Good afternoon, everyone. It seems that investors are still joining the call. I'm welcoming you to our conference call with investors to present you the first half results. I'll leave the floor to Eugen Comendant, Chief Operating Officer of Purcari Wineries.
Thank you, Eugeniu.
This meeting is being recorded.
Good afternoon, everyone. Thank you for joining the call. Indeed, we see that some investors are still connecting their audio, but we can kick off. Welcome to the presentation where we'll present the results, the financial results of Purcari Wineries PLC for the second half of 2022. Today in the call, there's myself, Eugen Comendant, Chief Operating Officer of Purcari Wineries. Financial Officer, Eugeniu Baltag. The Investor Relations Manager, and we have Vasile Tofan, Chairman of the board. The agenda for today is. I'll try to go quickly through some slides, which again, I guess many of you know from previous presentations. I'll cover them quickly. They'll cover, you know, the overview of the group, our vision, our strategy.
We'll dive into the actual operational results. We'll end with having a look at the guidance that we've given out. Well, somewhere earlier in the year, how we perform versus our guidance, and then we'll open the floor for questions and answers, which, well, we hope to be very interactive and, we're welcoming your questions. Just a quick overview of the Purcari Wineries PLC. You know, we are proud to have one of the wineries being the most awarded winery in the world. That's Château Purcari. In 2021, it became the most awarded winery in the world with 333 medals at most important and notorious wine competitions around the world.
As well, Purcari is the most awarded winery at the contest which we call the Wine Olympics between years 2015 and 2021. Obviously a very awarded winery, and this is important of course in the wine business. We continue to be the fastest growing large winery in Central and Eastern Europe. You may know that we are the largest exporter of bottled wine from Republic of Moldova, and we now own around, you know, close to 1,400 hectares of vineyards. Of course, we are very proud and we are happy to have many of you and also other reputable shareholders as part of our shareholder base.
If you were to look at the split in sales or where our revenues come from, 53% of our revenues come from Romania. This is based on the latest results for the first half of this year. 20% of revenue comes from Moldova. This share has increased with Moldova performing very well in the first half of this year, as we'll see later in the presentation. Poland now with 10%, China with 5%, Czech Republic and Slovakia with 3%. Ukraine has decreased obviously because the sales to Ukraine have pretty much halted, so now it's around 1% share of our sales, and then we have other markets which account for 8%.
Just to, you know, reaffirm the statement that, you know, our vision being creating the indisputable champion in the wine business in Central and Eastern Europe, obviously we need to start to have our home base, one of the most favorable ones. Our home base is for now, Romania and Moldova. Of course, we're also looking at M&A to expand this base, this regional base. Romania and Moldova in fact account for the most area of vineyards in Central and Eastern Europe, and number four in the whole Europe after the big three, which is Spain, France and Italy. Obviously we are in the region where we have an abundance of our raw material, which are the grapes, and basically we have the ability to grow the business unhindered.
We have the five brands. Purcari being of course the notable one and the premium one. Crama Ceptura is a production and positioned as a national brand in Romania. Bostavan is a mass market value, you know, playing in the value segment. Domeniile Cuza is a new brand launched now, you know, gaining traction in Romania, but perhaps we're looking at launching it in other markets. Bardar, the brandy brand production in Moldova, but also now becoming very popular, not only in Moldova but also other markets. You know, a good snapshot, I think it's an interesting chart.
You can see a bit of our track record, starting from 2017, you know, from top line all the way to net profit and the earnings per share. You know, obviously, you know, we've IPO'd on the Bucharest Stock Exchange in February 2018, and since then, we managed as a business to increase revenues by 75% while maintaining the same strong margins. Because, for example, in 2017, we had a 20% margin from a revenue base of RON 142 million, and now, or the end of 2021, we've posted RON 248 million in revenue and with the same pretty much net profit margin of 21%. Obviously a good track record.
We're also, you know, it's important for us as a company to provide value to our investors, not only through the business growth, the financial growth that we can generate in the business, but also making sure that we are disciplined in paying our dividends. I can imagine that for an investor, dividend is important. You know, we need to create value in this way. We've been actually good at paying out dividends. The only time we halted a dividend payout was at the dawn of the COVID pandemic, when we all would agree that we had to sit on cash just to make sure that we go through what was, you know, what seemed to be a period of uncertainty with a strong balance sheet.
Now, this is our model, business model. Again, if you're familiar with this presentation, it's a well-covered model, but the core of it is being able to provide our consumers with what we call affordable luxury, so high value, and very high-quality wines for affordable prices. We'll see. In fact, we'll see how we do this later, we have a slide on this. I mentioned that our vision is to become the indisputable wine champion in the Central and Eastern Europe, and that of course has also a connotation or a component of M&A. We want to act as a consolidator of a relatively fragmented industry. Of course, we have strong values that we believe define us and will define the, you know, the way we will achieve this vision that we propose ourselves.
We see that we are able to create strong sales and strong margins. You know, we have from the listed wine companies, we have one of the, if not the highest EBITDA margin. That comes with the ability to, on one hand, to price relatively high, and that comes from the high quality of our wines. You know, creating meaningful campaigns that create a high brand equity and a strong brand perception among consumers. On the other hand, being diligent and disciplined when it comes to cost, you know, using scale to our advantage and basically be able to price high with a low cost and generate strong margins. That's what our business says what we can do. I mentioned the M&A component.
