AB Akola Group (AKO1L) Earnings Call Transcript & Summary

Good morning, and welcome to Akola Group Investor Relations Conference. We will start with the presentation from the management, which will be followed by the Q&A session. Please be informed that this webinar is being recorded and will be also available on the NASDAQ Baltic YouTube channel. I encourage everyone to submit questions in the Q&A section at the bottom of the screen. With that said, I would give the floor over.

Thank you very much. Good morning, everyone. Thanks for joining Akola webinar for the 6 months of the financial year '24/'25. We just released our results yesterday, and I'm really excited to present them to you. So as always, please keep in mind that there might be direct or indirect expressed forward-looking statements, but that are only the assumptions or current view of the company's management and please don't take them for granted and make any investment decisions based only on that. Today, I am, as always, presenting you, the CFO of the group, the results of the company. So let's start, as always, with the structure of the group and what changes we have made or happened during the last 3 months. So as for the last 3 months, we have 63 subsidiaries and 2 associate companies. We have acquired or the biggest change in the structure is that we finished the acquisition of Elagro Trade in Latvia. So this was quite a big deal for us for the last quarter or the half of the year. We closed the transaction in December, and we actually have started to consolidate the balance sheet into our financials from December. However, the P&L will come in, in the next quarter. We also have acquired a small company in the fumigation area in Latvia and we have the registered one of the companies of our, which we haven't used for a while. So we also are cleaning the structure further on. We are converting to companies to different legal statuses, which will be then merged with Kauno Grudai AB, so we will have minus 2 companies in the next periods. And we also have 3 companies and liquidation going on. So we will be decreasing our company size going forward, meaning a more efficient structure, more simple business lines and that will probably help you as well to understand the business better. If we go to the highlights of our financial performance for the first half of the '24/'25 financial year, I would say we had a quite successful second quarter. And you can see that our consolidated EBITDA for the 6 months of this financial year stands at EUR 48 million versus EUR 42 million last year. The 5-year average is around EUR 44 million, and you can see that we are doing a bit better than we used to do on average. We had a slower first quarter, if you remember when I was presenting the last webinar. However, the second quarter was quite successful or we can see really strong, and I will talk about that later on where we have the benefit coming from. But I would say we have EUR 48 million of EBITDA for half financial year when our strategic target is in between EUR 70 million and EUR 90 million. So we are doing quite good, but we still have 2 quarters to come and quite a lot of business activity to process. When we look to other highlights, I could say we're doing really good. Our EBIT margin is 4.2% versus last year 3.8%. We are a bit below our 5-year average. However, since last financial year, if you remember, we are really working on our profitability, especially in our trading division, where we want to do more profitable trades maybe sometimes versus lower volumes. You will see how our volumes developed the last quarter. I will talk about that later and how we are doing there. Return on capital employed, 7.4% almost for the first half of the year. Last year, we had a comparably lower result. I want to remind you that this is calculated on a 12-month rolling basis to equalize any seasonality. So last 12 rolling basis, quarters -- months produced a bit sluggish result, as you can see. And a good sign is that we are also above our 5-year average, which stands 6.34%. When we look at our profitability and valuations, price-to-earnings ratio for 6 months stands at almost 6, last comparable quarter or time, we had a negative figure because we also had negative earnings per share. We had quite bad few quarters, which resulted in negative rolling basis result. However, for this half of the year, we have EUR 0.20 earnings per share, which is very close to our 5-year average. And I would say we are quite on a good track to deliver healthy results. I would like to talk now about our balance sheet. We don't have a lot of changes in the balance sheet, except that we have expanded it a bit in the property, plant and equipment part. As you probably remember, we are going through quite a heavy investment program and we just launched an instant noodle factory in Alytus. We will soon launch a breadcrumb factory in Kedainiai, so all the property, plant and equipment additions are expanding our portfolio. We also have increase in intangible assets, and that's the part, which comes from our Elagro acquisition. However, we are still quite high on our inventory and receivables. So we are -- we still have quite a lot of commodities on our books to trade for the second half of the year. So you can see that the balance sheet once again is close to EUR 1 billion. So how do we finance that and how our other ratios looks. So we have [ EUR 470 million] of available lines to trade. That's a very healthy ratio or amount of credit lines we have and we use. For the first half of the year, we made EUR 46 million of CapEx. So just a reminder, we are going through quite a lot of different investment projects. We have announced all of them historically, but the main ones, apart the ones I just mentioned, is also a seed factory in Iecava, Latvia, a biogas factory in Lukšiu, one of our farming companies and of course, Elagro acquisition. For the end of December, our total debt stands at EUR 420 million. So you can see that we use quite a lot of our debt capacity. Out of that, 39% is long-term debt. Debt has increased a bit because we have drawn long-term financing lines for our investments. But rather than that, I think we are now coming close to the peak of our long-term debt, and will -- debt will start decreasing after we start amortizing our long-term debt, which we use for the investments. Capital ratio, 34%, and overall, the equity is EUR 331 million. I think that's a very healthy ratio in the middle of the year. When we look at our debt profile, net readily marketable inventories adjusted debt level is 3.5%. Our long-term target is 4%. So I would say we are doing well because we have a quite good 12-month rolling basis EBITDA. You can see that it stands at EUR 80 million and again, you can see that we are targeting this year very, very neatly in the middle of our strategic target, which is between EUR 70 million and EUR 90 million. Let's look at our earnings, our sales profile. So for the first half, we delivered EUR 790 million in sales revenue, and that is 4% more than last year. But you can see that overall, the curve or the trend is balancing out. And year-on-year, we don't have a lot of changes in our revenue. In terms of volume, we have increased the volume by 11% to EUR 1.6 million -- roughly to EUR 1.6 million of commodities. Last year, we had close to EUR 1.5 million of various commodities. The proportion between our food revenues and trading or Partners for Farmers