraine. Of course, situation is difficult, but it's stable. We had a strong first half in 2023, but still behind pre-war, first half 2021. But we are sure that in the moment, this unfair and cruel war will end, we will have only one way, and this way will be the way of growth. Now, let's look at our performance, slicing, let's say, slicing our performance from brand perspective. So Purcari, yeah, we are capitalizing on brand value. We are enforcing our presence in the existing markets and exploring new ones. We are pushing forward with new SKUs.
Regarding Bostavan, I have to admit that, in our days, the reality is that, there are challenging conditions for the mainstream brands, and the decisions which we are currently taking will provide dividends in the future. So we opt for prioritizing margins over volumes and seeking for new opportunities. Regarding Crama Ceptura, the quality in the bottle is exceptional. We had a 20% increase in the first half. So my advice is, if you are in Romania, go and grab a few bottles of Crama Ceptura brand and see the values for money it provides. On, Bardar, in probably you may recall from our previous, meetings, Moldova is the main market.
We have registered here a middle single -digit growth in the first half, so it's partly impacted by the increase of excise duties in Moldova, which is in force from the first of January, mainly for spirits and brandy products. We registered a strong growth in Romania, which is our second market by size. So we are expanding through channels with this brand in our main market as Romania. Regarding Angel's Estate, which is our latest addition, it undergoes a transformational process. We are solving past inefficiencies on the go. However, it takes time to make it work right, but we are definitely sure that we'll achieve good results in Bulgaria as well.
We have an experienced CEO at the steering wheel of Angel's Estate, and he contributed to the success of Purcari in Romania, and now he's putting all his knowledge to replicate the Romanian success in in Bulgaria. Now, as we always say, the quality of our wines is one of the cornerstones to our success, and here on slide 21, you may see our latest achievements at the most reputable wine competitions this year. As example, you may see in the bottom right corner, at Decanter, the Republic of Moldova received four medals, and three of them were distributed for Bostavan wines. So for Maluri de Prut , for Saperavi in Limited Edition, and for Saperavi in the version of Academia.
Prior to jump to Q&A session, I would like to pass the floor to Vasile to continue our presentation with our guidance for 2023.
Yes, thank you.
The floor is yours.
Thank you, everybody. So, as you know, perhaps you've heard me saying this many times, we have one rule of thumb in approaching guidance. We always try to underpromise and overdeliver. So that's why our approach to the guidance also as formulated in our policies, the guidance policy is to be prudent. So, to that end, of course, many of you will notice a significant overperformance in terms of the guidance outlined to the beginning of the year for the first half of the year. The numbers are here, so we're significantly above the revenue targets. 8 percentage points for total revenue growth above, and 11 percentage points for the top range in terms of wine growth.
Same on EBITDA margin, we are beyond, so above two percentage points above the top range of the indicated EBITDA margin, and we are at the top range in terms of net income margin. Now, many of you will ask, why do we keep the guidance unchanged? Again, there's two reasons here. One is that goes back to that principle of being extra prudent and trying to underpromise and overdeliver. But the second is also the fact that historically, the first half of the year accounts for about 40%-45% of annual sales. So the second half of the year is actually the crucial one from a seasonality perspective.
It's still an environment which poses lots of challenges in terms of the macroeconomic environment I mentioned. So while we personally feel very good about where we stand in the marketplace and how we perform, and we do not see, say, material reasons for things changing in our operations, we decided at the latest board, you know, to still preserve the guidance unchanged and hopefully strongly deliver against it.
Okay. Thank you, Vasile, for the update on guidance. So that being said, we can start our Q&A session. So please feel free to address your questions directly by turning your microphone on or type your question in the chat.
Maybe we will start with a written question here. And for the benefit of the colleagues who do not speak Romanian, there is a question about a suggestion in terms of more metrics to be shared by the company, and this primarily reflect to the use of capital, the delta between the yields on our capital and the cost of our capital, and the suggestion on number of metrics to be included, like Economic Value Added and IRR, and other similar metrics. So thank you very much, Robert, for this suggestion.
