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Agriterra has bold strategy to grow its agricultural business

Agriterra has a bold strategy to grow its pan-African agricultural business. The acquisition in December of 45,000 hectares of brownfield land in Sierra Leone that is ripe for development into a palmoil plantation illustrates the plan, it said.

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Agriterra (LON:AGTA) has a bold strategy to grow its pan-African agricultural business.

The acquisition in December of 45,000 hectares of brownfield land in Sierra Leone that is ripe for development into a palmoil plantation illustrates the plan, it said.

The palmoil division is one of Agriterra's four businesses. The others focus on cattle ranching, maize farming and cocoa farming and trading.

Its plan to become a 'field to fork' operator across Africa has made great strides in recent months, particularly in beef, cocoa and palmoil.

"With Agriterra, we already have established operations generating significant revenues, in addition to further high growth/margin revenue streams which are due to come on stream over the next 12 months.

"This business model is building value for our shareholders and has recently translated into a strengthening share price," said chief financial officer Neil Clayton.

Last week’s interim results prompted the shares to rise more than 6 per cent, to 3.35 pence.

Clayton said he was "very pleased" with the numbers, pointing out that it validated the group's expansion strategy,  especially the development of two new revenue streams - in beef and cocoa – in addition to its established maize operations.

In the six months to 30 November, Agriterra reported turnover of US$5.3 million (2010: US$5.3 million) and a pre-tax loss on continuing activities of US$3.5 million (2010: pre-tax profit of US$ 0.1 mln).

In the statement, the company also revealed it was well funded with cash of US$11.4 million - an increase from its position at year-end due to a share placing, completed at a significant premium to the share price, which raised US$15 mln.

Looking ahead, Clayton said he believed three businesses will be making a contribution to overheads.

He highlighted the good performance of cocoa subsidiary Tropical Farms Limited (TFL), which is already contributing US$1.4 million to revenues.

Clayton said TFL had been acquired last July as an undercapitalised business but that Agriterra's investment had enabled it to develop.

And the firm has ambitious plans for the subsidiary - aiming to expand its cocoa operations to 40 locations from 12, and revealing last week it had bought a five acre site in the country's third largest city to develop a processing facility.

The company has also told investors it is in negotiations to acquire new land for a cocoa plantation.

These talks are aimed at securing the firm's own cocoa plantation, which would allow it to enhance the firm's traceability and sustainability, attracting premium prices, said Clayton.

Plantations being considered had old cocoa in them, where Agriterra may be able to extend their economic life, he added.

In the group's maize business, the period saw an excellent buying season with 34,000 tonnes of maize purchased - representing a 9,000 tonne increase on the comparable period in 2010.

Indications now suggest that the current strong demand for grain may continue through the second half of this year and into next year.

The group also reported rapid progress at Mozbife - its beef business. Cattle numbers at the Mavonde and Dombe ranches are growing rapidly and are on track to reach 10,000 head by 2015, while the Vanduzi feedlot is now operational and has a capacity of around 2,000 head.

In addition, Clayton said the firm's abattoir was due to open in the second half of 2012, which would enable the firm to improve its margins.

Other key targets, he said, were to move towards establishing the firm's own cocoa plantation and, in the maize business, to build on its  export markets.

Clayton says Africa focused Agriterra, which wants to become a leading food supplier, offers investors a stake in a high growth sector where there are not many listed vehicles.

Quick facts: Agriterra

Price: £0.06

Market: AIM
Market Cap: £1.32 m
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