LUXEMBOURG, May 15, 2017 /PRNewswire/ -- Adecoagro S.A.
(NYSE: AGRO, Bloomberg: AGRO US,
Reuters: AGRO.K), one of the leading agricultural companies in
South America, announced today its
results for the first quarter of 2017.
Main highlights for the period:
- Adecoagro recorded Adjusted EBITDA(1) of
$44.8 million in 1Q17, representing a
3.6% increase compared to 1Q16.
- Gross sales in 1Q17 reached $166.1
million, 36.7% higher year-over-year
- Net income in 1Q17 stands at $6.0
million, $3.2 million higher
than 1Q16.
Mariano Bosch, Adecoagro's Chief
Executive Officer, said, "The first quarter was a great start to
2017 for Adecoagro as a direct result of our continued execution on
our strategic plan, enhancing productivity, and deepening our focus
on sustainability across each of our core businesses. Our outlook
for 2017 remains positive, despite persistent macroeconomic
challenges. To that end, we continue to evaluate ways to
strategically deploy our capital to position our business for
future growth while maintaining margins and generating cash flow
and generating ROIC well in excess of our cost of
capital. Accordingly, we are making significant progress on
increasing our milling and crushing capacity in our Sugar, Ethanol
& Energy business, and now, in light of the improved regulatory
framework and outlook for the agribusiness sector in Argentina, we have identified several growth
opportunities across our farming operations."
Financial & Operational Highlights
- Adjusted EBITDA in our Sugar, Ethanol & Energy business in
1Q17 reached $30.3 million,
$8.2 million higher than 1Q16.
Results were mainly driven by (i) higher sugar, ethanol and energy
sales volumes (5.4%, 13.0% and 89.3%, respectively); (ii) higher
realized prices (57.9%, 18.5% and 27.0% higher, respectively); and
(iii) a $14.2 million gain derived
from the mark-to-market effect of our sugar hedge position. These
positive effects were partially offset by (iv) an increase in
unitary production costs mainly explained by an increase in third
party sugarcane purchases and the appreciation of the BRL; and (v)
a $2.7 million loss from changes in
fair value of our sugarcane plantation, mainly resulting from lower
projected sugar prices and BRL appreciation.
Rains in our cluster in
Mato Grosso do Sul during
November 2016 through March 2017 were 25% below the 10-year average.
Therefore, we decided to fine-tune our harvest schedule in order to
maximize sugarcane productivity throughout the year. As a result,
we decided to slowdown the pace of crushing during the first
quarter, and only crush: (i) our own sugarcane that has grown to
16-18 months in age; and (ii) sugarcane purchased from
third-parties. This strategy will allow our traditional 12-month
sugarcane to grow an additional 2 or 3 months, and benefit from
normalized rains during March and April. At the same time, any down
time was used to conduct "off-season" maintenance of industrial
equipment, agricultural machinery and sugarcane replanting. Despite
our decision to decelerate the milling pace, we were able to crush
a total of 1.5 million tons during 1Q17, essentially in line with
last year.
Despite dry weather during the
summer months, sugarcane yields during the quarter reached 94.1
tons/ha, significantly above the 5-year average yield for
Brazil's center-south region. This
is explained by our focus on enhancing sugarcane quality and
treatment. Yields fell 8.0% compared to our yields in 1Q16 as a
result of above average rainfalls during November 2015 through February 2016. In terms of sugar content, TRS
during the quarter increased to 110.0 kg/ton, 2.6% higher than
1Q16.
- Adjusted EBITDA in our Farming business in 1Q17 was
$19.7 million, 25% lower than 1Q16.
This decrease is primarily temporal in nature due to different
planting/harvesting cycles, which can vary due to crop rotations,
seed varieties and weather. Therefore we expect stronger
performance in the Crops and Rice businesses in the upcoming
quarters as these seasonality issues are reversed.
In the case of soybean and corn,
excess rains during January and February have delayed the seeding
of the crops. The crops are developing normally and yield potential
has not been affected, but margin recognition has been skewed
towards the second and third quarters. Regarding the rice crop,
despite a 16.5% increase in yields, margins were negatively
affected by (i) higher harvesting expenses due to setbacks caused
by rains; and (ii) a 21.1% decrease in white rice sales due to
schedule of shipments, partially offset by a 14.6% increase in
white rice prices. Consequently, as we ramp up sales volumes during
the upcoming quarters we expect to offset the reduction in margins
reported in the current quarter. In terms of foreign exchange, our
costs of production in Argentina
have been negatively affected in dollar terms as a result of the
appreciation of the Argentine peso in real terms.
These negative effects were
partially offset by (i) a $1.9
million increase in our Dairy business driven by solid
productivity and rising milk prices; and (ii) a $1.6 million gain derived from the mark-to-market
effect of our soybeans and corn hedge derivatives.
- Net Income in 1Q17 was $6.0
million, $3.2 million higher
than in 1Q16. Net income during the quarter was enhanced by
stronger Adjusted EBITDA and improved financial results, and was
partially offset by a $4.1 million
increase in depreciation expenses resulting mainly from the
expansion of our sugarcane plantation and the appreciation of the
Brazilian Real.
Strategy Execution
- Sugar, Ethanol & Energy Expansion Update
The expansion of our cluster in
Mato Grosso do Sul, as announced
in our 4Q16 Earnings Release, is currently underway and being
executed according to schedule.
The expansion of the Angelica mill
is already complete. We have installed larger mill rollers and
expanded the sugar centrifugation and ethanol filtration processes.
