Interim Results

RNS Number : 3254Y

Agriterra Ltd

29 February 2012

 



Agriterra Ltd / Ticker: AGTA / Index: AIM / Sector: Agriculture

29 February 2012

Agriterra Ltd ('Agriterra' or 'the Group')

Interim Results

Agriterra Ltd, the AIM listed pan-African agricultural company, announces its results for the six months ended 30 November 2011.

CHAIRMAN'S STATEMENT

Agriterra continues to successfully build itself into a multi-commodity African focussed agricultural business and now has four divisions.  In Mozambique, the Group is expanding its cattle ranching, feedlot and abattoir operations, and continues to build on its maize buying and processing businesses, which this year reported a record buying season.  In Sierra Leone, the Group has widened its commodity focus and now controls a growing cocoa sales, trading and out-growers operation.  In addition, the Group is in negotiations to acquire land for a cocoa plantation.  Separately, the Group has entered the palm oil sector following the acquisition of 45,000 hectares of land in Pujehun District.

In Mozambique, the Board continues to focus on building its 'field to fork' beef business and has made excellent progress on all fronts.  Cattle numbers at the Mavonde and Dombe ranches are growing rapidly both through organic growth and external purchasing and are well on track for reaching the target of 10,000 head by 2015.  The dam at Mavonde is nearing completion and when complete will increase the per hectare head capacity from 1.5 to 7 animals per hectare.  The Vanduzi feedlot is now operational and has a capacity of approximately 2,000 head, with a rolling throughput capacity of approximately 650 head per month.  The abattoir is due to open in the second half of 2012 and with the continued strong demand for beef in the region, I believe we have the foundations for a significant and highly profitable southern African beef business.

As mentioned above, due to the excellent harvest in Mozambique, we had an excellent buying season at our maize processing and trading business, with 34,000 tonnes of maize purchased through the out-grower programme, a 9,000 tonne increase on the comparable period in 2010.  Commensurate with a strong harvest, the demand for processed meal in the first half of the year was, as envisaged, curtailed and therefore to ensure a positive pricing dynamic, maize stocks were retained in storage in anticipation of a stronger second half.  Sales since the period end have accelerated, vindicating our strategy.  The Group will continue to monitor its stock levels and pricing structure as early indications suggest that current strong demand may continue through the second half of this year and into next year.

The performance of Tropical Farms Limited ('TFL'), our cocoa trading and processing business, is highly encouraging with the newly acquired company already contributing US$1.4 million to revenues.  We have invested significant amounts expanding our buying and processing points and increasing our network of out-growers.  Our focus on traceability and sustainable farming is proving popular with buyers and the Board is positive on the forecast pricing environment for this type of cocoa and remain confident that business will continue to grow.  In addition, with our knowledge of the business and locale, we are negotiating to acquire our own plantations which we believe will ensure we achieve our objective of being one of Sierra Leone's major traceable and sustainable producers.

Financial Results

The diversification strategy is working well with contributions now being achieved from three revenue generating businesses.  For the period, the Group is reporting a pre-tax loss on continuing activities of US$3.5 million (2011: pre-tax profit of US$0.1 million) on turnover of US$5.3 million (2011: US$5.3 million).  The reduction in profit is primarily due to our retention of stock in anticipation of a strong second half in response to the excellent harvest in Mozambique, as well as increased investment in the beef ranching operations and their associated costs.  Cash balances are currently US$11.4 million, substantially increased from the year end balance as a result of the placing of 320,328,016 new ordinary shares of 0.1 pence each in the Company at a price of 3 pence per placing share, raising US$15 million before expenses.

Outlook

We are operating in a fast growing sector and the demand for quality investment grade businesses in Africa is growing, something that will benefit us going forward.  I remain extremely positive about our business and its growth potential.  We now have three revenue centres and are expanding across all our divisions.  The demand profile for the commodities that we operate is positive and with our platform established in both Mozambique and Sierra Leone, we are in an excellent position to manage growth.   Importantly we have an experienced team of people who are highly qualified in international agricultural operations so I am also further encouraged that under their stewardship we can achieve our growth targets. 

