Good morning, dear listeners. Welcome to Linas Agro Group's meeting with investors. I am Ken from Nasdaq. I will 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 rewatch. As always, I encourage everyone to share your questions in the Q&A section at the bottom of your screen. You can submit them either anonymously or with your name. With that said, I am pleased to introduce today's presenters, Chief Financial Officer of the company, Mr. Šileika. Please, the floor is yours.
Thank you. Good morning, everyone. Thanks for joining our investor webinar, where we will look through or go through the financial results of Linas Agro Group for 9 Months of Financial Year 2022-2023. Of course, please bear in mind that it might look or might have some forward-looking statements or assumptions, but please bear in mind it's only a current view of the company's management. My name is Mažvydas, and I will take you through the presentation this morning. Please ask questions, anything you are interested in, and I will try to answer them as best as I can. I would like to start with some highlights for our nine-month results, and I would like to start with our profitability margins.
We have an operating margin or EBIT margin for nine months, on a rolling basis, of 2.7, which is very comparable to last year, when we had 2.9. Even with the market uncertainties, we are delivering quite a good profitability on that note. If we go further into the returns, we see that our return on capital employed is even more impressive at this point in the year. It's also calculated on a 12-month rolling basis, and we have a number or a percentage of 16.4 versus 9.4 last year. For sure, it is flattening out, and we need to see what it will look in the end of the financial year. However, it is still in a very, very good way.
If we look to our earnings part, we see that price to earnings for a 12-month rolling basis this year stands at 2.9, and last year was 3.29. From a valuation perspective, it looks that the stock is still under appreciated because the earnings per share for the last 12 months are at EUR 0.55 versus EUR 0.29 last year. Rather than that, it looks as a quite a good nine-month result if we compare to the last year.
In terms of the group structure and areas we operate, the geographies we are established in, we operate 69 subsidiaries, and that hasn't changed year on year. However, after the reporting period, we have closed one company, Kauno Grūdai ir Partneriai, which was a part of our integration and synergies when we acquired Kauno Grūdai. We also opened one new company, which is called Dotnuva Seeds, and it's a result of a spin-off from Dotnuva Baltic, where we will concentrate our seed production business going further.
Let's look at the revenue composition for the nine months of the financial year, we see that we have quite nice growth year on year, and we delivered EUR 1.5 billion in terms of sales revenue. However, we already see that the revenues are starting to slow down. Even we have delivered or recorded growth in every segment from 10%-40% if we compare that to the last year. The pace of the growth is slowing down, we see that the biggest slowdown is in Grain, Oilseeds, and Feed, as well as Products and Services for Farming. These are the segments which are mostly impacted by the decrease of commodity prices globally.
What I would like to highlight is the really nice increase in repositioning of our business portfolio in the group, meaning that we have a substantial increase of our food product sales. Last year, it was 18% of the total sales. This year, we have even more; it's 21%. If we look and compare that before the acquisition, we had only 7%. Meaning that, you know, we really are delivering on the strategy to increase our food production business's share in overall portfolio. In terms of the production volumes, they are lower. Even though we have higher sales, meaning that we still have a more or less impact of the inflation, which increases our revenues at most.
I would like to drop down now to the gross profit composition, and on the gross profit level, we delivered EUR 113 million of gross profit, and it's higher year on year. The composition has really changed, meaning that last year, food products were standing at EUR 12 million, and this year we have EUR 18 million. Even with embattled poultry business, we have delivered higher results in the gross profit level. If we go further, we see that our Grain, Oilseeds, and Feed stuff have a much better result this year compared to last year. We have a EUR 58 million of gross profit margin in this segment compared to EUR 30 million last year. The biggest decrease or sharpest decrease is in the Products and Services for Farming. Last year, that was the high-flyer segment of the year for the group.
This year, of course, it is impacted by the change of prices. This year we delivered EUR 29 million versus EUR 52 million last year. What I really would like to highlight is that, you know, even though with a flattening down or maximizing out revenues, we are still quite good on the profitability side. For nine months, we have a gross profit margin of 7.5% versus last year, 7.6%. It's a really comparable result, and having in mind that we are really going through the price transition, meaning a lot of the commodity prices are going down, we are still delivering a good result year-on-year. What else is very interesting is that Q3 is always slower for the group. It's usually the case here.
We have some seasonality in our business profile, and we have a drop in profitability almost every year if we compare H1 of the year with the nine-month results. This year is not an exception. However, the H1 of the year was really super good, so we have a gross profit margin for the H1 of the year at 9.5, you know, versus last year, 7.5. The change quarter-on-quarter is really higher. However, if we look historically, we have still a very high margin of 7.5 if we look to the previous years. Of course, Q3 has a lot of adjustments because, you know, a lot of things tend to drop down there. We have the majority of biological assets being written down.
