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 August, 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 ☒ 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 ☒
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be deemed to be a part thereof from the date on which this Form 6-K is filed with the SEC, to the extent not superseded by documents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 June 30, 2015, and for the six month periods
ended, June 30, 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.
| |
Adecoagro S.A. |
| |
By |
/s/ Carlos A. Boero Hughes |
| |
Name: |
Carlos A. Boero Hughes |
| |
Title: |
Chief Financial Officer and |
| |
|
Chief Accounting Officer |
| |
|
|
Date:
August 31, 2015 |
|
|
Exhibit Index
| 99.1 |
Operating
and Financial Review and Prospects
|
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:
| | |
| | | |
| | | |
| | |
| | |
| 2014/2015 | | |
| 2013/2014 | | |
| %
Change | |
| | |
| Harvest
Year (1) | | |
| Harvest
Year (1) | | |
| 2014/2015
-2013/2014 | |
| Corn (2) | |
| 6.1 | | |
| 6.3 | | |
| (3.2 | %) |
| Soybean | |
| 3.2 | | |
| 2.9 | | |
| 10.3 | % |
| Soybean (second harvest) | |
| 2.4 | | |
| 2.1 | | |
| 14.3 | % |
| Cotton lint | |
| 0.9 | | |
| 0.6 | | |
| 50.0 | % |
| Wheat (3) | |
| 2.3 | | |
| 2.6 | | |
| (11.5 | %) |
| Rice | |
| 5.1 | | |
| 5.7 | | |
| (10.5 | %) |
| Sugarcane | |
| 98.7 | | |
| 79.3 | | |
| 24.5 | % |
(1)
The table above reflects the presents yields in respect of harvest years as of June 30.
The portion of harvested area completed as of June 30, 2015 was 35% for corn, 100% for
soybean first harvest, 100% for wheat and 100% for rice. The portion of harvested area
completed as of June 30, 2014 was 43% for corn, 100% for soybean first harvest, 100%
for wheat and 100% for rice.
(2)
Includes sorghum
(3)
Includes barley
|
(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, has 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 June 30, 2015, soybean prices increased 4.6% and corn prices increased by 6.7%. Also, between January
1, 2015 and June 30, 2015, ethanol prices decreased by 7.2%, according to Escola Superior de Agricultura “Luiz de Queiroz”
(“ESALQ”) data, and sugar prices decreased by 11.9%, 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 June 30, 2010 to June 30, 2015, highlighting the periods
January 1 to June 30, 2014 and January 1 to June 30, 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:
| | |
Six-month
Period ended June
30, | |
| | |
2015 | | |
2014 | |
| | |
| Hectares | |
| Crops (1) | |
| 148,929 | | |
| 152,888 | |
| Rice | |
| 35,328 | | |
| 36,604 | |
| Sugar, Ethanol and
Energy | |
| 127,688 | | |
| 110,822 | |
(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 2013/2014. 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 June 30, 2015, the Peso-U.S. dollar exchange rate was Ps.9.09 per U.S. dollar as compared to Ps.8.13 per U.S. dollar as of
June 30, 2014. As of June 30, 2015, the Real-U.S. dollar exchange rate was R$3.10 per U.S. dollar as compared to R$2.22 per U.S.
dollar as of June 30, 2014.
The
following graph shows the Real-U.S. dollar rate of exchange for the periods since June 30, 2010 to June 30, 2015, highlighting
the periods January 1 to June 30, 2014 and January 1 to June 30, 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 $301.4 million for the year
ended December 2012, $226.6 million for the year ended December 2013 and $320.8 million for the year ended December 2014. . Capital
expenditures totaled $96.6 million for the six-month period ended June 30, 2015 in comparison with $168.1 million in the same
period in 2014. 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. 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 and other dairy
products; |
| • | 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 June 30, 2015, we have not yet completed
the 2014/2015 harvest year crops. The Harvested tons presented corresponds to the harvest completed as of June 30, 2015.