Here you can see indeed, wine industry is quite fragmented. If you take the combined market share of, or category share of the top three players. Now, of course, we understand wine is a bit of a different business from a commercial perspective from beer and spirits, because, you know, the augmented product and the perception towards the customer is different. Nonetheless, obviously, the wine industry gives ground to M&A opportunities. We are proud to keep showing this. Not only are we able to grow volumes, you know, grow the business, but also we are able to maintain that, you know, high quality towards customers or high quality of our wines. Towards customers, we do have what we say this promise.
Every time a customer picks up a wine from Purcari, there's a promise that we need to keep of that high quality, and we are able to do that. In fact, we're actually not only increasing volumes, but we're also increasing the number of medals and awards that we receive around the world for our wines. Of course, on one side is the experts that give us those medals and awards. On the other hand, we do want to hear from the consumer as well. Then from the consumers, we want to hear on two sides. On one side, we want to hear what do they think of our quality. Here on the right side of this chart, you see that Purcari scores extremely well on Vivino.
You know, this year alone, in the first half, we amounted over 70,000 scores, and out of five, we score at 4.1 out of five, which is extremely high score for Vivino. This is where consumers score our quality. On the left, consumers, in a way, score our brand perception or brand equity, where you know, we see that in Instagram, the Purcari brand leads the number of mentions when compared to other wine or wine alternatives, in this case, for the Romanian market. Not only we are a quality brand or quality wines, but we also a cool brand that consumers associate with.
Continuing to speak about Vivino, you know, as you can see here, we dominate the top 25 wines within the premium segment, but we can even say that we dominate the top 15, because 10 out of 15, top 15 are Purcari wines. Obviously, we dominate the quality segment. We like looking at these charts because we can also see where our wines get scanned and of course, consumed. You can see that, our wines reach, you know, I think it was 96 countries we can see here in terms of stats. Overall, you know, very good performance on Vivino. Now, moving on to the operational results. This is a sort of a high-level chart.
You can see that our revenues increased by 60% versus the same period of last year. This is, of course, we see this as a good result. Worth to mention that in this 60%, it's also included the consolidation of Ecosmart. We'll try to, in our presentations and also in the financial statements, we're trying to show the information on Ecosmart because we understand that for you also in your models and your analysis, it's you would want to see the apples to apples. Compare, let's say, the business without Ecosmart and the business with Ecosmart. In this case, 60% includes also the Ecosmart. Overall, when comparing to the first half of 2020, revenues have grown 46%.
Of course, we know that in the first half of 2020 was this dip in performance because of the beginning of the pandemic. Nonetheless, you know, we show that, you know, we were able to keep strong directional growth even in times of adversity. EBITDA up 10%, with a net profit up 27% with a net profit margin of 17%. Again, this includes, you know, Ecosmart and some other one-offs, which I'll cover maybe quickly in the slides later on, or we can discuss in the Q&A. A bit on the key operational results.
You know, firstly, of course, we are happy to show increase in sales despite the current turmoil in the region. We see strong performance in various markets. We have, you know, Romania is growing, Moldova is growing, Poland is growing again, and also we see brands growing. Purcari growing, the Bostavan flat, Bardar and Crama Ceptura growing. Overall, we see a healthy growth. We also see China, I would say, recovering still, but now, when comparing to the same period of last year, showing 30% growth, which is encouraging.
Of course, we're doing all this despite the drop in sales in Ukraine and in fact also Belarus because we were selling bulk branding in Belarus. Now we are managing to maintain margins. You know, as we call it here, resilient margins despite this inflationary pressures. Indeed, we have certain inflationary pressures of cost inflation. Overall, we are managing to some extent pass this on to the market and also to control the cost pressure that's coming from underneath, so to speak. We are busy with our CapEx investments. We've recently inaugurated the irrigation system at Purcari.
This will be the first technical vineyard, so wine-producing vineyards, in Moldova that would be irrigated. This is a great milestone. For us it's a milestone because it's an important milestone because it will provide for our grapes, one of our most important assets in the 2020, 2021, the drought has been 2020 worse, 2021 still there. In the future we want to be protected from that. In fact, you need to know that having irrigation also gives a control over quality because we'll have a constant yield, so we'll be able to have that just sweet spot of a yield for a vineyard.
In fact, the quality we are expecting. I wouldn't say to go up, but we'll be able to control the quality of our grapes. We've also inaugurated, so to speak, the warehouse at Crama Ceptura, where we can house or we can store around 1 million bottles. This is important because it helps our logistics, including also for Western Europe. You know, more on the sustainability side, but also on the cost efficiency side, we've installed solar panels on one of the roofs for the Purcari production facilities. The capacity is around 200 kW, and this covers around 50% of the annual electricity consumption at Château Purcari.
