Good afternoon. And, thank you for joining us today to discuss Pukar Winery's twenty twenty four preliminary results. My name is Evgeny Baldag, and I'm the Investor Relations Director at Pukar. And today, we'll walk you through the key financial highlights, operational developments, and our outlook for 2025. But, before we dive into the details, I would like to thank you, our shareholders, for their continuous support and our team for their hard work and dedication.
To our agricultural team for taking care of more than 1,800 hectares of vineyards. To our production team, which transformed by exceptional grapes into an amazing wines, sparkling and brandy. To our commercial and marketing teams which make our wines available in over 40 countries over the world. And of course, to the finance team which managed to publish the results three days ahead of the Bucharest Stock Exchange deadline. And the last but not least, to each of those over 800 group employees who stand behind Poker's success story.
Please consider that this call may include forward looking statements based on current expectations and assumptions which involve risks and uncertainties that could cause actual results to differ. The financial figures discussed are unaudited and should be read in conjunction with the full report in package available on our website and on the website of Bucharest Stock Exchange. So participants are advised to review all disclosures before making investment decision. So, I'm pleased to introduce our speakers, for today. Alexandre Philippe, Bucare Group's Chief Executive Officer and Anatol Belybov, the Group Chief Financial Officer.
Additionally, there is an extended team of senior executives and non executives on this call and we together aim to provide a comprehensive overview of a company's result and outlook. That being said, we can get started. So Alex, the floor is yours.
Super. Thank you, Eugenio. One housekeeping comment, please shoot questions in the chat as they come through. We will have a q and a session, at the end of the presentation. You can keep the questions for them, but you can also send them in advance and and, the different colleagues can start preparing the the answers.
Just to remind ourselves what we're set out to do as communicated last October in our Investor Day, we are set out to build a global winemaking champion focusing on indigenous grape varieties in what we call New Europe, which is fundamentally Central And Eastern Europe. We are building the foundation of such a champion. So everything that we do has a dual perspective delivering short term results in line with expectations, but also building the foundation for a bigger and more solid company going forward. And this is an important point to make because many of the investments that we make, given the specific of our industry are long term investments, be it in our vineyards or in our winemaking capabilities. These are long term investments that we make every year with the ambition to build a global winemaking champion.
That being said, if we focus on recent results and short term priorities, just a few highlights and many of you might have listened into the previous calls when we when we presented the quarterly results. So this might sound familiar, many of the points. Commercially, we continue to develop new products, and to expand into new markets. And this is an ongoing effort that we were doing while also deepening our presence in some of our core markets like Romania. We were very proud to have now as ambassador, Michel Cescu, which is the country's most distinguished football coach and currently the coach of Romanian national football team, a legend in the in the field.
He's been coaching for more than than fifty years now, and he hopefully might be the oldest coach qualified to the World Cup at the end of this year. So fingers crossed for Romania and for Mr. Lucescu. In terms of operational performance, financial results for full year, EBITDA reached $107,000,000 net profit $57,400,000 20 8 percent EBITDA margin, 15% net profit margin. Net profit performance affected by several one off elements that we will explain in detail when we get there, so I will not insist too much here.
Just mentioning one of them that you should know if you follow the previous calls, which is the the consolidation of EcoSmart, our waste recycling company. Now it's it's complete in terms of development, strategic acquisitions, both in Moldova and in Romania, we've added 200 hectares of prime vineyards, both in Purkar and in Dallumare. So Timbre is located in Purkar, and Dalomare, our core winemaking region in Romania. We've expanded there. It's an ongoing process there.
We will continue to look for additional opportunities to expand again with the mindset on building a future platform for growth, expanding our production capabilities. Ecosmart mentioned we have a recent 01/28/2025 decision for insolvency, and as a consequence, the consolidation from the group. You know, corporate affairs, you, again, if you filed the company, you might have known we have completed the transaction from Mr. Bostan, the founder, and myself in the CEO role. Mister Bostan is actively engaged, supporting, myself and the especially the winemaking team throughout this year.
