Good morning, dear listeners. Welcome to Linas Agro Group meeting with investors. I'm Emilia from Nasdaq Vilnius, and I'll be moderating today's event. We will start with a presentation from the management, which will be followed by the Q&A session. Please be informed that this webinar is being recorded. As always, I encourage every one of you to ask questions during or after the presentation in the Q&A section. The Q&A section allows to ask questions in the anonymous way too. With that said, I'm pleased to introduce today's presenter, Chief Financial Officer Mažvydas Šileika. Mr. Šileika, please, the floor is yours, and good luck.
Good morning, everyone, and thank you for joining me during this morning. My name is Mažvydas Šileika. I'm the Chief Financial Officer of Linas Agro Group , and I will present the financial results of nine months for financial year 2021/2022. As a small snapshot of the group, how we are doing after nine months of this financial year, we can say that we have crossed EUR 1 billion in terms of consolidated revenue, and we posted EUR 1.3 billion in consolidated revenues for nine months of the financial year.
Our EBITDA adjusted to IFRS 16 stands at EUR 64 million, and our balance sheet is around EUR 894 million, which is also a very big increase if compared to the last year. We maintain a strong capital ratio of 26%, and we traded a record high 2.9 million tons of various soft commodities. We don't have any big changes in our storage capacity, and it stands around 564,000 tons of storage capacity. There are no big changes in the hectares of arable land we manage or we own. We own roughly 6,000 hectares of arable land, and we manage around 18.3 thousand.
Regarding the structure of the group, there were some changes during the period of nine months. We have consolidated three elevator companies in Lithuania to optimize our activity as well as to aim for some efficiencies in management and coordination between the companies. We also merged two companies in Russia. We owned, with the acquisition of KG Group, three companies in Russia. After nine months, we currently have two companies there. We also merged the Žemaitijos Turto Konsultacijos and with Linas Agro Konsultacijos. We're trying to optimize the group structure as much as possible. Currently the companies in Russia and Belarus are classified as assets held for sale.
We have made a decision to sell the companies, and you can see that also in our structure, and going forward. I will briefly take you through the segments of the group. We maintain the same five key segments, and products and services for farming is the high flyer of the year. You can see that in terms of revenue, it has increased 19%. However, in terms of operating profit, it has a very nice steep upwards trend. It increased to EUR 37 million or almost 95% year-on-year. The main drivers, of course, are acquisition of Kauno Grūdai, where we acquired quite a significant portfolio of fertilizers, fertilizer trade, seed trade, plant protection, but as well as quite a good trading environment for this year.
It is quite challenging. However, due to the inflationary pressure and lack of product in the market, there is quite a nice upward trend. I have to mention as well that the machinery sales are doing also really very well, and we're probably looking to a very good last quarter of this financial year for this sub-segment as well. Agricultural production, we have a slight increase in the revenues of this segment, which stands at EUR 32 million, and the operating profit of this segment is around zero, which is actually good. Zero is good because this means that the profit estimates we made in June last year actually are close to the actual earnings of this sub-segment.
Grains, oilseeds, and feed maintains the biggest revenue share of all of the segments, and it increased by a very high percentage. It's 63% year-on-year. After a quite devastating six months of the financial year, as planned, the profitability of the segment has been restored, and we have now a nice profit of EUR 11 million, and this is a 28% increase year-on-year. Food segment has taken a much more significance in the overall portfolio of businesses we own and manage. It has now a revenue of EUR 244 million, which is an 18% increase. However, due to very unfavorable conditions in the poultry sub-segment, we posted an operating pro...
Operating loss of EUR 7 million, and this is a -90% year-over-year. I will go a bit deeper into the mechanics of each of the segments in separate slides, and I will comment on the underlying assumptions and the possible forecast for the year-end. The fifth segment is comprised of very different businesses. As you can see, they do deliver EUR 28 million revenue or sales. It's a slight increase of 2%. However, the operating result of this segment is around close to zero. The main highlights of 2021 for the 2022 financial year is, of course, the elevated sales, which is driven both by the acquisition as well as very high commodity prices.
