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's activity report 2022

AS Põlluvara was established in 2001. The company's field of activity is the management of agricultural lands, leasing them out, production and sale of agricultural products. The company's goal as a land manager is good agricultural practice and efficient use of Estonian agricultural resources. AS Põlluvara mainly earns income in rural areas and has decided to leave some of it locally - supporting the organization of children's summer work and holiday camps.

As of the reporting date, the company owned 668 (2021: 657) properties with a total area of 13706 (2021: 13420) ha, of which arable land made up 90% (2021: 91%). The area of land leased by the company is 12 154 (2021: 12 047) ha.

General financial results

The company's sales revenue for the reporting year was 3 515 (2021: 7 446) thousand euros, of which 61% (2021: 27%) was rental income, 34% (2021: 72%) was property sales. The company's operating profit for 2022 is 15 183 (2021: 8 352) thousand euros, net profit 15 283 (2021: 8 405) thousand euros.

Significant environmental and social impacts The weather conditions in 2022 were generally favorable for crop formation, but in some regions, some of the potential yield of cereals and oil crops remained unrealized due to lack of precipitation. Lower yield was compensated by high demand and price increase for cereals and rapeseed on the world market - food wheat price 360 euros per ton, rapeseed over 700 euros per ton.

Based on the production indicators for 2022, the average milk production per cow in Estonia was the highest in history and the highest in the European Union - on average 10628 kg per cow. The average purchase price of milk was 463 euros per ton, which is 47% higher than a year earlier and higher than ever before. At the end of 2022, the rapid rise in meat purchase prices began - this is mainly due to uncertainty in the world raw material markets, war in Europe and, in the longer term, the growth of the world's population.

Agricultural land prices were on an upward trend in 2022 - the price per hectare of fertile, easily accessible and large massif agricultural land increased by approximately 20%.

The main reason for the price increase can be seen as the need to securely place free funds - there is an opportunity to invest in agricultural land. At the same time, farmers' interest in acquiring good agricultural land has remained, banks consider agricultural land to be a good collateral and are ready to finance its purchase. Agricultural land prices at auctions exceed the 9 000 euro limit per hectare.

In 2022, all major agricultural subsidies increased. A single area payment and greening support were paid 192 euros per hectare, which is 1.7% more than in 2021.

Agriculture has great potential in mitigating the effects of climate change - by reducing emissions and sequestering carbon - soil is the largest "carbon bank" after the ocean. It is important to sequester carbon in agricultural soils, to maintain and increase soil fertility and species diversity through this, to promote organic farming. AS Põlluvara allows farmers a lower rent for a positive humus balance and organic farming. In cooperation with the eAgronom field management program, the plan is to achieve a result that allows the farmer/landowner to know with scientific certainty the amount of carbon sequestered in the fields in use and to get as much additional income from it as possible. The first banks in Estonia have started issuing preferential loans to companies whose humus balance in the fields is positive and carbon sequestration is greater than emissions.

Risk of interest rate changes

Loan agreements are concluded in euros and the base interest rate is 3 or 6 month EURIBOR. Long-term interest rate risk is unhedged with derivatives.

Investments

During the reporting period, investments were made to purchase land in the amount of 3 506 thousand euros (2021: 989 thousand euros).

Staff

As of the reporting date, the company has three employees under contract, who were paid a salary of 42 (2021: 37) thousand euros, the remuneration calculated for the board member was 14 (2021: 14) thousand euros, for the council members 4 (2021: 4) thousand euros.

Financial ratios 2022 2021

Payment ability general level = current assets / short-term liabilities 10.97 11.69

Debt ratio = long and short term liabilities / total assets 0.09 0.12

Debt and equity ratio = liabilities / equity 0.10 0.14

Operating profit margin = operating profit / sales revenue 4.32 1.12

Gross margin (%) = (sales revenue - cost of goods sold) / sales revenue 64% 34%

Return on assets = (sales revenue + other operating income) / average total assets for the year 23% 22%

Return on assets (ROA) = net profit / average total assets for the year 20% 13%

Return on equity (ROE) = net profit / average equity for the year 23% 15%

Goals for the next financial year In 2023, AS Põlluvara will continue its usual economic activity - managing agricultural lands and producing seeds. Plans are to invest in high-quality rural land properties, invest in the development of bioeconomy projects, the goal of which is to add as much value as possible to the raw material produced in the Estonian agricultural sector.

The board of AS Põlluvara confirms that the daily management of the company's economic activities has complied with the current legislation of the Republic of Estonia, the articles of association and the decisions of the council.

Vello Teor