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

Ladies and gentlemen, it's a pleasure to have so many of you on today's earnings call for Q2 for Purcari. And despite it being a Friday, I hope we'll have all of you very much focused on our results because we are very proud about the set of results we are presenting. So today, here is presenting a team, Eugeniu Baltag, Investor Relations Manager and Victor Arapan, the CFO, will do most of talking today, but we also have the Victor Bostan, Finance CEO; and Victoria Moldovan, our -- also part of our Investor Relations team and myself, Vasile Tofan, as chair. And Eugeniu, I will kindly ask you to jump to Slide 8 next. We are very proud about the track record of growth we have been showing for so many years now. And I'm very proud by the fact that despite the company getting larger, despite the scale getting larger and despite the macro environment being so difficult, we actually even today in presenting these Q2 results, we continue and accelerating that track record of growth. So you know we grew revenues by 30% in the first quarter, and we are proud that in the second quarter too that revenue has stayed at that same very high level of 30% expansion versus the last year. So without further ado, I will pass the floor to Eugeniu Baltag, who will take it from here. And Arapan Victor will take you through our results, and then we'll open up for questions.

Vasile, thank you for your introduction, and it is good to see so many people attending our conference call. And I want to thank you for your decision to spend with us 2 hours of your time in this last Friday of the summer. We have a long agenda but propose to focus more on operational results, on guidance and the Q&A session. Last, we are here to give you more color on how Purcari Wineries Group has performed during the last 3 months and what are our perspectives for the rest of the year. So yes, Vasile already had the intro. And indeed, we had a very strong quarter and managed to deliver exceptionally well in revenue terms by growing 30% for the second quarter in the row as well as we performed very well in profitability, reaching 22% growth in net profit and 15% increase in EBITDA year-on-year basis. However, we have achieved this exceptional performance based on a mix of 2 things. So first of all, it's a volume increase and roughly please consider like 2/3 of our growth comes from volume and 1/3 comes from price increases, which were pushed through across the markets. We delivered strong margins above our guidance with EBITDA margin at 28%. Please recall our guidance for this KPI was 26% and net profit margin at 16% being at the top end of the guidance. So in current turbulent environment and geopolitical turmoil, we consider our first half results to be a very good achievement and excellent contribution and execution of our entire Purcari team. Unfortunately, starting with the COVID in 2020, the turbulences have become a new normal, but our affordable largely model proved to be highly lucrative and adaptive to the new reality. Nevertheless, we have to mention that in the second quarter, we have experienced the highest pressure on COGS from inflation and more expensive wine stock of 2020 and 2021 vintage. But the good news is that we already see first signs of easing and expect certain operational improvements in the second half. As well, we have good news on IR part, Purcari has been maintained in the FTSE Global Micro Cap Index as of August 2023. We are in the top 5 best-performing companies in that index with 37% increase year-to-date. As well our shareholders manage to benefit not only from the upside in the share price but received as well on 18th of August a dividend amounting to RON 0.55 per share. So as well, we moved forward closer to our ESG targets by increasing our photovoltaic system to an annual almost 1 megawatt, actually, it's 960-kilowatt energy capacity, thus ensuring 40% of our energy requirements for Purcari Winery alone and around 15% for Bostavan Winery and Bardar Winery each. Okay. That being said, I think I will leave the floor to Victor Arapan, the CFO of our group, who will provide additional insights on financial evolution during the first half of 2023. Victoria, could you confirm if Victor Arapan is on the call?

Yes, he is.

