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26 November 2009

LANDKOM INTERNATIONAL PLC 

 

Trading update

Landkom International PLC (AIM: LKI, "Landkom" or "the Group"), the Ukrainian producer of agricultural commodities announces its trading update for the 10 month period ending 31 October 2009.

Autumn Planting

Farming operations for the calendar year have been successfully completed.  In total, approximately 16,500 ha of oil seed rape ("OSR") have been planted, an increase of approximately 13 per cent over 2008.  Approximately 5,500 ha of winter wheat have also been planted which gives a total winter planting area of around 22,000 ha in Western Ukraine.  Approximately 2,500 ha of low input, non-irrigated crops have also been planted in the Group's Crimea operations.

Spring planting

In addition, 10,000 ha of land has already been prepared for spring planting.  Spring planting in the West is expected to be divided equally between maize and soyabean.  The Group's Crimea operations will cultivate irrigated sunflower. With the addition of the Spring planting campaign, total harvest for 2010 will total at least 34,000 ha (an increase of approximately 17 per cent on 2009).  An increased proportion of spring planting reduces the Group's risk of winter kill during extended cold periods, aides working capital management and increases fixed asset utilisation through the extension of seeding and harvesting windows.

Management

Since his appointment as Chief Executive, Vitaliy Skotsyk has already implemented a number of significant improvements, both in terms of cost and efficiency, including reduction of labour force and increased efficiency of farming methods. He has also strengthened Landkom's operational management by recruiting an experienced team with a significant track-record in the Ukrainian agricultural sector.  

Land bank

Economically viable, fertile land remains the key to Landkom's future success.  The land bank currently stands at approximately 70,000 ha of which around 65 per cent is fully registered. The Group aims to register the remaining leases prior to the spring planting campaign.  The Group does not envisage the land bank falling significantly below this current level.  In addition, the Group is optimising land resource by swapping small portions of logistically inefficient land for land close to main operational hubs.

The Group's priority is to maximise the planting of this land in the shortest possible time.  The quality of the farmed land will continue to be improved through continuous, sustainable farming and improving yields year on year, increasing the value of the land to the Group.

Storage

Landkom has its own storage capability for 20,000 tonnes of grain in the Lviv region, with equipment for a further 20,000 tonnes purchased and earmarked for construction in Berezhany, Ternopil region.  Both facilities are expected to be able to accept third party grains in 2010.  Other storage requirements will be met through arrangements with third party silos.

Use of assets

The Group has initiated a programme to rent excess equipment to third parties. The truck fleet is providing third party transportation services for the maize and sugar beet harvests. Some agricultural machinery has been subcontracted to third party field works with 100 per cent down payment.

 

Placing and cash

On 24 November 2009, the Group successfully completed a placing to raise £9.75 million to fund spring planting and provide working capital up until harvest 2010.  Adjusting for the placing proceeds, the year-end cash position was $15.6 million.  Crop worth around $1.5 million was held in storage awaiting sale with this value reflecting recent increases in Ukrainian wheat prices.  Obligations of $3-4 million will be met by the end of December 2009.  Cash corporate overheads have stabilised at around $450k per month.  The Group continues to implement measures to reduce overheads and operating costs further. The Group's loss for the year will be in line with losses published in its interim results.

At the year end, the Group employed 643 employees.  Further reductions will be facilitated by the introduction of new farming methods and new operational IT systems.

Vitaliy Skotsyk, Landkom CEO said:

"With the successful placing, autumn planting completed and land prepared for next Spring's planting campaign, we are well positioned for the next year.  We can now look forward with considerable optimism for the future."

Enquiries:

Landkom International Plc (www.landkominternational.com)
Vitaliy Skotsyk, Chief Executive Officer	+44 (0)1462 790175
Stephen Pickup, Chief Financial Officer
Liberum Capital
Simon Atkinson	+44 (0)20 3100 2000
College Hill
Adrian Duffield/Simon Whitehead	+44 (0)20 7457 2020

Note to Editors

Landkom International PLC is an arable farming group, producing agricultural feedstock on a large scale in Ukraine in the prime, fertile lands close to the border with Poland, the centre of the country and Crimea. Its principal crops are oil seed rape, wheat, maize and soya for supply to the European biodiesel and food industries. As of 1 November 2009, Landkom had 24,500 ha planted.

Landkom is implementing Western, high-yield agronomy practices using modern agricultural equipment to carry out efficient, large-scale farming techniques which will maximise the profitability of land under cultivation and help conserve the environment.

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