I, I think, I'm speaking for the rest of the team here, we agree that some metrics would be actually indeed valuable, for us and for our investors, like, a version of economic value add maybe, or some guidance in terms of the internal rate of return we employ for assessing our capital investment projects. At the same time, like my humble and perhaps wrong view, is that some of these metrics maybe would be a little bit, say, not fully relevant for our business, because, like, the delta between the cost of capital and the yielding capital would probably apply more to, say, a financial institution as a bank, but would be a little bit less relevant for a wine company.
Again, that's just my subjective view, assuming I'm understanding the question right. But thank you again for the suggestion. I think some of them, in terms of the directional IRR or hurdle rate for the CapEx projects or EBITDA, I think this could be indeed helpful. And last, I'll say, still, because I think you touched it on your question, in terms of the capital structure as filed, we do not have hard rules that we have communicated in terms of the capital structure, but you have probably observed that we are typically at a level of 40% debt to equity level.
While we have not written that down as a target, we would probably aim to stay at around 50% debt to equity level, so very, very well capitalized. One metric that we have communicated related to this one consistently is the net debt to EBITDA level. We are a prudent company, so while we're seeing many, many companies going on with a much more aggressive capital structure, we always aspire to stay at a level of below 1.5 times net debt to EBITDA. At the moment, we are just around 1.2, 1.3, and so still within that realm. We may slightly go above 1.5, say, if we're seeing an attractive acquisition opportunity and raise extra financing for that.
But we believe, especially in this high interest rate environment, staying below 1.5 or around 1.5 times Net Debt to EBITDA is the right, right way to go.
Hi, this is Iuliana Ciopraga from Wood & Company . A couple of questions from me. So on the one hand, how sustainable is the growth in Romania? I mean, it is definitely super impressive. How sustainable is it? Secondly, if you could provide an outlook on margins, that would be ideal, actually. And third, I mean, I already asked about Romania, but a bit of color for the rest of the countries would also be great. Thanks a lot.
Hey, Iuliana, good to hear from you. Let's split your questions and deliver the answers. So regarding the sustainable growth in Romania, of course, in Romania, we have plenty room of growth. As I mentioned previously, we still have some areas in Romania which are not covered. Our market share is, let's say, roughly around 10%, so we have plenty growth in different channels, starting from key accounts, then going to HORECA and covering, of course, different SKUs with new brands like Domeniile Cuza and others. So definitely there is still room of growth in Romania.
Nobody says it will be an easy walk, but we'll—our team in place are putting a lot of efforts, like, to continue this this growth. If to cover your second question, on on margins, as I mentioned, we saw the, I think the peak of the pressure in the second quarter from this inflation, from the cost of packaging, which, actually was like we were comparing the highest price, highest price of packaging in the second quarter of 2023 versus the lowest price for the packaging in the second quarter last year. And of course, this was reflected in the margins here. Furthermore, we are selling more and more of the wine stock from 2020 and 2021 vintage.
You see, we are growing the revenue both from price increases, but as well from volume increases. So, definitely these more expensive stocks are diminishing, and we expect the impact from these more expensive stocks to decrease by the end of a year. Of course, this will happen gradually, depending on the mix of sales, but our best estimate is that this pressure from inflation and the pressure from high cost inventories will decrease gradually. Nonetheless, we have to look like the winter is coming, so we have to focus and see how things will evolve. Yeah, Vasile?
Just to add to the Romania question, and I think Eugen covered it fully. Maybe I'll just add a few more words. So we are still player number four/number three in the market. So we are behind Jidvei, Vincon, Cotnari, and on par with Recaș. And to that end, we still see plenty of room to grow in terms of market share. Looking at some mature markets that with an established leader like U.S. or Chile, for example, that have big domestic players, E. & J. Gallo in the U.S., and Concha y Toro in Chile, they both are north of 20% in terms of market share. So clearly, this is where we aim to be, at 20+ market share in Romania.
At the moment, we are at around 12%, so half the aspired market, market share. That's first. Second, while we are strong in still wines, two important segments are still very much almost like in startup mode for us. One is sparkling wines, very important, high-growth segment. We are, we are, we are weak. We are seeing plenty of potential to capitalize on the existing brands and by expanding to the sparkling market segment. And we're doing that, but we are certainly not where we have to be in terms of market share in sparkling wines. And the second is the brandy. So brandy, again, is a large profitable category. We launched Bardar. We have very strong growth on Bardar in Romania, but we are at the beginning of the journey only.
