Highlights:
*Strong revenue growth in 2011 driven by substantial sales in Mexico
*HYT products for USD 28 million shipped and invoiced in 2011
*HYT A product licence received in China
*Expansion of production facilities in Etchojoa, Mexico initiated
*Strengthening capabilities within technical and sales support a key to further growth
*Part of 2011 sales may be recognized as revenue in 2012 pending subsidies structures under the MasAgro programme
CEO comment:
"Agrinos' introduction of a new biotechnology which increases agricultural yields, crop quality and sustainability has been well received during 2011 - both by farmers, companies and public officials. When it comes to short term sales, it is of course our commercial breakthrough in Mexico with the governmental MasAgro programme which has lifted the company the most in 2011. New trials, customers and market entries, as well as obtaining a license for HYT A in China, further underlines the increased international adoption of our HYT technology.
I am satisfied that Agrinos delivered a significant sales growth in 2011 and that we produced and delivered HYT products equal to a value of approx USD 28 million during the year. A major part of these sales were achieved in Mexico under the umbrella of the MasAgro programme, the Mexican Governments initiative to improve agricultural performance. The sales were generated as a consequence of the increasing awareness and acceptance of our HYT technology, since we have a been appointed as a formal supplier under the programme. At the same time, we look forward to when the Mexican government can formalize the MasAgro subsidies distribution structures. The promulgation of these structures could impact the level of revenues to be recognized in our accounts for 2011. Nevertheless, the demand situation looks strong regardless of subsidy distribution structures.
Agrinos is currently building capacity to meet the substantial demand that both commercial distributors and farmers express in Mexico today. We are furthermore prepared to meet additional requirements from vehicles under the MasAgro programme. Agrinos flexible production system enables the pace of production ramp-up and product deliveries to be continuously adapted to the overall demand development for HYT products. While the main focus within commercial activity for Agrinos in 2012 will be to continue to increase sales activities under the MasAgro umbrella through various commercial distribution structures, the company is prepared to deliver on the plan described in the LOI with Mexico's agricultural ministry SAGARPA.
Moving forward, we are continuing an efficient ramp-up of our organizational capabilities to support our growth and strengthen Agrinos' market positions. The two main priorities are technical support and sales. As planned Agrinos has accelerated hiring and training of technical support and sales professionals in all markets, and continued to industrialize corporate structures in order to prepare the company for further growth in the years to come."
Group performance
Agrinos is a growth company with a progressive business plan. The company reported an unaudited 2010 pro forma revenue of USD 3.7 million and reiterated its 2011 full year revenue target of USD 17.6 million when the company released its annual report in June 2011. On the back of the increased expectations to sales development following the appointment as an official supplier of so-called "biofertilizers" through the MasAgro programme, the full year 2011 revenue target was lifted to USD 28 million in October. Agrinos has sold and delivered HYT product volumes equal to approx USD 28 million during 2011, but is awaiting a final conclusion of revenue recognition in Mexico before the unaudited full year 2011 revenue and financial statements are announced. Approximately 20% to 30% of the 2011 sales could potentially be postponed and as such recognized as 2012 revenue.
Operational status
Agrinos has divided its operations into Business Area South America (Mexico, Brazil and Latin America), Business Area North America (US West and US East), Business Area EMEA (Western Europe, Eastern Europe and Middle East and Africa), Business Area South East Asia (Malaysia and Indonesia) and Business Area China and India. This operational status will focus primarily on Mexico and China but Agrinos will revert later with a company update containing the company's consolidate unaudited full year 2011 financial results, and an operational review covering its entire business.
Mexico:
Agrinos announced on the 19th of September 2011 that it had signed a "Letter of Intent" (LOI) with Mexico's Ministry of Agriculture, Livestock, Rural Development, Fisheries and Food (SAGARPA) pertaining to the large scale use of its products within a newly formed agriculture programme known as "MasAgro". SAGARPA has initiated this ten year, national scale agricultural development programme to increase maize and wheat productivity, obtain higher returns on the yields of these strategic crops and decrease the regional and global environmental impact associated with their cultivation. One of multiple avenues SAGARPA is pursuing to reach their ambitions under this program is the introduction of so called "biofertilizers" to increase productivity in traditional agriculture in a sustainable way In October, the company received a binding purchase order from SAGARPA's designated agent, Mex Agro Internacional S. A. de. C. V. This order specified quantities of HYT products sufficient to treat 1 million hectares of agricultural land participating in the MasAgro program. The deliveries of these products were to be made on a running basis over the coming four months through January 2012.