Yes, I'm here. Thank you, Eugeniu. Hello, everybody. As my colleagues mentioned, the group recording great performance in the first 6 months of the year, with the sales and financial performance above or at the top range of the guidance. The group sales in Q2 kept the same pace of growth as in Q1. As a result, we have a great increase in revenue by plus 30% year-on-year as the reported period. The gross profit increased by 14% year-on-year, reaching RON 67 million, it increased slower than sales as cost of production increased on use of stock of expensive bottled wines of 2021 year's vintages, which still have a big share in the production as well as by more expensive packaging results that was made at the end of the previous year to avoid any disruption that could happen in the winter of 2023. For example, the packaging used during the first half of 2022 was mainly purchased by the end of 2021 at much lower cost on fear of energy crisis and clashes at the Ukrainian/Russian border at the time. The cost of sales increased also because of a higher depreciation expenses as most of investments made in 2022, were put into operation by end of previous year as well the acquisition of Angel's Estate in Bulgaria in Q4 2022. The total depreciation expenses increased by 38% year-on-year or plus RON 3.4 million, which led to an increase in the manufacturing costs. We should not also ignore the increase in the second business segment, recycled services provided by our subsidiary, Ecosmart in Romania, which increased to a share of 8% in total sales in the reporting period, but which has a much lower margin compared to the main segment of the business. You now see in the slide the [ Angel Estate lower ] yield. And all these factors led to a decrease in the gross margin from 47% to 41% in the first half of this year. SG&A expenses registered an increase as a share of sales to 23% compared to 22% for the same period of last year. In particular, we have a significant increase in marketing and selling which increased the plus 52% in first half of the year. As last year, the trade marketing activities were very unusual due to uncertainties relating to the war in Ukraine. So please note that last year, 76% of trade and marketing activities were expenses were made in the second half of the year. So we believe it's a period of 9 or 12 months, there will be a more variance in their growth compared in the last year. And actually, we expect and growing similarly with sales. Other income and expense had not overall significant impact. You can see however, when a separate items, we have significant changes, such as increase in interest expenses by 51% from RON 2.1 million to RON 3.1 million, as our borrowings increased by 30% as of 30th of June compared with 30th June '22. And of course, some continued increase of Euribor rate. At the same time, as a result of Romanian Leu depreciation against the Euro, the group recorded a net ForEx gain of RON 1.9 million, while in the first half of 2022, we recorded a net ForEx loss of RON 2.8 million. EBITDA net profit registered an increase by plus 15% and plus 22%, respectively, compared to the previous year, and the margin of both indicators are above on the top of the range of the guidelines we've presented in February. You can please keep it on Slide 17. Few words about waste and cycling services. This segment offered by the services offering by Ecosmart in Romania is still insignificant in the first 6 months of the year, but without a huge impact, as I told earlier. The gross margin of Ecosmart business is significantly lower than in first half of 2022, mainly because of increase in cost of recycling as national target for recycling of waste and packaging in Romania increased in average by 8%. The sales prices were adjusted later and we expect that the annual figure of gross margin for this segment of the business will be improved. However, it will be lower than 2022. Next slide, please, Eugeniu. You can see what you can assess by ourselves that this group continues to have a very strong financial position over the year with a low level of indebtedness and optimal liquidity. The decrease of current liquidity ratio in as of 30th of June, is due to the distribution of dividend in Q2, which increased the current liabilities by RON 22.1 million. It should be noted that group's goal is to maintain the net debt-to-EBITDA ratio at 1.5x. And you can see that there is a room for sustaining strong growth in the future. So Eugeniu, floor is yours for a short overview of sales by markets and brands.