| | |
Six-month
period ended June 30, | |
| | |
2015 | | |
2014 | |
| Sales | |
(In thousands
of $) | |
| Farming
Business | |
| 137,216 | | |
| 166,532 | |
| Crops | |
| 70,908 | | |
| 98,458 | |
| Soybean(1) | |
| 38,533 | | |
| 58,018 | |
| Corn (2) | |
| 14,058 | | |
| 28,983 | |
| Wheat (3) | |
| 7,542 | | |
| 6,620 | |
| Sunflower | |
| 9,046 | | |
| 3,896 | |
| Cotton | |
| 925 | | |
| 333 | |
| Other crops(4) | |
| 804 | | |
| 608 | |
| Rice(5) | |
| 48,727 | | |
| 53,343 | |
| Dairy | |
| 16,919 | | |
| 13,943 | |
| All
other segments(6) | |
| 662 | | |
| 788 | |
| | |
| | | |
| | |
| Sugar, Ethanol and
Energy Business | |
| 147,928 | | |
| 136,627 | |
| Sugar | |
| 53,303 | | |
| 43,036 | |
| Ethanol | |
| 72,941 | | |
| 74,963 | |
| Energy | |
| 21,684 | | |
| 18,628 | |
| Total Sales | |
| 285,144 | | |
| 303,159 | |
| Land Transformation
(7) | |
| - | | |
| 25,575 | |
| | |
| 2014/2015 | | |
| 2013/2014 | |
| | |
| Harvest | | |
| Harvest | |
| Production | |
| Year | | |
| Year | |
| Farming Business | |
| | | |
| | |
| Crops (tons) (8) | |
| 555,573 | | |
| 489,375 | |
| Soybean (tons) | |
| 284,263 | | |
| 213,892 | |
| Corn (tons) (2) | |
| 164,252 | | |
| 172,740 | |
| Wheat (tons) (3) | |
| 84,609 | | |
| 77,168 | |
| Sunflower (tons) | |
| 21,762 | | |
| 23,111 | |
| Cotton Lint (tons) | |
| 687 | | |
| 2,465 | |
| Rice(9) (tons) | |
| 180,149 | | |
| 205,874 | |
| | |
| | |
| |
| | |
Six-month
period ended June 30, | |
| | |
2015 | | |
2014 | |
| Processed
rice (10) (tons) | |
| 52,270 | | |
| 91,744 | |
| Dairy (11) (liters) | |
| 41,282 | | |
| 37,636 | |
| Sugar, Ethanol and
Energy Business | |
| | | |
| | |
| Sugar
(tons) | |
| 196,528 | | |
| 111,547 | |
| Ethanol
(cubic meters) | |
| 130,072 | | |
| 86,196 | |
| Energy
(MWh) | |
| 206,201 | | |
| 120,673 | |
| Land Transformation
Business (hectares traded) | |
| - | | |
| 26,299 | |
| | |
| |
| | |
| 2014/2015 | | |
| 2013/2014 | |
| | |
| | | |
| | |
| | |
| Harvest | | |
| Harvest | |
| Planted
Area | |
| Year | | |
| Year | |
| | |
| (Hectares) | |
| Farming Business
(12) | |
| | | |
| | |
| Crops | |
| 192,783 | | |
| 185,443 | |
| Soybean | |
| 96,476 | | |
| 82,980 | |
| Corn (2) | |
| 40,074 | | |
| 51,323 | |
| 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 | |
| 228,112 | | |
| 222,047 | |
| Second
Harvest Area | |
| 40,115 | | |
| 29,923 | |
| Leased
Area | |
| 60,086 | | |
| 55,881 | |
| Owned
Croppable Area(13) | |
| 127,911 | | |
| 136,243 | |
| | |
| | | |
| | |
| | |
| Six-month
period ended June 30, | |
| | |
| 2015 | | |
| 2014 | |
| Sugar, Ethanol and
Energy Business | |
| | | |
| | |
| | |
| | | |
| | |
| Sugarcane
plantation | |
| 127,688 | | |
| 110,822 | |
| Owned
land | |
| 9,145 | | |
| 9,145 | |
| Leased
land | |
| 118,543 | | |
| 101,677 | |
| (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) | Represents
capital gain from the sale of land. |
| (8) | Crop
production does not include 118,510 tons and 37,189 tons of forage produced in the 2014/2015
and 2013/2014 harvest years, respectively. |
| (9) | 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. |
| (10) | 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). |
| (11) | Raw
milk produced at our dairy farms. |
| (12) | Includes
hectares planted in the second harvest. |
| (13) | Does
not include potential croppable areas being evaluated for transformation. |
Six-month
period ended June 30, 2015 as compared to six-month period ended June 30, 2014
The
following table sets forth certain financial information with respect to our consolidated results of operations for the periods
indicated.