The LOI represented SAGARPA's and Agrinos mutual intention of identifying viable avenues of providing farmers with biofertilizers in general and HYT products in particular. As described above, Agrinos also entered into an agreement with the government appointed MexAgro SA de CV, under which the company received a purchase order to enable delivery in accordance with the LOI by the use of targeted funding sources from various government subsidy programmes as the incentive. The final formal structures for the use and dispersion of these incentives have been delayed, and as a consequence,the deliveries to Mex Agro Internacional S.A. de C.V. have been slow. However as Agrinos was appointed an official supplier under MasAgro, the company could accelerate the promotion, sales and invoicing of HYT products through commercial channels in multiple regions, covering several crops, in Mexico. This resulted in total group sales approximately in line with the 2011 revenue ambition of USD 28 million.
As for the ambitions for the spring/summer season of 2012 and the autumn/winter season of 2012/2013, Agrinos is experiencing increased interest from distributors and farmers across Mexico and this is expected to drive the company's growth further. Agrinos is positioned to supply additional quantities of HYT to government appointed vehicles, including MexAgro, once the MasAgro subsidies distribution structures are formally established. Related to this, the company is keeping a close dialogue with SAGARPA to enable appropriate planning of production and inventory.
Agrinos is monitoring the results and progress from current crop cycle applications in Mexico, and will prepare relevant and third party reports on yield results and soil fertility as a basis for the promotion of the principles under MasAgro for evaluation and use by the Mexican Government.
The LOI with SAGARPA also indicates an intention to increase the use of Agrinos products during 2012 and beyond, for product application on between 7 million and 14 million hectares of agricultural land per year. It is Agrinos' view that the LOI reflects a true commitment and ambition over a ten-year period and Agrinos is capable and prepared to deliver on the Mexican government's target of developing the productivity and sustainability of the country's agricultural sector on a national scale.
Agrinos' focus in Mexico going forward will be to ensure the correct application of HYT products and follow-up of MasAgro participants, as well as other customers. To enable timely deliveries and follow-up of the MasAgro programme and the general market in Mexico, Agrinos has accelerated the strengthening of the Mexican organization, particularly through an increase of technical support personnel.
China:
Agrinos strengthened its strategic basis for growth in China during 2011. In December, the company obtained from the Ministry of Agriculture of the People's Republic of China a formal nationwide product license for its microbial HYT(tm) A product. The product license enables Agrinos to sell its products in all provinces in China through its local joint venture company during 2012. Following the HYT(tm) A approval, contracts have been signed with a Chinese organic farming group and a government related company for HYT deliveries. With the HYT(tm) A license in place, the product becomes eligible for governmental purchase programmes. The product registration supports the underlying momentum of technology adoption with key clients in strategic regions across China.
Agrinos' joint venture company in China, Beijing Agrinos Biotech Co Ltd, has conducted trials and tests in 18 different regions and important agricultural provinces during 2011. In parallel and based on a previously achieved HYT(tm) B product license, sales and marketing efforts have been directed towards the retail segment, as well as governmental and large institutional parties. Moving into 2012, activities are increasingly focused towards key opinion leaders with large commercial potential.
Other business areas:
Agrinos continues to experience overall positive trial results in all regions when HYT is used and followed-up correctly. To ensure trials with consistent results when the company is expanding, Agrinos will focus on an integrated crop management philosophy and implement a strategy of establishing Centers of Excellence in multiple geographical regions, in order to ensure dissemination of knowledge and support to customers. Strengthened focus on continuous improvement efforts in Quality Assurance and Control throughout the value chain will furthermore be a priority.
Agrinos has already established a Centre of Excellence in Mexico supporting the Americas and a unit in the UK is being developed to support the European markets. The company is also in the process of expanding the Colombian organization's activities into Peru, as a part of the Latin American strategy towards key agricultural regions.
