AB Linas Agro Group results for the six months of FY 2018/19
Consolidated revenue totaled EUR 329 million and was 1.3% more. Sales volume in tons reached 1 million and was 16% less as compared to previous year.
The gross profit reached EUR 20.5 million and was 24.5% less than a year before. Consolidated EBITDA was 44% lower and amounted to EUR 8 million. The operating profit was EUR 2.7 million or 66% lower. Profit before taxes amounted to EUR 1.5 million and was 5 times lower. The net profit attributable to the company decreased 6 times and stood at EUR 1.1 million.
The 23% lower grain yield in the Baltic States has been challenging for all businesses of the Group, especially those related to grain trading. The drop was observed in traditional products group – wheat, barley and rapeseed – as their sales in tons plunged 29% to 572 thousand tons, white sales revenue had only a slight decrease of 1.6 % to EUR 210 million because of the high grain prices. At the same time feedstuffs sales volume in tons went up 52% and sales revenue reached EUR 83 million. Operating profit gained from grain, oilseeds and feedstuffs trading dropped 48% to EUR 3.2 million.
The autumn weather in 2018 was favorable for sowing, therefore the increased winter crop area and traders’ readiness for the growing season have had a positive impact on the sales of fertilizers, plant protection products and micro-nutrients, which has grown 7% up to EUR 45 million. During the reporting period the market for certified seeds has shrunken 28%, the Group’s sales of certified seeds in tons were 24% less than in previous year, and sales revenue decreased 6%. Sales of new agricultural machinery decreased by 2% to almost EUR 16 million. The used machinery sales revenue went up 73% up to EUR 1.7 million. Sales revenue from trading spare parts went up 11% to EUR 4.3 million. Revenue from grain complexes installation was almost EUR 5.8 million or 5% less as compared to previous year. The total revenue from products and services for farming business increased by 4% to EUR million 74, while operating profit decreased 65% to EUR 1 million.
A 24% fall in crop yields and milk prices decline by 13% had a negative impact on the performance of the farming companies of the Group. Their total revenue dropped 10% to EUR 16.4 million and previous operating profit of EUR 0.5 million has turned into loss amounting to EUR 0.6 million.
Overproduction in the EU is the factor that pushes down the prices of poultry meat, and the average EU poultry price fell by 4.6% over the reporting period, while the prime cost of poultry farming has risen due to higher prices for grain and other feed. Poultry farms of the Group raised 2% more chicken and sold 4.5% more poultry products than in previous year. Their revenue grew almost 16% to EUR 39 million and operating profit fell 27% to EUR 1.1 million Eur.
“The worsened financial results were mainly caused by the difficult harvest situation in the Baltic States – grain yields fell by one fourth in all three markets due to summer drought. This has affected the sales of both conventional crops and the interest of farmers in investing in grain elevators or new agricultural machinery.
Nonetheless, we recorded positive results in some of businesses. The first half of the reporting period was the second best in the history of trading plant protection products – their sales grew by 16%. We have also grown our feedstuff sales – have sold 52% more tons of them. In addition, despite the low trend of the average price of poultry in the EU, we managed to market poultry at a 12% higher price due to exceptional quality of products.
Although farmers have postponed investments in new machinery, they have shifted to used machinery. Sales of the used machinery grew by as much as 73% and revenue from sales of spare parts also went up 11% percent.
In addition, we continued our investments into business development over the reporting period, and they amounted to EUR 9.2 million (14% higher than a year before). Of this amount, more than EUR 2 million we have invested in the construction of two new grain elevators in Latvia and the improvement of the existing grain storage facilities. Another EUR 0.1 million was invested to build new liquid fertilizer storage tank in Joniškis, the completion of which is planned to by the end of this financial year.
We are carrying out some internal transformations in the organizational structure as we seek optimize trading activities, reduce operating costs, improve customer service and avoid an internal competition between subsidiaries. Currently we are in the final stages of merging Linas Agro and Dotnuva Baltic sales departments and administrations in Lithuania and Latvia. We have invested almost EUR 0.4 million in the construction of a new joint office and farm service center for both companies in Latvia. We plan to open the center by the end of this financial year.
We are active in making preparations for the spring trade of seed, fertilizer and plant protection products. The situation in the crop fields makes us optimistic – they are in a good condition in our farming companies and partner farms as well. We therefore expect this to have a positive impact on the sales of fertilizer and agricultural machinery”, commented Finance Director of AB Linas Agro Group Tomas Tumėnas.
AB Linas Agro Group Consolidated unaudited Financial Statements and Interim Activity Report for the six months period ended 31 December 2018.