Good afternoon. Dear listeners, welcome to AUGA Group Investor Event. I'm Emilia from Nasdaq Vilnius, and I will be the moderator for today's event. We will start with a presentation from the management, which will be followed by the Q&A session. As always, I encourage every one of you to ask questions during and after the presentation in the question box of your screen. With that said, I'm pleased to introduce today's presenter, Chief Financial Officer Mindaugas Ambrasas. Mr. Ambrasas, please, the floor is yours, and good luck.
Thank you and good afternoon to everyone. As introduced, my name is Mindaugas Ambrasas. I'm CFO of AUGA Group. Today I will present the results of AUGA Group for the full year of 2021. I think in general, we can say that results for nine months, which we presented three months ago, they really showed quite a clear trend how the year 2021 looks for us. Today, we just really can confirm that, unfortunately, 2021 was quite a challenging year for AUGA Group for several reasons. You know, first of all, extreme heat in summer, COVID cases, some other things. This led to, I would say, quite poor result financially when the group have 14 minus...
EUR 40 million loss for the full year of 2021. From the perspective of the fourth quarter, I would say the result is really in line with the situation of the trend which was going for the last year. A few things I would like to elaborate a little bit, that we incurred additional losses in the fourth quarter due to some additional provisions we made at the end of the year. I think the most important part of the provisions is EUR 1.2 million provisions for receivables from Symbol LLC. Just to elaborate on this case, the real story goes from 2018 when AUGA Group sold a company in Crimea.
We still have receivables from that transaction. We had some problems already last year with payment for this transaction. From that perspective, and also keeping in mind the current situation, a decision was made to make additional provisions. Generally those additional provisions, all the provisions of almost EUR 1.5 million, they of course also had negative additional impact on losses we incurred for the year, though they didn't have that or the same effect on our EBITDA result. As always, let's go through our business segments and to discuss in more details what happened.
I think our idea and our target for today was not maybe to spend that much time on the results for the year because really lots of reasons and consequences of those reasons already were told and discussed in quite a detail during presentation of three quarters. Today we would like to focus more on the latest developments, what happened in the segments in the last quarter, and how we see and how we plan to work in the future. As always, let's start from our largest segment, Crop Growing. As I mentioned already today, and as we already told you in the presentation of three quarters, you know, we...
Our results suffered quite a lot from extreme heat we had in our region during the summer. Because of that, we have significantly lower yields, especially for summer crops and legumes. This was, I would say, the main reason of our poor result of the segment for the year. Secondly, this is also important fact that though we had significant increase in commodity prices in the end fourth quarter of the year, we really didn't benefit that much from those changes because you know, we do pre-contracting of our forecasted harvest. We start doing this in the beginning or second quarter of the year when the price level was lower.
Unfortunately, we end up with a situation that due to lower harvest our actual harvest was significantly lower. Though in the beginning we planned to contract, let's say 30%-40% of forecasted harvest, we end up with contracting 100%. You know, we had to follow the agreements and execute transactions on the prices which were set in the beginning of the year and didn't benefit that much from higher price level at the end of the year. At the end of that, because of those two reasons, for the year, we have EUR 3.2 million loss in revaluation of crops. Last year result was almost EUR +8 million .
This difference of almost EUR 11 million year-over-year really reflects almost on the same level on the last line of segment's result, gross profit. On a positive note, we already saw some positive effect of increasing prices in the fourth quarter. I think, after quite a long period of time, I think it was the first quarter when we had a positive result from our sales operations. Though it was not that significant, EUR 0.13 million profit from sales operations in Q4 alone. You know, though this had some positive effect, but not that big that we have essential change in our overall result.
Another important note, we had a quite significant amount of write-offs of inventories. I think I also need to elaborate on this a little bit, because inventories, maybe they are not, let's say business as normal, but they also result of some of the changes we are doing. I think the main idea and what we are trying to achieve here, we really want to have very clear internal pricing for internal transactions and really have very clear result of our every business segment. Because we still have internal transactions when one segment, for example, crop growing is preparing forage for dairy business, and we have transactions between the segments.
