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Trigon underlines difficulties for Russia, Ukraine farm groups

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Trigon Agri highlighted the difficulties for farming groups in Russia and Ukraine, even as it unveiled declining losses, helped by weakness in the hryvnia and the rouble.

The farm operator, while not directly affected by the military conflict in eastern Ukraine, said that the "political crisis in Russia and Ukraine continues to dominate business, including agribusiness, in the region".

Joakim Helenius, the Trigon Agri chairman, said that "the economic situation remains difficult to predict", highlighting the "danger" of Ukraine defaulting on sovereign debt repayments if it cannot reach agreement with creditors.

The country said this month that it had "the right… not to return loans borrowed by [a] kleptocratic regime", a comment seen as potentially heralding default on loans taken out by the administration of former president Viktor Yanukovich, including a $3bn bond owed to Russia and due for repayment at the end of this year.

Such a default would likely cause widespread implications, with Mr Helenius highlighting the potential for measures to avoid capital flight.

"Whilst we are selling our produce in hard currency we nevertheless want to see a resolution of Ukraine's debt situation so as to ensure that we are not impacted by currency controls," he said.

'Complicating our disposals'

In Russia, while pressure on the rouble has eased, and indeed the currency has recovered some 30% against the dollar over the past four months, financial sanctions against the country are still taking a toll.

They have "significantly hurt the liquidity of the Russian banking system, thereby negatively impacting business transactions and sentiment and complicating our asset disposals", Mr Helenius said, referring to a long-standing process to sell some Russian farms.

While the disposal process, which has stalled since the sale in March last year of 36,000 hectares in central Russia, had prompted "interest in all" assets up for sale, "this has still not translated into firm bids".

"We hope to receive price indications from at least some of the parties carrying out due diligence on assets belonging to us by summer, but cannot be sure given the prevailing external uncertainties," he added.

Losses narrow

The comments came as Trigon Agri, which expects to harvest some 67,000 hectares of crops this year, unveiled a 26% narrowing to E8.31m in its net loss for the January-to-March quarter, on revenues down 15.7% to E8.11m.

The earnings before interest, tax, depreciation and amortisation (ebitda) loss dropped by 41% to E1.25m, with Mr Helenius underlining the dent to euro-denominated costs from the weaker hryvnia and rouble.

"We expect that our costs will benefit from the currency effect for the foreseeable future," he said.

He added that the group's autumn-sown crops had "survived the winter period reasonably well and all spring fieldworks, including seeding, have been completed as planned.

"The crops look promising, especially in Ukraine, but the final result will depend on weather conditions going forward."

Trigon Agri shares, which are listed in Stockholm, eased 1.0% to SEK0.95 in morning deals.


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