Ladies and gentlemen, good morning. We are delighted to welcome you to VIRŠI Investor Webinar. Today we are hosted by VIRŠI Chairman of the Management Board and the CEO, Jānis Vība, as well as Member of the Management Board and CFO, Vita Čirjevska. During the webinar, you will be introduced with VIRŠI most recent key activities and financial results, as well as an insight into company's future plans. After the presentation, we will have a Q&A session. To submit your question to the company, please use the Q&A window that you can find at the bottom of the screen. The recording of this webinar will be available shortly after the session. Now, without further ado, I would like to hand over to Jānis and Vita, who will proceed with the presentation.
Thank you. Good morning, dear participants of webinar. Today, together with Vita, we'll explain what has happened, all the positive things in 2022 with regards to our company. Also we'll obviously answer some questions and illustrate what is likely to happen in the future. Let me begin by maybe reminding what are our key business areas where we are operating. Obviously we have three business segments. One is convenience stores, second is fuel trade, and the third one is the segment which is newest. It's only, let's say less than two years old. It's energy segment where we are selling electricity.
That's a bit of background, but maybe let me start with what's a more global overview about what has happened in energy segment in 2022. Basically, if we define this energy segment in three parts, then we have fuel, we have natural gas, and we have electricity. Basically, with regards to fuel, obviously, a lot has changed after February 24th. Obviously, when Russia invaded Ukraine, there had been a huge amount of fluctuations in pricing levels of energy commodities. If you speak about fuels, then we see that once this aggression happened, Russian oil became, let me use a word, toxic.
Basically what it meant is that this market lost, at least in Europe, quite a significant amount of oil supply. Obviously, when you have problems in supply but demand is still quite high, then you have this pressure on pricing level, and these fuel prices increased relatively significantly. What we see in the last couple of months is that this situation has normalized, and basically there is even a decreasing trend in the fuel pricing. With regards to future, we don't know obviously what will happen, but in case there is economy, let's say, booming, obviously that increases this demand for oil.
In case the economy is not booming or even slowing down, then the demand is decreasing, and that could obviously put these pricing levels downward. One more thing with regards to fuel is worth mentioning is that after these February tragic events, obviously this all supply chains for oil products are becoming much more complex and much more longer, which means that also that has an impact on this pricing effect. Okay, that's about fuel. With regards to natural gas, obviously here the fluctuations have been much, much higher than in fuel. We have experienced pricing level for natural gas around 20 EUR per MWh in, let's say, history, historic years.
What we saw this year is that the increase was almost like 10 or even 15 times at some point. Obviously the main reason for this was again, this situation with Russian invasion, where this natural gas product has been used also as a political instrument. Therefore, there was time when this price was huge, this price increased. What happened in the second half of the year, we see that we have experienced quite warm winter. We also see that there has been a slower economic growth in Asia region, which is reducing this demand for natural gas.
We are currently therefore seeing that natural gas pricing level is actually decreasing, and it's already today below EUR 50 per MWh level, which obviously is a very good thing for energy market as such. Also worth mentioning is that obviously in this in Finland there is a new terminal starting to operate with regards to LNG. This is of course, reducing this risk of supply for Baltic region in future. The third and final one is electricity.
Electricity is actually very much correlated with what we see in natural gas market because electricity is a very significant part produced from natural gas. What we see is that again, when the natural gas prices were highs and electricity also was extremely expensive. Now in, let's say, last couple of months, we see that the electricity pricing is around close to EUR 100 per MW, which is obviously much cheaper than it was in maybe summer. Still it is around two times more expensive than the historical average. Yeah, that of course also worth mentioning is that with regards to renewable energies, there is still big potential, especially in Latvia, but this progress is quite slow. We need to look how it goes in future. That's a broad overview about, this energy market. Vita, our CFO, will tell you more about, financial results.