So in that sense, yes, I understand many of you wonder, "Hey, is this growth in Romania going to continue?" But, don't forget, the market is growing, and we are only at half, the market share we target. So there's certainly room to at least double our sales in Romania in a reasonable period of time.
But if I may, one more question related to this. So what is actually the growth for the market, for the total market?
And not ready to share the latest data. Apologies, I don't have it top of my mind. Historically, the growth rate has been at high single digits rates, based on Euromonitor, and that was the volume growth. And so the value growth was higher, was more double digits rate. I'm not ready to tell you what the figure is for 2023, but we are happy to share it, Iuliana, as soon as we check the latest news and data to share it with you.
Iuliana, I think you had one more question. Could you repeat it, please?
I mean, I asked about Romania, so actually, the last question was about the rest.
Yeah. Regarding other countries, indeed, the volatility is very high as well with with uncertainty. As I mentioned, we see this silver lining, like mainstream brands are performing less efficient than the premium brands. What we are doing right now is, like, pushing forward with Purcari brand in the markets where we are at present. We are focusing on premiumization. And indeed, we will continue to put the efforts and to build, let's say, our strategies in such a way, like we will have a sustainable growth in each market. It's not an easy journey.
We have to do it step by step, but we will increase, of course, some prices, because we have to cover the inflation impact in our costs, and of course, adjust to each country depending on the realities on the ground.
But we have seen actually a decline in Poland in the second quarter, and Ukraine as well, contracted. The sales in Ukraine contracted. Can you provide some color there? What is happening?
Uh, this is-
What should we expect?
Yeah. Now, with Ukraine, we are beating last year results, but for sure, but, again, we have to... We are comparing, like, with last quarter, when the war was raging at full. Now, now-
No, I meant actually,
Yeah.
Sorry, I meant actually regarding first quarter. So the quarter-on-quarter comparison is, yeah, it's not that encouraging.
Mm-hmm. Yes. We will continue, we will continue to implement our strategy in, in Ukraine. Definitely, you may see that we are growing, both, in volume terms and, and value terms. We have started a partnership with Coca-Cola to promote, Bardar, to, to increase, our local presence, there. But, at this moment, the uncertainty is too big. Literally, we are selling to half of the country. We are selling to the western part of, of Ukraine. Mm, we will see, mm, how the things will evolve, because everything depends on, the stability in this country and how, how the war will, will, will continue. Yeah.
Poland, the Czech Republic, Asia, what should they expect there?
Yeah. With Asia, good question. Unfortunately, we do not have a crystal ball, like to say, "Look, we are going to grow," how things will evolve. Probably most of you are following up what is happening in China. They had a sort of cool down. Nevertheless, the good thing is, like, our country manager is on the ground. He's building new relationship there. He's strengthening our current partnerships on the region. But the situation is highly uncertain for Asia in order to make an assumption at this moment. At least we are stick to our guidance. So overall, we should achieve our guidance for this year.
If to speak to, with our European markets like Poland, Czech Republic and Slovakia, you already saw, like, a strong recovery for Czech and Slovakia, because in the first half, first quarter, it was a very weak one. Now we managed to increase by 2% year-on-year. In Poland, again, we saw some seasonality and some moderation in in consumption. We have to see how the things will evolve, let's say, in the third and and fourth quarter. I think we should be moderate in, let's say, our optimism, but we are putting all the efforts in order to maximize our sales in these countries.
Thank you. Thanks a lot. If I may, just one—if there are no other questions from the other participants. Regarding SG&A, if you could guide us on the percentage going forward. So we're seeing it at around 30%-33%. What... Do you still keep the 22% guidance?
You know, yes, of course, it's our internal guidance. It's not written on the paper, but we always target for this SG&A to be at roughly 20%-23% out of revenues. It's not an easy job to do this considering the current macro situation. We have managed to maintain the growth of expenses up to 22% out of revenue. So, at this moment, we are keeping, let's say, our target in place. Of course, it's not going to be an easy job because you have to consider that we have added Angel's Estate, we have EcoSmart.