He's actually currently here at Portcari with the winemaking team tasting our 2024 vintage that we're about to bottle soon. Maintained the indexes presence, paid the dividend, and we've also added one market maker Intercapital as of 10/01/2024. Now if we dive deeper into the commercial results, so as I mentioned, presence in our core markets in Romania, wine events, also music festivals. We had a first sponsorship in Jazz in the Park Festival in Cluj. We will continue to be there also this year and we will soon communicate two other leading blog pasta festivals that we will sponsor this year.
Marketing campaigns I mentioned Michelo Cescu. We also launched a new collection of wine Sapiens. Multiple awards for Prokari. We continue to win medals and we also communicate about them. We will have a new campaign for Easter in Romania at the March.
Otherwise, in terms of recognition of our quality, we've been, we were nominated the best winery in Moldova in 2024. If not mistaken, this is second time in the last three years. I think we were previously awarded the same award in 2022, so you can see there the consistency in in in the production excellence and also it's a recognition for our ability to to sell internationally our wines. Multiple awards. We we singled out Decanter because it's a leading competition, but also several others.
If we move on. Yeah, an important priority for us launching of new products and expanding the markets. Good presence in Israel. We launched in addition to the the standard retail brands. We also launched Nocturne, which is our Horeca dedicated brand.
First entry into The UAE market, both with alcoholic and non alcoholic wine. We see a big opportunity for non alcoholic wines in The Middle East and we will expand there. Cote D'Ivoire, we launched Nideszanges, both still in sparkling wines. And also a new range in The Netherlands, a blend range called Dos Familias. Otherwise, new markets, Nigeria, Slovakia, Canada, just some examples.
We also communicated, I think, at the end of first nine months, first exports to Cyprus, Northern Cyprus. I think Q4 we even had the to the Greek part of the island. The first export multiple events in The US, Latvia, Serbia. So basically the 40 countries that that originally mentioned strong activity throughout the the key markets. If we move on, Evgeny.
Yeah, numbers. Core markets remain the same. Romania, Moldova, Poland, Algeria. You You see there fundamentally a growth across the board. Different speeds also reflecting our approach to managing profitability, and long term profitable growth in this market, especially the ones where we have, let's say, a lower growth rate.
There were also either investing in developing the market or managing the profitability of the existing ranges to ensure that long term we have the profitability that we need and we expect across the board. I think good news, Romania, it's not just Pukar supporting the growth, but also also Bardac. Moldova. It's a very competitive market with many, many local producers. There, we have both Porcar and Kuza supporting the growth.
There is a disrupt there was a disruption in the market last year. Fundamentally, the the challenges to the duty free channel, which is an important export, if you want, channel for Moldavians and foreign nationals leaving Moldova. Poland, it's a very tough market with competitive, very price sensitive consumers. And there, we're we're focusing on improving our profitability and growing the more profitable ranges within our portfolio. We're very happy to see that PerCard is is growing faster than the overall market, and we'll continue to prioritize that.
Bulgaria, you know, the wider distribution is showing the the results. We are also investing more in ensuring the visibility, not only for Angels Estate, but also for Perkar. Porcar is personally in the Horaca channel, so we're we're very happy with with the, you know, evolution of Porcar. We also started developing specific products out of our Bostavan winery for Moldova for Bulgaria, So that's why we had the first delivery in Q4. The other markets, Czech Republic, Slovakia, solid, solid growth.
Asia, very good momentum in Q4. The rest of the world, these are more, let's say midterm bets where we expect that volumes will pick up throughout the next years. We started first deliveries in some of these markets and we expect, pick up renewed orders with with higher volumes. In terms of brands, you know, our flagship brand, Burkard, growing very nicely. Angels Estate in Bulgaria also growing nicely.