| | |
Six-month
period ended
June 30, | |
| | |
2015 | | |
2014 | |
| | |
(Unaudited) | |
| | |
(In
thousands of $) | |
| Sales of manufactured products
and services rendered | |
| 198,454 | | |
| 189,737 | |
| Cost of manufactured
products sold and services rendered | |
| (132,348 | ) | |
| (126,095 | ) |
| Gross
Profit from Manufacturing Activities | |
| 66,106 | | |
| 63,642 | |
| Sales of agricultural produce and biological
assets | |
| 86,690 | | |
| 113,422 | |
| Cost of agricultural produce sold and
direct agricultural selling expenses | |
| (86,690 | ) | |
| (113,422 | ) |
| Initial recognition and changes in fair
value of biological assets and agricultural produce | |
| 33,948 | | |
| 39,860 | |
| Changes in net
realizable value of agricultural produce after harvest | |
| 3,898 | | |
| (1,704 | ) |
| Gross
Profit from Agricultural Activities | |
| 37,846 | | |
| 38,156 | |
| Margin
on Manufacturing and Agricultural Activities Before Operating Expenses | |
| 103,952 | | |
| 101,798 | |
| General and administrative expenses | |
| (23,485 | ) | |
| (23,634 | ) |
| Selling expenses | |
| (31,032 | ) | |
| (31,393 | ) |
| Other operating income/(expense), net | |
| 15,607 | | |
| (2,384 | ) |
| Share of loss of joint ventures | |
| (1,470 | ) | |
| (231 | ) |
| Profit
from Operations Before Financing and Taxation | |
| 63,572 | | |
| 44,156 | |
| Finance income | |
| 5,670 | | |
| 4,301 | |
| Finance costs | |
| (44,604 | ) | |
| (39,180 | ) |
| Financial results,
net | |
| (38,934 | ) | |
| (34,879 | ) |
| Profit
Before Income Tax | |
| 24,638 | | |
| 9,277 | |
| Income tax expense | |
| (9,542 | ) | |
| (5,229 | ) |
| Profit
for the Period | |
| 15,096 | | |
| 4,048 | |
Sales
of Manufactured Products and Services Rendered
Six-month
period
ended June 30, | | |
Crops | | |
Rice | | |
Dairy | | |
All
Other Segments | | |
Sugar,
Ethanol and Energy | | |
Total | |
| | | |
(Unaudited) | |
| | | |
(In
thousands of $) | |
| | 2015 | | |
| 431 | | |
| 48,679 | | |
| 754 | | |
| 662 | | |
| 147,928 | | |
| 198,454 | |
| | 2014 | | |
| 117 | | |
| 51,883 | | |
| 322 | | |
| 788 | | |
| 136,627 | | |
| 189,737 | |
Sales
of manufactured products and services rendered increased 4.6%, from $189.7 million for the six month period ended June 30, 2014
to $198.5 million for the same period in 2015, primarily as a result of:
| • | a
$11.3 million increase in our Sugar, Ethanol and Energy segment, mainly due to: (i) a
40.5% increase in the volume of sugar and ethanol sold, measured in TRS(1),
from 183.1 thousand tons in the six month period ended June 30, 2014 to 257.2 thousand
tons in the same period in 2015; and (ii) a 70.9% increase in volume of energy sold,
from 120.7 thousand MWh in 2014 to 206.2 thousand MWh in 2015. The increase in volume
of sugar and ethanol sold was due to (a) a 54.2% increase in sugarcane milled, from 2.2
million tons in 2014 to 3.4 million tons in 2015; and (b) a 5.5% increase in the TRS
content in sugarcane, from 120.4 kilograms per ton in 2014 to 127.0 kilograms per ton
in 2015; partially offset by a higher inventories build-up, measured in TRS, from an
inventories sell-of of 48.4 thousand tons in 2014 compared to an inventories build-up
of 43.4 thousand tons in 2015. The increase in the volume of energy sold was mainly due
to (a) the increase in sugarcane milled; and (b) an increase in the cogeneration efficiency
ratio measured in KWh per ton of sugarcane crushed, from 54.9 in 2014 to 61.6 in 2015.
The increase in the sugarcane milled is sustained by (i) an increase in the harvesting
area from 25.5 thousand hectares in 2014 to 33.0 thousand hectares in 2015 due to the
earlier start of the crushing season; (ii) a 24.5% increase in sugarcane yields from
79.3 tons per hectare in 2014 to 98.7 tons per hectare in 2015; and (iii) a 27.1% increase
in sugarcane crushed per day as a result of the expansion of nominal crushing capacity
coupled with enhanced agricultural and industrial efficiencies. The increases in volume
sold were partially offset by: (i) a 31.9% decrease in energy price, from $154.4 per
MWh in 2014 to $105.2 per MWh in 2015; (ii) a 25.3% decrease in the price of ethanol,
from $625.9 per cubic meter in 2014 to $467.6 per cubic meter in 2015; and (iii) a 13.8%
decrease in the sugar price from $393.1 per ton in 2014 to $338.8 per ton in 2015 |
| | The
following figure sets forth the variables that determine our Sugar and Ethanol sales: |
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.
