UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 under
the Securities Exchange Act of 1934
For the month of June, 2015
Commission File Number 001-35052
Adecoagro S.A.
(Translation of registrant’s name into
English)
Vertigo Naos Building, 6, Rue Eugène
Ruppert, L-2453, Luxembourg
R.C.S. Luxembourg B 153 681
(Address of
principal executive office)
Indicate by check mark whether the
registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F x Form
40-F ¨
Indicate by check mark if the registrant
is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ¨
Indicate by check mark if the registrant
is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ¨
Indicate by check mark whether the registrant
by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule
12g3-2(b) under the Securities Exchange Act of 1934.
Yes ¨
No x
If “Yes” is marked, indicate
below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- .
EXPLANATORY NOTE
This Report of Foreign Private Issuer on Form 6-K (this “Form
6-K”) is being filed by Adecoagro S.A. (“Adecoagro” or the “Company”) with the Securities and Exchange
Commission (the “SEC”) and is incorporated by reference into the Company’s Registration Statement on Form F-3
filed with the SEC on December 6, 2013 (File No. 333-191325) and will be deemed to be a part thereof from the date on which this
Form 6-K is filed with the SEC, to the extent not superseded by documents or reports subsequently filed or furnished. This Form
6-K contains, as Exhibit 99.1, Operating and Financial Review and Prospects, which reviews Adecoagro’s results of operations
and financial condition as of March 31, 2015, and for the three month periods ended, March 31, 2015 and 2014. This report also
incorporates by reference the Company’s annual report on Form 20-F filed with the SEC on April 30, 2015 (our “Form
20-F”).
Forward Looking Statements
This
report contains forward-looking statements. The registrant desires to qualify for the “safe-harbor” provisions of the
Private Securities Litigation Reform Act of 1995, and consequently is hereby filing cautionary statements identifying important
factors that could cause the registrant’s actual results to differ materially from those set forth herein and in the attached
Condensed Audited Financial Statements.
The
registrant’s forward-looking statements are based on the registrant’s current expectations, assumptions, estimates
and projections about the registrant and its industry. These forward-looking statements can be identified by words or phrases such
as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,”
“is/are likely to,” “may,” “plan,” “should,” “would,” or other similar
expressions.
The
forward-looking statements included in the attached relate to, among others: (i) the registrant’s business prospects
and future results of operations; (ii) weather and other natural phenomena; (iii) developments in, or changes to, the
laws, regulations and governmental policies governing the registrant’s business, including limitations on ownership of farmland
by foreign entities in certain jurisdictions in which the registrant operate, environmental laws and regulations; (iv) the
implementation of the registrant’s business strategy, including its development of the Ivinhema mill and other current projects;
(v) the registrant’s plans relating to acquisitions, joint ventures, strategic alliances or divestitures; (vi) the
implementation of the registrant’s financing strategy and capital expenditure plan; (vii) the maintenance of the registrant’s
relationships with customers; (viii) the competitive nature of the industries in which the registrant operates; (ix) the
cost and availability of financing; (x) future demand for the commodities the registrant produces; (xi) international
prices for commodities; (xii) the condition of the registrant’s land holdings; (xiii) the development of the logistics
and infrastructure for transportation of the registrant’s products in the countries where it operates; (xiv) the performance
of the South American and world economies; and (xv) the relative value of the Brazilian Real, the Argentine Peso, and the
Uruguayan Peso compared to other currencies; as well as other risks included in the registrant’s other filings and submissions
with the United States Securities and Exchange Commission.
These
forward-looking statements involve various risks and uncertainties. Although the registrant believes that its expectations expressed
in these forward-looking statements are reasonable, its expectations may turn out to be incorrect. The registrant’s actual
results could be materially different from its expectations. In light of the risks and uncertainties described above, the estimates
and forward-looking statements discussed in the attached might not occur, and the registrant’s future results and its 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 the attached relate only to events or information as of the date on which the statements are
made in the attached. The registrant undertakes 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.
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
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Adecoagro S.A. |
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By |
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/s/
Carlos A. Boero Hughes |
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Name: |
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Carlos A. Boero Hughes |
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Title: |
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Chief Financial Officer and |
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Chief Accounting Officer |
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Date:
June 9, 2015
Exhibit Index
| 99.1 |
Operating and Financial Review and Prospects |
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Exhibit
99.1
Operating and Financial Review and Prospects
OPERATING RESULTS
Trends and Factors Affecting Our Results of Operations
Our results of operations
have been influenced and will continue to be influenced by the following factors:
(i) Effects of Yield Fluctuations
The occurrence of severe adverse weather conditions,
especially droughts, hail, floods or frost, are unpredictable and may have a potentially devastating impact on agricultural production
and may otherwise adversely affect the supply and prices of the agricultural commodities that we sell and use in our business.
The effects of severe adverse weather conditions may also reduce yields at our farms. Yields may also be affected by plague, disease
or weed infection and operational problems.
The following table
sets forth our average crop, rice and sugarcane yields for the periods indicated:
| |
|
|
|
| |
|
% Change |
| |
2014/2015 |
2013/2014 |
2014/2015 -
2013/2014 |
Harvest
Year (1) |
Harvest
Year (1) |
| Corn (2) |
4.4 |
|
4.3 |
|
1.8% |
|
| Soybean |
3.8 |
|
3.3 |
|
15.9% |
|
| Soybean (second harvest) (3) |
- |
|
- |
|
- |
|
| Cotton lint (3) |
- |
|
- |
|
- |
|
| Wheat (4) |
2.3 |
|
2.6 |
|
(12.9%) |
|
| Rice |
5.2 |
|
5.8 |
|
(9.1%) |
|
| Sugarcane (3) |
- |
|
- |
|
- |
|
| |
|
|
|
(1) The
table above reflects the presents yields in respect of harvest years as of March 31. The portion of harvested area completed
as of March 31, 2015 was 16% for corn, 9% for soybean first harvest, 100% for wheat and 93% for rice. The portion of harvested
area completed as of March 31, 2014 was 19% for corn, 6% for soybean first harvest, 100% for wheat and 95% for rice.
(2) Includes sorghum
(3) None/insignificant harvest
as of March 31, 2015 and as of March 31, 2014 respectively
(4) Includes barley |
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(ii) Effects of Fluctuations
in Production Costs
We experience
fluctuations in our production costs due to the fluctuation in the costs of (i) fertilizers, (ii) agrochemicals, (iii) seeds,
(iv) fuel and (v) farm leases. The use of advanced technology, however, allowed us to increase our efficiency, in large part mitigating
the fluctuations in production costs. Some examples of how the implementation of production technology has allowed us to increase
our efficiency and reduce our costs include the use of no-till technology (also known as “direct sowing”, which involves
farming without the use of tillage, leaving plant residues on the soil to form a protective cover which positively impacts costs,
yields and the soil), crop rotation, second harvest in one year, integrated pest management, and balanced fertilization techniques
to increase the productive efficiency in our farmland. Increased mechanization of harvesting and planting operations in our sugarcane
plantations and utilization of modern, high pressure boilers in our sugar and ethanol mills has also yielded higher rates of energy
production per ton of sugarcane.