We have some trailing logistics costs, which we have to book into the Q3 . This year we had an extra thing. We revalued our fertilizer stock, which we have in the warehouse, as we really envisage a very sharp drop of the prices in the market. That's actually already factored in for the full year. Please bear in mind, you know, we have emphasized that as well previous time, that, you know, the Q3 is a transitional quarter. We see the majority of commodity prices dropping down, and being a production company or a trader, you know, we always have a part of our warehouse, which now, of course, is a bit more expensive than the market prices, and we have to wear it down.
We have to use it in our production. Of course, we have a positive things as well. Energy prices are much lower, they will help, especially the poultry business. However, you know, the Q3 was still not that much impacted. The Q4 now is much more visible in terms of lower energy prices for poultry. However, lower gas prices do not really help fertilizer prices because they tend to follow the trend, as it's a very big part of fertilizer production cost, the drop of fertilizer prices was really sharp in the market for the Q3 . Let's go further down and look at the operating profit composition. Year-over-year, we have a very similar result, which I think is a very good result, EUR 39 million versus EUR 40 million this year.
The composition, again, is very different, and we delivered some profit on the operating profit level for the food business, meaning that, you know, the gross profit which we receive from poultry is not enough to cover our fixed cost. Still, as the results from other food segments is really good, we have a positive result overall. A much higher and better result for the Grain, Oilseeds, and Feed stuff, and of course, much, much lower result in Products and Services for Farming. This is everything about the transition I just told you. I would also draw your attention to the profitability, and if we look at the year-on-year gross profit margin, it's very similar compared to last year, 2.7% versus 2.9%.
I would like really to emphasize that we are working on a very same note as last year, but the story again is very similar. H1 results were very, very good, and they were record high, especially the Q2 , and the profitability was EUR 5.3 versus EUR 2.7 last year. Actually, that buffer, which we were managing to earn H1 of the year, helps us to accumulate the potential cost and go through the transition this quarter. You can see that historically, it was always like this, that H1 has higher profitability than the nine-month results. Just the gap between them usually was lower. If you look at five-year average, we're much above with our profitability than our five-year average.
We delivered 2.7 versus five-year average of 0.7. I mean, the group is really a very different animal than a few years before. Let's go through the segments now briefly. We have Grain, Oilseeds, and Feeds. This year is doing really well so far. We have EUR 58 million of gross profit. We're doing much better in the elevator segment, but it's not everything about the market. We really manage the activities. We have now a aligned, you know, reporting on this, so that doesn't come everything from the market. Part of that or majority of that was in the group, just maybe in a different segment reflection. What really looks better is, of course, the grains, grain trade.
Of course, it's not an easy story this year because the low quality of grain or low-class grain really makes it difficult. You know, the result is decreasing quarter-on-quarter, because we, you know, we are finishing our trades, but overall it looks good, but it's a lot of tension there because of the geopolitical reasons. The other segment, which you know, is really tangible, it is a bit lower year-on-year. It's the feedstuff segment. It's EUR 25 million versus EUR 31 million last year. You know, we have quite a lot of competition here. We have a lot of pressure here, but we think we are working on a good note here. We are in a good position to maintain the profitability.
Last year, we have a gross profit margin of 8%. This year it is 7%, so it still looks quite good. Well, the segment which is going through the biggest transformation is, of course, the Products and Services for Farming, and here, the biggest impact is felt, of course, on the input side. Last year, from the inputs, we earned a record higher gross profit of EUR 43 million versus EUR 17 million this year. That's, of course, you know, the biggest impact here are the fertilizers. We are not earning that much on fertilizers this year, especially in the H2 of the year, because, you know, the gas prices decreased, and we had a quicker or sharper change of prices downwards than we expected.
This correction was really expected because, you know, it was, the prices were record high, and at some point they had to start to decrease. Maybe the pace of the decrease was a bit of a faster or quicker than we anticipated, but that's for the full market. And, you know, fertilizer is a position where we work from the warehouse from a long position. Rather than that, our machinery and equipment rent services look really very good year-over-year. This is the segment which is represented by Dotnuva Baltic, so we have a very good position there. The market grew nicely last calendar year, so we delivered EUR 10 million of gross profit versus EUR 6 million last year.
You can see that the profitability is higher as well, 16% versus 14%. That's a success story this year. Of course, low milk prices, low grain prices, you know, and pressure from a lot of costs will put the pressure on the segment going further, but this year is really a success story in our portfolio. Food products. Food products is a very mixed story. We have a very good result year on year, EUR 18 million of gross profit versus EUR 12 million because the composition is better than last year. We have EUR 9 million coming from our instant food business, so that is really booming. Thus, we actually announced, and we are investing EUR 32 million to double our capacity in Alytus, because, you know, it really is driving the market growth.