| | |
Six-month
period ended June 30, | | |
Six-month
period ended June 30, | | |
Six-month
period ended June 30, | |
| | |
2015 | | |
2014 | | |
Chg
% | | |
2015 | | |
2014 | | |
Chg
% | | |
2015 | | |
2014 | | |
Chg
% | |
| | |
(in
million of $) | | |
| | |
(in
thousand units) | | |
| | |
(in
dollars per unit) | | |
| |
| Ethanol (M3) | |
| 72.9 | | |
| 75.0 | | |
| (2.8 | %) | |
| 156.0 | | |
| 119.8 | | |
| 30.2 | % | |
| 467.6 | | |
| 625.9 | | |
| (25.3 | %) |
| Sugar (tons) | |
| 53.3 | | |
| 43.0 | | |
| 23.9 | % | |
| 157.3 | | |
| 109.5 | | |
| 43.7 | % | |
| 338.8 | | |
| 393.1 | | |
| (13.8 | %) |
| Energy (MWh) | |
| 21.7 | | |
| 18.6 | | |
| 16.7 | % | |
| 206.2 | | |
| 120.7 | | |
| 70.9 | % | |
| 105.2 | | |
| 154.4 | | |
| (31.9 | %) |
| TOTAL | |
| 147.9 | | |
| 136.6 | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| • | a
$0.4 million increase in our Dairy segment due to a 190.4% increase in the volume of
milk powder sold, from 75 tons in the six month period ended June 30, 2014 to 218 tons
in the same period in 2015; partially offset by a decrease of 19.5% in the price, from
$4.3 thousand per ton in 2014 to $3.5 thousand per ton in 2015 |
partially
offset by;
| • | a
$3.2 million decrease in our Rice segment, mainly due to: (i) a 5.4% decrease in the
volume of white rice sold measured in tons of rough rice, from 119.8 thousand tons in
the six month period ended June 30, 2014 to 113.3 thousand tons in the same period in
2015, mainly explained by a higher inventories build-up from 82.8 thousand tons in 2014
to 116.8 thousand tons in 2015; and (ii) a 49.7% decrease in the sale of by-products,
from $10.6 million in 2014 to $5.3 million in 2015. These decreases were partially offset
by an increase of 7.5% in the price, from $356 in 2014 to $383 per ton of rough rice
equivalent in 2015. |
Cost
of Manufactured Products Sold and Services Rendered
| Six-month
period ended June 30, | | |
Crops | | |
Rice | | |
Dairy | | |
All
Other
Segments | | |
Sugar,
Ethanol
and Energy | | |
Total | |
| | | |
(Unaudited) | |
| | | |
(In
thousands of $) | |
| | 2015 | | |
| (262 | ) | |
| (40,193 | ) | |
| (884 | ) | |
| (331 | ) | |
| (90,678 | ) | |
| (132,348 | ) |
| | 2014 | | |
| - | | |
| (39,328 | ) | |
| (322 | ) | |
| (33 | ) | |
| (86,412 | ) | |
| (126,095 | ) |
Cost
of manufactured products sold and services rendered increased 5.0%, from $126.1 million in the six month period ended in June
30, 2014 to $132.3 million in the same period in 2015. This increase was primarily due to:
| • | a
$4.3 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 16.7% depreciation of the Brazilean Real during
the six month period ended June 30, 2015. |
| • | a
$0.9 million increase in our Rice segment mainly due to a 8.1% increase in the unitary
cost of product sold due to the 24.7% depreciation of the Argentine peso during the six-month
period ended June 30 2014, in comparison to the 7.4% depreciation during the same period
of 2015; partially offset by the increase in volume sold. |
| • | a
$0.6 million increase in our Dairy segment mainly due to the increase in the volume of
milk powder sold. |
Sales
and Cost of Agricultural Produce and Biological Assets
Six-month
period
ended June 30, | | |
Crops | | |
Rice | | |
Dairy | | |
All
Other
Segments | | |
Sugar,
Ethanol and Energy | | |
Total | |
| | | |
(Unaudited) | |
| | | |
(In
thousands of $) | |
| | 2015 | | |
| 70,477 | | |
| 48 | | |
| 16,165 | | |
| - | | |
| - | | |
| 86,690 | |
| | 2014 | | |
| 98,341 | | |
| 1,460 | | |
| 13,621 | | |
| - | | |
| - | | |
| 113,422 | |
Sales
of agricultural produce and biological assets decreased 23.6%, from $113.4 million in 2014, to $86.7 million in 2015, primarily
as a result of:
| • | A
$27.9 million decrease in our Crops segment mainly driven by (i) the general decrease
in the price of grains sold: soybean prices decreased 27.2%, from $366.3 per ton in the
six-month period ended June 30, 2014 to $266.6 per ton in the same period of 2015, and
corn prices decreased 22.8%, from $201.2 per ton in the six-month period ended June 30,
2014 to $155.4 per ton in the same period of 2015; (ii) a 8.7% decrease in soybean tons
sold due to a higher inventories build-up from 83.0 thousand tons of inventories build-up
in the six month period ended June 30, 2014 to 137.2 thousand tons in the same period
of 2015; and (iii) a 37.2% decrease in tons of corn sold from 114.0 thousand tons in
2014 to 90.4 thousand tons in 2015 due to a decrease in harvested area as of June 30,
from 43% in 2014 to 35% in 2015. Thes decreases were partially offset by higher soybean
yields from 2.9 tons per hectare in 2014 to 3.2 in 2015 for soybean first crop and from
2.9 in 2014 to 3.2 in 2015 for soybean second crop. |
The
following table sets forth the breakdown of sales for the periods indicated.