(iii) Effects of Fluctuations
in Commodities Prices
Commodity prices
have historically experienced substantial fluctuations. For example, based on Chicago Board of Trade (“CBOT”) data,
from January 1, 2015 to March 31, 2015, soybean prices decreased 2.9% and corn prices decreased by 4.9%. Also, between January
1, 2015 and March 31, 2015, ethanol prices decreased by 0.9%, according to Escola Superior de Agricultura “Luiz de Queiroz”
(“ESALQ”) data, and sugar prices decreased by 15.8%, according to Intercontinental Exchange of New York (“ICE-NY”)
data. Commodity price fluctuations impact our statement of income as follows:
| • | | Initial recognition and changes in the fair value of biological assets and agricultural
produce in respect of unharvested biological assets undergoing biological transformation; |
| • | | Changes in net realizable value of agricultural produce for inventory carried at its
net realizable value; and |
| • | | Sales of manufactured products and sales of agricultural produce and biological assets
sold to third parties. |
The following graphs
show the spot market price of some of our products since March 31, 2010 to March 31, 2015, highlighting the periods January 1 to
March 31, 2014 and January 1 to March 31, 2015:
(iv) Fiscal Year and Harvest
Year
Our fiscal year
begins on January 1 and ends on December 31 of each year. However, our production is based on the harvest year for each of our
crops and rice. A harvest year varies according to the crop or rice plant and to the climate in which it is grown. Due to the geographic
diversity of our farms, the planting period for a given crop or rice may start earlier on one farm than on another, causing differences
for their respective harvesting periods. The presentation of production volume (tons) and production area (hectares) in this annual
report in respect of the harvest years for each of our crops and rice starts with the first day of the planting period at the first
farm to start planting in that harvest year to the last day of the harvesting period of the crop or rice planting on the last farm
to finish harvesting that harvest year.
On the other hand, production volumes for dairy
and production volume and production area for sugar, ethanol and energy business are presented on a fiscal year basis.
The financial results
in respect of all of our products are presented on a fiscal year basis.
(v) Effects of Fluctuations
of the Production Area
Our results of operations
also depend on the size of the production area. The size of our own and leased area devoted to crop, rice and sugarcane production
fluctuates from period to period in connection with the purchase and development of new farmland, the sale of developed farmland,
the lease of new farmland and the termination of existing farmland lease agreements. Lease agreements are usually settled following
the harvest season, from July to June in crops and rice, and from May to April in sugarcane. The length of the lease agreements
are usually one year for crops, one to five years for rice and five to six years for sugarcane. Regarding crops, the production
area can be planted and harvested one or two times per year. As an example, wheat can be planted in July and harvested in December.
Right after its harvest, soybean can be planted in the same area and harvested in April. As a result, planted and harvested area
can exceed the production area during one year. The production area for sugarcane can exceed the harvested area in one year. Grown
sugarcane can be left in the fields and then harvested the following year. The following table sets forth the fluctuations in the
production area for the periods indicated:
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Three-month Period ended
March 31, |
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2015 |
2014 |
| |
Hectares |
| Crops (1) |
148,915 |
152,777 |
| Rice |
35,328 |
36,604 |
| Sugar, Ethanol and Energy |
126,866 |
104,897 |
(1) Does not include second
crop area.
The decrease in
crop production area in 2015 compared to 2014 was mainly driven by farm sales in 2014. The increase in sugar, ethanol and energy
production area in 2015 is explained by an increase in leased hectares.
(vi) Effect of Acquisitions
and Dispositions
The comparability
of our results of operations is also affected by the completion of significant acquisitions and dispositions. Our results of operations
for earlier periods that do not include a recently completed acquisition or do include farming operations subsequently disposed
of may not be comparable to the results of a more recent period that reflects the results of such acquisition or disposition.
(vii) Macroeconomic Developments
in Emerging Markets
We generate nearly
all of our revenue from the production of food and renewable energy in emerging markets. Therefore, our operating results and financial
condition are directly impacted by macroeconomic and fiscal developments, including fluctuations in currency exchange rates, inflation
and interest rate fluctuations, in those markets. The emerging markets where we conduct our business (including Argentina, Brazil
and Uruguay) remain subject to such fluctuations.
(viii) Effects of Export
Taxes on Our Products
Following the economic
and financial crisis experienced by Argentina in 2002, the Argentine government increased export taxes on agricultural products,
mainly on soybean and its derivatives, wheat, rice and corn. Soybean is subject to an export tax of 35.0%, wheat is subject to
an export tax of 23.0%, rough rice is subject to an export tax of 10.0%, processed rice is subject to an export tax of 5.0%, corn
is subject to an export tax of 20.0% and sunflower is subject to an export tax of 32.0%.
As local prices
are determined taking into consideration the export parity reference, any increase in export taxes would affect our financial results.
(ix) Effects of Foreign
Currency Fluctuations
Each of our Argentine,
Brazilian and Uruguayan subsidiaries uses local currency as its functional currency. A significant portion of our operating costs
in Argentina are denominated in Argentine Pesos and most of our operating costs in Brazil are denominated in Brazilian Reais. For
each of our subsidiaries’ statements of income, foreign currency transactions are translated into the local currency, as
such subsidiaries’ functional currency, using the exchange rates prevailing as of the dates of the relevant specific transactions.
Exchange differences resulting from the settlement of such transactions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies are recognized in the statement of income under “finance
income” or “finance costs,” as applicable. Our Consolidated Financial Statements are presented in U.S. dollars,
and foreign exchange differences that arise in the translation process are disclosed in the consolidated statement of comprehensive
income.
As of March 31,
2015, the Peso-U.S. dollar exchange rate was Ps.8.82 per U.S. dollar as compared to Ps.8.00 per U.S. dollar as of March 31, 2014.
As of March 31, 2015, the Real-U.S. dollar exchange rate was R$3.20 per U.S. dollar as compared to R$2.26 per U.S. dollar as of
March 31, 2014.
The following graph
shows the Argentine Peso-U.S. dollar rate and the Real-U.S. dollar rate of exchange for the periods since March 31, 2010 to March
31, 2015, highlighting the periods January 1 to March 31, 2014 and January 1 to March 31, 2015:
Our principal foreign
currency fluctuation risk involves changes in the value of the Brazilian Reais relative to the U.S. dollar. Periodically, we evaluate
our exposure and consider opportunities to mitigate the effects of currency fluctuations by entering into currency forward contracts
and other hedging instruments.
(x) Seasonality
Our business activities
are inherently seasonal. We generally harvest and sell corn, soybean, rice and sunflower between February and August, and wheat
from December to January. Cotton is unique in that while it is typically harvested from May to July, it requires a conditioning
process that takes about two to three months before being ready to be sold. Sales in other business segments, such as in our Dairy
segment, tend to be more stable. However, milk sales are generally higher during the fourth quarter, when weather conditions are
more favorable for production. The sugarcane harvesting period typically begins between April and May and ends between November
and December. As a result of the above factors, there may be significant variations in our results of operations from one quarter
to another, since planting activities may be more concentrated in one quarter whereas harvesting activities may be more concentrated
in another quarter. In addition our quarterly results may vary as a result of the effects of fluctuations in commodity prices and
production yields and costs related to the “Initial recognition and changes in fair value of biological assets and agricultural
produce” line item. See “—Critical Accounting Policies and Estimates—Biological Assets and Agricultural
Produce” included in our Form 20-F.
