AS APF Holdings ($EGG)

Good afternoon. Welcome to Agrova Baltics Investor Webinar. We will begin with the company's presentation, after which we will address your questions. You're kindly invited to submit them in writing through the Q&A window that you will find below the presentation. For your convenience, we are recording this session, and a replay will be available shortly after the webinar. Now let me introduce today's host Jurijs Adamovics Founder and Chairman of the Management Board; and Mihails Keziks, CFO and member of the Management Board. Jurijs, the floor is yours.

Good afternoon, dear investors, ladies and gentlemen. Pleased to welcome all of you to our webinar that is going to cover the results of financial year 2025. The agenda that we'll cover today is comprising of six items. I will walk you through the first 2 points and cover the targets for financial year 2026. And my colleague, Mihails will cover the rest of the agenda. So last year, year 2025 was historically the best ever year for Agrova Baltics. We have reached a 92% increase in the revenue. We have reached a 257% increase in EBITDA. Our gross profit was up by almost 200%. The volume of eggs that we sold is up by 47%, and this is a result of the completion and commissioning of the increased production capacity. Return on equity for the year 2025 was 48% and P/E ratio is 5.5. Key highlights for the last year. We had a very insightful year, eventful year in 2025. We did commission a major expansion project, which was the largest CapEx project we have completed ever before. We have commissioned three substantial buildings. Two of those were state-of-the-art [indiscernible] with capacity of 125,000 birds each. And we have also commissioned a new liquid egg processing plant and the central warehouse complex, which is all located in one building. These projects were completed and officially commissioned in the May of 2025. Also, our marketing team worked very hard. We have launched quite a number of new SKUs and new packaging solutions, of which the best seller was Family Pack, which you currently see on the screen. We have also expanded further with our new business line, Fiteg², which is a health nutrition and sports nutrition product line and several food supplement products. This business is also growing quite substantially, and we've launched new products, in particular, the unflavored protein was actually a best seller of the last year, which helped us to significantly increase our market share across the Baltics. International certifications was also a highlight of the last year. Not only we have successfully renewed our energy management certification, but we also have obtained a very prestigious British retail consortium certificate, which is a golden standard in the food and agri sector. With the first audit, our Aluksnes production site was rated A, which is a very high evaluation of the operational excellence that our team has managed to demonstrate. Continuing on the highlights, earlier last year, to be more specific, in March '25, we have conducted the second placement, the private bond placement with CVI, which was parts of the planned capital raising exercise and which helps us to complete the CapEx program on time. We have also signed a market maker agreement with Signet, which became effective in March last year. This was done in order to enhance liquidity of our shares, and that reflects our commitments to facilitate more active trading and investor accessible solutions. Also last year, the group itself was going through a quite substantial transformation, both in terms of the corporate governance and also our visual identity. We have rebranded the group entirely. The legal name, as you remember, our dear investors, when we joined the markets, we joined as APF Holdings. Now as part of our international growth strategy, we decided to introduce an umbrella brand for the group, which is Agrova. And we have formed a holding entity called Agrova International, which consolidated over 81% of Agrova Baltic shares. Hence, APF Holding was rebranded and the legal name of the entity was changed to Agrova Baltics to reflect the market focus of this particular entity. Also as a result of the changes at the shareholder structure with Austria-based fund Accession Capital Partners becoming our shareholder at the holding level, acquiring 23%. The fund is also now represented at the Supervisory Board level. Dmytro Kistechko was elected on behalf of ACP Fund. And the new Supervisory Board is now functioning in extended headcount. Also, as I mentioned, Agrova International was formed at the new group level HoldCo. And Agro International has completed the acquisition of the Sunrise Group, which is a top 10 egg producer in the United Kingdom. Now we have completed this transaction at the shareholder level. So it does not have an immediate impact of the -- on the group. But we do believe that it also sends very strong signal to Agrova Baltic shareholders because now Agrova Baltics is a part of much larger operational and financially more stable group, which also helps to diversify biosecurity risks and potential financial risks in a much more efficient way. I'm now passing the floor to my colleague, Mihails, who will walk you through the next agenda items.