| | |
Six-month
Period ended June
30, | | |
Six-month
Period ended June
30, | | |
Six-month
Period ended June
30, | |
| | |
2015 | | |
2014 | | |
%
Chg | | |
2015 | | |
2014 | | |
%
Chg | | |
2015 | | |
2014 | | |
%
Chg | |
| | |
(In
thousands of $) | | |
| | |
(In
thousands of tons) | | |
| | |
(In
$ per ton) | | |
| |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| Soybean | |
| 38,533 | | |
| 58,018 | | |
| (33.6 | %) | |
| 144,553 | | |
| 158,412 | | |
| (8.7 | %) | |
| 266.6 | | |
| 366.3 | | |
| (27.2 | %) |
| Corn (1) | |
| 14,058 | | |
| 28,983 | | |
| (51.5 | %) | |
| 90,446 | | |
| 144,023 | | |
| (37.2 | %) | |
| 155.4 | | |
| 201.2 | | |
| (22.8 | %) |
| Cotton lint | |
| 925 | | |
| 333 | | |
| 178.0 | % | |
| 770 | | |
| 201 | | |
| 282.7 | % | |
| 1,201.7 | | |
| 1,654.4 | | |
| (27.4 | %) |
| Wheat (2) | |
| 7,542 | | |
| 6,620 | | |
| 13.9 | % | |
| 35,462 | | |
| 28,014 | | |
| 26.6 | % | |
| 212.7 | | |
| 236.3 | | |
| (10.0 | %) |
| Sunflower | |
| 9,046 | | |
| 3,896 | | |
| 132.2 | % | |
| 19,313 | | |
| 10,985 | | |
| 75.8 | % | |
| 468.4 | | |
| 354.7 | | |
| 32.1 | % |
| Others | |
| 373 | | |
| 491 | | |
| (24.0 | %) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| Total | |
| 70,477 | | |
| 98,341 | | |
| (28.3 | %) | |
| | | |
| | | |
| | | |
| | | |
| | | |
| | |
| • | A
$1.4 million decrease in our Rice segment was mainly driven by a lower volume of rough
rice sold to third parties in the six-month period ended June 30, 2015. The sales reported
in 2014 were exceptional, as we normally process all of our rough rice. During the six month period ended June 30, 2014, we
sold 4.0
thousand
tons
of rough rice at a
price of
$275.6
per
ton. |
Partially
offset by:
| • | A
18.7% increase in our Dairy segment, from $13.6 million in the six-month period ended
June 30, 2014 to $16.2 million in the six-month period ended June 30, 2015. This increase
is explained by an increase in the amount of liters of fluid milk sold, from 33.6 million
liters in the six-month period ended June 30, 2014 to 39.4 million liters in the same
period of 2015 as a result of: (a) a 3.6% increase in our milking cow herd driven by
enhanced reproduction efficiencies at our two free-stall dairy facilities from an average
of 6,346 heads in the six month period ended June 30,2014 to an average of 6,577 heads
in the same period of 2015; and (b) by a 5.8% increase in cow productivity, from 32.8
liters per day per cow in 2014 to 34.7 liters per day per cow in 2015 due to enhanced
operating efficiencies. The increase in the amount of liters sold was partially offset
by a 1.1% decrease in milk prices from $0.373 per liter in 2014 to $0.369 per liter in
2015. |
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
Six-month
period
ended June 30, | | |
Crops | | |
Rice | | |
Dairy | | |
All
Other
Segments | | |
Sugar,
Ethanol
and Energy | | |
Total | |
| | | |
(Unaudited) | |
| | | |
(In
thousands of $) | |
| | 2015 | | |
| 15,473 | | |
| 3,755 | | |
| 4,178 | | |
| (2 | ) | |
| 10,544 | | |
| 33,948 | |
| | 2014 | | |
| 42,871 | | |
| 11,557 | | |
| 3,890 | | |
| (386 | ) | |
| (18,072 | ) | |
| 39,860 | |
Initial
recognition and changes in fair value of biological assets and agricultural produce decreased 14.8%, from $39.9 million in the
six-month period ended June 30, 2014 to $33.9 million in the same period for 2015. The decrease was mainly due to:
| • | a
$27.4 million decrease in our Crops segment mainly due to: |
| - | a
$26.6 million decrease in the recognition at fair value less cost to sell of crops at
the point of harvest mainly due to a decrease in commodity prices, partially offset by
the higher yields. |
| - | a
$0.8 million decrease in the recognition at fair value less cost to sell for non-harvested
crops, from a gain of $0.8 million in the six-month period ended June 30, 2014 to nill
in the same period of 2015, mainly due to (i) a general decrease in prices; and (ii)
a lower production with significant growth at the end of the period. |
| - | Of
the $15.5 million gain of initial recognition and changes in fair value of biological
assets and agricultural produce for the six-month period ended June 30, 2015, $8.0 million
gain represents the realized portion, as compared to the $27.4 million realized gain