You can see the structure of our business portfolios has changed, and we are now more diversified as well as stable in terms of profitability and revenue. We can see, as management expected, even though with the extra debt we have taken for the acquisition, we see a decrease in leverage, which stands at 3.4x for our rolling basis. Probably the main topic or the main challenges we faced, and we still face, but we faced that during the nine months of the financial year is the war in Ukraine. The group has exposure both in the country, which is torn by the war. We have a company in Ukraine.
It is actually a representative's office, and we don't have any significant balance sheet or sales exposure there. The activity is ongoing, and we continue to take it or to continue the activity for foreseeable future. However, the group has also exposure in Russia and Belarus, both in terms of companies we acquired with KG Group, as well as in terms of our trading relationships with those countries. In terms of sales revenues for the nine months of this financial year, we have sold goods and services for Russian entities in terms of EUR 91 million, which is close to 7% of total revenue. It is very important to emphasize that eighty.
Almost EUR 82 million of that figure comes out of sales of companies who are based in Russia. Around EUR 9 million-EUR 10 million are sales from Baltics to the eastern part. The same goes for Belarus entities. We have sales for Belarus counterparties in terms of EUR 25 million. It stands around 1.8% of total revenue, and out of that, EUR 22 million is our sales made by entities in Belarus, the companies we own there. Only a minor share of sales is done by our companies from Baltics to those areas. In terms of our balance sheet exposure, it is quite insignificant in terms of overall balance sheet of the group.
Trade and other receivables from Russia stands at EUR 0.7 million, and in Belarus, even smaller number, which is not very significant in terms of the whole balance sheet of the group. Trade and other liabilities are even smaller. It stands at EUR 200,000 for Russia and EUR 400,000 for Belarus. The exposure is really manageable. We see that there won't be any significant exposure for the group for this financial year. In terms of the future year, of course, this is a challenge for the group to reorientate part of the sales and part of the sourcing we do in those countries to other regions.
Management has decided to dispose the Russian and Belarusian business, so the entities and the assets and liabilities they represent in the balance sheet were classified as assets held for sale. It stands around EUR 29.6 million. Also we have made management has made a estimation how or what is the possible price of these entities. We had to account an impairment on these entities at around EUR 2.8 million, which is already accounted in the nine months of this reporting period.
To give you a brief update, we are currently under a due diligence for these companies. If the due diligence is successful, we will have a firm offer, and we supposed to close, or we are planning to close the deal, which we have communicated previously by the end of the financial year of the group, so meaning by the end of June. However, this is a very complicated process. It's quite encumbered by different regulation and other obstacles. However, we hope to finish the deal by the end of the financial year, at least in part or in full. The next slide shows the dynamics of our gross and operating profits.
I will start from the left-hand side of the slide, where we have a representation of our gross profit, and you can see that we have a very healthy increase in sales of almost 200% or twice. We reach EUR 1.3 billion in terms of revenues. This is driven by the acquisition as well as the increase in overall prices. Meaning that the group is expanding both ways. The biggest share of the sales are still attributed to grains, oilseeds, and feed. However, you can see that food products take a higher proportion of the sales now and the products and services for farming. Of course, this is the year where we can see very significant result coming from this segment.
Probably the highest highlight or the biggest highlight of this dynamics is the gross profit margin. We have seen an increase of it to 7.6%, and we haven't seen such a high level for the last five years or so. This is also quite a bit of achievement for the group. If we move to the right-hand side of the slide, we can see the dynamics of the operating profit and we see a very high increase in the operating profit, which is mainly driven, of course, currently or for these three quarters by the products and services for farming. However, the profitability of the grain, oilseeds, and feed has been restored according to our estimations and plans.
