Dear ladies and gentlemen, welcome to the Linas Agro Group Webinar. I am Emilia, an account manager at Nasdaq Vilnius, and I am pleased to introduce today's presenter, the Finance Director of Linas Agro Group, Majvodashileka. Firstly, the management of the company will comment on Linas Agro Group financial results for the year ended June 13, 2020, and guide us through the recent events in the company. Right after the presentation, we will open the floor for the Q and A session. During the presentation, you shall type your questions to the question box on your screen.
So let's begin. Dear guests, I invite you to start the presentation.
Thank you very much. Good morning, everyone, and welcome to the webinar for investors hosted by Linas Agra Group. I thank you for joining and sparing your time for this webinar and asking questions in advance. Today, as already mentioned by Emilio, I will present the financial results of year ended 2019, 20 June. And I will give you a bit an overview of the Q1 results of this financial year.
And of course, we'll discuss the most important key developments for the group, which happened recently or in the foreseeable future. I am also your contact for investors. So please always feel free to approach me if you have any questions on the financials, reports or any key developments. And I would like to start with a snapshot of Lemas Agro Group. So we are a international vertically integrated agribusiness and food group.
We have or we segment our activity into 4 main segments. The group was founded in 1991 and we are listed on NASDAQ since 2010. We have roughly around 2,100 employees in the group for all the geographies. And our recent operational figures stands out that we have 321,000 of tons of grain capacity of our own elevators. We are managing 18.4 1,000 of arable land and last year sales volumes in tons was 2.2 1,000,000.
And this is a rough picture how the group looks and how it started. More key developments you can see on this main slide since the founding of the Group. The most recent ones are, of course, made during this calendar year or less than this financial year. And one of those are, for example, acquisition of Galeface startup, which is we are like going further into the precise farming or agri innovation business with this kind of development. We have also acquired another farming or agriculture company last financial year named Namulus.
And we also have recently established a subsidiary of Linas Agro in Estonia to start activity there or to expand activity there. The group consists or comprises of 39 companies in mainly 4 geographies, the Baltics and Ukraine. You can see a brief structural pictures of the main compositions of our components of the group through all the segments. The latest developments, apart from GEOFACE and Linasagoras Sony, is that we recently sold a 21 company of land holdings. So the group the number of companies in the group decreased by 21 recently, which we have announced.
And you can see the main four segments in this slide and the geographies we operate in and the main brands we use in those geographies. I will briefly run through main aspects of each segment. I believe you know them quite well. We have used this kind of segmentation for the Linaciro group reporting since listing. And the first point is products and services for farming is the 2nd biggest segment in terms of revenues.
And the main customers for this segment are farmers in the Baltics. The recent developments in the segment is the mentioned one GEOFFE startup. We are also investing in seed storage capacity expansion and this is also this will give more efficiency in operations and management. The second segment is agricultural production and this is completely Lithuanian based business segment, which is compromised of 7 farming companies. And as mentioned before, 18,400 hectares of managed land.
The recent developments here is the mentioned NAMONOS farming company, as well as the modernization of Lubunava mill production, which of course is a driver for efficiency looking further. The biggest segments in terms of turnover and one of the biggest EBITDA contributor is, of course, Brain and Feedstocks Handling and Merchandising. This is the most geographically dispersed segment as we operate in all 3 Baltic countries as well as Ukraine. The main counterparties for these segments are traders and, of course, the farmers in Lithuania and Latvia. The 4th segment is food production and this is mainly our poultry production unit in Latvia, which operates under main brands of Kekawa and Pauska.
Of course, there are many more, but these are the most probably pronounced or identified. Main operating geography is the Baltics or especially Latvia and Lithuania as well as strong presence and exports in Scandinavia. We extensively work with the whole with the main retailers in the Baltics and outside as well as the Horeca sector. And we have some efficiency projects under this segment for the upcoming year, which are listed below. I will then maybe move to the main financial highlights for the year ended on June 30th and the Q1 of this financial year and we'll briefly introduce you the revenues and the operating profit developments, which we see in the group.