Finally, I would also like to point out that we retain, as a legacy asset, a significant interest in the South Omo block in Ethiopia into which London listed Tullow Oil plc farmed into together with Africa Oil Corp.  Should a discovery be made on the block, then Agriterra's 20% interest in South Omo could prove to be significant for the Company's shareholders and we look forward to future announcements regarding the South Omo concession.

We continue to negotiate as to compensation from Total and the Government of South Sudan with regards to the former block Ba in South Sudan.

Phil Edmonds

Chairman

29 February 2012

OPERATIONS REVIEW

Agriterra currently has four agricultural divisions:

·    Mozbife Limitada ('Mozbife') which conducts cattle ranching, feedlot and abattoir operations

·    Desenvolvimento E Comercialização Agricola Limitada ('DECA') and Compagri Limitada ('Compagri') which operate maize farming and processing businesses

·    Tropical Farms Limited ('TFL') which manages the Group's cocoa sales, trading and farming activities

·    Red Bunch Ventures (SL) Limited which houses Agriterra's palm oil operations

Beef Operations

The period under review has been transformational for Mozbife, as it implements its aggressive expansion strategy across the 1,000 hectare Mavonde Stud Ranch, the 15,000 hectare Dombe Ranch, the Vanduzi Feedlot and the 4,000 head per month capacity Chimoio Abattoir which is under construction, in order to build a vertically integrated "field to fork" beef business.  The total Mozambique herd size now stands at over 3,000 head, the increase being achieved through successful breeding at the Mozbife's ranches and importing prime Beefmaster stock from South Africa.  The rapid ramp up in herd size across both Mavonde and Dombe ensures that Mozbife remains on target to have a total herd of 5,000 head by the end of 2012 and 10,000 by 2015.

The Mavonde Ranch

The 1,000 hectare Mavonde Stud Ranch continues to expand both in terms of cleared land and herd size.  The current herd size exceeds 700 Beefmaster cattle, which are prized for their top weight gaining ability and adaptability to hot climates.  A further 400 Beefmaster cows have been ordered from South Africa.  As a high quality animal, pedigree Beefmaster carcasses from Mavonde have commanded a high sale price, with average sales in the region of US$1,100.

In addition to rapidly increasing Mozbife's breeding herd, significant steps have been made to increase the capacity of Mavonde to ensure the continued expansion of the stud ranch.  The construction of a 48 billion litre dam is nearing completion with capacity to irrigate in excess of 4,000 hectares and provide 132kV of hydroelectric power for the irrigation pumps.  With full irrigation, the head to hectare ratio at Mavonde will be increased from 1.5 to 7 head per hectare.  Furthermore, negotiations are underway to acquire additional land to enlarge the Mavonde ranch to 3,000 hectares. 

The Dombe Ranch

The 15,000 hectare Dombe Ranch now has in the region of 1,400 head.  The herd is principally local and F1 commercial cattle, such as Brahman, to be augmented as part of a cross-breeding programme with Beefmaster cattle to create a bloodline with good meat yields and high disease resistance.  Investment during the period has focussed on infrastructure and land clearance, including the construction of paddocks, improving road access, erecting 40km of fencing, and the construction of staff head-quarters and accommodation.  Furthermore, seven boreholes have been drilled and fitted with pumps, tanks and drinking troughs, with an additional seven planned.  Holes are also being drilled for the local community to provide clean drinking water for the local residents and their livestock.  A lease on the land, known as a DUAT, granted by the Mozambican Government, runs until 2061.

The Vanduzi Feedlot

The Vanduzi Feedlot has a 12 pen line with rolling capacity of approximately 2,000 head every three months.  An additional six pen line is under construction.  Sales have reached over 200 carcasses per month and slaughter dress out weight percentages have been between 53% and 55% over the period, with an average price of U$835 per carcass.  1,050 hectares of land for pasture and production of feed for the feeding pens has been secured following the recent purchase of an adjoining 350 hectare farm.  Importantly, Mozbife is ramping up its local buying of cattle to increase the through put at the feedlot and awareness is building amongst the local community. 

