Good morning, dear listeners. Welcome to Akola Investor Relations Conference. I'm Emilija from Nasdaq Vilnius, and I'll be moderating today's event. We will start with the presentation from the management, which will be followed by the Q&A session. Please be informed that this webinar is being recorded and will be available on the Nasdaq Baltic YouTube channel. I encourage everyone to submit questions in the Q&A section at the bottom of the screen. You can submit them either anonymously or with your name. With that said, I'm pleased to introduce today's presenter, the CFO of the company, Mažvydas Šileika. Please, the floor is yours.
Good morning, everyone, and thanks for joining me this morning. My name is Mažvydas, and I'm the Group CFO of Akola Group and a board member. Please be aware that, of course, the presentation can have, or I can express directly or indirectly, some assumptions or forward-looking statement, that's, of course, only the current view of the management. So I'm with the group since 2020, four years now, and I'm going to take you through this presentation this morning. So, Akola Group consists of 63 companies as of nine months of 2023/2024 financial year. We actually are cleaning up a bit our structure. We have seven companies less than basically a year before.
We want to close companies which are not operating or optimize our activity by merging companies together. We have already merged four companies into one in Latvia with our poultry operations, and now we have one company called Ķekava Foods there. We closed three companies on the go in the quarter, and we acquired a minority share in a start-up called OMG Bubble Tea last quarter. That's not in the company list. We don't show that in our company count because we have a minority stake, but it is now actually a significant or important part of our business development going forward. After the reporting period, we made another minority investment into a drink start-up, which is called Brite. That's also not represented here.
And we have started reorganization of one more company in this quarter, so this after reporting period, and when we merge the companies, we'll have one more company less in the structure. Looking at the main ratios after nine months of this financial year, we see that there is some stabilization in the performance of the group. If we still compare it to the last year, we are lower both on sales and earnings. However, you can remember that last year was a bumpy ride for the group, when we talk about changes in commodity prices, and the volatility in the market was very big. Last quarter, we had a significant net loss.
This year, we still have a net loss, unfortunately, but it's much, much lower. If we look to our EBIT margin, it stands at 2.2% this year versus 2.7% last year, so the gap is not that big, and it's, much more than five-year average. However, when we look at return on capital employed, unfortunately, it's much lower than last year, where it stands at 4.5%, and it's below the five-year average. We will see how it, transforms to the end of the day. However, at this point now, it is below, the five-year average. P/E, it's very high. Of course, we have low earnings per share, due to, calculating the result on the 12-month rolling basis.
The EPS is only 0.04, but if you look, of course, our net profit is lower compared year- on- year, quite significantly, and we'll talk about that later, why did this happen. Balance sheet looks strong. Balance sheet value is decreasing. Now we are below EUR 900 million. At the peak, we were close to EUR 1 billion, but with lower commodity prices as well lower inventory on our books, we see that we are going down, and this is what's actually expected by us. Borrowing base, if we calculate on the whole group level, is also very conservative.
It stands at 49%, so meaning that we have less inventory on our books, but as well, that we have quite a lot of equity of our own, which we are using to trade main commodities and other and other stuff. At this, at closing of this quarter, we had EUR 490 million of available credit lines, and we performed EUR 29 million of CapEx. This year is intensive in CapEx, and we will have more to come in the last quarter. As you know, we're building two, three factories, but of course, not everything will be finished in this financial year. There will be a rollover going forward.
Due to the lower overall debt position, long-term debt, including leases, has now a significant share, a more significant share. It is 42%, and the total debt overall is EUR 311 million, including leases, at the end of the quarter. Overall, group has EUR 303 million of its own equity. Capital ratio remains very solid and strong. It rebounded from 30% to 35% due to the decrease in the balance sheet total balance sheet value, but of course, as well, that the company is profitable and adding up to the equity. EBITDA on 12-month rolling basis is EUR 52 million euros for the quarter.
So you see on the 12-month basis, we're a bit above that, and the debt to EBITDA ratios are actually going back to normal. They were elevated, elevated last quarter. This one, we are going back and net RMI-adjusted debt to EBITDA is 4.5. Short slide about the changes in the group structure. I probably won't go through it. You will have it in the presentation if you want to follow up that after the webinar. I will move to sales, and you can see that sales are lower this year. F or the nine months of this financial year, we have EUR 1.1 billion in sale.