So for the last financial year in terms of revenue, we are witnessing or seeing a positive development in the products and services for farming and as well as agricultural production. After a year or 2, with negative trends in terms of revenues, we see rebounding in these segments. And we see that on the Q1, the note is the same. We see that improving revenues in those quite important segments for the group. The biggest or the one of the most important revenue drivers, of course, grain and feedstock handling and merchandising segment, which we see that is fluctuating through the historical years, but we have a very strong start of the year, meaning this year for this financial year Q1, which ended end of September.
And this is, of course, supported by quite strong harvest in the Baltics and especially in Lithuania. And this is the key driver for this segment to be growing. In terms of operating profit, we see that all the segments in the group are having positive trends and we have a much better result compared to last year. The ones that are the main or how to say the biggest growth we are seeing in, of course, the before mentioned grain and feedstock handling segment and as well as the products and services for farming. We see close to double increases in those two segments in terms of operating profit.
And this is, of course, also supported by the stabilizing financial situation of the farmers in the Baltics. They are having a better financial year after this harvest. And we see that their need for his investments as well as willing to invest is actually becoming more positive. So we have felt this for the main these 2 main segments. However, the main challenging segment and the main challenging outlook for this financial year is in the food production.
As you can see, the Q1 results in terms of revenue as well as operating profit is somewhat down. And this is mainly due to the COVID situation throughout the Baltics as well as the main export markets. And looking further, we see that this is the most challenging segment for the year. And this is driven by the huge overproduction of poultry and poultry products in Europe and the main export markets for our company. I would like to move to our balance sheet overview and we consider our balance sheet to be quite firm after this financial year.
It mainly comprises of current assets and short term liabilities, which actually reflects our main trading activity, because we hold quite a lot of inventory on our books, as well as farmer financing through the payment terms. And as you can see on the graph on your left hand side, that the 60% of our net debt is covered by readily marketable inventory. So as mentioned before, this is mainly connected to our main trading activity. So even though we carried quite a lot of debt on our portfolios, this is connected to short term debt, which is used to buy commodities and export them through the ports. The 2nd largest part, the finance by debt is, of course, receivables and these are receivables mainly connected with farmers when we sell inputs to them.
However, the equity position of the company for the year ended in June is €181,000,000 and the capital ratio stands at 44%. The net financial debt including IFRS 16 is around 5.4 percent, which in our terms is back on track and decreasing year on year. Group has secured the main financing €1,000,000 of facilities available with our main financing banks. So we have actually covered our financing position for the season and financial year of 2021. I will move then to our return ratios, which are mainly reported and the ones we are looking at within the group is return on assets, return on equity.
And I would say the one of the most important is return on the capital employed. And after a loss making last year, we have rebounded in those all positions of return driven ratios and they are going actually back to the ones we saw previously and they are higher than our 5 year average. 5 year average return of assets is 1.4 and the one reported is 2.5. Percent. Return on equity, a 5 year average is 3.1 percent and the one reported is 5.5 and return on capital employed is also better than our 5 year average, which was reported 4.8%.
We have quite a high focus of management inside the group on the return driven ratios and as well as on the return and maybe especially on the return on capital employed ratio, which is both implemented or influenced by the returns the group generates as well as the capital amount we employ. Basically, we want to see higher turnover of the capital employed in the group going further. If I move to the next slide, which shows how our generated EBITDA is then connected to the value we drive for the Group and the shareholders as a whole. We reported and we produced around €5,900,000 of EBITDA for the last financial year. Around €5,200,000 are more or less non cash flow items, which we identified to be significant in the reporting.
Debt service which compromises of loan repayments and interest payments for the year was around €12,000,000 and we have a net CapEx of €4,200,000 that means we had to put our own money into investments together with financing from the banks during that financial year. So the generated net cash flow for the year is 4.4 and of course this is used to improve our credit metrics to finance our future investments and of course for future dividend payments. Last year we made around of €12,700,000 of investments, which around €8,500,000 of them were financed by loans from the banks. Our financial costs year on year are flat. Financing margins have increased slightly.
However, we managed to use the working capital more effectively, which resulted in a flat expenditure for the interest. We see that generated cash flow is improving and after quite difficult 3 years for the Baltic agri sector, we see a rebound and this should be evident for this financial year as well. I would like to then move forward and present a bit more regarding our value we try to create for the shareholders. As you, of course, saw during the Annual General Meeting, it wasn't approved and we didn't propose to pay any dividends for the last financial year. So we will have 2 years without dividends in the row.