The target, as I said, is to make results of the segment very transparent and clear. Historically, part of those costs were attributed to different segments. Currently we put them into one line of inventory write-offs. Starting from next year, this will be accounted separately and will be a separate line in our financial reports. For 2021, we have slightly, I'd say not slightly, but higher negative result from those transformations. Because of the way how we calculate the result of those internal transactions, but also from the, like, business logic. Because last year, due to the same high costs per ton of forage were higher.
This also increased overall costs per ton for forage and affected the higher negative result which was this year shown in the inventory write-offs line. Moving further to the future, I think the most important and the factor which really gives reason for optimism for us is really latest developments in the market and talk about the pricing level. As always, we are showing prices of wheat, conventional and organic in Lithuania, and the price level we have in AUGA Group. I think prices of wheat really represents quite well overall situation with other commodities, organic and conventional, as well.
As you can see from the slide, I think all of you follows now that really there was quite significant growth of the prices, which started in the end of 2021. The trend really continues in 2022, at least for organic commodities as well. Right now we really have a situation in the market that at least in organic markets, the demand is really outpacing supply. There is in some cases it is even problematic to get some of the crops, to find some of the crops. There are also some specific reasons and we believe that they will help this trend to continue, and those reasons will support high price of commodities in the future as well.
First of all, starting from 2022, there is a new regulation in EU regarding organic feeding of organic livestock, let's say. Generally, there is a requirement that all the feed for the livestock, cows and pigs, should be organic as well. This really increase demand for organic feed. Secondly, due to increased logistics costs, some of the countries, China, for example, they really are not competitive anymore. This also, you know, is beneficial for EU or producers or AUGA Group as well. Thirdly, due to reasons mentioned earlier, we see a very clear trend from big EU companies that, you know, they made a decision that in the long term, they really want to purchase raw materials of EU origin only.
Once again, you know, we have competitive advantages with non-EU producers, and this is also supports higher prices for organic grains in European Union. This is more like a general overview, but if just to go to specific situation in our group. Our expectation was also that if we will start making contracts for next or this year, sorry, harvest, we really believe that the pricing level should be like 20%-30% higher comparing to the prices we had last year, and we sold our harvest last year. The biggest price growth is coming from feed grains, legumes. Generally, where like the biggest demand is at the moment. For the end of February, we have 28% of our forecasted harvest contracted.
A really big part of that is contracts, long-term contracts we have for growing specific crops, for example, sugar beets. If we exclude those long-term agreements, generally, I think now is the time when contracting of new harvest just started. From that perspective, we minus or exclude those long-term agreements. From the remaining forecasted harvest, we contracted, as for today, 2.4%. Though percentage is still quite low, as I said, this is more of like situation in the market and market's willingness to make new contracts. Even from this small number, we can see that our expectations regarding the pricing level is really online.
Generally, we talk about those 2.4% agreements. If we compare prices, we sold our harvest last year and the contract price we have for this year. Generally we see 25%-33% higher prices for the same commodities. This really gives optimism for us. We really can see why situation and results can change quite significantly in crop growing segment and overall for our group in 2022. Second segment, dairy. Here, I think we already told the story a couple of times that unfortunately we had some issues in production in the first half of the year. We solved those issues in the second half.
Generally, if we look at the figures, for the end of the year, we generally compensated what was lost in the first half. Still, if you look at the overall figures, we can say that expectations were higher. At the same time, we believe that now the positive trends in production first and secondly in the pricing. I will elaborate on this a little bit later. Generally, there is also optimism for the segment to improve result this year. Another important message from us, we already mentioned a couple of times that we are working on new technology, how to prepare feed for the cows in new way, in using technologies we are currently developing.
We already have first facility running, and we are running tests on small number of cows. The first results from the tests are really encouraging because we, you know, we get around 20% higher yields comparing to the same cows, but which are using, let's say, our standard feed. You know, if we are really successful with the testing and we can start using this technology on at least part of our herd. This is also another reason to be optimistic about possibilities to improve results of the segment. But as you can see from the table. Gross profit for the year is almost EUR 1 million increase from the last year.
