Purcari Wineries Public Company Limited (WINE) Earnings Call Transcript & Summary

Welcome, everyone, to the presentation of the first half 2021 results of Purcari Wineries plc. I'm happy to show some good results today as I'm sure you've seen in the presentation, the documents you have received earlier. So, let's get into it. So as Eugeniu mentioned, today we have a few participants from our side of the call. My name is Eugeniu Comendant, I'm the Chief Operating Officer. We also have Victor Arapan, who is the Chief Finance Officer of the group and Eugeniu Baltag whom you've just seen, the Head of Investor Relations. The agenda for today, I'll go very quickly through the overview of the group, our vision, our strategy. And I'll do it quickly, but nonetheless I do think it's important to keep reiterating what our vision is, what our strategy is and, sort of, to keep double checking that we are within the said vision and strategy and is, the foremost, working to delivering to what our goal is. So this is a good slide that shows the overview of the group. As most of you know, there are 4 -- company's 4 leading brands: Purcari -- [winning] brands, with Crama Ceptura, Bostavan and Bardar. Purcari, Bostavan and Bardar are wineries and production platforms in Moldova, and Crama Ceptura is a production platform winery in Romania. On the top right side of the slide, you'll see the sales split based on the countries where we generate our revenue. Romania's still on the lead, more than 50% of our revenue comes from that market. Now, I'm sure many of you may see this as somewhat a risk that half of our eggs are in one basket. Now as much as we want for other markets to gain up in sales share versus Romania, we are also very happy that Romania keeps this share of sales with its very good results. And of course, this goes out to the fantastic teams in the marketing and sales department. And of course, here are the teams that produced this fantastic wines that we sell. Another important addition in this slide is that we've made a [thread] in -- over the left list, or the list on the left, we've managed to add another #1. So until now, we were boasting being #1, which is the most awarded winery in Central and Eastern Europe between the years of 2015 and 2021 at Decanter. Decanter, we can see this as being the Olympics in the wine world. Well, already at half-year, we are proud -- we can proudly say that in 2021, Purcari will be the most awarded winery in the world at leading wine competitions -- international wine competitions. So this is a great achievement. Not only further solidifying our status and our presence in the region where we aim to become champions, which is the Central and Eastern Europe, but it also places Purcari as a significant player in the wine business around the world. Now very quickly when it comes to the -- to what creates the product for success, we do see that we are operating in a very attractive market with a continuation of the shift from other drinks such as beer and spirits towards wine. And overall we see that in our key markets, the wine consumption especially in the segment we are very strong in, which is the more -- let's say, more premium segments, we see that the consumption in those segments keeps accelerating. And of course on the other side, we come in to the markets with a significant competitive advantage as we see it, both from the cost side. And the fact that we are in the regions -- we're producing regions which are abundant in grapes as raw material for our products but also with labor, allowing us to have a relatively low cost base. And we're producing wines from these regions, from distilleries, wines of incredible quality, which comes to be seen on our side -- the way that experts judge us being #1 around the world this year, and also the way consumers judge us as we'll see later on platforms such as Vivino. Now the core of our business model is affordable luxury, and that's the intersection of more than cost-competitive winemaking, being very agile and differentiated when it comes to marketing and, of course, producing very high quality-to-price [ratio] of wines. And of course this together creates that sweet spot where the consumers resonate with our wines, both in the way they enjoy our wines, but also the way they associate with our wines. Because not only do we produce high quality wines, but also we want to see them as ethical and aspirational wines. Well, our mission is to provide consumers with this joy that our products can bring to their life, and our vision is to become the undisputed wine champion in the Central and Eastern Europe, not only through organic growth but also acting as a consolidator in this industry, that means through M&A. And how we're going to do it? Well, we're going to be hungry, we're going to be ethical. Thrifty, which means we're going to be careful with our spending. We will be different than others and we'll be better than our competition. Now I was mentioning becoming the champion in Central and Eastern Europe through consolidation of a fragmented market. And this chart keeps showing that, that in industries such as beer and spirits, if you look at the top 3 players in specific markets, then those top 3 players hold a significant consolidated market share in those markets. While in wine, this still keeps being a very fragmented industry. And we do see ourselves as being the company that can create that consolidation. And we can do that through the fact that we keep growing, we keep having high margins. So we keep retaining earnings, having strong balance sheets, which allows us to have the funds or liquidity for our balance sheets, to seize some M&A opportunities but also the ability to fund through other sources of financing in order to convert an M&A potential deal. Another strong chart, and this chart just keeps getting stronger and stronger. So as mentioned here what the X first single bar, so here it is on the left side when we were saying Decanter, we were the #1 winery when it comes to medals. We see it at Decanter, again, what we call the Olympics in the wine world, where we've taken a massive lead in 2021, now with 103 medals at Decanter between the years of 2015 and 2021. So massive lead when it comes to the regions of Central and Eastern Europe. And on the right side, these are very strong charts when you think about the fact that we have managed to keep growing our sales, year on year on year. And with that, we've kept receiving more and more awards at top international wine competitions. And here you see the cumulative -- well let's say the cumulative per year