Good morning, dear listeners. Welcome to Linas Agro Group Investor Relations Conference. I'm Paulius 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 for a re-watch on Nasdaq Baltic YouTube channel. As always, I encourage every one of you to share your questions in the Q&A session at the bottom of your screen, and you can submit them either anonymously or with your name. With that said, I'm pleased to introduce today's presenter, the Chief Financial Officer, Mažvydas Šileika. Mažvydas, please, the floor is yours, and good luck.
Thank you, Paulius. Good morning, dear investor community, and welcome to Linas Agro Group overview of activities and finance for 12 months of financial year 2022-2023. The results are yet unaudited, but I think we can still discuss quite a lot of important topics. So please bear in mind that there are some, or can be expressed, some, forward-looking statements, but they are only reflecting current view or assumptions of the, companies and group's, management. So, my name is Mažvydas, and I will be, going through the presentation with you, this morning. So we finished yet another year, and it's the 32nd year for the group since its establishment in 1991. And, this year, of course, can be characterized by several, features.
One is that we reached a record high sales revenue last year, and it was really very close to EUR 2 billion. Unfortunately, there was only EUR 1 million lack of sales to ink a nice EUR 2 billion figure in our P&L statements. And of course, by the end of the financial year and the beginning of the new one, but it's still in 2023 of the calendar year, we acquired. We made another acquisition, and we acquired part of AUGA Group business, where we bought and expanded our ready-to-eat food category. We bought from AUGA Group Grybai LT , which is producing soups, vegetables, and ready-to-eat meals and porridges.
The company currently is delivering EUR 1.5 million in terms of EBITDA, and we are roughly estimating that in 1-2 years, we will be able to deliver close to EUR 3 million in EBITDA and with additional EUR 4 million-EUR 5 million in terms of investments, that number can go up to EUR 6 million. So that's a really nice addition going forward to our food business portfolio. It fits really nicely strategically, as well as in terms of how we view and we manage the business segments. So going now to group structure, we ended the last financial year with 68 subsidiaries. Not a lot of movements last quarter. We actually started and we finished the organization of Dotnuva Baltic.
It resulted in spinning off a company called Dotnuva Seeds, where we actually concentrated seed production business, and it will be transferred to Linas Agro Group under Linas Agro, sorry, which will be managed by Linas Agro management, as it is the same farmer-servicing business. So seed production will be now in a separate company under Linas Agro. We established another company called Dotnuva Seeds SIA. It's also under Linas Agro, which will have and will have to execute our plan and decision to build a seed production factory in Latvia. So we are expanding our seed production business. The investment will be roughly close to EUR 8 million, and it will deliver about EUR 1.5 million in terms of EBITDA.
It will be, it should be finished in the coming two years, and we will expand our seed production business in, in Latvia as well as in Estonia from that area. We closed several companies during the fourth quarter, so we are trying to optimize and make the group structure as lean as possible. So key messages for the last financial years, financial year, and of course, a few trends and opportunities going forward. So the last financial year can be characterized by global price transitions. So we were going from very high prices to, well, we can say now maybe normalized prices or the prices we have seen before. So some of the changes impact group earnings positively. Some, of course, have negative effects. Last year was very challenging for grain trade.
As you can see, for the first half of the year, we delivered very good results. However, for the second half of the year, the results started diminishing. It can be basically characterized by poor quality of grain we had to trade in the second part of the year. First part of the year was more characterized by higher premiums, a strong demand for Baltic grains, as there were quite a lot of uncertainty surrounding war in Ukraine and Ukraine's abilities to export grain. But then, you know, that settled down, and Russia's record-high wheat harvest hit the markets, which actually, you know, made the premiums for the Baltic grains or other grains collapse. So that was a big challenge for us last year. Fourth quarter can be characterized by really dry weather conditions.
You probably noticed we had very, very bad weather conditions in June, the end of May. We had a huge drought here, so that impacted the input trade a lot because farmers were not willing to buy, invest in the harvest, where they expected it to deteriorate quite a lot, and that changed week by week. But good for us and for the farmers that, you know, the most difficult scenario did not established. We see now that the harvest is around the average quantities. Good thing is that we see a rebounding poultry operations since May.
