TIDMCFGP
RNS Number : 0976B
Continental Farmers Group PLC
28 March 2013
CONTINENTAL FARMERS GROUP PLC ('CFG')
Final results for the year ended 31 December 2012
Highlights
Operational Highlights
-- 42% increase in 2012 area under harvest to 26,122 hectares
-- Hectares cropped in Ukraine grew by 49% to 23,677 hectares
-- Investments in technology and people deliver quality and yield improvements
-- Strong prices achieved in cereals in both Poland and Ukraine
-- Ukraine results impacted by domestic sugar and potato oversupply
-- JV with ED&F Man starts well with successful trial plantings of sugar beet under irrigation
-- 3 year Contract Farming JV concluded with Rabofarm to farm 1,200 hectares in Poland
-- Group well placed for 2013 with 19,592 hectares of winter
crops planted and in excellent condition
Financial Highlights
-- EBITDA 9% higher at EUR7.3m (EUR6.7m in 2011)
-- Profit before tax EUR1.9m (EUR3.1m in 2011)
-- Group revenues increase by 23% to EUR30.7m (EUR25.0m in 2011)
-- Gross margin 41% higher at EUR12.1m (EUR8.6m in 2011)
-- Costs impacted by weak Euro and increased rental payments in Ukraine
-- Diluted EPS of 0.95c (2.47c in 2011)
Commenting on the results today, Mark Laird, Chief Executive
said:
"CFG's commercial strategy of precision farming of a mixed
portfolio of crops across different jurisdictions, proved effective
again in 2012, with overall harvest revenues growing by almost 50
per cent on a 42 per cent larger cropped area of 26,122 hectares.
Further significant progress has also been made in developing our
farming platform, particularly in Ukraine, seeing us very well
positioned in our 5 year strategy.
In Poland, margins were more than doubled based on strong
improvements in yields and pricing on all crops. In Ukraine our
expansion targets were exceeded, and the significant investments in
people, equipment and infrastructure delivered efficiency and
quality gains, placing the Group in a strong position for future
expansion. While Gross Profit and EBITDA grew in Ukraine, the EBIT
was impacted by costs related to the rapid pace of expansion and
currency factors as well as weaker prices on potatoes and sugar
beet.
The first year trial of irrigated sugar beet under the Joint
Venture with ED&F Man has been very encouraging with a
significant expansion in this venture planned for 2013. Within
Poland, CFG has entered into a contract farming joint venture with
Rabofarm which will leverage our expertise and infrastructure and
this is expected to deliver further opportunities for the
Group.
Plantings for the 2013 harvest are on target, with winter crops
in Poland and Ukraine currently in excellent health.
It is in the context of these positive results that I wish to
thank all of the local CFG teams in Ukraine and Poland, without
whose efforts none of the above achievements could have been
possible."
The 2012 Preliminary Results announcement is available on the
company website: www.continentalfarmersgroup.com.
About Continental Farmers Group
Continental Farmers Group plc is a diversified agricultural
producer with significant farming operations in northern Poland and
western Ukraine as well as a Joint Venture with ED&F Man in
southern Ukraine. The Group's core business is crop production
comprising oil seed rape, potatoes, wheat, sugar beet and maize.
The Group's crops are sold when harvested or stored in the Group's
storage facilities for later sale to the Ukrainian and Polish
domestic markets, Russia and the European Union.
CFG has been farming in Poland since 1994 and owns circa 1,600
hectares and leases a further 1,100 hectares under long term lease
arrangements. The Polish operations concentrate primarily on
intensive production of arable crops including sugar beet, winter
and spring wheat and oil seed rape ('OSR').
CFG commenced farming operations in Ukraine in 2006 and since
then has leased approximately 33,000 hectares of chernozem (black
soil) farmland by way of land lease in the Lviv region in Western
Ukraine. The availability of farmland at low cost and world class
soil composition, climate and topography of Ukraine make it a
desirable location for commercial farming.
CFG is listed on the AIM market of the London Stock Exchange and
the ESM market of the Irish Stock Exchange.
London Stock Exchange: AIM CFGP (GBX)
Irish Stock Exchange: ESM CT3 (EUR)
Enquiries:
Continental Farmers Group
Chief Financial Officer
Alastair Stewart Tel +44 7917 435 224
Murray Consultants
Joe Murray Tel +353 1 498 0300
Joe Heron Tel + 353 1 498 0300
Mob +353 87 690 9735
Davy Corporate Finance
John Frain Tel +353 1 679 6363
Anthony Farrell Tel +353 1 679 6363
FINAL RESULTS STATEMENT
Overview:
2012 was a year of significant growth and investment for CFG.