medals. We see at top 5 wine competitions of the world: Mundus Vini, Concours Mondial de Bruxelles, Challenge International du Vin, International Wine and Spirits Competition and Decanter. So in 2021, only at these 5 alone we have amounted 97 medals. So this is a great achievement. And it just shows again the -- what I was mentioning about, the competitive advantage that we have. Keep into consideration that still our wines, eventhough of incredible quality, they are still quite affordable to our customers. Now on the previous slide was -- what the experts say here is what the customers say. So one thing is to produce fantastic wines, and of course you also have to market those wines. And not only do we produce these fantastic wines, but also we are trendy. We have trendy and interesting brands. So the consumers, they associate with our brands. You can see on the left the mentions of Purcari Romania on Instagram. Purcari's still in the lead by a long shot compared to other competitors. And on the right, we like to reference the figures from Vivino, which is this wine-rating platform. And now it is becoming a wine marketplace. But we like to mention the performance on this platform because it's -- this scores transpose with what customers think in the market. So you can see that, for example, in Romania, Purcari wines have received 55,000 times a score from a customer, and the average score is 4.1. So statistically speaking, this gives a very good view of the market and on the brand perception and the -- on the perception of customers of our products and our brand. Staying a bit on Vivino, again we like to call the figures here. And we have the next slide on Vivino too, 11 of the top 25 wines in the premium segment are Purcari. So you can see that we -- basically we dominate the premium segment. A good chart or a good visualization, which shows that our wines become more and more accessible and present in wider geographies. One, perhaps, good takeaway here is that we see other geographies starting to accelerate in the adoption of Purcari. And the way they are being -- the customers interact with this platform in ranking our Purcari wines, and that is Ukraine, so we do see good dynamics there. Overall, if you look, here are the figures. We are still top 1 ranking in the world, and we see, for example here, 21% increase in this year versus last year. So overall, good indicator when looking at this platform. Now moving into the results. So here, we are -- I will say we are very happy to report a 25% increase in the 6-month revenues comparing to the same period of last year. EBITDA has increased by 24% year-on-year, and net income has increased by 31%. So of course, these are all extremely good results. We see them as positive results. Now when comparing just the second quarter. So here, as you see, we're comparing the 6 months versus 6 months. But if we were to compare just the second quarter of 2021 versus the second quarter of 2020, then we will see that revenues have increased by 47%. EBITDA has increased by 41%, and net profit has increased by 34%. But of course, in this presentation, we prefer that we compare 6 months of this year versus 6 months of last year because we know that especially the second quarter of last year was sort of the first quarter that was -- where the effect of the pandemic was felt. And in fact, it was one of the first quarter in a very long history of Purcari Group where we saw a decline year-on-year. But if you remember, we managed to recover the quarter after that. So overall here, we're focusing on the 6 months. And we also want to compare not only versus 2020, but also versus the 2019 results because, in a way, 2019 was still sort of a benchmark year, particularly if we look at some of the markets that need to have a recovery, such as -- recovery from the pandemic effect, such as China and Moldova. So the increase is -- when we look at 2021 versus 2019, the increase of the revenues will be at 21% for the 6 months versus 2019. EBITDA is increasing by 17%, 2021 versus 2019, and net profit are increasing by 19% when comparing to 2019. And if you look at the bottom, you can see the margins. We are continuing to retain this healthy and strong margins with 33% EBITDA margin and 19% net profit margins, which we see also as sustainable. As I'm sure perhaps in the question-and-answer session, we -- you can ask me questions about this, and we can dive into it. Now here, you see the market data -- when it comes to market data in Romania, audited by Nielsen with primary focus on modern trade. Now as you see here on the left, Purcari as a group continues to gain market share, close to 11% -- or at 11% market share in the overall market. But what's important here to mention is that these charts do not show the impact of HORECA. In fact, they do not contain the data from HORECA. And what's important -- I want to mention here that even though on the right side, you may see a slight dip from 26% to 24%, and that, of course, is because last year, we were very strong in using the -- wasn't easy to say, can't let a good crisis go to waste. So we -- even though we were hit in the second quarter, we had a good recovery in the second half of the year, again, with great work from the teams in Romania. But here, what I also want to mention that what is not present in this chart, because, as I said, Nielsen doesn't cover HORECA, is our very successful launch of Purcari Nocturne. It's a series exclusive for HORECA. We launched this in Romania late last year. And already in the first half of this year, the sales from this series alone account for 3% of group sales. So this is an outstanding success. And in fact, with this occasion, I want to thank the teams that have been involved in launching the series. Amazing line. So thanks go to the staff at the winery but, of course, also to the sales and marketing teams in Romania that have made the launch such a success. This is a good chart that shows the strength that we have in the Romanian market, but not only as a player with a market share but also a player that keeps growing and is still aggressive in the market. So on the y axis -- well, let's say, let's start with the x axis. So on the x axis, you see the revenue growth in percentage. And on the y axis, you see the profit margin in percentage. These are figures for 2020, for full year 2020. And these are also figures that we have pulled from public sources. Now as you can see that Purcari -- and I forgot to mention, of course, the size of the bubble is the -- represents the revenues in 2020. So as you can see, Purcari is a very strong player with