(xi) Land Transformation
Our business model
includes the transformation of pasture and unproductive land into land suitable for growing various crops and the transformation
of inefficient farms into farms suitable for more efficient uses through the implementation of advanced and sustainable agricultural
practices, such as “no-till” technology and crop rotation. During approximately the first three to five years of the
land transformation process of any given parcel, we must invest heavily in transforming the land, and, accordingly, crop yields
during such period tend to be lower than crop yields once the land is completely transformed. After the transformation process
has been completed, the land requires less investment, and crop yields gradually increase. As a result, there may be variations
in our results from one season to the next according to the amount of land in the process of transformation.
Our business model
also includes the identification, acquisition, development and selective disposition of farmlands or other rural properties that
after implementing agricultural best practices and increasing crop yields we believe have the potential to appreciate in terms
of their market value. As a part of this strategy, we purchase and sell farms and other rural properties from time to time. Please
see also “Risk Factors-Risks Related to Argentina-Argentine law concerning foreign ownership of rural properties may adversely
affect our results of operations and future investments in rural properties in Argentina” and “Risk Factors-Risks Related
to Brazil- Recent changes in Brazilian rules concerning foreign investment in rural properties may adversely affect our investments.”
included in “Item 3-Risk Factors” in our Form 20-F.
The results included
in the Land Transformation segment are related to the acquisition and disposition of farmland businesses and not to the physical
transformation of the land. The decision to acquire and/or dispose of a farmland business depends on several market factors that
vary from period to period, rendering the results of these activities in one financial period when an acquisition of disposition
occurs not directly comparable to the results in other financial periods when no acquisitions or dispositions occurred.
(xii) Capital Expenditures
and Other Investments
Our capital expenditures
during the last three years consisted mainly of expenses related to (i) acquiring land, (ii) transforming and increasing the productivity
of our land, (iii) planting non-current sugarcane and coffee and (iv) expanding and upgrading our production facilities. Our capital
expenditures incurred in connection with such activities were $335.2 million for the year ended December 2012, $232.1 million for
the year ended December 2013 and $322.9 million for the year ended December 2014. . Capital expenditures totaled $62.7 million
for the three-month period ended March 31, 2015 in comparison with $113.3 million in the same period in 2013.See also “-Capital
Expenditure Commitments.”
(xiii) Effects of Corporate
Taxes on Our Income
We are subject to
a variety of taxes on our results of operations. The following table shows the income tax rates in effect for 2015 in each of the
countries in which we operate:
| |
Tax Rate (%) |
| Argentina |
35 |
| Brazil(1) |
34 |
| Uruguay |
25 |
____________
| (1) | Including
the Social Contribution on Net Profit (CSLL) |
Critical Accounting Policies and Estimates
The Company’s critical
accounting policies and estimates are consistent with those described in Note 4 to our audited consolidated annual financial statements
for the year ended December 31, 2014 included in our Form 20-F.
Operating Segments
IFRS 8 “Operating
Segments” requires an entity to report financial and descriptive information about its reportable segments, which are operating
segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity about
which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”)
in deciding how to allocate resources and in assessing performance. The CODM evaluates the business based on the differences in
the nature of its operations, products and services. The amount reported for each segment item is the measure reported to the CODM
for these purposes.
We are organized
into three major lines of business, namely, Farming; Sugar, Ethanol and Energy; and Land Transformation. As from January 1, 2014
the Company did not consider its Coffee and Cattle businesses to be of continuing significance as they no longer meet the quantitative
threshold for separate disclosure as reportable segments. Accordingly, the Coffee and Cattle businesses are now presented within
“Farming – All Other Segments” segment and prior year disclosures have been recast to conform to this presentation.
As a result, the Company’s businesses are comprised of six reportable operating segments, which are organized based upon
their similar economic characteristics, the nature of products they offer, their production processes, the type of their customers
and their distribution methods.
We operate in three
major lines of business, namely, Farming; Sugar, Ethanol and Energy; and Land Transformation.
| • | | Our farming business is further comprised of four reportable segments: |
| § | | Our Crops segment consists of planting, harvesting and sale of grains, oilseeds
and fibers (including wheat, corn, soybeans, cotton and sunflowers, among others), and to a lesser extent the provision of grain
warehousing/conditioning and handling and drying services to third parties. Each underlying crop in this segment does not represent
a separate operating segment. Management seeks to maximize the use of the land through the cultivation of one or more type of
crops. Types and surface amount of crops cultivated may vary from harvest year to harvest year depending on several factors, some
of which are out of our control. Management is focused on the long-term performance of the productive land, and to that extent,
the performance is assessed considering the aggregate combination, if any, of crops planted in the land. A single manager is responsible
for the management of operating activity of all crops rather than for each individual crop. |
| § | | Our Rice segment consists of planting, harvesting, processing and marketing
of rice; |
| § | | Our Dairy segment consists of the production and sale of raw milk, |
| § | | Our All Other Segments segment consists of the combination of the remaining
non-reportable operating segments, which do not meet the quantitative thresholds for separate disclosure and for which the Company’s
management does not consider them to be of continuing significance as from January 1, 2014, namely, Coffee and Cattle. |
| • | | Our Sugar, Ethanol and Energy segment consists of cultivating sugarcane which
is processed in owned sugar mills, transformed into ethanol, sugar and electricity and marketed; |
| • | | Our Land Transformation segment comprises the (i) identification and acquisition
of underdeveloped and undermanaged farmland businesses; and (ii) realization of value through the strategic disposition of assets
(generating profits). |
The following table presents
selected historical financial and operating data solely for the periods indicated below as it is used for our discussion of results
of operations. In respect of production data only as of March 31, 2015, we have not yet completed the 2014/2015 harvest year crops.
The Harvested tons presented corresponds to the harvest completed as of March 31, 2015.