revenues, have also so far stabilized and it is 2/3 and 1/3. And I think that's also a healthy proportion going forward. In terms of -- in terms of what we traded more or less this quarter, is that we had, of course, more trade in wheat and pulses, but we had less trade in rapeseed and other feedstuffs. But we will see how that will go on in the next half year, and I will present the trends in the presentation of the segments. Overall, even we produced more volume, but the revenue did not increase proportionally meaning that majority of the products which we trade are on lower prices. So basically, the commodities year-on-year cost less, inputs cost less. The only -- where we see maybe some uptick in prices is, of course, poultry and poultry products, but that did not impact the overall consolidated sales profile that much. Let's drop to the gross profitability part. And this year, we see that we have managed to deliver higher gross profit for the first half of the year, and it stands at EUR 87 million versus EUR 82 million last year. And we have a very nice proportion, again, which actually has changed a bit more favorably to the food production part where we received EUR 40 million of our gross profit from food products at EUR 42 million from our trading activity. So 64% and 49%, as you can see, it's close to 50-50. Our long-term target is probably 60-40, 50-50 would be another target, but we are doing quite well here. In terms of profitability, it stands at 11%. It's a bit better than last year. However, you can see that last year was also good in terms of gross profitability. So we are keeping our trend here, and it's also better than 5-year average. The 5-year average stands at 7.7%. Absolute top performer for the second quarter is our poultry business, both in Lithuania and Latvia. They have really favorable conditions in the market, and they have contributed the most to this quarter and the first half of the year. So you can see that even though we have some areas where we are fighting for the profitability or for the margins, but the portfolio diversification actually really helps us. Let's look at our operating profit profile. So for this year, we delivered EUR 33 million in operating profit, which is EUR 5 million more than last year. And actually, in this area, the share of where the profit comes from has changed dramatically. We have almost 60% of the operating profit coming from our food production versus 37% coming from trading. Trading is still a very volatile and seasonal business. We have quite a lot of commodities yet still to train. So the next few months also will be very important for this segment because also spring trade in inputs, fertilizers, plant protection is also very crucial. So we will see how we will do there. But for half of the year, the proportion looks like this. In terms of profitability, 4.2%, slightly better than last year. We are really happy that we can keep up with the profitability or the margins. There is some pressure in different areas of our business. However, we managed to maintain it. And even compared to last year where we had overall a higher average profitability, we are doing quite well. EBIT margin compared to 5-year average, which is 2.8%, and we have 4.2%. I think it's really looking good. Very big positive effect as well in the gross profit area as well in the EBIT profit area is coming from poultry. We have a good market price for poultry products. I will talk about that more in the segment area. Also, input costs allow us to deliver higher profitability. So on the 12-month rolling basis, we have close to EUR 80 million of EBITDA, which, again, is in our range of strategic target. We will see where we will -- how we will move in the third and fourth quarter. But so far, I would say that we delivered good results for the half of the year and we will work on the second 2 halves -- quarters, sorry. So Partners for Farmers segment. We had the biggest change actually here in the last quarter, the second quarter, we acquired Elagro Trade, a trading company in Latvia, which is very similar to our existing company, SIA Linas Agro and now we are going through an integration of those 2 entities. We are planning some synergies but we also see that there is a very good synergy in the team, in the business profile, in the product portfolio as well in the client portfolio where we think we will strengthen our Latvian positions in this area really, really well. We also complemented our existing infrastructure of elevators in Latvia with this acquisition. So we will be doing more in elevator service and logistics in Latvia in the next quarters and next years. So Partners for Farmers, the sales have increased by roughly EUR 10 million to EUR 585 million. In terms of quantities, it's almost EUR 150,000 more in quantities. The segments which contributed more are inputs and mainly due to fertilizer trade, we have increased our fertilizer volumes as well as our grain and oilseed trade, which was quite slow maybe in the first quarter but started picking up pace in the second quarter. If you look at our profitability profile or how we're doing the gross profit level, so in grain storage and logistics, we have lower quantities collected. Squeeze drying service income because the grain was really dry. And starting the third quarter of this financial year, this category will be as well affected or increased or added with additional storage capacities, which we obtained and the acquisition of Elagro. Overall, you see that last year, we had EUR 10 million of gross profit in this area. This time, we have EUR 7 million. And because the peak earnings season is first quarter for this segment, we don't expect that it will change dramatically only what we get from additional Elagro capacities. When we look at grain and oilseed trade, the activity picked up in second quarter. The prices didn't change a lot. So the prices are still in the low end. However, we found some good opportunities in spot rates. And we also did quite well in pulses, in contrast to last year. Wheat was again still the main trade and the main volumes came from wheat. However, we have, of course, a bit lower quantities of corn and rapeseed, which is actually coming from the first quarter as well. Gross profit margin, flat. Gross profit overall, EUR 5 million versus EUR 5 million last year, but we are doing better than our 5-year average. Our 5-year average gross profitability is EUR 1.3 million. So you can see that we are working on that quite a lot in this area because it is a big contributor to the gross profitability overall. Feed business. We have a slightly narrow gross profitability, EUR 11 million last year versus EUR 10 million this year. We still have difficulties or it's quite difficult to do trade via Ukraine or source commodities from Ukraine and trade them in Western Europe or the Baltics. And there are different, of course -- different whys, why it's hard to do that? One thing is, of course, the price environment, other thing is the situation in Ukraine. And of course, the other thing is how countries defend their own markets from the imports. Feed production, more or less stable, but overall, the gross profitability is also more or less flat, a bit lower than last year, but not significantly. Inputs, we still have a quite challenging environment for plant protection and micronutrients activity. The price pressure or the profitability pressure is still there from the competition. Farmers also