As I said, this is really, we believe that this is, this segment really has potential to improve the results and the things what we are doing our herd. The quality of herd should start giving results hopefully in 2022. To elaborate a little bit more on those two key areas, in the segment. Generally, what are our milk yields and what is our milk price? Here you can see more detailed information. As already mentioned, first half of the year, even looking at the graph, you can see that milk yields year-over-year generally were on the same level. In the second half of the year, we really picked up. For the year, we had growth of only 2%.
If we compare our results in January year-over-year. Generally our results for January is yields are 7% higher than we had in 2021. This is, I would say, very optimistic sign for us. More importantly, milk prices, I would say they also following general trend of commodity prices. Price for raw milk is increasing and continues to increase in 2022. Of course, there are some seasonal aspect in that. Still, if we look at change of price during 2021. You know, average milk price for AUGA Group increased by 8%. There are two aspects in this increase. Of course there is, let's say, normal price increase.
We also slightly increased part of our organic milk in total sales. This effect is small one already because for the last couple of years our sales of organic milk exceeded 90%. There is, I would say, full possible room for improvement is already reached there. Now we are focusing more on production and milk prices. As mentioned, this trend of increasing prices, it really continues in January or in 2022. You know, and this was even more substantial increase. In January, we received 15% higher price comparing to January 2021. This is just a confirmation. As I said, there are reasons to believe that results of the segment should improve. Mushroom growing.
This is really very similar story to what I told about dairy. Unfortunately, in this segment we also had some problems with production. This led to substantially poor result for the year. We already told a couple of times, I believe, what had happened. Just a short reminder that due to hot weather and due to COVID situation, we had a problem with production. Generally our production and sales volumes decreased almost by 15%-20%. I will follow up on that a little bit later. Our cost structure in general are almost fixed. Generally we have the same costs but our revenues went down. This was the main reason.
Once again, going back to the situation with dairy, you know, this problem started from June 2021. It took some time to find a solution and to improve the situation. The reason why it really takes that long is that production cycle in the mushrooms is almost seven weeks. Generally if you make changes in compost production, you know, until you see how those changes really work in mushroom growing, it takes some time. If you need to make another adjustments, it's another one and a half months to see the final result. We believe that, you know, we were on track last year. Currently we reached, let's say, normal level of production.
which should help us to get back on the results we had previously in this segment. Just to elaborate on the things I mentioned. Here you can really see that production and sales volumes had decreased substantially starting from July. Then we had almost six months constant, maybe small, but constant growth. In the fourth quarter, comparing to the third quarter, production output was already higher by 18%. In January we reached 1,074 tons of mushrooms sold. As I said, generally we are in the level of I'd say historical average. The level where we want to be in order to have acceptable financial results.
Really hopefully all those problems we had, they are solved and controlled now, so we can really focus on other things. Talking about mushrooms, we already mentioned and we worked for couple of years how to increase part of our organic mushroom sales. This is also one of the key topics and then targets for this year. I would say for the mushroom growing, there is really important how we will be able to control the costs. Because this is one of the segments which is really affected by increased energy prices. You know, we already started implementing solutions how to decrease energy consumption and in that way control our cost level. At the same time a review of pricing is happening.
Generally we made some agreements already at the end of last year. We're already seeing the first results from that. This is also the task for the first quarter, because once again, pressure from the cost side is there. We believe that we've restored the production volumes. We are on track to get back to normal results on this segment. FMCG is really, maybe the. You know, we only have one slide about the segment. I think the situation is generally the same as we had for the last couple of years. The segment has stable growth. It grew by 27% for the full year. Profitability also increased.
What observation I could say, and just comparing results for the year and for the nine months, I think we can see that there is, from our history already working with our customers, that there is quite big seasonality in this business. Just because our main product is soup, and as it is a hot product, so it is mainly consumed during winter or autumn periods. Generally, our consumers are buying and preparing for the new season in the end of second quarter, third quarter, and the first quarter and fourth quarter are usually weaker, and we expect the same this year. That will be lower periods in terms of sales, etc.