We have some, let's say, additions to our, let's say, core business, which will incur some additional G&A expenses and SG&A. But nevertheless, we are pushing with the sales, and we are backing up with this SG&A in order to, in the end, to have this to achieve our target. Thank you. Thanks a lot.
Good afternoon. I also have some questions. I was going to ask about the EBITDA margin, but, as you covered it, my question is: What will happen to surpass this prudent guidance? Are we speaking about the increase in revenues or rather the reduction of costs and SG&A expenses going forward?
No, hi. Thank you. Thank you for your question. Again, it's not a straight answer for this. We are pushing in both directions. First of all, we understand we have to work on our top line, so we have to push forward with our sales. And here, a big impact comes from the mix of sales. Of course, we have several brands, like premium brands and mainstream brands. Our scope is to keep going with improving and increasing revenues. On the other hand, if you are not monitoring your costs, if you are not disciplined from a cost perspective, it doesn't matter how good you are selling. So we are focusing both.
On one hand, be very hungry to make sales and on the other hand, to be very strict on this cost base. Of course, there are some, let's say, components of the costs, which can be, let's say, controlled by us. So we continuously are negotiating prices. Our purchasing department is working around the clock to ensure the best deals for us and to secure sufficient inventories for production. But there are some aspects which are not under our control. For example, we have this wine stocks from 2020 and 2021 vintage. Here, we have just to wait and push through the selling cycle, like to sell all these wine stocks.
So, to conclude, we are pushing both on revenue part and on cost side. And this, in the end, should give the margins and hopefully, they will be within our guidance.
Okay, thank you. Regarding this expensive wine stock, it will be persist in the second half of the year or it was diminished in the first half?
It's constantly diminishing. It's constantly diminishing. And for you, the best way for you to check this is, like, to go to a, I don't know, supermarket and see on the shelf what vintage, for example, white wine or rose wine, what vintage you have there. So you will see that now we are selling more of 2022. So it will gradually, this more expensive wine stock will gradually pass through this commercial cycle. But however, it takes time because, of course, we have red wines and, yeah, it takes time.
But, if you're speaking about deadline, it will be at the end of 2023, or maybe will take more time?
We're expecting that the biggest chunk of more expensive wine stocks to pass through by the end of 2023, but nevertheless, we will still have some wine stocks in 2024. But again, it depends on the mix of sales, and depends how quickly we are going to sell, let's say, different brands.
Okay, thank you. Regarding Turkey, is there a new market for you, right?
Yeah. Turkey is the new market. We had more significant sales last year when Moldova have received the quota. It means the quota, like, we were selling there without excise duties and other tariffs. So last year we have achieved the quota, I think in the first or the second, or second quarter. This year, we made most of the sales to achieve the quota in the first quarter, but nevertheless, we are expecting that in the last quarter, I don't know, October, November or December, we will have a new quota for the next year, and we'll be able to deliver some sales.
Our commercial team are working in this direction because we are focusing not only on this, let's say, subsidized wines without tariffs, but they are building partnerships in order to increase sales, not only after the quota, but to have additional sales of, of wine. But of course, Turkey is an interesting interesting country and an interesting market.
Can you comment with some,
I just-
Sorry, please.
Daniela, I just want to add what Eugeniu told about EBITDA margins. So,
Sure. No, no.
And you have to see that our expenses with depreciation amortization increased significantly. It's about plus RON 4.5 million compared to last period on our CapEx program and both for existing wineries and the program we have for newly acquired Angel's Estate in Bulgaria. So, on both acquisition of new subsidiaries and on our CapEx program, we increased our expenses with depreciation, but the benefits of this will be, we will see a little bit later in higher revenue and with production with lower cost per unit. And regarding our inventories, high cost inventories of 2020, 2021 vintages.
So now, at the end of Q2, these inventories represent around 25%. So for many brands, this quantity will be consumed in the second half of the year. So, we expect that if you have a good harvesting season this year, we should have, by the end of the year, a much better position on the cost of inventories. So this is your question, when we will consume our high cost or high inventories with high cost.