are a bit picky looking at the prices, the grain prices. They are still waiting for some improvement there. But hopefully, if the fields and the sowing will look good in spring, we will have a pickup in activity there as well. We have normalized the returns on fertilizers, and we are doing there better with quantities this year. So we have increased our quantities year-on-year. And overall, inputs are doing flat in terms of gross profit, EUR 14 million versus EUR 14 million last year. Agricultural machinery, demand and market size has decreased in all operating countries, Lithuania, Latvia, Estonia, a bit different situation per country. Lithuania is decreasing around 15%. However, Latvia and Estonia is decreasing roughly around 50%. So both of the markets in terms of tractor sales are down by 50% or you can say, in other words, 50% of the units sold in the market are gone. So a really tough situation there. However, we are doing a lot of active steps; how to maintain our market share, how to be sharp in the market, and that actually helped. We have improved our market share in tractors in Lithuania. We have sustained our market share in Latvia and Estonia, so meaning that in falling markets, we are managing to sell more, and we have seen or we see quite healthy activity in service and spare parts. So that helps us because even though farmers are not investing, they still need to fix and service their machinery where we see health activity, as well healthy gross profit margins. Let's move to the food production segment. And here, of course, are quite a lot of good news. We have increased our sales slightly by EUR 20 million. In terms of quantities, we did a bit better as well. The majority of the increase came, of course, from poultry part and we are really happy with this segment this year because after, if you probably remember, if you follow us quite closely, had very tough and challenging 3 years. So finally, we see a recovery in this market. So in poultry business, we have higher quantities. We have favorable selling prices and we have a stable or reasonable input prices. Overall, the demand for poultry meat is really healthy, and it is improving year-on-year. Overall, poultry consumption is improving in Europe or even worldwide because it's considered a good and healthy protein. But also, you probably can read in the news that there are a lot of bird flu happenings in Europe. We had one in Lithuania, but there are a lot of in Poland. So this impacts the supply of poultry to the market and quite seriously, that's a big risk for any producer and we are taking, of course, quite a lot of precautions. Another impact for the market is that after those or during those 3 years, quite a lot of poultry producers or farmers actually stopped their operations because they couldn't survive. So overall, we have now a bit more tilted demand or bigger demand than the market can produce in terms of supply in Europe. Instant food salt quantities and units have increased by 17%, where we have a good new large accounts with big world-known names for our new and existing capacity, new meaning the second Alytus instant noodle plant. Unfortunately, it's not running still on full capacity. We are still doing some testing and calibrating but that's only a matter of time when we will produce on full capacity. And so those things out, they are usually natural when you start that kind of big operation in the group. So ready-to-eat foods. We have quite a bit of a downward pressure on the prices, but we are managing that, maybe the major change or bigger changes that we are operating only on our “ACTIVUS” brand in the market on the soups and porridge, which we acquired from “Auga” Group. So you probably even noticed maybe in the shelves of the supermarkets that the Auga brand in this area has left the market, and now we have rebranded under our ACTIVUS brand. Flour, average product portfolio price roughly decreased by 10%, but the gross profitability, we have managed to maintain. If we talk about coating systems, we feel and we see that we have a solid demand there. We had increased and actually saw the increased production quantities, and we see stable gross profitability. In this area, we will launch a new factory in the coming quarter, and we will see how much it will actually add for the activity in the last or the fourth quarter. That new factory will be opened in Kedainiai quite soon. Agricultural production, also a segment which is going through a lot of interesting market changes or turbulences. Some are positive, some are a bit negative. But if you overall look, total sales have increased by EUR 2 million to EUR 27 million. We have sold 10,000 tonnes more in grains, and we produce roughly the same amount of milk in terms of tonnes. For 2024, harvesting results, we have 3% more in terms of volume. So year-on-year, we harvested a bit or slightly more. Condition of the future crop meaning 2025 crop is considered a good or even very good so far. For the last 2 weeks, we had a bit of frost, a bit of snow. In essence, that's not a big problem. It is a risk. But so far, we cannot evaluate if that has changed the crop quality. When the snow will melt, we will see how the sowings look and how we are coming into the spring season. But overall, it looks good. So maybe on the bit negative side, we have continuously low price environment. So on average, the price for main grains and oilseeds is 10% to 15% lower year-on-year. So that hurts our profitability a bit. And overall, we have already sold 95% of our 2024 harvest. So it means that we have only 5% left to sell in the coming quarters. So more or less, the trade in grains and the agricultural production part is done. So mill production, that's a positive trend and that you can see actually helped us quite a lot because in terms of gross profit, we have close to 0 in terms of our grain trade, but we have EUR 3 million in terms of our milk production and sales. So EUR 3 million is comparable to EUR 1 million last year, and we haven't decreased that much our quantities but we have approximately higher 20% milk price -- raw milk price for the price, which we sell our milk, which we produce. So that's actually -- that's a big benefit because last year, we had quite low prices for the full year. So finally, we have increased because the first half -- the first quarter, if you remember, the prices were still on the lower side. So the second quarter actually saw a big increase in the prices. The biggest question is how much that is sustainable. Hopefully, it will continue at least for a quarter or a few months because our buyers or our dairies are also dependent on the global milk product prices and how that will calibrate going further. Overall, you can see that the segment is doing slightly worse than last year, but we will see how that will even out in the next quarters because we also have received or accounted less subsidies. For this second quarter, we have accounted -- or first half, we have accounted EUR 0.7 million in subsidies last year. For the same period, we have EUR 1.1 million. So that's also a different -- which will even out in next quarters and is part of the difference year-on-year. So more or less, thank you very much for listening. That's it from my side regarding the presentation. I invite you, of course, who haven't yet subscribed, to our news and keep -- and we will keep you posted on any developments in the group. I'm ready for your questions if you have any.