Victor, thank you for the detailed information on financial figures. And now let's see how we have achieved these figures by looking through commercial labs. First of all, the growth we have achieved today is just by tip of the iceberg. So what is not seen here is a huge amount of work and dedication of the entire team put in but today's results are the effects of a multitude of strategic decisions taken along that time. We are not looking for quick results, but we are looking for a sustainable growth. So long story short, you may see Romania had a strong performance. So strong growth for all brands here. We are expanding in the channels. We are adding new SKUs, new regions, new distributors, Purcari is usually getting all the credit, but please note that we have other stars in Romania as well. So Crama Ceptura, which grew by 24% year-on-year only in Romania and Bardar, which increased by 30%. We strongly believe in diversification and increasing revenues' funnels. But an example in this respect would be Domeniile Cuza which grew 4x year-on-year, albeit from a smaller base. Moldova as well has performed well. However, we can see that consumer confidence somehow moderates. Nevertheless, Purcari is showing double-digit growth in Moldova as well. But is it to speak about, let's say, other brands, for example, we see an almost direct elasticity for mainstream brands such as Bostavan, which was practically flat in the first half. Bardar grew single digit, and we continue to focus on premiumization with our branded division. If you have to look to other markets, I think we can see silver lining for 3 markets, for example, Poland, Czech Republic and Slovakia, where there is a high pressure on the mainstream wines market. So consumer confidence moderates and reached high sensitivity towards price increases in all 3 markets. However, we have a promise to our consumers to deliver high-quality wine and provide an excellent value for money. So we will not pursue the easy path of providing unsustainable discounts or reducing the quality in the bottle because this is a one-way ticket. So we are betting on premiumization and adding value in different creative ways to our consumers in these countries. Nevertheless, in all countries in Poland, Czech Republic and Slovakia, we registered good growth with Purcari brand, albeit from a smaller base. We -- I would like to mention about Ukraine. Of course, situation is difficult, but it's stable. We had a strong first half in 2023, but still behind pre-war first half 2021. But we are sure that in the moment, this unfair and true war will end, we will have only one way and this way will be the way of growth. Now let's look at our performance slicing outperformance from a brand perspective. So Purcari, Yes, we are capitalizing on brand value. We are enforcing our presence in the existing markets and exploring the new ones. We are pushing forward with new SKUs. Regarding Bostavan, I have to admit that in nowadays, the reality is that there are challenging conditions for the mainstream brands and the decisions which we are currently taking will provide dividends in the future. So we opt for prioritizing margins over volumes and seeking for new opportunities. Regarding Crama Ceptura, the quality in the bottle is exceptional. We had a 20% increase in the first half. So my advice is if you are in Romania go and grab a few bottles of Crama Ceptura brand and see the value for money it provides. On Bardar, probably you may recall from our previous meetings, Moldova is the main market. We have registered here middle single-digit growth in the first half. So it's partly impacted by the increase of excise duties in Moldova, which is enforced from the first of January, mainly for spirits and branded products. We registered a strong growth in Romania, which is our second market by size. So we are expanding through channels with this brand in our main market as Romania. Regarding Angel's Estate, which is our latest addition, it undergoes a transformational process. We are solving passing efficiencies on the go. However, it takes time to make it work right but we are definitely sure that we'll achieve good results in Bulgaria as well. We have an experienced CEO at the steering wheel of Angel's Estate and he contributed to the success of Purcari in Romania and now is putting all his knowledge to replicate the Romanian success in Bulgaria. Now as we always say, the quality of our wines is one of our cornerstones to our success. And here on Slide 21, you may see our latest achievements at the most reputable wine competition this year. As an example, you may see in the bottom right corner, we -- at Decanter, the product Moldova received 4 medals and 3 of them were distributed for Purcari wines, so for Maluri de Prut, for Saperavi and limited edition and for its Saperavi in the version of academia. So prior to jump to Q&A session, I would like to pass the floor to Vasile to continue our presentation with our guidance for 2023. Vasile, the floor is yours.

Thank you, everybody. So as you know, I will -- perhaps you've heard me saying this many times, we have one rule of thumb in approaching guidance. We always try to under promise and over deliver. So that's why our approach to the guidance also is formulated in our policies, the guidance policy is to be prudent. So to that end, of course, many of you will notice a significant overperformance in terms of the guidance outlined at the beginning of the year for the first half of the year, the numbers are here. So we are significantly above the revenue targets, 8 percentage points for total revenue growth above and 11 percentage points for the top range in terms of wine growth. And same on EBITDA margin, we are beyond -- so above 2 percentage points above the top range of the indicated EBITDA margin, and we are at the top range in terms of net income margin. Now many of you will ask why do we keep the guidance unchanged. Again, it -- there's 2 reasons here. One is that goes back to that principle of being extra prudent and trying to under-promise and overdeliver. But the second is also the fact that historically, the first half of the year accounts for about 40% to 45% of annual sales. So the second half of the year is actually the crucial one from a seasonality perspective, as it's still an environment which poses a lots of challenges in terms of the macroeconomic environment, I mentioned. So while we personally feel very good about where we stand in the marketplace and how we perform. And we do not see, say, material reasons for things changing in our operations. We decided at the latest Board to still preserve the guidance unchanged and hopefully strongly deliver against it.