Group revenues increased by 23% to EUR31m compared to EUR25m the
previous year. Adjusting for the impact of the high closing 2012
stocks, the equivalent year on year harvest revenues are actually
up 48%. EBITDA was 9% higher at EUR7.3m. Profit before tax
decreased from EUR3.1m to EUR1.9m as the Group continued to invest
in expanding its operations in Poland and Ukraine, with the year
under review being impacted by a number of related once-off costs.
Diluted earnings per share declined to 0.95c from 2.47c partly
reflecting the increase in the ordinary share capital of the Group
during 2011.
Revenues and Margins:
Ukraine Poland Corporate Total
Year Ended 31 December
2012 EUR'000 EUR'000 EUR'000 EUR'000
Turnover 25,933 4,803 - 30,736
Gross Profit 9,818 2,280 - 12,098
EBIT 2,783 2,394 (705) 4,472
Profit after Tax 1,131 2,124 (1,709) 1,546
EBITDA 5,244 2,751 (705) 7,290
Ukraine Poland Corporate Total
Year Ended 31 December
2011 EUR'000 EUR'000 EUR'000 EUR'000
Turnover 20,517 4,517 - 25,034
Gross Profit 7,630 937 - 8,567
EBIT 3,359 1,464 (313) 4,510
Profit after Tax 2,595 1,137 (664) 3,068
EBITDA 5,109 1,883 (313) 6,679
The Polish operations had an excellent year with margins more
than doubling on a 6% increase in turnover. This is the result
of:
-- the 2011 turnover including the sale of significant stocks of
potatoes held over from 2010 (the margin on which was correctly
recorded in 2010), and
-- the 2012 Polish margins being driven up by significant
improvements in yield and pricing on all crops.
A 26% increase in Ukraine turnover to EUR25.9m saw a 29%
increase in gross profit to EUR9.8m, while Ukraine EBIT declined to
EUR2.8m from EUR3.4m. The growth in turnover and gross margins
reflects the increased hectares under crop in 2012 and the strong
yields and pricing on cereals. These were offset by weaker yields
and pricing on potatoes and sugar beet and the impact on costs of
the weak Euro, especially during the first 6 months of 2012.
Ukraine reported turnover does not reflect the full growth of the
2012 harvest as approximately EUR6m of excess OSR and sugar stocks
were held over for sale into 2013. Taking the equivalent year on
year harvest revenues in Ukraine these are up approximately
50%.
The Ukraine EBIT reduction was driven by 3 other key
factors:
-- The investment in additional capital and human resources to
drive the rapid growth in the Ukraine operations. These are
expected to deliver efficiency gains in 2013,
-- A EUR1m p.a. increase in land rentals due to a legislative
change increasing the base land values, upon which minimum rentals
are based, by 70%, and
-- With the majority of costs based in local Hryvnia or US$
equivalents the impact on costs of the weak Euro during 2012 was
significant (Average rate 2012 was 10.3 Hryvnia to the Euro against
11.1 in 2011)
The above swing in the sources of profitability, due to climatic
and market conditions is part of the nature of farming and despite
these negative items, the Group met its internal budget for EBITDA.
The delivery of such strong results in 2012 continues to vindicate
the robustness of the CFG farming and diversified commercial
strategy to grow mixed crops in 2 separate countries which provide
natural hedges against the changing climatic and market conditions.
A clear strategy of forward selling and hedging also provides risk
management to reduce the impact of this volatility. It should be
noted that despite the lower year on year yields on potatoes and
sugar beet the yields achieved are well ahead of the majority of
CFG's Ukrainian peer group.
The Group owns approximately 1,600 hectares of freehold land in
Poland and leases approx. 1,100 hectares with further hectares
under management through the contract farming JV with Rabofarm. In
Western Ukraine, CFG leases over 33,000 hectares with a further
5,000 hectares leased under the JV with ED&F Man in southern
Ukraine. The Group continues to be ahead of its schedule to achieve
the targeted 50,000 hectares of land under harvest by 2015.
Cropped area increased in line with the Group's strategic plan
during 2012 with a 42% rise in cropped hectares to 26,122 hectares.
Ukraine operations grew strongly with a 49% rise in Hectares
harvested to 23,677 hectares. Polish hectares harvested remain
steady at 2,445.
Corporate costs have increased, reflecting the full year costs
of being listed. In addition the first year loss on the ED&F
Man Joint Venture has been included in corporate costs to avoid
this distorting the trading results of the main Ukraine operations
of the Group.