[Operator Instructions] We have received some questions, so I will start off with the first one. Congrats on the strong results. Could you please add a bit more color on why Akola engaged in a more intense grain trade in the last fiscal quarter? Do you expect the grain prices to ease later in the year or something else?

Thank you. That's a great question. Regarding the grain prices, it would be very hard to speculate how they will move. But so far, you can see or we see that the global grain production is healthy. So we don't have any extremums, meaning that we don't have a lack of grain in the market or the countries who join with their harvest throughout the year because we have different harvest and different geographical areas during the whole financial year. They join with healthy quantities, meaning that the implication is that the market doesn't feel lack of grain or the supply of wheat and other grains is good and healthy. And that's also probably reflects the price. The price is moving in a very narrow corridor EUR 10 to EUR 15 change, but that goes both ways and up and down. So very hard to speculate how it will move further on. But so far, the logic was like this behind the grain price. If we talk about our trade, it had to came quite naturally, the increases, it's either in second quarter or third quarter because in terms of how much grain we bought during the harvest, the number was very similar to last year, a bit lower in Latvia, similar in Lithuania. So we had the grain on the balance sheet. And basically, we tactically look and see and search for the opportunities, when is the best time to sell them. So we saw some good opportunities in the second quarter. And as I mentioned before, we still have quite a lot of grain in our balance sheet yet to trade, and we will trade them during the next 2 quarters, depending on the prices, depending on the shipments, they will come either in the third quarter, sorry, or the fourth quarter overall.