Thank you, Vasile, for update on guidance. So that being said, we can start our Q&A session. So please free to address your questions directly by turning your microphone on or type your question in the chat.

Maybe we will start with a written question here. And for the benefit of the colleagues who do not speak Romania, there is a question about a suggestion in terms of more metrics to be shared by the company. And this primarily reflect to the use of capital and the delta between the yields on our capital and to the cost of our capital and a suggestion a number of metrics to be included like economic value add and IRR and other similar metrics. So thank you very much, [ Robert ], for this suggestion. I think I'm speaking for the rest of the team here, we agreed that some metrics would be actually indeed valuable for us and for our investors like a version of economic value add maybe or some guidance in terms of the internal rate of return we employ for assessing our capital investment projects. At the same time, my humble and perhaps a wrong view is that some of these metrics maybe would be a little bit say, not fully relevant for our business because like the delta between the cost of capital and yielding capital would probably apply more to say, financial institutions and bank but would be a little bit less relevant for a wine company, again, that's just my suggestion view assuming that answering the question right. But thank you again for the suggestion. I think some of them in terms of the directional IRR or hold the rate for the CapEx projects or EVA, I think this could be indeed helpful. And last, I'll say still because I think you touched it on your question. In terms of the capital structure aspired, we do not have hard rules that we have communicated in terms of the capital structure, but you have probably observed that we are typically at a level of 40% debt-to-equity level and while we have not written that down as a target, we would probably aim to stay at around 50% of debt-to-equity level, so very well capitalized. One metric that we have communicated related to this one consistently is the net debt-to-EBITDA level. We are a prudent company. So while we're seeing many companies going on with a much more aggressive capital structure, we always aspire to stay at a level of below 1.5x net debt to EBITDA. At the moment, we are just around 1.2x 1.3x and so still within the [Foreign language]. We may slightly go above 1.5x, say, if we're seeing an attractive acquisition opportunity and raise extra financing for that. But we believe, especially in this high interest rate environment, staying below 1.5x or around 1.5x net debt to EBITDA is the right way to go.

This is Iuliana Ciopraga from Wood & Company. A couple of questions from me. So on the one hand, how sustainable is the growth in Romania? I mean it is definitely super impressive. How sustainable is it? . Secondly, if you could provide an outlook on margins, that would be ideal actually. And third, I mean, I already asked about Romania, but a bit of color for the rest of the countries would be great.

Iuliana, good to hear from you. Let's split your questions and deliver answers. So regarding the sustainable growth in Romania, of course, in Romania, we have plenty of room of growth. As I mentioned previously, we still have some areas in Romania, which are not covered. Our market share is, let's say, roughly around 10%. So we have plenty growth in different channels starting from key accounts then going to HoReCa and covering, of course, different SKUs with new brands like Domeniile Cuza and others. So definitely, there is still room of growth in Romania. Nobody says it will be an easy work, but our team in place, putting a lot of efforts like to continue this growth. If to cover your second question on margins. As I mentioned, we saw, I think, the peak of a pressure in the second quarter from this and inflation from the cost of packaging, which actually was like we were comparing the highest price of packaging in the second quarter of 2023 versus the lowest price of our packaging in second quarter last year. And of course, this was reflected in the margins here. Furthermore, we are selling more and more of wine stock from 2020 and 2021 vintage. You see we are growing the revenue, both from price increases, but as well from volume increases so definitely, these more expensive stocks are diminishing, and we expect that the impact from these more expensive stocks to decrease by the end of a year. Of course, this will happen gradually depending on the mix of sales, but our best estimate is that this pressure from inflation and the pressure from high-cost inventories will decrease gradually. Nonetheless, we have to look like -- well, winter is coming. So we have to focus and see how the things will evolve. Yes, Vasile?