Getting on to VIRŠI results, we see the typical two graphs that we are already used to in VIRŠI presentations, and also the tendency that we are used to over the past years. We see that the net profits for the reporting period has grown by 56% in 2022, and we see that EBITDA has reached actually the highest growth over the past periods, and it's +27% or reaching EUR 12.3 million.
We also this time present you in separate color, light green color, the effect from the financial instruments, the derivative instruments for the electricity purchase from 2021, where the effect on the net profits has been EUR 3.1 million in income, in financial income, and in 2021, it was EUR 1.1 million. If we exclude these effects that are highly correlated with the electricity price deviations, then we see that the actual growth also for VIRŠI has been significant. It's 31% in 2022. These results are special also for the market we are acting right now, Latvia, because GDP in Latvia has grown in last year by only 2%. We are under really high inflation effect.
It's 17.3% for last year. Also there is a really high pressure from the labor market over the past year. Managing all the effects and the costs, we see that actually, these growth rates are comparable to, like, the startup. Actually, the company is already in the 28th year. If we look at the other financial measures and at the return on equity, of course, including also the financial instrument effect, these ROI are growing very steadily. Also looking at the effect when the ROI is adjusted of the financial instruments, we see that our rates are really stable and at high levels, so it's above 12% over the past years.
Our balance sheet at the end of the year is well-balanced, we have a high growth strategy for the next periods. The CapEx for the next years are at really aggressive strategy. We know that over the 2022, we had periods when we needed to adjust our cash flows due to changes in legislation and bio-components. In the end of the year, we finished at very healthy and very, let's say, forward-looking position where net debt to EBITDA is 0.9. Further, Jānis with a more precise description on segments and how we reached .
Yeah. Also about key events in 2022.
Yeah.
What basically we think are the key events in 2022 is obviously the first one is this adaption to the new reality of geopolitics. We remember that we started the year with COVID, then we are having this tragic war in Ukraine, and then we are having also some economic issues in several countries. It's a very, let's say, tough tough environment to operate. We have managed to implement our strategy successfully further. We see that obviously we also have exited all, let's say, relationships with Russian and Belarusian counterparties, which we did already in early of the year because it's, of course, our obligation to do so.
What we also already saw in Vita's presentation is that we have very strong results. Not only our profit is increasing, but also our market shares. It's very important to know that we are able to grow market shares by also growing this profit, which is obviously a very good situation to be in. What we also have done in 2022, we are operating quite ambitiously to continue to increase our number of fuel stations. We have opened five new stations.
One is outside of capital city of Riga, but four of them are in Riga or near Riga, because in Riga we have still, let's say, less presence than we would like to have. What we are also having is that we are working currently on electricity charging project, which means that we have attracted the European Union funds. Not union, there is specific word which I always forget.
Mm-hmm.
We have attracted these funds from Europe, based on which 50% of this project is subsidized from Europe, and therefore we can move on. Let's say in roughly one year's time, we think that around 20 stations in our network will become points where you can charge electricity in a very powerful devices. What also it's important now that electricity business is continuing to develop, and we are very happy about results which is exceeding our expectations and also business plans. Currently, just to remind, we are doing electricity sales to business segment, but we are working also on this electricity product for private persons.
Of course, sustainability is a word which is important for any company, I guess. What we are doing is currently we have almost completed a project where half our stations will have these solar panels. We are also, of course, throughout the year, have done very specific actions to lower our energy consumption in our network, which means that we have made this efficiency much, let's say, better than it used to be maybe a couple of years ago. There is a biomethane project, which is obviously this green natural gas which we are working on.
Hopefully in, let's see how it moves, but hopefully in 2024, we will already start using biomethane, which in our mind is a very, very good option for these heavy trucks as a fuel. This is about 2022. If we speak shortly about each segment, I will begin with fuel. What is happening in fuel is that, basically, as mentioned, a lot of geopolitical impact on this, because of which supply chains are getting much more expensive and longer, and therefore the pricing for fuel products is increasing. What is also worth mentioning is that, we are, as you can see in the graph, we are growing our volumes in the sold amount of fuel. That is not turnover, it's sold amount in liters.
