LUXEMBOURG, Aug. 13, 2020 /PRNewswire/ -- Adecoagro S.A.
(NYSE: AGRO, Bloomberg: AGRO US,
Reuters: AGRO.K), a leading agro-industrial company in South America, announced today its results for
the second quarter ended June 30,
2020. The financial information contained in this press
release is based on unaudited condensed consolidated interim
financial statements presented in US dollars and prepared in
accordance with International Financial Reporting Standards (IFRS)
except for Non - IFRS measures. Please refer to page 34 for a
definition and reconciliation to IFRS of the Non - IFRS measures
used in this earnings release.
Main highlights for the period:
- Adjusted EBITDA(3) in the Farming & Land Transformation
business in 2Q20 was $40.2 million,
$29.7 million higher than in 2Q19.
Results include a gain of $10.1
million derived from the sale of a farm in Argentina.
- Adjusted EBITDA margin year-over-year increased by 8.3% and
7.1% in 2Q20 and 6M20, respectively.
Financial & Operational Highlights
- During 2Q20 we have been able to continue operating our
business on a regular basis in spite of the pandemic that spread
through the region. Given the general slowdown of the economies and
the decrease in prices, we have taken several strategic measures to
mitigate the impact. We reassessed our cost structure, reduced
SG&A expenses, put on hold uncommitted capital expenditures and
raised short-term credit lines to strengthen our cash position, as
part of an integral risk management program that includes a
$100 million loan agreement with
IFC.
- In the Sugar & Ethanol industry, ethanol experienced a
decrease in price and demand mainly explained by (i) the fall in
international oil prices which translated into a drop in the price
of ethanol and (ii) the reduction of circulation of people in
Brazil as a protective measure in
response to Covid-19, leading to a natural decline in the demand
for fuels and biofuels. The impact of these factors caused the
ethanol industry to experience a challenging second quarter, and
led us to reassess our strategy to adjust to the new scenario.
Indeed, we diverted 54% of TRS production to sugar (compared with
25% during 2Q19), continuing with our strategy of maximizing the
product with the highest marginal contribution; we implemented a
cost reduction plan which included the temporary suspension of
employees contemplated in MP 936/20; and we reduced our crushing by
1.1 million tons compared to 2Q19, which we expect to recover
during the second semester. Indeed, during July we reached a record
high of 1.7 million tons of sugarcane crushed as well as an all
time record production of sugar. This improvement in our
operations, coupled with a positive outlook in terms of
productivity, will allow us to take advantage of the recovery in
ethanol's fundamentals, as seen in an 11% month-over-month increase
in demand and only a 9% year-over-year decrease.
- Adjusted EBITDA in our Sugar, Ethanol & Energy business
reached $45.4 million in 2Q20, 44.4%,
or $36.2 million lower to the same
period of last year. This decrease is mainly explained by a 46.3%
reduction in net sales driven by the lower average prices of sugar,
ethanol and energy measured in U.S. dollars and the lower volumes
of ethanol and energy sold. This decrease was partially offset by
the higher volume of sugar sold, the lower cost of production and
SG&A expenses, driven by the combined effect of our cost
reduction plan, enhanced agricultural and industrial efficiencies,
and the depreciation of the Brazilian Real that further contributed
to reduce costs measured in U.S dollar.
- Adjusted EBITDA for the Farming and Land Transformation
businesses reached $40.2 million in
2Q20, $29.7 million or four times
higher year-over-year. The increase is attributable to the
$10.1 million gain derived from the
sale of a 811 hectare farm in Argentina, in addition to the improved
performance of every segment in the Farming business as our
competitive advantages placed us in a solid position to promptly
adapt to the current scenario and capitalize on the increased
demand for most food products.
Adjusted EBITDA in the Crops business registered an increase of
$14.0 million compared to 2Q19.
Results were mostly driven by (i) a year-over-year increase in
harvested area, led by 22 thousand hectares more corn generating a
$4 million gain in Changes in Fair
Value, and (ii) higher average prices despite the impact of the
pandemic, as we leveraged on our structure to increase the
participation of higher-value crops such as peanut and sunflower,
which fit in with our traditional crops and enhance the
profitability of the rotation. We have recently invested in a
second blanching line in our peanut facility to be able to increase
peanuts in the rotation.