From our plans for 2022, few things which happened that though we still see some challenges in logistics. We had some cases when, you know, logistics took really long time to reach and our products to reach our customers. This didn't create some big problems overall. The good thing that after couple of years we already are able to participate in the business fairs to meet our potential customers or existing customers live. This was really needed to expand our customer base, to increase our cooperation.
As of now, we are able to do that. You know, based on our existing pipeline, we believe that this growth rate we had in 2021 can really continued in 2022 as well. I think it's also a topic which is very important to talk and discuss currently. How our group business can be impacted by all the things which are happening in our neighboring countries. From that perspective, we don't see risks related to our group business. Russia, Belarus were never important markets for us. Historically, we did only occasional sales to those markets.
As you can see, we had like below 0.5% sales in 2021. From that perspective, you know, we didn't plan those countries as our important market. Definitely in current situation, we don't plan to do anything in these markets. Historically, we had some business with Russia. We were selling our compost from our mushroom segment to some Russian companies. This business was stopped in the end of 2020. We already mentioned couple of times that we never planned and we never expected to this business to get back to the levels we had. Generally, we didn't make any attempts to get back. Of course, we are not planning in the future as well.
Generally, from that perspective, effect on our results on our activities will be really limited. Additionally, I can also say that we saw a substantial increase in commodity prices in the last couple of days due to the same events. Secondly, I believe there is also an official announcement that Russia's commodities will not be certified as organics by EU anymore. Generally, Russia is out of EU organic market. These are the effects which could be positive for our group business. But of course, I think all of us hope that this really tragic situation would then come to an end in the shortest period of time. Financial information. Before that, just to sum up, all this presentation about the segments.
As always, here you can see what were the main drivers and which segments affected this change in our EBITDA. As I said in the very beginning, it's obvious that crop growing, the poor results due to extreme heat, had the largest impact on the decrease of the EBITDA year-over-year. If we have a decrease of almost EUR 11 million, you could say that almost all of that comes from crop growing.
The most important, I would say, discussion and then maybe news, for today. I think, last time, we mentioned already that, as we saw that results of the group are quite poor, that our biggest target and the focus for the future is really still find the possibilities how we can continue our R&D projects. Not only to do the R&D, but also we believe that we already are on phase, and some of the things we are developing, they are ready for commercialization. This is really was, the task, for us, to find a way how we can really start working with the projects even in a situation when we have quite poor financial results.
I think now I can really say and assure that we believe that we are. You know, we can not say 100% sure, but 99% sure that we succeeded with this task and goal. We are in the situation when we can continue with our plan to go further. What we did, we really reached, and we are really, I would say, happy with our cooperation with our partners, banks. Generally, we received waivers from all the banks for breaching financial covenants as of the end of 2021. Generally, they are supporting us and helping us to continue the path what we are doing.
Most important thing is that we also reached agreements and currently are working on just legal documentation to finalize financing for our daily activities, but most importantly, those investment projects we planned for this year. Important note, of course, I need to stress that theoretically, you know, we are still working on documentation, but all these financing were approved by our partners and in some cases, some term sheet agreements were already signed. Generally now we are working on documentation just to proceed with the funding we agreed. What type of investments we are planning to do and what we are planning to achieve with the funding we secured.
Because, as I said, the main focus is not really to invest into, I don't know, land, machinery, expand our business. We really see AUGA's future as a company which develops and uses new technology and finds the way how to share this technology with others. What we are trying or what we are planning to do this year, so we are planning to really implement or work in three key areas in reaching those sustainability goals or strategy implementation, which was planned and announced. First of all, the funding we secured, we will already have three biomethane production facilities running by fourth quarter in 2022. By the end of this year.
Generally, those three facilities will be able to produce biomethane, which will fully cover all needs of AUGA Group. If we talk our full needs in terms of our tractor energy consumption before we will be able, you know, to change our fleet. This can be sold as biomethane for other consumers as well. This is one project area. Secondly, as I already mentioned today during the presentation, we are working on this specialized feed technology. This first prototype is up and running, and we are doing testings now. Generally, we have two targets and what we want to achieve with this technology. First thing is really to improve yields. How much milk we get from the cow.
