Agromino A/S: 9m 2017 Interim Financial Report
Agromino 9m 2017 interim reportThe 9m 2017 Interim Financial Report has been made public at 08:00 CET on 30 November 2017.
• Overall the business turned round from a net loss of EUR 23.3 million in 9m 2016 to a net profit of EUR 6.6 million for 9m 2017
• Disposal of non-core part of elevator business for EUR 1.1 million, resulting in a profit of EUR 0.7 million included in 9m 2017
• Lower financial costs by EUR 4.2 million
• Share of profit EUR 0.8 million from investments in shares of TDFE against a loss of EUR 1.6 million in 9m 2016, note that this is a non-cash item as dividends are not paid at present
• No loss from discontinued operations for 9m 2017 against a loss of EUR 23.6 million in 9m 2016
• The bridge loan from a group of investors fully repaid in September
• 9m 2017 EBITDA undermined by reduced summer crop yields, higher costs, plus a large write-off
• Increased direct expenses from applying higher priced imported fertilizers, and a rise in land rentals
• Reduced legal and consulting fees
• We have taken the conservative approach and written down the doubtful prepayment for fertilizers in amount of EUR 1.4 million for 9m 2017, court cases are ongoing
• 2018 winter crops in reasonable condition
• Autumn 2017 very dry across all regions until October 25th, resulting late germination of wheat sown after summer crops
• 5,972 hectares Oilseed Rape established
• Cultivations for Spring sown crops on target
As predicted in the first half report the weather conditions have had the expected negative effect on our financial result for 2017. Our winter sown crops and spring peas, both which are harvested during July have had for the year very reasonable results. The later crops of soya, maize, and sunflower, crops which must grow through August, all have had yields reduced by the prolonged drought that started in late July and was only really relieved by a rainfall period in the last week of October. In common with much of Central, East, and South East Ukraine particularly affected have been Soya and Maize, with Sunflower reduced but by not such a degree.
On a positive note, we achieved our targeted area of winter wheat sowing and have some strong crops sown following oilseed rape and peas. The crops are sown after Soya and Sunflower received sufficient rainfall towards the end of October and although not so well developed are now 100% germinated at the 3 leaf stage. The oilseed rape crop is for the most part well established and is ready to face the winter conditions.
The performance of our Russian dairy business is steadily rising, as fertility and sound basic husbandry improve. Dramatic changes do not happen overnight in dairy farming, but we hope to see the improvements really start to show a return in the Spring of 2018. The change to three times per day milking is a very positive development and a real statement of intent from the management team.
Although the 2017 operational result will be below both our earlier expectations and the businesses real potential, when you take into consideration that we are still in the restructuring stage the overall position is definitely a dramatic improvement from the past.
The net profit at the 9 month stage is EUR 6.6m compared with a loss of EUR 23m at the same point in time in 2016.
There are several key factors that have influenced this result which are explained in more detail in this report. The result is undermined by the reduced summer crop yield, but that is a combined risk of farming and climate, our challenge as always is to mitigate to as much extent as possible the effect that the climate has on our yields.
Financial positives are lower interest costs a direct result of the Bond for Equity swap at the end of 2016, a profit on the sale of a non- core elevator asset, no losses from discontinued operations to date, reduced legal and consulting costs, and a positive contribution from the TDFE dairy business.
Financial negatives include the write-down of undelivered fertilizer; here we felt it prudent to take a conservative approach. Our increased direct cost expenses are as a result of a combination of the imported replacement fertilizer being more expensive and rises in the rental cost of our land bank.
Cereal and Oilseeds prices in Ukraine have broadly followed the overall commodity market trends. Compared to the levels a year ago, the EXW prices in dollar terms have risen +17% for wheat, slightly up for corn +4%, while oilseeds have remained at the same level. It should be noted though that the Euro exchange rate is now 11% weaker than it was around a year ago against the Euro which we report in.
In parallel with investment in replacement machinery we continue to look to improving yields and reducing costs through our Controlled Traffic Farming project. We are mitigating risks where possible and have already taken delivery of our fertilizer for 2018, having revised our purchasing strategy. We are assessing carefully various initiatives to optimize costs and will not be shy of making change. Finally, most importantly we are ensuring all operations in the field are of a high standard with no compromise on quality that can reduce yield, as profitable farming will always rely on a big heap of grain to sell.
Telephone conference details
A telephone conference will be held today, on 30 November, 2017 at 10:00 CET.
Simon Boughton, CEO and Konstantin Kotivnenko, Executive Board member, 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:
DK: + 453 544 5575
FI: + 358 981 710 492
UK: + 442 030 089 807
NO: + 472 350 0254
SE: + 468 566 426 62
Mr. Simon Boughton, CEO of Agromino A/S
Tel: +372 6191 500, e-mail: email@example.com
We are farmers and agribusiness managers, with operations in Ukraine, Russia and Estonia. Agromino A/S shares are traded on the main market of Nasdaq Stockholm.
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This information is information that Agromino A/S is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out above, at 08:00 CET on 30 November 2017.