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|
Three-month period ended March 31, |
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|
2015 |
2014 |
|
| Sales |
|
( In thousands of $) |
| Farming Business |
|
58,687 |
46,084 |
|
| Crops |
|
21,829 |
22,181 |
|
| Soybean(1) |
|
5,217 |
2,185 |
|
| Corn (2) |
|
4,149 |
11,914 |
|
| Wheat (3) |
|
6,851 |
5,373 |
|
| Sunflower |
|
4,637 |
2,000 |
|
| Cotton |
|
713 |
333 |
|
| Other crops(4) |
|
262 |
377 |
|
| Rice(5) |
|
28,488 |
16,486 |
|
| Dairy |
|
8,060 |
7,075 |
|
| All other segments(6) |
|
310 |
342 |
|
| Sugar, Ethanol and Energy Business |
|
55,531 |
53,045 |
|
| Sugar |
|
13,955 |
13,069 |
|
| Ethanol |
|
39,647 |
36,482 |
|
| Energy |
|
1,929 |
3,494 |
|
| Total |
|
114,218 |
99,129 |
|
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|
|
| | |
2014/2015 |
2013/2014 |
| | |
Harvest |
Harvest |
| Production | |
Year |
Year |
| Farming Business | |
| |
| Crops (tons) (7) | |
216,886 |
175,811 |
| Soybean (tons) | |
22,665 |
11,774 |
| Corn (tons) (2) | |
89,496 |
68,317 |
| Wheat (tons) (3) | |
84,606 |
77,168 |
| Sunflower (tons) | |
20,119 |
18,552 |
| Cotton Lint (tons) | |
- |
- |
| Rice(8) (tons) | |
171,197 |
198,343 |
| | |
|
|
| |
Three-month period ended March 31, |
| |
|
| |
| 2015 |
2014 |
| Processed rice (9) (tons) |
| 37,565 |
40,253 |
| Dairy (10) (liters) |
| 20,260 |
19,256 |
| Sugar, Ethanol and Energy Business |
| |
| Sugar (tons) |
| 22,468 |
- |
| Ethanol (cubic meters) |
| 16,596 |
2,103 |
| Energy (MWh) |
| 17,890 |
15,527 |
| Land Transformation Business (hectares traded) |
| - |
- |
| |
|
|
|
| |
|
2014/2015 |
2013/2014 |
| |
|
Harvest |
Harvest |
| Planted Area |
|
Year |
Year |
| |
|
(Hectares) |
|
| Farming Business (11) |
|
|
|
| Crops |
|
192,772 |
185,333 |
| Soybean |
|
96,604 |
82,981 |
| Corn (2) |
|
39,935 |
51,212 |
| Wheat (3) |
|
37,020 |
29,412 |
| Sunflower |
|
12,314 |
12,880 |
| Cotton |
|
3,160 |
6,217 |
| Forage |
|
3,739 |
2,631 |
| Rice |
|
35,328 |
36,604 |
| Total Planted Area |
|
228,101 |
221,937 |
| Second Harvest Area |
|
40,118 |
29,923 |
| Leased Area |
|
60,205 |
55,797 |
| Owned Croppable Area(12) |
|
127,778 |
136,216 |
| |
|
|
|
| |
|
Three-month period
ended March 31, |
| |
|
2015 |
2014 |
| Sugar, Ethanol and Energy Business |
|
|
|
| Sugarcane plantation |
|
126,866 |
104,897 |
| Owned land |
|
9,145 |
9,145 |
| Leased land |
|
117,721 |
95,752 |
| (1) | Includes
soybean, soybean oil and soybean meal. |
| (2) | Includes
sorghum and peanuts |
| (3) | Includes
barley and rapeseed. |
| (4) | Includes
seeds and farming services. |
| (5) | Sales
of processed rice including rough rice purchased from third parties and processed in
our own facilities, rice seeds and services. |
| (6) | All other
segments include our cattle business which primarly consists of leasing land to a third
party based on the price of beef. See “Item 4. Information on the Company—B.
Business Overview—Cattle Business.” in our Form 20-F. |
| (7) | Crop production
does not include 61,889 tons and 26,234 tons of forage produced in the 2014/2015 and
2013/2014 harvest years, respectively. |
| (8) | Expressed
in tons of rough rice produced on owned and leased farms. The rough rice we produce,
along with additional rough rice we purchase from third parties, is ultimately processed
and constitutes the product sold in respect of the rice business. |
| (9) | Includes
rough rice purchased from third parties and processed in our own facilities. Expressed
in tons of processed rice (1 ton of processed rice is approximately equivalent to 1.6
tons of rough rice). |
| (10) | Raw milk
produced at our dairy farms. |
| (11) | Includes
hectares planted in the second harvest. |
| (12) | Does
not include potential croppable areas being evaluated for transformation. |
Three-month period ended March 31, 2015 as compared to three-month
period ended March 31, 2014
The following table
sets forth certain financial information with respect to our consolidated results of operations for the periods indicated.
| |
Three-month period
ended March 31, |
| |
2015 |
|
2014 |
| |
(Unaudited) |
| |
|
(In thousands of $) |
| |
Sales of manufactured products and services rendered |
84,480 |
|
68,811 |
| |
Cost of manufactured products sold and services rendered |
(60,234) |
|
(46,340) |
| |
Gross Profit from Manufacturing Activities |
24,246 |
|
22,471 |
| |
Sales of agricultural produce and biological assets |
29,738 |
|
30,318 |
| |
Cost of agricultural produce sold and direct agricultural selling expenses |
(29,738) |
|
(30,318) |
| |
Initial recognition and changes in fair value of biological assets and agricultural produce |
23,666 |
|
38,945 |
| |
Changes in net realizable value of agricultural produce after harvest |
(162) |
|
861 |
| |
Gross Profit from Agricultural Activities |
23,504 |
|
39,806 |
| |
Margin on Manufacturing and Agricultural Activities Before Operating Expenses |
47,750 |
|
62,277 |
| |
General and administrative expenses |
(12,018) |
|
(10,780) |
| |
Selling expenses |
(13,255) |
|
(11,636) |
| |
Other operating income/(expense), net |
21,625 |
|
(13,570) |
| |
Share of loss of joint ventures |
(878) |
|
(255) |
| |
Profit from Operations Before Financing and Taxation |
43,224 |
|
26,066 |
| |
Finance income |
3,291 |
|
2,165 |
| |
Finance costs |
(27,783) |
|
(18,338) |
| |
Financial results, net |
(24,492) |
|
(16,173) |
| |
Profit Before Income Tax |
18,732 |
|
9,893 |
| |
Income tax expense |
(4,971) |
|
(7,297) |
| |
Profit for the Period |
13,761 |
|
2,596 |
| |
|
|
|
|
Sales of Manufactured Products and Services Rendered
Three-month period
ended March 31, |
|
Crops |
|
Rice |
|
Dairy |
|
All Other Segments |
|
Sugar, Ethanol
and Energy |
|
Total |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
(Unaudited) |
| |
|
(In thousands of $) |
| 2015 |
|
77 |
|
28,479 |
|
83 |
|
310 |
|
55,531 |
|
84,480 |
| 2014 |
|
84 |
|
15,340 |
|
- |
|
342 |
|
53,045 |
|
68,811 |
Sales of manufactured
products and services rendered increased 22.8%, from $68.8 million for the three month period ended March 31, 2014 to $84.5 million
for the same period in 2015, primarily as a result of:
| • | a $13.1 million increase in our Rice segment, mainly due to: (i) a 124.4% increase in the volume
of white rice sold measured in tons of rough rice, from 19.5 thousand tons in the three month period ended March 31, 2014 to 43.8
thousand tons in the same period in 2015, mainly explained by a lower inventories build-up from 148.0 thousand tons in 2014 to
114.0 thousand tons in 2015; and (ii) an increase of 3.8% in the price, from $575.4 in 2014 to $597.3 per ton of rough rice equivalent
in 2015. These increases were partially offset by a 56.0% decrease in the sales of by-products, from $5.2 million in 2014 to $2.3
million in 2015 due to a decrease a in volume sold, from 37.4 thousand tons expressed in rough rice during 2014 to 22.8 thousand
tons expressed in rough rice in 2015. |
| | | |
| • | a $2.5 million increase in our Sugar, Ethanol and Energy segment, mainly due to: (i) a 28% increase
in the volume of sugar and ethanol sold, measured in TRS(1), from 135 thousand tons in the three month period ended
March 31, 2014 to 172 thousand tons in the same period in 2015; (ii) a 12.6% increase in volume of energy sold, from 15.3 thousand
MWh in 2014 to 17.2 thousand MWh in 2015; and (iii) a 4.5% increase in the price of sugar, from $381.6 in 2014 to $398.8 per ton
in 2015. The increase in volume of sugar and ethanol sold was due to (a) a 918.4% increase in sugarcane milled, from 45.2 thousand
tons in 2014 to 460.1 thousand tons in 2015; (b) a 14.5% increase in the TRS content in sugarcane, from 103.0 kilograms per ton
in 2014 to 117.9 kilograms per ton in 2015; and (c) an increase in the commercialization of sugar from third parties; partially
offset by a lower inventories sell-off, measured in TRS, of 127.2 tons in 2014 compared to an inventories sell-off of 82.3 tons
in 2015. The increase in the volume of energy sold was mainly due to the increase in sugarcane milled; partially offset by the
lower stockpile of bagasse that was carried from previous year to be burned during the off-season. The increase in the sugarcane
milled is sustained by (i) an increase in the harvesting area from 0.7 thousand hectares in 2014 to 6.2 thousand hectares in 2015
due to the earlier start of the crushing season and (ii) a 41.3% increase in sugarcane yields from 64.2 tons per hectare in 2014
to 90.7 tons per hectare in 2015. The increases in volumes sold and sugar prices were partially offset by: (i) a 51.0% decrease
in energy price, from $229.0 per MWh in 2014 to $112.3 per MWh in 2015; and (ii) a 20.7% decrease in the price of ethanol, from
$629.3 per cubic meter in 2014 to $499.2 per cubic meter in 2015. |
| | The following figure sets forth the variables that determine our Sugar and Ethanol sales: |
| (1) | On average, one metric ton of
sugarcane contains 140 kilograms of TRS (Total Recoverable Sugar). While a mill can produce
either sugar or ethanol, the TRS input requirements differ between these two products.