significant size of revenues in Romania, but also second, when it comes to its profitability, but number one, when it comes to growth. What's worth probably mentioning here is that you see Purcari here slightly smaller the [indiscernible], slightly smaller than [indiscernible]. But here with [indiscernible], what's also accounted is their exports. So it doesn't only cover their Romanian sales but also exports when, in fact, for Purcari, it covers our sales in Romania as a market. Now I'll go very quickly through this because I'm covering kind of all of these messages later in the presentation. So firstly, accelerating revenue growth. Yes, we are sort of recovering to a sort of back-to-normal conditions. We are surpassing the 2019 figures. And we show, if we compare on a quarter level, as I mentioned earlier, very strong increases. Romania, still very strong leading growth. And in Romania, Purcari is the growth generator, and we also see recovery in Moldova and China. So Moldova and China were the ones that were hit in 2019, the most out of all of our markets. So for us, the recovery of those sales is important, and we see that happening. Not still yet to the 2019 results, but we see that as an opportunity. In Poland, we are facing some headwinds, particularly from price competition and from price discounts of our direct competitors, but also through some effect from the Tesco restructuring being purchased by Netto. So we see some of that effect. And that effect, in fact, overspilled, there's an overspilling effect into the figures in Czech Republic as well. And Bardar is showing strong figures and strong growth in Romania and Asia. Good recovery in Moldova, with some reduction in sales in Belarus, but that comes with a combination of the political situation in Belarus, but also with the fact that long term, we're looking to focus more on the high profitability bottled sales of Bardar rather than bulk. So sustaining high margins, again, I've mentioned the fact that we are confident on the margins that we are producing as a business to sustain them in the future. We had some effect when it comes to the improvement of the mix of sales. So the fact that Purcari has been accelerating growth and Bardar has been recovering. These 2 products are the ones with the higher margins. And of course, they have contributed to overall strong margins at group level. And also, we have sales in China and Moldova recovering, also markets with -- that generates high -- the sales that have higher margins. Now we keep delivering on quality. And as I mentioned, so excellent performance of our wines at international wine competitions. Just in the first half alone, 335 medals versus 158 medals won in 2020. But of course, I have to say that for this year, we've pretty much exhausted the wine competitions that are available. So this is pretty much the number of medals that we're looking to end the year with. We're very happy with the results of our sparkling with Cuvée de Purcari receiving gold medal at Concours Mondial de Bruxelles and Cuvée Alb Brut receiving the Best of Show White at Mundus Vini Spring Tasting in 2021. Now we are committed to delivering value to our shareholders. And we do this one through -- of course, we're always looking at the fundamentals of our business. So for us, the foremost of importance is to create a business -- a long-term business, a sustainable business that can create returns for our customers in the future. So that's where, as we call them the fundamental, which is developing markets, developing products, increasing sales organically and growing through M&A is at the core of our focus. But also, we're looking at other things that are important to our investors. For example, the increase of the share capital -- the doubling of the share capital earlier this year was done again with an intention to provide value to our investors, particularly the retail investors. And that was not -- we do see that as enough compensation for investors. So we have also gone with the issuance of a dividend in the value of RON 26 million, which will be paid out on the 9th of September. This RON 26 million divided by the 40,000 issued shares at the moment would amount to RON 0.65 per share. We started the buyback program, which is required to fulfill our obligations to the management when it comes to the stock option plan and the share grant program that was approved by the AGM. And the positive news is that through our divesting of the -- of our stake in Glass Container Company, we have received an additional cash amount of close to EUR 1 million, which is part of that sale transaction. So the total now cash receipt from that sale of our stake in GCC is over EUR 8 million. So going a bit more in detail in the financials. We've covered the revenue. So you see 25% growth, 2021 versus 2020, and 21% growth versus 2019. Now what's positive to see is the dynamics of the gross profit. And as I mentioned, this is particularly because of an improved sales mix. When it comes to SG&A, here, I can spend a bit more time, and I can also answer questions in the Q&A sessions if you have some, if you have any for me. But basically, the dynamics in the SG&A has multiple components with various effects, so towards either an increase or decrease relative to last year's SG&A figures. So on one hand, the lower brand and trade marketing activities in the first half of 2021, they've had, of course, a positive effect on the marketing and selling expenses, that's when comparing to the same period of last year because, in fact, last year, during the second quarter, we kind of went all out on marketing activities, on one hand, to diminish the potential negative effect of the demand erosion given the pandemic situation. But on the other hand, in a way, anticipating a slowdown or more quietness from our competitors. And basically, we thought that the approach is to be a bit more active in marketing and gain on visibility and on awareness comparing to our competitors. Also this year, the SG&A expenses includes the remuneration of the sales teams that relates to achieving their KPIs. As you can imagine, last year, the KPIs or the bonuses or the KPI achieving related remuneration has been pretty much 0 because of the low performance in the second quarter of last year. This year, the teams have done a tremendous job in different markets. So this is represented in a slight increase in SG&A. Additionally, the long-term management incentive plan with share grants and with stock options, which was approved by the AGM, has been implemented in the second quarter of this year. So the registering of this