KSG Agro reveals 5x assets increase over 2011

KSG Agro (KSG PW) reported its unaudited 1Q12 financials yesterday. Revenues were up 6x yoy to USD 4.6 mln, and operating profit increased to USD 2.4 mln in 1Q12 from USD 1.5 mln a year ago. It also reported that total assets increased to USD 123 mln at the end of 2011 from USD 97 mln at the end of 9M11 and USD 26 mln at the end of 2010, driven primarily by an increase in the book value of PP&E and reported goodwill from acquisitions. 

Yegor Samusenko: As farmers sell most of their produce in the second half of the year, KSG Agro’s first quarter figures hardly deliver any material information about the company’s performance. More interesting is the balance sheet data for 1Q12 and 2011 disclosed in yesterday’s report (the company has not yet published its full 2011 statements). KSG Agro seems to have boosted its assets by more than USD 25 mln through the consolidation of a pig farm in 4Q11, a 50% stake in which was acquired during the period. This follows several other acquisitions in 2Q11-3Q11, which boosted its total assets 5x within a year, which we believe hardly represents real growth in the company’s size. We believe this poor reporting practice could be behind the company’s ongoing dispute with its auditors, who still have not signed KSG Agro’s report for 2011.