Biogas, food investments lift KTG Agrar profits

KTG Agrar shares leaped nearly 6% after the German farming group unveiled strongly improved results, lifted by its switch into biogas and food, and forecast further improvement.

KTG shares hit E14.44 in morning deals in Frankfurt, a rise of 5.8%.

The jump followed the announcement by the Hamburg-based group of a jump to E10.6m ($13.9m) in earnings for the first half of 2014, from E700,000 a year before, on revenues up 48% to a little over E100m ($131m).

Although E6.2m of the earnings was down to a one-off windfall from the sale and leaseback of 4,000 hectares of land it farms in Lithuania, the group also flagged improvement in its results thanks to its investments in biogas, which raised revenues by 23% to E32.1m, and food, where revenues near-doubled to E50.1m.

Ahead of forecasts

And KTG Agrar forecast that its earnings and revenues "will pick up even further" in the second half of the year, when it reaps seasonally most of the benefits from its farming operations.

"The first half of the year is traditionally the weaker half for the agricultural sector, which means we will pick up even further in the second half of the year," said Siegfried Hofreiter, the group's chief executive.

Full-year revenues will come in "significantly" above E200m, compared with E164.9m last year, with the food division alone set to contribute some E100m.

"As the sales revenues increase, KTG's earnings will also grow considerably, and cash flow will be clearly positive," the group said.

For 2015, KTG said that it was "firmly targeting the E250m mark" for revenues.

Analysts have factored in revenues of E185m for this year, and E219m for 2015.

Foods flotation ahead?

The group also highlighted that its food division has now reached a "critical size", a comment likely to fuel speculation of a possible flotation ahead.

KTG Agrar, which has already floated its biogas business as KTG Energie, has signalled that it could float its food division, or seek a partner for the business, potentially in 2018.

The food division has been built around Frenzel Tiefkühlkost, a frozen foods group which KTG purchased in 2011, but also includes a vegetable oils and organic foods arms.

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