Agrokultura seals disposals in land grab reversal

26.07.2013

Agrokultura shares recovered ground as the Black Sea farm operator revealed success in a longstanding plan to consolidate its Ukraine landbank, with plans afoot to centralise its Russian operations too.

The group, formerly known as Alpcot Agro, said it had signed deals on the disposal of 24,800 hectares of land, mainly in central and southern Ukraine, to other farming groups for $5.6m excluding machinery, buildings and crops.

The deals, equivalent to $226 per hectare, plus some further land swaps, leave the group with 65,000 hectares in the west of Ukraine, an area which, while typically less sunny than other parts of the country, has more reliable rainfall.

"A few units less sun is not going to bankrupt you, but getting no rain will," Agrokultura finance director Stephen Pickup said.

'Enemy of profitability'

The consolidation also concentrates Agrokultura's Ukraine portfoio, of which it has some 55,000 hectares in production, within three hours' drive of its headquarters in Lviv, allowing the group to manage better its portfolio.

"Inefficiencies are the real enemy of profitability in this business and we are trying to be as efficient as possible," Mr Pickup told Agrimoney.com.

Indeed, the group was in the process of "doing something similar" in Russia, where it has 161,000 hectares under control.

Such a retreat is, however contrary to the land grab mentality of 2007-09 which saw farm operators in the former Soviet Union, and elsewhere, build up large land portfolios, some of which has still yet to be tilled.

Many operators in the region also prefer holding land in different geographies as a hedge should poor weather wipe out crops in one.

Landkom assets

Agrokultura's land disposals are mainly of land acquired with last year's purchase of rival Landkom, for which Mr Pickup was finance director.

However, the deals did not question the need for the Landkom deal, which had enhanced the concentration of land in western Ukraine, enabled the release of land from disposals, and come with other assets, he said.

"We need now to make sure we make money out of remaining Landkom assets," he said.

Agrokultura shares stood 3.5% higher at SKE3.30 in lunchtime deals in Stockholm.


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