We are growing it by around 7% in 2022, while the market was actually decreasing by roughly 1%. We are we have been able to grow our market share quite significantly despite that there is obviously this increased competition in the sector, and we are experiencing many, let's say, price wars, how we call it, with other market players, but that's how it is. On the fuel, alternative fuel part, we are seeing that our CNG or compressed natural gas segment is continuing to increase even despite the fact that there was obviously a period of very expensive natural gas prices. We see that still the volumes are increasing, and that's a very good thing which we see.
With regards to market share of electricity cars, yes, it may sound that it's like a market is booming. Still, the facts are such that we are having around 4,000 cars in the market on electricity, the whole market is around 760,000. It means that currently electricity is only around 0.5%. It's not like a very huge business currently. Of course, knowing that in the future it will develop, we are as mentioned already, doing some homework to expand our station electricity charging points in our stations. Okay, we are going to store.
Yeah. About the store results. It might sound that, on utility side and the energy prices, it has been a challenging year, but in the store it has been challenging year as well. Actually, it has, it had a big target set on the, on the beginning of 2022. As in the last quarter of 2021, we opened four new stores. We had our expectations that the pandemic will be over. Not over, but the restrictions will be lower, thus we will have a better conditions for our clients and the, let's say, the demands will increase. It all turns around in February. We know all the negative effects and, let's say internal considerations of the clients and the stress they had at that time.
Also it had an effect on the inflation and the increased purchase prices for the store store products. At the same day, inflation was that high that it actually impacted our employees as well as our clients in the real wage sense. The optimism of the employee and the optimism on the client on the other side was decreased. There were two main struggles for 2022. First one was managing the quality products we set as a target for our customers and the quality offer we want to offer to our clients with a highly increasing prices and also with the different kind of challenges in the logistics for the product.
That was one core problem in the stores, but also within our employees. We had a real struggle on the labor market side, as in the end of 2021, we had a new market chain to enter the market, and of course, the competition for the employees was increased. We have over 500 employees on our fuel station stores. Of course, we had to focus a lot on what or how your employees feel themselves, what are the salaries, how we can motivate them. Now, in the end of 2022, we have found the balanced way for the products. The best offer, not challenging the quality of our very popular coffee and foods.
We have a quite motivated team, and we believe we'll succeed in the next period. In general, not to show that it has been a bad result year. Also for the stores, it has been a very good year. Year-to-year increase in VIRŠI standalone as such was by 18% at the gross profit level compared to 2021. Looking at the network from Wilson data, it the growth was 16.1%, whilst the other market, including VIRŠI, grew only by 12.6%. Thanks to our store team, and let's move on to next segment.
The third, our energy segment, which as mentioned is quite, let's say new, less than two years of operations. What we can see is that we have already successfully expanded our relationships with our B2B or business customers. That's like a first step because then the second step, what we are planning to do is our development of this product for private customers, which we hope to launch in second half of this year. What we also do is that we are having good relationships with our local Latvian electricity producers, which are producing this green electricity from several green sources like biomass, biogas and water and sun and so on.
We see that this is actually helping us to boost this volume and to make some operations also in this wholesale market further. Also, of course, it's important to note that this volume, as you can see in the graph, is constantly increasing of purchased and sold electricity. That means that we are heading good into good direction. We are increasing our, let's say, market share in some specific segments, and also being able to deliver cheaper electricity to our Group companies, which obviously you can see in this financial instrument impact in our financial statement. Yeah, that's about energy.
Thanks. We already touched the net profits and EBITDA growth. EBITDA since it has been a very good year, 27% growth. We already touched on our profit drivers. Looking at the turnover, of course, our key turnover and then turnover driver, this year has been fuel. It's still over 80% of the turnover. We know that in a profit sense, we have set this target in the IPO, that no matter the fuel growth, the rest of the segments could grow even faster and reach over 50%. Right now, still the fuel keeps the over the 50% margins. We know that in fuel we have fixed unitary profit.