It could be faster, or we would expect to be faster, but we are coming out of red figures already, and we see that the business is actually cash flow positive. A very big change in our group's earnings, and I think that's not a this year trend. This is a trend going forward as well, that we have very strong results from our grain-based food business, which is also coming from our instant food business. Last year can be characterized by record high sales of our agri machineries, agri machinery segment, which delivered also very good results. Looking forward, it will be a good year in terms of harvest quantity. It looks like an average quantity for this harvest.
So we will have, or the traders will have, enough quantities to trade. Yet the quality is on the lower side, but it's not that bad as last year. And the input trade will still be a challenge because, you know, the winter gas prices might still give a lot of surprise going further. Farmers' resilience, financial strength might be challenged this year because the prices are lower for the main grains. Quantities look all right, so but some farmers really have lower quantities due to adverse weather conditions. So we will see how that will even out through the year. Milk prices are still very low. Farmers are losing money on the milk production or barely breaking even.
So if that persists during the year, that will be a challenge for farmers' financial condition and strength. But so far, the quantities we see in the market, which farmers have received from the main cereals production look all right. Agri technologies mainly challenging conditions due to the reasons mentioned above, due to farmers' willingness to invest and their financial strength. There are some changes in EU support schemes. We have to adjust to that as well. Food, we are further capitalizing on instant foods strength. We are running on full capacity. We are aiming to improve on further efficiencies. Hopefully, poultry segment will be more stable this year as we have more hedges on our energy inputs through investments into liquefied petroleum gas as well.
We're looking to the winter gas price. So far, it doesn't seem to be very bad. It's not on the low side, but it's not on the high ends, which we saw last year. So few key figures for you for this year comparing to last year. Of course, last year was a record high year. It is very hard to compare everything with last year as due to challenges, uncertainties, supply restrictions, high inflation in the market. We delivered results we haven't seen in the group's history, so all the figures compared to this year are lower. However, I want to emphasize that the figures we delivered this year is in line with our five-year average or even slightly above. So this is a pretty average year for us.
We want to push it further, but if you look at the EBIT margin, it stands at 2.06%. Compared to last year, 5.47%, it's more than two times lower. However, it's really in line with our five-year average, which is 2.17%. Price to earnings, 8.72 compared to 2.01 last year. The price, of course, the earnings drop is reflected here. Five-year average is also 3.4, almost. But if you look how the peers, the global peers trade in the market, they trade in the area of 9x-12x price to earnings. So if you look at the global peers, we are still in line or a bit above them.
Return on capital employed. Last year we had a very good figure because of the high EBIT, and of course, we were very low on inventories and debt in the end of the financial year. This year is a bit different. The return on capital employed stands at close to 7, and it's above our five-year average, which is 6.19. So basically, we also had more inventory and debt on our hands by the end of financial year, which also dropped or impacted the drop in the return on capital employed. Earnings per share, 0.16 versus 0.57. Five year average, 0.15. So as I mentioned before, really in line with our five-year average or average results of the group.
On a positive note, we have a very strong balance sheet, and you can see that the balance sheet is decreasing quarter by quarter because inventories of lower price are now coming into the balance sheet. It stands now close to EUR 900 million. In the peak of the financial year, it was close to EUR 1 billion. The borrowing base is still conservative, standing at 60%, so we have capacity to finance our working capital. At this time in year or for this financial year 2023-2024, we have a solid liquidity position. We have secured financing of EUR 550 million, which is fully sufficiently for our operations. Last year, we performed EUR 30 million of CapEx, and we financed them by our equity and long-term debt. Long-term debt is only 28% of our full financing portfolio.
So we are not on long-term debt. We still have capacity to borrow and finance our investments. Total debt at end year stands at EUR 328 million. Our capital position looks really good. Capital ratio stands at 33%, very close to our long-term target of 35%. So with decreasing balance sheet, that will be really attainable, and our debt ratios also look good. We are good. We are controlling the debt, and our net debt to EBITDA stands at 4.7. Net RMI adjusted debt stands at 4.2. It's a bit higher than last year due to drop in the EBITDA. However, it's still really under control. So let's look at the sales revenues of the group, and it's really close to EUR 2 billion.