Last year, of course, it was motivated by poor financial performance of the group. And this year, it is mainly connected with our planned acquisition of Como Rode Group. We're basically trying to prepare the group for the acquisition, which is foreseen this financial year. But looking at historically, the payout ratio of the 5 past years is around 16 percent, which is I think a healthy ratio, however, fluctuated quite significantly through the last years as we can see in 2017 2018 financial year, the payout ratio was much higher than 16%. I will then now briefly go through the main segments and main developments in each of the segments.
I have touched several or main items which happened in the segments, but I will also maybe look a bit more what happened in the Q1 of this financial year. And I will start with the products and services for Pharma segment. And the main, we have added quite a few new brands in this segments when we've offered them for the farmers, which is also a positive effect for our sales. We opened a new farmer service center in Latvia. We started a strategic cooperation with Acadrena, which is a smart or regulated Renesh business or system for farmers.
And this is becoming quite important as we saw 2 years with very big drops here in the Baltics. So with an investment, farmers are looking more and more into it. Overall, the segment had a positive note for the end of last financial year and this quarter as well. We see higher activity in through all the segments, through all the group of products, let me say like this, in this segment. And especially quite a positive thing is that we see that investments into agricultural machinery are up ticking and through all 3 Baltic countries.
So this is something very important for the group and we can see that the health of the financial health of the farmers is actually improving after this harvest. We are planning higher rent equipment rent activity during this financial year and we hope to launch Gjalfeis this spring. We have already started the construction of the seed warehouse. And the management expects operational profit for this segment to improve by around 20% compared to last financial year. We will revisit this figure throughout the year and we'll follow-up.
However, from the beginning of the year, it looks like it is going to be better than the last financial year. You can see on the right hand side the graph of the EBITDA development in this segment and we have an improvement year to year from 2018, 2019 to 2019 2020 financial year. So we hope to improve that further this year as well. I would like to move then to our agricultural production segment, which compromises mainly of 7 farming companies here in Lithuania. And the main developments here, of course, was the acquisition of agricultural company Navonas.
We also are continuing the development or modernization or organization of milk production in the Lagunawa Agricultural Company. And during the Q1 of this financial year, we see quite a stronger operational metrics from the segment. We have around 40% higher harvest figures. We also produced more mill than previously. And the beginning of the sowing was really good, which we sowed around 10,000 hectares of land.
Currently the conditions of the crops are quite well. And we see that the backbone for the upcoming harvest has so far been fine. Milk prices have rebounded slightly. We have reported a 1% increase in the milk prices. However, this is only still a marginal effect on the Group earnings.
So it would need more to make it more sustainable. Management expects to have the operational profit for the segment improved by 20% as well for the financial year 2021 compared to last year. We will revisit this figure as soon as the whole crops from the last harvest will be sold. Then we will have better forecast of the possible results. However, we have already then indicated what could we expect.
We have also reported that we have sold around 2,000 hectares of our own land. So, it's moved from 8,000 to 6,000 our own land. However, we are renting out the land on the long term lease contract. So the managed land under the group hasn't changed significantly. And I would like to move then to the Grain and Friesau Handling and Merchandising segment which is the biggest contributor in terms of sales for the group.
We actually had some influence of COVID for and lockdowns through the export markets in this segment. We also see some volatility during the Q1 as well in terms of prices and the global markets, especially for feedstock trends. However, we expect the volatility to continue, but given the quite good harvest results from the Baltics, we see that the Q1 of this financial year started quite strongly. If looking to the developments for this segment, we, as mentioned before, have opened a subsidiary in Estonia, which will support the segment as well in the long term. But looking at the financial figures, we have an explicitly strong quarter in terms of tons traded.
It's around 37% more year on year than compared last year, which we bought through our elevators from the farmers in Latvia and Lithuania. Overall, we trade at more tons of main crops as wheat and rapeseed around 112%. Volumes of feedstock grew around 36%. So, very busy Q1 for this segment. You can also see that in the sales growth for this segment.
We have a rebounded profitability compared year on year. I mentioned that in the group over year of operational profit figures and management expects to be this year, financial year to be better by 20% for the segment as well compared to last year. As I mentioned before, the markets due to COVID are quite volatile. There are some macro movements in the global commodity trade. And this maybe doesn't allow us to be much more optimistic regarding the possible operating profit for the segment.