In this year, whilst prices were growing with a fixed unitary profit, our gross margin has sacrificed a bit. In 2022, the gross margin for the whole portfolio was 8.7%. In general terms, gross profit grew by 37%, similar to EBITDA. We see that, although for this year and this fuel price, the margin had to sacrifice a bit. In a longer term, the economies of scales and the increased market share can give us benefit, and we are in a better position compared to our competitors and in a sense to our suppliers. Company as such continues to provide a pretty tough planning policy on the other costs.
I already touched the situation in the labor market. This has been one of the biggest cost drivers in this year. The situation in the labor market has been really tough for 2022, where we had to come back on the labor costs twice and understand what is the best offer to have the best service for the clients and not sacrifice with our employees. So, Profit drivers together with the cost planning has driven us to the increased profits as I as we presented already before. That, in a sense, will give you also increase in the dividends per share. In this slide, it's only a proposal from the management side, and this should be agreed in the shareholders' meeting.
Let's say the dividends payable is already presented for you net to the taxes. In the last year, we paid EUR 0.07 per dividend to our shareholders. All the shares that are distributed to the shareholders are net to the income tax. So income taxes are paid here in Latvia, and if you need further information right now for state revenue services in your location, please contact us directly for further information. For the next year, we see similar increases in profits. The potential dividend of EUR 0.11 per dividend for the 2022 results that is provisionally payable in the middle of this year. Let's go to the balance sheets.
The profit drivers lead us to the stronger balance sheets. This year it has been quite turbulent working capital planning, as prices increased, and this uncertainty in the market was huge over our debtors as well as our creditors. Looking at the inventories, we also had a task management with a bio-component in the middle of the year. All in all, we finished well, we grew our network by five stations, we are reaching now 70 stations. This year we have invested EUR 10.9 million in the CapEx and additional EUR 1.2 million in our associated companies. Main investment strategies went to the fuel station network, including CNG network expansion.
Additionally, we have driven in 2022 the strategic strategies for the improved IT. This is one of the strategies we would like to continue over the next years, and we see that this is one of our potential competitive advantages in the next period. If we talk about the financial streams to the company, we have used the same strategies as in past year, which is EUR 7 million loan from SEB, operating cash flows. In the end of 2021, we raised capital in the IPO in Nasdaq, and we still are targeting it to meet the aims set, and the investments continues.
In 2022, as Jānis already mentioned, we have attracted AFIF funding or European Union's Alternative Fuels Infrastructure Facility funding as additional component to VIRŠI financing portfolio. Similarly, right now we look also to the digitalization options from external financing to drive our growth even faster. Let's go to the liability side. Liability side, we see that we have growth equity-wise and liabilities-wise about in the same levels. I should mention on the equity side that there has been first period for dividends payout in public, and it was EUR 1.1 million last year as a net effect from the equity.
The other material effect is by raising the profitability of our network. Once in three years, we revaluate our company's network station properties, and we have recognized EUR 6.8 million increase in the value of the company's assets at the same time in the valuation reserve in 2022. Speaking about the balancing our investments and assets to the liabilities, we see that our liquidity ratio, although the year has been tough, is now around 1.3 and has increased over the past years, as in 2020 it was only 1. I think it's a good position. We have still strategies and aims to reach according to IPO target set. We are in a good shape to continue. Yeah.
Yeah, definitely. Yeah, with regards to our strategy, what we see is that during IPO process, we, let's say we promised in 2024, specific targets to be reached. I guess now is a good time to look at the picture because 2022, it's almost like a midpoint. We can evaluate how we are going. Yeah, in terms of EBITDA, we are basically moving, I would say very strong. It seems that we still should be able to make the 2024 target. With regard to profit, we are also seeing that we are actually already over achieving this 2024.