However, even though we now have a more diversified food portfolio due to the pressure of the poultry part of the food portfolio, they generated a loss of EUR 7 million. Even though we have a very nice figure of EUR 39 million for the nine months of this financial year. The highlight of operating profit dynamics is that we have managed to increase the operating profit margin to 2.9%. This is quite a challenging aspect of our financial year as we have quite a lot of pressure coming from the wage inflation, other cost inflation. This is actually a very good achievement we see and comparable to the market as well.
This is a slide which shows how the group has changed year-on-year. We are comparing the nine months of last financial year to the nine months of this financial year. If we take it from the left-hand side of the slide, we can see that the revenue part or the revenue mix has really changed in the group. Even though grains, oilseeds, and feed has posted a 60% increase in sales. We see that overall in the portfolio of businesses, it has decreased to 63% versus 75% last year. This is mainly due to the increase of share of sales mainly in food products as well as products and services for farming.
This is one of the achievements we were looking for when we were doing the acquisition. I expected to see even a more healthy mix going forward in terms of sales, when we compare the segments going forward. When we look at the gross profit dynamics, we see that the overall change is also visible, that we have a very high increase in products and services for farming. This is of course the year where they are performing the best and have increased their share. However, we see a decrease in the trading part to 29% versus 38%, and the food production is more or less stable due to the challenges which we actually see with the poultry.
Even though other businesses in this segment, which are flour mixes, breadcrumbs, instant noodles, are doing really well, they are profitable segments, profitable businesses. However, they represent only a third of overall revenues, which then translates to gross profit and operating profits. Even though we have a third of the segment performing profitably, due to the challenges in the poultry, we have overall a negative effect on the operating profit, which actually shows in the bottom part of the bar charts. Operating profit comes mainly for the nine months from the products and services from farming and grains and oilseeds, and then we have a negative effect coming from the foods and food products. Our balance sheet changes are actually mainly connected with our debt level.
Overall, the balance sheet composition remained the same or more or less the same. The balance sheet has increased almost double in size. However, the composition is more or less the same. We still have a majority of our balance sheet coming from current assets, and these are mainly inventory and trade receivables. The biggest part of inventory is readily marketable inventory, which are exchange-traded commodities and the majority of the debt is actually connected with them. Capital ratio remains solid at 26% as for a trading company and 12 months adjusted pro forma EBITDA on rolling basis stands at around EUR 88.5 million, which gives a net debt EBITDA at 3.4.
Having a 3.4% for nine months of the financial year when we are still quite high on our stock as well as debt is actually quite a good sign. We expect that to decrease further for the full financial year. Group has total committed facilities for financing, I mean, in factoring and credit lines at around EUR 350 million. We are fully financed for this financial year. We made investments in amount of EUR 14.5 million. Around 10-11 million came through other segments, and around EUR 3.5 million came from food segments and especially poultry. Poultry comprises around a 20-25% of the investments overall.
I will go a bit deeper into each of the segments. I will give you a small overview as well as a possible picture of full financial year. As you can see that products and services for farming and all the categories in this segment have posted really nice growth in terms of sales. We see all the positions are edging upwards, and we have a very high increase in certified seeds, which stands around at 96%. Fertilizers sales increased almost double. Plant protection and traits more to almost 300%. Grains facilities and farm equipment almost 90%. Agricultural machinery spare parts it has a healthy increase year-over-year. It's almost +27% and +14% respectively.
It's historically quite evident that the last quarter of the financial year is even stronger for them. It's quite important because we have a very healthy activity for the end of the financial year and for before the season when you take the crops. What I would like to emphasize are the fertilizer sales and plant protection sales. This is of course driven by the quite nice acquisition effect that we acquired a significant portfolio of customers with Kauno Grūdai, as well as they were actually in some parts even more into these segments, meaning fertilizers, where we have actually increased more than two times our market share.