On average, 1.045 kilograms of TRS equivalent are required to produce 1.0 kilogram of
sugar, while the amount of TRS required to produce 1 liter of ethanol is 1.691 kilograms |
The following
figure sets forth the variables that determine our Energy sales:
The following
table sets forth the breakdown of sales of manufactured products for the periods indicated.
| |
Three-month period ended March 31, |
|
Three-month period ended March 31, |
|
Three-month period ended March 31, |
| |
2015 |
|
2014 |
|
Chg % |
|
2015 |
|
2014 |
|
Chg % |
|
2015 |
|
2014 |
|
Chg % |
| |
(in million of $) |
|
|
|
(in thousand units) |
|
|
|
(in dollars per unit) |
|
|
| Ethanol (M3) |
39.6 |
|
36.5 |
|
8.7% |
|
79.4 |
|
58.0 |
|
37.0% |
|
499.2 |
|
629.3 |
|
(20.7%) |
| Sugar (tons) |
14.0 |
|
13.1 |
|
6.8% |
|
35.0 |
|
34.2 |
|
2.2% |
|
398.8 |
|
381.6 |
|
4.5% |
| Energy (MWh) |
1.9 |
|
3.5 |
|
(44.8%) |
|
17.2 |
|
15.3 |
|
12.6% |
|
112.3 |
|
229.0 |
|
(51.0%) |
| TOTAL |
55.5 |
|
53.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Manufactured Products Sold and
Services Rendered
Three-month period
ended March 31, |
|
Crops |
|
Rice |
|
Dairy |
|
All Other
Segments |
|
Sugar, Ethanol
and Energy |
|
Total |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
(Unaudited) |
| |
|
(In thousands of $) |
| 2015 |
|
- |
|
(23,156) |
|
(168) |
|
(186) |
|
(36,724) |
|
(60,234) |
| 2014 |
|
- |
|
(11,767) |
|
- |
|
(18) |
|
(34,555) |
|
(46,340) |
Cost of manufactured
products sold and services rendered increased 30.0%, from $46.3 million three month period ended in March 31, 2014 to $60.2 million
in the same period in 2015. This increase was primarily due to:
| • | a $11.4 million increase in our Rice segment mainly due to: (i) the increase in volume sold; and
(ii) a 68.2% increase in the unitary cost of product sold from $206.8 per ton of rough rice in 2014 to $347.8 per ton of rough
rice in 2015 due to the 22.6% depreciation of the Argentine peso during the three-month period ended March 31 2014, in comparison
to the 4.2% depreciation during the same period of 2015. |
| | | |
| • | a $2.2 million increase in our Sugar, Ethanol and Energy segment mainly due to increase in the
volume of sugar and ethanol sold measured in TRS; partially offset by a lower unitary cost of product sold due to a 20.3% depreciation
of the Brazilean Real during 1Q 2015. |
Sales and Cost of Agricultural Produce and Biological
Assets
Three-month period
ended March 31, |
|
Crops |
|
Rice |
|
Dairy |
|
All Other
Segments |
|
Sugar, Ethanol
and Energy |
|
Total |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
(Unaudited) |
| |
|
(In thousands of $) |
| 2015 |
|
21,752 |
|
9 |
|
7,977 |
|
- |
|
- |
|
29,738 |
| 2014 |
|
22,097 |
|
1,146 |
|
7,075 |
|
- |
|
- |
|
30,318 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
Sales of agricultural
produce and biological assets decreased 1.9%, from $30.3 million in 2014, to $29.7 million in 2015, primarily as a result of:
| • | A $1.1 million decrease in our Rice segment was mainly driven by a lower volume of rough rice sold
to third parties in the three-month period ended March 31, 2015. The sales reported in 2014 were exceptional on account of the
delivery of 4.0 thousand tons at a price of $275.6 per ton. |
| • | A $0.3 million decrease in our Crops segment mainly driven by the general decrease in the price
of grains sold. Soybean prices decreased 10.3%, from $332.4 per ton in the three-month period ended March 31, 2014 to $298.3 per
ton in the same period of 2015. Corn prices decreased 24.8%, from $200.7 per ton in the three-month period ended March 31, 2014
to $151.0 per ton in the same period of 2015. Wheat prices decreased 5.1%, from $235.6 per ton in the three-month period ended
March 31, 2014 to $223.7 per ton in the same period of 2015. The decrease in prices was partially offset by an increase in the
proportion of soybean and wheat sold, mainly due to (i) an increase in production harvested from 11.7 thousand tons in the three-month
period ended March 31, 2014 to 22.7 thousand tons in the same period of 2015 and from 77.1 thousand tons in 2014 to 84.6 thousand
ton in 2015 for soybean and wheat respectively; and (ii) lower soybean inventories build-up from 97.3 tons in 2014 to 4.6 tons
in 2015. |
The following table sets forth the breakdown
of sales for the periods indicated.
