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

Good afternoon, everyone, and thank you for joining Purcari Group results for the first half of 2026 results. I'm Eugeniu Baltag, Head of IR Purcari. And today with me is Mr. Anatolie Belibov, the CFO of the group; and Victoria Moldovan, Senior IR of the group. We will start with a brief overview of the key highlights for the period, then we will walk you through the financials, main operational developments across our markets. We will close with our guidance update for 2026. So after that, we will open the line for Q&A. So before we continue, please note that this conference may include forward-looking statements that involve risks and uncertainties. The financial figures presented are unaudited and should be viewed together with a full reporting package available on our website or on the book Stock Exchange website as well. So of course, this half was a very interesting one. First of all, I have to mention that our group managed to finalize 2 M&A deals, both of them are in Romania. We have issued previously current reports on that. So first of all, SERVE Ceptura acquisition in Romania and the second one is CaraprodVin. So our first acquisition is in Dealu Mare region, very famous for red wines. And the second one is in Vrancea, which is the largest wine growing region in Romania. So actually, we expanded our footprint in Romania by almost 100 hectares. Of course, we continue our biodiversity projects. We are monitoring. So for us, it's very important, but the vineyards we have, so we have more than 2,000 hectares developed in a sustainable way and they will have a useful life more than 50 years. Our commercial team has been very active in this period. We just put here on slide 2 of the fact. So they have visited ProWine in Tokyo. And of course, they have been in China. Nevertheless, Asia is difficult market right now, but we are investing for the future. And one good news for all consumers of our wine, we have launched a new wine at Purcari, it's called Parcela. So actually, it's related to separate parcels where we grow wine, gold [indiscernible] and do a specific wine. I think soon, you're going to see the perspective Parcela wine on the shelves of stores or in specialized wine bars. With that being said, I'm passing the floor to Anatolie because he has this heavy duty to explain the financial figures.

