Vision, Goals and Strategy

Vision

Trigon Agri’s vision is to be the most cost efficient integrated commodities operator, from land acquisitions to grain trading, globally using sustainable farming methods.

Goals

Trigon Agri has formulated a comprehensive goal and a set of five-year goals.

Comprehensive goal

Trigon Agri as a cost effecient integrated soft commodities operator, is a price taker and revenues are dependent on market prices for the commodities produced. Although the group to some extent can manage its revenues through choosing the timing for the sale of its commodities. Trigon Agri group owns elevator storage capacity which allows it to store its produce over longer time periods. The main operational focus is on cost management. Therefore, the operational goal is to produce its commodities at the lowest possible price per tonne. This is planned to be achieved through continuous improvements of the efficiency in its production operations.

Five-year goals

Trigon Agri’s five-year goals are described below.

• Increase land under control from 170,000 hectares to 300,000 hectares

• Increase harvest from 82,000 hectares to 200,000 hectares

• Maximise efficiency of production sites below 7 employees per 1,000 hectares for area under production

• Expand elevator storage capacity from 322,000 tonnes to 662,000 tonnes

• Expand trading volumes with a similar growth rate as own production

• Release capital from milk production by divesting or spinning off the activities

Strategy

Trigon Agri group’s overall business strategy covers every value-added activity from the acquisition of agricultural land and former collective farms in Russia, Ukraine and Estonia, subsequent introduction of modern technology and experienced farm management, as well as follow-on storage, sales and trading activities with the purpose of maximising prices achieved for the group’s commodities.

The business strategy is depicted below.

The overall business strategy of Trigon Agri can be summarised as follows:

Focus on large-scale farming clusters

Trigon Agri acquires farming operations and agricultural land within small geographical areas (building up land concentration around grain storage capacity within a geographical radius of up to approximately 75 kilometres) with an aim to form large cereal farming clusters of more than 80,000 hectares, a size which justifies significant investment and realises managerial efficiency.

Acquire land next to road, rail and storage infrastructure

Trigon Agri only acquires land which has access to the required road, rail and storage infrastructure.

Set up operations next to regional population centres

Trigon Agri builds its clusters in vicinity to regional population centres which, in addition to offering more developed production infrastructure, facilitates recruitment and retention of high quality employees for cluster level management.

Use primarily highest capacity Western manufactured machinery

Trigon Agri focuses on using primarily highest capacity Western manufactured machinery, allowing for high efficiency in operations.

Use Russian language speaking management teams

Trigon Agri uses local management teams together with primarily Estonian co-managers. The Estonian co-managers are Western trained but speak fluent Russian and understand the post-Soviet mindset. This enables the company to quickly implement technological and operational changes required under modern production standards.

Selectively implementing international best practice

Trigon Agri works closely with leading global agronomic advisors and technology providers to pick and choose approaches best suited for its own regional climate, soil and manpower. New technologies are first tested and tried on the company’s test-fields prior to being implemented in large scale on a group-wide basis.

Acquire or build own elevator storage capacity

Trigon Agri only sets up operations where it can either acquire or build its own elevator storage capacity, strengthening the independence of regional traders and storage providers.

Develop integrated commodities production, storage and trading operations

On the basis of its production and storage operations the company has developed its own trading operations. This allows for maximisation of sales prices for the company’s produce and for capturing available trading margins from consolidating crop from small regional farmers which do not have access to distribution channels.

Setting up production clusters in geographically diversified areas allowing for weather hedge

Trigon Agri has set up its production clusters at large distances from each other, allowing for hedging against regional weather conditions and providing for a better group level predictability of cash flows.

Expansion of agricultural land portfolio in the Black Earth region

Trigon Agri continues to build up its cereal farming land portfolio in the Black Earth region of Russia and Ukraine, areas known for the very high fertility of the soil and allowing for production of grains and oilseeds at some of the lowest production costs available globally.

Competitive strengths

The management believes that the company’s main competitive strengths are:

• High-quality land portfolio

The group’s land areas for cereal production are located in the Black Earth region, offering some of the lowest production costs of grains and oilseeds globally.

• Optimal geographic location with access to required infrastructure and personnel

The production clusters are contiguous and compact, allowing for low production logistics costs, and are located close to regional population centres providing access to required infrastructure and personnel.

• Some of the lowest production costs in its region

Due to high potential for economies of scale from land concentration and high-capacity Western manufactured machinery, the group obtains some of the lowest production costs in the Black Earth region where many competitors are substantially smaller in size and rely on out-dated Soviet-era machinery.

• Efficient application of modern agricultural know-how in the former Soviet Union setting

The Western training and Russian language skills of its key management in combination with their knowledge of the post-Soviet environment allows Trigon Agri to implement modern agricultural know-how efficiently in the former Soviet Union setting.

• Integrated business model with access to grain elevators and trading expertise

Trigon Agri either already owns or is in the process of building its own elevator storage facilities at each cluster which strengthens independence of regional traders and storage providers. The group’s sales and trading business allows the group to obtain the best available prices for its commodities through the execution of deliveries both domestically as well as to export markets. Further, it allows the group to combine its own goods with third-party commodities thereby increasing sale volumes and average prices achieved.