Shares in Black Earth Farming jumped to a 15-month high
after the group, at its seventh attempt, unveiled its first full-year profit, and
progress in measures to ensure it keeps up a better performance.
The Russian farm operator - which controls a landbank of
more than 3,000 square kilometres, an area twice the size of Greater London -
revealed earnings of $7.2m, or 231m roubles, for 2012.
Black Earth ran at a loss of $44.2m, or 1.34bn roubles, the
Indeed, it had run up losses totalling 5.84bn roubles - $190m at today's change rate - since
its first full results in 2006, with a further 15.7m roubles on top from a
shortened reporting year in 2005.
Black Earth shares, which are listed in Stockholm soared to
SEK12.95 in opening deals, as jump of nearly 10% and the highest since November
2011, before easing back to close at SEK 12.30, up 4.2% on the day.
The move into the black was "a milestone and a significant
improvement", Richard Warburton, the Black Earth chief executive, said, noting
the contribution to the "turnaround" from "improved crop yields, control of
logistics and effective marketing".
The group has returned to export markets, boosted soil fertility
through measures such as lime applications, and upgraded its elevator network,
enabling better crop blending and storage and avoiding an estimated in $15m in
discounts for missing quality specifications.
"The focus on improving logistics, drying and storage meant
that, unlike 2011, we got all dryers working and elevators working much more
efficiently," Mr Warburton said.
The group's grains and oilseeds harvest rose 6.6% to 458,000
tonnes thanks to strong yields for spring crops, in wheat was a poor year for Russia's
overall harvest, with an increased focus on sugar beet taking total Black Earth
volumes up 23% to more than 630,000 tonnes.
'Helped by high prices'
However, Mr Warburton also acknowledged the boost from higher
crop prices, and of high carry-in stocks, in a more than doubling to $146.8m in
Despite the bigger harvest, Black Earth ended 2012 with
inventories of less than 132,000 tonnes, down 38% year on year.
The figures had also been flattered by the uplift to values
of stored crop from near-record market prices.
"We have been helped by high agricultural commodity prices,"
"We are far from satisfied with the improvements to date [in
yields] and intend to step up our efforts by significantly increasing training
at all levels to improve technical decision making and operator performance.
"We cannot bank on the current high prices for future years
and are very realistic about what we have to achieve in order to deliver
profits in lower price years."
Measures being undertaken to support profits in future
include further land improvements, and taking out insurance to meet a priority
of reducing revenue volatility.
2013 crop we have for the first time invested in crop insurance in order to
reduce the potential negative financial effects of a major weather event
affecting crop yields in our regions," Mr Warburton said.
He also underlined the importance for risk management of a supply deal with PepsiCo, for which it has signed a three-year deal for growing beet
for sugar and potatoes for making crisps.
Sugar beet and potatoes, and corn, will form an increase
part of the group's crop mix, he said, while revealing that the group had
maintained its winter wheat area at 74,000 hectares, out of total sowings
expected at 230,000 hectares.