The result of these segments or these categories have been driven as well as by the economic activity. Farmers willing to invest into the harvest, there was a lack of the product, and we were working in an inflationary environment. However, also from this intensity or in terms of volumes we have sold for the farmers this year. You can see that sales were edging nicely, and we have by far probably record high operating profit for this segment going forward for this year. Main challenges for this segment is of course the supply of fertilizers. Before the war, before all the sanctions, the main suppliers were Belarusian and Russian entities.
Now we're actually reorienting our portfolio to other suppliers, and this takes time. It has proven to be a bit more cumbersome. It has more logistical issues. However, we deem to be successful basically as this is a big shift for the overall market, and we see that there are possibilities to reorienting the supplies from other suppliers and other geographies going forward. If we look to the agricultural production segment, there are no big changes in this segment regarding how much arable land we manage or the agricultural companies we own. You can see that the crop production sales have increased by 7%, and milk production sales are up by 32%.
Main message from this segment is that we have healthy prices for raw milk, which even with the inflationary pressure we face this year gives a good result for this segment. As I mentioned before, the segment is also quite difficult to evaluate during the interim quarters, but we expect for the full financial year to post a quite good results for this segment as all the conditions are there. Milk prices are healthy. We sold the crop for the price we were more or less expecting for the last year harvest. Looking to the this year harvest, it looks really fine. The condition of the crop is good or either very good.
We have enough humidity and the sowings were done according to time, and we have fully prepared for the season in terms of fertilizers. We deem to expect quite another successful year for the agriculture production segment going forward. Grains, oilseeds, and feed, the biggest segment in terms of sales. The biggest change or the biggest mix of the portfolio also came to this segment with the acquisition of Kauno Grūdai because now we're not only the trader of grains and oilseeds, but we also are a significant or one of the biggest producers in the Baltics of compound feed and premixes.
This segment includes the result from compound feed and premix production as well as trade of feedstuff, and this gives as well more stability and extra profitability coming from this segment. As you can see that we have healthy increase in sales in terms of trading activity of grains and oilseeds as well as a more than double increase in compound feed and feedstuff sales. This actually brings attention to my previous point. This segment is also challenged by the current situation we face with the war in Ukraine and the decision by the group to exit businesses and suppliers from Russia and Belarus because part of the feedstuffs and soft commodities were sourced in Russia and Belarus and traded to the partners in Western Europe, Scandinavia.
We are reorienting our business and our suppliers searching for new trade flows which we can change. However, of course, part of that might not be restored and change the tit-for-tat, so we might face challenges next year for this segment. However, the trade of feedstuff and soft commodities from the eastern countries did not represent a very significant part of this business. It is a significant part in terms of sales. Of course, it brings gross profit and operating profit to the table. However, trade of Baltic grain and Baltic oilseeds or production of compound feed comprises the majority or represents the majority sales and profit from this segment. We will see how it goes for the next year. However, it will face challenges.
The segment will face challenges next year going forward. Food products, we talked about. I talked about the challenges in food products a little bit. I touched upon it. As you can see here, we have mainly three categories in this segment. It's poultry meat production, flour mixes, and breadcrumbs, and then we have instant foods, which are instant noodles and porridges. Because these are very new businesses, we still don't have a benchmark for them. However, sales of poultry meat increased to 150%. When we acquired the KG Group, we also acquired a very significant portfolio of poultry production, which is Vilniaus Paukštynas and Kaišiadorių Paukštynas.
Even though we have a very big increase in terms of our sales, and we have a third of the sales coming from other segments than poultry meat production, overall the segment posted a negative result for the nine months. This is mainly due to the sharp increase in energy prices. Poultry production is a very big consumer of energy, especially natural gas, because breeding of broilers require to keep them in quite high temperatures, around 32 degrees. We have had a very big spike in the energy prices during the cold period of the year, which actually is covered by the nine-month results.