Thank you, Eugeniu. So dear investors and analysts, good afternoon, and thank you for joining our today call. So I'm pleased to present and to go for the financials of the Purcari Group, both operational and commercial part, yes, for sure, we can say that half 1 financial result of the Purcari have been impacted by 2 different contrasting trends. Yes. First of all, commercially, with revenue significantly affected by the consumer demand trend in Romania, but also in some countries in Central Europe. And in the meantime, yes, together with changing the ownership, we are trying to align with new shareholders, find some synergy, and that's all we have some new change and new distribution arrangement with to market, yes, that also lets say, good impact on our commercial performance. At the same time, [indiscernible] this trend in the, let's say, consumer and also commercial performance. We are very disciplined in terms of costs, yes, operational efficiency and we try to manage each spend prominently by each type of [indiscernible] . That's why you can see that, for sure, despite of [indiscernible] in turnover, we managed to deliver higher EBITDA versus [indiscernible] previous year. So in this slide, our total turnover decreased by 6.8% to RON 182 million, and also our gross margin decreased by RON 5 million. Nevertheless, it's very important to -- again, to mention that percentage-wise, yes, we managed to improve from 44.6% to 45.3%. And here is despite of very, let's say, problematic period of time when it's not easy to change the price on the shop in order to manage the inflation pressure. Yes, EBITDA margin improved to one of the highest level, 18.5%. And for sure, it's important to go in next slide and explain how we achieved this one. Profit wise, yes, we delivered this half RON 15.1 million, mostly flat versus prior year, but once again, like percentage, it's 3 basis points -- 13 basis points better than previous period of time. I propose to start with the commercial part [indiscernible] once again, we already mentioned that in Romania, yes, we have, let's say, big pressure on household budget and available income. That's why people start to consume less and for sure, Purcari [indiscernible] wine, the impact in the sold volume. So Romania registered a decline of 9% and this remains our biggest market share impact on group commercial performance. Moldova, which is, let's say, more stable in test of consumer change. Still, yes, we delivered approximately 1% increase, significantly that, let's say, the [indiscernible] trend for modern end market. In Bulgaria, still remain, let's say, a market under developed stage and continue to deliver strong double-digit growth year-over-year. So here, we continue to improve our route to market and extend our portfolio. This allow us to continue to deliver this strong growth. We have some, let's say, a decline in consumption in Central and East Europe, still in Poland. And here, we can say about our volume maker brand [indiscernible] which have, let's say, a significant decline due to consumer trend. But in the mean time, we are trying to change or to find new route market in Wolberto increase our sales of Purcari brand and rest of the world is minus 5.3%. For sure, here, we have, let's say, good news and also bad news, good news mean that we improved significantly our commercial performance in a country like Turkey, Croatia. But in the meantime, Asia and Africa, let's say, reduced our [indiscernible] growth in terms of the case of Africa or Asia Pacific, China we have the same trend declining year-over-year. So we consider that, this period of time, it's about a decline in volume, but we're trying to mix and to deliver a healthy growth, meaning to change pricing to change our promo pressure in order to be sure that we are not affecting our margin. So if you can go now to the next slide, meaning to move from revenue performance to profitability. So once again, it's important to mention that apart from decline, minus 7% in terms of revenue, yes, we managed to reduce also our COGS rates, mean we reviewing our court of packaging, meaning trying to negotiate new price for all the production cost that's also being more efficient in order to manage this [indiscernible] from reduction in sales. So this allow us to reduce from minus RON [ 78 million ] to minus [indiscernible] gross margin. I believe this is one of the first year over the last 3 years when we managed to be flat in terms of total operational costs. So for sure, we can say that start with marketing costs. We are minus 5.6% of percentage-wise. This was mainly driven by strong control in marketing and advertising costs. Also [indiscernible] cost and here is very important to mention that despite high inflation in terms of fuel customers through logistic price, yes, we managed to negotiate and to keep mostly flat or below double-digit growth. General administrative costs increased, by 8%. Here is mainly because of increased salary in line with change in the structure of the team, but all remaining line of general and administrative costs, and you can see in our financial statement, registered reduction once again, we are looking line by line in order to find any let's say, opportunity to improve our profitability. The important point here also, it's not finance cost, which increased by 4% to RON 13.3 million. And here it's good to go in the financial statement in more details and important to highlight that we managed to registered a 17% increase in interest costs despite of increase by approximately 50% in the total, let's say, loan balance of the group. And also because of a reduction in [indiscernible] our main, let's say, local currency, Romanian [indiscernible] also exchange rate impact decrease versus prior year. So you can see that, all these factors support us to deliver a flat in terms of profitability improvement by RON 2 million or 6 basis points in EBITDA margin. So here, one important point that in other operating income, which at the moment RON 5.7 million. We include also gain from a business combination with [indiscernible] and this gain is approximately RON 2.4 million. This is our preliminary internal assumption, for sure, we'll have to carry out business valuation by the specialized company during the end of the year, we will include the final number and presenting in the same way, adjusted and normalized EBITDA. I think now we can go to the next slide. So once again, as of 30th of June 2026, our total assets is around RON 141 million which means 8% increase year-on-year. And the key driver for sheet increase in the total property and plant equipment by 13% reflecting both significant investment in capital expenditures, you know that we announced previously by 2 weeks by 2027, that we will invest averaged RON 20 million year-on-year, starting from 2025. [indiscernible] half 2026 [indiscernible] we have approximately RON 53 million. New investment in CapEx, working which is not in progress. But also, we have increase in total assets because of incorporation [indiscernible] started from 30th of June. For sure, from, let's say, to cash position, we are at RON 14 million, which is, let's say, like the needs to cover our operational needs. Otherwise, we are trying to reduce our loans, mean and net debt increased from RON 170 million 2025, up to RON 345 million. So once again, we have now the, let's say, high speed of our investment. We are trying to finish our increase in capacity in order to continue to fill our growth. Yes, the current ratio remains above 1, so 1.4 compared to 188 versus year-end. So we are once again compliant with all the bank loans covenants on [indiscernible]. So we are managing very careful, everything which is related to cash liquidity. Net debt to equity, you can see that increased from 66% to 80%, yes, and net debt to EBITDA, at the moment, it's at level of 2.95%. Yes, a significant increase versus year-end and also versus previous period of time. But once again, this is impacted both sides, yes, by implement approved budget for 2026 and also by reduction of our sales, which for sure had impact on available cash flow. So overall, they are the most important, let's say, balance sheet items. And for sure, I'm here to go more deeply in more details, if there will be additional question about debt level and liquidity. So I think now, again, we can move to the next slide. So our guidance for 2026, it was plus 10 plus it in terms of revenue, for sure, in line with our historical trend, but also with our ambition when we set up this EBITDA margin '24, '26 and net income 11 plus 14. Nevertheless, we know that we start the year with different changes, including the situation in Romania, also the crisis in the Middle East. So for sure, now consumption trend change, and we have the half year result. Here is approximately plus 97% in terms of revenue, and we are below our budget. In terms of EBITDA margin, we are at a level of 28.5%. So we are above what we plan and profitability, 8.3%, mainly impacted by a decrease in sales. So once again, both in net income, we are below target. But it is important to mention that this is the phasing of our business similar like prior year, we start half year with lower level of profitability, and in the second half, we are compensating. But I think it's important to understand that we have a plan for [indiscernible]. As Eugeniu mentioned, we launched important brand, we believe Parcela. We are implementing now important project, meaning change [indiscernible] market. That's why if you move to the next side of [indiscernible], I believe we are confident, and we share this guidance that we are targeting plus 5 in terms of revenue growth in terms of full year. So our new guidance updated will be between 0 and 5. In the meantime, EBITDA margin, we keep as it was previously announced '24, '26. And net income margin, we reduced by 1 percentage point to 10 plus 12, meaning that, yes, for sure, we will continue to challenge all our costs. But in the meantime, for sure, it's important to invest in order to deliver this 5% -- ambitious 5% growth. While we're reducing net income margin because we still have no confidence about operation of local currency, especially on [indiscernible] and this can, let's say, impact on our profitability target for 2026. So overall, this is our view in terms of how we can learn 2026. We try to manage to go fast for all the side and we are here to get Eugeniu to answer to any of your questions.

Indeed, we are starting our Q&A part. [Operator Instructions]

So [indiscernible] maybe people will think about this. So it's very important once again to sum up that 2026 for car demonstrated resilient business model. And once again, looking to other peers, we show and the most despite of decline in volume, we are able to manage all our costs in an agile way. Yes. So once again, we are here to, let's say, to ensure all the investor analyst that we'll continue to have the same approach. You have to be agile and to manage all our let's say, trends in order to secure our profitability.

And to finish on a positive note, we are starting harvesting period right now. So crop at least per rigs on the lines are looking great. So this year was good for that. And of course, we will come with updates on the harvest during our third quarter results, which will be in November. With that being said, I want to thank you all for allocating the time for our conference call. I understand it's the end of summer. So it may be a very good one for all of us. Thank you. Have a nice day. Bye-bye.

Thank you. Bye-bye.