Next question is about poultry. The poultry segment has been doing really well for the past few quarters. How long do you expect this kind of an extraordinary performance to continue? Or is that a new normal?

It's very hard to judge what is the new normal, and we are looking at the market and trying to understand where everything is going because there are a lot of things which are actually maybe not that usual like the bird flu. We have much more cases of bird flu in Europe, which you cannot expect to be all the time. Especially we have a lot of bird flu cases in Poland, which is the biggest exporter of poultry in Europe, and that affects the price of poultry meat quite a lot. So this is the one thing. The other thing, we so far had very mild weather, meaning a very warm winter. And if you remember, during the winter, we used to fell in profitability because we had to use quite a lot of natural gas to heat our broiler houses. And so far, the winter was very warm. Gas prices are normal, and that helped us well a lot in the second quarter. This actually also is very relevant to the third quarter because third quarter is January, February, still quite cold months, but you have probably noticed that January was also quite warm. That might help our cost as well. February is a different story. February -- we have colder in February, so we will see how that will impact our profitability. So there are different trends playing here. Some are more controllable, some are less controllable. But what also helps on our end is stable input costs, meaning feed cost is stable for the last year, thus stable or low grain prices. That is very much connected. And the other thing is that I think our team did a great job on diversifying or working on our sales portfolio in terms of geographies, in terms of product mix, which actually gives also us a very big benefit. And this is something maybe we can control, and we can say that, that can last for quite a while. I think after all the COVID and all the difficult years, we do have a much healthier diversification of sales in terms of geographies and we also do more in terms of our product portfolio. One more thing, I think we have sustained strong leader position in the local market because we are still very much also dependent or we are working quite a lot in the local market, meaning Latvia and Lithuania. So that's good as well.

