AGRO Adecoagro SA

 

 

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 May, 2011

Commission File Number 001-35052

Adecoagro S.A.

(Translation of registrant’s name into English)

13-15 Avenue de la Liberté
L-1931 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 þ      Form 40-F o

     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): o

     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): o

     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 o       No þ

     If “Yes” is marked, indicate below the file number assigned to the registrant in connection
with Rule 12g3-2(b): 82-                                           .

 

 

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2011

     This report on Form 6-K is being furnished for the purpose of providing a copy of the registrant’s unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2011 (the “Consolidated Financial Statements”). The Consolidated Financial Statements are presented in U.S. Dollars and prepared in accordance with International Financial Reporting Standards.

     The attachment 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 in the attachment.

     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) the implementation of the registrant’s business strategy, including its development of the Ivinhema project; (iii) the registrant’s plans relating to acquisitions, joint ventures, strategic alliances or divestitures; (iv) the implementation of the registrant’s financing strategy and capital expenditure plan; (v) the maintenance of the registrant’s relationships with its customers; (vi) the competitive nature of the industries in which the registrant operates; (vii) the cost and availability of financing; (viii) future demand for the commodities the registrant produces; (ix) international prices for commodities; (x) the condition of the registrant’s land holdings; (xi) the development of the logistics and infrastructure for transportation of the registrant’s productions in the countries where it operates; (xii) the performance of the South American and world economies; (xiii) weather and other natural phenomena; (xiv) the relative value of the Brazilian Real, the Argentine Peso, and the Uruguayan Peso compared to other currencies; and (xv) developments in, or changes to, the laws, regulations and governmental policies governing the registrant’s business, including environmental laws and regulations; 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.

Date: May 16, 2011

Adecoagro S.A.

Condensed Consolidated Interim Financial Statements as of March 31, 2011 and for the three-month periods ended March 31, 2011 and 2010

Legal information

Denomination: Adecoagro S.A.

Legal address: 13-15 Avenue de la Liberté, L-1931, Luxembourg

Company activity: Agricultural and agro-industrial
Date of registration: June 11, 2010
Expiration of company charter: No term defined
Number of register: B153.681
Capital stock : 120,069,222 shares

Majority shareholder: Pampas Húmedas LLC, a Delaware limited liability company
Legal address: 888 Seventh Avenue, New York, New York 10106, United States of America
Parent company activity: Investing
Capital stock: 27.158.693 shares

Adecoagro S.A.

Condensed Consolidated Interim Statements of Financial Position

as of March 31, 2011 and December 31, 2010

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

						March 31,				December 31,
		Note				2011				2010
						(unaudited)
ASSETS
Non-Current Assets
Property, plant and equipment			6				755,089				751,992
Investment property							20,852				21,417
Intangible assets			7				28,786				28,653
Biological assets			8				144,012				104,216
Investments in joint ventures							6,182				6,271
Deferred income tax assets							57,631				67,463
Trade and other receivables			9				29,548				30,752
Other assets							25				26
Total Non-Current Assets							1,042,125				1,010,790
Current Assets
Biological assets			8				88,908				82,541
Inventories			10				96,994				57,170
Trade and other receivables			9				122,987				119,205
Derivative financial instruments							2,397				876
Cash and cash equivalents			11				451,246				70,269
Total Current Assets							762,532				330,061
TOTAL ASSETS							1,804,657				1,340,851
SHAREHOLDERS EQUITY
Capital and reserves attributable to equity holders of the parent
Share capital			12				180,104				120,000
Share premium							925,416				563,343
Cumulative translation adjustment							20,623				11,273
Equity-settled compensation							14,001				13,659
Retained earnings							15,340				257
Equity attributable to equity holders of the parent							1,155,484				708,532
Non controlling interest							15,055				14,570
TOTAL SHAREHOLDERS EQUITY							1,170,539				723,102
LIABILITIES
Non-Current Liabilities
Trade and other payables			14				11,524				11,785
Borrowings			15				247,931				250,672
Deferred income tax liabilities							105,260				111,495
Payroll and social security liabilities			17				1,192				1,178
Provisions for other liabilities							3,930				4,606
Total Non-Current Liabilities							369,837				379,736
Current Liabilities
Trade and other payables			14				72,479				69,236
Current income tax liabilities							3,455				978
Payroll and social security liabilities			17				16,568				15,478
Borrowings			15				155,955				138,800
Derivative financial instruments							5,530				8,920
Provisions for other liabilities							10,294				4,601
Total Current Liabilities							264,281				238,013
TOTAL LIABILITIES							634,118				617,749
TOTAL SHAREHOLDERS EQUITY AND LIABILITIES							1,804,657				1,340,851

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

Adecoagro S.A.

