Dear ladies and gentlemen, welcome to the Linas Agro Group webinar. I am Emilija, an Account Manager at Nasdaq Vilnius, and I am pleased to introduce today's presenter, the Finance Director of Linas Agro Group, Mažvydas Šileika. 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&A session. During the presentation, you shall type your questions to the question box on your screen. Let's begin. Dear guest, I invite you to start the presentation.
Thank you very much. Good morning, everyone, and welcome to the webinar for investors hosted by Linas Agro Group. I thank you for joining and sparing your time for this webinar and asking questions in advance. Today, as already mentioned by Emilija, I will present the financial results of year ended 2019- 2020 June, and I will give you a bit of an overview of the first quarter results of this financial year. 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, please always feel free to approach me if you have any questions on the financials, reports, or any key developments. I would like to start with a snapshot of Linas Agro Group. We are an international vertically integrated agribusiness and food group.
We segment our activity into four 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. Our recent operational figures stand at that we have 331,000 tons of grain capacity of our own elevators. We are managing 18,400 of arable land, and last year, sales volumes in tons was 2.2 million. This is a rough picture of 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.
One of those are, for example, acquisition of GeoFace startup, which is we are going further into the precise farming or agri-innovation business with this kind of a development. We have also acquired another farming or agricultural company last financial year named Anamelis. 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 four geographies, the Baltics and Ukraine. You can see a brief structural picture of the main compositions of our components of the group through all the segments. The latest developments apart from GeoFace and Linas Agro Estonia is that we recently sold 21 company of land holdings. The number of companies in the group decreased by 21 recently, which we have announced.
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 these kind of segmentation for the Linas Agro Group reporting since listing. The first one is products and services for farming. It's the second biggest segment in terms of revenues. The main customers for this segment are farmers in the Baltics. The recent developments in the segment is the mentioned one, GeoFace startup. We are also investing in seed storage capacity expansion, and 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 comprised of seven farming companies and, as mentioned before, 18,400 hectares of managed land. The recent developments here is the mentioned Navmanas Farming company, as well as the modernization of Labūnavos ŽŪB milk production, which of course, is a driver for efficiency looking further. The biggest segment in terms of turnover and one of the biggest EBITDA contributor is, of course, grain and feedstock handling and merchandising. This is the most geographically dispersed segment as we operate in all three Baltic countries as well as Ukraine. The main counterparties for these segments are traders and, of course, the farmers in Lithuania and Latvia. The fourth segment is food production, and this is mainly our poultry production unit in Latvia, which operates under main brands of Ķekava and Bauska.
Of course, there are many more, but these are the most probably pronounced or identified. Main operating geographies is the Baltics or especially Latvia and Lithuania, as well as strong presence and exports in Scandinavia. We extensively work with the main retailers in the Baltics and outside, as well as the HORECA sector. We have some efficiency projects under this segment for the upcoming year, which are listed below. I will then maybe move the main financial highlights for the year ended on June 30th and the first quarter of this financial year, and will briefly introduce you the revenues and the operating profit developments which we see in the group.
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 two with negative trends in terms of revenues, we see rebounding in these segments. We see that on the first quarter, the note is the same. We see that improving revenues in those quite important segments for the group. 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. We have a very strong start of the year, meaning this financial year, first quarter, which ended end of September. This is, of course, supported by quite a strong harvest in the Baltics and especially in Lithuania.
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, 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. 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 investment as well as willing to invest is actually becoming more positive. We have felt this through these two 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 first quarter results in terms of revenue as well as operating profit is somewhat down. This is mainly due to the COVID situation throughout the Baltics as well as the main export markets. Looking further, we see that this is the most challenging segment for the year. 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. 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 deferred payment terms. As you can see on the graph on your left-hand side, that the 60% of our net debt is covered by regularly marketable inventory. As mentioned before, this is mainly connected to our main trading activity. 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 second largest part financed by debt is, of course, receivables, and these are receivables mainly connected with farmers when we sell inputs to them.
