Tonkens Agrar AG (DE:GTK)'s 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.
Profit after tax trebles
Group revenues rose by €0.5m year-on-year during H117/18 to €8.2m. This was attributable to the successful expansion of sales of processed potatoes and onions. Improved milk prices were offset by extremely low prices for unprocessed potatoes. The cost of materials as a percentage of revenues dropped from 46.6% in H116/17 to 45.5%, as material costs grew more slowly than revenues. Personnel cost increases were limited to 2%. Profit after tax rose by €1.9m to €2.6m.
This was partly the result of a more than 70% increase in the volumes of peeled potatoes processed, which is a high-margin activity, partly a €0.9m uplift in other income, which benefitted from the sale-and-leaseback of property. Net debt reduced from €17.7m at end June 2017 to €16.5m, cutting gearing from 193% to 140%.
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