Trigon Agri Interim Report January - June 2008
Executive Summary
The total revenue and fair value gains for the Group for the reporting period
amounted to EUR 20,132 thousand (EUR 6,375 thousand in first half 2007). The
Group's revenue and other income for the reporting period was in the amount of
EUR 6,704 thousand (EUR 1,469 thousand in first half 2007). The operating profit
for the reporting period amounted to EUR 4,654 thousand (EUR -46 thousand in
first half 2007). Net profit for the reporting period amounted to EUR 4,456
thousand (EUR -85 thousand in first half 2007). The accounting policies used by
the Group involve the immediate expensing of all field improvement works (as
opposed to capitalisation). Such a conservative approach has lowered the result
of the Group for the reporting period but is going to have a positive effect on
future reporting statements.
1H 2008 was a period of significant developments for A/S Trigon Agri. The Group
continued its active expansion strategy in accordance with the targets
previously communicated to its shareholders and is currently in the process of
harvesting over 69,000 hectares of land in its four cereals and two dairy
clusters of operation. The total land area taken under control by the Group as
of the date of this report stands at 144,000 hectares, out of which close to
140,000 is located in the Black Earth regions of Ukraine and Russia and is
earmarked for cereals production, the rest being related to the dairy clusters
outside of St Petersburg and in Estonia. The Group is well on the way with the
required preparatory works in order to take the total harvested area to 200,000
hectares in 2009.
In parallel to land expansion, the Group has been moving forward as planned with
the restructuring of the acquired agricultural operations and with showing the
targeted improvements in yields. In the Harkov cluster in Ukraine, where the
Group is operating for the second full year and where all fields were prepared
and seeded by the Group itself, the productivity results are expected to come in
better than targeted in A/S Trigon Agri's so-called ‘ramp-up' schedule for a
typical second year of operations. In the other three clusters the Group took
land under control over winter and spring 2007/2008 and thereby the overwhelming
majority of the required field preparation and seeding (including seed
selection) was carried out by former land operators. Nevertheless, the expected
results in these clusters look better than expected by the management but given
that the Group could not control the quality of the field-works and seeding of
the former owners, the results, as announced previously, will stay significantly
lower than what could have been achieved had the Group carried out all the
field-works and seeding itself. Overall results show clearly how dramatic the
yield improvements can be on fields fully prepared by the Group versus fields
prepared by local farmers.
The weather conditions for the production clusters of the Group have overall
been favourable without any weather extremes such as droughts or flooding.
However, the results for the Harkov cluster of the Group have been lowered by
the strong rainfalls at the end of the harvest period, which has resulted in
higher than expected harvesting losses and lower wheat quality. Nevertheless, in
addition to exceeding its overall ‘ramp-up' schedule targets, the Group's best
wheat fields in Harkov to date have achieved productivities as high as 8.78
tonnes per hectare and barley fields as high as 6.61 tonnes per hectare. This
gives further evidence of the high quality of soil in the Black Earth region and
gives management continued strong confidence in its ability to achieve or exceed
its stated yield improvement targets.
As an important part of its strategy the Group has continued aggressive
expansion of storage capacity. The acquisition of three rail-road connected
elevators in Ukraine added a total of 272,200 tonnes of storage capacity and
took the current storage capacity of the Group to 322,200 tonnes in Ukraine. An
ongoing current investment program for add-on expansion of the current storage
sites will further expand the existing storage facilities to a total of
422,000-472,000 tonnes, depending on the final technical solutions to be chosen
for the technical construction projects. Meanwhile, the Group has secured
sufficient storage for its produce in Russia through entering into storage
rental agreements and is actively negotiating to acquire further elevator
capacity also for its Russian production clusters.
In parallel to storage capacity acquisition, the Group took one step further in
its strategic goal of becoming an integrated soft commodities producer, storage
provider and trader, with the signing of a joint venture agreement with Ramburs
Group on April 7, 2008. Ramburs Group is a leading independent trading company
in Ukraine having international grain trading experience dating back to 1995 and
has shifted all of its grain trading activities into the joint venture. The
implementation of the joint venture operations are currently proceeding as
planned. The 2008/2009 trading year as the first year of joint operations will
be managed conservatively with limited trading activity. The business plan of
the joint venture will be reviewed prior to its second year of operations in
order to take a decision on potential further expansion of the trading
activities. The joint venture is 51% controlled by A/S Trigon Agri.
In the dairy farming clusters of the Group in Estonia and North-Western Russia,
the previously announced investments have been proceeding as planned. Following
the completion of scheduled investments in Estonia in year-end 2007, the Group
completed the construction of the first phase of the large-scale dairy unit
close to St Petersburg in north-western Russia with a cow-shed for 600 milking
cows where milk production commenced in April 2008. The current site will be
further expanded to 1,080 milking cows by the end of 2008 and to 1,620 by the
end of 2009. Preparations are ongoing for the start of dairy construction
projects in the Group's southern production clusters in the Black Earth region
in order to launch dairy farming activities to complement the cereals
operations.
On the financing side, despite the turbulent market conditions, the Group
managed to successfully carry out a EUR 105 million equity capital raising on
May 6, 2008. The issue was subscribed by over 60 investors, which included
internationally well recognised institutional investors and family offices. The
capital raising was a significant further step for the Group and provided the
required financial platform in order to continue realising the Group's expansion
targets.
For further information please contact:
Mr. Ülo Adamson, Chairman of the Board of Directors of A/S Trigon Agri
Tel: +372 66 79 200
E-mail: mail@trigonagri.com
About Trigon Agri A/S
Trigon Agri A/S is an integrated leading cereal and dairy commodities company
with operations in Ukraine, Russia and Estonia. Trigon Agri A/S shares are
traded at the First North stock exchange in Stockholm, an alternative market
place of the OMX Nordic Exchange. Trigon Agri A/S is managed under an advisory
agreement by AS Trigon Capital, a leading Central and Eastern European
investment and corporate advisory firm with more than USD 1 billion of
discretionary assets under management.