The second, which is also very important in terms of our future strategy, reaching the CO₂ neutrality, is to decrease or reduce our CO₂ emissions from cows. We're already doing some tests regarding yields, and I already mentioned what kind of results. Tests for CO₂ emissions will follow. From those three areas, I think this one, you know, this is the one we don't have, like, a full clear plan yet. Of course, we need to finalize our testing. If we are successful with that, we already have, like, projects, locations in place, so we can start implement and build not only this one facility we already operating, but other facilities, which can be also used to produce this special feed for cows.
The third, it's AUGA tractor, the first prototype we presented last year. Of course, we have lots of questions and lots of interest, you know, what we are planning to do with this. As said, it was already said during previous presentation that we really want to start production this year. Our target with the funding we have and possibilities we have is that for the start, we really want to build small number of the tractors, which will be fully working and used in AUGA Group fields. This will be like a test group, which can later be, like, a proof that this technology is really working and we can expand this business model further.
Just also to remind, we already have agreement for assembling of tractors signed and in place. Generally, once again, with financing secured, we are on path to start building those tractors for first of all our own use and testing and later on as another step, how to expand this business line in the future. Thirdly, you know, how we see AUGA Group going and developing and changing in the future. From all those discussions we had for the last 3-4 months, I believe we understood that the best way for us to move forward is first of all to complete couple of tasks.
First of all, what we are planning to do for this year, generally we really want to implement those investments I mentioned in the previous slide. Generally, by the end of the year we would have so-called operational proof of concept. Generally, the technologies we were talking about for a couple of years now, that we could really have them operational running in AUGA Group fields. Of course, this will not be the situation that, you know, all operations of AUGA Group are working on those technologies, but we will have at least part of that operational, and we can really show actual results from technologies we are having. Secondly, the...
We believe that there is quite an interest in those new technologies, but there is also a challenge because, you know, there could be lots of interest in new technologies, but then you also have quite sizable agricultural business on the side. This creates lots of questions and, you know, this is really difficult to find new investors which would like to invest into new technologies but would get this agricultural business as well. Our plan is that we would like to separate or create like subsidiary in AUGA Group, which will be the center of all those new technology developments. The plan is to do this also by the end of the year.
Generally, the idea and the vision is that this year should be like a year that we need to do all the homework and to be prepared for the next step in AUGA Group. We understand that, you know, with our current situation, all the developments we did, we did from our own funds and of course, this is a limiting factor. Generally, if we have this proof of concept working, if we have strategy, structure in place, which is interesting for future investors, we believe that then could be a good timing to look for new equity funding for scaling of those technologies or for scaling this business model in AUGA Group or for the third parties, as well.
Once again, maybe legal note that no official decisions regarding new funding is made yet. This is just a view and plan how we want to move forward with our strategy execution. As always, the same information about our share price changes. Just maybe a couple of updates on what had happened in 2021. We are still in the process of delisting from Warsaw Stock Exchange. Generally, I would say it's more like technicality. We are waiting for the final approval from regulator from Poland, and then this transaction will be finalized. Hopefully, you know, we will do it in I don't know a month or something. This is just technical process going on.
As always, you can find more information, financial reports, figures in Excel format in our web page, and thank you. I think that's it from my side. Thank you for listening, and now I'm open for the questions.
Thank you very much for your presentation. We will proceed with the questions. Before that, I would like to remind all the attendees that you are very welcome to send in your questions in the question box of your screen. Let's start, and the first question would be as follows: Due to ongoing war in East, distinct agricultural commodity prices have risen. Do you see AUGA Group benefiting from that? Thank you.
Thank you for the question. I think this topic was already discussed during the presentation. Yes, there is an increase in commodity prices and other factors which I already mentioned in the presentation. As I said, you know, hopefully this situation will be solved and I think that's the most important thing for all of us.
