Mažvydas Šileika: how should businesses assess EBITDA fluctuations

In the agri-food sector, EBITDA is often one of the most important indicators when assessing a company's resilience. Unlike revenue or net profit, it provides a clearer view of how successfully a business generates operating results regardless of its financing structure, tax environment, or investment cycle. For this reason, operating profitability frequently serves as a starting point for investors evaluating whether a business model is becoming stronger over time.

EBITDA is a metric that can easily be dismissed as a "somewhat abstract accounting figure," yet, when interpreted correctly, it tells a very specific story about the quality of a business.

Numbers That Require Context

Over the past four financial years, the nine-month EBITDA of Akola Group has increased from approximately EUR 44 million in FY2022/2023 to EUR 66 million in the current financial year-an increase of nearly 50%. During the same period, the market experienced significant grain price fluctuations, an energy crisis, geopolitical uncertainty, and a sharp rise in interest rates across Europe.

The profitability result for the current financial year is 7% lower than in the corresponding period of the previous year, which was a record year. However, the first nine months of the previous financial year were exceptional-among the strongest in the Group's history. Today's EUR 66 million EBITDA is a better reflection of a normalized operating level than an indication of decline. Therefore, a more important question is: why has operating performance grown so significantly compared with FY2022/2023?

What Has Actually Changed?

Over the last ten years, Akola Group's revenue has grown approximately fourfold, while operating profitability has increased even faster. This is not a coincidence but rather the result of a structural transformation driven by several factors.

First, the growth of the food production segment. When margins in commodity trading are pressured by global market prices, food production operates under a different logic. It generates more stable added value, is less cyclical, and allows greater control over end-market pricing. During the current period, this segment generated EUR 38 million in operating profit-more than 50% higher than during the same period last year. Poultry production, instant food products, and breadcrumbs all delivered growing margins. This is the outcome of targeted investments rather than a one-off effect.

The second factor is diversification as a buffer. Cyclicality is unavoidable in agriculture: grain prices decline, milk procurement prices fluctuate, and fertilizer markets react to geopolitical developments. However, when food production operates at full capacity and demand for poultry products across Europe remains stable, overall Group performance becomes more resilient. This is clearly visible today: while the agricultural value chain is facing price and cost pressures, food production is offsetting these challenges and stabilizing overall profitability.

Finally, there have been investments in capacity and efficiency. Depreciation is excluded from EBITDA, meaning that the more a company invests, the larger the difference between EBITDA and operating profit becomes. In recent years, the Group has significantly expanded production capacities in poultry farming, feed production, and grain storage infrastructure, and these investments are already generating returns.

The Right Metric for This Industry

In the agri-food business, seasonal fluctuations are a structural reality rather than a random occurrence. The first and second halves of the financial year are always significantly different, as harvest procurement, storage, and processing cycles vary throughout the year. Consequently, interim results must always be assessed within their seasonal context.

Operating profitability serves as a stabilizing metric in this environment because it removes the effects of financing structures, tax regimes, and investment intensity. This allows for meaningful comparisons between different periods and business segments within the same group.

Furthermore, EBITDA is often used as an indicator of a company's cash-generating potential. A business that maintains stable operating performance even during challenging periods generally has the capacity to service debt, finance investments, and reduce its dependence on external capital.

What Does the Latest Period Tell Us?

The results of the current financial year reveal two contrasting trends.

The agricultural value chain is currently under pressure. Crop quality challenges, grain price corrections, and rising costs are weighing on performance. During the period, the Farmers Partnership segment generated only EUR 4 million in operating profit, compared with EUR 21 million a year earlier. This reflects the reality of today's agricultural markets.

Food production, meanwhile, is moving in the opposite direction. The segment generated EUR 38 million in operating profit, supported by improving profitability in poultry operations and rapid expansion of the breadcrumbs business. Not only did this segment offset the pressure in agriculture, but it also increased the Group's overall profitability.

Transformation Visible Only Over Several Years

When evaluating agri-food businesses, the results of a single quarter-or even a single year-often fail to reveal the full picture. Greater significance lies in understanding how the profitability structure evolves, what share of earnings comes from higher value-added activities, and how effectively the business maintains resilience through different market cycles.

The case of Akola Group illustrates a broader principle. Over a decade in which revenue increased fourfold, operating profitability grew even faster. This means that every euro of revenue generated today creates more value than it did ten years ago.

That is precisely why EBITDA trends over a longer period often provide investors with far more insight than the profit figures of any single reporting period.