Domeni Lekusa, growing both in Romania and Moldova. Bardar with the challenges that we indicated in the past, relatively low growth in Moldova in a very challenging pricing environment with multiple competitors getting into promotion wars, where we try to avoid getting into such competition because we want to preserve the premiumness of the brand. And there for us, the priority is also to develop additional export markets such as Romania, but also Nigeria, for example, where we can export profitably our production. For BARDA in particular, given the specifics of the category, there is no short term pressure in, let's say getting rid of of volumes because actually brandy ages very well and it increases value with time. So there we have a more maneuver space to to ensure we have the right commercial opportunities for for our brands.
If we move on, I think, into the details, Anatol, if you wanna take from take over from here.
Thank you, Alex. Good afternoon. Yeah. For sure, apart from a stronger, let's say growing core business line. Yeah.
Total revenue increased by 3% year on year. And for sure, it's important to mention that that, yes, the decision to deconsolidate or discontinue EcoSmart activities have impact on total year revenue growth, yeah, 3%, yeah, or in 2023, EcoSmart count for 30,000,000 revenue, or it's more than 8% in 2023. That's why this have impact on growth for 2024. Also, this this is an impact on the gross margin. Yeah, you can see that in 2023 EcoSmart, represent half of the group profitability.
That's why, yeah, after the consolidation, this help us to improve average in 2024 approx one percentage point our gross margin. If we speak about core wine business, yeah, you can see that in 2024, we managed to increase by 4.5 percentage point our margin. Yeah. And here is important to maintain mention, let's say, two main contributor. First, it's about pricing and mix improvement.
Yeah. As it was mentioned in previous slide about product performance and county performance. Yeah. We managed to play with healthy mix. Yeah.
We managed to change our price, yeah, in order to increase average price at bottom. Yeah. And this help us to to improve profitability. In the meantime, yeah, we observe reduction in cox rate. Yeah.
Apart from shifting production of less expensive wine, yeah, from 2022, '20 '20 '3, also our team managed to negotiate with our customer and have cheaper price for bottle, yeah, for cork. And also, yeah, we managed to improve production efficiency. So altogether help us to improve profitability in terms of gross profitability. Now moving to sales and general admin expense for sure. Here it's out of question and I will be here to explain.
But overall, total SG and A or OpEx reached €107,000,000 registering 31% increase year on year. Yeah, specific for marketing and selling, yeah, here, the biggest contribution of increase is coming from trade and marketing. Investment, yeah, which increased 27% year on year. For sure, our team was focused to improve, yeah, and maintain our brand awareness, yeah, to support our promotional activities. We focus in trade execution, yeah, and all these, let's say, marketing initiative have impact on total marketing spend.
Salary cost, yeah, increased 29% year on year. Yeah. Here for short, next slide will give more, let's say, details. But, yeah, here first impact is salary inflation. Yeah.
Team expansion and implementation of management incentive plan twenty twenty four, twenty twenty seven, which was approved by General Faldermietin. Logistic cost also increased and this is in line with our strategy and vision to grow in export market. And one important point here is implementation of Retturo, which have an impact of R2.4 million. This is part also of marketing and sales expense. General administrative cost, yes, also increased by 31% and now account close to 30% in total revenue.
Let's say here the contribution of the increase is coming from salary related costs. Yeah. And half of this cost is driven by implementation of this management incentive plan. Yeah. And in the next slide, I will show more details, but it's important now to mention that we have management incentive plan in terms of share awards and stock option.
And this stock option isn't one off cost, like Alex already mentioned. And we have all these costs in current year driven this increase in general and admin cost. Moving to other income, yeah, no, here, one second. Moving to other income, yeah, we registered R8,000,000, yeah, which is mainly accounted for rebates from our customer, which is include also income from, let's say sales of different fixed asset and also adjustment of prior year provisions. For sure, before to move to Edida, I think it's important to mention that our operational result, as it's stated in financial statement, the patient close to $83,000,000 and this is 12% increase versus 2023.
So our operational profit or result increased in line with, let's say, rate of increase for core business. Now about EBITDA. So currently EBITDA stayed at R107 million or 28% and net profit at R57.4. In the next slide, I will show more details for sure why it is lower versus prior year minus 10%. In the meantime, EKGOS market consolidation, EKGOS thirty one December twenty twenty four, the group make the assessment based on IFRS 10 and conclude that there is no control over Ecostat.
