Agrogeneration releases its financial report for 1H 2016

20 October 2016

General financial standing of the company is below average, as debt burden remains rather large. On positive side are expectations regarding slightly better vs. previous season yields and sufficiency of short-term liquidity to provide for normal operating activity.

Key performance figures
EUR k 1H 2016 1H 2015
Sales 3 828 3 082
EBITDA 5 801 8 364
Net Profit 233 -5 410

Revenues of Agrogeneration in 1H 2016 made EUR 3.8M (main part of revenues is generated in H2 of any given year), so that EBITDA of EUR 5.8M was composed mainly of gain from biological assets revaluation. Total gain from revaluation for current seasons harvest as of 30.06.16 made EUR 12.8M.

Basing on provided by the company data regarding factual and estimated yields for main crops and current market prices (bearing in mind some portion of crops was sold on forward basis), we estimate that total revenues of Agrogeneration in new season will make about EUR 60-65M, potentially slightly higher than in previous year (EUR 60M). Breakdowns of sown area and factual/estimated yields are as follows:

2016 area, k ha 2016 yield, t/ha 2015 area, k ha 2015 yield, t/ha
Wheat 36 478 4.4 45 621 4.1
Barley 10 954 4.3 10 714 4.2
Rapeseeds 4 876 2.0 9 000 2.6
Pea 10 520 3.1 8 280 2.1
Sunflower 29 988 2.5 18 895 2.6
Corn 5 437 7.0 5 305 5.5
Soybeans 8 354 1.8 7 768 1.7

In general yields of Agrogeneration have been close to average as for Ukraine level, one should note slight growth of wheat yield vs. last season, good peas and sunflower seeds yields. On the other side increase of sunflower seeds share up to more than 25% of total sown area is not considered as good practice in long-term perspective, though can help support profitability in short-term. Basing on factual costs as of 30.06.16 data and bearing in mind high administrative expenses of the company on the annual level of EUR 8-10M, which is clear disadvantage of the company, we estimate that total EBITDA of the company in current season will be about EUR 15M (EBITDA margin about 20%), which means that main part of profits is already reflected by the company in its financials (EUR 12.8M gain from biological assets revaluation).

Balance sheet structure
EUR k 30.06.16 30.06.15
Total Assets 147 802 141 361
Fixed Assets 80 051 79 662
Current Assets 67 751 61 699
Inventory 55 549 51 410
Equity 67 077 59 778
Debt 51 581 51 801
Payables 12 638 14 073
Advances received 7 182 6 984

Balance sheet structure of Agrogeneration remains mediocre Equity of EUR 67.1M is not sufficient to cover fixed assets (which we see as certain measure of financial health for non-diversified and not vertically integrated agri-company), moreover fixed assets themselves (EUR 80.0M) contain goodwill in amount of USD 37M. Operating activity of the company is fully financed by bank loans, open credit provided by suppliers and prepayment from buyers. As a result we see rather low margin of safety in business operations and vulnerability of the company to negative market/weather in the future. On positive side is sufficiency of funds for financing of operations in short-term perspective.

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