In the future, in fact, we're looking to keep installing these solar panels at Purcari but also at other production facilities because it is a lucrative investment with a relatively short breakeven. At Purcari, we're looking maybe to reach around 80% of the coverage of our electricity cost in a few years from now. Of course, you know, we are very busy, you know, the whole team working on the growth of Purcari, you know, launching new products in new markets and grow the business. Also we're not taking our eye off other activities that bring value to our investors.
As you know, the 0.51 RON dividend per share earlier this year, and it will be paid out very soon on the 8th of September. We maintained our liquidity, the liquidity of the Purcari stock. This means that we maintain our position, our presence in the FTSE Global Micro Cap Index. As you'll see later in the presentation, we're still highly liquid, relatively liquid company. We're the second most relatively liquid company on the Bucharest Stock Exchange. We are participating actively in different investor events because, you know, there's a demand, you know, generating demand for our wines among consumers, but also we believe that also we need to be active in generating demand for the Purcari stock among investors.
We need to make sure that we stay relevant to you as existing investors. That also being present at these events, you know, having the opportunities to, you know, to dig into certain issues and maybe strategy, with you, but also to be present, and show ourselves in front of potential other investors that, hopefully generate demand for our stock and, drive the share price up in the future. Last but not least, we are organizing the Purcari Investor Day at Château Purcari. It's on September the thirtieth, and I hope all of you have received the invitations. I think they've been sent out, yes.
We hope to see you, many of you that are here in this call, to also see you live at Château Purcari on September the thirtieth. In this presentation, we're covering the financials a few times, but that's fine. I think it's better more than less. Revenue for the first half of 2022 are now at RON 123.9 million. As mentioned, RON 8.9 million of this is Ecosmart. If you imagine that without Ecosmart, the revenue for the rest of the business or the business that was before the acquisition of this majority stake in Ecosmart would be RON 115 million. That would be a growth of around 8% versus the same period last year.
With Ecosmart, this growth represents 16%. On the cost side, you know, 23% increase. A few effects here, of course, is the cost inflation. You know, we have double digit growth in the cost for different components of our cost of sales or cost of goods sold. But overall, it's we see that this is, of course, it's not something that we want. No company wants this. We see that we are able to manage this. We've also passed some of the price increases to the market and we'll speed up a bit.
There's also another effect here because in recent months, the Moldovan leu has appreciated versus the RON, and we incur a lot of our costs in Moldovan leu. This also has an effect in this call as a component of our cost of goods sold. Of course, the consolidation of Ecosmart, which is a lower gross margin business, has that effect in there. But overall, you know, we're still looking at a healthy gross margin of 47%. We managed to maintain this strong gross margin with, you know, as I mentioned, price increases. Also we are looking at, you know, how we manage our sales mix.
In fact, you'll see in a bit that for example, we have a market, the Czech Republic and Slovakia, where sales have slightly decreased, but that's also because of our, you know, prioritization of margins versus just volumes. You know, that being a lower margin market for us is decreasing the total share of sales or share in total sales leads to this mathematical increase in margins. Overall, we are happy with the margins we've been able to maintain. When it comes to G&A, here you see the marketing and selling flat. The G&A have gone up by 11%. There's a few components here for this, for what has driven up the G&A.
One of them, in fact, again, comes from Ecosmart. We see some professional fees, as you know, we have some legal cases pending there. We are very confident in how they'll end. Nonetheless, there are some legal costs that are entering in this component for the cost of the G&A. There's also depreciation that went up with the fact that we've rolled out some of the CapEx investment that we've done in the previous periods. If we look at this other income or expenses, you see a delta of RON 2.6 million. We have a negative impact in the first half of 2022 by RON 1.5 million.
It was a positive impact last year by RON 1.1 million. Also this delta of RON 2.6 million has a few components. One of the larger components again it's impairment loss on trade and loan receivables, which is a combination of some Ecosmart provisions for bad debt and also some provision for bad debt in Ukraine. Overall, we again are relatively confident that we'll be able to reverse these provisions. Management here as management always prefer to be more prudent. Usually we do the 100% provisions on these kind of items. Moving on to EBITDA.
You see here a 10% increase, and a 31% margin for the first half, which is solid. Net profit RON 20.9 million. Again, impact from Ecosmart is around RON 1 million. If you were to remove that and then some other bad debt provisions, then the net profit would have been a bit higher and probably so our net profit margin would have still remained around 90% as it was the first half of last year. Overall, solid, as we see solid figures and solid margins. Talking about solid, we see also that we have a solid balance sheet. You see here that the cash position now is RON 23.
At the 30th of June 2022 is RON 23.8 million. Over the period from the end of last year and then the first quarter to the end of the first half, the cash position has gone down. That of course is due to the fact that you know we've been very busy in implementing some of the CapEx investments earlier this year. Of course, we also now need to have the cash to pay out the dividend of the RON 20.4 million on the 8th of September. Current ratio is healthy 1.33%. This means that we are covering our current debt you know comfortably. The cash ratio is at 0.16%.
Nevertheless, we are, you know, we're extending some of our long debt arrangements with banks to be able to cover current liabilities if necessary. Overall, we are, you know, still a solid cash ratio. Debt to equity ratio and net debt to last 12 months EBITDA, we see them solid. 40% debt to equity and 0.82 times net debt to last twelve months EBITDA, way below, you know, comfortably below the 1.5 ratio that we have as internal limit, internal benchmark. Quickly about the markets. Romania is now 53% of sales, +7% versus the same period last year. Crama Ceptura is showing single digit growth.