| |
Three-month Period ended
March 31, |
|
Three-month Period ended
March 31, |
Three-month Period ended
March 31, |
| |
2015 |
2014 |
% Chg |
|
2015 |
2014 |
% Chg |
|
2015 |
2014 |
% Chg |
| |
|
|
|
|
|
|
|
|
| |
(In thousands of $) |
|
|
(In thousands of tons) |
|
|
(In $ per ton) |
|
| Soybean |
5,217 |
2,185 |
138.8% |
|
17,488 |
6,573 |
166.1% |
|
298.3 |
332.4 |
(10.3%) |
| Corn (1) |
4,149 |
11,914 |
(65.2%) |
|
27,477 |
59,352 |
(53.7%) |
|
151.0 |
200.7 |
(24.8%) |
| Cotton lint |
713 |
333 |
114.3% |
|
588 |
201 |
192.5% |
|
1,211.8 |
1,654.4 |
(26.8%) |
| Wheat (2) |
6,851 |
5,373 |
27.5% |
|
30,629 |
22,801 |
34.3% |
|
223.7 |
235.6 |
(5.1%) |
| Sunflower |
4,637 |
2,000 |
131.9% |
|
10,514 |
5,843 |
79.9% |
|
441.0 |
342.2 |
28.9% |
| Others |
185 |
292 |
(36.6%) |
|
|
|
|
|
|
|
|
| Total |
21,752 |
22,097 |
(1.6%) |
|
|
|
|
|
|
|
|
____________
Partially offset by:
| • | A 12.7% increase in our Dairy segment, from $7.1 million in the three-month period ended
March 31, 2014 to $8.0 million in the three-month period ended March 31, 2015. This increase is explained by (i) an
increase in the amount of liters of fluid milk sold, from 18.1 million liters in the three-month period ended March 31, 2014
to 19.8 million liters in the same period of 2015; and (ii) a 1.9% increase in milk prices from $0.366 per liter in 2014 to
$0.373 per liter in 2015. The increase in the amount of liters sold is attributable to (a) a 2.3% increase in our milking cow
herd driven by enhanced reproduction efficiencies at our two free-stall dairy facilities from an average of 6,396 heads in
the three month period ended March 31st, 2014 to an average of 6,544 heads in the same period of 2015; and (b) by
a 2.8% increase in cow productivity, from 33.5 liters per day per cow in 2014 to 34.4 liters per day per cow in 2015 due to
enhanced operating efficiencies. |
While we receive
cash or consideration upon the sale of our inventory of agricultural produce to third parties, we do not record any additional
profit related to that sale, as that gain or loss had already been recognized under the line items “Initial recognition and
changes in fair value of biological assets and agricultural produce” and “Changes in net realizable value of agricultural
produce after harvest.” Please see “—Critical Accounting Policies and Estimates—Biological Assets and Agricultural
Produce” above for a discussion of the accounting treatment, financial statement presentation and disclosure related to our
agricultural activity.
Initial Recognition and Changes in Fair
Value of Biological Assets and Agricultural Produce
Three-month period
ended March 31, |
|
Crops |
|
Rice |
|
Dairy |
|
All Other Segments |
|
Sugar, Ethanol
and Energy |
|
Total |
| |
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
(Unaudited) |
| |
|
(In thousands of $) |
| 2015 |
|
9,004 |
|
4,717 |
|
1,955 |
|
(1) |
|
7,991 |
|
23,666 |
| 2014 |
|
34,089 |
|
12,515 |
|
1,932 |
|
(278) |
|
(9,313) |
|
38,945 |
Initial recognition
and changes in fair value of biological assets and agricultural produce decreased 39.2%, from $38.9 million in the three-month
period ended March 31, 2014 to $23.7 million in the same period for 2015. The decrease was mainly due to:
• a
$25.1 million decrease in our Crops segment mainly due to:
| - | a $21.1 million decrease in the recognition at fair value less cost to sell for non-harvested crops,
from a gain of $25.3 million in the three-month period ended March 31, 2014 to a gain of $4.1 million in the same period of 2015,
mainly due to (i) a general decrease in prices; and (ii) a lower area with significant biological growth. |
| | | |
| - | The recognition at fair value less cost to sell of crops at the point of harvest, remained essentially
unchanched from $4.1 million in the three-month period ended March 31, 2014 to $3.8 million in the same period in 2015. |
| | | |
| - | Of the $9.0 million gain of initial recognition and changes in fair value of biological assets
and agricultural produce for the three-month period ended March 31, 2015, $8.0 million gain represents the unrealized portion,
as compared to the $29.4 million unrealized gain of the $34.1 million gain of initial recognition and changes in fair value of
biological assets and agricultural produce in 2014. |
| | | |
| • | A $7.8 million decrease in our Rice segment, as a result of: |
| | | |
| - | the recognition at fair value less cost to sell for non-harvested crops remained essentially
unchancged as most of the area was already harvested, from 95% in 2014 to 93% in 2015. |
| | | |
| - | a $7.8 million decrease in the recognition at fair value less cost to sell of rice at the point
of harvest, from a gain of $12.5 million in the three-month period ended March 31, 2014 to a gain of $4.7 million in the same period
in 2015 mainly due to (i) a 9.1% decrease in yields from 5.8 tons per hectare in 2014 to 5.2 tons per hectare in 2015 due to above
average rains and cloudy days during the development of the crops; and (ii) a 3.5% decrease in the area under production. |
| - | Of the $4.7 million gain of initial recognition and changes in fair value of biological
assets and agricultural produce for the three-month period ended March 31, 2015, $1.6 million gain represents the realized portion,
as compared to the $2.2 million gain realized portion of the $12.5 million gain of initial recognition and changes in fair value
of biological assets and agricultural produce for the same period in 2014. |
| | | |
Partially offset
by:
| • | A $17.3 million increase in our Sugar, Ethanol and Energy segment, mainly due to: |
| | | |
| - | a $15.7 million increase in the recognition at fair value less cost to sell of non-harvested sugarcane,
from a loss of $3.4 million in the three-month period ended March 31, 2014 to a gain of $12.3 million in the same period for 2015,
mainly generated by a decrease in sugarcane yield estimates in 2014 as a result of a dry period during November 2013 to January
2014 which affected the normal development of the sugarcane. |
| | | |
| - | The changes in the recognition at fair value less cost to sell of sugarcane at the point of harvest
increased from a loss of $5.9 million in the three-month period ended March 31, 2014 to a loss of $4.3 million in the same period
for 2015 due to higher harvested area as a results of the earlier start of the season. |
| | | |
| - | Of the $8.0 million gain of initial recognition and changes in fair value of biological assets
and agricultural produce for the three-month period ended March 31, 2015, $9.0 million gain represents the unrealized portion,
as compared to the $10.8 million loss unrealized portion of the $9.3 million loss of initial recognition and changes in fair value
of biological assets and agricultural produce in the same period for 2014. |
| | | |
Changes in Net Realizable Value of Agricultural Produce after
Harvest
Three-month period
ended March 31, |
|
Crops |
|
Rice |
|
Dairy |
|
All Other Segments |
|
Sugar, Ethanol
and Energy |
|
Corporate |
|
Total |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
(Unaudited) |
| |
|
(In thousands of $) |
| 2015 |
|
(162) |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(162) |
| 2014 |
|
861 |
|
- |
|
- |
|
- |
|
- |
|
- |
|
861 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Changes in net realizable
value of agricultural produce after harvest is mainly composed by: (i) profit or loss from commodity price fluctuations during
the period of time the agricultural produce is in inventory, which impacts its fair value; (ii) profit or loss from the valuation
of forward contracts related to agricultural produce in inventory; and (iii) profit from direct exports. Changes in net realizable
value of agricultural produce after harvest decreased from $0.9 million gain in the three-month period ended March 31, 2014 to
$0.1 million loss in the same period for 2015. This decrease is mainly explained by the decrease in commodity prices that impacted
in higher inventories of corn.