We also have a very high increase in the feedstuff prices because you can see that the prices of grain, other proteins, meals have increased a lot, and this is also a big pressure on the cost of goods sold. We have also been in a situation where the closest substitute, pork, was quite cheap during this period, and consumers tend to switch between pork and poultry depending on the price as well, and their consumption preferences, of course. Giving all the circumstances around the segment, even though we put quite a lot of effort to optimize, we moved a part of the slaughtering operations to Vilniaus Paukštynas. We closed the Krešų Dvaras Paukštynas. We are trying to have.
We are trying to gain efficiencies and economies of scale in our production, and we try to see the three production plants, two in Lithuania and one in Latvia as one to gain the maximum effect. However, the cost of goods sold increase or hiking energy prices and feedstuff prices were very hard to adjust during the nine months. Looking forward, due to natural decrease in energy consumption due to warmer weather and due to the increase in final product prices, we expect the last quarter to be profitable for this segment. However, profitable, I mean, for poultry segment. However, it probably won't be enough to change the direction of this segment for the full financial year.
We expected it to ease out or to decrease the negative operating profit. However, it is still hard to say if it will be significant enough for the full financial year. This was the full overview of the financial standing of the group. I hope it was useful and interesting for you, and I will be now ready to take your questions.
Thank you very much for your presentation, and let's proceed with the questions. I would like to remind all the attendees that you can send in your questions in the Q&A box-
Okay
they will be answered. Let's start, and the first question would be as following. Optimization of bird business, how is it going? What decisions were made, and will it shrink quantity of production wise heavily, not revenue? Thank you.
Thank you. I probably have covered a bit of this question already, but I will try to address the other question parts. The volumes or tons we produce will shrink this year-over-year due to the closure of Kaišiadorių slaughtering house. We cannot move full slaughtering capacity from Kaišiadorių to Vilnius. We cannot basically accommodate that. However, we see that a very natural shift due to the overall decrease in sentiment or consumption of poultry in the market. Not so to say decrease in consumption, however, switching of consumer preferences between other substitutes, meaning pork, as well as switching between different suppliers. We still have a lot of pressure from our competitors from Poland as well as Estonia.
The decrease in our production, in our view, comes really naturally and we see that, in this occasion, less is more in terms of our profitability, because we will achieve more efficiencies, cost savings, economies of scale operating one slaughterhouse in Lithuania. However, the full effect of cost savings will come more towards the next year. However, because this year we have more of the costs we have to bear to close the slaughterhouse. Next year will be evident the full effect of cost savings from this action. The other part.
Answering the other part of the question is that, we see that it might actually, you know, as I mentioned before, not be enough for this year to have a successful last quarter to change completely the direction of this segment for the full financial year. However, due to the lower energy requirements, we see that it will be more profitable going forward. Thank you.
Thank you for your answer. Another question would be sales of companies in Russia, Belarus, at what stage is this? What will be the profit loss, if known yet, and how will this and the Ukraine situation in general will impact revenue and volumes of production operated? Thank you.
Yeah, I can emphasize that we are now undergoing due diligence. If the diligence is successful, we go to a firm offer and SPA negotiations. I hope that we will work according to our timeline, which we communicate, and we hope to close the deal by the end of the financial year, meaning by the end of June. Management has estimated the possible effect on the financial standing of the group due to the sale, and we have already accounted that in our nine-month results. The effect is an impairment, a negative impairment of EUR 2.8 million, and we expect it not to change significantly.
In terms of revenues, we might, well, we will lose the revenues which we now have in terms of Russian entity sales, which is around EUR 81 million for nine months this year and EUR 22 million in Belarus this year. Of course, there is another part that we were sourcing soft commodities and feedstock from those geographies, which we are trying to reorient next year. We will have to search for other trade flows and other suppliers around us. Ukraine is one of the potential one. We're actively working with Ukraine and actually swapping the other eastern suppliers with Ukraine. The total effect of sales might not be that big in terms of our consolidated group revenue.