Purcari showing single digit growth. What's good to see is that Bardar is accelerating. Now Bardar sales in Romania become more and more relevant into our overall sales. That's very positive to see. Moldova overall, very strong growth at 20% share of sales and 44% growth versus last year. All brands in fact are performing very well in Moldova. Poland showing 10% growth and 10% share of sales. Here we were able to both increase prices, but also making sure that this does not generate a decrease in sales. Obviously, with increased price, we have maintained strong margins there despite the cost inflation pressure.
Asia showing promising growth, so 30% versus last year. Czech Republic and Slovakia, we see this 19% decrease in sales, and that comes on the background of, on one hand, also us pushing price increases forward to the market. In fact, Czech Republic being quite, I guess, with a high sensitivity, high price sensitivity to high demand sensitivity to price. Also there seems to be a relatively high inflation and a bit of a difficult economic environment that also has led to this decrease in sales. Ukraine, it's obvious why the decrease in 71%. With the rest of the world, well, in the rest of the world, we have here Baltic States.
They're also showing a bit of decrease. We understand that there's also in the Baltic States, there's a bit of uncertainty and there's sentiment of worry among consumers because of this war in Ukraine and the conflict that the Baltic States are now, you know, more and more conflict with Russia. If we were to exclude the Baltic States from this rest of the world, in fact we see over 20% growth in other markets. Important here to mention that indeed we are pushing heavily to grow in other markets such as U.S., such as U.K., Western Europe, you know, the Nordics. In fact, we're also looking at Africa, which I've mentioned this before. Of course, there's nothing very tangible yet, but the teams are working great.
We see potential, and hopefully we'll generate some new pillar for growth in that region. Here quickly on the brands, Purcari 9%, because Purcari just, it's a strong brand that grows pretty much across all markets. Bostavan -1%. There's a bit of a compensation, you know, from the decrease that Bostavan experienced in Czech Republic, Slovakia and the Baltics, with Moldova being very strong. Cuza +6% and Bardar very strong +25% with growth in Moldova and in Romania. Despite the loss of the bulk sales to Belarus, Bardar is showing strong 25% increase. Now, of course, besides just pure financials, we stayed relevant as a brand.
Of course, our support to the Ukrainian refugees was totally unconditional. We knew from the twenty-fourth of February that we, as a leading company in the region, had to step in and be involved in supporting the fleeing Ukrainian refugees, you know, the ones who are fleeing from this war, especially Château Purcari being close to the border with Ukraine. Not as per our efforts, but you know, the international media has picked up on this, and we've gotten quite a bit of coverage. You know, Purcari was featured on BBC, on CNN twice, with Anderson Cooper first time and the second time with Richard Quest.
Many articles in leading media publications such as Deutsche Welle, Washington Post, you know, the Buyer, which is a magazine for distributors and even Bloomberg. Overall, there was positive coverage for Purcari in social media. We have to continue with our marketing efforts of course, we have a business to run, so we launched Domeniile Cuza where we are accelerating our communication with Domeniile Cuza, especially now on the back of some medals won in respectable competitions such as Decanter. Prime is a value wine brand that has been adopted by the consumer, so it's growing and we keep pushing that.
There's been a feature of Crama Ceptura at a popular show in Romania, MasterChef România, and of course, with Domeniile Cuza we had to boast about the fact that it won grand gold at Mundus Vini. We believe that for our consumers, but also for our investors, it's important to see that we also do efforts in the direction of sustainability. In fact, this is a picture of the solar panels on one of the buildings at Purcari. Now, I think I mentioned that I'll show how in fact we're able to give high quality to consumers while the price is relatively low. Now, Negru de Purcari which is our, you know, our flagship wine.
Negru de Purcari 2019 made it to the list of top 100 classic wines as per Decanter. Decanter, of course, being the leading magazine in the wine world. You know, this is an incredible achievement. I mean, think about top 100 wines in the world. Here we are, you know, Negru de Purcari is among these heavyweights of the wine industry. Heavyweights from a brand awareness, but also from price perspective. You can see that, you know, our Negru de Purcari, which is retailing at around GBP 26 is, you know, relative, you know, quite strongly below the prices of other wines that are in the same top 100 list.
We've shown this kind of chart before, you know, we've seen this before with Chardonnay de Purcari that won platinum at 97 points at Decanter and was retailing at around GBP 12. The Cuvée de Purcari and other wines. Overall, again, it shows our ability to provide this affordable luxury to consumers, and that obviously supports the growth of Purcari brand across the world. On the stock side, we continue to be a liquid stock. In relative terms, Purcari is the second most liquid listed company on the Bucharest Stock Exchange. We continue working with our market makers to support this liquidity.
If you look at price-to-earnings ratio with our peers in the wine industry, we see ourselves relatively low. Our stock is relatively low price with a price-to-earnings ratio of 7.7%. Now, we know that a big component or how to say, maybe a big penalty was awarded by investors due to the war that's happening in Ukraine. We saw that on the twenty-fourth of February, the price of our stock almost halved. We are hoping and confident that we believe the war will end, of course, the peace will always prevail.