Thank you. The next question is, the agricultural machinery equipment and services market is still shrinking in all Baltic countries, as stated in the report. Could you please share your view about when one could reasonably see it bottoming out?

That's a $1 million question. We are also looking for that. One big -- one big momentum, which we are looking is, of course, the future harvest. If the future harvest, meaning the harvest of 2025, will look good. If the prices will be more or less favorable for the farmers, they will have more incentive or more safety to invest and to plan their future. So that will help a lot and that would really stabilize the market because farmers would receive healthy income. And then, of course, they are willing to invest because they need to renew. They need to increase their efficiency, and that is a very big factor, which plays in. Another big factor, of course, is financing costs, the EURIBOR. EURIBOR is falling for the last now probably more than half a year. It still takes time when it goes or spills into the market. But with lowering EURIBOR, we see that the sentiment of farmers to take loans is also better. So meaning that they will have more opportunities or better conditions to finance their investments. So this is a good trend, which really already helps us. Second trend, which I have described for you in our agriculture production segment is milk price. For farmers who have milk production, they really have rebounded like us as well. They have good healthy income coming in. And combined with decreasing borrowing cost, farmers who have bigger milking operations, already are more active in the market. So this is also very important. The other thing, which is more connected to Lithuania than rather to other 2 countries is the support schemes. So Lithuania had announced a very big support scheme in autumn. And since then, everyone stopped buying machinery and went to apply for the support schemes because the logic is very simple, if I can get support, why should I buy now? I will buy later when I will know the results. So basically, those results are starting to come in. They will come in, in spring and if farmers will receive the support, I think that will be a great boost to the market going forward. But that's still to come, and we will see how many farmers will get the support, what will be the amounts? Will our clients will get the support and so on. But that will be a great uptick in the market for sure.

Next question. Akola demonstrates vertical integration and utilizes much of its own production to create higher value-added goods. What is the scale of this activity?

It is -- to answer to your question, it is not fixed because even though we are vertically integrated, we want to be always as efficient as possible. So we always check market prices. And if we can get lower market prices or better market prices, we buy from the market, and overall, we cannot satisfy all our production in the end with our integration. So we still are working in the market. But of course, we have closed all the chain. We are agri producers. So we produce grains and milk. We are also a trader. So we sell to our farming companies. They need machinery, we have the machinery. Then the agriculture companies can sell to our mills. We produce flour. The flour goes to the instant noodles and bread crumbs and so on and so on. So we have that, but our scale of production in flour, our scale of production in instant noodles is much higher than we produce grains ourselves. So basically, we cannot satisfy all the chain, but we are there. And we have good market knowledge. We have good efficiencies, we have good understanding where everything is going, and that helps us a lot. What's the direct impact for the P&L? It changes, it can differ and so on. But we are there, we always play on market prices, and we always look where the market is moving because we need to be sharp and efficient.

Thank you. Now moving towards investments. Your investments in [ PPF ] segment are the largest at approximately EUR 29 million. Could you please disclose the areas where those were made?

Yes. This is 2 big investments, apart from several smaller, One is Iecava seed plant. So if you remember, we announced last year that we are investing into seed production plant in Iecava, Latvia. We have one in Lithuania in Dotnuva. This is a very good business for us. We are the market leaders in Lithuania having more than 30% of the market share. And we have started with this business quite, quite long ago. So our Lithuanian plant is running at full capacity. It's also exporting to Latvia and Estonia. We see huge potential in Latvia. So we are building a seed plant there. The other big investment is, of course, our Elagro acquisition. So we bought the company in Latvia. I mentioned before, it's -- it was a competitor or a close competitor to our Linas Agro SIA so we are basically buying Elagro. We are scaling up our operations, scaling trading, inputs, improving our -- or increasing as well expanding our client portfolio. We will have team synergies. We're really, I think, adding good people to our organization, and we will see that the scale, which is very important to this business, we will hope to gain and establish our positions in the Latvian market, and we will be #2 or #1 player in the market.