That's why we deconsolidate from the financial statement and this had an impact of 4,600,000 loss. If we, let's say, recalculate EBITDA and net profit, we can see that our normalized EBITDA is $112,000,000 or 29% and our normalized profit is close to 62%. Now, I think it's also important to have a look on the next slide. Once again to let's say to state that our gross margin is improving over the last eight quarters, yes, and for sure our operational decision, yes, are here to continue this trend of improvement, yes? We focus on the right growing question, meaning pricing and mix, yes?
And also taking care about cost special now in the current environment when costs became more, let's say, fluctuating. And the next slide, yeah, which will, let's say, explain in more details how our profitability, let's say, evolved during the year. So in 2023, yeah, we finished with SEK 64,000,000 profit. Yeah. In 2024, we account for additional close to 30% in gross margin.
Yeah. And we already mentioned about this. We became more efficient and we have also other income close to $8,800,000 If we exclude, let's say, increase in Warpicks, which is close to $19,000,000 Yes, we have also very strong negative impact coming from agriculture. Yes, we already mentioned in previous call that the current situation 2024, it was not the best. So, yes, we have lower, let's say, quantity of grapes.
That's why we registered a loss close to 7,200,000.0. Also, yes, this prior year we have several one off yeah, cost, which we have just in 2024. This is, because it's tax. Yeah. So, you can observe in our financial statement that in tax, we increase versus last year more than 80%.
This is because in prior year we have one off adjustment of profit. Yeah, in our internal financial statement for 2023 we put close to SEK 12,000,000. After some revision, yeah, it was reduced to SEK 7,000,000. That's why this make an impact close to 6,000,000 year on year variance. This continuation of Tecosmart, which is one of impact of 4,600,000.0 and also implementation of management incentive plan specific stock option plan impact which is 4,000,000, yes?
So like for like for sure you can observe that our net profit with this we found this one off, it was it should be higher than prior year. Yeah. And also ForEx and other costs, yeah, which impact, let's say, decrease in our net profit result. So once again, very important slide to mention that current year, it was highly impacted by this one, of course. And about balance sheet performance, yes, here you can see that still, yes, we have a very good strong position.
Yeah. And we are able to finance our investment strategy. Yeah. With the current cash ratio, yeah, it's similar like prior year. We are playing to have enough liquidity, but also, yeah, to cover we are looking to, let's say, not pay too much for the credit.
In terms of net debt, yeah, it's increasing. And for sure, this is in line with our strategy to CapEx strategy and invest in our production capacity. Net debt also increased, but it's still in the range of the market. Yeah, and EBITDA at rate of 1.72% slightly increased because of increase in the our debt exposure. Thank you.
Okay. Thank you, Anatol. Just to comment on how we fared versus the guidance that we had given. It's fair to admit that we failed to deliver on the revenue growth ambition. You see there, fundamentally, the difference comes from the growth in wine revenues.
We were planning to end between 1520%. At the end of the year, we ended up with 13%. And this has driven also the overall revenue growth accordingly. We were counting fundamentally on several export transactions to come through at the end of the year. This didn't happen and also the growth in the core markets was slightly below what we planned.
EBITDA, and I think this is has been an important focus for us. The profitability has been towards the higher end of the range for us. So profitability has been a core element of our strategy and focus on our delivery. And we're happy to reflect that we have delivered on this. And I think for for us profitability, as mentioned, is a core element of sustainability of our growth and will continue to be so.
Now if we move to the guidance for 2025, we have now that EcoSmart is no longer part of our activity, we're only looking at total revenues, which are fundamentally revenues from wine and ancillary activities. Our ambition is to achieve growth between 1217%. You see, the range is driven fundamentally by the uncertainty of the markets that we operate in and the world that we live in. And many, many things that can impact that, and hence, we are taking a cautious stance. But the growth should come from growing the core markets And there we have clear plans to expand our product portfolio and improve the distribution and the turnover of our core products.