Just to add to the Romania question and I think Eugeniu covered it fully. Maybe I'll just add a few more words. So we are still player #4/#3 in the market. So we are behind [ Averesti ], Vincon Cotnari and on time with [ Acash ]. And to that end, we still see plenty of room to grow in terms of market share, looking at some mature markets that with an established leader like U.S. or Chile, for example, that have big domestic players, E. & J. Gallo in the U.S. and Concha y Toro in Chile, they both are north of 20% in terms of market share. So clearly, this is where we aim to be at 20-plus market share in Romania. At the moment, we are at around 12%. So half the aspired market share. That's first. Second, while we are strong in still wines, two important segments are still very much almost like in start-up mode for us. One is Sparkling Wines, very important high-growth segment. We are weak. We are seeing plenty of potential to capitalize on the existing brands and by expanding to the sparkling market segment, and we're doing that. But we are certainly not where we have to be in terms of market share in Sparkling Wines. And the second is Brandy. So Brandy again, is a large profitable category. We launched Bardar. We have very strong growth on Bardar in Romania, but we are at the beginning of the journey only. So in that sense, yes, I understand many of you wonder, hey, is this growth in Romania going to continue? But don't forget, the market is growing, and we are only at half the market share we target. So there's certainly room to at least double our sales in Romania in a reasonable period of time.

But if I may, one more question related to this. So what is actually the growth for the market for the total market?

Not ready to share the latest data. Apologies, I don't have it top of my mind. Historically, the growth rate has been at high single-digit rates based on Euromonitor and that was the volume growth. And so the value growth was higher, was in low double-digits rate. I'm not ready to tell you what the figure is for 2023, but we are happy to share it, Iuliana, as soon as we check the Nielsen -- latest Nielsen data to share it with you. Iuliana, I think you had one more question. Could you repeat it, please?

I mean I asked about Romania. So actually, the last question about -- was about the rest.

Regarding other countries, indeed, the volatility is very high as well with uncertainty. As I mentioned, we see the silver lining like mainstream brands are performing less efficient than the premium brands. What we are doing right now is like pushing forward with Purcari brand in the markets where we are present. We are focusing on premiumization and indeed, we will continue to put the efforts and to build, let's say, our strategies in such a way like we will have a sustainable growth in each market. It's not an easy journey. We have to do it step by step, but we will increase, of course, some prices because we have to cover the inflation impact in our costs and of course, adjust to each country depending on the realities on the ground.

But we have seen actually a decline in Poland in the second quarter and Ukraine as well contracted -- the sales in Ukraine contracted. Can you provide some color there? What is happening and what should we expect?

No, with Ukraine, we are beating last year results, but for sure, but again, we have -- we are comparing like with last year quarter when the war was raging at full.

No, I meant actually -- sorry, I meant actually regarding first quarter. So the Q-on-Q comparison is, yes, it's not that encouraging.

We will continue to implement our strategy in Ukraine. Definitely, you may see that we are growing both in volume terms and in value terms. We have started a partnership with Coca-Cola to promote Bardar to increase our local presence there. But at this moment, the certainty is too big. Literally, we are selling to half of a country. We are selling to the Western part of Ukraine. We will see how the things will evolve because everything depends on the stability in this country and how the war will continue.

And Poland, the Czech Republic, Asia, what should we expect there?

With Asia, good question. Unfortunately, we do not have a crystal ball like to say, look, we are going to grow or how things will evolve, probably most of you are following up what is happening in China. They had a sort of cool down nevertheless. But good thing is like our country manager is on the ground. He's building new relationship there. He's strengthening our current partnerships on the region. But the situation is highly uncertain for Asia in order to make an assumption at this moment. At least we are stick to our guidance. So overall, we should achieve our guidance for this year. If to speak to with our European markets, like Poland, Czech Republic and Slovakia, you already saw like a strong recovery for Czech and Slovakia because in the first half -- first quarter, it was a very weak one. Now we managed to increase by 2% year-on-year. In Poland, again, we saw some seasonality and some moderation in consumption. We have to see how things will evolve let's say, in the third and fourth quarter. I think we should be moderate in, let's say, our optimists, but we are putting all the efforts in order to maximize our sales in these countries.

