Continental Farmers Group said it was on track to beat its full-year profit hopes, and to expand its sowings for the 2013 harvest, after revealing its crops had largely avoided the drought hit to Ukraine's grains harvest.

The farm operator, in both Poland and Ukraine, said that it expected "to exceed management's targets" for the full 2012, its first full year as a listed company, in London and Dublin.

The forecast reflected in part a first half of the year in which its pre-tax profits tripled to E3.5m, boosted by lower costs besides an uplift from strong grain markets to the value of its crops.

However, Continental Farmers also flagged an increased harvest, underpinned by higher yields of winter crops, even in Ukraine, where winter frost and a dry spring left national output of grains such as barley and wheat sharply below 2011 levels, with the corn harvest expected to drop too.

Spring crops had fared less well – with a 39% yield drop in the case of rapeseed – although the decline in wheat was limited to less than 10%.

'Exceptionally difficult climatic conditions'

The group had achieved a "successful" harvest "delivering improved yields under exceptionally difficult climatic conditions", Mark Laird, the group's chief executive, said.

This result reflected strict adherence to a full, five-crop rotational programme, in line with best agronomic practice, besides mixing spring and winter sowings to spread risks, while its Ukraine farms are based in the west of the country, which tends to suffer less volatile weather than many other parts of the country.

Chairman Nick Parker said: "The increased tonnage in our cereal crops grown and harvested is a testament to the efforts made in planning, agronomy and execution."

Continental Farmers also signalled that it was, as with some other former Soviet Union companies such as Ros Agro, seeking to delay crop sales in expectation of firmer markets ahead once pressure has passed from growers selling quickly to raise cash for sowings, or avoid storage headaches.

"The business continues to hold a significant percentage of harvested cereals in store whilst the typical seasonal glut of crops finds its way on to the market," Mr Laird said.

'Number of opportunities'

The group, which has a target of harvesting 50,000 hectares in Ukraine in 2015, up from 23,655 hectares this year, said it had secured an unspecified amount of further land for sowings for the 2013 harvest and was seeking more.

"We continue to investigate a number of opportunities to deliver the controlled expansion of our farming operations and available land under management," the company said.

And it heralded further joint ventures along the lines of that signed earlier this year with ED&F Man, the sugar group, in which Continental Farmers will provide beet for processing.

"This model of partnership is one which we will seek to extend," Continental Farmers said.

"It is likely that this strategy will be used with more potential partners in other sectors of [the group's] business."

Market reaction

The results were termed "very strong" by Davy analyst John O'Reilly, who forecast that the group could achieve earnings before interest, tax, depreciation and amortisation (ebitda) of E10m for the full-year, up from a previous forecast of E8.9m.

"Its success is more than about chance. Excellent agronomy and operational management skills enable it to achieve optimal performance from its advantaged climatic region and soils," Mr O'Reilly said, restating an "outperform" rating on Continental Farmers shares.

The stock closed 4.0% higher at 26p in London.