expense in one go has sort of had this a bit more skewed effect or this spike effect on SG&A. So overall, the SG&A is at 24% of revenue. However, if we were to adjust to this, we can call it a one-off event of this equity-settled share-based payment that has been applied in the second quarter, so the adjusted SG&A would show an improvement to being 20% of revenue versus 21% of the revenue for the same period last year. So a 1 percentage point decrease, which shows that nonetheless, we are still very much in control of our expenses. Now if we look from the performance of each market. So in Romania, the international key account performance has been very strong. We also saw strong recovery in the fragmented trade. Purcari has led the growth. So Purcari had very good sales in the first half, but so had the Crama Ceptura brand and Bardar. As I mentioned, the very successful launch of HORECA exclusive, Purcari Nocturne series, has had a strong contribution. So overall, you see here, 29% increase in Romanian sales versus 2020, and 60% versus '19, overall share of sales of 53%. We're happy with the rebound of sales in Republic of Moldova. We're still under the 2019 figures, but we are in close contact with our partners. So we keep sort of, so to say, the path on the market. And the feedback is that the sell-out, which is the sales from the shelves or at least from our partners to the retail accounts, is showing good dynamics. So we're waiting for this lagged effect to reach us. In Poland, as I mentioned, we did face strong price discount activities from our direct competitors that are competing with -- directly with our brands, almost on a copycat scheme. We don't -- we -- yes, we acknowledge the effect that this had on our sales, but we do see that the long term will be beneficial to us. Sort of similar to what happened last year when in Moldova, we decided to not go and be very active in strong discounts because in the long term, we do see that this has a brand perception erosion effect even though you may have some short-term positive effect. So we have abstained from very deep discounts in Poland. But nonetheless, we're working with our partners, and we do have some activities that are planned, both on trade marketing and on brand marketing side. And these are planned for the second half of the year. As I mentioned, the Tesco restructuring continues to have a certain effect with the overspill also to the Czech Republic figures. Asia, it shows strong recovery still under the 2019 figures. We see this still as a potential. We do have large projects that are being rolled out with our trade partners later this year. And in fact, some of them are being rolled out. So we are being more active in digital marketing with the support of our partners and also the -- now that the restrictions have -- most of the restrictions have been removed in China, there's more and more activity in, so to say, trade shows and presenting our wines to potential large customers. And of course, we mentioned that China is one of the markets where we have local presence. So we have local staff there. Local, meaning also Chinese. And we're waiting for more restrictions to be lifted so that the -- our, so to say, internal staff can revert to being present in China as well. When we speak about Czech and Slovakia, we are managing to hold sales despite the effects of this Tesco restructuring that I keep mentioning. We're yet to ramp up sales through our new distributor because somewhere towards the second half of last year, we started with a slow in-out process with an additional distributor, and we're still yet to create that ramp-up of sales through that distributor. But the positive news on the other hand is that we are igniting sales of Purcari wines through distributors but also through 8Wines, which is the e-commerce wine retailer in which Purcari Group has acquired a minority stake earlier this year. In Ukraine, we have -- even though the numbers here is showing a 6% increase, overall, we have a very positive outlook on Ukraine. This 6% is -- modest 6% increase is actually a combination of a strong double-digit increase in Purcari sales and a slight slowdown in Bostavan sales. So overall, if you were to think from a margin contribution, yes, here, you'll see maybe 6% increase in overall sales. But from a margin contribution, we are looking at double digits increase. Overall, in Ukraine, we are working on a, let's say, a more aggressive approach to our activity in Ukraine. So we have opened a trading company in Ukraine, and we now have local staff there. So we have, so to say, a country manager and then we have staff dedicated for trade activities, for brand marketing activities and for working with the channels. This is the beginning of developing the formula as we internally would call the Romanian formula. So the Romanian formula has worked extremely well, as you can see, until today. And we want to extend this approach in Ukraine, and that requires local presence. So this local presence also has some benefits on the cost side, too, and also on the control in the market because then this trading company will perform importing activities of our wines and also would, so to say, capitalize all the investment in listing fees and similar costs in the market with the retailers. Changing a bit the direction of perspective. Now if you look at Purcari, if we look at the brands versus the countries. So first, Purcari, Purcari is showing fantastic results across all important markets. So we see growth in all markets versus 2020, but still behind versus 2019 in Moldova and China, the markets that were mostly hit in 2020. We see promising results in Poland. So the sales keep increasing. And we have a planned acceleration for Purcari in Ukraine where we have already engaged with a strong local marketing agencies, and we have a marketing campaign ready to be rolled out as we speak. And then here, I guess, what's also good to mention that we, Purcari, we see the strong growth in the different markets where we are already having this strong presence, but also the fact that we started our cooperation through also being an investor in the company, 8Wines. This opens up the geographies for us where the Purcari wines are pretty much available in all European markets, but even beyond. So I can tell you that Purcari has also been shipped to Australia. Bostavan. So what we see with Bostavan is that the focus needs to remain and still remains on the long term -- or medium-term premiumization of this brand. And we have a good, strong pipeline of products that were planned to launch in key markets, such