Highlights of 3Q 2012
Total revenue, other income, fair value adjustments and net changes in inventory
for 9m 2012 amounted to EUR 59,909 thousand (EUR 57,055 thousand in 9m 2011).
Cost of purchased goods for trading purposes amounted to EUR 11,308 thousand in
9m 2012 (EUR 7,437 thousand in 9m 2011).
Total operating expenses amounted to EUR 42,900 thousand in 9m 2012 (EUR 36,651
thousand in 9m 2011).
EBITDA from continuing operations in 9m 2012 amounted to EUR 11,629 thousand
(EUR 12,967 thousand in 9m 2011).
EBITDA in 9m 2012 including clusters to be discontinued amounted to EUR 7,435
thousand (EUR 12,967 thousand in 9m 2011).
The Net profit from continuing operations of the Group in 9m 2012 amounted to
profit of EUR 1,036 thousand (profit of EUR 4,303 thousand in 9m 2011).
The Net profit/loss of the Group in 9m 2012 including clusters to be
discontinued amounted to loss of EUR 6,695 thousand (profit of EUR 4,303
thousand in 9m 2011).
The consolidated assets of the Group as of September 30, 2012 amounted to EUR
198,830 thousand (EUR 194,360 thousand at December 31, 2011).
Trigon Agri’s Founder and Chairman of the Board, Joakim Helenius, Comments:
2012 has been a challenging year for Trigon Agri. The Group was hard hit by the
severe drought, which has affected especially the Southern regions of Russia and
Ukraine. In spite of the very challenging environment Trigon Agri has continued
to work toward its declared strategic aim of becoming a sustainably
significantly profitable agricultural producer.
Trigon Agri consist of three business units: dairy production; Ukrainian cereals
production including storage and trading; and Russia cereals production. Two out
of these three business units have broken through into solid and sustainable
profitability already a number of years ago. The challenge has been the Russian
cereals production. Therefore the management of Trigon Agri has worked for a
long time on ways of addressing this challenge in a constructive way. For over a
year this work has focused on effecting a land swap transaction, which today
have been communicated in a separate press release, that when completed will
provide Trigon Agri’s Russian cereals production business unit with a platform,
which has the potential to deliver long-term sustainable profits.
Trigon Agri has today announced that it has carried out a land-swap transaction
in Russia involving the acquisition of a new 71 thousand hectares production
cluster in Rostov Oblast in exchange for swapping out of its two current Russian
production clusters in Samara and Stavropol as well as a cash contribution. The
new production cluster acquired in Rostov Oblast has exceptional characteristics
due to four strong competitive advantages: location near the main export ports,
regionally speaking good historical rainfall, contiguous layout of the land and
last but certainly not least potentially very significant irrigation potential.
These four factors together allow the new Rostov production cluster to offer a
much higher potential to show consistent profits than the land areas Trigon Agri
has swapped out of.
The newly acquired Rostov production cluster is located in the neighbourhood of
the Novorossiysk port. Novorossiysk port is the main export hub for grain from
Russia. The proximity to this port allows for higher than average prices on the
sale of grain, as domestic farm-gate grain prices in Russia tend to fall as the
distance to the main ports increases. The very long distance to the Black Sea
ports from the Samara region proved to be a major handicap for Trigon Agri’s
operations in that region.
The ten-year average rainfall of the new Rostov cluster production areas stands
at 485 millimeters per year, compared to 374 millimeters per year in the
Stavropol production cluster.
The land area of the acquired production cluster is laid out as two large
contiguous blocks of around 20 by 20 kilometres each. The contiguous nature of
the fields allows for the land to be farmed at low costs per hectare, as field
equipment does not need to travel long distances to move from one field to
another, and can therefore be deployed in the most efficient way possible during
the seeding, spraying and harvesting windows. This results in a low cost per
tonne produced and allows for high profit margins everything else being equal.
The land acquired in the new production cluster is connected to an irrigation
canal system that is unique in the region. This system provides the option to
develop irrigated farming in the area. Applying irrigated farming could
potentially more than double longer term average production yields achieved for
each hectare under production as well as removing most of the weather related
risk.
