Purcari Wineries (WINE) H1 2024 earnings summary

Executive summary

• Group revenue grew 3% year-over-year to RON 165.9 million in H1 2024, with core wine and brandy sales up 12% YoY, led by premium brands and strong performance in Romania and Bulgaria; Ecosmart operations were discontinued.

• Net profit increased by 15% YoY to RON 29.3 million, with Q2 net profit up 70% sequentially due to improved gross margin and lower packaging costs.

• Management expanded with new hires and launched Vintech Innovations to drive digitalization; recent acquisitions include 51 hectares in Dealu Mare and Timbrus Purcari Estate SRL.

• Dividend of RON 0.65/share paid (RON 26.2 million total), with share capital increased via stock options.

Financial highlights

• Gross margin reached 51% in Q2 2024, the highest since IPO, driven by pricing, premiumization, and lower packaging costs.

• EBITDA for H1 2024 was RON 55.3 million (33% margin), and net profit was RON 29.3 million (18% margin); Q2 EBITDA margin reached 38%.

• Discontinued Ecosmart operations after a RON 22.2 million penalty and bankruptcy proceedings; normalized EBITDA margin is 32-33% and net profit margin is 16-17.6%.

• Marketing and selling expenses increased by 24% YoY, mainly due to team expansion and SGR system implementation.

• Net finance costs surged 339% YoY due to higher interest expenses and lower FX gains.

Outlook and guidance

• 2024 revenue growth guidance revised to 5-10% (from 12-15%), with core wine segment expected to grow 15-20%.

• EBITDA margin guidance remains at 26-28%, and net income margin at 14-16%; management remains confident in delivering indicated ranges.

• Ecosmart deconsolidation expected in November 2024; moderate global recovery anticipated in 2025.

• Risks from climate-related grape shortages in Moldova and Bulgaria may increase input costs and affect margins in 2025.

• The war in Ukraine is not expected to materially impact the Group, as exposure is limited and receivables are under control.