Release Date: August 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Purcari Wineries PCL (BSE:WINE, Financial) reported a 3% year-on-year revenue growth for the first half of the year, with core wine and brandy sales increasing by 12%.
- The company achieved a gross margin of 51% and impressive EBITDA numbers, indicating strong profitability.
- Purcari's premium brands, such as Purcari and Crama Ceptura, are performing well across multiple markets, contributing to the company's growth.
- The company has expanded its share capital and paid dividends, demonstrating a commitment to shareholder returns.
- Purcari Wineries PCL is investing in a new digital hub to accelerate digitization and improve operational efficiency.
Negative Points
- The discontinuation of Ecosmart operations has impacted overall group revenue growth, slowing it down compared to core revenue growth.
- The company faces challenges in the Polish market, with pressure in the mainstream segment affecting sales.
- In Moldova, the brandy segment is experiencing fierce competition and aggressive pricing, impacting sales.
- Purcari Wineries PCL has revised its revenue guidance downward due to unexpected price competition and a strategic focus on profitability over volume.
- The Romanian economy's slower growth could potentially impact future sales, although the company remains optimistic about its market position.
Q & A Highlights
Q: Can you clarify the discrepancy in the cost of goods sold figures for Q2?
A: Anatol Belibov, CFO: The cost of goods sold for Q2 is RON41 million, not RON86.7 million. There seems to be a technical error in the figures you mentioned. The correct numbers are RON81 million in revenue and RON46 million cost of goods sold for Q1, and RON84 million in revenue and RON41 million cost of goods sold for Q2.
Q: Which brands have the best potential to reach your margin targets, and what level of profitability can you achieve?
A: Alex Filip, Deputy CEO: We aim for a 50% gross margin and 30% EBITDA margin across our portfolio. Purcari is a premium brand with high margins, and we are working to strengthen other brands to achieve similar profitability. This involves building new brands and enhancing existing ones to improve pricing power.
Q: How does issuing new stock for employee compensation affect shareholders, and are there plans for stock buybacks?
A: Vasile Tofan, Non-Executive Chairman: We align management incentives with shareholder interests through stock options with high strike prices, ensuring they benefit only if the stock performs well. While this may cause slight dilution, the value created by attracting top talent outweighs it. We focus on long-term value creation rather than immediate buybacks.
Q: What is the strategy for entering the US market, and how many hectares of vineyards do you have in each country?
A: Alex Filip, Deputy CEO: We are working with large wholesalers in the US and considering hiring a dedicated person for the market. We have around 100 hectares in Romania, 100 in Bulgaria, and 430 in Moldova, ensuring a secure grape supply.
Q: How is the Romanian economy impacting your guidance for 2024 and 2025?
A: Alex Filip, Deputy CEO: Despite slower economic growth, consumption continues to rise, supporting our revenue growth. We have ample room to expand in Romania through distribution and new brand development. Vasile Tofan adds that Romania's election cycle may boost consumption, benefiting our sales.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