Capacity expansion
Agrinos currently has an annual production capacity of 8 million litres of HYT A, and 4 million litres of HYT B. Based on the projected demand from Mexico and other markets, Agrinos initiated another phase of expansion of the production facilities in Etchojoa in Mexico in November. The expansion project will be made step wise and Agrinos will ultimatelybe able to increase its annual production capacity by 22 million litres of HYT A and 11 million litres of HYT B, reaching an annual capacity of 30 million litres of HYT A and 15 million litres of HYT B by July 2012. Related capital expenditures of an estimated USD 11 million will be financed through the proceeds from the capital increase in November 2011. This expansion method secures necessary capacity, while giving flexibility with regards to the timing of the capital expenditures. Practically, this means that the production plant buildings will be erected, and bioreactors will be sequentially installed in order to match global demand.
Share capital increase
Related to Agrinos' acquisition of distribution networks in Mexico and Colombia as described related to the capital increase in November of 2010, the company entered into asset purchase agreements where seller loans to Agrinos constituted parts of the settlements. It was agreed that the NOK 6.0 million seller loans were to be converted into Agrinos shares at a later stage, on predefined terms.
To effectuate the conversion of these loans into shares in Agrinos, an extraordinary shareholders' meeting held on November 11 2011 granted the Board of Directors an authorization to increase the company's share capital with up to NOK 2,400 by issuing up to 240,000 new shares each with a par value of NOK 0.01.
In accordance with the authorization, the Board of Directors resolved a capital increase where the share capital has been increased by NOK 2,400 from NOK 370,348.33 to NOK 372,784.33 through the issue of 240,000 new shares each with a nominal value of NOK 0.01. The capital increase was completed in 2011.
By this, Agrinos has completed all outstanding requirements relating to the acquisition of distribution networks in Mexico and Colombia.
Full year 2011 financial results
Agrinos aims to announce unaudited full year 2011 consolidated financial statements in March 2012 and will announce the event in due course.
Investor contacts:
Tom Einar Rysst-Jensen
Chief Executive Officer
+47 977 94 958
tom.rysst-jensen@agrinos.com
Hellek Braathen
Chief Financial Officer
+47 450 46 037
Hellek.braathen@agrinos.com
Investor and media contact:
Harald Bjørland
Investor relations and Corporate communications
+47 908 58 221
harald.bjoerland@agrinos.com
About Agrinos
Agrinos is a green technology company committed to improving the productivity and decreasing the environmental impact of modern agriculture. Agrinos' line of High Yield Technology(tm) ("HYT(tm)") products help farmers to practice profitable, high yield sustainable agriculture by providing increased crop productivity, improved efficiency of conventional fertilizer use and decreased environmental footprint. Certified organic and based on Agrinos' proprietary technology, the HYT(tm) products provide these benefits by strengthening the soil-based microbial ecosystem, stimulating crop development at key points in the growth cycle and boosting natural plant resistance to pathogens and threats. With solutions for a variety of crop categories, the technology comprising the HYT products has demonstrated its value through more than 1500 trials in key agricultural regions worldwide.
Founded in 2009, Oslo-headquartered Agrinos has grown to include offices and operations in the USA, Mexico, Colombia, Brazil, UK and Europe, Ghana, Indonesia, Malaysia, India and the People's Republic of China. Agrinos enjoys financial backing from a number of leading international investors and a strong management team lead by its Chairman, Dr. Thorleif Enger.
This announcement contains certain forward-looking statements relating to the business, financial performance and results of the Company and/or the industry in which it operates. Forward-looking statements concern future circumstances and results and other statements that are not historical facts, sometimes identified by the words "believes", expects", "predicts", "intends", "projects", "plans", "estimates", "aims", "foresees", "anticipates", "targets", and similar expressions. The forward-looking statements contained in this announcement, including assumptions, opinions and views of the Company or cited from third party sources are solely opinions and forecasts which are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any anticipated development. Neither the Company, nor any of their parent or subsidiary undertakings or any such person's officers or employees provides any assurance that the assumptions underlying such forward-looking statements are free from errors nor does any of them accept any responsibility for the future accuracy of the opinions expressed in this announcement or the actual occurrence of the forecasted developments. No obligation, except as required by law, is assumed to update any forward-looking statements or to conform these forward-looking statements to our actual results. |