Agria Corporation revenues down 15% in FY 2013

Agria Corporation (Agria), an international agricultural company with operations in China, South America, New Zealand and Australia, recently announced its financial results for the fiscal year ended June 30, 2013.

Consolidated revenues were RMB5.9 billion (US$961 million), a decrease of 15% from revenue of RMB6.9 billion in fiscal year 2012. The decrease in revenue was due primarily to a decrease in sales at a subsidiary, PGG Wrightson Ltd ("PGW"), that resulted from a change in the way the retail business was conducted. PGW has entered a new contractual arrangement with suppliers of certain rural products since July 2012 where PGW sells products as an agent on behalf of the suppliers rather than trading on its own. Prior to the new arrangement, the full transaction values of sales and purchases were recorded as revenue and cost of revenue. As an agent, PGW only accounts for commission income it earns from the suppliers as revenue. This, however, did not have an impact on gross profit or operating income.

The Group recorded an operating loss of RMB1.1 billion (US$184 million), compared to operating income of RMB143 million for the fiscal year 2012. Operating income decreased due to an impairment loss on land use rights and non-current prepayments of RMB357 million (US$58 million) and an impairment loss on goodwill of RMB883 million (US$144 million) (of which non-controlling interest shared RMB438 million (US$71 million)). Operating income excluding these charges was RMB110 million (US$18 million), which represented a decrease of 23% compared to fiscal year 2012.

Mr. Alan Lai, Agria's Chairman of the Board, commented, "Over the past two years, we have steadily built Agria into an international agricultural company. We see many opportunities to drive sales of our proprietary seeds, by more fully leveraging on Agria's vast network of relationships throughout key agricultural regions across Asia. With our international reach -- which spans China, Australia, New Zealand, and South America -- and our advanced proprietary seed technologies, we believe we are well-positioned for future growth."

Strategic Outlook

PGW faced challenging trading conditions during the financial year 2013. However, with anticipated stronger agricultural commodity prices and return to normal conditions on farm, the Company expects to see continued improvement in the fundamental performance of its business through the coming financial year.
The strategic integration of PGW technological capabilities and the Company's market reach is expected to enhance strengths and boost our future plan for the development of the South American and China markets. The agricultural and seeds sectors and economies are highly recognized in these fast expanding markets. With world-leading seed technologies and management expertise, the Company believes it will continue to create value for its customers in these markets and generate long term significant investment return for its shareholders.

The Company expects further consolidation trends in the global agriculture industry, and in particular, in markets which would provide merger and acquisition opportunities for us, including North America and Greater China, and plans to explore external financing to facilitate expansion of our market reach in these key markets. The Company considers it to be of strategic importance that it continues to stay ahead of these market opportunities with an aim of enhancing returns to its shareholders.