I would like to move then to our food product segment, which is poultry production in Latvia. And this segment has probably the biggest influence of COVID seen in their results in the Q1. We have a very high overproduction of poultry products in Europe and especially in the markets we are exporting. One more thing which really impacts the sales of this segment is the lockdowns of quarantines in the geographies we sell because hardware sector then is suffering a lot. People are not going out to restaurants or eating lunch when they are going to offices and this has an impact on the consumption of food as the whole and especially as poultry as well.
So, basically that our reported result is much lower for the Q1 compared year on year. And the sales prices or average price of poultry meat sold by the group decreased by 8%. And this is as mentioned by me before is primarily COVID driven. So we expect to be in the second quarter quite challenging as well for this segment. However, the cycle should looking forward term because with the older producers throughout the Europe cannot last producing and having their profitability going down for a long time.
And we think that the producers will decrease the production grades quite soon, but because of the lag in time, it might be seen quite late in the financial year. So management expects the operational profit for this segment for the financial year 2021 to decrease by at least 15% for now. We will revise the figure with the reported quarters going further if we see any changes in the market. However, today, the projection is more or less around 15%. I would like to also draw your attention actually to the graph on the right hand side.
And you can see that EBITDA reported for the last financial year was really strong for this segment and it was one of the better in the last 4 years for the group. Briefly, the drivers for coming year and the most important developments, which we reported recently, the investments plan for this financial year for the group is RMB 13,800,000 and they're of course mainly allocated to food production and agri production segments. As I mentioned before, the launch of GEA phase activity is upcoming in spring in Lithuania and Latvia. We have reported that we sold 2,000 of hectares of arable or agricultural land and the transaction amount was roughly around €13,600,000 We of course will use these funds to drive growth and investments for the upcoming year and this was made primarily after revisiting the operational model of the agricultural production segment. And it was decided to decrease the this group together with the 2 poultry companies.
And of course, this is the main focus of the financial year for the management and the group coming further. I would like to make maybe a brief intro into how the group will look like or would look like and what is the logic behind this acquisition. And in brief, it is of course a further integration, further vertical integration of the Group and we would add more food production segments of Sibylinas agro Because as you can see, there are quite a few segments which overlap, which Linas Agro Group has and Kolmogruday has as well. And there are several segments, which would complement Linas Agro Group as whole quite well. In terms of revenue, the companies are quite comparable.
The revenue of Linaas Agro is higher. However, in terms of EBITDA and this is, as reported publicly by Kona Groude is €26,000,000 So in terms of EBITDA figures, the companies are quite comparable. And it would form quite a big food and agricultural group here in the Baltics. And this is one of the main things is to compete. The new group would be able to compete not only in the local markets, but more in the regional based markets, meaning Scandinavia or the Baltic Sea Basin.
We expect that this acquisition to scale economically and operationally grain trading, seed and fertilizers segments, of course poultry would have quite significant synergies in terms of management as well as opportunity to offer higher quantities and better products for export markets. We would add feed production, feedstock production, which is not performed currently in Linas Agro Group. And Nokona Rode is one of the biggest feedstock productions here locally in Lithuania, which 2 segments which would really complement Linas Agro Group and it would be a big shift towards more branded food production is of course instant meals and flowers. Flour, these are noodles, porridges and similar branded food, which have very recognizable and good brands in Lithuania and the Baltic States. So this acquisition is aiming to, of course, increase efficiency in the trading segments, add branded food production segments in instant meals and flour and right efficiencies in poultry and poultry segments creating more of a regional player.
Mainly these are the main factors which are drivers for the acquisition, which was decided to undergo Wodenas Agra Group. We expect the acquisition to be performed in spring. We are under the process to acquire all the necessary permissions from the Competition Council in every geography which is necessary. And we, of course, will announce any developments regarding this acquisition through NASDAQ as soon as we have. We haven't yet decided how the acquisition will be financed.
There are several options on the table, which we are discussing briefly, but we will try to choose the most suitable and most flexible way to do that looking further. I will probably end up here and we'll take any questions which we have you have asked in advance during this presentation. Thank you very much.
Thank you for the comprehensive presentation. Now we will proceed with the questions. Before that, I would like to remind you that you can send in your questions on your question box of your screen. So let's begin. The first question we have received in advance is, Linas Agro Group has achieved an enormous turnover in 2020, 2021 Q1, but profit margin is rather low.