as Moldova, Romania and Ukraine. What we see, products that already have received a positive review from customers and focus groups. So we do want to create this premiumization effect in the future, entering more and more premium segments, thus solidifying our position of Bostavan sales. And you can imagine, Bostavan is accounting for nearly half of the wine production of the group when we speak in volumes. So you can imagine that the ability to create premiumization, an increase in price or an increase in the average price of the sales mix at this winery can have significant impact on the group's margins -- gross margins and beyond. When we look at Crama Ceptura. So Crama Ceptura has shown healthy growth, so 17% versus 2020 and 31% versus 2019. We see good dynamics in Romania, but also what's good to mention is that it's good to see that the exports in China, the U.K. and Germany and markets such as these are picking up. With Bardar, we see a recovery in Moldova, strong sales in China already above 2019, very much above 2019 and also very much above 2020. So very good dynamics in China. We are accelerating in Romania. We have this slowdown of sales in Belarus. But again, this is due to the political instability that we see in Belarus and also with our focus being more in selling bottled wine rather than bulk. I thought I'd drop this in a bit with the fact that Purcari is the world's most awarded winery in 2021. And again, this is a message for the customers but also a message for our potential partners in markets such as the U.S., such as China, such as Japan. So a message such as these where it really places Purcari as a player -- as a strong significant player around the world globally. It's a message that will help us in developing markets and developing our sales across markets with high potential such as what I mentioned, U.S., Japan and other perhaps markets in Asia, but, of course, also in Europe. Now I'm focusing a lot on Purcari and on the qualities that Purcari shows over the years and how it competes against other leading brands across the world. But I also want to mention, I spoke a bit about Bostavan. And here, I want to mention that, in fact, the quality of Bostavan has had a significant gain in quality through some recent investment in our production equipment. And in fact, the quality of the wines, the recent increase in quality of the wines is already appreciated by experts, including that international contracts, but also by customers. So again, the theme here is premiumization of Bostavan is ongoing, and this is a strategic direction for creating the growth and maintaining our margins. Just a bit on the fact that on the marketing side, we stayed relevant. So of course, we've made ourselves heard a bit with the fact that Purcari is the world's most awarded winery. Then we like to be involved on the CSR side and different sponsorships, particularly in this one where we sponsored the Moldovan team. We've been the general sponsor of the Moldovic Olympic team. So Purcari has been the company -- one of the companies that has facilitated the presence of our athletes in Japan. And there's a great picture -- you've probably seen it somewhere on the social media or maybe LinkedIn with the medal winner celebrating with one 3-liter Purcari sparkling. We had some viral campaigns earlier this year, receiving millions of views in social and digital mediums. And of course, we want to revive one of our traditions, which is the Purcari wine run. It was -- it didn't happen last year. But this year, it will happen, and we're looking forward to that success. Another very positive thing, more of a macroeconomic and political, is the recent stream of wins of pro-Democratic and pro-European Party, which is PAS. Firstly, the -- Maia Sandu has become the President last November, the President of Moldova. Then following that, on July 11, the -- this party has had a landslide victory in parliamentary elections, now having 63 seats out of the 101 parliament seats. And the appointment of Natalia Gavrilita, the new Prime Minister of Moldova, another technocrat and very progressed and modern-viewed politician. And of course, also Igor Grosu, the Head of Parliament, all of these people with this progressive views, with the focus on the rule of law and the judicial system being functional in this country and in this area, but of course, their close alliance to the Western world also means that we are looking at potentially some improved trade relationships with some markets but also potentially some -- the traction of certain EU funds for the development of the country, including for the wine industry, for which we may be eligible to benefit from this as well. So covering a bit the outlook for 2021. We mentioned in the last call that after the first half, we'll consider whether to review the 2021 guidance. Now of course, you see here that we have beaten the guidance for the organic revenue growth, we mentioned 12% to 14%. We are 25% now. And also on the EBITDA margin, we mentioned a guidance of 28% to 30% for the year, and we are at 33%. Now first question would be like, would we consider revisiting these guidelines and -- this guidance? And at the moment, we're looking to maintain this guidance. Now not that we do not believe that we can maintain these results for the rest of the year, but we still want to remain prudent because even though now we're comparing -- we are now comparing to a relatively slower first half of the year 2020. And when we look at the second half of 2020, if you remember, we made some significant recovery following the second quarter dip in 2020. So that significant recovery means very strong sales figures. So we have a high hill to climb and to beat the figures of last year, and we are planning to do that. But nonetheless, we do not want to overpromise something, and we prefer to stay on the side of underpromise and overdeliver. From the revenue growth side, as I mentioned, is we will be comparing to a very strong second half of last year. And on the EBITDA margin, we do anticipate a potential impact of the fact that last year, the harvest was relatively poor. In fact, it was one of the poorest harvest in recent years. So of course, that poor harvest has translated into -- or will translate into higher cost of sales as the wines that have been produced with harvest of last year will start to get sold. So that's why we prefer to stay prudent when it comes to these figures and this guidance. Now I guess this is the presentation of the results. I want to thank you for your attention, and I'm happy to open for -- the floor for questions.