The equity position of the company for the year end in June is EUR 181 million, and the capital ratio stands at 44%. The net financial debt, including IFRS 16, is around EUR 5.4 million, which in our terms is back on track and decreasing year-on-year. Group has secured the main financing for this operational year, we have around and a bit of more than EUR 160 million of facilities available with our main financing banks. We have actually covered our financing position for the season, and financial year of 2021. I will move 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.
After a loss-making last year, we have rebounded in those all positions of return-driven ratios. They are going actually back to the ones we saw previously, and they are higher than our five-year average. Five-year average return on assets is 1.4 and the one reported is 2.5. Return on equity, five-year average is 3.1, and the one reported is 5.5. Return on capital employed is also better than our five-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 generate 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 that we produced around 25.9 of EBITDA for the last financial year. Around 5.2 are more or less non-cash flow items, which we identify to be significant in the reporting. Debt service which comprises of loan repayments and interest payments for the year was around EUR 12 million. We have a net CapEx of EUR 4.2 million. That means we had to put our own money into investments together with financing from the banks during that financial year.
The generated net cash flow for the year is EUR 4.4 million, 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 EUR 12.7 million of investments, which around EUR 8.5 million 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 the generated cash flow is improving and after quite difficult three years for the Baltic Agro Sector, we see a rebound and this should be evident for this financial year as well. I would like to 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. We will have two years without dividends in the row. Last year, of course, it was motivated by poor financial performance of the group. This year, it is mainly connected with our planned acquisition of Kauno Grūdai Group. We're basically trying to prepare the group for the acquisition, which is foreseen this financial year. Looking historically, the payout ratio of the five past years is around 16%, which is, I think, a healthy ratio. However, fluctuated quite significantly through the last years. As we can see in 2017 and 2018 financial year, the payout ratio was much higher than 16%. I will 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 first quarter of this financial year. I will start with the products and services for farmer segments. We have added quite a few new brands in this segments when we 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 operation with EkoDrena, which is a smart or regulated drainage business or system for farmers. This is becoming quite important as we saw two years with very big droughts here in the Baltics. This is an investment farmers are looking more and more into.
Overall, the segment had a positive note for the end of last financial year and this quarter as well. We see higher activity through all the segments and through all the group of products, let me say like this, in this segment. Especially quite a positive thing is that we see that investments into agricultural machinery are upticking and through all three Baltic countries. This is something very important for the group, and we can see that the financial health of the farmers is actually improving after this harvest. We are planning higher equipment rent activity during this financial year, and we hope to launch GeoFace this spring. We have already started the construction of the seed warehouse, and the management expects operational profit for the segment to improve by around 20% compared to last financial year.
We will revisit this figure throughout the year and we will follow up. From the beginning of the year, it looks like it is going to be better than last financial year. You can see on the right-hand side the graph of the EBITDA development in this segment. We have a improvement year-to-year from 2018 and 2019 to 2019 and 2020 financial year. We hope to improve that further this year as well. I would like to move to our agricultural production segment, which comprises mainly of seven farming companies here in Lithuania. The main developments here, of course, was the acquisition of agricultural company, Navmanas. We also are continuing the development or modernization or robotization of milk production in the Labūnavos agricultural company. During the first quarter of this financial year, we see quite a strong operational metrics from the segment.
We have around 40% higher harvest figures. We also produced more milk than previously. 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. 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. We will have a better forecast of the possible results.
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. It moved from 8,000 to 6,000 our own land. We are renting out the land on the long-term lease contract. The managed land under the group hasn't changed significantly. I would like to move then to the grain and feedstock handling and merchandising segment, which is the biggest contributor in terms of sales for the group. We actually had some influence of COVID and lockdowns through the export markets in this segment. We also see some volatility during the first quarter as well in terms of prices in the global markets, especially for feedstock trades.