Would it be possible to buy and sell crops at higher margin losing some turnover but having higher profitability? Thank you.
Thank you for the question. I would probably say that the best way to draw final results regarding the see what we have traded in the end of the financial year when we have the full turnover made. But to answer briefly this question that sometimes the turnover increases or depends on the trading strategies we adopt and how we build the trading book because during the year, we have different strategies adopted and we also we do buy and sell grains, opening and closing different positions. We do trades with other traders when it makes sense or we need to swap different grains, types, qualities and so on or we need to deliver contracts in different locations. So the turnover sometimes increases more than the margins due to different trading strategies we adopt.
Thank you for the answer. The next question is as following. Please give an overview of Kegay Group transaction. What is the aim of the deal? And how it would improve Lena's agro position?
Thank you.
So I've maybe touched a bit on the question when I was looking briefly through the transaction before. But maybe I would only add that the key drivers, this is of course driving efficiencies in our trading segments because it's economically logical to scale trade. We also have we would add businesses which are more stable in terms of earnings and profitability. These are segments more connected to food production. So the EBITDA, the new EBITDA of, for example, Linas Agro would be more towards food production than trading after this acquisition.
And of course, poultry segment is quite important for us as acquiring quite a strong brand in Lithuania and adding it together with our Latvian brand and having those production capacities would drive efficiencies. We would be able to offer more innovative and value added products for the customers here locally, as well as our main aim is to compete in the export markets, which are also connected and with the quantities we can offer and the markets we can enter. So this is the main logic behind that. Kontoorvay is a well managed company. As you see, the EBITDA is quite comparable to Linas Agro Group.
So it is a bit less leveraged company as it is more food production based company. So overall, the set for the book would also would be for the leverage ratios as well. That would be my addition to the comment before.
Thank you for your comment, Mr. Majotas. We are receiving actually quite a lot of questions. So let's proceed. What has happened on grain trading market in 2020?
Any consolidation in Lithuania? How competition has changed? Thank you.
Yeah. So the main driver, of course, for the grain trade in 2021 is the record high harvest in Lithuania and Latvia. But one of the other drivers that we see some players downscaling in this market, in this industry or we even see some players leaving the market. And it is mainly driven due to quite difficult and hard years for the Baltic at risk sector in the last few years. So I would say that the competition in this segment is tending to decrease.
Thank you for your answer. The next question is as following. What has impacted grain trading margins?
Well, as I mentioned before, maybe the best to drive or to do any far reaching conclusions, it would be best to do by the end of the financial year. But the grain trading margins are, of course, driven by the global environment for grain trade or the demand for food and feedstuff, as well as local harvest and quality of the local harvest and of course of the competition we have within the markets we operate. So these are the main drivers and previously, of course, we had not very favorable conditions, both harvest and global. And due to the big competition as well, it was a big pressure for the margins. I think we would see if the competition tends to decrease further, maybe we will see a more positive development for the segment in terms of margins.
Thank
you. Thank you for your answer. Another question is as following. Could you comment what had biggest positive impact on quarter ending with September? Anything one off?
Thank you.
There were no major one offs in the Q1 of this financial year. I would say that the main drivers for the better results are the record high harvest as well as the good financial position of the farmers. They really invested into the agricultural machinery and of course into agro inputs for the next harvest. I would say that even the combination of input prices and grain prices is quite favorable for the farmers, which would improve their financial position even further. That would be my main comment for that.
Thank you for your answer and thank you for your input. You are doing very well with all the time given. The next question is as following. How do you see machinery segment for 2021? Thank you.
So I touched upon that a bit throughout the presentation and we have witnessed quite positive developments so far. And if the good crop conditions hold through the spring and beginning of the summer, I think that the uptick in the sales for agro machinery will continue. And this is the foremost main driver for the farmers. It also is connected with the EU support for this segment, which is not maybe that clear yet. But even without that, farmers are tending to invest this year.
Some farmers are moving from buying to renting, which is also good, and we see to expand this segment for this financial year as well.
Thank you for your comment. We still have quite a few questions left. The next question is as following. How do you see your current dividend policy? And when are you going to renew the dividend payments?