In addition to the four characteristics described above, which together provide
the basis for potentially good profitability going forwards, the production
cluster acquired also has farm-based grain storage warehouses with a total
storage capacity of 35,000 tonnes of grains. Having the security of storage is
vital for successful farming operations in Russia, as there is a general lack of
storage capacity in the country. Local farmers without their own storage are
often forced to sell their produce into a cyclically weak pricing environment
during the harvesting season.
The transaction is structured as a share exchange deal whereby Trigon Agri
acquires 100% ownership of a legal entity having a free-hold title to roughly 71
thousand hectares of farm-land in the Rostov Oblast. The payment for the shares
of the acquired entity will be effected in the form of shares in the Group’s two
existing production clusters in Samara (45 thousand hectares of farm-land in
ownership) and Stavropol (33 thousand hectares of farm-land in ownership) and a
monetary payment of EUR 15.1 million. As part of the transaction the seller of
the Rostov assets will also take over EUR 6.4 million of bank borrowings of the
Stavropol cluster, while the Rostov land holdings will be passed on to Trigon
Agri as free of any bank debt. Out of the monetary payment of EUR 15.1 million,
Trigon Agri has paid EUR 6 million in the form of prepayment as of end of Q3
2012. In accordance with the signed acquisition agreement, the remaining EUR 9.1
million will be paid in Q4 2013 in the form of a delayed cash payment (no
interest to be accrued on the delayed amount). As Trigon Agri is free to take on
loans against the new Rostov cluster and the swap removes EUR 6.4 million of
bank debt from Trigon Agri’s balance sheet (and Trigon Agri saves about EUR 1
million in interest payments which would otherwise have accrued on the Stavropol
loan over 2013) the transaction will not significantly affect Trigon Agri’s
liquidity position. Accordingly the need to effect payment for the swap partly
through issuing new shares, which has been mentioned in previous stock exchange
releases, is no longer necessary and will not be carried out.
As part of the transaction Trigon Agri will take over 17 thousand hectares of
2013 winter wheat crop seeded in the Rostov cluster under the supervision of
Trigon Agri’s agronomy team. The fieldworks carried out to date in the Stavropol
and Samara clusters will pass on to the sellers of the Rostov cluster. No field
equipment is part of the agreed land-swap transaction.
The Samara and Stavropol assets contributed by Trigon Agri into the swap
transaction had an acquisition cost value in Trigon Agri’s balance sheet of EUR
29.2 million (net of EUR 6.4 million of borrowings). The 9m 2012 EBITDA of the
Samara and Stavropol operations showed a negative result of EUR 4.2 million.
The transaction is subject to the approval of the Russian Competition Authority
currently expected in December 2012. The divestment of the Samara and Stavropol
clusters is expected to result in one-off income for Trigon Agri in the size of
around EUR 20 million in Q4 2012. The transaction will lead to a significant net
profit for the full year 2012 which in turn will lead to a substantial increase
in year-end book value of equity.
Telephone conference details
A telephone conference will be held today, Wednesday 28 November, at 10.00 CET.
Program: Joakim Helenius, Chairman of the Board, and Ülo Adamson, President and
CEO, will present and comment upon the results. There will also be an
opportunity to ask questions.
To participate in the telephone conference, please call one of the following
numbers:
UK: + 44 (0) 203 043 2436
SE: +46 (0)8 505 598 53
FI: +358 (0) 923 101 527
NO: +47 215 111 88
DK: +45 369 541 87
CH: +41 (0) 445 806 524
US: +1 866 458 4087
Trigon Agri 3Q 2012 Interim
Report (http://mb.cision.com/Public/515/9341379/8dac1f76546d2160.pdf)
The presentation material will be available under the “Investor Relations”
section at www.trigonagri.com before the telephone conference starts.
Investor enquiries:
Mr. Ülo Adamson, President and CEO of Trigon Agri A/S, Tel: +372 66 79200, E
-mail: mail@trigonagri.com
About Trigon Agri
Trigon Agri is a leading integrated soft commodities production, storage and
trading company with operations in Ukraine, Russia and Estonia. Trigon Agri’s
shares are traded on the main market of NASDAQ OMX Stockholm. Trigon Agri is
managed under a management agreement by Trigon Capital, a leading Central and
Eastern European operational management firm with around USD 1 billion of assets
under management.
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