Despite strong deflationary moves in second half of the full financial year, the segment still delivered revenue growth in the area of 3%-28% if we compare it to last year. However, you can see that the price increase really plays a part here because our traded tonnage quantities are flat compared year-over-year. So with the drop in prices, we probably will see a drop in revenues for the group going further because we are trading currently more or less at our capacity, and it's hard to increase the traded quantities going further. So it will be in the area of existing ones. But after the acquisition of Konevė and Brodei , we see a very nice portfolio repositioning going through a very nice transition.
So in 2021, our sales coming from food segment was only 8%. Now it's 21%. So meaning we are following our strategy to expand and increase our sales and earnings from food production. That is also an area where our future sales will come, will increase and grow because, we also had the price inflation in this segment. However, we are investing here to increase our quantity sold here, so we will have a nice organic growth in this area in terms of sales. If we look at our gross profit, we delivered EUR 137 million in gross profit, compared to EUR 190 million, roughly last year. And, the full-year gross profit stands at 6.8%, which is above or in line with our five-year average, which stands at 6.7%.
However, what is really uncommon for this year is that we usually have a very strong last fourth quarter, and our gross profit tends to increase for the fourth quarter. This year is a bit different. We had a rough fourth quarter with the trading conditions were not good, and we have a further decrease in our gross profitability in the fourth quarter. Last year, it was a very different story, and two years before as well. So, decreasing uncertainty in the market decreases our window for record profitability and, of course, the lagging effect of our inputs in terms of our inputs for poultry, for compound feed, fertilizers, that really pushed our profitability down the last fourth quarter.
If we look at the operating profit, the layer, we have EUR 41 million in terms of operating profit for last year. The operating profit margin is still in line with our five-year average, which stands at 2.2%. So having all the challenges in fourth quarter, I think we delivered again a strong result. It could have been worse, in my opinion. And, the thing is that you can see again that, our fourth-quarter profitability dropped compared to nine-month result. That's also unusual. Previously or the years before, it used to be a different story. We delivered very strong results during fourth quarter. It's usually a strong quarter for us. This year it's a bit different story. Food segment finally delivered positive operating profit results.
So very good results from other foods or grain-based foods offset continuously make loss-making poultry operations. So even with the loss-making poultry operations, this year, other food products actually made it profitable. So based on our long-term strategic EBITDA target, which stands at EUR 70 million- EUR 80 million, 2022-2023, EUR 70 million- EUR 90 million , sorry. 2022-2023 EBIT results illustrates normalized EBITDA on the lower end of indicated gap. So we delivered a EUR 67 million EBITDA this year, which it unfortunately drops by EUR 3 million below the indicated gap. But we have to bear in mind that we sold Russian and Belarusian operations this year, and we inked a EUR 3 million loss from that on, and that if you actually think on continuously operations basis, that would not have been impacted on the EBITDA side.
So let's have a look at the segments a bit closer. So grains, oilseeds and feed, we delivered higher sales revenue, very, very similar quantities compared to last year. So that is the message I delivered in the previous slides, that in terms of tons we trade, it's very hard to grow, so it is expected to remain in the area of 3 million tons per year. If you look at gross profits, gross profit, we dropped from EUR 70 million- EUR 55 million. Of course, every segment was impacted. However, the improved result of elevators and logistics looks very nice. However, we changed some accounting principles since acquiring Konevė and Brodei , so more or less, the segment delivered what we expected, roughly EUR 7 million of gross profit. That's not 4x higher than last year.
It's some adjustments in our accounting policy. However, you can see that in feed segment, complicated oil trade and lately chaotic deliveries through Poland border with Ukraine, decreased our gross profit here. Compound feed had some expensive inputs coming in with the dropping market price. Grains and oilseeds, as I mentioned before, really difficult trade in the second half of the year due to lower quality of grain, which we had to sell with higher discounts than we anticipated or the higher discounts than we bought during the pressure harvest pressure. Overall, the segment profitability went from 6%- 5% for the full financial year. Products and services for farmers, we increased the sales quite considerably, going to EUR 416 million for the full financial year.
