A/S Trigon Agri announces that it has expanded its earlier announced land-swap
transaction in Russia to involve the acquisition of 71 thousand hectares
production cluster in Rostov Oblast, compared to previously announced 30
thousand hectares. The payment will be in the form of shares in the Group’s two
existing production clusters in Samara and Stavropol and a monetary payment of
EUR 15.1 million.
“The new production cluster acquired in Rostov Oblast has exceptional
characteristics due to four strong competitive advantages: location near the
main export ports, regionally speaking good historical rainfall, contiguous
layout of the land and last but certainly not least potentially very significant
irrigation potential. These four factors together allow the new Rostov
production cluster to offer a much higher potential to show consistent profits
than the land areas Trigon Agri has swapped out of, says Joakim Helenius,
Chairman of Trigon Agri.
· The transaction is structured as a share exchange deal whereby Trigon Agri
acquires 100% ownership of a legal entity having a freehold title to 71 thousand
hectares.
· The payment for the shares of the acquired entity will be effected in the
form of shares in the Group’s two existing production clusters in Samara (45
thousand hectares of farm-land in ownership) and Stavropol (33 thousand hectares
of farm-land in ownership) and a monetary payment of EUR 15.1 million.
· Out of the monetary payment of EUR 15.1 million, Trigon Agri has paid EUR 6
million in the form of prepayment as of end of Q3 2012. In accordance with the
signed acquisition agreement, the remaining EUR 9.1 million will be paid in Q4
2013 in the form of a delayed cash payment (no interest to be accrued on the
delayed amount).
· As part of the transaction the seller of the Rostov assets will also take
over EUR 6.4 million of bank borrowings of the Stavropol cluster, while the
Rostov land holdings will be passed on to Trigon Agri as free of any bank debt.
· As Trigon Agri is free to take on loans against the new Rostov cluster and
the swap removes EUR 6.4 million of bank debt from Trigon Agri’s balance sheet
(and Trigon Agri saves about EUR 1 million in interest payments which would
otherwise have accrued on the Stavropol loan over 2013) the transaction will not
significantly affect Trigon Agri’s liquidity position.
· The divestment of the Samara and Stavropol clusters is expected to result in
one-off income for Trigon Agri in the size of around EUR 20 million in Q4 2012.
The transaction will lead to a significant net profit for the full year 2012
which in turn will lead to a substantial increase in year-end book value of
equity.
· Accordingly the need to effect payment for the swap partly through issuing
new shares, which has been mentioned in previous stock exchange releases, is no
longer necessary and will not be carried out.
· As part of the transaction Trigon Agri will take over 17 thousand hectares
of 2013 winter wheat crop seeded in the Rostov cluster under the supervision of
Trigon Agri’s agronomy team. The fieldworks carried out to date in the Stavropol
and Samara clusters will pass on to the sellers of the Rostov cluster. No field
equipment is part of the agreed land-swap transaction.
· The Samara and Stavropol assets contributed by Trigon Agri into the swap
transaction had an acquisition cost value in Trigon Agri’s balance sheet of EUR
29.2 million (net of EUR 6.4 million of borrowings). The 9m 2012 EBITDA of the
Samara and Stavropol operations showed a negative result of EUR 4.2 million.
· The transaction is subject to the approval of the Russian Competition
Authority currently expected in December 2012.
Background
The newly acquired Rostov production cluster is located in the neighborhood of
the Novorossiysk port. Novorossiysk port is the main export hub for grain from
Russia. The proximity to this port allows for higher than average prices on the
sale of grain, as domestic farm-gate grain prices in Russia tend to fall as the
distance to the main ports increases. The very long distance to the Black Sea
ports from the Samara region proved to be a major handicap for Trigon Agri’s
operations in that region.
The ten-year average rainfall of the new Rostov cluster production areas stands
at 485 millimeters per year, compared to 374 millimeters per year in the
Stavropol production cluster.
The land area of the acquired production cluster is laid out as two large
contiguous blocks of around 20 by 20 kilometres each. The contiguous nature of
the fields allows for the land to be farmed at low costs per hectare, as field
equipment does not need to travel long distances to move from one field to
another, and can therefore be deployed in the most efficient way possible during
the seeding, spraying and harvesting windows. This results in a low cost per
tonne produced and allows for high profit margins everything else being equal.
The land acquired in the new production cluster is connected to an irrigation
canal system that is unique in the region. This system provides the option to
develop irrigated farming in the area. Applying irrigated farming could
potentially more than double longer term average production yields achieved for
each hectare under production as well as removing most of the weather related
risk.
In addition to the four characteristics described above, which together provide
the basis for potentially good profitability going forwards, the production
cluster acquired also has farm-based grain storage warehouses with a total
storage capacity of 35,000 tonnes of grains. Having the security of storage is
vital for successful farming operations in Russia, as there is a general lack of
storage capacity in the country. Local farmers without their own storage are
often forced to sell their produce into a cyclically weak pricing environment
during the harvesting season.
Investor enquiries:
Mr. Ülo Adamson, President and CEO of Trigon Agri A/S,
Tel: +372 66 79200, E-mail: mail@trigonagri.com
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’s
shares are traded on the main market of NASDAQ OMX Stockholm. 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.
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