Again, let's please remember that around EUR 3 million in this 10.3 was coming from these financial instruments. With regards to electricity. In reality it's around 7.3. It's still very, very strong performance, and we are continuing to chase our EUR 9 million target for 2024. With regards to number of stations, we are currently again around in the middle, so around 70, up from 60. And we are should be able to reach this 80 station target.
Obviously we are working on other things like alternative fuels, where we are still working on this compressed biogas or biomethane project, and also in future, looking at these LNG options, that's on top of electricity and CNG, which we already have in the moment. Also to remind we have this specific target where we want to diversify our business model, and we want to, I would say, decrease this importance from fuel in our business model, and we see that this trend is actually going according to the plan. We see that currently around 44% from gross profit is coming from non-fuel products, and we expect that that should increase more than 50% in 2024.
Regards to business diversification, we discussed that we need this energy segment to be set up, and we have already done it, at least partly for this business segment. We will move on to this private customer segment. Meanwhile, we are also working specifically to become more and more attractive employer of choice.
Mm-hmm.
Yeah. Okay, that's a, that's a big picture, of our objectives, and, I guess, we are pretty much, having this, formal part ended, and we will welcome any question.
Yes. Thank you. All questions are welcome through Q&A box that you see beneath the presentation. Please join the discussion and ask your question to the company if you do have any. The first question in line: Could you please tell about the company's strategic development plans?
Yeah, I guess we are quite ambitious, but the three main things which I would like to mention is, firstly, we will continue to grow our network. We want to become in next, I would say five years, somewhere between 80-90 stations in Latvia, which is obviously still a way to go because currently we are having 70 stations. Bigger and bigger focus will be on this store business, because obviously the margins are quite good in store, and we think that there's still good potential for this. Secondly, as already indicated, we are moving to develop our energies segment much, let's say, stronger.
We are planning to launch this private customer electricity business this year. In 2024, most probably, we will also try to put natural gas offer on table so that we have all energy products like fuel, gas and electricity in one package to our customers. Certainly, again, as already mentioned, we want to strengthen our position on alternative fuels, and therefore we are already working with electricity, CNG, but in future also on biomethane for heavy truck segment. That would be like a big picture. Of course, there is much more details, but I guess that's the answer, yeah.
Mm-hmm. Thank you. The next question is a combination of two. What will be the dividend payout policy for this year? Can you please comment on the stagnation of the share price value?
The dividend payout policy was as indicated in the presentation. It was set before the IPO at 20%, which we believe is the balanced ratio to balance the further development and the payout of the company. Further information and details was also over the presentation to the potential amount payable. Regarding the stagnation of the share price, if we look at the VIRŠI stock performance in First North, we should consider the bigger picture and the stock exchange fluctuations or indexes performance in general. We see that in First North, we actually are the second performer in over the past 12 months. If we look at the Baltics indexes, we are also doing very well.
We believe that looking at VIRŠI, where we are in a very stormy situation, in a stormy market, we're dealing with utilities, having presented you a stable price in the stock exchange is actually a good indicator. We also believe that the price should be higher, we need to take into account the external factors as well for this current period.
Mm-hmm.
Thank you. What are the further development plans of the Skulte Terminal, and what is the role of VIRŠI in it?
Yeah. It's quite, let's say, complex and topic we can speak for hours about it, but I just give a very high level, let's say, situation. Just to remind, we purchased a 20% stake in Skulte last year. In September, we received a national object status for this project. We agreed with a strategic investor to present our, let's say, plan government. Last week, it was also quite surprising to us that government basically says that now they they want another proposal for from us because they think that the demands which we have, let's say, put in this offer are too extensive.
We don't agree, because we think that these demands are very, let's say, limited in comparison to other terminal stories in other countries. Basically, what is happening in future, I guess, there are a couple scenarios. The one scenario is that we somehow agree with government and then meet some compromise in order to continue to work on building this terminal. Second option would be that government would build this terminal on their own, but it's very, let's say, expensive for the national budget. Also it's very, let's say, in terms of this term, it means that it will basically demand much more years than if it will be done by private investor.