In terms of quantities we traded, it's in a very similar area. So again, not a lot of room or space to increase the quantities we trade. However, the segment profitability and the segment gross profit dropped by more than 2x . Agro machinery, really strong sales and stable profitability. You can see that agro machinery delivered EUR 15 million in gross profit versus EUR 30 million last year. Really good results. However, inputs deteriorated mainly by the trade of fertilizers. That, of course, was the biggest impact here. We were trading fertilizers from a long position, meaning we had to buy inventories in advance due to long deliveries. Very difficult supply chain, and unfortunately, in spring, the prices fell more than we anticipated.
We made accruals with our nine-month results, but that appeared not sufficient, because farmers were not in a position to buy and invest into the future harvest due to very adverse weather conditions. We still made the discounts because we wanted to clear down our inventory by the financial year. So all in all, we see that the gross profit overall dropped significantly, the profitability as well. What is good, that the other inputs like seeds, micronutrients, and plant care products remained similar year-on-year, meaning that we managed to deliver good results in value-added sales here. Food products. Food products increased in sales as well, going above EUR 400 million.
In terms of quantities and tons traded, it's dropped a bit even because we closed one of our poultry production areas in Kaišiadorys, so we sold less poultry meat this year, but the price for poultry meat was higher, so we delivered higher sales. If you look at the gross profit, we went from EUR 26-EUR 31 due to strong performance of instant foods as well as flour and breadcrumbs. But in terms of poultry, which is still a very big part of this business, you know, we see positive effects from cheaper energy components, which started in May and June. Of course, that was not yet enough to make a breakthrough for this financial year.
Selling price, the price we get for poultry meat also shows some signs of stabilization, so hopefully, if the input prices remain normalized, we might see a better year going forward. Other foods or grain-based foods, instant food product demand exceeded our capacity. So that's why we are making our investment and expansion in our noodle, instant noodle production. We announced the investment, which will be EUR 32 million. We should start with the production by the end of this financial year, so the full or part of the result will be probably seen in not this financial year, but next financial year. We already announced, and I talked a bit more about the Grybai LT acquisition, which also will go into the instant food segment.
Of course, we also have planned the coating systems expansion investment, which will start production also by the end of this financial year. Full result or more of the result will come to the next financial year. We already making everything here for the investment, which will make the food product segment even more strong and more favorable for the group. In terms of margin, we delivered a very similar margin year-over-year, 7.5 compared to 7.4 last year. So this segment really looks good if you take into account the loss-making poultry operations. So as soon as that becomes positive and black figures, this result of this segment will become even more stronger and more visible in the group result. Agricultural production, two very strong years here.
Growth in sales, growth in quantities, and, you know, even it's a small drop in the gross profit we delivered, still, agricultural production and the farming companies we own have a third year of very high success. Last year, EUR 15 million in gross profit. This year, EUR 12 million in gross profit. We have a decreasing result in both, both segments, in crops as well as in milk production. However, you know, it is anticipated as a good result for us. We produce more milk year-over-year by 7%. First half of the year was really good for milk production, with good profitability in terms of prices and margins.
However, second year, second half of the year was really behind with profitability, as we evidenced a very sharp drop in milk prices and raw milk prices in the market. Currently, the milk prices haven't yet recovered. We see that our milk production is barely breaking even. Hopefully, the trends will change here. Looking to the harvest, the harvest looks good for our farming companies. We already have pre-sold 55%, 55% of our wheat and 70% of our rapeseed. So we have secured our part of our prices or part of our income for the this financial year. We always do. We always sell part of our harvest in advance, part of our harvest during the harvest pressure, and then part after it.
So we try to even out the possible market price for the agricultural production. That's more or less from my side. Please register and subscribe for our newsletters and news announcements on our website, and I'm looking forward to your questions now.
Thank you, Mažvydas, for the comprehensive presentation. Now, we will proceed with the questions. Before that, I would like to remind you that you can submit them in the question box in the bottom of your screen. So let's start with the first question. Why did the share price drop on February twenty-seventh? What influenced it? What are further stock predictions?