And if I may, just one -- if there are no other questions from the other participants. Regarding SG&A, if you could guide us on the percentage going forward. So we're seeing it rounding to 33%, what do you still keep the 22% guidance?

No -- of course, it's our internal guidance. It's not written on the paper, but we always target to this SG&A to be roughly 22%, 23% out of revenues. It's not an easy job to do this considering current macro situation. We have managed to maintain the growth of expenses up to 22% out of revenue. So at this moment, we are keeping, let's say, our target in place. Of course, it's not going to be an easy job because you have to consider that we have added Angel's Estate, we have Ecosmart, we have some, let's say, additions to our, let's say, core business, which will inquires (sic) [require] some additional G&A expenses and SG&A. But nevertheless, we are pushing with for sales. And we are backing up this SG&A in order to -- in the end to have -- to achieve our target.

I also have some questions. I was going to ask about the EBITDA margin, but as you covered it, my question is, what will happen to surpass this prudent widens? Are we speaking about the increase in revenues or rather the reducing of cost and SG&A expenses going forward?

Thank you for your question. Again, it's not a straight answer for this. We are pushing in both directions. First of all, we understand we have to work on our top line. So we have to push forward with our sales. And here, big impact comes from the mix of sales. Of course, we have several brands like premium brands and mainstream brands. Our scope is to keep growing with improving and increasing revenues. On the other hand, if you are not monitoring your COGS, if you are not disciplined from a cost perspective, it doesn't matter how good you are selling. So we are focusing both on one part be very hungry to make sales and on other hand to be very strict on this cost base. Of course, there are some, let's say, components of the COGS, which can be, let's say, controlled by us. So we continuously are negotiating prices. Our purchasing department is working around the clock to ensure the best deals for us and to secure sufficient inventories for production. But there are some aspects which are not under our control. For example, we have this wine stocks from 2020 and 2021 vintage. Here we have just to wait and push through the selling cycle, like to sell all these wine stocks. So to conclude, we are pushing both on the revenue part and on cost side. And this, in the end, should give the margins and hopeful they will be within our guidance.

And regarding risk expense in wine stock, it will be persist in the second half of the year or it was diminished in the first half?

It's constantly diminishing. And for you, the best way for you to check this is like to go to, I don't know, supermarket and see on the shelf what vintage -- for example, white wine or rosé wine, what vintage you have there. So you will see but now we are selling more 2022. So it will gradually -- this more expensive wine stock will gradually pass through this commercial cycle. But however, it takes time because, of course, we have red wines. And yes, it takes time.

But if you're speaking about deadline, you do it at the end of 2023, or maybe will take more time?

We're expecting that the biggest chunk of more expensive wine stocks to pass through by the end of 2023. But nevertheless, we will still have some wine stocks in 2024. But again, it depends on the mix of sales and depends how quickly we are going to sell, let's say, different brands.

And regarding Turkey, it's a new market for you, right?

Yes. Turkey is a new market. We had more significant sales last year when Moldova have received the quota -- in the quota, like we were selling them with our excise duties and other tariffs. So last year, we have achieved the quota, I think, in the first half or second quarter. This year, we made most of the sales achieve the quota in the first quarter. But nevertheless, we are expecting, but in the last quarter, I don't know, October, November or December. We will have a new quota for the next year, and we'll be able to deliver some sales. Our commercial team are working in this direction because we are focusing not only on this, let's say, subsidized wines without tariffs, but we are building partnerships in order to increase sales, not only after by quota, but to have additional sales of wine. But of course, Turkey is an interesting country and an interesting market.

Can you comment on the...

I just want to have what Eugeniu told about EBITDA margins. So you should -- you should -- and you have to see that our expenses with depreciation and amortization is significantly. We speak about plus RON 4.5 million compared to last period. On our CapEx program and both for existing ones and the program we have newly acquired Angel's Estate in Bulgaria. So on lowest acquisition approval of new subsidiaries. And on our CapEx program, we increased our expenses or depreciation, but the benefits of this will be -- we will see a little bit later in higher revenue and with production with lower cost per unit. And regarding our -- in deltas, high cost inventory of 2020, 2021 vintages. So now at the end of Q2 this inventories represent around 25%. So for many brands, this quantity will be consumed in the second half of the year. So we expect that if you have a good harvesting season this year, we should have by the end of the year, a much better position with the cost of inventories. So this is your question when we will consume our high cost or high inventories with high cost.