Thank you.
Thank you for the question. We haven't had announced an official dividend policy for now. Maybe this is something the group should aim for in the upcoming year or 2 to straighten that up. I would say that as soon as we have structured and acquired, if we are according to the plan, I think the Group would be able to renew the dividend payments and that would maybe also be the main driver to structure the dividend policy going further for the loan.
Thank you for your answer. Another question is as following. How many grain products are stored in group elevators at the end of Q1 and which part of it is owned by the group? Thank you.
Thank you for the question. So I haven't I don't have that exact information for the end of Q1, what is the position of the rain inventory in our elevators. And also, I cannot recount from my head what is the exact position of own grain. But if it is delivered to our elevators, basically, of course, these are the grain ready for trading and they can be traded. The utilization made by, I can say that, the utilization of our own elevators this year was really high.
And we picked quite a lot of grain through the system in Lithuania and Latvia. And of course, we see that even the Q2 is still quite active in regards that farmers are delivering grain to the elevators. So I would say the Q2 is still quite active in regards of purchasing the harvest. Thank you.
Thank you. We are actually receiving quite many questions about KG Group. So let's proceed with them. Is any clarity from competition agency according to permission to acquire KG Group in date terms? Thank you.
I can only say that we are in the process of to receive the approval and we have also started the approval process in other geographies apart of Lithuania. However, I would not be able now in the position to disclose this information what is the result or what is the indications. I can say that so far we are moving according to the
plan. And could it be possible that KG acquisition will finish by acquiring a part of KG?
There is a practice of the Competition Council to give partial approvals for the concentration. We have discussed that internally and made some calculations what that might mean for the acquisition and the Group. So, you cannot always maybe prepare for that as you don't know the outcome. But I can comment maybe that we are looking at every different scenarios as we can think of.
Thank you for your comment. So another question is as following. Can you disclose some valuation multiples for KG Group deal? Thank you.
No, I'm sorry. I cannot do that at this point of the process. This information as far as now is confidential under the share and purchase price agreement.
Thank you for your answer. And is there any plan for share issue on KG acquisition?
I can maybe say that we are considering quite broad, specter of instruments how to finance this acquisition. However, I wouldn't like to give you indications at this moment what the precise
The next question is as following. Can you name the financing scenarios of KG Group acquisition you are evaluating? Is some kind of a share swap among it? Thank you.
Yes. Amibi probably is quite connected with the question before. I can say that share swap wasn't announced, so meaning that probably it's not in the game. We have announced that we are acquiring the shares of the Group. As I mentioned, instruments we are looking at is quite broad.
So I think there were several mentioned as well in the press. And you can also imagine that that could be financing, of course, from our own equity, sale of assets and then debt and equity instruments, meaning loans and other equity instruments. I wouldn't be now in the position maybe to give more precision here, mainly due to the thing that we haven't yet decided. And we are still in the process to evaluate the scenarios how to finance and what's the best way to do that.
Thanks a lot for your answer and the comments you provide. We are still receiving some questions, so I will proceed then. The next question is as following. Poultry price drops and the group operating profit from this segment is about 0. Can it be presumed that group self cost level in poultry business is at this market price level?
Thank you.
Well, it is a conclusion which can be drawn from the numbers. In a sense, the group, the poultry group, of course, has some fixed costs, which do not depend on the turnover sales and the price level of the poultry we sell. I would say that in a sense that the deeper conclusion for that should be drawn in the end of the financial year. But I would say that we are looking at possibilities in efficiencies if the market condition continues to worsen in the bolt to market as well. So, it is not completely equal as formulated in the question.
And I think we should follow-up every quarter on that and you can see the developments and how the costs are scaling throughout the year. Thank you for the question.
Thank you. Another investor is congratulating you with the great presentation. And the question we received is the following: Why you are not eliminating IFRS 16 effect to EBITDA when comparing annual EBITDA levels of group? In my view, year 2019 2020 EBITDA is not correctly presented. Thank you.
Thank you for the question. I maybe would say in general that IFRS 16 is something, of course, new for the group and maybe for the market as well. And we are evaluating every quarter and of course, mainly in the end of the financial year, the effect of IFRS 16. But in a sense, if we would need to make the corrections, we would like to make them quite clearly and openly for everyone to understand what have we adjusted. Because the adjustments can be made easily, but then we can sometimes lose the fair value of the reports.