This component of, you know, risk aversion towards the war in Ukraine will be removed and the price of our shares will return to what they were before the war. Of course, with other components of our growth being incorporated in that. Same comparison when we look at other companies at the Bucharest Stock Exchange. Again, we are on the side of the lower priced companies, and this is a nice chart to show that not only, you know, we have a low price to earnings ratio currently, but usually, you know, a higher price to earnings ratio should include a component of growth, where a company shows strong growth and track record of growth.
Now, we've done that, so if you were to compound the CAGR growth between the years of 2016 - 2021, where we show, you know, a CAGR of almost 25% growth, you know, versus the price-to-earnings multiple, you see that we're a bit of an outlier. We're, you know, based on our growth, the price-to-earnings multiple perhaps is a bit on the lower side. Okay. Now, going to the guidance. Just to recap, we've issued a guidance earlier this year, where we. The guidance is 15%-20% growth from a group perspective, which includes also the waste management business.
10%-15% growth for the wine business, so that means without that waste management business. Then EBITDA margin, we've given the guidance of a margin of 20%-25%, and net income margin, we've given the guidance of 10%-15%. Now, so far, we are in line with our revenue growth guidance for the top line. We are slightly below the revenue guidance when it comes to our wine business, but it's worth mentioning that we see relatively strong numbers in July and early August, so we're still confident that we'll gain. We're maintaining basically the guidances for revenue growth overall of the group and the wine business.
We believe that will be within this guideline by the end of the year. We are beating so far the margins or the guidance for the EBITDA margin, and we are beating so far the guidance for the net income margin. Nonetheless, we are maintaining these margins for the rest of the year. There's still some uncertainties ahead, but we see this inflation. Inflation is happening. The cost of capital is increasing, so the interest rates are going up. There's still uncertainty with the war. We prefer to stay prudent, always under with the principle of under promise and over deliver. Of course, there's a base to the guidance that we're giving, but we can say that we always try to beat even the guidance that we've given.
This has been so far the presentation. I want to thank you for your attention and let's open the floor for questions.
Hi, good afternoon. This is Uliana from Morgan Stanley.
Hi, Uliana.
Hi. I have a couple of questions.
No problem.
Regarding the gross margin, we are seeing quite a volatility in terms of gross margin if we look per quarter, not necessarily for the first half. I mean, gross margin in the first quarter was very high, above 50%, and it dropped significantly in the second quarter. What is driving the volatility in the gross margin? A second question on the sales outlook, where do you see the growth coming from? I mean, Romania has not been particularly strong so far. On the other hand, we've seen very high growth in Moldova and Asia. Where do you see the growth in the second half? If you could give us your longer term expectations for sales growth as well, that would be very helpful.
Mm-hmm.
If you could update us on the buyback program, because you have buyback program approved, if anything is happening with that.
Mm-hmm.
Thank you.
Yeah, thanks. On the gross margin volatility, the impact on the gross margin for the second half, which was around 43%, 43.5%, was because we have one component, the sales of wines that have the wine from the harvest of last year in 2021. 2021, the cost of the grapes was relatively higher versus let's say a normal course of business. Because of that, there was an impact on the margins. 2021 and also 2020.
If you remember 2020, we had a relatively strong drought in the region and also Moldova and Romania, but primarily Moldova. Then in 2021, we had a relatively higher cost of grapes from third parties. As you know, we are, let's say, around 50%-50% or maybe 1/3 our grapes, 2/3 third party grapes, depending on our harvest. Because of this cost, now that we are in the second quarter, we started selling the wines that were produced with the harvest of 2021. We are seeing an impact on the gross margin. That's on the gross margin volatility.
Somewhere though, you know, we've seen this effect. I would almost say every second quarter of the year because there's always... You know, I'm looking at the quarters of all the previous years, and always in the second quarter we had a bit of an impact. Usually, I guess the way it works, we have this negative effect, and then we work with the market. We're pushing price increases forwards, and then we normalize the gross margin. But first we have this effect in the second quarter. That's when it comes to gross margin volatility. When it comes to the sales outlook, now of course we have large markets. You know, we have Romania, we have Moldova, Poland, China.
An increase, a percentage increase in these markets of course will contribute to a higher percentage increase in overall sales. For us, it's also important to generate, so to say, new pillars for growth. The teams are heavily working and heavily involved in creating momentum in sales in, for example, the U.K., in the Netherlands, in the Nordics. We had just recently one relatively large shipment to the United States. Growth in Romania will of course still be important. By all means, please still see that there's room for growth in Romania. We have around 11% market share, so there's still room to grow. We've launched now Domeniile Cuza, which is a new pillar for growth as a new brand.
Because as Purcari is moving up in the segment, we are coming from behind Domeniile Cuza to cover the some price segment that perhaps Purcari may leave behind. But also, Bardar is performing very well in Romania. So Romania still has some space to grow for some years ahead. You know, if you look in Poland, Purcari has doubled in sales versus nearly doubled in sales versus last year. So for example, Purcari in Poland is picking up. So overall there are many. For me, it's difficult to say that there'll be one market or one brand or market that will create the most of the revenue. Growth for us is the efforts to make sure that it happens everywhere.