We are looking fundamentally to launch new products, especially with above average margin. So improves the overall profitability of the portfolio while investing in developing new markets to constantly diversify and strengthen the revenue base. So we have a diversified footprint. The latter point, it's something that takes time and can short term have an impact on both our operating cost and our margins. And to give you an example, one of the things that we've done at the end, as of, let's say, beginning of this year, we have expanded our international sales team with local representatives in Poland and Central Europe on one hand, North America on the other hand.
This is an investment that we're making in growing significantly faster mid term than we have been able to do so, thanks to the local presence and professional network that our sales colleagues should build. The cost, of course, comes first and then we will reap the results. Similarly, we're investing into market launches with new distributors in markets such as the ones I mentioned before. Of course, there is initially an investment in paid marketing communication in those markets to support the takeoff of the volumes in those markets. And overall, we will manage the profitability of the portfolio, taking into account these different factors.
You see that we are consistent in our profitability, estimates and ambition, despite what we have communicated already to be more expensive twenty twenty four vintage. We believe we have the instruments to manage the impact on the cost, both through the mix with previous cheaper vintages, but also with both cost management and revenue management actions. We have already started passing on some of the cost increases to our clients at the end of last year and also underway for the first half of this year. So we expect to see the impact of that in the remaining of the year. We are looking also at operational efficiency.
We have started digitizing our operations and this is an ongoing process both in terms of the scale of the processes that we digitize, but also the rollout of the new processes to the different entities and operations that we have across different markets. So, we remain positive. We remain optimistic that we will achieve our ambition and we are very mindful of the midterm commitments that we made when we presented our 2027 strategy. We continue to invest, and we are confident that the both the commercial investments that will make now, but also the investments in capacity will show results, mid midterm and we will also one of the things that is very important for us is how we transfer the additional added value that we create through additional sales into net profit for the shareholders as we reap more scale effects from bigger sales. As I mentioned several times, investments are not linear.
You need to make them in jumps. So we're expanding production capacity. We're investing in vineyards. These are not linear investments, but rather taking us to a different scale. And we expect to also see the impact of this, increased scale in the next couple of years in line with the midterm target that we communicate.
I think now it's a good time to open up the floor for questions. I don't know if or, generally, if you already received some questions where people have indicated they're interested.
Let's have let's check the chat. Indeed, we have received the one question. So are we going to launch a sparkling wine product or will we make acquisitions?
Okay. I guess we're referring to acquisitions of sparkling wine production. So first of all, just to clarify a few things. We are already producing our own sparkling wines at Burkhart, the classic method sparkling wine. And there, I think we launched it, generally, 2019.
I don't know when we had the first production. We've been growing our sales, and we're now looking at expanding the production capacity in line with the with the demand. And sparking wines for us, but for car remain a priority because they're complementary to our core, still wine offering and also offer higher than average margins. So we will continue to develop that both commercially and from a production perspective. At the same time, for other brands in the group, we are already selling what is called Sharma method, slightly cheaper sparkling wines that we currently produce with third party producers, and we sell under our own brands.
And the plan for us is that as volumes consolidate and we have sufficient volumes that we can already produce ourselves, we will gradually make the switch and invest in our own production capacity. We're assessing, the business case for this and figuring out what is the the volume and the moment where it makes sense, mindful that we need to optimize the CapEx, in line with the different priorities that the group has. So at the moment, we are, very happy and focused to develop the brands, and we have the, let's say, the consumers behind our brands. And midterm, we will consider the opportunity to to switch to our own products. And we believe that it's more important to have the customers at the moment than than the production capacity. I don't know if there are other questions.
Yeah. Alex, thank you for for the answer. So, dear participants, you can address more questions. You can use either the chat or you can unmute yourself and address the question directly. Yeah.
We have additional, questions. So from Adrian Hornia. Good afternoon. Do you expect higher negative impact cost from a warranty return system in Romania or it's not meaningful? I
think it's also to a certain extent public information what is happening with the warranty system. Go ahead.
Yeah. Yeah. So so we are already received official communication. Yeah. That's starting from 2025.
