Half Year Results 2021

RNS Number : 2799N
29 January 2021 

Agriterra Limited / Ticker: AGTA / Index: AIM / Sector: Agriculture
Agriterra Limited (‘Agriterra’ or the ‘Company’)

Agriterra Limited, the AIM listed African agricultural company, announces its unaudited results for the six months ended 30 September 2020.

Chair’s Statement

I am pleased to provide an update on our performance in the first half of the 2021 financial year (‘HY-2021’). These results will be made available on the Company’s website.

Operational update

Grain division

The Grain division faced competition from cheap imported maize from South Africa in the southern market of Mozambique, however total sales revenue for the Grain division increased by 3% as compared to the prior period as a result of better performance in the other regions. We managed to maintain our strong hold in the central region of Mozambique and intend to expand and diversify our product ranges to cater for different customer needs. 

Revenue for the 6 months increased to $ 4.0m (HY-2020: $ 3.9m), however EBITDA decreased to $ 0.1m (HY-2020: EBITDA of $ 0.4m) due to an increase in grain purchasing cost as compared to the prior year. The finance costs increased to $ 430,000 (HY-2020: $ 352,000) resulting in a loss after tax of $ 407,000 (HY-2020: loss $ 139,000).

Improved quality and the recommissioning of a 1kg packaging line, are expected to lead our entry directly into the informal sector in the second half of the year. This product has a higher margin than the larger packs of meal.

We entered into three pre-paid contracts for our products with wholesalers which provided some liquidity to purchase early season maize. The strategy was to acquire sufficient maize for the financial year in the period April – July, however delays in the approval of additional overdraft facilities to finance the procurement of maize, meant that the division was not able to take full advantage of lower early season maize prices. Consequently, it is expected that the division’s margins will be under more pressure against budget in the second half of the year.

In 2020 we entered into a joint venture with Snax for Africa Limited to produce maize snacks, operating from our premises in Chimoio. COVID-19 restrictions delayed the commissioning of the new plant, but this became operational in December 2020 and early results show an increasing demand for the product.

Beef division

After a significant improvement in the division’s trading in the prior year, the Beef division has seen a fall in volumes as the South African Rand depreciated to less than 4 Metical during Q1/early Q2 FY-21. This has led to tough trading conditions in the south of the country where our beef product has to compete with cheap imports from South Africa. This situation is expected to change, as the Rand has strengthened to over 4.8 Meticais, which, if it holds, will make imports more expensive in Q3 and Q4 of FY-21.

Revenue for the 6 months fell to $ 1.5m (HY-2019: $ 2.2m), however EBITDA improved to a loss of $ 0.1m (HY-2020:  loss $ 0.4m). Finance costs decreased to $ 74,000 (HY-2020: $ 84,000) and the loss after tax decreased to $ 346,000 (HY-2020: loss $ 708,000). The loss for the period significantly decreased due to cost management initiatives implemented during the period and the strategy to unlock the southern market, notably Maputo, commenced.

Plans are being made to develop a sustainable presence in the Maputo market. This will provide a platform for growth in the Beef division.

Group Results

Group revenue for the half-year ended 30 September 2020 decreased by 9% to $ 5.5m (H1-2020: $6.1m). As a result of cost management in the Grain division, and despite the difficulties in the Beef division, the Group’s trading operations showed a reduction in the operating loss before interest to $ 0.5m (H1-2020: loss $ 0.8m). The containment of the operational loss is due to aggressive cost monitoring and control measures implemented by management during the period. However, financing costs increased by 24% to $0.5 million (H1- 2020: $0.4 million) but despite this, the Group loss after tax decreased by 21% to $ 0.997 million (H1-2020: loss $ 1.268 million). During the period, inventories increased by $ 1.2m to $ 2.8m (H1-2020: $1.6m). Net debt at 30 September 2020 was $ 6.8m (31 March 2020: $ 4.3m). Increase in net debt resulted from procurement of grain stock using the overdraft facility, which will provide a large proportion of the inventory requirements in the second half of the 2021 financial year.

Outlook and COVID-19

COVID-19 has had a significant negative impact globally, both economically and socially. There is a risk the virus will start to escalate in Mozambique, which could potentially impact the Group’s operations through the contraction of the economy and restrictions on movement within the country. Currently the incidence of COVID-19 is increasing and Mozambique health care units and facilities are reported to be 90 percent full. All countries in Southern Africa are implementing aggressive COVID-19 preventive measures which include closing land borders in response to the new COVID-19 variants, with travel bans widespread.

The operating companies continue with the training and awareness programmes implemented at the start of the pandemic. The training and practical measures taken to protect staff health have resulted in no significant cases amongst the staff. We remain alert to the fast-changing environment and are prepared to put in place mitigating actions as events develop. As previously reported, our products are key staples in the domestic Mozambican market and demand is not expected to be significantly affected.

The investment in the oil and gas sector in the North remains in large part suspended and has reinforced the importance of developing the presence of our Beef division in the South.

CSO Havers
Chair28 January 2021