Keep growing the existing large markets where we operate, but make sure that we also plant the seeds and we create new pillars for growth that will ensure that we can sustain and accelerate growth with the new markets. Not the most, maybe not specific answer, but you can expect that this will be the answer. You know, our efforts go everywhere. In long term, look, overall we are looking at, roughly speaking, if I were to, you know, to say a figure, we're looking to continue growing our business at double digits for the long term. Be it at around 20%, maybe under 20%, but definitely above 15%. This is where we're looking to keep growing in the future.
Of course, this is organic growth, so we're not including here M&A, which I'm sure there'll be perhaps a question on M&A, but we're also busy on that front as well. On the buyback, at the moment we're not considering the buyback yet because we are looking at capital allocation, and since we have certain projects ahead, we want to make sure that we you know that we don't you know borrow you know extend our credit lines just to do the buyback. At the moment, so far there's no specific decision on the buyback, even though it has been a topic internally, but it's been parked for the moment. As we speak, there's no decision on performing a buyback.
I asked about the sales outlook, but also on the margin outlook. Longer term, where should it be? Because margins for this year are substantially below what you've included in the outlook, is substantially below the previous years. I mean, this year you're seeing the impact of 2021 vintage, but you're also seeing very high inflationary pressures.
Yes.
What about next year? What do you think will happen then?
Well, look, our aim is to maintain the current business model, so to speak. We'll look at maintaining gross margins in the vicinity of 50%, maybe slightly under.
EBITDA?
EBITDA 30%, maybe slightly over. Around 30% EBITDA.
Even with Ecosmart? Is that possible after-
More or less.
the acquisition of Ecosmart?
Well, Ecosmart, we in fact foresee that this can become a quite lucrative business. For us now it's important to clear, and in fact, we're pretty much done with clearing the company. Now we are looking at how do we set up, you know, the management and how do we set the company to rise on course and to be independent. That doesn't involve, you know, the Romanian team's involvement, as much. Yes, Ecosmart of course will have a slight negative impact on the EBITDA. It's actually not such a bad business. We'll have to see how this will evolve.
The target you mentioned, 30%, would that include Ecosmart?
That's a good question. It depends on how large Ecosmart becomes in our business. I think. Let me make it, let's say more clear. The indication that I've given for margins, these would be valid for the wine business, for the business except Ecosmart. Because with Ecosmart, it will depend on how we can turn around or what kind of business we can create from Ecosmart in terms of, you know, the margins it can generate, and then how quickly we can accelerate growth in that business. Then the bigger it becomes, the more share it has in our total sales and then will impact the margins on the overall group.
Would you consider segment reporting for Ecosmart?
In fact, we were considering in general to bring it to a level or to a state where Ecosmart is a independent business. It's cleaned up, it creates you know its revenue and net profit, and then we consider to even diminish our stake in Ecosmart to under 50% so we don't have to consolidate. Because we understand that we see this is exactly the issue that we have with Ecosmart. It creates discussions like this where it makes it even difficult for us to give clear indications where will the total group figures you know be in the future. It creates this dilution of a message when it comes to what we are as a group, as a wine group.
You know, a dilution of the message that we are there to provide high growth and high EBITDA margins, net profit margins. We will consider even to reduce our stake in Ecosmart to not have to consolidate it and have this discussion more clear. I think Vasile, maybe he also wants to add something.
Yes. No, I'm. Thank you again for elaborating on this on Uliana. Look, on Ecosmart, you understand. On this transaction, we had to step in because for us it's very important to clean up the business and it was also part of our standards commitment, but we don't see ourselves long-term in this business. It's an attractive business, so just for you to understand the simple numbers, you know, it's a business that can operate on 30% gross margin, and the SG&A are relatively modest. We're talking about a G&A in a very low single-digit million RON. At scale, this business can do an EBITDA margin in the 20s still.
Even with Ecosmart, it's not that our, say, group margins are going to be that diluted. I'll remind you, at peak, Ecosmart has been doing up to RON 80 million of sales, and at the moment, Ecosmart is valued effectively as zero as part of our company. We believe there's tremendous value there after we have cleaned this business. Tremendous value, truly. We're bringing in new customers on constant basis using the reputation of Purcari as a trusted partner. I think this can be one of the most successful investments we've ever done.
At scale, I think my view is either we have to indeed, as Eugen said, decrease our stake to below 50% so that we don't consolidate it, and ideally, spin it off and distribute the proceeds to our shareholders. I think it's the same as we did with the glass business last year. I hope we'll get there. Not too far away from now.
Low single-digit million RON per year, I guess, right?
In terms of SG&A. This is just for your calculation, that this can be. You shouldn't get the impression that Ecosmart is a single digit EBITDA margin business. At scale, this is.
If I may add, in the figures that we present today, the contribution of Ecosmart to the net profit was negative. This was due to certain one-offs. The litigation that we have and some, you know, some impairment loss on a receivable. If those were not there, Ecosmart would have already, this report would have shown a positive contribution to the net profits.
Thanks. Thanks a lot.