Ladies and gentlemen, we may start the questions now. [Operator Instructions]

Of course, the fact that before this, we were doing the calls with just through the phone. Now it's very nice. We can potentially see each other. So feel free to -- also to put the camera on and -- so that we can see each other as well as you want. No pressure.

So maybe I'll start. This is Chris, although it's a [indiscernible]. So first of all, congratulations on good results. And you mentioned that this harvest in 2020 was poor. And I think now climate change also is impacting the industry, right? So do you see a warming climate as a threat or rather an opportunity to you?

That's a very good question, Chris, and thank you for this question. In fact, we do see this as an opportunity. We see that as a threat. We must not overlook this, but we also see this as an opportunity. In one of the slides in other presentations, we do show the wine belts. And we show that, in fact, with the warming of the climate, in fact, these wine belts are moving more and more towards the [indiscernible]. Now the good thing is that the parallel at which we are, we are more on the sort of the upper side of this wine belt. So in fact, risks such as freezing in early spring are becoming less. So we have a benefit from that. Now the drought, of course, may become an issue for us in the future. And this has been the issue last year. So on one hand, we have a decrease in risks such as frost. But on the other hand, we have an increase in risk such as drought. And for that, the mitigation for such risks are implementing irrigation systems. And this is something that we plan to do. In fact, for Bostavan, initial plan was to make it happen this year. But given certain, on one side, priorities on capital allocation, but on the other hand, also the fact that this year, it was clear from the start, there was no need for an irrigation system just this year alone. For us, the deployment and the implementation of such an irrigation system will take around 3 months. So we know that if we start such a deployment of such a project somewhere at the end of the year or early next year, we'll be in time to mitigate against, I don't know, some risk of drought in 2022. If there are no questions, maybe I'll find a subject that is not covered in the presentation.

Yes. We have a few questions in the chat.

Sure. Let me just read them. Sorry about that. Let me just take a look. All right. So what is the difference in price as percentage of the same wine sold in different countries? Now in fact, our -- one element of our success -- and this is a question, by the way, from [indiscernible]. Something that perhaps is not -- doesn't transcend to all the figures in our results is the fact that one element of the success, not only in a certain market, but also in the reason is the fact that we will have a relatively robust pricing policy. So the only where -- only places where you would see perhaps an increase or the price being slightly higher than what we call in our home markets would be when, for example, when products are being sold either through online due to shipping costs or in markets where the route to market absorbs more costs such as, for example, the U.K. But overall, the -- we have a relatively strong and stable pricing policy in order to not create this balance among, on one hand, different channels in one market, but also different distributors, large distributors for different regions. So overall, the difference in price is minimum. Moving on. I think I've answered -- you said that harvest of 2020 was low, that only means high quality of wine. Exactly. Yes. So on one hand, yes, the -- it means a higher cost -- average cost for the wine produced from grapes over the 2020 harvest, but we're looking at an amazing vintage. And we're already seeing some amazing wines being produced from that year. What about the harvest of 2021? Do you see better volumes for this year? By all means. So this year, the harvest is looking significantly better. We're looking to approach somewhere the 2019 harvest figures. So this year is looking much better. What is your view on the inflation rebound in Romania and in other markets as regard to your ability to pass on the cost increase to the customers, particularly in terms of sales and margins? Thank you. So what we see when it comes to inflation is that, of course, as inflation penetrates into different product category, it will also penetrate into our category. When we are looking particularly on the exchange rate between hard currencies such as euro and dollar versus other currencies such as Moldovan leu or Romania leu, we have sort of a hedging on the fact that though a majority or a good portion of our revenue is in local currencies, so to call, revenue in Romanian leu and Moldovan leu, a very good portion of sales are also in euro. So that, of course, gives us sort of this mitigation against, on one hand, exchange rate, but also inflation in some of these markets. Okay. So what is the expected CapEx spend in 2021 and 2022? So the expectation for the CapEx this year would be somewhere around RON 4.5 million, RON 5 million. So that would mean 20 to 25 -- sorry, I'm going back, EUR 4.5 million to EUR 5 million, if I said it wrongly. So EUR 4.5 million to EUR 5 million, which equates to, say, give or take, RON 20 million to RON 25 million.

I have a question on Bostavan. You mentioned you had a large investment in the bottling plant there. And now you talked a bit about the premiumization of the brand. When do you think that you will be ready with the operational efforts and start the sales and marketing efforts for Bostavan? I'm referring to the fact that now there is a bit of stagnation in the brand sales. And I was wondering when should we expect to see the same double-digit beautiful numbers in growth just as for Purcari.

So the efforts -- first -- answering the first portion of your question, when are we planning to exert the efforts into promoting these products? It's imminent. So it's happening pretty much as we speak and in the next month. So we are looking at launching a few new products from the Bostavan winery. And there's, let's say, the full attention is given to creating of new brands and sort of associating ourselves with Bostavan because changing customer perception, even though you have now this very, very high-quality wines, the customer perception to be changed is not that easy. So we are launching these products, as we speak, in key markets, which is Romania, Moldova and Ukraine. So in the next month or maybe 2 months, you should see them already promoted and potentially on shelves. But in order to see those double-digit growth that you are mentioning, now we still intend to keep pushing double-digit growth on, let's say, let's call it, the core Bostavan product portfolio. But of course, the -- for the new portfolio -- if I were to call it the new portfolio, for it to have a significant share in the overall sales of Bostavan and to have that effect, even though it may grow on very high double digits or maybe at the beginning of -- not double, but triple digits growth, for it to start becoming significant in the total portfolio, the wines that are being sought on this, wineries may take some time. So this effect and this premiumization road is a medium to -- I'd say more of a medium term, so to say, so this will take a few years when this effect is really felt. But we have to start it now so that in 3 years, we look back and we know that we started it when we were supposed to start it and we start reaping the effects then.

