The „Auga Group“, one of the largest organic food producers in the Baltic States, is facing financial difficulties and plans to double its operating costs and sell some of its companies and assets by 2027. The group plans to merge or close up to 60 companies.

„By restructuring our operations, we will preserve jobs in the Lithuanian regions, as we have done so far, we will pay taxes responsibly to the state and we will maintain our infrastructure together with our large supplier and customer base," Kęstutis Juščius, shareholder and chairman of the board of directors of Auga Group, said in a statement to the Nasdaq stock exchange.

The Group's cost reduction programme is expected to reduce costs by a factor of 2.1 by 2027 compared to 2023, from EUR 13.9 million to EUR 6.5 million. In addition, it plans to sell some of its businesses or individual production activities located away from its main operating centres and to use the assets needed for its operations on a long-term lease basis.

This is according to a four-year restructuring plan drawn up by „Auga Group“ and will be discussed by shareholders on 4 December, the group said on the „Nasdaq“ stock exchange.

„Auga Group“ also plans to optimise the activities that remain at the core of its businesses, including crop production, livestock, mushroom cultivation, supply of finished products, divestment of unprofitable land, and the pursuit of conventional production.

„The business plan of each enterprise will be reviewed, and a simpler and less cost-intensive management structure will be introduced. Up to 60 companies will be merged or wound down to reduce management costs. These optimisation and efficiency plans are to be implemented by 2026," said „Auga Group“.

It will also aim to accelerate the recruitment of new businesses, such as the production of biomethane, which is expected to generate gross profits of up to €2.4 million annually, and the use of the Group's own more sustainable feed in livestock farming.

After shareholder approval, the company's Board of Directors will draw up a final restructuring plan, subject to shareholder and creditor approval. It is expected to be finalised and agreed in the first half of 2025.

At the end of June, the company's non-current liabilities amounted to €16.1 million and current liabilities to €23.4 million. Its non-current assets were valued at €113.84 million, current assets at €6.35 million and retained earnings at €1.43 million. 

According to K. Juščiaus, the restructuring was initiated following financial challenges caused by inflation and rising production costs, volatile prices of organic raw materials.

„The main objectives of the company during the restructuring period are to repay its debts to its creditors in the agreed timeframe and as foreseen in the restructuring plan, and to remain a competitive company. The company expects the restructuring to take place over four years, but there is a possibility of completing the restructuring sooner," the draft plan says.  

K. Juščius has said that „Auga Group“ will discontinue the development of innovative agricultural technologies and will engage in normal agricultural activities, as well as lay off employees.

„Auga Group“ announced the restructuring on 10 November.