TIDMAGTA
RNS Number : 6824G
Agriterra Ltd
31 March 2022
Agriterra Limited / Ticker: AGTA / Index: AIM / Sector:
Agriculture
Agriterra Limited ('Agriterra' or the 'Company')
Trading update
Agriterra Limited, the AIM listed African agricultural company,
announces its trading update for the period as of March 2022.
This update is provided in advance of the financial statements
for the year ended 31 March 2022 which will be issued in due course
in accordance with the AIM Rules for Companies. The information and
commentary provided is based on unaudited management accounts and
other internal performance measures and is subject to concluding
the routine annual accounting adjustments as well as any
adjustments that arise as a result of the external audit process.
The Company expects to release FY-22 results in early
September.
Grain division
Upgrades to both mills improved the overall extraction rate from
75% in FY21 to 79%, while the cheaper maize purchases have improved
this year's overall gross margin to 26.7% against the 15.4%
achieved in the prior period. These efficiencies have not
translated into improved bottom line results or overall
performance, as the total sales have continued to be much lower
than forecasted.
The continued drop in sales has been caused by the excessive
volume of maize being imported from Malawi and Zambia, where
favourable climatic conditions and government subsidised fertilizer
schemes resulted in exceptionally high maize production. The supply
continues to be far greater than the local demand in these
countries and as such, the grain is still entering Mozambique and
eventually making its way towards Maputo. Latest figures confirm
that a ton of maize in Malawi costs c.$151, a significant reduction
on the import parity price of $310 in Maputo, resulting in
consumers buying cheaper maize rather than sourcing locally
processed meal. The low sales have impacted all millers across the
central and southern regions of the country.
A total facility of $6.1m was secured from First Capital Bank,
S.A., which assisted in the purchase of the 30,000 tons of maize
needed for milling this season. The business also has in silo 9,000
tons of maize (FY-2021: 1,500 tons), which will enable the business
to mill through to July 2022, when the new crop will be available
to purchase.
The numerous initiatives discussed in the HY-22 report have
helped drive sales, but the Company continues to be behind its
expectations, as the cheap maize from Zambia and Malawi continues
to enter the market. The campaign to push the new 1kg DECA meal
packages did not realise the higher sales anticipated. However, a
new recipe that differentiates the meal from that of the larger
25kg and 50kg bags was launched in February and this is starting to
result in a lift in the 1kg DECA meal package sales.
Grain division generates c.80% of the Group consolidated
revenue.
Beef division
The Beef division was subject to a reduction in demand between
March and April 2021, and as a consequence the division was forced
to focus on new customers, improving operating margins and cutting
overheads. With a new feedlot and sales teams, these initiatives
are delivering improvements. These improvements were picked up in
the HY-22 report and have now begun to produce the anticipated
results.
Sales and value per kilogram of meat increased in the second
half of the year and the demand for Agriterra's beef is now growing
as the markets in the northern and southern regions begin to
recover from the impact of the COVID-19 pandemic. The Company is
encouraged by these positive changes and is working diligently to
ensure that it can continue to supply the market with the
quantities and quality that are required.
Beef division generates 20% of the Group consolidated
revenue.
Snax Division
One year into this venture and the Company is encouraged by the
uptake of its Snax products. The second half of FY-2022 is proving
to be much better than that of the first. A considerable number of
COVID-19 restrictions have been lifted, with schools and
recreational centres (bars, restaurants and activity centres) being
allowed to reopen. As a result, demand is quickly returning and the
Company is in the process of ramping up its distribution systems
(vehicles and warehousing).
Snax division is a joint venture and is expected to generate US$
61 000 profit to offset group accumulated losses in its first year
of operations.
Impact of COVID-19, climatic change, security and the war in the
Ukraine
In the last eight weeks, three tropical storms have hit the
central and northern regions. Fortunately, none of the Company's
installations have been affected and all Agriterra's staff are
safe. April is typically the month for cyclones, and further
weather events are anticipated. On a more positive note, the
COVID-19 pandemic appears to be under control now in Mozambique.
Although a number of restrictions remain in place, these are more
manageable, and people's lives are returning to normal. The
education, tourism, entertainment, and events industries have
re-opened, offering jobs and restoring the demand for services and
food. It is anticipated that the increase in gas prices and EU
requirements to diversify sources of gas will motivate the oil and
gas sector to return and reach extraction faster. If this happens,
it will be a boost to the economic sector in Mozambique.
Security in the north of the country has improved, as the
Southern African Development Community forces slowly dominate the
region. This too, has encouraged the oil and gas sector to return
and continue the development process.
Outlook for the new year (FY-2023)
The outlook for the new FY-2023 is encouraging for all sectors
of Agriterra's business:
Ø The combined effect of a below average rainfall and the
increased price of wheat and oil (due to the ongoing conflict in
Ukraine), will reduce the availability of local food and cause a
higher demand for the Company's products;
Ø Import restrictions on meat from South Africa and the growing
demand from Maputo and the oil and gas sectors are likely to drive
up demand for the Company's beef; and
Ø The Snax division is successfully penetrating the markets,
plus the introduction of new flavours will allow the Company to
further establish its position in the market.
Caroline Havers
Chair
31 March 2022
The information communicated within this announcement is deemed
to constitute inside information as stipulated under the Market
Abuse Regulations (EU) No. 596/2014 as it forms part of United
Kingdom domestic law by virtue of the European (Withdrawal) Act
2018, as amended. Upon the publication of this announcement, this
inside information is now considered to be in the public
domain.
For further information please VISIT www.agriterra-ltd.com or
contact:
Agriterra Limited Strand Hanson Limited
(Nominated & Financial Adviser
and Broker)
Caroline Havers James Spinney / Ritchie Balmer
caroline@agriterra-ltd.com Tel: +44 (0) 207 409 3494
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