Good afternoon. My name is Daniela Popov from Horizon Capital. I have a couple of questions. The first one is regarding dividends. Can you please say if the company will maintain 50% or above payout ratio for the next five year?
Hi, Daniela. Yes, thanks for the question. It just gives me an opportunity to restate and reaffirm that we want to maintain. We have a policy of paying out dividend of up to 50% of retained earnings. And we want to maintain that dividend payout. Again, it's important, you know, for us to stay relevant and you know an important company in the portfolio of our investors, we want to maintain paying our dividends. The short answer is yes, we will maintain to the highest extent possible the payout of dividends of up to 50% of the retained earnings.
Okay, it is up to 50, but the lower base is 40%, right?
No. We'll have to. Usually the way we analyze, of course, we look at the policy, which is up to 50%, then we look at our cash position and the CapEx investment and other requirements for cash. We look at our, you know, trade lines. We look at, you know, what kind of dividend will create a significant dividend yield to our investors. In all of this, we arrive to a figure, but usually it's somewhere between 40%-50%.
Okay, thank you. The next question is regarding the CapEx. In a previous call was mentioned that beginning with 2023, the CapEx will be RON 5 million. Is this guidance valid for the next five years?
Well, this is the maintenance. The RON 5 million is sort of the maintenance CapEx that we see for the business to just keep continuing. If we have projects, of course, if we have lucrative projects where CapEx investments are required, of course, we'll analyze and we'll have to increase this figure. When we speak about the maintenance, something as a baseline, the baseline figure is around RON 5 million in CapEx.
Do you have detailed CapEx regarding what CapEx means as a % of revenues?
You're asking if we have some sort of internal guidance as a CapEx of revenue?
Yeah.
Not necessarily. Not necessarily with the way we more look at it, we're looking from a ROI perspective. If we invest for a total investment, we're looking at the break-even, and we're looking at the what is the return on investment of that CapEx. Of course, we always have to consider this allocation of capital. There's some things that we can do with the capital. One is we can build dividends, we can, you know, invest in markets, in products, or we can invest in increasing our capacities, in increasing our quality. Wherever we see that is more the capital invested gives a more lucrative return on this investment, that's where we will decide to allocate that capital.
Okay, thank you. Regarding increase in interest rate in Moldova, how do you evaluate this impact for the following period for the company?
Yes. The National Bank of Moldova has increased the rates quite significantly. If I were to just to have a look quickly.
Yeah. The base rate went to 21.5%, and indeed, but that doesn't mean that this is what the banks lend at. I'll take opportunity to answer this and make a plug for MAIB, the number one bank in Moldova, which Alfond is also a shareholder in, you know. The rates in MDL are in low double digit space, high single digit to low double digit level. In foreign currency, it's still in the 3%-4% rate at the most. Great companies like ours can go even below 3%, which are the rates at which we borrow.
Yes, you can see it in our finance cost, the impact is a little bit higher now in terms of financing costs, but it's nothing close to the base rate that the National Bank pushed in the latest decision.
Okay.
At the moment, the vast majority of our loans are in foreign exchange currency, basically mirroring the exporting nature of our business, so we are naturally hedged against that. That means that, well, for the bulk of our loan portfolio, we pay around 3% interest rate.
Okay, thank you. My following question is regarding the energy strategy. We said that you can achieve up to 80% of energy needs using solar energy in the following period. Can you give the timeline for this achieving? Because at the moment, I understand that it is 15%, and when we expecting that 50% of energy?
Of course, 80%, you know, this is our ambition to achieve this 80%. This would be in the next 80% will probably be in the next five plus years. Overall, I think it's important to know that the overall energy cost in our business is relatively low. Eugeniu, in fact, you've done a bit of a, like a quick analysis on the energy costs as our total cost. Perhaps you can mention what, you know, what the impact of the energy cost is in our overall cost.
Hello. Yeah, indeed. The share of costs in our full cost base is pretty low, especially for natural gas. For electricity as well, is not very, very high. The fact that we have built up with solar panels allowed us to, let's say, stabilize the prices and our costs for electricity. Again, it's everything depends on the full load of our production capacity in order to benefit, like to have a better yield on that. But generally, electricity prices, of course, will put some pressure on our cost base, but will not be so significant in order to affect. I think we will manage to pass part of this, of that costs, we'll pass to the consumer through our price increases.
Actually, we have done this, let's say in the first half when we had first price increases in on the markets. Of course, we will continue with that gradually during the year.
Just to state some numbers. Of course, these are numbers for some entities, it doesn't represent the group, but just to give you a sort of an indication. The share of electricity cost in our overall operational expenses is around 5.5%. And the natural gas as a share of our operational expenses is, one entity has 3.3%, other entity has 1.4%. These are relatively small numbers, and overall, they would not yield, they will not generate a significant even if we double, if this cost double, it will not create a strong impact on our cost.
What creates though an impact on the cost side is the fact that, I don't know, for example, the gas the glass producer uses, you know, is very gas cost intensive. Though, you know, the increase in that cost comes to us where the glass prices go up, and then the carton, and so on, so. So that's where this indirect cost pressure comes from, but not necessarily from our operations.