Operations Review:
2012 2011 2010 2009
Cropped Area (Hectares) 26,122 18,369 15,366 13,128
Group Revenue (EUR'000) 30,736 25,034 21,118 12,331
EBITDA (EUR'000) 7,290 6,679 6,341 348
Group Profit / (loss)
after tax (EUR'000) 1,546 3,068 2,577 (1,907)
Yields (tonnes per Ha) Poland Ukraine
2012 2011 2012 2011
Oil Seed Rape 3.8 2.9 3.1 2.8
Winter Wheat 7.8 7.2 6.1 6.4
Spring Wheat 7.8 6.0 4.6 4.1
Potatoes n/a n/a 30.8 32.7
Sugar Beet 68.2 58.3 44.0 54.5
Maize n/a n/a 5.9 6.5
Oil seed rape ('OSR') continues to be a key driver of CFG's
revenues (EUR13.7m from the 2012 harvest compared with EUR7.4m in
2011) accounting for 37% of the harvest revenues. The Group's OSR
margins benefited greatly from both yield gains and strong prices
with Ukraine yields growing from 2.8 to 3.1 tonnes per hectare and
prices averaging EUR426 per tonne. In Poland, yields grew
significantly from 2.9 to 3.8 tonnes per hectare with average
pricing at EUR452 per tonne.
Wheat revenues also delivered significant gains with the 2012
harvest increasing from EUR5.1m to EUR8.0m. The increased hectares
were bolstered by continued strong yields and 25% higher pricing in
both Ukraine and Poland compared to 2011. CFG also achieved
substantial improvements in the quality of wheat produced in
Ukraine with the majority of wheat being of milling quality for the
first time. In particular, CFG produced the first Class 1 milling
wheat to be harvested in the Lviv region for over 20 years. This is
testament to the investment in agronomy and additional harvesting
capacity which allowed the cereals to be harvested efficiently and
at the optimal time.
Maize revenues also benefited from the increased pricing with
Ukraine pricing up 17% year on year. Yields were impacted by the
dry summer conditions, however, this crop represents less than 5%
of the Group's planted hectares.
Sugar beet revenues increased to EUR7.7m, accounting for 21% of
2012 Group harvest revenue. 2012 was a very difficult year for
sugar producers within Ukraine with lower yields, due to the dry
conditions and lower pricing. Due to the bumper sugar beet harvest
in 2011, significant stocks of sugar were held over to 2012 and
consequently pricing has been held back. This has resulted in the
closure of a significant number of the less efficient sugar beet
factories and it is anticipated that the 2013 plantings of sugar
beet will be significantly reduced, bringing the Ukraine sugar
supply position back into equilibrium. Due to wet conditions later
in the year Polish sugar beet yields grew by 17% to 68.2 tonnes per
hectare and given the regulated nature of the EU sugar market the
sugar pricing remained firm. As a consequence Polish sugar revenues
were up 39%.
2012 potato harvest revenues recovered by 25% in Ukraine to
EUR6.2m. This is still, however, not back to long term average
pricing in the table potato market which is still impacted by
consumer expectations of lower pricing from the 2011 harvest.
Processing potatoes have recovered with strong demand for these
varieties and all of the 2012 harvest volumes being contracted with
key customers. The Group is undertaking a comprehensive review of
its potato strategy to focus on quality with sales of potatoes to
the key customers and at the times of year when premium pricing can
be achieved.
In January 2012 CFG entered into a 50/50 joint venture in
southern Ukraine with ED&F Man for the long term production and
supply of sugar beet to ED&F Man's sugar refinery in the
Mykolaiv region. During 2012 trial plantings of sugar beet and
other crops were completed, both with and without irrigation.
Approximately 3,200 hectares were cropped and all of the trials
under irrigation gave excellent results, with beet yields in
particular exceeding expectations. The crops without irrigation
suffered from the drought conditions which hit Eastern Europe in
2012. For 2013 the hectares of sugar beet under irrigation are
expected to grow significantly to approximately 2,500 hectares and
significant investment in irrigation infrastructure is
underway.
Key Statistics
Hectares and Yields: Poland Ukraine
2012 2011 Change 2012 2011 Change
Hectares Harvested
Oil Seed Rape 658 603 9% 9,640 5,216 85%
Winter Wheat 1,301 1,396 (7%) 4,220 3,008 40%
Spring Wheat 81 105 (23%) 2,181 1,408 55%
Potatoes - - - 1,347 1,309 3%
Sugar Beet 405 338 20% 4,950 3,002 65%
Maize - - - 1,185 1,905 (38%)
Other - - - 154 79 95%
------ ------ ------- -------- ------- -------
Total Hectares 2,445 2,442 0% 23,677 15,927 49%
------ ------ ------- -------- ------- -------
Poland Ukraine
2012 2011 Change 2012 2011 Change
Yields (tonnes per hectare)
Oil Seed Rape 3.8 2.9 31% 3.1 2.8 11%
Winter Wheat 7.8 7.2 8% 6.1 6.4 -5%
Spring Wheat 7.8 6.0 30% 4.6 4.1 12%
Potatoes n/a n/a - 30.8 32.7 -6%
Sugar Beet 68.2 58.3 17% 44.0 54.5 -19%
Maize n/a n/a - 5.9 6.5 -9%
Financial Review
Biological Assets
The Group continues to take a conservative position in relation
to the fair value accounting for biological assets.