And an additional question on Purcari. Seeing the high growth, will you need significant more investments to accommodate that growth? Are you comfortable that you can manage to have capacity to replicate that growth in the following years?

That's a good question. Thank you for this question. The capacity comes from -- well, the capacity and the potential bottlenecks have 2 stages. The first one, of course, is sourcing the grapes, the high-quality grapes for Purcari. Until recent, Purcari was 100% exclusive-owned grapes. Recently, though, we started to look at, first, singles or third-party grapes from the Purcari area and from the Stefan Voda wine region. This, of course, the purchasing third-party grapes is done with partners that we have a very close relationship. We subsidize them through the years, and we ensure the very high quality of grapes. So that's how we are -- we're mitigating the capacity needs on sourcing the grapes. Then on the processing, storage and bottling, we have no bottlenecks because somewhere last year, around mid of the year, we have opened a new production section at Purcari. So now we've increased both our processing, storage and bottling capacity to 10 million bottles. So until 10 million bottles, we have room to grow without any hindrance. And even beyond that, you probably don't know, but before this line -- this new bottling line being opened mid last year, the teams at the Purcari Winery sometimes, we're working 3 shifts. So they're working overnights. So we're in 3 shifts, about 8 hours in order to keep with demand. Now this is, of course, not the case. So when I mentioned 10 million bottles is 10 million bottles without any additional pressure on the workforce. But should we reach truly cross 10 million bottles, we are able to -- we're still able to supply for such demand.

Can you hear me?

Yes.

Good. And in regard -- in continuation for the previous question, there must be somewhere a limiting factor in the growth of this extremely successful brand, Purcari. And I mean if it is though the -- you can only have that much grapes harvested in that region. Isn't like that? Or how -- because you said you have already a large, but there's no problem there with the processing and the rest.

Yes. No. So when it comes to sourcing grapes, again, as I mentioned, for a very long time, Purcari was owned grape only. But with the approach of allowing to source from very close parties, third parties that work with Purcari to now to supply additional grapes, this is not a limitation. Let's say, we don't see a limitation or any risks in the near future -- near to medium future.

So you have grapes from -- you can't have grapes from anywhere, you mean, in Moldova and...

Not anywhere in Moldova, but in that wine region. So...

In that wine region?

Yes. There are 3 regions in Moldova, which is called the Val lui Traian and Stefan Voda. And within Stefan Voda, we now allow ourselves to source these grapes. But at the same time, every year, we're planting more and more of our own vineyards. So we've planted some vineyards last year. We've planted some more vineyards this year. Of course, it takes 4 years to be able to get the first harvest from a new plantation. So in 4 years' time, we'll see that our -- the vineyards that are in our operations that create harvest will increase, and we're planning to keep doing this year-over-year.

Can you tell us which is going to be the brand you'll use for Bostavan or it's still a secret?

Well, I prefer that maybe in the next call, we will do a presentation on this because I'd like to see some initial sales. Why? Because we know that a good -- the audience for these calls are also our competitors. I want to gain some...

What about [ d'Or ]? Are you keeping that brand, [ d'Or ]?

Yes. So [ d'Or ], we are keeping its -- we've recently rebranded this wine completely, and it's being launched as we speak. So we've done a full rebranding, a full repositioning. So best -- we are reinventing this brand altogether, and we are launching it as we speak in Moldova.

And I don't want to monopolize, but I'd like to stay a little bit on this side of the branding story because, I guess, even yourself or many people have been surprised by the extraordinary success that Purcari has and that's conquered the Romanian market. And I guess how do you see that? What was the [indiscernible]? What's in the name? What's in the -- what was the -- that you made?

The formula for success, what made Purcari successful?

Yes. Yes, because it's -- evidently that it's very hard to replicate that as much as you will try, but it's going to be hard.

Yes. Well, look, let me start with the fact that the history of Purcari started in 1827. So Purcari has this great legacy and heritage of how we became more than winery that it is. So 1827, the year of its foundation. Then in 1878 Purcari already won its first Negru de Purcari, which is the flagship wine from our portfolio. In 1878, it already has won the gold medal at Bordeaux wine contest. So already in 1878, it has placed itself as -- on this world map of top wines. Then their sources -- different sources, but Purcari was even the preferred wine of Queen Mary, so before Elizabeth. And it's also the wine that's present in the private collection of Prince Charles.

I'm not sure they made -- they played a role, but...

So I'm getting there.

Not every Romanian -- that bottle -- Purcari knew all those [ legal ] things.