The Vanduzi Feedlot has good synergies with other companies in the Group, such as using bran, the by-product from the nearby DECA maize processing facility, as a feed supplement.

The Chimoio Abattoir

Construction of the abattoir and office building at Chimoio is complete.  Mozbife is targeting a 4,000 head per month processing rate, supplemented by native animals from the local community, including goats.  The internal processing lines have been ordered and are due to be shipped in March 2012 with operations due to commence in August 2012.  There are also plans to open a number of butchers shops to further increase the margins on the beef operations and fulfil the Group's strategy of becoming a 'field to fork' producer.

Maize Processing & Farming

The Group's maize buying and processing operations are centred on the 40,000 tonne capacity DECA facility and the 16,000 tonne capacity Compagri facility, located in Chimoio in central Mozambique and Tete in north-west Mozambique respectively.  The period under review has seen another record buying season at DECA and Compagri, with 34,000 tonnes of maize purchased through the out grower programme; a 9,000 tonne increase on the comparable period in 2010.

Beginning the period with a strong maize stock pile will enable the Group to manage the processing and sales of the product in-line with favourable pricing environments, ensuring the maximum price is commanded for the project and should subsequently translate into significantly higher turnover moving forward. 

Cocoa Sales & Trading

During the period, the Group acquired Sierra Leone based TFL, enabling the Group to further diversify in terms of product and geography.  TFL has provided the Group with a platform from which to expand into cocoa production by making use of TFL's regional expertise and established buying operations in West Africa. 

Since TFL's acquisition in July 2011, focus has centred on the expansion of TFL's buying infrastructure, through a rapid increase in buying points from four to 12 within six months, and the establishment of administrative and processing facilities to facilitate the development of an end to end logistics chain.  TFL's buying register has also increased to approximately 3,500 farmers across the country as it remains focussed on one of the leading in-country traders of sustainable and traceable cocoa with 40 buying points by the end of 2012.  With an increased network and strengthened in-country relationships, the Board envisages that TFL will expand its commodity reach to include coffee and palm oil. 

As part of its expansion plans, both in terms of critical mass and commodity, TFL is in negotiations to secure a 15-acre site in Sierra Leone's New Airport Development Zone in Freetown in order to build a state-of-the-art collateral management facility.  This will be TFL's main hub servicing both Freetown and the international markets for all commodities that TFL is involved.  In addition, it will have sufficient capacity to handle produce from the planned plantations TFL intends to invest.  TFL has also been granted a 50 year lease over a five acre site in Kenema, where it intends to construct a processing and management facility to dry and process cocoa beans ready for export.  It will also house administrative and buying offices as well as vehicle maintenance facilities.

TFL's reputation and business profile is building rapidly through relationships with farmers and out-grower schemes.  TFL continues to implement initiatives, including modern farm management techniques and farmer incentive schemes, which have proved extremely successful in Agriterra's maize production and process facilities in Mozambique.  The Board is confident that similar results can be achieved with cocoa production in Sierra Leone and the wider region.

Palm Oil Operations

Building on the Group's growing range of agricultural commodities, the Company acquired control of a lease of approximately 45,000 hectares of brownfield agricultural land in an area suitable for palm oil production in Sierra Leone post period end.

The 45,000 hectares of brownfield agricultural land is located in the Pujehun District in the Southern Province of Sierra Leone.  This area of Sierra Leone, which is close to the Liberian border, is suitable for palm oil production.  The region receives one the highest levels of rainfall in Sierra Leone, which in itself, receives some of the highest rainfall globally.  In addition, the lease area is located on the equatorial belt, which is the most favourable geographical location for palm oil production.  The Company intends to monetise this landholding in the short term and clearing and planting is expected to commence shortly.  The Board believes that as the most important and widely produced edible oil in the world, demand for palm oil is projected to continue to grow, driven by demand in Africa, India, China and the US, making it an important new target of for Agriterra's ambitious investment strategy. 