of the $42.9 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: |
| - | 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 $11.6 million in the six-month period ended June 30,
2014 to a gain of $3.8 million in the same period in 2015 mainly due to (i) a 10.0% decrease
in yields from 5.7 tons per hectare in 2014 to 5.1 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 $3.8 million gain of initial recognition and changes in fair value of biological
assets and agricultural produce for the six-month period ended June 30, 2015, $1.0 million
gain represents the realized portion, as compared to the $5.5 million gain realized portion
of the $11.6 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
$28.6 million increase in our Sugar, Ethanol and Energy segment, mainly due to: |
| - | a
$21.5 million increase in the recognition at fair value less cost to sell of non-harvested
sugarcane, from a loss of $3.3 million in the six-month period ended June 30, 2014 to
a gain of $18.1 million in the same period for 2015, mainly generated by an increase
in sugarcane yield estimates due to enhancements in our agricultural operation. |
| - | The
changes in the recognition at fair value less cost to sell of sugarcane at the point
of harvest increased from a loss of $14.7 million in the six-month period ended June
30, 2014 to a loss of $7.6 million in the same period for 2015 due to an increase in
yields. |
| - | Of
the $10.5 million gain of initial recognition and changes in fair value of biological
assets and agricultural produce for the six-month period ended June 30, 2015, $14.5 million
gain represents the unrealized portion, as compared to the $10.4 million loss unrealized
portion of the $18.1 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
Six-month
period
ended June 30, | | |
Crops | | |
Rice | | |
Dairy | | |
All
Other
Segments | |
Sugar,
Ethanol and Energy | |
Corporate | | |
Total | |
| | | |
| | |
| | |
| | |
| |
| |
| | |
| |
| | | |
(Unaudited) | |
| | | |
(In
thousands of $) | |
| | 2015 | | |
| 3,898 | | |
| N/A | | |
| N/A | | |
N/A | |
N/A | |
| N/A | | |
| 3,898 | |
| | 2014 | | |
| (1,704 | ) | |
| N/A | | |
| N/A | | |
N/A | |
N/A | |
| N/A | | |
| (1,704 | ) |
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 increased from $1.7 million loss in the six-month period ended June
30, 2014 to $3.9 million gain in the same period for 2015. This increase is mainly explained by the increase in gain from forward
contracts.
General
and Administrative Expenses
Six-month period
ended June 30, | | |
Crops | | |
Rice | | |
Dairy | | |
All Other Segments | | |
Sugar, Ethanol and Energy
| | |
Corporate | | |
Total | |
| | | |
(Unaudited) | |
| | | |
(In thousands of $) | |
| | 2015 | | |
| (1,792 | ) | |
| (1,618 | ) | |
| (747 | ) | |
| (41 | ) | |
| (10,152 | ) | |
| (9,135 | ) | |
| (23,485 | ) |
| | 2014 | | |
| (2,083 | ) | |
| (1,602 | ) | |
| (777 | ) | |
| (84 | ) | |
| (10,132 | ) | |
| (8,956 | ) | |
| (23,634 | ) |
Our
general and administrative expenses remained essentially unchanged, from $23.6 million in the six-month period ended June 30,
2014 to $23.5 million in the same period for 2015.
Selling
Expenses
Six-month
period
ended June 30, | | |
Crops | | |
Rice | | |
Dairy | | |
All Other Segments | | |
Sugar, Ethanol and Energy
| | |
Corporate | | |
Total | |
| | | |
(Unaudited) | |
| | | |
(In thousands of $)
| |
| | 2015 | | |
| (2,751 | ) | |
| (6,763 | ) | |
| (346 | ) | |
| (13 | ) | |
| (20,663 | ) | |
| (526 | ) | |
| (31,032 | ) |
| | 2014 | | |
| (2,029 | ) | |
| (9,126 | ) | |
| (272 | ) | |
| (13 | ) | |
| (19,225 | ) | |
| (728 | ) | |
| (31,393 | ) |
Selling
expenses remained essentially unchanged, from $31.4 million in the six-month period ended June 30, 2014 to $31.0 million in the
same period for 2015. The $2.4 million decrease in selling expenses in our Rice segment due to lower tons of white rice sold was
offset by (i) a 7.5% increase in our Sugar, Ethanol and Energy segment from $19.2 million in 2014 to $20.6 million in 2015 due
to higher tons of sugar and ethanol sold expressed in TRS; and (ii) a $0.7 million increase in our Crops segment due to lower
selling costs from exports as of June 30, 2014 that wer booked in July 2015.
