LUXEMBOURG, May 21, 2019 /PRNewswire/ -- Adecoagro S.A.
(NYSE: AGRO, Bloomberg: AGRO US,
Reuters: AGRO.K), a leading agricultural company in South America, announced today its results for
the first quarter of 2019.
Main highlights for the period:
- 1Q19 Adjusted EBITDA was $58.3
million, marking a 5.9% decrease year-over-year. Adjusted
EBITDA margin net of 3rd party commercialization, reached
37.1%.
- Gross sales reached $162.1
million in 1Q19, 4.2% higher year-over year.
- 1Q19 Adjusted Net Income was $11.7
million or 38.9% lower compared to 1Q18.
Financial & Operational Highlights
- In our Sugar, Ethanol & Energy business, Adjusted EBITDA
reached $31.2 million in 1Q19,
marking a $16.8 million decrease
year-over-year. Adjusted EBITDA was positively affected by: (i) the
full maximization of ethanol production (97% total TRS produced was
diverted to ethanol, an all-time record), allowing us to profit
from higher relative prices (hydrous and anhydrous ethanol traded
at a 21.7% and 24.4% premium to sugar during 1Q19, respectively),
(ii) the high level of cogeneration efficiency (73.2 KWh per ton
crushed) which allowed us to maximize energy sales, capturing
attractive prices during the quarter (prices reached as high as
BRL/MWh 450 in February); and (iii) the dilution of total
production costs, on a per ton basis thanks to the enhancements in
agricultural and industrial efficiencies, and the depreciation of
the Brazilian reais. These positive effects were fully offset by
lower crushing activities, coupled with the $26.3 million difference registered from the
mark-to-market effect of our commodity hedge position. However,
this also resulted in a $14.3 million
higher gain from the mark-to-market of our biological asset.
- Adjusted EBITDA for the Farming and Land Transformation
businesses reached $31.9 million in
1Q19, $13.1 million or 69.6% higher
year-over-year. The improvement in financial performance is
primarily explained by higher margins in our Rice and Dairy
businesses, coupled with the completion of the sale of Alto Alegre
farm, which contributed $9.4 million
to EBITDA.
In the case of the Rice business, higher margins were explained by
(i) cost dilution following the depreciation of the Argentine Peso,
(ii) higher selling volumes since we not only processed 15.0
million additional tons of rough rice (50.8% increase), but also
carried stocks from the previous quarter; coupled with (iii) the
ongoing enhancement in agricultural and industrial
efficiencies.
Regarding our Dairy business, higher selling volumes and average
prices were responsible for the increase in financial performance.
Indeed, as a result of the shortage of raw milk due to weather
related issues, prices increased margins. At our confined free
stall system, milk production was not affected allowing us to fully
profit from higher prices.
- Net Income in 1Q19 was a loss of $2.2
million, compared to a $10.9
million gain recorded in the same period of last year.
EBITDA generation was offset by: (i) the $27.8 million non-cash loss derived from the
revaluation of our U.S. dollar denominated financial debt, measured
in local currency; coupled with (ii) a $1.0
million loss resulting from the application of IAS 21: "The
Effects of Changes in Foreign Exchange Rates." (for more
information, please refer to financial note 3 "Segment
Information")
- Adjusted Net Income, a concept we introduced in 2018 to
more accurately provide a proxy cash metric, which excludes, by
definition, (i) any non-cash result derived from bilateral exchange
variations, (ii) any 3 revaluation result from the hectares held as
investment property, (iii) any inflation accounting result; and
includes (iv) any gains or losses from disposals of non-controlling
interests in subsidiaries whose main underlying asset is farmland
(the latter is already included in Adj. EBITDA) and (v) revaluation
surplus of farmland sold. We believe Adjusted Net Income is a more
appropriate metric to reflect the Company´s performance. In 1Q19,
Adjusted Net Income reached $14.5
million, $4.7 million or 24.6%
lower compared to 1Q18. (Please refer to page 33 for a
reconciliation of Adjusted Net Income to Profit/Loss).
Strategy Execution
5 –YearPlan Update – Cluster
Expansion
- The expansion of our cluster in Mato
Grosso do Sul is proceeding according to plan. A total of
50,057 hectares have been secured for planting so far, representing
93.5% of the total hectares needed to fully supply the three
million tons of additional crushing capacity. Planting operations
are also well underway with 26,778 hectares that already having
been planted now and now available. We feel confident that we will
be able to plant the remaining hectares through 2020 and 2021,
subject to weather conditions.
Milk Processing Facilities
Investment Update
- Right after taking full control of the two milk processing
facilities we acquired, all the efforts were focused in obtaining
the necessary permits and certifications to produce and
commercialize our dairy products. That took almost two months and
by the end of March we started to fully operate the plants. In the
meantime, we started to make the necessary maintenance works to
fine tune the operation and enhance industrial efficiencies. At the
same time we started developing commercial relationships with raw
milk suppliers and potential customers.
Currently, we are operating at half of the targeted capacity and
already reached break-even. The shortage of raw milk in
Argentina, resulted in high
domestic prices. As a result, all the milk is diverted to our
Chivilcoy facility to produce fluid milk for the domestic market.
It´s worth remembering that the acquisition enabled us with the
flexibility to sell into the domestic and export market, based on
relative profitability.