Last year it was close to EUR 1.5 billion, so we have a significant gap or change in sales. The same goes for the volumes. We have 2.3 million tons of various commodities sold, when last year we had close to 2.7 million tons. So you can see that the revenues are 25% lower year-on-year, and volumes are 12% lower year-on-year. So suggesting that the average price correction was also felt. So we are lower not only on revenues, but the commodities where we traded were lower on price as well. The segment responsible for the biggest drop is Partners for Farmers. As you know, this is the commodity throughput we have.
The main changes are probably in grain trade category. You will see that later on. But we see that farming has delivered more or less better result in terms of sales, but the impact for overall group earnings is lower. Food segment delivered something similar year-on-year in terms of sale. So you can see the food segment is keeping on increasing in the overall sales mix, and now the food segment sales are 26% of the total sales, which is actually nicely corresponding with the strategy we have put forward. If you look at our gross profit dynamics, so we have EUR 104 million of gross profit for nine months, EUR 9 million less than last year.
We could say not that much less, but, you know, that also translates further on down the profit and loss. However, the nine-month gross profit margin is actually higher than last year, and it's much higher than five-year average. Five-year average is 5.9. So on gross profit level, with lower trade, we are actually doing quite good because, to be honest, we are looking for that profitability and looking for more juicy deals and trades, but the pressure overall in the market remains very good. You can see that food segment is delivering fantastic results compared to last year. And it goes both. We have very good results coming from the poultry segment. It has finally rebounded.
The dynamics are very good, and we have a strong result delivered by the poultry segment. But overall, the food segment, as such, instant meals, flour and breadcrumbs, we are delivering a solid, forecastable result year on year. Where of course, we have more volatility, you know, in the Partners for Farmers segment, and this year is very unfortunate for the farming segment. We had a significant write-down of cost in the farming segment because the assumptions taken into account last financial year and are not there. Prices were lower and the cost were higher of inputs. So we have a loss in the farming segment, which of course, doesn't help with the overall group profitability.
EBIT margin is a bit lower compared year-on-year. It stands at 2.2%. However, it's still higher than five-year average, so overall, the group is looking better. Of course, OpEx pressure is there. We have an 8% increase in OpEx, which doesn't help, you know, to deliver a more stable result. But of course, the main impact for the contraction in EBIT is lower sales year-on-year. You can see that the food segment is continuing very strong going forward as well in EBIT level, EUR 12 million compared to last year's EUR 2 million. However, Partners for Farmers are much lower year-on-year, EUR 19 million versus EUR 39 million.
As I told before, farming, you know, has not that successful year, and we have negative figures there, which, you know, doesn't help overall the group result. So I'll go now to the segment information. We don't have that many changes in Partners for Farmers segment. It's more or less the same. If we look at the total sales of the segment, this is the main reason why overall the group sales are lower, because we have EUR 400 million lower sales in this segment and around 400,000 lower tons, which we sold. The main, you know, implication here is that we have lower grain sales, 400,000 tons of lower grain sales.
We have feed, more or less the same level sales and then, you know, inputs are also more or less the same quantities. Some are even higher, so overall, we have a better result there. Grain storage and logistics, higher income from drying services and continuously stronger gross profit. You can see that we have EUR 11 million versus EUR 8 million last year. Grain and oilseed trade, as I mentioned before, lower quantities traded. Strong competition among exporters, as well as Russian activity is very, very high. They discount their sales in the market, but overall, the gross profit is still satisfactory. And, of course, we will end up full year results lower in terms of quantities, and probably strategically, are two reasons for that.
We have lower harvest overall in Latvia, so we had lower quantities to trade there. The other reason is that we were quite selective when buying grains in the second half of the year, because, you know, the market is quite difficult and competition very high among global exporters. Feed business, strong result from compound feed category was outweighed, you know, with the deteriorated margins in raw materials and feed additives trade. This is much lower this year because we have a lot of restrictions for transit and import into Poland from Ukraine. The materials which we trade are actually, you know, very cumbersome now to bring through the border.