In terms of balance sheet, we will sell around EUR 29.6 million in terms of assets and similar in terms of liabilities. Overall, the effect is manageable, and the management feels that we will be able to to withstand it and weather it out through changes in other businesses, trade flows and other geographies.
Thank you for your answer. We are receiving quite a few questions, so let's proceed. The next one would be as follows: What segments will be the drivers of the business of the company in 2022, 2023 financial year? Do you expect the profitability of products and services for farmers segment to stay at such high profitability levels? Thank you
It's a very, very good question. It probably would be really good to see how will the geopolitical situation develops, and what are the full effects of war and how long it takes, you know, in current situation. Of course, next year will be challenging. It will be mostly challenging for grains, oilseeds, and feed trade, because the situation is really volatile. The prices are really volatile. Any you know movements regarding the Ukrainian grain stock, crop stock, it changes the market in one or the other direction. This is a very big unknown factor.
However, the sowings and the crop season in terms of the Lithuanian or Baltic geography, at least for now, looks fine, and it gives a positive outlook that overall, the Baltic grain trade might be successful in terms of volumes. However, there is a lot of volatility in the markets in terms of prices and buyers, potential buyers, and so on. Grains, oilseeds, and feed really has challenges looking forward. Agricultural production probably now is the segment which gives more comfort, at least for now, looking at the crop situation, looking at the raw milk prices.
If these conditions remain, because we have still quite a long period, almost two months or a month and a half before we start the harvest. I think these conditions remain. I think we have a good backbone for the agriculture production segment for the next financial year. However, I really want to emphasize that it might change every time we have changes in weather, which is also, you know, something we cannot really control. Products and services for farming, of course, this year is really extraordinary. I really would like to emphasize that management doesn't take it for granted, and we don't expect to have it in the same high level because due to the challenges we have in terms of fertilizer supply.
We will see how that goes, how the market sentiments, meaning the farmer sentiments in terms of fertilizer buying, acquisitions will go, because we are doing a really big shift from supply from the east to the supply from the other parts of the world. We will see how that goes. We are currently undergoing this process. It looks that we are doing our best, and we find alternative suppliers, which is already good. We will see how that will fit with our farmer expectations in terms of price and other parts.
However, this segment will be much more visible in group's portfolio because as I mentioned before, we acquired quite a significant part of portfolio of our customers, farmers with
Thank you very much for the comprehensive answer.
Okay.
Now we have another question, and it's asking, "So which globally listed company could be similar to Linas Agro activities portfolio?" Thank you.
Yeah. Probably it's hard to find the company very similar to Linas Agro. When we benchmark ourselves, we look at companies closer to our region that would be Lantmännen Group in Sweden, that would be Danish Agro Group in Denmark or DLG in Denmark. If we look more to the global context, of course, these big corporations and companies as Archer-Daniels-Midland or Bunge are more or less doing similar activities, but they have other priorities and other emphasis in their business portfolio. They are of course much bigger, and they operate globally. However, you know, these are companies operating in agricultural food and global nutrition sectors, which are part of our sectors as well.
These are probably more or less similar companies to some extent to us.
Thank you. What was the reason for such a high profitability in products and services for farming? What factors contributed to it? Thank you.
Two drivers increase in volumes we traded, and these are due to the acquisition of KG Group and overall market sentiment. Volumes increased nicely year-over-year. Of course, plant protection and traits products goes the same story here. We have increase in volumes due to the acquisition and due to the larger portfolio of customers we now have and we can reach. The other part is that we were working under really inflationary conditions this year, as well as of a lack of a product or lack of supply due to the changing conditions due to sanctions during this year. The activity of farmers was also very healthy, and these are probably two drivers.
