Trigon Agri 2011 Guidance and Five Year Outlook
Guidance 2011
• Despite historically severe weather (the worst in 130 years) which impacted our harvest negatively, Trigon Agri managed to show an EBITDA positive result for 2010 (EUR 1.4 million positive in 2010 vs. EUR 7.8 million loss in 2009).
• Trigon Agri’s autumn seeding for the 2011 harvest went according to plan. There has been no significant winter damage affecting the seeded areas to date (total of 47 thousand hectares under winter crops currently compared to winter crop area of 37 thousand hectares in 2009). Total targeted seeding area in 2011 (including spring crops) is 86 thousand hectares (85 thousand hectares in 2009).
• Trigon Agri continues to focus on its soil improvement work, cost reductions, and operating efficiency.
• Local farm-gate prices in Russia and Ukraine for Trigon Agri’s main crops have continued to rise and would seem to be solidly underpinned by global and regional developments even if the Russian export ban and the Ukrainian export quotas on some commodities are prolonged.
• Assuming that weather conditions are closer to normal*, Trigon Agri’s 2011 harvest is likely to be very much higher than in 2010. Consequently, the financial result would be dramatically improved compared to 2010.
Five Year Outlook (2011 – 2015)
• By 2015, Trigon Agri targets to increase its harvested area to 300,000 hectares, all of which would be fully owned or leased by the company on the basis of agreements registered in the local land cadastres.
• By 2015, Trigon Agri targets to increase its elevator storage capacity to 662,000 tonnes, from the current level of 322,000 tonnes.
• Assuming stable prices and historically average weather conditions the expansion outlined above could be carried out with internally generated cash flow and limited bank borrowings, and with no need to raise additional equity capital. Given the reality of unpredictable weather and volatile soft commodity prices Trigon Agri will manage its expansion with care and will if necessary adjust its targets to comply with prevailing realities.
• In parallel with its expansion on the production side of the business, Trigon Agri will continue to develop its trading operations with the aim of becoming a leading regional aggregator of soft commodities in Russia and Ukraine, selling its crops either domestically or internationally depending on profit optimization calculations.
• Trigon Agri will look to release capital and hidden value from its milk production operations by divesting or spinning off these assets, considered as non-core.
• Subject to achieving its long-term average yield targets (listed in the attached appendices) and assuming currently prevailing soft commodity prices, Trigon Agri would expect to be able to collect a total gross harvest in 2015 of 1 million tonnes which would give the company total sales of its own crop in 2015 of EUR 210 million.
• Assuming today’s cost of inputs consolidated EBITDA in 2015 would be expected to amount to EUR 110 million, i.e. an EBITDA margin of 52%, for Trigon Agri’s cereals production operations.
• The company also sees growth potential from its core trading and elevator operations.
Joakim Helenius, Chairman of the Board comments. ”Assuming that weather conditions in our farming regions return to more normal trends, Trigon Agri’s 2011 harvest is likely to be significantly higher compared to 2010 which in turn would equate into dramatically improved financial results. Long-term Trigon Agri is committed to managing its expansion with care. Given the right circumstances, however, we believe that we face a historic opportunity to grow into one of the largest and most efficient grain and oilseeds producers in the world”.
* Trigon Agri define normal weather conditions as the average result measured over a ten year period.
Appendix to Trigon Agri Outlook
Investor enquiries:
Mr. Ülo Adamson, President of Trigon Agri A/S
Tel: +372 66 79200
E-mail: [email protected]
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 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.