Thirdly, it's also possible that we agree with strategic investor and our key customers that we are moving on without any government support. That is very, let's say, challenging scenario. We are also looking at it. Probably also question which needs to be answered is whether VIRŠI has some impact in case this project stops. The answer is no, because we have not invested material amount of investment in this project. The game plan is that we would have more material investment once we have agreed with the government, and project would be already started to be building and kicking off. Currently, even if the project stops, let's put like this worst case scenario, let's call it that.
I can assure that there is no material impact to VIRŠI Group because we have not made material investments in this project currently.
Thank you. Growth is good. Can you give an indication of growth per station, meaning ignoring the overall growth of the network? In general, what is growth of profitability per station in last year?
Okay. Actually, the KPI as profitability per station is what we are not presenting to you and so we cannot provide such information. In general terms, if you look at the growth of the network, which is five stations and reaching 70, and if you look at the growth rate of the profits, then you'll see that the profits grow more aggressively than the network stations. Also, if you look at our, let's say, targets, let's say, outside the station networks and investments targeted, they are not so focusedly related to the network station. Of course, they go hand in hand. This is a base and this is a, let's say cash cow for our business and further development. Looking in the future, there are more things to achieve besides the network stations.
Sure.
Yeah.
What are key areas of growth for 2023, meaning this year?
Okay, I can take this. Obviously, we see that the fuel market is actually, I will be surprised if it is very growing in Latvian market. Most likely it will be more stagnating, more in line with the trend which we see in last couple of years. There will be probably no significant decrease, but also no significant growth. This growth in this fuel segment, yes, there will be some because we are gaining market share, but it will not be like not very significant for us. What we see that the growth will actually come from two other segments. The first one is this convenience stores, where we are quite aggressively put some targets which probably we cannot comment in this public currently.
I can assure that there is a quite ambitious target for this convenience stores. The second one, obviously, is this energy segment where we are also seeing quite a good potential to move on and grow further. The short answer is convenience stores and energy will be probably the main sources of growth in 2023.
Mm-hmm. Jumping from growth to key challenges, what would be the key challenges to achieve growth in 2023 or to achieve the targets of 2024?
Okay.
Continue the same question.
Basically the same, just from the other end, I guess. Basically, I guess, the key challenges obviously are. Well, several of course. One is overall market situation because there is an extreme competition in fuel market. Yes, we are growing the market share, growing profits, but it's very hard to do that because market is fighting like crazy.
[audio distortion].
Yeah. Yeah. In a way, yeah. That's probably one challenge, but we are confident that we will be okay on that. The second challenge, obviously, I guess that there are some financial costs. For example, our funding cost is increasing. Of course, we are still having some interesting situation in electricity market. We are kind of hedging with a lower price, but still, you know, there are some interesting situations. The last one, of course, is very significant, is labor market, yeah. Because labor market, we see that this particular segment which is working in this networks, this is very much the same segment for which each retail chain is fighting. Of course, it will be pushing, probably this cost even further in next years, and we should be ready for it.
Mm-hmm. How much is the Euro amount of the investment in the LNG terminal at the end of last year, meaning 31st December 2022?
If you look at the annual report, actually from the associated companies' note, you can drive the amount. The amount actually is immaterial amounts to the investment done. I think the most investment from our side is the, let's say, intelligent investment in our belief.
Yeah.
The idea, and actually the time and energy spent on the project.
By the team.
Yeah.
Yeah.
Yeah.
Thank you. With this, we are over with the Q&A session. All questions have been answered. I will remind that the recording of the webinar will soon be available on VIRŠI announcements. Please follow VIRŠI news to find out more. Participants, thank you for joining us today, and have a nice day.
Thank you.
Thank you.