Farmers were willing to secure products for their farms due to the rising prices as well as due to the war. They were thinking a bit in front or forward-looking to secure their supplies for not only this season, but maybe partly for other season a bit earlier than usually because the situation is really, you know, hard to predict how it can evolve going forward. These are where the probably main drivers for this for this segment this year, which is, you know, both some part of the internal and acquisition decisions we made, part of the conditions of the market and geopolitics, which were of course not in our control.
Thank you. As there is still ongoing search to replace Russian suppliers, could you give some guidance on potential increase in COGS? Is there a risk of local market shortage of some items not being replaced in time? Thank you.
Well, hopefully we're not looking at shortages. We are probably looking at a possible increase in prices in our prices which impact our cost of goods sold. This is still a very big question, how much of them we will be able to transfer forward on. It's more easy when we talk about exchange-traded commodities because these are exchange-traded commodities and you can deal quite openly on this part. We see that there are disruptions in the supply chain. However, we hope that they won't be that big that we could have a physical shortage of some of our inputs.
In terms of probably fertilizers, which is also quite a significant segment of ours and a big trade of ours. This is a big market shift. It's not only about us, it's about the market. The market overall is shifting, and the consumers, buyers are shifting together because we need to supply, and we will find alternatives or the best possible alternatives, best possible products to be changed. We might need to plan more in advance. We might need to take bigger parcels in terms of shipments, meaning we will receive fertilizers now mainly by ships, not via rail. We need to plan and accommodate a bit in advance.
However, we see that, as of now, more or less the shift is going according to plan, and hopefully there won't be big disruptions. The supply chain overall has increased. It's hard to predict how the situation in terms of prices and market supply and demand will change in the next couple of months or even a month because the dynamics and volatility is really very high in the market due to the war and all the geopolitical changes we see. All the possible sanctions, they move the markets and you see that the sanctions really change quite often. We are really trying to be flexible, not holding long positions, and we try to adapt to that as much as possible.
Thank you for your answer. Can the profitability of products and services for farming operations continue in the next financial year if fertilizer prices stabilize globally? Thank you.
Probably the trend in the farming segment overall is somewhat slightly positive or slightly optimistic because the grain prices have increased as well with the increasing price of the fertilizer. This means that an average farm, if there were no big mistakes operating mistakes made, should be profitable or significantly profitable because majority of the main grains which are being harvested in Lithuania and oil seeds prices really increased during the year. They are high looking forward for the next year.
Even if you have the inflation or the higher prices of the fertilizers, it still looks economically fine and profitable for farmers to operate. We will see how the autumn sowings will go and what will be the strategies of the farmers regarding the application of the autumn fertilizers. Autumn fertilizer period maybe is less crucial than the spring one. Spring nitrogen fertilizer application is really crucial for the crops. Nitrogen fertilizer is actually something a bit less difficult to supply in the market. We have more alternatives for nitrogen fertilizers, which are more crucial and are applied during the spring.
Having said all that, I think that the conditions for the farmers looking forward are still there to be profitable this season if the weather conditions do not change significantly into the worst part. I think it will be more or less okay, and we're looking at a good season. Next year is still there to be answered, but I think there are possibilities to manage.
Thank you very much. We have quite a few questions left, so let's continue. The next one would be as following: How do you see the Q4 for trading segment? Did you already made contracts for all your inventories or still some balances is left to be sold at current market levels? And do you see similar profitability of the segment in Q4? Thank you.
The forecast for the fourth quarter for this segment is positive. We expect to see growing profitability and we expect to have a really good result for the end of financial year. The fourth quarter is really still very active in terms of trading, so we still have trading activity and we still had and have goods to sell this quarter. There might be some carryovers to the next financial year, but they won't be that significant. To sum up, the fourth quarter for this segment is expected to be good, profitable, and the targets will be reached for the full financial year.
Thank you very much. In the report disclosed that the price of poultry meat in Poland has risen by more than 40%. Are all producers in the region struggling with operational profitability or is it more of a Baltic effect? Thank you.
