Trading Update

Landkom International plc (AIM: LKI, "Landkom" or the "Company"), a leading producer of agricultural feedstocks in Ukraine, has issued a pre-close trading update for the year to 31 December 2008.

Strategic overview
The agricultural markets both in Ukraine and globally have sharply changed over the last six months. Generally demand for land is now no longer increasing and credit to support planting and new land development has dried up domestically.

The Board has therefore shifted Landkom's strategic focus during the autumn 2008 to concentrate on rationalising the land bank, focussing on efficiency in land usage, yield per hectare and cost controls to maximise profitability and cash-flow.

Land bank
Landkom has significantly re-organised its operations based on the experience gained in its first full year of crop production, 2007/2008. The Company is focusing its resources on its most fertile, contiguous and by definition profitable land, based around five core farms which are centred on its freehold farm bases in the west of Ukraine.

The Company is in the process of reviewing its land bank and land not meeting its new and stringent profitability criteria will be divested. This divestment will reduce both the carrying cost of the Company's unplanted land bank and the proportion of derelict land as compared to land in cultivation.

The Board anticipates retaining the best 75,000 hectares ("ha") out of the current land bank of 115,000 ha after rationalisation.

Landkom expects to resume the acquisition of leases of cultivated land as market conditions improve or opportunities arise. The Company also continues to look opportunistically at acquiring financially constrained farms which have contiguous land close to Landkom's existing operations and which have crops in the ground and equipment in place.

Harvest and planting
In H2 2008 the Company successfully drilled (planted) 31,000 ha of winter crop comprising 16,750 ha of Oil Seed Rape ("OSR") and 14,250 ha of winter wheat. This represents a more than threefold increase over the winter planting which took place in H2 2007. The excess 25,000 ha of cultivated but not planted land will help to decrease farming costs significantly for the 2009 planting.

Landkom met optimal drilling windows in the 2008 winter planting and the seed beds were in excellent condition, far improved over the previous year. All chemical and fertiliser application windows have been met and crop emergence levels were satisfactory going into the winter.

Of the 2008 harvest, all the OSR has now been sold, with approximately 50% being presold at a premium price of approximately US$ 540 per tonne excluding VAT, and the remainder being sold at market prices throughout the period. Around 50% of the harvested wheat has now been sold and the Company plans to sell the remainder shortly.

Operations and finances
Reflecting the market conditions and the reduced investment programme, the Company has downsized the local full time headcount by over 350 employees (approximately 30%) and has also halved the number of expatriate and UK based staff. Staff costs continue to be tightly monitored and improved in all areas of the business with no bonuses awarded for 2008.

Despite market conditions, Landkom is negotiating a number of efficient ways to use the strong balance sheet to raise additional capital. These include a range of operational joint ventures with the aim of divesting management control over non-core assets in return for cash consideration.

As previously announced, planned 2009 CAPEX was brought forward to 2008. There are therefore no material CAPEX items planned for 2009.

In its interim statement on 26 September 2008 the Company stated that it was seeking reimbursement of a VAT receivable from the Ukrainian government of approximately US$ 10 million. The Company is yet to be reimbursed for this receivable but the Board continues to work with the Ukrainian authorities at the highest level.

A majority of the Company's cash has been held in pounds sterling. Both the pound and the dollar have appreciated in recent months against the Ukrainian hryvna. This appreciation has reduced the Company's hryvna denominated costs and has helped to reduce the average farming cost per hectare. In addition owing to lower oil prices, fertilizer, diesel and chemical prices are lower than last year's levels at this time.

The Company expects to publish its year end figures at the end of April 2009.

Richard Spinks, Chief Executive Officer, said:
"We have gained considerable experience during a period of rapid growth in 2008 and are now realigning our strategy to reflect a sharply changed global economic environment. We are in an excellent position to develop profitably from our cultivated land bank whilst acquiring financially constrained farms when opportunities arise.

"Despite the current global downturn, the world's population continues to grow and the fundamentals of our strategy to grow a substantial enterprise introducing Western farming techniques into a fertile and underdeveloped part of Europe remain sound. Food and energy security trends also continue to support this strategy".

For further information:

Landkom International PLC
(www.landkominternational.com)
Richard Spinks, Chief Executive
Tel: +380 673 410 140
Stephen Pickup, Chief Financial Officer
Tel: +44 (0) 7825 294352

Libertas Capital
Aamir Quraishi/Anthony Rowland
Tel: +44 (0)20 7569 9650

College Hill
Simon Whitehead/Adrian Duffield
Tel: +44 (0)20 7457 2020

 

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