And another question will be if you are going to increase the prices going forward?

Yes, thank you for the question. Indeed, like price increases. It's not -- again, it's not an easy job like pushing a button and then you have all the prices increased across the channels, across the partners, across the distributors. We have to pay close attention to this. We closely analyze each move we have. And we are gradually passing price increases. Indeed, -- we -- I think it's still too early to elaborate to tell you, for example, yes, we will increase by 10% or it will increase by 5%. For each market, we have a very tailored approach and not only for market but for each partner. In order to secure both volume increases and secure value increase because it's a sort of mix between both. So we are going to see how macroeconomics will move on. What will -- what is going to happen with inflation and the regional -- especially in the region. And depending on that, we are going to have a separate decision. So our commercial department, together with top management, will decide the best formula how to mix with increasing volumes and price increases.

And my last question will be about the net financial results. If you can -- saying wine is about mix, so what do we expect for the second half of the year? As I noticed that in this half, you have some ForEx gain. Are you expecting to -- this persists in the second half of the year?

I think the best person to answer regarding net finance cost is Victor Arapan.

Yes. Daniela, we expect that our costs with interest will continue to increase compared to last year as we have higher interest rates in the market. Even Moldava, Central Bank of Moldava, National Bank of Moldova, decreased a few times -- 4 times during this last period, the basic rate and now it's quite low. The interest in Moldova level is quite high, and we still borrow in Euro as this is now mainly export currency. So we want to match the cash flow borrowings with revenues. And you still know that European banks is raising the interest rate. So we expect that Euribor could increase. So our Euribor loans will generate more cost. On other hand, we have to -- we increase our business, we increase our inventories to ensure the highest quality. So this is required in the finance acquisition of liquidities of grapes and processes. So we expect to increase borrowers' borrowings, the borrowing level and the interest to be higher. On -- if we speak about the net finance costs, of course, you saw that we have been positively impacted by the evolution of Moldova, Niue, which was appreciated against euro. And we cannot guess what will be the foreign exchange rate by the end of the year, but I expect that it will stay around current levels. So I don't expect that we will have some adverse impact from operating exchange.

Maybe just one more note here. Of course, the strengthening of the Moldova is a double-edged sword. Yes, it helps us save on this accounting gain in terms of the finance cost line, but you understand this has affected our gross margin because most of our costs, but also generally multiple costs are in league. And in that sense, of course, we very much hope that, that play will weaken. Now it's abnormally strong, and that will boost our margins overall because in the end, we're an exporting business. And this may impact on accounting side, the financing cost side, but will have a positive effect in terms of our cost base and margins, overall. So in general, so that everybody understands a weaker level is better for us. Okay. I think you've been very generous with your time on a Friday afternoon. And as Eugeniu said indeed the last Friday of this summer, so we'll let you slowly transition into the weekend. Not our team though, we still have a retail call in Romanian language. Retail is an important -- Romanian retail investors are an important segment for us. We count to nearly 10,000 retail investors very grateful for them. Many of them are also our consumers. So it's great to have such ambassadors. I remember when we did IPO I think we're at around 1,500 retail investors. So that number has expanded a lot and very grateful to our investor relationships team for helping increase that number of retail investors so much. So this Romanian language call we're doing is also say, a testament to how important we see this base, again, also because these are our consumers and investors of our brand. On this note, thank you, everybody, for backing us. We are going to participate at the Woods and Co. teleconference on September 7, 8, and we already have a number of -- quite a few meetings lined up. So if you would like to talk to us, please do signal, please do reach out. Really want to take the opportunity to update you in person on the latest. So, September is going to be a busy month for us with a lots of activity, so please stay tuned. And I hope we'll have more positive news to share. Thank you, everybody. Have a great Friday, weekend, end of summer. And hopefully, if we see you in Bucharest in September at the investor conference. Thank you. Bye.