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Trigon Agri sowings off to better start, dodging south Ukraine drought

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Trigon Agri flagged a decent start to its autumn sowings in Ukraine, where farms in some southern areas face drought, as the debt-laden group unveiled a rise in underlying earnings just as a deadline looms for restructuring talks.

The farm operator in Russia and Ukraine, which is listed in Stockholm, said that it had last month started sowings of crops for the 2017 harvest, including of winter wheat, for which it is targeting sowings of 22,000 hectares this year.

Plantings of 9,800 hectares of winter rapeseed had already been completed, adding that "the majority of the crop has now germinated".

Indeed the group, which has a total Ukrainian landbank of 46,000 hectares, flagged that there had been "enough moisture for the good germination of crops" – in contrast to last year, when Trigon Agri, along with other farm operators, suffered from weather it termed "exceptionally dry".

'Not favourable'

Indeed, the group said that Kharkov in the north east of Ukraine, where it has one of its farm clusters, had been "quite wet" over the past two months, although further south in Nikolaev it had been "relatively dry".

Indeed, Kherson - the neighbouring oblast to Nikolaev, and directly north of Crimea - has suffered "long term hot and dry weather", with most areas not seeing rains for 42-51 days, consultancy UkrAgroConsult said earlier this week.

"Due to the deficit of effective precipitations and dryness of upper soil layer current conditions are not favourable for required preparation of soil for the winter sowing," Kiev-based UkrAgroConsult said, estimating at some 1m the depth of dry soil on Kherson farms.

'Quality issues with wheat'

Trigon Agri's comments came as the group revealed that its newly completed winter wheat and rapeseed harvests had matched, or beaten, expectations lowered after the "very dry autumn in 2015".

And it said that its autumn-harvested crops were "in good condition, with corn, sunflower and soybeans expected to be harvested with yields above the previous year".

One downside of the wetness in Kharkov was that, while "positive" for autumn harvested crops, in coming amid their growing season, the precipitation "did give us some quality issues with wheat", with moisture on ripe grains encouraging sprouting and downgrades to specifications.

Still, the proportion of wheat deemed of export grade, at 76%, was "similar" to last year, the group said, with a further 12% termed as being of "domestic quality", and the outstanding 12% of the crop reserved for seed and rental payments.

Trigon Agri forecast "stronger projected cereal revenue from the 2016 harvest… despite crop prices being under pressure".

Bank deadline looms

For the April-to-June quarter, the group reported revenues down 11.9% at E20.87m, and a net loss of E5.96m – a marked retreat from the earnings of E10.78m achieved a year before.

However, investors took heart that the slide into the red was down to one-off losses on the sale of a Russian grains operations - excluding which Trigon Agri saw earnings rose by 29.8% to E12.91m.

Shares in the company soared 52% to a six-month high of SEK0.41 in early deals, before easing to SEK0.346 in late morning trading, a rise of 28% on the day.

The results come amid negotiations with shareholders and bondholders over a restructuring of its borrowings, which totalled E54.3m as of the end of June, equivalent to $60.5m at current exchange rates, with a bank deadline looming.

If shareholders and bondholders fail to agree a deal by the end of September, "the Ukrainian banks may refuse to prolong/renew the working capital loans and demand the repayment" over the rest of year of dollar and hryvnia borrowings totalling more than $12m at current exchange rates.

"The management of the company urges all involved stakeholders to find a constructive solution in order to secure further working capital funding for 2016-17 harvest period," Trigon Agri chief executive Simon Boughton said.

By Mike Verdin

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