General and Administrative Expenses
Three-month period
ended March 31, |
|
Crops |
|
Rice |
|
Dairy |
|
All Other Segments |
|
Sugar, Ethanol
and Energy |
|
Corporate |
|
Total |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
(Unaudited) |
| |
|
(In thousands of $) |
| 2015 |
|
(1,403) |
|
(1,087) |
|
(370) |
|
(19) |
|
(4,421) |
|
(4,718) |
|
(12,018) |
| 2014 |
|
(980) |
|
(812) |
|
(394) |
|
(35) |
|
(3,710) |
|
(4,849) |
|
(10,780) |
Our general and
administrative expenses increased 11.5%, from $10.8 million in the three-month period ended March 31, 2014 to $12.0 million in
the same period for 2015. This increase is explained by a $0.7 million increase in our Sugar, Ethanol and Energy segment due to
higher average headcount as a result of the expansion in milling activities.
Selling Expenses
Three-month period
ended March 31, |
|
Crops |
|
Rice |
|
Dairy |
|
All Other Segments |
|
Sugar, Ethanol
and Energy |
|
Corporate |
|
Total |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
(Unaudited) |
| |
|
(In thousands of $) |
| 2015 |
|
(802) |
|
(4,291) |
|
(165) |
|
(7) |
|
(7,506) |
|
(484) |
|
(13,255) |
| 2014 |
|
(722) |
|
(3,383) |
|
(155) |
|
(4) |
|
(7,155) |
|
(217) |
|
(11,636) |
Selling expenses
increased 13.9%, from $11.6 million in the three-month period ended March 31, 2014 to $13.3 million in the same period for 2015,
mainly driven by a $0.9 million increase in our Rice segment, primarily due to an increase in sales volume.
Other Operating Income, Net
| Three-month period ended March 31, |
|
Crops |
|
Rice |
|
Dairy |
|
All Other Segments |
|
Sugar, Ethanol
and Energy |
|
Land
Transformation |
|
Corporate |
|
Total |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (Unaudited) |
| (In thousands of $) |
| 2015 |
|
8,962 |
|
479 |
|
(28) |
|
2 |
|
12,205 |
|
- |
|
5 |
|
21,625 |
| 2014 |
|
(12,503) |
|
183 |
|
19 |
|
(1) |
|
(1,366) |
|
- |
|
98 |
|
(13,570) |
Other operating
income increased $35.2 million, from a $13.6 million loss in the three-month period ended March 31, 2014 to $21.6 million gain
in the same period for 2015, primarily due to:
| • | a $21.5 million increase in our Crops segment due to the mark-to-market effect of outstanding hedge
positions of our soybean and corn derivatives; |
| | | |
| • | a $13.6 million increase in our Sugar, Ethanol & Energy segment due to the mark-to-market effect
of outstanding hedge positions. |
Other operating income, net of our Rice,
Dairy, All other segments, Land Transformation and Corporate segments remained essentially unchanged.
Share of Loss of Joint Ventures and Investment
Results
| Three-month period ended March 31, |
|
Crops |
|
Rice |
|
Dairy |
|
All Other Segments |
|
Sugar, Ethanol
and Energy |
|
Land
Transformation |
|
Corporate |
|
Total |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| (Unaudited) |
| (In thousands of $) |
| 2015 |
|
(878) |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(878) |
| 2014 |
|
(225) |
|
- |
|
- |
|
- |
|
- |
|
- |
|
- |
|
(225) |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our share of loss of Joint Ventures increased
slightly from a loss of $0.2 million in the three-month period ended March 31, 2014 to a loss of $0.9 million in the same period
for 2015. This result is explained by the 50% interest that we hold in CHS AGRO, a joint venture with CHS Inc., dedicated to the
processing of confectionary sunflower. The negative result is mainly due to interest expenses and the negative impact of the depreciation
of Argentine peso on the dollar denominated debt.
Financial Results, Net
Our financial results,
net decreased from a loss of $16.2 in the three month period ended March 31, 2014 to a loss of $24.5 million in the same period
of 2015, primarily due to: a $13.7 million mainly non-cash loss in 2015, compared to a $3.7 million non-cash loss in 2014, mostly
generated by the impact of foreign exchange fluctuation on our dollar denominated debt issued by subsidiaries.
The following table
sets forth the breakdown of financial results for the periods indicated.
| |
|
Three-month period ended March 31, |
| |
|
2015 |
2014 |
|
| |
|
(Unaudited) |
|
| |
|
(In $ thousand) |
% Change |
| Interest income |
|
2,568 |
1,477 |
73.9% |
| Interest expense |
|
(12,715) |
(12,693) |
0.2% |
| Foreign exchange losses, net |
|
(13,694) |
(3,702) |
269.9% |
| Cash flow hedge – transfer from equity |
|
464 |
(245) |
(289.4%) |
| Gain/(Loss) from interest rate /foreign exchange rate derivative financial instruments |
|
226 |
592 |
(61.8%) |
| Taxes |
|
(705) |
(743) |
(5.1%) |
| Other Income/(Expenses) |
|
(636) |
(859) |
(26.0%) |
| Total Financial Results |
|
(24,492) |
(16,173) |
51.4% |
| |
|
|
|
|
|
Income Tax expense
Current income tax charge
totaled $5.0 million for the three-month period ended March 31, 2015, which equates to a consolidated effective tax rate of 26.5%.
For the same period in 2014 we registered a loss of income tax of $7.3 million, which equates to a consolidated effective tax rate
of 73.8%.
As of March 31, 2015, the
income tax rate in Uruguay was 25%. However, in Uruguay the income tax rate applicable to derivative activities is 0.75%. During
the three-month period ended March 31, 2015, we recognized a gain in the line item Other operating income, net, of $6.0 million
which was subject to the 0.75% rate. As result of these effects our consolidated effective income tax rate decreased from 73.8%
for the three-month period ended March 31, 2014 to 26.5% for the same period in 2015.
Profit for the period
As a result of the foregoing,
our net income for the three-month period ended March 31, 2015 increased $11.2 million, from a gain of $2.6 million in 2014 to
a profit of $13.7 million in 2015.
LIQUIDITY AND
CAPITAL RESOURCES
Our liquidity and capital
resources are and will be influenced by a variety of factors, including:
| • | our ability to generate cash flows from our operations; |
| | | |
| • | the level of our outstanding indebtedness and the interest that we are obligated to pay on such
outstanding indebtedness; |
| | | |
| • | our capital expenditure requirements, which consist primarily of investments in new farmland, in
our operations, in equipment and plant facilities and maintenance costs; and |
| | | |
| • | our working capital requirements. |
| | | |
Our principal sources of
liquidity have traditionally consisted of shareholders’ contributions, short and long term borrowings and proceeds received
from the disposition of transformed farmland or subsidiaries.
We believe that our working
capital will be sufficient during the next 12 months to meet our liquidity requirements.
Three-month period ended March 31, 2015 and 2014
The table below reflects
our statements of Cash Flow for the three-month period ended March 31, 2015 and 2014.
| |
Three-month period |
| |
2015 |
2014 |
| |
(Unaudited, in thousands of $) |
| Cash and cash equivalent at the beginning of the period |
113,795 |
232,147 |
| Net cash generated from operating activities |
41,803 |
40,915 |
| Net cash used in investing activities |
(60,613) |
(112,958) |
| Net cash generated by financial activities |
125,879 |
75,561 |
| Effect of exchange rate changes on cash and cash equivalent |
(22,585) |
11,766 |
| Cash and cash equivalent at the end of the period |
198,279 |
247,431 |
| |
|
|
Operating Activities
Period ended March 31, 2015
Net cash generated by operating
activities was $41.8 million for the three-month period ended March 31, 2015. During this period, we generated a net profit of
$13.8 million that included non-cash charges relating primarily to losses from foreign exchange, net of $13.7 million, $10.8 million
interest and other expense, net, $5.0 million of income tax and $4.9 million of depreciation and amortization. All these effects
were partially offset by a gain from derivate financial instruments and forward contracts of $21.3 million and the unrealized portion
of the “Initial recognition and changes in fair value of biological assets and agricultural produce” of $20.1 million.