As at 31 December 2012 the biological assets were valued at
EUR9.1m against EUR5.3 m in 2011. As in prior years, in estimating
the 2012 fair value, we have taken account of the condition of the
growing crops, the market prices for these crops and the costs to
complete and sell these crops.
The year on year increase is driven by three key factors:
-- the increase in area of winter crops planted from 15,052 hectares to 19,635 hectares,
-- the significantly improved year on year condition of these
crops as at 31 December 2012 (reduced expectation of winter damage
and ideal planting conditions in late 2012), and
-- the stronger market and forward prices for OSR and Wheat
combined with a higher proportion of the 2013 crop sold forward at
higher prices.
Cash Flows and Net Debt
Operating Cash flows for 2012 showed a net outflow of funds of
EUR0.1m despite being held back significantly by a EUR10.4m
increase in closing stocks. These primarily related to OSR and
sugar stocks in Ukraine. The OSR shipments were held up due to
delays in railway loading, however, all were shipped and settled in
January 2013. The sugar stocks were held back due to poor local
pricing as noted above and are being sold through in early 2013 as
export opportunities are identified.
These working capital timing issues were funded through EUR6.5m
of temporary local bank facilities in Ukraine. The EUR3m of
additional funding received during 2012 is all related to asset
finance in Ukraine to fund the capital expenditure investments
made.
To date the funds raised on IPO have been used for the funding
of infrastructure development, land lease expansion, EUR1.7m
investment in the ED&F Man Joint Venture as well as repayment
of short term shareholder loans. Group net cash decreased by
EUR5.0m to EUR5.0m, driven mainly by these investments.
Group Net debt increased to EUR19.8m from EUR6.4m, however
EUR6.5m if this increase relates solely to the timing issues around
extra Ukraine stocks financed at the year end. The remainder
reflects EUR8.8m investments in infrastructure and equipment as
well as the EUR1.7m investment to date in the ED&F Man joint
venture.
For 2013 EUR15m of working capital financing has been secured
for the Ukraine operations. These are secured locally against the
Group's Ukrainian assets and growing crops and are at market
interest rates. These facilities are considered sufficient to meet
working capital requirements in Ukraine for the 2013 financial
year.
Outlook
The group has already planted approximately 19,600 hectares of
winter cereals for the 2013 harvest, ahead of its growth strategy
set out at the time of listing. In addition, the group is on track
to significantly increase the hectares of irrigated sugar beet
under the Joint Venture with ED&F Man in southern Ukraine. With
good conditions at the time of planting in autumn 2012 and
widespread protective snow cover throughout the winter our crops in
Poland and Western Ukraine are currently in excellent health. We
remain committed to our agronomy led approach to farming based on a
strategy of precision planting and expect this to continue
delivering through improved yields and better margins.
Within Poland, the Group has also entered into a Joint Venture
to farm 1,200 hectares of land owned by Rabofarm, under a 3 year
profit-sharing, contract farming agreement. There is also further
opportunity for this to be expanded in future years.
Taking account of the land under harvest in the Joint Ventures
with ED&F Man and Rabofarm, CFG is on track to harvest over
32,000 hectares in Ukraine and 3,300 hectares in Poland in
2013.
