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9 months of the 2022/2023 financial year of AB Linas Agro Group: revenue up, profit down

The consolidated revenue of AB Linas Agro Group and its controlled companies (the Group) for the nine months of the 2022/2023 financial year exceeded EUR 1.5 billion and was 11% higher than the previous year (EUR 1.3 billion).

The Group sold almost 2.7 million tons of miscellaneous products, 7% less than in the same period last year (2.9 million tons).

Consolidated earnings before interest, taxes, depreciation, and amortization (EBITDA) exceeded EUR 61 million for the 9 months and was 7% below the previous year (EUR 66 million). Net profit decreased by 5% to EUR 25 million.

EUR thousand	2021/20229 months	2022/20239 months	Change 2022/23 compared to2021/22, %
Gross profit	30,123	57,703	91.6%
EBITDA	65,745	61,202	(6.9%)
Operating profit	39,344	40,464	2.8
Net profit	26,319	24,895	(5.4%)

Consolidated revenue for Q3 amounted to EUR 366 million, a contraction of 26%, with a net loss of almost EUR 20 million, compared to a net profit of EUR 11 million in the corresponding period last year.

"The last quarter of the financial year was very challenging due to the uncertainty in global price trends. Energy prices started to fall towards the end of the reporting period but remained high. Many of the products needed for production, such as feed raw materials, as well as energy inputs, were purchased earlier at high inflationary prices, as supplies for production have their cycles, need to be secured, and are planned beforehand. The fall in fertilizer prices, which we had bought earlier, has been sharper than we had anticipated, following the fall in energy prices," said Mažvydas Šileika, the Chief Financial Officer of AB Linas Agro Group.

The Group sold 1.5 million tons of grain and oilseeds for 9 months, 8% less than the previous year's reporting period. Sales of compound feeds, premixes and raw materials for feed were 627 thousand tons or 92% more. The total revenue of the Grain, Oilseeds, and Feed segment grew by 8.5% to EUR 927 million in the period under review, while the operating profit increased by 116% to EUR 24 million.

"As in previous quarters, we continued to trade poor-quality grain from the 2022 harvest in a constantly changing market. Good harvests in Australia, Brazil, and Russia kept grain and oilseed prices down in 2023, which have been unusually high in the spring of 2022 and even at the beginning of the financial year, in July, before fluctuating downwards. From the beginning to the end of the quarter, wheat and oilseed rape prices on the exchanges fell by 15% and 20%, respectively. Unpredictable supplies from Ukraine disrupted oil trade, while the fall in the oil price depressed the market price of vegetable oils, which reached a three-year low in February and continued to fall until the end of the reporting period," said M. Šileika.

The Group's Products and Services to Farmers business grew by 13% to EUR 296 million, while operating profit was 72% lower at EUR 10 million. Sales of seeds, plant care products, and fertilizers grew by 12% to almost EUR 221 million. Revenues from selling and renting agricultural machinery, spare parts supply, and services increased by 20% to EUR 71 million. Income from grain storage and farm installation projects contracted by 42% to EUR 3.6 million.

"This spring, commodity trading for farmers has been less successful than last spring, when shortages of fertilizers and other commodities due to the outbreak of war in have increased profitability. However, sales volumes showed a modest contraction of 3%, as only seed and fertilizer sales fell. Micronutrient and plant care product sales rose by almost 9% compared to the previous year. In the agricultural machinery and farm equipment product group, grain elevator equipment showed the largest decline of 49%, while new agricultural machinery showed the most significant increase, up 32%.

Farmers had already bought many of the products needed for sowing and further cultivation in the autumn of 2022 to avoid inflation. The competition was, therefore, very fierce in the spring; operating margins were squeezed, severely eroding the segment's profits. Relative gross margins were better than in the previous financial year only in the plant care products, new and used agricultural machinery and spare parts, and farm equipment product groups," said M. Šileika.

The Group's agricultural companies' revenues grew by 37.5% to EUR 44 million in the period under review. Operating profit amounted to EUR 2.8 million, compared to an operating loss of EUR 0.1 million in the previous year.

"We sold 97 thousand tons of crop production, or 21% more than last year. Income from crop production grew by 27%, but the increase was more significant in the early months of the period under review when cereal prices were higher. Agricultural companies always spread the risk and sell their production in installments so that some of the production has been sold at much lower prices in the spring. However, the overall profitability of crop production was better than in the previous financial year, with a gross profit of EUR 1.77 million.

Milk procurement prices were only favorable at the beginning of the financial year and then declined throughout the period. The cost of milk production was high and did not correlate with the falling farm-gate milk prices, as the feed components were purchased at a time of high prices. We sold 9% more milk and received 26% more income from milk due to the premiums we receive for particularly good milk quality. This has allowed the business to remain profitable," said M. Šileika.

The Food Segment, which includes the poultry and flour businesses, grew by 28% to EUR 311 million in the reporting period. Operating profit was EUR 1.6 million, compared to a loss of EUR 7.4 million in the same period last year.

"Poultry meat production is down by 6% compared to last year's reporting period, as we closed the poultry slaughterhouse in Kaišiadorys last spring. The selling prices of poultry meat products have increased by more than 25%, resulting in a 20% increase in the income of this business. The results were boosted by the fall in energy prices at the end of the reporting period and by our decision to start using petroleum gas instead of natural gas in production," notes M. Šileika.In the flour products category, sales continue to grow, with sales of flour and flour mixes, instant products, and breadcrumbs increasing by 49% to EUR 96 million. "Sales of instant products showed the strongest growth, with unit sales up 42%, sales revenue up 64%, and gross profit up 156%. We expect to expand noodles production in 2024, with an additional 240 million units annually. We want to increase the weight of the food production in our business," M. Šileika commented on the situation in the Food Segment.The Group's Other Activities include the provision of pest control and hygiene products and services, the manufacture and sale of pet food, the provision of veterinary pharmaceutical services and the wholesale and retail sale of veterinary pharmaceuticals, and other activities not included in other segments. Total revenue in these segments contracted by 42% to EUR 16 million, with an operating profit of EUR 1.6 million, an increase of 323%.

"Although the Segment's revenue has contracted, its operating profitability is increasing as in the pet food business, we strategically reduced economy class and increased the production of premium products," said M. Šileika.

According to M. Šileika, this high overall growth in segment operating profit is mainly due to the reallocation of small and non-classifiable activities between segments. It varies slightly because with Kauno Grūdai many new activities joined the Group, and the assignment of these activities to one or another segment is a subject of discussion every year. From the beginning of the next financial year, the allocation of activities between segments should be finalized and no longer change.

AB Linas Agro Group operates the largest agricultural and food production group in the Baltic States, employing almost 4.9 thousand people. The Group operates along the entire food production chain from field to fork, producing, preparing, and marketing agricultural and food products and providing goods and services to farmers.

Attached:Consolidated unaudited financial statements and Consolidated Interim Report of AB Linas Agro Group for the nine-month period ended 31 March 2023

Contact for more information:

AB Linas Agro Group CFO Mažvydas ŠileikaMob. +370 619 19 403E-mail m.sileika@linasagro.lt

Attachment

• Linas Agro Group Interim Financial Statements and Activity Report for 9 months of FY 2022/2023