For further information please visit www.agriterra-ltd.com or contact:

Andrew Groves	Agriterra Ltd	Tel: [phone]
Jonathan Wright	Seymour Pierce Ltd	Tel: [phone]
David Foreman	Seymour Pierce Ltd	Tel: [phone]
Andy Cuthill	MC Peat & Co LLP	Tel: [phone]
Hugo de Salis	St Brides Media & Finance Ltd	Tel: [phone]
Susie Geliher	St Brides Media & Finance Ltd	Tel: [phone]

Unaudited Consolidated Income Statement

For the six month period to 30 November 2011

		Unaudited 6 months to 30 November 2011	Unaudited 6 months to 30 November 2010	Audited year to 31 May 2011
Continuing Operations	Note	$'000	$'000	$'000
Revenue	4	5,288	5,284	13,588
Cost of sales		(5,080)	(3,660)	(10,372)
Gross profit		208	1,624	3,216
Increase in value of biological assets		228	63	214
Operating expenses		(3,577)	(2,248)	(6,109)
Other (expense) / income		(254)	612	349
Operating (loss) / profit		(3,395)	51	(2,330)
Net finance (expense) / income		(82)	46	159
(Loss) / profit before taxation		(3,477)	97	(2,171)
Income tax expense		-	-	(168)
(Loss) / profit for the period from continuing operations		(3,477)	97	(2,339)
Discontinued operations :
Profit / (loss) for the period		726	(10)	(89)
(Loss) / profit for the period attributable to equity holders		(2,751)	87	(2,428)
Earnings / (loss) per share: Basic & diluted	5	(0.4 cents)	0.02 cents	(0.4 cents)
Earnings / (loss) per share from continuing operations: Basic & diluted		(0.5 cents)	0.02 cents	(0.4 cents)

Unaudited Consolidated Statement of Comprehensive Income

For the six month period to 30 November 2011

		Unaudited 6 months to 30 November 2011	Unaudited 6 months to 30 November 2010	Audited year to 31 May 2011
	Note	$'000	$'000	$'000
(Loss) / profit for the period		(2,751)	87	(2,428)
Other comprehensive income net of tax Foreign exchange translation loss		2,962	(1,337)	3,399
Total comprehensive profit / (loss) attributable to equity holders		211	(1,250)	971

Unaudited Consolidated Balance Sheet

As at 30 November 2011

		Unaudited 30 November 2011	Unaudited 30 November 2010	Audited 31 May 2011
	Note	$'000	$'000	$'000
Non current assets
Intangible assets		964	-	271
Property, plant and equipment		17,282	8,891	13,264
Biological assets		988	212	631
Total non current assets		19,234	9,103	14,166
Current assets
Biological assets		456	100	157
Inventories		7,578	6,550	2,976
Trade and other receivables		2,247	2,140	2,039
Cash and cash equivalents		990	7,080	8,172
Total current assets		11,271	15,870	13,344
Total assets		30,505	24,973	27,510
Current liabilities
Bank loan	6	(1,551)	-	-
Trade and other payables		(3,911)	(2,407)	(2,678)
Total current liabilities		(5,462)	(2,407)	(2,678)
Net assets		25,043	22,566	24,832
Equity
Issued capital	7	1,387	1,387	1,387
Share premium		131,593	131,548	131,593
Share based payment reserve		1,360	1,360	1,360
Translation reserve		1,180	(6,518)	(1,782)
Retained earnings		(110,477)	(105,211)	(107,726)
Total equity attributable to equity holders of the parent		25,043	22,566	24,832

