Trigon Agri (STO: TAGR) reported rather weak third quarter result on the basis of heavy drought in some areas of Russia and Ukraine. Third quarter 2012 revenue was 12.5 million Euros and EBIT almost -11 million Euros. Net profit for the quarter fell to -14.4 million. First 9-month EBITDA still remains slightly positive as is the net profit from continuing operations.
Expected land swap deal for an attractive asset in Rostov was bigger than what the company had been saying previously. Instead of a 30 000 hectare cluster, Trigon Agri acquires a legal entity with a freehold titled to 71 thousand hectares. The deal is done as a share swap where the seller gets not only Samara but also Stavropol clusters on top of a 15.1 million monetary payment. Given that Rostov cluster has no outstanding debt against it where as Stavropol has some, the liquidity effect is minor.
Existing seeding in Samara and Stavropol is a part of the deal and Trigon Agri will monitor seeding in Rostov. Production equipment is not part of the deal. Significant irrigation potential and higher average rainfall as well as available store capacity and vicinity of Novorossiysk port are reasons for paying a premium. The divestment of Samara and Stavropol clusters will result in a one-off gain of about 20 million Euros that is expected to lead to a book-value gain and clear full-year profit.
Russian cereal operations have been a drag where Ukraine production and dairy farming have both already been profitable. Trigon Agri now feels it has a clear path to sustained decent profitability. The transaction is subject to the Russian Competition Authority approval. The company is currently expecting that in December.
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