Thank you. Could you please comment on what percentage of 2021 income was from the export, please?
As always, you know, we are quite export-oriented company, and historically, the bigger part of our sales goes to export market. If we look at our segments, mushrooms is the only, and dairy, I would say, partly is segments which are more focused on local, I would say, regional market, meaning Baltics, Scandinavia, Poland. If we talk about commodities, generally it's EU mainly. If we talk of FMCG, you know, we are selling our products all over the world, and U.S. is still the largest market. If just to take overall, I would say around 75% of sales is export.
Thank you. Have you faced any limitations of dairy products exports to China?
Export of dairy products to China was really the topic we are working on this subject for quite long time. We also, I think, talked about this during similar presentations almost a year ago. Almost a year ago, we even had all the certificates needed to export dairy commodities to China. We even had some discussions about starting this business, but it really never started. Generally, we didn't have any dairy sales to China. You know, that's why issues with China we have for last couple of months, they also don't have any effect on AUGA Group results and on our business in general. Generally, right now, we are really happy with the situation prices we are getting for our milk in our region.
I would say there is even no need to sell the milk to China in order to get organic prices or to get a higher price. This is really not a problem, and it doesn't create problems for us.
Thank you for your comment. Could you please clarify EUR 0.3 million one-off costs for cash crops?
It's just provisions we did for some of the cash crops. This is from previous harvest, quite specific culture. You know, we believe that there was decrease in the price. That's why we made provisions reevaluating price of our inventories. That's how this EUR 0.3 million came up.
Thank you. Do you plan to contract 100% of expected wheat harvest till the end of Q3 of 2022? Thank you.
It's really very good question, and it's really impossible to answer it. Because, you know, from one perspective, we believe that current pricing level is really good for us. You know, I would personally, I would prefer to fix everything and to be sure about our result right now. You know, we also learned some lessons from last year, and we had similar situations some years ago, that situation, the forecasted harvest can change. We know we can't take a risk making more contracts than we can deliver. That's why we always have a plan in the beginning of the year, which cultures we want to contract in advance, which portion of the cultures we want to contract in advance.
I would say wheat, it has less fluctuation in the harvest, so this is the culture we are tending to contract more comparing to others. From other perspective, we still want to keep the room and to mitigate the risk of lower harvest. We also believe that right now there are lots of factors saying that this price level will stay and will continue. You know, I think we will continue with similar strategy we had for the last couple of years. You know, we are contracting certain parts, I would say till the end of second quarter. Because if you look at the third quarter, it's already September, so lots of contracts are already made there.
If we talk about pre-contracts here, so they are usually done by the end of the second quarter.
Thank you. Have you received any licensing offers from major tractor market players for AUGA technology? Thank you.
I think that we had some interest and just requests from different players. I'm not sure there was a major tractor manufacturer, but companies from different areas were interested just to discuss our plans and what we are planning to do with this technology. I think our vision, what we want to do is not to have like a license and sell the technology to a producer. We see our tractor as part of our solution. Generally, we want to develop this technology by ourselves. That's why we really want to test the tractors in real AUGA farms and then to propose not tractor only, but to propose overall solution how to produce agricultural products in completely different way.
You know, it's not only about tractor, but about biogas, about feed, plants, et cetera. It's only a small part of the big puzzle. That's why we really don't consider this option just to sell the technology and then to buy tractors from the third party.
Thank you for your answer. Do you see profitability reduction in 2022 due to increased energy prices, for instance, fuel, electricity or natural gas? Thank you.
Of course, increase in energy prices will have an impact on profitability overall. We believe that, at the same time, increase in prices is happening. From our forecast and from actual figures we already have for January, we see that, you know, this increase in cost is lower than increase in prices we see in our business. Of course, this increase will have negative effect, but it will be compensated by even higher increase in final product prices.
Thank you. As all the questions are answered on behalf of AUGA Group and Nasdaq Vilnius, thank you everyone for being with us today. The recording of the presentation will be available in the Nasdaq Baltic YouTube channel. Have a good evening, everyone, and goodbye.