Well, thank you for making it clear. Another question will be if you are going to increase the prices going forward?
Yeah, Daniela, thank you for the question. Indeed, like, price increases is not, again, it's not an easy job, like pushing a button, and then you have all the prices increased across the channels, across the partners, across the distributors. We have to pay close attention to this. We closely analyze each move we have, and we gradually, we are gradually passing price increases. Indeed, we I think it's still too early to elaborate, to tell you, for example, yeah, we will increase by 10%, or we'll increase by 5%.
For each market, we have a very tailored approach, and not only for market, but for each partner, in order to secure both volume increases and to secure value increase, 'cause it's a sort of mix between both. So we are going to see how the macroeconomics will move on, what is going to happen with the inflation and the regional situation in the region. And depending on that, we are going to have a separate decision. So our commercial department together with the top management will decide the best formula, how to mix this increasing volumes and price increases.
Thanks a lot. And, my last questions will be about the net financial results. If you can, say a guidance about this, what to expect for the second half of the year. As I noticed that, in this half, you have some Forex gain? Are you expecting this to persist in the second half of the year?
I think the best person to answer regarding net finance cost is Victor Arapan.
Yes, Daniela, we expect that our costs with interest will continue to increase compared to last year, as we have higher interest rates in the market. Even the Central Bank of Moldova, National Bank of Moldova, decreased a few times, four times during this last period, the basic rate, and now it's quite low. The interest in Moldovan leu is quite high, and we still borrow in euro, as this is our main export currency. So we want to match the cash flow of borrowings with revenues. And you still know that European central banks is raising the interest rates. So we expect that EURIBOR could increase.
So our EURIBOR linked loans will generate more cost. On the other hand, we have to increase our business, we increase our inventories to ensure the highest quality. So this requires in finance acquisition of big quantities of grapes and processes them. So we expect to increase both borrowings the borrowing level and the interest be high. On... If we speak about net finance cost, of course, you saw that we have been positively impacted by the evolution of Moldovan Leu, which was appreciated against euro. And we cannot guess what will be the foreign exchange rate by the end of the year, but I expect that it will stay around the current level.
I don't expect we will have some adverse impact from foreign exchange.
Thanks a lot for answering. That was all my questions.
Maybe I'll just one more note here. Of course, the strengthening of the Moldovan leu is a double-edged sword. Yes, it helps us save for this accounting gain in terms of the finance cost line, but you understand this is affecting our gross margin because most of our costs, but also generally, most of our costs are in leu. And in that sense, of course, we very much hope that leu will weaken. Now, it's abnormally strong, and that will boost our margins overall, because in the end, we're an exporting business, and this may impact, say, the, on accounting side, the financing cost side, but will have a positive effect in terms of our cost base and margins overall.
In general, so that everybody understands, a weaker leu is better for us.
Thank you.
Okay. I think you've been very generous with your time on a Friday afternoon, and as Eugen said, indeed, the last Friday of this summer, so we'll let you slowly transition to, into the weekend. Not our team, though. We still have a retail call in Romanian language. Retail is an important... Romanian retail investors are an important segment for us. We count nearly 10,000 retail investors. Very grateful for them. Many of them are also our consumers, so it's great to have such ambassadors. I remember when we did IPO, I think we're at, at around 1,500 retail investors, so that number has expanded a lot, and I'm very grateful to our investor relationships team for helping increase that number of retail investors so much.
So, this Romanian language call we're doing is also a testament to how important we see this base. Again, also because these are our consumers and ambassadors of our brand. On this note, thank you, everybody, for backing us. We are going to participate at the Woods and for the proprietary conference on September 7th and 8th, and we already have a number of quite a few meetings lined up. So if you would like to talk to us, please do signal. Please do reach out. We really want to take the opportunity to update you in person on the latest, too.
September is going to be a busy month for us, with lots of lots of activities, so please stay tuned, and I hope we'll have more more positive news to share. Thank you, everybody. Have a great Friday, weekend, end of summer, and hopefully to see you in Bucharest in September at the investor conference. Thank you. Bye.