We have a exceeding capacity, so we managed to push our profitability there further. Flour and breadcrumbs is doing mostly flat year-on-year. Poultry on the gross profit level, we actually managed to increase the profitability. It's still not enough to cover our fixed cost because there are a lot of inflationary pressure on wages as well, and other costs, like logistics, are higher year-on-year, so that doesn't provide much to the bottom line. We see some positive trends going further with the decrease of natural gas prices and of course, warmer weather in the Q4 . We will see how that goes going further. Agricultural production. Agricultural production is actually looking good this year as well. We have our crop margin higher this year overall.
We actually managed to take the advantage of the high grain prices, even with the high input prices like fertilizers or plant protection, it was still a very good mix for having a good profit. Milk was very profitable or decently profitable H1 of the year. Now, due to really low prices in the market and still higher feedstuff costs, we are barely breaking even on that. We're really looking forward for the market to change gear and receive higher prices for the market. Overall, for the new harvest, we have 18,000 hectares of arable land sown for the harvest 2023. All the crops are, of course, insured, that the quality looks good.
We still are looking for some rain for the coming weeks because it was really dry for the last two weeks, very untypical for this part of the year. We are looking for the rain and humidity going forward because it will become quite critical for the next two weeks. Yeah, we sold more milk quantities year on year. It's 10, 9% more year on year. That's also, you know, helps for the efficiency and keep the business profitable even with such a low raw milk prices. I would like to go through the balance sheet quickly. Not a lot of changes. You can see that the balance sheet value stands at EUR 944 million. The composition is very similar year on year.
I would like to draw your attention at our financing composition. We have more working capital year on year, because, of course, we're operating in the higher price environment. A lot of our debtors on the balance sheet are from the high fertilizer prices. However, the borrowing base, you can see year on year, is on a very similar level, 63% versus 61%. Basically, we have quite a lot of our own equity and cash in the system for our trade. We delivered, or we made, 19 million EUR of CapEx for the nine months, and not anything special in terms of big projects, a lot of maintenance, wear and tear, some improvements in efficiency.
Higher investments were to liquefied petroleum gas and the poultry business, rather than that, it's a business as usual. I would say we have a very good capital ratio, which stands at 32%. The balance sheet is decreasing, we actually are expecting it even to go further because we are increasing our equity position, so the equity now is EUR 301 million, roughly. If you look at our leverage level, it's also pretty much under control. For the 12 months rolling basis, we have a EBITDA of EUR 120 million, net debt to EBITDA stands at 2.8, if we adjust it by readily marketable inventories, it's even lower at 1.9x .
Even with the high balance sheet, quite a lot of debt on our hands, we have a portfolio of EUR 550 million. With the good results, we have all the leverage under control. On the finishing note, please be active and subscribe to our investor center, where you will receive all the notifications and news from us. It's on our website. You can see the link here. Please fill it in, and you will be on top of all the things happening in the group going further. Thank you very much for your attention, and I'm looking forward to your questions.
Thank you for the presentation. Let's proceed with the Q&A session. Let's start off by the questions we have received in advance prior to the webinar. Just a friendly reminder to all the participants that you can ask your questions using the Q&A section, and just submit them there if you have any. Now let's proceed. The first question is that: When is the sale of Belarus business going to be completed? Would you cover that, please?
Sure. It's a deadlock situation, the Belarusian business, because due to the legislation changes in the country, now we are in a list where we cannot sell the shares as a foreign investor, foreign asset holder. We have also reclassified Belarusian assets into the balance sheet from assets held to for sale back to the balance sheet, and it's a minor part of the overall group balance sheet. The situation is really a deadlock because we cannot sell, and at this moment, we're also not in the position to sell. We have a minority shareholder there as well.
We are closely monitoring the situation, looking for potential buyers, because, you know, with a potential buyer, maybe we can go through the situation, but nothing there yet to announce. Sorry. Nothing new here.
Thank you. On the same note, perhaps, any comments, in case it would be sold, would it be sold with a profit or with a loss?
You know, it really depends on the price. In this situation, you imagine that it would be sold with a huge discount, so I imagine it would result a loss. You know, I'm not really in the position to speculate what it would be because, we don't really know what would be the selling price.
Thank you. The third questions: Are the sales channels in Belarus going to be also affected by leaving the local market, or this is independent business, what, that has nothing to do with the factory?
It's a completely independent business. It's managed on standalone. We have no ties, or no, trade links with them. It is really kept on standalone with the local management running the operations. That's it.