Thank you a bit about strategy. Last time, you noted that strategy target will be reviewed when Alytus factory will start operations. Any fresh information on time schedule?

We will communicate that to all the investors via, of course, NASDAQ. When we will do that? We usually do some religions of our strategy and other things by the end of the financial year. So we -- that's one of the moments, but it might happen later. The only thing is that we want the Alytus factory up and running at a smooth process. And also, we want the Kedainiai bread crumbs factory also going live. And after those 2 big investments going live and producing, we will have more information and data how we are doing and what's our -- or how that's impacting our overall strategy. The other thing, Iecava seed plant will start production this summer as well, and we will see sales, fresh sales coming from that plant in autumn or late summer. And that's also a big indicator of how much that will impact our strategy and what's -- how we can then communicate that target to the market.

Following question is about wheat price. As it is higher this year, do you expect a positive impact on your Q3 and Q4 results because of that? Or all 2024 harvest is already contracted?

In terms of what we produce, the overall wheat price or any grain price is important to our agriculture companies, who produce grain and sell them, so they need an absolute price. And there, we have already sold 95% of our production. So only 5% left. That will not impact that much of the profitability. In terms of our training activity, not only the overall price or the universal price plays here. Trading is more about the margins. So how we construct the margin. And margin construction is a lot of different pieces; logistics, market situation, wheat or -- great quality overall, supply/demand in the global market and stuff like that. So it's not necessarily that if the wheat price increases, we will do better in trading. There's a lot of other factors playing in there because you saw the wheat price, for example, was more or less stable in the first half of the year or a bit even lower year-on-year, but we still do the same gross profit. So it's not a direct relationship.

Thank you. We are almost through all the questions. A couple still left. [Operator Instructions] But in the meantime, let's proceed. What are the key reasons for decreasing profitability margins in ready-to-eat instant food segments?

That's maybe 2 reasons. One is a bit of a price pressure and competition in the market, which is, of course, natural, but that maybe was not the main impact. But the main impact is that we have not yet fully -- we don't have yet fully running, the new plant, and that's connected with extra cost so we have some extra costs, which is coming from all the calibration processes, adjustments and other stuff. And that decreased the overall profitability of the segment. So when we will have that part done, it's only a matter of time, we will be smoothly running. I think we will restore the profitability, and we will then add all the extra quantities which we have planned with the new production plan.

And lastly, about -- a bit about biosecurity and the poultry farms. And also a question was asked about do you have insurance for birds as well as insurance for operations continuity in case of any flus?

We have insurance for birds, of course. Business continuity is a different question. But I really want to say for everyone that we are taking extra precautions, and we are managing a lot of risks. We know that's a huge risk for us. So we are, very, on a high level of the biosecurity, and we are doing a lot of additional measures after the case in Lithuania, which you probably heard about to prevent anything with what we can think of. Of course, bird flu is a very nasty disease and it spreads around. However, we take that very seriously, and we don't leave it for fate. We are putting any extra measures we can get in the market. We also work with our feed suppliers, with our workers and anyone else who has any potential risk in this area because we can see the situation in -- sorry, not Latvia, but Poland, where the disease is spreading, and they have a lot of problem to contain. Of course, a big country, a lot of big -- small and big producers all over the country, and they have much more problem to contain it. In our case, we have a bit more concentration, which is also a risk, but also that we can put more control measures on them. We have also diversification. We have 2 plants, Lithuania, Latvia. We have different places where we breed the birds. So it's not in one place. So that also diversifies our risk. So probably more or less than that.

Thank you. With this, we have actually covered all the questions that we received. So final notes that on behalf of Akola Group and NASDAQ, we thank everyone for joining today, and it was a pleasure being with you today as well. Finally, the recording of the presentation will be available on NASDAQ Baltic YouTube channel. From my side, I would like to thank for this informative conference and maybe a couple of final words from you as well.

Thank you, everyone, for listening. Great questions. I hope to meet you after next quarter. Have a good day. Thank you, everyone.