In addition, other changes
in operating assets and liability balances resulted in a net increase in cash of $33.6 million,primarily due to an decrease of
$24.4 million in trade and other receivables, a decrease of $11.3 million in derivate financial instruments, and a decrease of
$11.3 million in biological assets, partially offset by a increase of $13.0 million in trade and other payables.
Period ended March 31, 2014
Net cash generated by operating
activities was $40.9 million for the three-month period ended March 31, 2014. During this period, we generated a net profit of
$2.6 million that included non-cash charges relating primarily to a loss from derivative financial instruments of $13.3 million,
$12.1 million of interest and other expenses, net, $5.3 million of depreciation and amortization, $7.3 million income tax, $3.7
million of foreign exchange gains, net and $2.1 million of provisions and allowances. All of these effects were partially offset
by unrealized portion of the “Initial recognition and changes in fair value of biological assets and agricultural produce”
of $28.8 million.
In addition, other changes
in operating asset and liability balances resulted in a net increase in cash of $22.2 million, primarily due to an decrease of
$18.3 million in biological assets, mainly due to the harvest of rice and crops, and a decrease of $6.9 million in trade and other
receivables, partially offset by a increase of $3.7 million in inventories.
Investing Activities
Period ended March 31, 2015
Net cash used in investing
activities totaled $60.6 million in the three-month period ended March 31, 2015, primarily due to the purchases of property, plant
and equipment (mainly acquisitions of machinery, buildings and facilities for the finalization of the construction of the second
phase of Ivinhema mill), totaling $51.3 million; and $11.3 million in biological assets related mainly to the expansion of our
sugarcane plantation area in Mato Grosso do Sul.
Period ended March 31, 2014
Net cash used in investing
activities totaled $113.0 million in the three-month period ended March 31, 2014, primarily due to the purchases of property, plant
and equipment (mainly acquisitions of machinery, buildings and facilities for the construction of the second phase of Ivinhema
mill), totaling $88.0 million; and $25.1 million in biological assets related mainly to the expansion of our sugarcane plantation
area in Mato Grosso do Sul.
Financing Activities
Period ended March 31, 2015
Net cash provided by financing
activities was $125.9 million in the Period ended March 31, 2015, primarily derived from the incurrence of new long and short term
loans in the amounts of $160.7 million and $5.2 million, respectively, mainly for our Brazilian operations related to the Sugar
and Ethanol cluster development. This effect was partially offset by a net payments of short and long term borrowings in the amounts
$19.8 million and $11.2 million, respectively. During this period, interest paid totaled $9.7 million.
Period ended March 31, 2014
Net cash provided by financing
activities was $75.6 million in the Period ended March 31, 2014, primarily derived from the incurrence of new long and short term
loans in the amounts of $120.8 million and $19.0 million, respectively, mainly for our Brazilian operations related to the Sugar
and Ethanol cluster development. This effect was partially offset by net payments on short and long term borrowings in the amounts
of $30.2 million and $11.2 million, respectively, and $12.9 million of purchase of own shares. During this period, interest paid
totaled $10.2 million
Cash and Cash Equivalents
Historically, since our
cash flows from operations were insufficient to fund our working capital needs and investment plans, we funded our operations with
proceeds from short-term and long-term indebtedness and capital contributions from existing and new private investors. In 2011
we obtained $421.8 million from the IPO and the sale of shares in a concurrent private placement (See “Item 4. Information
on the Company—A. History and Development of the Company” in our Form 20-F). As of March 31, 2015, our cash and cash
equivalents amounted to $198.3 million.
However, we may need additional
cash resources in the future to continue our investment plans. Also, we may need additional cash if we experience a change in business
conditions or other developments. We also might need additional cash resources in the future if we find and wish to pursue opportunities
for investment, acquisitions, strategic alliances or other similar investments. If we ever determine that our cash requirements
exceed our amounts of cash and cash equivalents on hand, we might seek to issue debt or additional equity securities or obtain
additional credit facilities or realize the disposition of transformed farmland and/or subsidiaries. Any issuance of equity securities
could cause dilution for our shareholders. Any incurrence of additional indebtedness could increase our debt service obligations
and cause us to become subject to additional restrictive operating and financial covenants, and could require that we pledge collateral
to secure those borrowings, if permitted to do so. It is possible that, when we need additional cash resources, financing will
not be available to us in amounts or on terms that would be acceptable to us or at all.
Projected Sources and Uses of Cash
We anticipate that we will
generate cash from the following sources:
| • | the dispositions of transformed farmland and/or subsidiaries; and |
| | | |
| • | debt or equity offerings. |
| | | |
We anticipate
that we will use our cash:
| • | for other working capital purposes; |
| | | |
| • | to meet our budgeted capital expenditures; |
| | | |
| • | to make investment in new projects related to our business; and |
| | | |
| • | to refinance our current debts. |
| | | |
Indebtedness and Financial Instruments
The table below illustrates
the maturity of our indebtedness (excluding obligations under finance leases) and our exposure to fixed and variable interest rates:
| |
March 31,
2015 |
|
December 31, 2014 |
| |
(unaudited) |
|
|
| Fixed rate: |
|
|
|
| Less than 1 year |
94,680 |
|
95,524 |
| Between 1 and 2 years |
42,394 |
|
45,518 |
| Between 2 and 3 years |
31,831 |
|
41,685 |
| Between 3 and 4 years |
30,282 |
|
25,809 |
| Between 4 and 5 years |
26,580 |
|
39,992 |
| More than 5 years |
59,704 |
|
87,219 |
| |
285,471 |
|
335,747 |
| Variable rate: |
|
|
|
| Less than 1 year |
98,207 |
|
111,371 |
| Between 1 and 2 years |
173,344 |
|
130,426 |
| Between 2 and 3 years |
133,418 |
|
80,199 |
| Between 3 and 4 years |
63,158 |
|
13,154 |
| Between 4 and 5 years |
6,323 |
|
7,346 |
| More than 5 years |
17,477 |
|
19,683 |
| |
491,927 |
|
362,179 |
| |
777,398 |
|
697,926 |
| |
|
|
|
| (1) | The
Company plans to partially rollover its short term debt using new available lines of
credit, or on using operating cash flow to cancel such debt. |
During 2015 and
2014 the Company was in compliance with all financial covenants.
Short-term Debt.
As of March 31,
2015, our short term debt totaled $193.1 million.
We maintain lines
of credit with several banks in order to finance our working capital requirements. We believe that we will continue to be able
to obtain additional credit to finance our working capital needs in the future based on our past track record and current market
conditions.
Capital Expenditure Commitments
During the three-month
Period ended March 31, 2015, our capital expenditures totaled $62.7 million. Our capital expenditures consisted mainly of equipment,
machinery and construction costs related to the finalization of the construction of the Ivinhema sugar and ethanol mill in Brazil.
We expect continuous capital expenditures for the foreseeable future
as we expand and consolidate each of our business segments.
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