We expect the volatility to continue, given the quite good harvest results from the Baltics, we see that the first quarter 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 this segment as well in the long term. Looking at the financial figures, we have a 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 traded more tons of main crops as wheat and rapeseed around 112%. Volumes of feedstock grew around 36%, very busy first quarter 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 overview of operational profit figures, and management expects this financial year to be better by 20% for this 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 this segment. I would like to move then to our food product segment, which is poultry production in Latvia. This segment has probably the biggest influence of COVID seen in the results in the first quarter. 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 or quarantines in the geographies we sell. HORECA sector then is suffering a lot. People are not going out to restaurants or eating lunch when they are going to offices. This has an impact on the consumption of food as the whole and especially as poultry as well. Basically, our reported result is much lower for the first quarter compared year-on-year. The sales prices or average price of poultry meat sold by the group decreased by 8%. This is, as mentioned by me before, is primarily COVID driven. We expect to be the second quarter quite challenging as well for this segment.
The cycle should, looking forward, turn because with the older producers throughout Europe cannot last producing and having their profitability going down for a long time. 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. 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. 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.
You can see that EBITDA reported for the last financial year was really strong for this segment, and was one of the better in the last four 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 EUR 13.8 million, and they are, of course, mainly allocated to food production and agri production segments. As I mentioned before, the launch of GeoFace activity is upcoming in spring in Lithuania and Latvia. We have reported that we sold 2,000 hectares of arable or agricultural land, and the transaction amount was roughly around EUR 13.6 million. We, of course, will use these funds to drive growth and investments for the upcoming year. This was made primarily after revisiting the operational model of the agricultural production segment.
It was, of course, decided to decrease the ownings of the agricultural land plots. One of the biggest driver for this financial year is, of course, the announced acquisition of Kauno Grūdai . We are aiming to acquire this group together with the two poultry companies. Of course, this is the main focus of the financial year for the management and the group coming further. I would like to maybe a brief intro into how the group will look like or would look like, and what is the logic behind this acquisition. In brief, it is, of course, a further vertical integration of the group. We would add more of food production segments to Linas Agro. As you can see, there are quite a few segments which overlap, which Linas Agro Group has and Kauno Grūdai has as well.
There are several segments which would complement Linas Agro Group as a whole quite well. In terms of revenue, the companies are quite comparable. The revenue of Linas Agro is higher. However, in terms of EBITDA, and this is as reported publicly by Kauno Grūdai, is EUR 26 million. In terms of EBITDA figures, the companies are quite comparable. It would form quite a big food and agricultural group here in the Baltics. 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 market, meaning Scandinavia or the Baltic Sea basin. We expected 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 feedstuff production, which is not performed currently in Linas Agro Group. Kauno Grūdai is one of the biggest feedstuff productions here locally in Lithuania. Two 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 flour. These are noodles, porridges, and similar branded food, which have very recognizable and good brands in Lithuania and the Baltic States. This acquisition is aiming to, of course, increase efficiency in the trading segments, add branded food production segments in instant meals and flour, and drive 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 by Linas Agro 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. 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. 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 you have asked in advance or 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. 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 a 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 profitability of the trading segment is year-end, because due to accounting specialties and other operational moments, it would be the best way to see what we have traded in the end of the financial year when we have the full turnover made. 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 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.
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 KG Group transaction. What is the aim of the deal and how it would improve Linas Agro position? Thank you.
I 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 would add businesses which are more stable in terms of earnings and profitability. These are segments more connected to food production. The new EBITDA of, for example, Linas Agro would be skewed more towards food production than trading after this acquisition. 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. This is the main logic behind that. Kauno Grūdai is a well-managed company. As you see, the EBITDA is quite comparable to Linas Agro Group. It is a bit less leveraged company as it is more food production based company. Overall, the effect for the group would also be through the leverage ratios as well. That would be my addition to the comment before.
Thank you for your comment, Mr. Mažvydas. We are receiving actually quite a lot of questions. Let's proceed. What has happened on grain trading market in 2020? Any consolidation in Lithuania? How competition has changed? Thank you.
The main driver, of course, for the grain trade in 2021 is the record high harvest in Lithuania and Latvia. One of the other driver is that we see some players downscaling in this market, in this industry, or we even see some players leaving the market. It is mainly driven due to quite difficult and hard years for the Baltic Agro Sector in the last few years. 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? Thank you.
Well, as I mentioned before, to drive or to do any far-reaching conclusions, it would be best to do with the end of the financial year. 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 the quality of the local harvest, and of course, of the competition we have within the markets we operate. 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 first quarter 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.