Well, probably, I don't have a glass, a crystal ball to think about or to say something about the future stock performance. I can say that, you know, I'm optimistic about the future group's performance and its developments. I think we have a really good strategy in place, which we are partly already implementing, and we'll go further with our decisions to do it. In end of February or beginning of March, the price drop might be influenced only by our announcements of the nine-month results, which probably was below the shareholders' or investors' expectations. As you know, it was a different figure from the half-year result. The direction of the group profitability changed course.
Thank you for the answer. Let's proceed with the other question: What do you see planned for Linas Agro Group's turnover and profit prospects in the upcoming financial year?
Yeah, as I mentioned, slightly, it is hard to expect a further increase in the revenue as more or less we're trading our max capacity in terms of quantities, and currently, the prices are lower. So year-on-year, we will have probably similar quantities with lower prices. Our growth of revenues should come in the future from our increase of quantities we sell of our food products. That's something stable and more predictable. In terms of profitability, we remain committed to the indications, strategic indications we gave to investors previously. We expect the group to deliver, deliver from EUR 70 million- EUR 90 million in terms of EBITDA upcoming year. Maybe it is a wide gap, but currently, you know, the group is built like that.
If we will have a very successful year, then we can expect the higher end. If we will have a more challenging year like this one, we probably can expect the lower end. Unfortunately, we dropped a bit below the EUR 70 million line this year. However, you know, it was a challenging last quarter. We also have some one-off results from our sale of Russian and Belarusian operations, so it's not a very clean financial year. Hopefully, going further, it will be more stable and more predictable.
... Thank you for the answer. So the next question is regarding dividends. Are there any plans to pay out dividends for this stock? If so, what size?
So, you know, group board has approved the dividend policy, which stands at 20% from the group's consolidated audited net profit. Currently, if you would take 20% from the net profit, the dividends would stand at roughly EUR 4.2 million. The board is still in the position to take the decision on the final dividend payout, but the board is fully aware of the dividend policy and the commitments we gave to the investor community.
Thanks for the answer. Which activities of Linas Agro Group exceeded the expectations of this financial year? Which ones were less successful?
So the most or the really successful were agricultural production. The result delivered by the farming companies looks really very good. We are happy with it. Agri machinery sales, and the segment of agri machinery sales and rent, delivered very strong results, record high sales and record high, EBITDA and gross profit. We also are really happy with that. Food production, overall, the segment, you know, is struggling due to the poultry operations. However, if you look at the instant foods and if you look at, flour and breadcrumbs coating systems, that's a very good result as well. Instant foods and coating systems and, looks really very good in perspective. We are investing there further. So those, those are the, the ones we really are happy with.
The more challenging ones, of course, is still poultry. Third, third year in a row, we have a loss-making result. We are supporting the business area as much as we can, financially, as well as management, managerial resources. However, previously we had the COVID pandemic, which influenced the sector a lot. Now we have the high inputs. Hopefully, all the changes and the things we think we can influence, we made already. We have a more diversification of our energy inputs. We are looking, and we are trying to hedge part of the energy prices for the cold period and cold season. So hopefully the moves we are making and what we can really influence are good.
Some things we cannot influence, like, you know, the market price for poultry meats, and the developments of it. Input trade was challenging this year and of course, the fertilizer trade. If you look at fertilizer result in the last two years, meaning this one and last year, the result is still very good, even though this year was really unsuccessful for us, because last year was really very, very good. So if you even out that in two years, it looks all right. However, of course, we want to deliver strong result every year. So hopefully this one will be a breakthrough year. And the other thing is, of course, we have challenges in our grains, oilseeds trade.
Poor quality trade last year did not allow us to deliver the results we actually wanted. We were very active trading feedstuffs from Ukraine through the Polish border. It delivered a very good result as well. It was a very successful year. However, you know, to reach an even better result, the closure of the Polish border, even it opened later after all, but the trade now is really complicated through the land crossings from Ukraine. Hopefully, it will get better because last year we delivered a good and strong result here. It's an important trade for the group, so hopefully this year will be a bit more convenient here.
Thank you for the answer. The next question is in regards to the poultry business. I know that you've briefly mentioned about it. How do you see the future of this business? Are you competitive in the European market? What is the key problem here?