The Rice business reported a $5.2
million increase in Adjusted EBITDA, mostly driven by an
increase in demand both in the domestic and export market as
countries built buffer stocks and increased their food consumption
in response to the pandemic. This, in addition to the higher prices
observed in the export market and the increase in the sales mix of
higher margin products such as parboiled rice.
- Net Income in 2Q20 resulted in a loss of $12.1 million, compared to a gain of $23.3 million recorded during the same period of
last year. The $35.3 million decrease
is primarily explained by the non-cash loss derived from the
revaluation of our U.S. dollar denominated financial debt, measured
in local currency.
- Adjusted Net Income by definition excludes, (i) any non-cash
result derived from bilateral exchange variations, (ii) any
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). We believe Adjusted Net Income is
a more appropriate metric to reflect the Company´s performance.
Adjusted Net Income in 2Q20 reached $18.2
million, $17.3 million higher
compared to 2Q19, mainly explained by $42.0
million higher FX loss quarter-over-quarter and the sale of
a farm in 2Q20.
Strategy Execution
Farmland sale at premium to
independent appraisal
- In June 2020, we completed the
sale of a plot of 811.7 hectares in the Province of Santa Fe, Argentina, for a selling price of
$12.1 million, a 21.3% premium to the
latest Cushman and Wakefield´s independent appraisal dated
September 30, 2019.
- The transaction generated an EBITDA of $10.1 million of which $2.1 million represented a gain before tax
included in the line item "Other operating income" and $8.0 million as a reclassification of Revaluation
Surplus to Retained Earnings Before Income Tax, reflected in the
Statements of Changes in Shareholders Equity.
$100
million loan granted by multilateral institution
- Not only from an operational point of view did we adapt our
strategy in response to the pandemic. We also worked on continue
improving our capital structure and liquidity position in light of
such an uncertain economic scenario. We began the year with a cash
position of $290 million and
throughout the first half of the year we reassessed our cost
structure, put on hold uncommitted capital expenditures and raised
short term credit lines as a precautionary measure to strengthen
our cash position and to secure our financial obligations and
working capital needs.
In June 2020 as part of an integral
risk management strategy, we entered into a $100 million loan agreement with the
International Finance Corporation (IFC), member of the World Bank
Group, to support our Argentine operations. Securing a $100 million loan facility is a major achievement
given the current global economic situation, and is only possible
because of our hard work, solid reputation and the trust worthy
stable outlook of our business. This also validates our strong
commitment to environmental sustainability. The financing package
includes a $17.8 million IFC Green
Loan tranche, which is aligned with the Green Loan Principles of
the Loan Market Association, and represents the first IFC Green
Loan in the real economy in Argentina and in the dairy and animal protein
sector globally. The loan's tenor is eight years, including a
two-year grace period, and it will enable us to extend the average
life of our debt to over six years.
Pioneers in carbon credit
commercialization
- In June 2020 we officially became
the first company to commercialize carbon credits (CBio) under the
RenovaBio program, marking a milestone in Brazil's biofuel policy. We are proud to have
kickstarted Brazil's CBio trade
through the sale of 100 carbon credits at a price of R$50/CBio (~USD
10/CBio). Being environmentally responsible is central to
what we do. RenovaBio is fully aligned with our values of
sustainability, efficiency and innovation, and we remain fully
committed to continue working towards achieving greener operations
and further improving our mills' score, which already positioned us
in the top 10%.
RenovaBio is a program designed by the Brazilian government to cut
carbon emission in the country by establishing a mechanism that
taxes fossil fuel consumption while subsidizing the production of
renewable energy. Under this program, a carbon credit market is
established in which sellers of fossil fuels have to acquire a
mandatory quota of CBios, which is defined based on the amount of
non-renewable fuels sold by them in the prior year. The issuers of
CBios are biofuel producers whose mills have been certified and
awarded a score based on how "green" their mill operation is. CBios
are financial instruments traded on Brazil's B3 platform, with prices based on the
supply of and demand for those credits. The RenovaBio program was
officially launched on December 24th,
2019. The official trading of CBios in the Brazilian stock
exchange started on April 27th, 2020
and the first sale of CBios took place on June 12th, 2020.
Non-Gaap Financial Measures: For a full
reconciliation of non-gaap financial measures please refer to page
34 of our 2Q20 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 2Q20 earnings release, please access
ir.adecoagro.com. A conference call to discuss 2Q20 results will be
held on August 14, 2020 with a live
webcast through the internet:
Conference Call
August 14, 2020
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: 10145631
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.