The cost increase in average by 10%. For sure, this was not expected for us. That's why we update our budget. Yeah. And we will take some corrective measure in in terms of, let's say, as Alex Alex mentioned to take some correction in terms of pricing, which will be transferred to the market, but also to find other opportunity for sale.
So, yeah, it's already plus 10% higher, let's say, fee in terms of But once again, the cost, we will try to minimize the impact in our margin. We'll take some action.
Any other questions? From Mark Gordon, James, could you provide more granular explanation for your revenue growth target for 2025? How will it break down by brands international markets?
So I think, this is, I'll try to give a satisfactory answer. I think for us, the story is as follows. If you think of absolute in relative terms, we expect new brands, new markets to grow faster or smaller markets to grow faster than our core markets. That being said, contribution in absolute terms at the end of the year, given the weight that both, let's say, Romania, Moldova, Purkar, Bardar, Kere will come in absolute terms from these, let's say, three, four markets that we indicated before. So Romania, Moldova, Bulgaria, Poland, and then Purkar, Triptura, Bardar.
The, it's just mathematics. Over time, we plan to reduce the weight of of these markets and and this brand short term, and we plan that for this year, export will grow much faster. So the rest of the world, the weight of the rest of the world should be bigger at the end of next year. That being said, contribution in absolute terms will still come from the core markets. How do you see Asian and North American markets in 2025?
So I'll take a very simple answer. We see them quite differently. We see Asian, which is fundamentally driven by China, on a more challenging dynamic. And I think we were looking at the numbers. 2024 volumes are below 2019 for China, so significant decrease in the market.
That being said, we're relatively small in that market, so we're not necessarily put off by the overall market dynamic. We still have our plans to grow, but it's a more challenging environment. North America, it's actually a bit of the opposite. We see good momentum. For example, we exported for the first time a significant batch in Mexico, and we're now very hopeful and excited to see the impact in the market because the products only got there November.
So we're now trying to see what is the market reaction and how how the follow-up orders will be. So North America, and that's why we also invested in having local presence, the presence in Canada and The US. It's actually a market where we see significant opportunity. We are already present both in Canada and in The US in addition to Mexico, and we are hopeful that we can, we can grow there. And that's the the ambition.
I think I see the question. So there's a question for Purkari and the core markets to which extent growth will come from volume and from from price. I think there is a third element and we are also counting on that. It's also the mix of products. So we are passing on some of the cost increases throughout the portfolio.
We are and it's a balance between volume and price, but we're also investing significantly in promoting more expensive products and that's a focus for us. And I mentioned Sparkling before We, we're focusing on investing further in communicating our Spark and pushing our Sparkling presence. We're also investing more in our Horeca channels where we have our specific offering with high margin. So that's the the element. And, one of the things that we're doing, it's we're also monitoring what we call the price index versus our competitors.
And we believe that we are moving before looking historically at what the index has been, we're still operating within what the standard price index has been. So we're making sure that we do not become too expensive for consumers versus competitors. There is a question on EcoSmart from Adrian. Not sure I understand it. New services, products.
I think we don't just to make it plain, we're not expanding into new lines of services, new products, and so on. We're sticking to winemaking and brandy, for core products, and we are the only services, if you want, are our hospitality services in Buckeye and in Chisinau. We might develop we have a plan. I don't know if it's gonna happen this year. We might develop also hospitality services in our other, wineries.
First and foremost, Angels Estate, also Ceptura, but this is from our point of view, you know, sticking to what we know.
It seems that we had a very detailed presentation because we received only a few questions so far. Yeah. In case there is if there are no other questions, we can say thank you for attending our conference call. Yeah.
I think that And I I mean, I think that, as always, we're available for follow-up questions if there are any. Eugenio and Victoria, we will also be attending several events throughout the next month. So hopefully, we'll meet some of you there. And, yeah, happy to to connect on on specific points at at any time. Thank you very much for for attending the call and for, following our company. Thank you.
You too.
Thank you.
Bye bye.