And now, of course, we have to compete with Russian and Belarusian origin in the European market because it's still imported and, you know, companies and users buy them. So this year is nothing compared to last year, in terms of profitability, but that comes more from the trade which we have from Ukraine to the rest of the Europe. Compound feed looks very good. It's fully utilized and strong results from there. Inputs, quantities-wise, key input categories were growing. Normalized profitability for seeds and fertilizers trades. Last year, you remember, fertilizer trade were very complicated. However, plant protection and micronutrients category, way below average, mainly due to oversupply in the market. The competition is tough, so the margins are going down as well.
Agricultural machinery, very, very competitive market, this year. The market is actually contracting quite a lot, from 20%-40% in different categories and actually different markets. Food production, total sales, are more or less in the same level. Quantities-wise, we have grown, and we have grown mostly in flour, flour and breadcrumbs. Poultry is more or less stable. Instant foods looks as well better. So overall, poultry has stabilized their results, and not even stabilized, but started growing nicely forward. We have good prices in the shelves or in the supermarkets, and we have much better input structure. Meaning that, you know, the gas prices through the winter and currently the feed prices are favorable for us.
So the margins have opened, and we have the result for poultry segment coming in the area we would expect or we would perform. And you see how poultry is important overall for the group. When we have a good result for the poultry, you know, overall the result is coming even better. Instant and ready-to-eat foods, lower quantities, though record high profitability, you know, illustrating a decline in some of the cost, and we have, you know, favorable sale prices. Overall, we also added some extra products and extra production from the acquisition of Grybai LT, stews and soups, which we bought from AUGA Group. So this segment is actually becoming very significant and important for the group, and we are, you know, developing that further with our investments, which you probably more or less know about.
So we have EUR 41 million of gross profit compared to EUR 19 million last year, and a lot of that comes from poultry. Agricultural production, sales-wise, only little less ton-wise, even more. We have a higher sugar beet production this year, so that's why we have a higher quantities. But overall, you know, rather than that, if you take that out, the quantities are more or less flat. But we have a lower production prices for about 30%-35% in the crop area. And the input prices, you know, still were quite elevated, which made this segment actually and unfortunately unprofitable from the crop production perspective. The harvest for 2024 looks well now. We have sown around 19,000 hectares of arable land.
The condition of the crop is actually good or very good here in Lithuania and in our farming companies. The humidity is really enough, and we have all the inputs bought, and application is not lower from our side. That's the same, actually, more or less story as well for Lithuania. Maybe the difference is that we have lower winter sowings this year in Lithuania. That can impact the harvest a bit, but rather than that, Lithuania is looking good. A bit more complicated situation going up north to Latvia and Estonia. Winter kill during the spring was more visible there. So we have some re-sowings with spring crop in Latvia and Estonia because the harvest was impacted there.
So it looks like it's a bit more difficult year or harvest you can see for those areas coming for the next season. Milk production? Somewhat better raw milk purchase prices year on year. However, cost remains still quite high because that come also from our own feed production, you know, and the inputs we use to produce that feed. But the prices dynamics are not favorable for us. In the last few months, raw milk prices started to decline, and, you know, we don't expect any positive actually changes to the next autumn, because usually during the summer seasonally, the prices are decreasing even further. So that's probably more or less from my side.
I hope to get your questions, and please don't forget to subscribe to our news and investor alerts on our website. And thanks for listening, at least for now. Looking forward to your questions.
Thank you for the presentation. We'll now proceed with the questions. Before that, I would like to remind everyone you can submit the questions in the question box below. The first question is: Do you expect grain trade margin compression to last into the last fiscal quarter or maybe even next fiscal year?
I would not like to make, you know, very far forward-looking answers regarding this. We will see, you know. Now, regarding the next year, the situation is still evolving. Now everyone is trading, as we call, weather. Weather impact for the future harvest is very important at this stage now, and that, you can see, dictates the wheat price and the rapeseed price in the market. It has increased recently to an area of EUR 250-EUR 260 from the lows we have seen in spring of around EUR 220 per ton. And that's mainly because of new weather developments globally, and especially in Russia. Winter kill had an effect there as well.