Other
Operating Income, Net
Six-month
period ended
June 30, | | |
Crops | | |
Rice | | |
Dairy | | |
All Other Segments | | |
Sugar, Ethanol
and Energy | | |
Land Transformation | | |
Corporate | | |
Total | |
| (Unaudited) | |
| (In thousands of $) | |
| | 2015 | | |
| 1,480 | | |
| 601 | | |
| (306 | ) | |
| 1 | | |
| 13,609 | | |
| - | | |
| 222 | | |
| 15,607 | |
| | 2014 | | |
| (5,245 | ) | |
| 235 | | |
| 20 | | |
| (15 | ) | |
| 2,484 | | |
| - | | |
| 137 | | |
| (2,384 | ) |
Other
operating income increased $18.0 million, from a $2.4 million loss in the six-month period ended June 30, 2014 to $15.6 million
gain in the same period for 2015, primarily due to:
| • | a
$11.1 million increase in our Sugar, Ethanol & Energy segment due to the mark-to-market
effect of outstanding hedge positions. |
| • | a
$6.7 million increase in our Crops 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
Six-month period
ended June 30, | | |
Crops | | |
Rice | | |
Dairy | | |
All Other Segments | | |
Sugar, Ethanol and Energy
| | |
Land Transformation | | |
Corporate | | |
Total | |
| | | |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
| |
| (Unaudited) | |
| (In thousands of $)
| |
| | 2015 | | |
| (1,470 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (1,470 | ) |
| | 2014 | | |
| (231 | ) | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| (231 | ) |
Our
share of loss of Joint Ventures increased from a loss of $0.2 million in the three-month period ended June 30, 2014 to a loss
of $1.5 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 the decrease in commodity
prices, interest expense and the negative impact of the depreciation of Argentine peso on its dollar denominated debt.
Financial
Results, Net
Our
financial results, net decreased from a loss of $34.9 in the six month period ended June 30, 2014 to a loss of $38.9 million in
the same period of 2015, primarily due to: a $9.7 million mainly non-cash loss in 2015, compared to a $3.3 million non-cash loss
in 2014, mostly generated by the impact of foreign exchange fluctuation on our dollar denominated debt
The
following table sets forth the breakdown of financial results for the periods indicated.
| | |
Six-month period ended June 30, |
|
|
|
| |
| | |
2015 | | |
2014 | | |
| |
| | |
(Unaudited) | | |
| | |
| |
| | |
| (In
$ thousand) | | |
| | | |
| %
Change | |
| Interest income | |
| 4,906 | | |
| 3,393 | | |
| 44.6 | % |
| Interest expense | |
| (24,151 | ) | |
| (27,809 | ) | |
| (13.2 | %) |
| Foreign exchange losses, net | |
| (9,653 | ) | |
| (3,268 | ) | |
| 195.4 | % |
| Cash flow hedge – transfer from equity | |
| (7,754 | ) | |
| (4,609 | ) | |
| 68.2 | % |
| Gain from interest rate /foreign exchange rate derivative financial instruments | |
| 570 | | |
| 720 | | |
| (20.8 | %) |
| Taxes | |
| (1,457 | ) | |
| (1,954 | ) | |
| (25.4 | %) |
| Other Expenses | |
| (1,395 | ) | |
| (1,352 | ) | |
| 3.2 | % |
| Total Financial Results | |
| (38,934 | ) | |
| (34,879 | ) | |
| 11.6 | % |
Income
Tax expense
Current
income tax charge totaled $9.5 million for the six-month period ended June 30, 2015, which equates to a consolidated effective
tax rate of 38.7%. For the same period in 2014 we registered a loss of income tax of $5.2 million, which equates to a consolidated
effective tax rate of 56.4%.
As
of June 30, 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 six-month period ended June 30, 2015, we recognized a gain in the line item Other operating income, net,
of $2.1 million which was subject to the 0.75% rate. As result of these effects our consolidated effective income tax rate decreased
from 56.4% for the six-month period ended June 30, 2014 to 38.7% for the same period in 2015.
Profit
for the period
As
a result of the foregoing, our net income for the six-month period ended June 30, 2015 increased $11.0 million, from a gain of
$4.0 million in 2014 to a profit of $15.1 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.