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2012
2012 2011
EUR'000 EUR'000
Revenue 30,736 25,034
Cost of sales (18,638) (16,467)
--------- ---------
Gross profit 12,098 8,567
Other income 1,696 1,697
Administrative expenses (9,322) (5,754)
--------- ---------
Operating profit 4,472 4,510
Finance income 12 32
Finance costs (2,058) (1,457)
Share of losses of joint venture (500) -
--------- ---------
Profit before taxation 1,926 3,085
Tax expense (380) (17)
--------- ---------
Profit for the year after taxation 1,546 3,068
--------- ---------
Other comprehensive income for the year:
Currency translation differences (902) 3
Total comprehensive income for the year 644 3,071
========= =========
The income statement has been prepared on the basis that all
operations are continuing operations.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 31 DECEMBER 2012
2012 2011
EUR'000 EUR'000
Assets
Non-Current Assets
Goodwill 22,140 22,140
Property, Plant & Equipment 43,737 37,806
Investments in Joint Ventures 1,271 -
-------- --------
67,148 59,946
-------- --------
Current Assets
Inventories 15,422 8,791
Biological Assets 9,089 5,297
Receivables 6,928 10,035
Cash & Cash Equivalents 5,014 10,036
-------- --------
36,453 34,159
-------- --------
Current Liabilities
Trade & Other Payables 5,184 4,977
Borrowings 15,205 6,760
Shareholder Loans 2,529 3,556
Income Tax Liability 345 412
-------- --------
23,263 15,705
-------- --------
Net Current Assets/liabilities 13,190 18,454
-------- --------
Non-Current Liabilities
Borrowings 7,109 6,072
7,109 6,072
-------- --------
Net Assets 73,229 72,328
======== ========
Equity
Share Capital 1,635 1,635
Share Premium 68,795 68,795
Share-based Payment Reserve 257 -
Retain Earnings and Other Reserves 946 302
-------- --------
Equity Attributable to Owners of the Parent 71,633 70,732
-------- --------
Minority Interest 1,596 1,596
-------- --------
Total Equity 73,229 72,328
======== ========
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2012
2012 2011
EUR'000 EUR'000
Cash flows from operating activities
Profit before taxation 1,926 3,085
Finance income (12) (32)
Finance costs 2,058 1,457
Depreciation 2,818 2,169
Share of loss from joint venture 500 -
7,290 6,679
Decrease / (increase) in trade & other receivables 3,107 (5,872)
Increase in inventories (10,423) (4,030)
(Decrease) / increase in trade and other payables (104) 1,848
Net cash outflow from operating activities (130) (1,375)
--------- --------
Tax paid (164) (154)
Cash flows from investing activities
Advancement of loans 9,482 5,540
Fixed asset investments (1,271) (119)
Purchase of property, plant and equipment (8,773) (7,508)
Proceeds from sale of property, plant and equipment 24 -
Net cash flows used in investing activities (538) (2,087)
--------- --------
Cash flows from financing activities
Repayments to shareholders (1,027) (2,376)
Net Equity share issue proceeds - 14,740
Interest paid (2,261) (1,294)
Net cash flows generated by financing activities (3,288) 11,070
--------- --------
Net (decrease) / increase in cash and cash equivalents (4,120) 7,454
Exchange gains and losses (902) 3
Cash and cash equivalents at the beginning of
the year 10,036 2,579
Cash and cash equivalents at the end of the year 5,014 10,036
========= ========
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2012
Share
Based Foreign
Share Share Payment Currency Retained
Capital Premium Reserve Reserve Earnings Total
EUR'000 EUR'000 EUR'000 EUR'000 EUR'000 EUR'000
Balance at 1 January
2011 829 52,069 - (3,815) 1,329 50,412
Profit for the year - - - - 3,068 3,068
Exchange gain on consolidation - - - 3 - 3
Acq'n of non-controlling
interest - - - - (283) (283)
Conversion of preference
shares 118 2,674 - - - 2,792
A Share anti-dilution
share issue 48 (48) - - - -
Proceeds from equity
issue 640 16,073 - - - 16,713
Costs of equity issue. - (1,973) - - - (1,973)
-------- -------- -------- --------- --------- -------
Balance at 31 December
2011 1,635 68,795 - (3,812) 4,114 70,732
Profit for the year - - - - 1,546 1,546
Share-based payment charge - - 257 - - 257
Exchange loss on consolidation - - - (902) - (902)
-------- -------- -------- --------- --------- -------
Balance at 31 December
2012 1,635 68,795 257 (4,714) 5,660 71,633
======== ======== ======== ========= ========= =======
Earnings per Share:
2012 2011
EUR'000 EUR'000
Profit after Tax 1,546 3,068
========= =========
Weighted average number of ordinary shares
in issue (thousands) 163,489 123,988
========= =========
Basic and diluted EPS (Euro cents) 0.95 2.47
Equalised EPS (Euro cents) 0.95 1.88
Basic earnings per share have been calculated on the profit or
loss after taxation for the period and the weighted average number
of ordinary shares. Equalised earnings per share have been
calculated on the profit and loss after taxation for the period and
the number of shares in issue subsequent to the listing of the
company on 28 June 2011. In the opinion of the Directors, these
provide shareholders with more appropriate representation of the
underlying earnings derived from the Group's businesses.
ENDS
This information is provided by RNS
The company news service from the London Stock Exchange
END
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