They're now estimating a lower harvest. So that made, you know, a bit more lift for the price overall. So it's still very hard to say how the price will form in the next harvest. Now it seems that the conditions are very good here, and the price has lifted up to better levels globally, so that helps our local farmers. How will look the trade? It's hard to tell. It truly depends a lot on the final harvest amounts and how big players like Russia will act in the market, because recently it makes a lot of impact.
Thank you. Could you comment on the plans to reach the targeted EBITDA for the full financial year of EUR 70 million-EUR 90 million?
Fourth quarter is critical for us in both, in a few categories. One of them is, of course, Partners for Farmers. Fourth quarter is very, very important as we are selling big amounts of inputs to the farmers, so a lot of earnings have to come from there. Last year, we were very unfortunate in this area because if you remember, we had quite significant drought. And when the drought happened, of course, all the farmers stopped buying inputs and investing into the future harvest because we didn't see any sense. They were expecting lower yields, and that, in a sense, happened. So far, we see the activity of the farmers as positive this year.
It still can change, because, you know, we are very vulnerable with the weather. But so far, the weather helps. So it is important as well for machinery sales. We will see how that will perform and earn the wealth, because farmers are buying tractors and cultivators before the harvest. And if they have a good opinion of the harvest, and they see that it can be a successful year, they're more willing to invest. The other part, which is very important, is poultry. Poultry seasonally has a strong fourth quarter due to, of course, lower input prices coming from gas consumption, but also because the weather is better, and people tend to consume more meat, and they go out, and they grill more.
We have usually higher sales. So, fourth quarter is very critical and important. You can see that the gap is quite big, but it's usually the last three years that we deliver, and we need to deliver quite a lot in the fourth quarter. The other thing, which is still a big unknown for us because we do the calculations and the assumptions in the end of the year, it is the biological value of the crop and our milking cows. So that also impacts and can change the full year result quite significantly because we have to do the revaluation. If we would think that we are very far apart from the guidance, we probably would issue a statement.
But, as of now, we are looking for the last quarter to be very strong.
Thank you. The next question is regarding operations in Ukraine. Should operations related to grain, oil seed, oil trade from Ukraine decrease in the future? And are you looking for other options to replace this part of the business?
This is a very difficult question. We are actually, you know, at the brunt of the geopolitics here. We have people there. You know, we know how to source grain and oilseeds from Ukraine. However, the trade through the border and the logistics are really very difficult currently. And the main assumption we are working on is that it will remain so. So basically, you know, we think that we don't foresee a quick rebound there because this is connected with a lot of politics. And you know that politics are very difficult, and also we have a lot of elections this year.
But the other thing is also that Ukraine is actually exporting quite, well through their Black Sea ports. So that also changed the playing ground a bit because there are less surplus quantities, which are willing to be traded through the Ukrainian-Polish border. What we are trading quite well, we are trading quite well other origins, and they are mainly Kazakh origins, like sunflower meal and rapeseed meal, some oils. But we don't see other huge opportunities to change the volumes, which we had from Ukraine, because basically, you understand that the logistics plays a very big part here.
And, you know, the geographies which are near Lithuania or near the Baltics, they are mainly Russia and Belarus, Ukraine, which, you know, we don't trade with the first two of them. So to find other areas where you have commodities which can be brought to Europe or to Baltic Sea ports, it's not easy anymore. As I mentioned at the beginning, you know, we are trading Kazakh origin, but that's only comes from western part of Kazakhstan because that's where only the logistics make sense. Other goes to China and other Asian countries. So to be honest, not a lot of different areas where we can, you know, still source commodities properly.
Thank you. What is the long-term EBITDA target for instant food segment when all new facilities will be up and running?
We haven't disclosed that yet. We will do that in appropriate manner because we need to see where we will settle down in the market. So far, we had a very strong market, as you can see, and that was mainly impacted by previously COVID, and then, of course, the high inflation, and so on. So we will see how that goes, and we will communicate accordingly to the market.
Thank you. Akola has invested in a beverage start-up. Could you tell us more about this investment, as the group has no control in the start-up?
