LUXEMBOURG, Nov. 13, 2019 /PRNewswire/ -- Adecoagro S.A. AGRO Bloomberg: AGRO US,AGRO)), a leading agro-industrial company in South America, announced today its results for the third quarter of 2019.
Main highlights for the period:
- 3Q19 Adjusted EBITDA(3) was $93.5 million, marking a 17.4% increase year-over-year. Adjusted EBITDA margin reached 40.3%, 2.2% higher year-over-year.
- Gross sales reached $219.9 million in 3Q19, 14.4% higher year-over year.
Financial & Operational Highlights
- In our Sugar, Ethanol & Energy business, Adjusted EBITDA reached $85.1 million in 3Q19, 33.0%, or $21.1 million higher compared to the same period last year. Financial results were positively impacted by: (i) our continued strategy of maximizing ethanol (87% of total TRS production) enabling us to make the best use and extract the highest value from our sugarcane, (ii) the high level of cogeneration efficiency of 76.2 KWh, which resulted in higher energy sales, (iii) the dilution of industrial costs, on a per ton basis, thanks to higher crushing activities, coupled with efficiency enhancements and the implementation of a cost saving program; and (iv) the $17.0 million gain in the mark-to-market of our unharvested sugarcane driven by higher sugar prices and the depreciation of the Brazilian real. These positive effects were partially offset by adverse weather conditions - specifically dry weather and frost -, which resulted in lower yields and thus in a higher harvested area. This, in turn, translated into higher agricultural costs, year-over-year.
On a year-to-date basis, Adjusted EBITDA totaled $197.9 million, marking a 2.6% increase compared to the same period last year. The main drivers for the increase were lower production costs, coupled with a higher gain resulted from the mark-to-market of our sugarcane biological asset. Positive results were mainly offset by the $48.8 million lower result generated from the mark-to-market of our sugar future contracts. - Adjusted EBITDA for the Farming and Land Transformation businesses reached $13.4 million in 3Q19, $7.0 million lower year-over-year. The decrease is mainly attributable to the performance of both our Crops and Rice businesses.
In our crops business, the combined effect of higher yields, enhanced operational efficiencies and the cost dilution as a result of the year-over-year depreciation of the Argentine peso, was fully offset by lower average selling prices.
As for the Rice business, the re-introduction of export taxes coupled with lower sales volumes - as a result of shipment delay - were responsible for the lower year-over-year financial performance.
On an accumulated basis, Adjusted EBITDA in our Farming business (excluding Land Transformation) totaled $46.4 million, $17.8 million lower year-over-year. The reasons for the decrease vary from business to business. However, overall, lower average selling grain prices and lower selling volumes in our Rice business offset lower production costs stemming from enhanced operational efficiency. - Net Income in in 3Q19 resulted in a loss of $30.3 million, compared to a gain of $3.5 million recorded during the same period of last year. The $33.5 million decrease was primarily explained by the $62.3 million difference generated in "Financial Results". The higher balance of U.S dollar denominated debt in Argentina, coupled with the depreciation of the Brazilian real explain this difference year-over-year.
- Adjusted Net Income excludes, by definition, (i) any non-cash result derived from bilateral exchange variations, (ii) any revaluation of 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. Adjusted Net Income reached $45.5 million for 9M19.
Strategy Execution
Independent Farmland Appraisal Report
- As of September 30, 2019, Cushman & Wakefield (C&W) updated its independent appraisal of Adecoagro´s farmland. Adecoagro´s subsidiaries held 225,631 hectares valued at $716.7 million, 8.7% lower year-overyear. Political and economic uncertainty in Argentina resulted in a sharp decrease in transactions, negatively impacting our land portfolio valuation. Farmland value in Argentina went down by 9.6% while farm valuation in Brazil and Uruguay were unchanged.
Please visit ir.adecoagro.com for the Cushman & Wakefield 2019 Appraisal Report. These appraisals are subject to change based on host of variables and market conditions. Please also refer to page 72 of our Annual Report on Form 20-F, for the year ended December 31, 2018 for the methodology employed in the appraisals of our farmland by Cushman & Wakefield.
Weather Update - Mato Grosso do Sul
- Weather in Mato Grosso do Sul has been dry since the beginning of 2019. As of October, the region reported 768 mm of rainfall, 46% lower compared to the 10-year average and 52% lower compared to the same period last year. This negatively impacted our cane development and is reflected in lower achieved yields. At the same time, the frost occured in most of the cane area in the Center-South region of Brazil, including part of our cane plantations at the cluster, further contributed to lower yields and TRS content.
We rapidly fine-tune our milling strategy and adapt it to adverse weather conditions. We decided to lower our crushing pace as a way to: (i) maximize ethanol production and profit from high prices; and (ii) to allow the cane to grow and benefit from normalized rains during March and April. This resulted in the postponement 2019 and 1Q20 crushing activities.Neither EBITDA nor cash generation should be significantly compromised. Thanks to our continuous focus in enhancing efficiencies and upgrading our industrial assets, we were able to increase our daily ethanol production capacity by 500,000 liters. The increased storage capacity we built, allowed a more efficient carry strategy throughout the year. Indeed, factoring for the price differential that we expect (as we are pushing sales forward towards the end of the year) the entire investment in expanded ethanol storage will be returned within a year. Considering the constructive ethanol price scenario going forwards, we are confident that higher production will offset the impact of lower cane harvest.
(1) | 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 27 of our 3Q19 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 3Q19 earnings release, please access ir.adecoagro.com. A conference call to discuss 3Q19 results will be held on November 14, 2019 with a live webcast through the internet:
Conference Call
November 14, 2019
9 a.m. (US EST)
11 a.m. Buenos Aires
11 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: 10136312
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.
SOURCE Adecoagro S.A.
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