Thank you, Jurijs. Good evening, all our dear investors. So let's now walk through all the financial results that Agrova Baltic received in 2025. And as usually, we will start with the industry overview, which were the most important information for us is, of course, our strategy-based idea. It's a market shift from caged eggs to the barn eggs. So as usually, we provide you the statistics for all three states. And as you can see, the situation in the market in 2025 was good. The market continued to grow and the leader in this growth, of course, was this barn egg segment, which almost approximately doubled in all the country with the highest growth rate in Latvia, which was 132% comparing to the previous year. And in Latvia, we reached a market share of 63%. But again, the leader country in the Baltics is still Lithuania having the largest barn share of 66% as it was also previously. Again, Estonia is lagging behind with only 25%. But still, as you see, this segment is developing very fast in this country. And as the supermarket postponing the transfer for the later years, we expect to see the increase in the coming years. And with our current capacity and the upcoming investment plans, we will be ready for this increase as well. Prices, egg prices in all three Baltic states and also Poland, which is very active in our segment, you can definitely notice some kind of increase in prices towards the end of year 2025 and also some very interesting structural changes where historically, average price in Lithuania was the lowest one for the Baltic states and Latvia being somewhere between Estonia and Lithuania. As the last quarter of the 2025, the egg prices almost equal almost similar for all three Baltic states, what was some driven by increased demand for barn eggs and also increased demand for eggs in total in all categories. And as usual, Polish prices in Poland are much higher than in Baltics. So still some room for Baltic states to improve in the future. So let's review Agrova Baltics sales data. So as usually, we provide a split for retail eggs sold to supermarkets and eggs to industry or to processing for the lower price, let's say. So as I mentioned, this demand for ForEx in 2025 was substantial. So we managed to significantly decrease this egg for processing by almost half of it comparing to the previous year. It was only 11% and almost 90% was sold to retailers to the customers in supermarkets. Another important parameter is, of course, eggs sold to so-called private labels, labels of supermarkets. Yes, this is a market trends. It is increasing and also it's increasing -- the share is increasing in sales of Agrova Baltics. But still in year 2025, we managed to keep private labels only to 40% of total eggs -- fresh eggs sold, which is still below, let's say, some market average, which is close to the 50% in the Baltics. Sales by geography, by the delivery location. So as we mentioned also previously, for Agrova, we see that our home market, it's not just Latvia, it's all three Baltic states at least or maybe even wider. But still, as you see, our top -- our core clients are countries, supermarkets which are targeted to sell mostly barn eggs, and as you see, in Baltics, the leader was Lithuania. So in 2025, Latvia made only 40% of our sales and Lithuania and other countries was bigger than more than half of our sales reached 60% of our sales. And then the financials, financials and then start with changes in main operational income positions above EBITDA. So what give us the main increase this year, it, of course, was sales of our core products of fresh eggs, which was achieved by both increase in production, increased number of eggs sold due to investment phase we have completed in May and June 2025 and also favorable development of eggs due to higher demand for barn eggs. Of course, higher production capacity came with increase in expenses for feed. Other production expenses, we also faced some increase in administrative expenses due to R&D and other positions. But as you can see, it's nevertheless kept the higher part of our income increase and brought us to the significant and brilliant EBITDA result, which was more than EUR 9.2 million, which again is about 6% above our IPO expectations, which was EUR 8.5 million. So very good result and proof for our strategy and for our ability to achieve results expected. The second financial slide and waterfall, it's for net profit this year, let's see how it changed from 2024 to 2025, where we finished the previous year with some minor losses, but again, increase in EBITDA. This year gave us of EUR 6.6 million more income and positive result to this year. What was increase in expenses below EBITDA. Of course, it was higher interest payments. As Jurijs mentioned previously, we received the last and closing drawdown from CVI of EUR 5 million, reaching in total EUR 12.5 million of debt from funds, which increased our interest expenses also due to completion of new fixed assets. Construction and depreciation have increased and also additional flocks brought us some increase in changes in [indiscernible]. But still, again, as you can see, very proud to announce that our net result for 2025 was higher than EUR 5.1 million, providing a good value for all our shareholders. Final financial slides we saw with all indicators very nicely represents our impact of the financial phase -- financial investment phase we have finalized in 2025. So as you can see, we have managed to increase our production capacity more than by 50% and managed due to this increase our revenue by almost 2x. And our adjusted EBITDA is more than 3x higher than the years before when we were still running with a smaller capacity. Of course, of course, this brought a very nice, very nice result to all the income indicators. So our EBITDA margin reached almost 40% historical return on equity result almost 50%. Our price to earning ratio decreased from large numbers to only 5.5%, which is a very nice result for the market. Earnings per share is almost one year comparing to five-year price of share in the market. And what's most important for us as a company under very high and investment and very rapid investment phase our leverage, let's say, indicator or indebtedness indicator, which is net debt to EBITDA decreased to just 1.2%, which is a very nice, very stable and bankable indicator showing that the company have successfully finished investment phase and is healthy and ready for as the next developments. So just to mention and run through again our main guidance we provided you in previous periods. So our results are slightly better in turnover than our last guidance and just a little bit below our IPO guidance. But in terms of adjusted EBITDA, which is, I believe, more important for investors, we have overperformed and reached like 6%, 7% above our IPO indicator in 2023. So with this good notice, happy to finish the financial part and maybe give a few words to Jurijs about our next plans.