I just took some opportunity to give a bit of the history. At the end of the day, wine is not just -- you don't sell a product that just gives you an analytic sensation, but it's also a product that comes with a history and a story behind it. In 2004, Mr. Victor Bostan, who's the founder of the modern Purcari Winery and Purcari Group, he is -- so the legend and the head figure in Moldova and Romania.

It's a pity we don't see him too often on the conference calls and things like that. But then, yes, continue, please.

Well, Mr. Bostan, perhaps English is not appropriate to go into these discussions, but he's very much the helm of this group, and his most important contribution is to the production of wine -- to the quality of wines that are being produced. So with his direction, Purcari has grown to what it is today. And at the core of this is extremely high-quality wines, delivered to customers for an affordable price. Of course, I can go a bit more in the history how Purcari was a leading exporter to Russia, then the embargoes and the folks on the that market.

Yes. And I finish with that. The proximity with Ukraine, which is opening up so much now, and it's always kind of -- I asked myself why you could not replicate in any way the success you had in Romania or even on some further away markets on this Ukrainian -- they don't like wine. Actually, they have a great winery a little bit further east, but I don't know how the -- how their tastes are. But anyway, it's a big market, it seems to me.

Well, look, if we speak about Purcari, so Purcari alone has grown 26% in Ukraine, this -- the 6 months versus last year. And I would say in the -- for sure, more than 50%, but I would say, close 100% growth, Purcari alone in Ukraine versus 2019. So your conclusion that the success there is not as is Romania right now because -- we're happy to see Romania keep growing at 25% or 29% year-over-year pace. But Ukraine, in fact, is showing very good adoption of Purcari wines, and it's becoming really a trendy product. And in fact, what we're doing now, we want to support this pool effect that we see in the market. And the way we want to support it is with local presence to replicate the Romania formula. So it hasn't been done until now, but we're doing it now. And in fact, we're not looking at doing that only in Ukraine. We're looking to do that in the Baltics, and we're looking to do that in Poland. So we know that, maybe for some years, the reliance has been growing these few key markets, such as Moldova, Romania, Poland, though Purcari was not present there; and Czech Republic, though Purcari was not present there; the Baltics, though Purcari was not present there. But now if you look at Purcari's presence in those markets that I mentioned, they are not present. In fact, the sales are accelerating for Purcari. In the Baltics, for example, Purcari has already -- I don't want to mislead, but it already has surpassed some other markets that were fairly significant for Purcari, and we see success there. So for Ukraine, we do see a strong opportunity and we are continuing the growth of Purcari there. And the opportunity in Ukraine is through the fact that, unfortunately, for Ukraine, Russia has done this aggressive move of removing or, let's say, annexing Crimea. However, 50% of the vineyards of Ukraine were in Crimea. So players like Inkerman and such, the total surface of vineyards, of technical vineyards for winemaking, in Ukraine is 60,000 hectares. Now 30,000 were in Crimea. So now with sort of this depletion of supply, we see a further opportunity there. One opportunity is for us to push our products from Moldova, but now also from Romania. So we're looking at exporting from Crama Ceptura as well. But the second one is on the nonorganic, so the M&A side. So of course, we are careful. We're assessing the risk, the political risk, because we have opportunity cost where we could invest in other areas, in other regions, but there's also an opportunity to actually do an M&A and create a local champion. And here, I mentioned another sort of side root of our M&A strategy because on one hand, we're looking at -- let's say, if we look geographically, our M&A -- the spectrum of our M&A focus incorporate also countries such as Georgia, such as Croatia, such as Czech Republic. Some of them are with the focus of perhaps export rather than local consumption. Georgia would be an example. But then we're looking at regions such as Bulgaria and such as Ukraine for an M&A or for different formulas of entering those markets to create a local champion. And with our expertise, for example, if we were to look at Bulgaria, and we've done a full analysis of the full wine shelf, and we have plotted -- we basically plotted the whole wine shelf in Bulgaria. And we do see that when we look at quality versus price, we see that, with the quality-to-price ratio that we have, we can become a local champion. But of course, Bulgaria being a wine producer, the strategy is not to export from Moldova in Bulgaria, but actually to produce local wine there and basically create a local champion and similar could be done in Ukraine. Sorry, I've gone a bit in the -- in more details. And we will try to rely not on luck but on our enough efforts.

This is Iuliana from Wood & Company. I already included some questions in the chat. I thought -- I just want to make sure that I get the time to ask them. Also the discussion on Ukraine was indeed interesting. Should I just go to them?

Yes, please. Iuliana, we always appreciate your questions.

First, a very short one. You're mentioning that you received another EUR 1 million from the Glass Container Company. Will that be included in the P&L in the third quarter?

I'm not sure if we have Mr. Victor Arapan, the CFO, here. Perhaps he can elaborate more on the way the transaction is reflected. But here, it's a bit of a combination on the fact that we have created some provisions or some -- we have retained the recording of some, let's say, beneficial effects of the transactions, and they are reflected in different periods. But perhaps, Victor, you can elaborate on this, please.

Yes. Thank you, Iuliana, for the question. The transaction [indiscernible] on July 30. So it is not yet reflected in the P&L of the company. It will be recording in the third quarter.