Well, long term, we think that, poultry meat as a, actually as a protein, is really competitive in the market. It's healthier than pork, it's cheaper than beef. So prospects of, for poultry consumption, are really good, and especially that, to produce poultry, the negative effects for the climate and then for the, sustainability goals is much lower than compared to cattle, beef and pork. So in terms of, overall, competitiveness of the market, and the protein, we think it's still there, it's still good. However, recently we had, two crises in a row, so it's basically, you know, a perfect storm for us.
Previously, we had a very sharp drop in our demand of poultry meat due to COVID and due to war in Ukraine. Now, we had very sharp increase in our input prices. Previously, when we didn't have those two shocks, we were delivering good results in the poultry area. So we think we are competitive. We are really competitive in the local market here in the Baltics. We have high market share, recognizable brands, really high quality products, which I think our consumers really like and buy if you compare to other ones. And our proximity to our main export markets, like, Scandinavia, especially Sweden, is really good. So, I think we are competitive. We just need to go out from the market or the input shocks, because you can imagine that...
And if you would look to actually any peers of ours in the poultry area, they are more or less going through the same kind of process, and the results are very similar. The thing is that how fast you rebound and the rebound, you know, is basically based on the strength of the market or the size of the market and of course, your input base. Maybe someone has more inputs from the biofuel, so they were, they're recovering faster than the ones who have more exposure to natural gas prices. But even though, if you would see, the story is very similar in all the market and all the major players, so that's not something different.
So the short answer is yes, we think we are competitive, and we have still strong beliefs in the poultry as such as a protein in the food chain.
Thank you for the answer. The next question is, "How do you see crop segment and overall agriculture segment results for this financial year?
Still very hard to judge. Still very hard to judge because, you know, we finished the harvest just, you know, two weeks ago. Good thing is that we see that the quantity will probably be around 7 million tons in Lithuania, which is a good quantity to trade. The quality looks a bit above average, sorry, below average than usual. So this will be a bit maybe challenging for us, you know, to find the export markets as traders, where the... where you can earn a good premium for that kind of quality. But rather than that, it doesn't look that bad as last year. So we will see how that develops. Of course, you know, the exports from Ukraine, they are going further to the market.
Ukraine is able to export, so you know, there is no, no big shock from that part. Russia has inventories from last year, and the harvest looks really very good this year as well, so they will be exporting a lot as well. That will give pressure for the price. You can see that the price of milling wheat is quite, quite, you know, on the lower side, you can say, with all the challenges in the market. Basically because, rather than that, the global harvest is good. It's good in Europe, it's good in the Americas. The prospects are good in Australia, and you know, as I mentioned before, we're expecting really high quantities going for export from Russia.
You know, the picture as always is difficult, but I think we are in a good position since the beginning.
Thank you for the answer. Well, you've briefly touched upon this question already, but how does this year's harvesting season compare to last year from volume and grain quality perspective?
So I think, you know, I touched upon that. So just to remind you, you know, we anticipate around 7 million tons of various cereals and oil seeds and wheat, you know, in Lithuania. That's around average or a bit above average. And, you know, the quality, it's a bit below average than our usual in Lithuania and in the Baltics. Maybe Latvia has even a bit worse quality than last year. More feed grain there is anticipated. Estonia as such, maybe is a small exporter, however, you know, the dry weather impacted Estonia the most. So, you know, grass to feed the cattle and milking cows in Estonia is a challenge for the farmers.
So, but rather than that, the quantities look good, the quality is all right, the price is what it is. Maybe it will change during the year. Of course, after the record prices, now it's a bit on the lower side for the farmers, what they were actually looking at before. So it looks like this.
Okay, thank you for the answer, and this was the last question so far. If you have any more questions, please do not hesitate, and we'll wait for a moment or two for you to type those in. If no questions are coming in, so on behalf of Linas Agro Group and Nasdaq Vilnius, thank you, everyone. It was a pleasure being with you today. The recording of this presentation will be available on the company's website and Nasdaq Baltic YouTube channel. Mažvydas, thank you for the very informative conference. Have a good day, and goodbye.
Thank you, everyone. Thank you for joining. Goodbye.