Yes. This is the last substantive slides of our presentation, covering targets for financial year 2026. As you investors might have noticed from our media announcements, we have informed the market that we plan to implement the next investment phase, which is roughly EUR 30 million in budget. We expect that this investment phase will be largely completed during 2026. And the remaining bits of it will be commissioned in the first half of 2027. As part of this new investment phase, we plan to construct three more barns, which will be in terms of technology and scale will be replicas of our previous investment phase. So we are speaking of three hen barns 125,000 birds each. So this will add a very substantial additional capacity and will be instrumental to enable us to meet rising demand across the Baltics. And also beyond in Europe, as we continue to experience a structural deficit of cage-free eggs, especially by the more developed Western European markets, which we are also currently servicing. So the -- this investment program that we're going to implement is going to boost further our shift towards cage reproduction. As you might recall, currently out of five birds, only one bird is a so-called enriched cage or colony reduction method, which is being gradually phased out across the Europe, albeit at a very different pace depending on the geography. And from that angle, Agrova Baltics is very uniquely positioned because already today, we are #1 cage-free industrial scale producer in the Baltics, and perhaps even in Nordic Baltics because only 20% -- actually less than 20% of our production is in this cage. By completing this next investment phase, will be 90% cage-free egg producer. And dear investors, you might have noticed two weeks ago, we made a public announcement that we aim to transition cage-free by 2028, which will imply that the Agrova Baltics becomes a first egg producer in the Baltics to go 100% cage-free. And just to emphasize, this is primarily driven by our export clients as we see that demand is growing for the cage-free barn egg in particular, which is a higher-margin product. Now we also intend to scale up on our [indiscernible] on the product line, making substantial investments into marketing across the Baltics. We also intend to launch a couple of new products later this year, which we hope our loyal customers will like and that will also help us to diversify the revenue base, and we believe this to be very important part of our business going forward as we see a very high potential in the functional nutrition market. And all these initiatives will help us to improve our product mix that will allow us to shift gradually into higher-margin products, thereby boosting -- boost revenue, EBITDA and the bottom line of the business. So this covers the presentation that we had, and we are ready to answer the questions investors might have. Thank you.

Yes. We will now be taking your questions. Please submit them through the Q&A box that you see below the presentation. We will start with the questions submitted prior to the call, and then we'll take the rest of them. Sunrise eggs acquisition has had a lot of spotlight recently. How this exactly benefits Agrova Baltic's minority shareholders.

As I have mentioned during my presentation, it mostly benefits from the lines that now Agrova Baltics is a member of a much larger international group, with an ambition to become a pan-European egg platform and egg protein-based platform. It also gives a -- from the risk management perspective, that gives some protection to the business from the lens of biosecurity. As our investors who follow the industry might know, the industry is going through an unprecedented bird flu pandemic and we're now experiencing a fundamental shortage of egg in Europe. But speaking more broadly because we received this question in various different formats. I understand that there might be some -- so to speak, bitter aftertaste, this acquisition was not done through the Agrova Baltics and Agrova Baltic balance sheet was not used for this acquisition. And here, I want to just clarify that actually from the outset, we did make an attempt to do the transaction from the balance sheet of Agrova Baltics. We have approached our largest minority shareholders, which are institutional investors from Baltic pension funds. And at the moment, we felt there is very low appetite. We discovered that any attempt to raise this funding through the public markets, given the size of the Baltic markets and the track record of previous issuers is unlikely to succeed. Hence, we took the decision to structure this transaction on the level of the shareholders.

Have the feed prices catched up with the egg price growth this year. At what level do you see your gross margin going forward?

Yes, there was some increase in feed prices in the first half of the year and during the summer months, but after the harvest period in September, prices remain on the previous level. So we noticed our increase in feed prices was mainly driven by the higher consumption of feed due to increase on the production capacity. Regarding gross margin, this time, we do not make any forward-looking statements. So you may understand that this price of this year was incredible. It was very good due to also some [ cyclogram ] issues that we might have. But so we expect next the year to be with some moderate result, but still, we believe to deliver as the market best margins to you.

Do you anticipate to expand staff count at current capacities?

The current capacities are fully staffed. So as I said, all of the commissioned buildings are working at full capacity now. So the next wave of recruitment will happen as we'll commission the new three barns.

How much of the debt hold floating rates.

Yes, all of our debt, which now is only from CI funds, it holds floating rates.

What risks do you see arising from Middle East geopolitical issues -- have any of them realized already?