I touched upon that a bit throughout the presentation. We have witnessed quite positive developments so far. 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. 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. 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 a official dividend policy for now. Maybe this is something the group should aim for in the upcoming year or two to straighten that up. I would say that as soon as we have structured and acquired, if we are successful, Kauno Grūdai, and we have made the main integration steps towards the group, and if that's 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 group. Thank you.
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. I don't have that exact information for the end of the Q1, what is the position of the grain inventory in our elevators. Also, I cannot recount from my head what is the exact position of owned grain. If it is delivered to our elevators, basically, of course, these are the grain ready for trading, and they can be traded. 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. Of course, we see that even the second quarter is still quite active in regards that farmers are delivering grain to the elevators. I would say the second quarter 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 to receive the approval. We have also started the approval process, in other geographies apart Lithuania. 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.
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. You cannot always maybe prepare for that as you don't know the outcome. I can comment maybe that we are looking at every different scenario as we can think of.
Thank you for your comment. 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 I know, is confidential under the share and purchase price agreement.
Thank you for your answer. Is there any plan for share issue on KG acquisition?
I can maybe say that we are considering quite broad sector of instruments how to finance this acquisition. However, I wouldn't like to give you indications at this moment what the precise strategy of financing would be.
Thank you for your answer. The next question is as following: Can you name the financing scenarios of KG Group acquisition you are evaluating? Is some kind of share swap among it? Thank you.
Yeah, maybe probably it is quite connected with the question before. I can say that share swap wasn't announced, meaning that probably it's not in the game. We have announced that we are acquiring the shares of the group. As I mentioned, the instruments we are looking at is quite broad, I think there were several mentioned as well in the press. 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, 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 zero. 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 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, the deeper conclusion for that should be drawn in the end of the financial year. I would say that we are looking at possibilities in efficiencies if the market condition continues to worsen in the poultry market as well. 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. 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 that 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. We are evaluating every quarter and of course, mainly in the end of the financial year, the effect of IFRS 16. 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. The adjustments can be made easily, but then we can sometimes lose the fair value of the reports. I can only say that we will definitely revise the calculations, and we will think 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.
We don't want to make too much of the adjustments and to go away from the reporting we have or the reporting standards we have in the group here. That's a very good question, and this is something, of course, we are discussing internally as well, and in terms of 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. Mažvydas. We are still receiving questions about KG Group, so I will ask the last one of it seems. 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. In terms of our house view and that debt 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 EUR 30 million. This was mainly used to finance our investments, and this comprises of around 1.5 EBITDA of long-term debt. I think that this kind of group would be able to have around 2.5 to 3x 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. It is as following. What is the average book value of the land in your balance sheet? Is the figure approximately EUR 4,800 per hectare? Does it mean net result of land sale transaction is approximately EUR 4 million? I am 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 EUR 3,000. 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 cost accounted in the balance sheet. As for indication, I know that this question comes up quite often in our annual general meetings. 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.
Sure.
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. I think that in the short term, one of the two 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 one of the 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. 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. In my opinion, in the short term, share buybacks would be an opposite activity rather than dividend payments.
Thank you for your comment. 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.
How do you see your agriculture machinery business performance? Thank you.
Agricultural. Yeah, of course. It had previously quite a difficult two years, mainly due to the bad harvest or really deteriorating financial position of the farmers. We have the benefit of being in all three Baltic countries and having a bit of a diversification through the client base, as well as different needs of the clients in all three Baltic countries. I see that the segment really has underperformed the last few years. Last year, we already saw a really strong finish of the year, which also gave us really big impact on the final figure we had due to the good harvest and the good prospects of the future sowings. Farmers really went and invested. I see that this note 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. We also are changing the product mix, which I think really helps to improve the segment performance. I would say that with the strong finish of last financial year in this segment and strong start of this year, the prospects are getting better. As mentioned before in the slide, the management expects of that segment to improve in line with the forecast provided by us. Thank you for the question.
Thank you for your answer. 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. Mažvydas, thank you for your presentation and a very interesting Q&A session. Have a good day, everyone, and goodbye.
Thank you, everyone. It was my pleasure. Goodbye. Have a nice day.