Yes. So this is one of the first times when we tried a different approach to investment. Previously, we were usually buying the control of the companies. However, I would, you know, say that we need more growth opportunities and new markets and areas where we can potentially unlock some growth and new markets. And we understand that maybe not everything we should do internally. We look for good ideas and good founders. And, you know, we have probably three or four investment pieces which we want to follow, is that, you know, we would only invest as an equity investor, where we have a minority share, where we have a product which has a big potential market.
That goes for both of the start-ups. Bubble Tea and Brite Drinks have very, very deep markets. It's calculated in billions of euros. The second thing is that it is a branded product with a nice story behind it. Then, you know, we are looking for products which have a lot of export potential, so it's not a local product. Both of the drinks are 90%-95% sold outside the Baltics. So the potential is very huge, and you get a lot of traction in the foreign markets with your own brand. So we think that's spectacular results by the both companies.
They sell their branded products in markets like U.K., France, Germany, you know, Austria, and so on. And the other thing is that, you know, that we also maybe see some potential to learn and explore the other areas of food and food production or drink production, as you can see now, that we maybe don't have now. And, you know, we as a group learn a lot. As I called it, disciplined risk taking, you know, because we have a limited exposure to that. But we see that the dynamics are very good now. So, you know, for us to build a factory or, you know, to R&D it ourselves, it probably would bring more time, more exposure, you know, and so on.
Here, you know, we will see how we will take it further, but as far as now, we see it as a disciplined risk-taking with, you know, thinking about the future of the group development and its business portfolio development.
Thank you. Following up on that, how much is the group willing to invest into start-ups? Do you have a policy for such riskier investments and the amount you are willing to risk?
That's a very good question. We are still thinking about that. We are not a venture capital fund, and we haven't established one in the group, so we don't have a fixed amount of money, you know, just to put into the market just for the purpose of investment. We are very picky, and we don't have a purpose, you know, to deliver a result to deliver a certain amount of portfolio here. We haven't set an amount, but at least for now, I think we are more or less happy with the investments we did.
We won't make it a significant part or a significant part of the group's equity or cash reserves are, of course, not going there.
Thank you. Could you comment briefly on the quality of crops this spring?
The quality so far is good in Lithuania. I don't know when was the last time you were driving through the country. I was driving just a few days ago. You can really see how beautiful the rapeseed looks, and it really more or less throughout all Lithuania. It's flowering now, so it looks great. It's very thick. The same goes with other cultures, especially wheat. We have enough humidity, so the crop quality looks really good at this point in time. Let's hope there won't be any big droughts.
As of Latvia and Estonia, the start was quite good. However, you know, as I mentioned before, t he winter kill, which we had in spring, had more adverse effect on the crops there. So the situation there is a bit more challenging, but it's not critical. The majority of areas were resown. So, you know, hopefully, they will average out and balance out the overall crop quantity as well as quality.
Thank you. Akola Group's five-year strategy includes revenue growth to EUR 3 billion. How much could this increase EBITDA?
Well, you know, the official guidance of EBITDA now is EUR 70 million-EUR 90 million, and that's the official guidance of the group. We will update the official guidance with the new investments coming up. So when we will have them up and running, and we see that more or less everything is okay, we will issue the upcoming notice. We have a strategy put forward that the EBITDA could reach up to EUR 130 million. But that's our long-term strategy plan, which is connected with the EUR 3 billion revenue aim. But to be honest, please, this is something from our strategic plan. Don't take that for granted.
Please follow the official company announcements and guidance, because that's a long term or the long way to go to that number and that revenue.
Thank you. Does Akola Group consider listing a part of its business on the stock exchange?
As of now, we don't have such plans. We have listed the holding company, and we will remain with the strategy that the holding company has listed, and existing businesses are not listed. But we might revise that if we will see that we need to raise extra capital, or we need to add a partner to any of the business lines. But as of now, that's not on the table of the group board.
Thank you. It looks like we've covered all the questions so far. If you have not sent in your question, please do so now. As all questions have been answered, on behalf of Akola, thank you, everyone. It was a pleasure being with you today. The recording of the presentation will be available on the Nasdaq Baltic YouTube channel. Mažvydas, thank you for a very informative conference. Have a great day.
Thank you, everyone, for joining. Thank you. Have a nice day.