No, things -- as we all know, situation is very dynamic and is evolving as we speak. We don't see any immediate substantial impact, but we are likely to face some CapEx adjustment, because obviously, because of the energy commodity prices going up significantly, that will adopt the -- effect the prices of steel and construction prices will most likely go up. But this is something the industry across the world will face -- and we are most likely going to address it through the open book contracts with our vendors.

Are you providing any financial targets for 2026.

Not at this point, as Mihails has already mentioned, because we live now in the world of very high uncertainty because of the conflict in the Middle East. Looking at the egg market in particular, we believe that the structural deficit of eggs in Europe is likely to extend beyond the first half of this year. So all things equal, we expect margins by '26 be somewhat close to the margin we demonstrated for 2025. But again, I want to make a disclaimer, we will see how geopolitical situation is unfolding. So at this point in time, we will refrain from making any very firm forward-looking statements.

Thank you. Can you name some synergies that Agrova might have with Sunrise Group?

There are no immediate synergies between Agrova Baltics and the Sunrise Group, rather than experience sharing, for example, at Sunrise Group U.K., we already have a very established [indiscernible] operation. So our U.K. business is raising young pets themselves. They've done it for several decades. In the Agrova Baltics, we plan to commission [ putting ] capacities later this year. So this will be quite instrumental not experience we have in U.K. will obviously be transferred here. But other than that, operationally, there are -- financially, there are not too many synergies, again, other than operational experience sharing that also is from the fact that our business in U.K. is U.K. focused. Everything that is produced in the U.K. is currently sold in U.K.

How does the company plan to balance export growth with the strengthening its position in the domestic market?

This is going to be, frankly, quite hard to achieve because we see that -- there is quite a bit of pressure through various NGOs and also some international scale retailers announcing transition to the barn egg over cage-free egg production. At the same time, we see that also there are various surveys also conducted by some local players that when it comes to the animal welfare, the population in the Baltics life, in particular, is not really prepared to pay for that. So we believe that it will be quite hard for us to increase the market share in domestic markets and perhaps in the Baltics, because once we will complete the transition to cage-free, most likely our export volumes on the share of exports will go up and the share of domestic sales will go down. There is high probability that domestic markets will be experiencing an influx of cheap imports of EU noncompliant products from third countries.

What are your thoughts on the recent definition news we can see on media? And what could be the cause for the increases of those?

Well, on this one, I'll probably make three very clear statements. Number one, myself and the entire team, we are super proud of our farms in Aluksnes and animal welfare is, was and will be our #1 priority. Statement number two, all those defamation and Black PR [indiscernible]. That's what it is. All our counterparties, corporate counterparties have been informed. We had individual meetings with every counterparty. It's also needs to be emphasized that during 10 years, of the operation of Aluksnes poultry farm, since the current shareholding management team took over. There was not ever a single bridge of product quality and animal welfare. We are also a subject of regular announced and not announced international audits, all of which have been passed with a mark A or A+, meaning excellent compliance with the world-class practices. So this is a targeted Black PR campaign, which we are currently experiencing. The law enforcement agencies and security and police agencies have been informed. There have been some detentions and police is doing their work. But I can assure you that the farm continues to operate normally. As a result of these attacks, we were forced to hire additional private security campaigns, but it is what it is. It's very unfortunate that this Black PR is happening, but -- but we are dealing with this and are protecting the interest of the company.

What are the key priorities for the next two, three years, production capacity, product development or perhaps market expansion.

Well, I would probably refrain to picking one because everything that's listed here, production capacity, product development or market expansion, in my view, do not exist one without the other. The market expansion is not possible with additional production capacity. The next investment phase of EUR 30 million CapEx is exactly going to be delivered for the reason so that we can satisfy the needs of our export clients. The product development is something we work on, on a continuous basis, across all our SKUs, the quality management of the product, new packaging, we are constantly negotiating with our corporate accounts to see how packaging solutions can be tailored for individual markets, et cetera.

At the moment, the last question that we have received. Do you foresee a significant increase in competition from imports to the future in the future?

We believe that most likely it will remain at its current levels. What we have seen that during last year, there is no further increase in exports from Ukraine -- and this is a result of various factors. Also, there have been a number of incidents where someone and other and other issues were registered in and egg products originated from third countries. So this has somehow restricted the volumes of third countries imports -- but I guess it's also fair to say that whether any additional increase raw materials or not will be largely a function of political decisions, which unfortunately are beyond the influence of the company. We are working very actively with industry association to make sure that the local farmers -- local Agrova food businesses are the priority of the government agencies.

Thank you. All questions have been addressed. That concludes our Q&A session. Participants, thank you for joining us today, and we hope to see you next time.

Thank you very much.

Thank you. Bye-bye.