Based on our initial performance, we feel optimistic in achieving
the targeted ROIC and we are confident that this transaction will
be accretive for our existing shareholders.
Farmland sale at premium to independent appraisal:
- As previously announced in our 4Q18 release, during
January 2019, we completed the sale
of Alto Alegre farm, located in Tocantins, for $16.8 million. The selling price represents a 33%
premium to the latest Cushman and Wakefield´s independent
appraisal, as of September 30,
2018.
Changes to Leases Accounting –
IFRS 16:
- In January 2016, the
International Accounting Standards Board (IASB) amended IAS 17
Leases, to be effectively implemented as of January 2019. The previous lease accounting
focused on identifying when a lease arrangement was, pursuant of
its terms, equivalent to the purchase of the underlying asset. If
that was the case, the agreement was treated as financial lease and
booked accordingly. Otherwise, it was deemed as an operating lease
and remained off-balance sheet.
Under the new standard, the main focus is placed on whether the
lessee has control over the underlying asset. If this is the case,
the agreements must be capitalized by recognizing the present value
of the lease payments. At the same time, a financial obligation
must also be registered. In the case of Adecoagro, mainly land
leasing agreements in our Sugar, Ethanol & Energy business ,
must be treated as financial leases given (i) that the Company
controls key managerial decisions over the assets; and (ii) it´s
long term nature (over 12 months period).
The direct financial effects of fully applying IFRS 16 are as
follows:
-
- Increase in both assets and liabilities by the present value of
projected lease payments.
- Increase in EBITDA. The leasing costs are now replaced by
depreciation expenses which are, by definition, excluded from
EBITDA calculation. At the same time, interest expense is now
recognized. As a way to maintain the proxy cash nature of the
metric, we decided to include the depreciation expenses stemming
from the capitalization of the lease payments in the calculation of
Adj. EBITDA.
- The adoption of the IFRS 16 does not impact the Company´s cash
position
- We define Adjusted Net Income as (i)( Profit/(Loss) of the
period year, plus (ii) any non cash finance costs resulting from
foreign exchange losses for such period, which breakdown composed
both Exchange Differences and Cash Flow Hedge Transfer from Equity,
net of the related income tax effects plus (iii) gains or losses
from disposals of non controlling interests in subsidiaries whose
main underlying asset is farmland, which are relieved in our
Shareholders Equity under the line item. "Reserve from the sale of
non-controlling interests in subsidiaries plus (iv) the reversal of
the aforementioned income tax effect, plus (v) the inflation
accounting effects, plus (vi) the revaluation results from the
hectares hold as investment property and plus (vii) the revaluation
surplus of the farmland sold.
Non-Gaap Financial Measures: For a full
reconciliation of non-gaap financial measures please refer to page
26 of our 1Q19 Earnings Release found on Adecoagro's website
(ir.adecoagro.com)
Forward-Looking Statements: This press release
contains forward-looking statements that are based on our current
expectations, assumptions, estimates and projections about us and
our industry. These forward-looking statements can be
identified by words or phrases such as "anticipate," "forecast",
"believe," "continue," "estimate," "expect," "intend," "is/are
likely to," "may," "plan," "should," "would," or other similar
expressions.
These forward-looking statements
involve various risks and uncertainties. Although we believe that
our expectations expressed in these forward-looking statements are
reasonable, our expectations may turn out to be incorrect.
Our actual results could be materially different from our
expectations. In light of the risks and uncertainties
described above, the estimates and forward-looking statements
discussed in this press release might not occur, and our future
results and our performance may differ materially from those
expressed in these forward-looking statements due to, inclusive,
but not limited to, the factors mentioned above. Because of
these uncertainties, you should not make any investment decision
based on these estimates and forward-looking
statements.
The forward-looking statements made in this
press release relate only to events or information as of the date
on which the statements are made in this press release. We
undertake no obligation to update any forward-looking statements to
reflect events or circumstances after the date on which the
statements are made or to reflect the occurrence of unanticipated
events.
To read the full 1Q19 earnings release, please access
ir.adecoagro.com. A conference call to discuss 1Q19 results will be
held on May 22, 2019 with a live
webcast through the internet:
Conference Call
May 22,
2019
9 a.m. (US EST)
10 a.m. Buenos Aires
10 p.m. Sao
Paulo
3 p.m. Luxembourg
Participants calling from the US:
Tel: +1 (844) 435-0324
Participants calling from other countries: Tel: +1 (412)
317-6366
Access Code: Adecoagro
Conference Call Replay
Participants calling from the US: Tel: +1 (877) 344-7529
Participants calling from other countries: Tel: +1 (412)
317-0088
Access Code: 10130989
Investor Relations
Department
Charlie Boero
Hughes
CFO
Juan
Ignacio Galleano
IRO
Email: ir@adecoagro.com
Tel: +54 (11) 4836-8624
About Adecoagro:
Adecoagro is a leading agricultural
company in South America.
Adecoagro owns over 247 thousand hectares of farmland and several
industrial facilities spread across the most productive regions of
Argentina, Brazil and Uruguay, where it produces over 1.9 million
tons of agricultural products including sugar, ethanol,
bio-electricity, milled rice, corn, wheat, soybean and dairy
products, among others.
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SOURCE Adecoagro S.A.