Thank you. We've received all the answers to the questions. Now let's move into the questions which we have received during the webinar. The first question is: Could you please comment on weather conditions in Lithuania this year so far in relation to the expected harvest?
Well, you know, after the winter, it looked really good. The sowings are good, and the crops after the winter looked good or very good even. However, now we do have a lack of humidity. It's for the last two weeks, it hasn't rained properly. That's starting to make an impact for the harvest, we need rain for the coming few weeks. Hopefully, it will be there, because now we're entering actually a very critical phase for the crops to get some humidity and some rain.
Thank you. Second question: What are your assumptions on wheat price and harvest development looking forward in 2023, 2024, H1 in Lithuania and EU?
A very good question. I would really like to have an answer because then I think the life would be much, much easier. Now they're really low. If you compare them to the input prices the farmers use for their crops, they are low and not encouraging the farmers to sell the harvest. Thus, we have not that much pre-sold grains from the farmers. You know, farmers are really looking at the situation in the global markets attentively, and actually waiting for at least some price increases. If the harvest forecast globally, because the global harvest forecast is really good, that's why the price of milling wheat is pressured down.
If the global price forecast for the harvest will remain good, it's hard to imagine that the price will go up a lot. Of course, all the political events and tensions, that's a black horse which can always influence the price upwards. You know, these are not the things you can really bet on, but it's really, you know, our house view, and you should not base that assumption for yourself.
Thank you. Could you please elaborate more on recent poultry development in Lithuania and the EU? Some drivers and risks for H2 of 2023.
The good drivers are, of course, the summer season, where we have higher consumption of poultry and poultry products. It's usually a high season for the business, so that's really what we're looking forward. We also have decrease of our cost base. The most important ones are, of course, feedstock cost. They are decreasing slowly, and they haven't yet go down that much, because we need a new harvest, because wheat is a big part of our feed cost. For example, lower wheat prices would help for the next year for the poultry business, because it would really bring lower feedstock prices. Gas prices are lower, much lower.
The weather is warmer, that also give us a forehand to reverse the poultry business. What are the main drawbacks or challenges is the overproduction in Europe, of course. European Union, as such, is an. Has overproduction of poultry, meaning that we always have a pressure, a downward pressure for the prices, and the biggest producer is Poland. Poland is our neighbor, which is in a very good logistical position, so we always have the competition coming from the Polish, as we are really close. We are really big producers, so part of the overproduction always have a pressure on the prices here locally. I would say these are the main drivers going forward into next year or the next few quarters at least.
Thank you. Next question: Will you call Q3 loss from fertilizers as one-off, or it will transfer also to Q4 ?
The management made an evaluation of the write-off for the fertilizer value. We see now as much as we can that we are selling that at the new prices we actually adjusted. I would assume that a lot of the losses already factualized into Q3 results. Of course, not everything is yet sold, so there might be some deviations. I think the majority of the part is already sitting in the profit and loss statements which we did of the write-off for the fertilizers.
Thank you. Next question: In your opinion, is current milk price achievable, its sustainable level, and will balance all market participants?
It's a very good question. As of now, due to the high input costs, meaning feed costs, it is really low, and you know, it's either negative or breaking even. Long-term, it's not sustainable. You have to be very, very efficient, you know, to be profitable here. We hope that, you know, the product, milk, product prices, like cheese, hard cheese, whey powder, skim milk powder, will start propping up, and hopefully, it will also put pressure to increase the prices for raw milk. You know that, you know, the consumption is slowing down a bit in Europe, overall, due to the economical reasons, so it's really hard to say how it will go.
The view is that, you know, you cannot continue for a very long time on such a low raw milk prices. It will start hurt the farmers, even more.
Thank you. currently, the final question. Just a friendly reminder, if any one of you wants to ask questions, please use the Q&A box. now let's have the final one. "Are there any plans for this financial year to pay out dividends?
Well, that will be announced when the decision will be made. Now I cannot comment on that. You will know that as soon as the board decides on that.
Thank you. Let's give perhaps, 30 seconds, if there are any other questions to be submitted. We received one question: "Will company achieve long-term EBITDA target this year?
We think, and our guidance is that the long-term EBITDA guidance, which, you know, we give for the investor community, holds. Q4 is very critical and crucial. However, the guidance is still there.
Thank you. Okay, no other questions. I would like to thank all the participants today for attending this webinar. Thank you also, Mr. Šileika, for this wonderful overview of your results. There will be a recording available on Nasdaq Baltic YouTube channel. With that, I would like to conclude on my behalf. If... Please, Mr. Šileika, any last words from your side?
Thank you very much, everyone, for joining. Hopefully, it was informative and useful, and looking forward for you for the next time.