Six-month
period ended June 30, 2015 and 2014
The
table below reflects our statements of Cash Flow for the six-month period ended June 30, 2015 and 2014.
| | |
Six-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 | |
| 47,489 | | |
| 26,559 | |
| Net cash used in investing activities | |
| (99,142 | ) | |
| (166,372 | ) |
| Net cash generated from financial activities | |
| 116,556 | | |
| 82,581 | |
| Effect of exchange rate changes on cash and cash equivalent | |
| (15,232 | ) | |
| 24,412 | |
| Cash and cash equivalent at the end of the period | |
| 163,466 | | |
| 199,327 | |
Operating
Activities
Period
ended June 30, 2015
Net
cash generated by operating activities was $47.5 million for the six-month period ended June 30, 2015. During this period, we
generated a net profit of $15.1 million that included non-cash charges relating primarily to losses from foreign exchange, net
of $9.7 million, $20.6 million interest and other expense, net, $9.5 million of income tax and $30.0 million of depreciation and
amortization. All these effects were partially offset by a gain from derivate financial instruments and forward contracts of $15.3
million and the unrealized portion of the “Initial recognition and changes in fair value of biological assets and agricultural
produce” of $24.7 million.
In
addition, other changes in operating assets and liability balances resulted in a net decrease in cash of $7.3 million, primarily
due to an decrease of $7.4 million in trade and other receivables, a decrease of $25.8 million in derivate financial instruments,
and a decrease of $37.3 million in biological assets, partially offset by a increase of $52.6 million in inventories and a decrease
of 27.0 in trade and other payables.
Period
ended June 30, 2014
Net
cash generated by operating activities was $26.6 million for the period ended June 30, 2014. During this period, we generated
a net gain of $4.1 million that included non-cash charges relating primarily to depreciation and amortization of $34.4 million,
$25.8 million of interest expense, net, and $5.2 million of income tax benefit. All these effects were partially offset by unrealized
portion of the initial recognition and changes in fair value of non-harvested biological assets of $11.2 million.
In
addition, other changes in operating asset and liability balances resulted in a net decrease in cash of $45.7 million, primarily
due to an increase of $49.3 million in inventories, $23.7 million of trade and other receivables and a decrease of $13.6 million
in trade and other payables, partially offset by a decrease of $45.1 in biological assets due to the harvest of rice, crops, and
sugarcane.
Investing
Activities
Period
ended June 30, 2015
Net
cash used in investing activities totaled $99.1 million in the six-month period ended June 30, 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 $69.9 million; and $25.9 million in biological assets related mainly to the expansion
of our sugarcane plantation area in Mato Grosso do Sul.
Period
ended June 30, 2014
Net
cash used in investing activities totaled $166.4 million in the six-month period ended June 30, 2014, primarily due to the purchases
of property, plant and equipment (mainly acquisitions of machinery, buildings and facilities for the construction of the Ivinhema
mill), totaling $113.1 million; $54.4 million in biological assets related mainly to the expansion of our sugarcane plantation
area in Mato Grosso do Sul.
Financing
Activities
Period
ended June 30, 2015
Net
cash provided by financing activities was $116.5 million in the period ended June 30, 2015, primarily derived from the incurrence
of new long and short term loans in the amounts of $166.9 million and $37.4 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 $19.7 million and $48.9 million, respectively. During this period, interest paid totaled $20.3 million.
Period
ended June 30, 2014
Net
cash provided by financing activities was $82.6 million in the period ended June 30, 2014, primarily derived from the incurrence
of new long and short term loans in the amounts of $159.1 million and $42.4 million, respectively, mainly for our Brazilian operations
related to the Sugar and Ethanol cluster development, and from the sale of minority interest in subsidiaries for $49.4 million.
All these effects were partially offset by payments of short and long term borrowings in the amounts $59.5 million and $71.2 million,
respectively. During this period, interest paid totaled $25.2 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 June 30, 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:
| | |
June
30, 2015 | | |
December
31, 2014 | |
| | |
(unaudited) | | |
| |
| Fixed rate: | |
| | | |
| | |
| Less than 1 year | |
| 114,204 | | |
| 95,524 | |
| Between 1 and 2 years | |
| 40,350 | | |
| 45,518 | |
| Between 2 and 3 years | |
| 32,697 | | |
| 41,685 | |
| Between 3 and 4 years | |
| 29,009 | | |
| 25,809 | |
| Between 4 and 5 years | |
| 27,641 | | |
| 39,992 | |
| More than 5 years | |
| 54,543 | | |
| 87,219 | |
| | |
| 298,444 | | |
| 335,747 | |
| Variable rate: | |
| | | |
| | |
| Less than 1 year | |
| 115,923 | | |
| 111,371 | |
| Between 1 and 2 years | |
| 162,487 | | |
| 130,426 | |
| Between 2 and 3 years | |
| 126,871 | | |
| 80,199 | |
| Between 3 and 4 years | |
| 58,536 | | |
| 13,154 | |
| Between 4 and 5 years | |
| 6,959 | | |
| 7,346 | |
| More than 5 years | |
| 15,368 | | |
| 19,683 | |
| | |
| 486,144 | | |
| 362,179 | |
| | |
| 784,588 | | |
| 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 June 30, 2015, our short term debt totaled $230.4 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 six-month Period ended June 30, 2015, our capital expenditures totaled $96.6 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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