Agria Group – Q2 2024 cons review – Positive inventory position for 2025 hurt by increased leverage

Q2 2024 Consolidated Results

• Agria’s total consolidated revenues decreased 9.5% YoY in Q2 2024 to BGN 309 mln. That, however, includes the operational revenues, which decreased 9.2% to BGN 301 mln, and financial revenues, which decreased 31% to BGN 3mln.
• In the operational revenues account, the sales of goods and materials, which represent the sale of grains, marked a decline of 5.6% to BGN 260 mln. The sales of production, which is the oils produced from oilseed grains, marked a bigger change of 32.9% to BGN 38.6 mln. These two revenue streams represent over 99.1% of the sales revenue, the rest of which is sales of services. Additionally, the government subsidies increased nearly 47% to BGN 5 mln.
• Profitability was negatively impacted by the market dynamics. EBIT and EBITDA had dropped by 7% and 11% respectively. EBIT was BGN 5 mln and EBITDA BGN 13.1 mln. The main accounts in OPEX marked proportionate decreases. COGS, representing 73% of OPEX, decreased 7% to BGN 219.6 mln.
• Operating Revenues and Operating Expenses dropped practically by the same pace – 9.25% for Revenues and 9.28% for OPEX. This lead to a smaller drop in EBIT by 7% to BGN 5mln, but due to the greater difference in the amortization account, EBITDA dropped 11% to BGN 13.1mln.
• Net Profit went into negative territory to become a loss of BGN 4.2mln due to the larger financial expenses associates with the greater leverage from bank loans that they took over the year.
• As mentioned in our annual review, they continued the trend of leveraging. Long term bank debt marked a massive increase of 83% to reach BGN 81mln by the end of 2023. For the 6 months of 2024 the trend continued albeit at a slower pace – they increased 26.8% to reach BGN 81.2mln. Similarly, short term bank loans increased 74% by end of 2023 and another 10% to reach over BGN 224mln at the end of Q2 2024.
• The increased leverage added additional BGN 38.3mln of both long and short term debt (BGN 17.5mln long term and BGN 20.8mln short term), which affected the financial expenses leading to the financial loss for the period. The financial expenses were not affected by the leasing liabilities as they dropped marginally to BGN 22.5mln.
• Trade liabilities marked an increase of 13% for the 6 months of 2024 (the company did not provide breakdown of current liabilities in its Q2 2023 report). While the factoring liabilities in that went from BGN 7mln to zero and the current portion of long term bank debt marked a slight decrease from BGN 14.2mln to BGN 13.3mln, the increase was due to the rise of Liabilities to suppliers, which more than tripled to BGN 20.8mln.
• Sales marked a decline of 9.9% YoY to reach BGN 301mln. While this result seems negative, considering the macroeconomic environment is important. For the 1 year period the prices of their main goods marked significant drops. Wheat prices declined 11.97%, barley declined 22.50%, corn declined 14.96% and sunflower seeds declined 15.57%. This allows us to conclude that Agria managed to sell greater quantities, but the macro environment was responsible for the decreased value of the sales.
• Similarly, the value of inventory is to be reviewed in a similar matter. It dropped 1.3% to BGN 147.4mln. In that, materials dropped 5.7% to BGN 86.5mln. The dynamics in it are multidirectional. There was a major sell-off of the major account of sunflower seeds (decreasing 60% to BGN 25mln), but the increase in the other (oil, wheat and barley) compensated nearly all of the BGN 38mln drop.
• Alternatively, the production in progress account increased over 29% to reach BGN 30mln. Production also increased from BGN 4.9mln to BGN 10.2mln.

Full report can be accessed here.