Okay, thank you. I noticed that in the first half, depreciation expenses increased. It is as a result of realized capital expenditure. Will the increase in depreciation continue for the second half?
From the latest that I know, perhaps Victor, I don't know if you want to add up here, but we've done the PPE, the property, plant and equipment that was given to us, was significantly high in the first half. We do not plan any transfer from in process or in progress, so to speak, to in use in the second half. Overall, like, of course there's still projects that are happening, but it will not be significant. Victor, I don't know if you want to, Victor Arapan, our CFO, if he wants to comment on this too.
You can see from our records that we made RON 20 million CapEx in the first half of the year. Till the end of the year, RON 9 million of investments is expected to be finalized. This is according to our budget for 2022.
It'll still increase, but perhaps at half of the percentage that it increased in the first half. Would that be accurate, Victor? To assume that the depreciation cost would increase but at half of the rate that increased in the first half.
Yeah.
Okay, thank you for your answer. This is all from my side.
Thank you, Daniela.
Hi. Dumitru Procopovici from BT Capital Partners. I have a follow-up question. Is that just to make sure that I understand correctly, the gross margin in the third quarter is expected to be closer to 45% or 55% considering all the evolution you've mentioned earlier?
No. I wouldn't think that we would be able to reach 55%, so that's not the case. If I were to give some prediction or an estimate, I would say that we would expect to be between 45% and 50% in gross margin in the third quarter.
Okay, thank you. Another question is regarding the sales in Poland. You've also mentioned earlier that sales in Poland grew at a high rate, and I would like to ask if this was caused by some deals with local distributors or something, and what should we expect in the third quarter?
It's a combination. When you look at our growth, it's a combination of price increase and volumes. If I were to quickly look at Poland, just give me a second. For example, in Poland there has been a moderate or almost like flat but moderate growth in volumes. The increase was a mix of price increase and better sales mix. For example, we are accelerating sales of Purcari. We are now working in listings in HoReCa, so we are penetrating HoReCa a bit more aggressively. Also we've pushed the price increases for the Bostavan brand. A good chunk of that increase has come from price increase.
In fact, you know, if you were to look historically up to, I would say, up to 2020, and then maybe a few years before that, usually the growth would be two-thirds volume, one-third price. Now this has swapped a bit, so overall you should see the growth being one-third volume and two-thirds price. Now we are pushing price increases more, and we are fine with the volume not growing as fast because for us now what's important is to create both, of course, generate growth but also make sure that we have margins. That's why the growth component is a higher component of price increase. Let me put it another way, otherwise.
Average price increase, average price per liter, because sometimes it's also the pushing of certain products which are of higher price and higher margins.
Okay. As a follow-up question, I would like to ask if you raised prices during these two months, I am talking about July and August of this year, and what is your strategy overall regarding price increases in the second semester?
We do have a sort of a schedule of price increases. I would not be able to answer you now precisely what exactly price increases have we done in which country and for which market. But I can say that we are currently revising another round of price increases. The answer is that we, you know, we do plan to keep increasing prices, because on one hand, we have the cost inflation pressure. On the other hand, we also see that in some markets and in certain price segments, our competitors have moved upwards with their shelf price, which gives us room to also follow them without being impacted on the volumes.
Okay. The last question I would like to ask about some acquisition plans in the second semester, if you had one, and which it is.
Of course, whenever we will be successful in closing a deal within the acquisition of or the M&A deal, of course we'll publish this through a current report so that all our shareholders get knowledge of this at the same time. Something that I've said many times and I well keep saying is that perhaps the front end doesn't reflect the effort in the back end. We've done some deals. We've acquired this Vinoteca Gherasim Constantinescu in Constanța, Romania, which is 55 hectares plus another some hectares for planting. We've done some acquisitions, but not necessarily the as you would call the traditional M&A, which is acquiring a player in the market and having some strategic impact from that.
Also, of course, the top line and the bottom line impact from that. What I can say is that we are working hard on this and it's an important component for our growth. We don't take it lightly or give it a low priority. No. This is quite a high priority for us. We're working hard to deliver to you such an inorganic growth. Rest assured, you know, we're working hard on this, and whenever there's a transaction or something that we need to publish to the market, we'll do that as soon as possible.
Okay. That's all.
Can you detail please the profit tax structure?
Excuse me. The profit?
The profit tax structure. Actually regarding the rate of profit tax. It is Romania or it is the.
You mean tax? You're saying tax?
Yes.
Victor Arapan, our CFO, can correct me if I'm wrong, but this overall we're looking at 12% in Moldova and 16% in Romania, corporate tax.
Okay, thanks.
One final question from me, regarding the sales in Moldova and Asia. Do you see the sales growth continuing the same pace in the following quarters?
Yes. So far, as the sales continue, yeah, we see strong numbers.
Thank you.
Good. Well, look, if there are no other questions, then, again, I want to thank you for being here. Thank you for being a part of our shareholder base. Perhaps we'll see each other on the thirtieth of September at 5 -1 2 for our Investor Day. If not, at one of the upcoming investor events, later this year. Thank you all again, and I wish you a very good day further.
Thank you. Goodbye.
Thank you. Bye.