Yes. The profitability struggle is more or less all around the bigger poultry producers, which we can, you know, follow. This goes the same for poultry producers in Poland and as well in Scandinavia. One of the biggest Scandinavian producers, Scandi Standard, also posted really bad figures for this financial year. However, they were slightly positive, not red figures as ours due to that moment that in the Baltics we have more competitive pressure than, for example, in Scandinavia.
Meaning that poultry producers in Poland usually some in Estonia or Finland really do dump their overproduction in the Baltics, meaning that their sales here are basically the very high discounts, giving pressure for our prices as well as the choice of consumer. Because the logic behind is really very simple. When you have overproduction and you cannot sell that in your local market, you either freeze it and export it somewhere far away, or you choose to take quite a high discount, but still not that big as for frozen production, and sell it in the geographies nearby you. Meaning that the poultry producers, for example, in Poland do really discount their production, which they sell here in Lithuania, for example.
There are a lot of other factors as well why sometimes they choose to discount the production. However, in the Baltics, we really have very big price pressure coming from this. Of course, when the price differences are that big, consumers tend to choose other products rather than ours. Which is a bit different in, for example, Sweden or Germany or France, where consumers try to prioritize local or fresh local quality production in terms of export production. This is a challenge going, you know, a bit more than only the feedstock and energy price increases.
Thank you for your answer. What is the group's long-term debt to equity goal, excluding short-term credit for working capital needs?
I will maybe illustrate that through our debt to EBITDA levels. Our long-term debt to EBITDA level on 12-month rolling basis stands at one. We think that we are, you know, not aiming to have more than 2.5 at any time of the period, meaning whenever we do the investments or we are expanding. As of now, our aim is to have 2.5. Our net debt EBITDA level, which is now 3.5 on 12-month rolling basis, is of course now on the lower side. It's hard to contain it in this kind of level because our balance sheet increases really much, you know, during the intensive trading periods, meaning Q2 and Q3.
When we adjust it with readily marketable inventories and we are now following this KPI as well, it stands at around 2.5 maximum, which I think is really a healthy number, and it's comparable with the other traders in the market. 26% of our capital ratio is probably somewhere in between where we are aiming to be. I think something around 30, more than 30 might be hard for the group to achieve basically due to you know, to the composition of our balance sheet. We have quite a lot of inventory and short-term assets which are moving through the year because we are a trading company. We need to buy everything on our balance sheet and then sell it during the year.
That's why we use quite a lot of working capital facilities and need the working capital. We especially now need quite a lot of equity to finance ourselves as well, not only banking loans, because our working capital is increasing, so we are increasing our financing facilities with our bank partners. We still need to maintain the leverage level or the leverage we are financed by the banks. We need to contribute more equity as well. Anyhow, to be conservative on the balance sheet, to be conservative on the future management of the group, we need to maintain a healthy level of equity and retained earnings in the group going forward due to the very, very high level volatility in the markets and the inflationary price increases.
Thank you very much. We have the last question for today, which is as following. As you explained, higher volumes was the reason behind the increase in absolute profits for products and services for farming segment. What led to increase in profit margins? Was it higher selling prices or lower cost? Thank you.
Yes. I mentioned two reasons why the result is so good. Volumes and then the profit margins. Profit margin drivers were increase in prices. Cost of goods sold, you know, it increased with the market. However, due to the really big demand for products and services for farming, due to the inflation, inflationary pressure, farmers were trying to buy and secure in advance, as well as the geopolitical situation and, you know, the security of supply. It also meant a higher buying, higher activity, which also led to higher prices for a given period.
Thank you. As all the questions are answered, on behalf of Linas Agro Group and Nasdaq Vilnius, thank you everyone. It was our pleasure being with you today. The recording of the presentation will be available on the company's website and Nasdaq Baltic YouTube channel. Thank you very much for the informative presentation, and have a good day everyone. Goodbye.
Thank you very much. Bye.