Consolidated Statement of Changes in Equity

	Ordinary share capital $'000	Deferred share capital $'000	Share premium $'000	Share based payment reserve $'000	Translation reserve $'000	Retained earnings $'000	Total $'000
Balances at 1 June 2010	923	238	125,184	1,360	(5,181)	(105,298)	17,226
Profit for the period	-	-	-	-	-	87	87
Other comprehensive income
Exchange translation differences on foreign operations	-	-	-	-	(1,337)	-	(1,337)
Total comprehensive income for the period	-	-	-	-	(1,337)	87	(1,250)
Transactions with owners
Share issue	226	-	6,364	-	-	-	6,590
Total transactions with owners	226	-	6,364	-	-	-	6,590
Balances at 30 November 2010	1,149	238	131,548	1,360	(6,518)	(105,211)	22,566
Loss for the period	-	-	-	-	-	(2,515)	(2,774)
Other comprehensive income
Exchange translation differences on foreign operations	-	-	-	-	4,736	-	4,736
Total comprehensive income for the period	-	-	-	-	4,736	(2,515)	2,221
Transactions with owners
Share issues	-	-	45	-	-	-	45
Total transactions with owners	-	-	45	-	-	-	45
Balances at 31 May 2011	1,149	238	131,593	1,360	(1,782)	(107,726)	24,832
Loss for the period	-	-	-	-	-	(2,751)	(2,751)
Other comprehensive income
Exchange translation differences on foreign operations	-	-	-	-	2,962	-	2,962
Total comprehensive income for the period	-	-	-	-	2,962	(2,751)	211
Transactions with owners
Share issue	-	-	-	-	-	-	-
Total transactions with owners	-	-	-	-	-	-	-
Balances at 30 November 2011	1,149	238	131,593	1,360	1,180	(110,477)	25,043

Unaudited Consolidated Statement of Cash Flows

For the six months to 30 November 2011		Unaudited 6 months to 30 November 2011	Unaudited 6 months to 30 November 2010	Audited year to 31 May 2011
Operating activities	Note	$'000	$'000	$'000
(Loss) / profit before tax		(3,477)	97	(2,171)
Adjustments for:
Depreciation		947	499	1,228
Profit on disposal of assets		-	(3)	5
Movements in exchange rates		53	(101)	(141)
Increase in biological assets		(228)	(63)	(214)
Net interest (income)/expense		82	(46)	(159)
Operating cash flow before movements in working capital		(2,623)	383	(1,452)
Working capital adjustments:
- (Increase ) / decrease in inventory		(4,196)	(2,205)	1,973
- (Increase ) / decrease in receivables		(50)	96	(547)
- Increase in payables		771	21	261
Cash used in operations		(6,098)	(1,705)	235
Net interest received / (paid)		(82)	46	159
Net cash used in continuing operating activities		(6,180)	(1,659)	394
Net cash  from / (used in) discontinued operating activities		726	(520)	(198)
Net cash outflow from operating activities		(5,454)	(2,179)	196
Taxation
Corporation tax paid		-	-	(38)
Net cash outflow from taxation		-	-	(38)
Investing activities
Purchase of intangible assets		-	-	(250)
Purchase of subsidiary net of debt acquired		(530)	-	-
Purchase of property, plant and equipment		(2,872)	(196)	(2,568)
Proceeds of sale of property, plant and equipment		51	-	38
Purchase of biological assets		(332)	-	(255)
Sale of financial assets		-	125	128
Net cash used in investing activities		(3,683)	(71)	(2,907)
Financing activities
Proceeds from issue of share capital		-	6,031	6,722
Drawdown of bank loan		1,551
Net cash flow from financing activities		1,551	6,031	6,722
Net increase / (decrease) in cash and cash equivalents		(7,586)	3,781	3,973
Cash and cash equivalents at start of the year		8,172	3,442	3,442
Effect of foreign exchange rates		404	(143)	757
Cash and cash equivalents at end of the period		990	7,080	8,172

Notes to the Unaudited Interim Group Financial Statements

1.	General information

Agriterra Limited ('Agriterra' or 'the Company') and its subsidiaries (together the 'Group') is focussed on the Agricultural sector in Africa.  Agriterra is a public limited company incorporated and domiciled in the Guernsey.  The address of its registered office is Richmond House, St Julians Avenue, St Peter Port, Guernsey GY1 1GZ

The Company is listed on the AIM Market of London Stock Exchange plc.

The unaudited interim consolidated financial statements for the six months ended 30 November 2011 were approved for issue by the board on 28 February 2011.

The figures for the six months ended 30 November 2011 and the six months ended 30 November 2010 are unaudited and do not constitute full accounts. The comparative figures for the year ended 31 May 2011 are extracts from the annual report and do not constitute statutory accounts.