So, we will I can only say that we will definitely revise the calculations and we will think of forward what kind of eliminations we should present for the investors in our reports to make the reports as much as possible comparable and in a fair view. However, we don't want to make too much of adjustments and to go away from the reporting we have or the reporting standards we have in the group here. But that's a very good question and this is something of course we are discussing internally as well and in terms how to show the reporting or at least the figures we present or the ratios we present for the investors.
Thank you for your comment, Mr. Masvides. We are still receiving questions about KG Group, so I will ask the last one of it, it seems. So the question is as following. Also, what is your debt capacity for the acquisition of KG?
Thank you.
Thank you. That's a really good question for in terms of we have we in terms of our how to say house view and that capacity we calculate, we see that the Group is not really carrying a lot of long term debt. The long term debt in the group stands around roughly €30,000,000 And this was mainly used to finance our investments and this compromises of around 1.5 EBITDA of long term debt. So I think that this kind of group would be able to have around 2.5 to 3 times the EBITDA of long term debt. That would be also supported with our repayment capacity and of course possibilities to make investments into assets and working capital.
Thank you for your comment. The next question actually includes quite a few numbers, so I will do my best to explain it clearly. So it is as following. What is the average book value of the land in your balance sheet? Is the figure approximately €4,800 per hectare?
Does it mean net result of land sale transaction is approximately €4,000,000,000 I'm not sure.
Thank you for the question. The average historical price, which is accounted in our balance sheet for the agricultural land plots is around €3,000 And I would not be able in the position to answer your question now what is the exact net effect of the sold land plots, because different land plots were sold with different historical costs accounted in the balance sheet. But as for indication, I know that this question comes up quite often in our Annual General Meetings. But so to answer it that our average cost accounted or average value accounted in the balance sheet of our agricultural land is around EUR 3,000.
Thank you for your comment. As we are running out of time, let's try to answer a few more questions. So the next question is as following. In the past, shareholders made a decision of shares buyback. However, this option was never used.
What are your plans on it in the future? Thank you.
Thank you. That's a very good question. I think it's completely connected to the Group's dividend policy looking further. And I think that in the short term, 1 of the 2 instruments should be used. Previously, the share buyback program wasn't used, but the company paid out dividends.
I would also say that we would have to be flexible in terms of the timing when to use 1 of the other instruments. I would suggest that dividend payments would be more logical for the Group at this point as share buybacks would decrease the liquidity of the shares in the market. And this is maybe not the aim the Group is looking for. We are really more attracted or we are more positive or we would like to see a better liquidity of the share in the market and we would like to give quite a lot of different instruments to increase the liquidity of the share. So, in my opinion, in the short term, share buybacks would be an opposite activity rather than dividend payments.
Thank you for your comment. And I see that this is the time to end, but we still have one more question. So if you would agree to provide a short comment, we would really appreciate it. So how do you see your agriculture machinery business performance? Thank you.
Agricultural, yes, of course. It had previously quite a difficult 2 years, mainly due to the bad harvest or really deteriorating financial position of the farmers. However, we have the benefit of being in all 3 Baltic countries and having a bit of a diversification through the client base as well as different needs of the clients in all different Baltic countries. And I see that the segment really has underperformed the last few years. But last year, we already saw a really strong finish of the year, which also gave a really big impact on the final figure.
We had due to the good harvest and good prospects of the future sowings, farmers really went and invested. And I see that this node is continuing through all three countries. We also have adopted quite good product development in terms we offered new products and new brands for the farmers for all three countries. So, we also are changing the product mix, which I think really helps to improve the segment performance. So I would say that we have the strong finish of last financial year in this segment and strong start of this year.
The prospects are getting better. And as mentioned before in the slide, management expects of that segment to improve in line with the forecast provided with. Thank you for the question.
Thank you for your answer. So as all the questions are answered, on behalf of Nasdaq Vilnius, thank you, everyone. It was a pleasure being with you today. Regarding the recording of the presentation, it will be available in Nasdaq Baltic YouTube channel. Dear Mr.
Majvidas, thank you for your presentation and a very interesting Q and A session. Have a good day, everyone, and goodbye.
Thank you, everyone. It was my pleasure. Goodbye. Have a nice day.