Tonkens Agrar - Drought affects profits

Tonkens continued with its strategy of increasing volumes of higher-margin processed vegetables in FY18/19, supporting a 17% y-o-y increase in group revenue. However, as flagged by management in March, the prolonged drought in calendar year 2018 caused a scarcity of vegetables, cutting profit before tax by €0.6m to €0.2m. Management expects that continued drought in calendar year 2019 will result in a similar financial performance for FY19/20.

Tonkens Agrar - Calendar 2018 drought affects profits

The prolonged drought during calendar 2018 had an adverse effect on crop yields, particularly potatoes and onions. This resulted in better produce prices, boosting H118/19 (to December 2018) revenue, but the associated reduction in inventories resulted in a €2.2m drop in total operating income and a similar fall in profit before tax. Consequently, management now expects FY18/19 (to June 2019) EBIT will be around break-even.

Tonkens Agrar - Back to the black

Improved farmgate milk prices and higher volume sales of processed vegetables enabled Tonkens to achieve its stated goal of reporting a net profit after tax for FY17/18, compared with a loss the previous year. However, persistently low potato prices prevented the group from meeting its expectations of year-on-year revenue growth. Management continued with its strategy of focusing on higher-margin, added-value business, with volumes of peeled and packaged produce rising by 23% year-on-year.

Tonkens Agrar - Value-added strategy drives H118 uplift

Management’s strategy of generating more profit from its crops by selling processed onions and potatoes, supported by higher farm gate milk prices and an exceptional profit on the sale-and-leaseback of land, delivered a three-fold increase in profit after tax during H117/18. Management has raised FY17/18 guidance and now expects a year-on-year increase in both revenues and profit after tax.

Tonkens Agrar - Better farm gate milk prices reduce losses

As management predicted at the interim stage, the sustained increase in farmgate milk prices helped Tonkens Agrar (Tonkens) deliver an improved performance during FY16/17. Self-help initiatives, such as a drive to gain new customers for processed potatoes and onions, also helped. The group remains vulnerable to changes in commodity prices. The current slump in potato prices for example makes it unlikely that there will be a further performance improvement in FY17/18.

Vertically integrated agricultural producer

Tonkens Agrar’s c 3,000 hectares of high-quality farmland in the Saxony-Anhalt region of Germany is the starting point for a vertically integrated agricultural production group. It processes the potatoes and onions grown on the farm in-house, substantially adding value to the harvested vegetables. Manure from the dairy herd and residual material from harvesting and processing crops is used to generate electricity, creating an additional revenue stream that is predictable and non-seasonal.

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