Interim financial report for 1 January - 30 September 2020 for FirstFarms A/S
Continued expectation of a strong result:
FirstFarms delivers a satisfactory result in a challenged market
FirstFarms has in the first 3 quarters of 2020 increased the turnover by 8 percent and improved EBITDA by 4 percent compared to same period last year. The profit for the year to date is DKK 17.7 million before tax, which, despite of COVID-19 and latest ASF1 in Germany, is only 12 percent lower than last year’s profit for same period.
The result year to date is therefore considered satisfactory taken into account the market which FirstFarms and the whole industry has operated in.
FirstFarms’ operations have overall delivered above budget before value adjustments of the biological assets, but although the individual farms have not been directly affected by COVID-19, there has been an indirect impact due to COVID-19 outbreak on several European slaughter houses and outbreak of ASF in Germany. This has caused disturbance on the pig market, and as a consequence hereof the prices on pigs have decreased significantly compared to the same period last year.
The significant decrease in the pig prices impacts the result partly through lower prices of the pigs we sell in 2020 and partly through a significant negative adjustment of the stock from the beginning to end based on fair value. The adjustment of the stock alone is expected to entail DKK -20 million with the current prices of pigs.
Therefore, the company adjusts downward the expectation to EBITDA to DKK 95-100 million and EBIT to DKK 45-60 million. Despite the very low pig prices, FirstFarms still delivers a strong result due to high efficiency in the operation and profits on acquisition and sale of land.
“The agricultural industry is currently being challenged. In particular, COVID-19 is making its mark. Nevertheless, FirstFarms can present a satisfactory result for the year to date, and we maintain the expectation to another strong year. We can primarily attribute this to our strategy of risk diversification on products and branches of operation. I am therefore pleased that we limit the risk, that we – and thus our investors – run, “says CEO of FirstFarms Anders H. Nørgaard.
FirstFarms’ goal is to be one of Europe’s best operated and most profitable companies in the area of agriculture and food products.
“It must be based on professional management and best practice, where we continue to acquire, develop and operate business in the areas of agriculture and food products. We shall ensure attractive return on operation and increase in value for our investors, continue to focus on risk diversification, and we must everyday work on creating a more sustainable company, “says Anders H. Nørgaard.
Summary
The Board of Directors and Management of FirstFarms A/S have today reviewed and adopted the un-audited interim financial accounts for the period 1 January – 30 September 2020.
- FirstFarms has in the accounting period realised:
- A turnover of DKK 221.0 million
- An EBITDA result of DKK 72.8 million
- An EBIT result of DKK 36.1 million
- A pre-tax result of DKK 17.1 million
- EBITDA and EBIT have improved with DKK 2.8 million and DKK 3.6 million, respectively, compared to same period last year. This is despite that in 2020 there has been a negative value adjustment on biological assets of DKK -11 million compared to a positive value adjustment in 2019 of DKK 18 million; a total difference of DKK -29 million. However, this is partially offset by recognition of badwill of DKK 19.7 million regarding the acquisition of AISM srl.
- FirstFarms has in June 2020 purchased AISM srl. (Now FirstFarms Agro North srl.)
- FirstFarms Agro North owns 2,430 hectares of cultivated, leased agricultural land in Romania, a modern silo plant with 6,000 tons storage capacity, feed mill and storage- and office facilities.
- In connection with the calculation of the values in the company, an added value of DKK 19.7 million has been realised compared to the purchase price (see page 13-14). This surplus value is recognised in the income statement.
- Operation branches
- Milk: The milk price has been lower than budgeted, whereas efficiency and production has been better than expected, overall, however, milk production is below the expectations.
- Pigs: The prices for piglets and slaughter pigs have decreased significantly during the first three quarters. This has entailed in 2020, that there is a negative adjustment of the stock with DKK 17 million, compared to a positive adjustment in 2019 of DKK 7 million. Overall, the result for 2020 is negatively influenced by DKK 24 million compared to same period in 2019.
- Crops: The harvest has all in all been lower than budgeted, primarily due to drought in East Romania.
- Land
- One of the most essential foundations for the operation is the agricultural land, but also ownership or lease of land. The land has been acquired or is on lease, which is extended on an ongoing basis. The operating value is and will therefore continuously be significantly increased. The value added is not included in FirstFarms asset statements on land. The value added is realised on an ongoing basis in form of sales, that support the current operation, and which support the framework of growth.
FirstFarms has entered agreement about sale of 1,675 hectares of land, of which the first 618 hectares have been transferred and paid in October, cp. company announcement no. 28/2020. The completed sale amounts to DKK 31 million. The total sales price is DKK 85 million and is expected to affect EBIT by DKK 40 million in 2020 and 2021.
Best regards,
FirstFarms A/S
For further information:
Please visit our website or contact CEO Anders H. Nørgaard on telephone .
About FirstFarms:
FirstFarms is a Danish stock exchange listed company. We operate FirstFarms with responsibility for the surrounding communities, and we deliver highest quality which is primarily sold locally. We act on new opportunities, that create value for our investors and for the surroundings. Every day, we work on creating a more sustainable company.
1 ASF: African swine fewer
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