The unaudited interim consolidated financial statements have been prepared in US Dollars as this is the currency of the primary economic environment in which the Group operates.

2.	Basis of preparation

The basis of preparation and accounting policies set out in the Annual Report and Accounts for the period ended 31 May 2011 have been applied in the preparation of these interim condensed consolidated financial statements. These are in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) and with those of the Standing Interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC) of the International Accounting Standards Board (IASB). References to 'IFRS' hereafter should be construed as references to IFRSs as adopted by the EU

3.	Accounting policies

The accounting policies and methods of calculation adopted are consistent with those of the financial statements for the period ended 31 May 2011.

4.	Segment information

The directors consider that the Group's activities comprise three business segments, grain, beef and cocoa and other unallocated expenditure in one geographical segment, Africa. 

6 months ending	Continuing activities
30 November 2011	Grain	Beef	Cocoa	Other	Total
	$'000	$'000	$'000	$'000	$'000
Revenue	3,591	298	1,399	-	5,288
Operating loss	(1,225)	(919)	(9)	(1,242)	(3,395)
Interest expense	(82)	-	-	-	(82)
Loss before tax	(1,307)	(919)	(9)	(1,242)	(3,477)
Income tax					-
Loss for the period from continuing activities					(3,477)
6 months ending	Continuing activities
30 November 2010	Grain	Beef	Cocoa	Other	Total
	$'000	$'000	$'000	$'000	$'000
Revenue	5,284	-	-	-	5,284
Operating profit	527	(314)	-	(162)	51
Interest income	46	-	-	-	46
Profit / (loss) before tax	573	(314)	-	(162)	97
Income tax					-
Profit for the period from continuing activities					97

	Continuing activities
Year ending 31 May 2011	Grain	Beef	Cocoa	Other	Total
	$'000	$'000	$'000	$'000	$'000
Revenue	13,533	55	-	-	13,588
Operating profit	233	(1,196)	-	(1,367)	(2,330)
Interest income	159	-	-	-	159
Profit / (loss) before tax	392	(1,196)	-	(1,367)	(2171)
Income tax					(168)
Profit for the period from continuing activities					(2,339)

5.	Earnings per share

The calculation of basic and diluted earnings per share is based on the following data:

		Unaudited 6 months to 30 November 2011		Unaudited 6 months to 30 November 2010	Unaudited 11 months to 31 May 2011
		$'000		$'000	$'000
Profit / (loss) the purpose of calculating basic earnings per share (profit / (loss) attributable to equity holders)		(2,751)		87	(2,428)
Profit / (loss) for the purpose of calculating basic earnings per share from continuing activities		(3,477)		97	(2,339)
Number of shares
Weighted average number of ordinary shares for the purposes of calculating basic and diluted loss per share		693,254,888		548,901,427	625,894,111
Basic and diluted loss per share (cents)		(0.4)		0.02	(0.4)
Loss per share from continuing activities (cents)			(0.5)	0.02	(0.4)

6

Bank loan

		Unaudited 6 months to 30 November 2011	Unaudited 6 months to 30 November 2010	Unaudited 11 months to 31 May 2011
		$'000	$'000	$'000
Bank overdraft		1,551	-	-

The group has a $2m revolving credit facility secured upon its grain inventories in Mozambique.

7.	Share Capital

		Ordinary shares of 0.1p each
		Authorised	Allotted and fully paid
		Number	Number	$'000
At 1 June 2010		2,345,000,000	547,771,554	923
Issue of shares		-	145,483,334	226
At 30 November 2010, At 31 May 2011 and at 30 November 2011		2,345,000,000	693,254,888	1,149
		Deferred shares of 0.1p each
		Authorised	Allotted and fully paid
		Number	Number	$'000
At period ends		155,000,000	155,000,000	238
Total share capital
At 30 November 2010		2,5000,000,000	702,771,554	1,161
At 31 May 2011		2,5000,000,000	848,254,888	1,387
At 30 November 2011		2,5000,000,000	848,254,888	1,387

 

END

 

 

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