Nominal crushing capacity has increased by 0.9 million, from 4.7
million tons per year to 5.6 million tons per year. Regarding the
Ivinhema mill, we have already begun building the foundations for
the new mill tandem (#6).
Regarding the expansion of our
sugarcane plantation to supply the new milling capacity, we have
already leased the necessary land scheduled to be planted in 2017
at prices according to budget. Planting activities are being
executed as planned. We have succesfully planted 7.0 thousand
hectares or 28% of the targeted area for 2017. In addition,
depreciated agricultural machinery has already been renewed
according to plan, which we expect will increase our harvest
capacity by 10% year-over-year.
- Accretive Growth Projects in our Farming Business
In light of the improved
regulatory framework and outlook for the agribusiness sector in
Argentina, we have identified
several growth opportunities across our farming operations. These
investments will allow us to increase operational efficiency,
reduce costs and enhance returns across our dairy, rice and crops
segments. These projects are expected to generate ROIC well in
excess of our cost of capital.
- Dairy business: our free-stall dairies #1 and #2 are fully
ramped-up and delivering superior productivity. We are now ready to
continue consolidating the operation and increase capacity. We plan
to invest $50.0 million over the next
four years to build free-stalls #3 and #4. This project will allow
us to double production capacity, reaching over 185 million liters
of fluid milk production per year and over 14 thousand milking
cows. This investment is a unique opportunity to leverage on
Argentina's competitive advantages
in transforming vegetable protein into milk protein, our
operational expertise and the positive outlook for global and local
milk prices.
- Rice business: during the second half of the year we will be
investing $6.0 million in various
equipment and machines to improve our rice processing and
distribuition, and increase the value of main by-products. These
projects include: (i) a rice parboiling plant; (ii) a new packaging
machine for branded white rice; (iii) expansion of finished goods
storage capacity; (iv) a rice husk bailing press; and (v) a rice
bran oil de-activation system. This will allow us to strengthen our
brand in the local market and increase margins.
- Crops business: following the recent boost in Argentina's grain production volumes,
specifically corn and wheat, certain regions are affected from lack
of grain storage and conditioning capacity. This is generating
bottlenecks and increasing logistics costs. In order to continue
managing our production capacity efficiently, we will build two new
storage and conditioning facilities located near the Rosario and
Bahia Blanca ports. These assets will allow us to reduce our
conditioning and logistics costs and enhance our commercial
flexibility. Total investment is expected to reach $11.0 million over the next 12-months.
__________________________________________________________________________________
(1) Adjusted EBITDA is defined as consolidated profit from
operations before financing and taxation, depreciation,
amortization plus the gains or losses from disposals of
non-controlling interests in subsidiaries. Adjusted EBIT is
defined as consolidated profit from operations before financing and
taxation, plus the gains or losses from disposals of
non-controlling interests in subsidiaries. Adjusted EBITDA margin
and Adjusted EBIT margin are calculated as a percentage of net
sales.
Non-Gaap Financial Measures: For a full
reconciliation of non-gaap financial measures please refer to page
22 of our 1Q17 Earnings Release found on Adecoagro's website
(ir.adecoagro.com)
Forward-Looking Statements: This press
release contains forward-looking statements that are based on our
current expectations, assumptions, estimates and projections about
us and our industry. These forward-looking statements can be
identified by words or phrases such as "anticipate," "forecast",
"believe," "continue," "estimate," "expect," "intend," "is/are
likely to," "may," "plan," "should," "would," or other similar
expressions.
These forward-looking statements involve various risks and
uncertainties. Although we believe that our expectations expressed
in these forward-looking statements are reasonable, our
expectations may turn out to be incorrect. Our actual results
could be materially different from our expectations. In light
of the risks and uncertainties described above, the estimates and
forward-looking statements discussed in this press release might
not occur, and our future results and our performance may differ
materially from those expressed in these forward-looking statements
due to, inclusive, but not limited to, the factors mentioned above.
Because of these uncertainties, you should not make any investment
decision based on these estimates and forward-looking
statements.
The forward-looking statements made in this
press release relate only to events or information as of the date
on which the statements are made in this press release. We
undertake no obligation to update any forward-looking statements to
reflect events or circumstances after the date on which the
statements are made or to reflect the occurrence of unanticipated
events.
To read the full 1Q17 earnings release, please access
ir.adecoagro.com. A conference call to discuss 1Q17 results will be
held on May 16, 2017 with a live
webcast through the internet:
English Conference Call
May 16, 2016
9 a.m. (US EST)
10 a.m. Buenos Aires
10 a.m. Sao
Paulo
3 p.m. Luxembourg
Participants calling from the US: Tel: +1 (844) 836-8746
Participants calling from other countries: Tel: +1 (412)
317-2501
Access Code: Adecoagro
Conference Call Replay
Participants calling from the US: Tel: +1 (877) 344-7529
Participants calling from other countries: Tel: +1 (412)
317-0088
Access Code: 10105830
Investor Relations Department
Charlie Boero Hughes
CFO
Hernan Walker
IR Manager
Email: ir@adecoagro.com
Tel: +54 (11) 4836-8651
About Adecoagro:
Adecoagro is a leading agricultural company in South America. Adecoagro owns over 247
thousand hectares of farmland and several industrial facilities
spread across the most productive regions of Argentina, Brazil and Uruguay, where it produces over 1.7 million
tons of agricultural products including sugar, ethanol,
bio-electricity, milled rice, corn, wheat, soybean and dairy
products, among others.
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SOURCE Adecoagro S.A.