Condensed Consolidated Interim Statements of Income

for the three-month periods ended March 31, 2011 and 2010

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

						March 31,				March 31,
		Note				2011				2010
						(unaudited)				(unaudited)
Sales of manufactured products and services rendered			19				26,341				33,181
Cost of manufactured products sold and services rendered			20				(21,944	)			(35,247	)
Gross Profit/(Loss) from Manufacturing Activities							4,397				(2,066	)
Sales of agricultural produce and biological assets			19				31,911				19,169
Cost of agricultural produce sold and direct agricultural selling expenses			20				(31,911	)			(19,169	)
Initial recognition and changes in fair value of biological assets and agricultural produce							58,458				(1,967	)
Changes in net realizable value of agricultural produce after harvest							2,620				1,634
Gross Profit/(Loss) from Agricultural Activities							61,078				(333	)
Margin on Manufacturing and Agricultural Activities Before Operating Expenses							65,475				(2,399	)
General and administrative expenses			20				(17,307	)			(13,983	)
Selling expenses			20				(5,870	)			(6,004	)
Other operating income, net			22				(5,696	)			11,530
Gain/(Loss) from Operations Before Financing and Taxation							36,602				(10,856	)
Finance income			23				3,423				854
Finance costs			23				(15,308	)			(9,162	)
Financial results, net			23				(11,885	)			(8,308	)
Gain/(Loss) Before Income Tax							24,717				(19,164	)
Income tax (charge) / benefit			16				(9,356	)			2,348
Gain/(Loss) for the Period							15,361				(16,816	)
Attributable to:
Equity holders of the parent							15,083				(16,384	)
Non controlling interest							278				(432	)
Gains/(Losses) per share for loss attributable to the equity holders of the parent during the period:
Basic			24				0.1410				(0.2048	)
Diluted			24				0.1404				n/a

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

Adecoagro S.A.

Condensed Consolidated Interim Statements of Comprehensive Income

for the three-month periods ended March 31, 2011 and 2010

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

		March 31,				March 31,
		2011				2010
		(unaudited)				(unaudited)
Gain/(Loss) for the period			15,361				(16,816	)
Other comprehensive income:
Exchange differences on translating foreign operations			9,550				(10,239	)
Other comprehensive income for the period			9,550				(10,239	)
Total comprehensive income/(loss) for the period			24,911				(27,055	)
Attributable to:
Equity holders of the parent			24,433				(26,406	)
Non controlling interest			478				(649	)

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

Adecoagro S.A.

Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity

for the three-month periods ended March 31, 2011 and 2010

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

		Attributable to equity holders of the parent
										Cumulative																Non				Total
						Share				Translation				Equity-settled				Retained								Controlling				Shareholders’
		Share Capital				Premium				Adjustment				Compensation				Earnings				Subtotal				Interest				Equity
Balance at January 1, 2010			120,000				563,343				2,516				11,914				44,161				741,934				15,222				757,156
Total comprehensive loss for the period			—				—				(10,022	)			—				(16,384	)			(26,406	)			(649	)			(27,055	)
Employee share options granted			—				—				—				570				—				570				12				582
Balance at March 31, 2010 (unaudited)			120,000				563,343				(7,506	)			12,484				27,777				716,098				14,585				730,683
Balance at January 1, 2011			120,000				563,343				11,273				13,659				257				708,532				14,570				723,102
Total comprehensive income for the period			—				—				9,350				—				15,083				24,433				478				24,911
Net proceeds from IPO and Private placement (See Note 12)			60,104				362,073				—				—				—				422,177				—				422,177
Employee share options granted			—				—				—				342				—				342				7				349
Balance at March 31, 2011 (unaudited)			180,104				925,416				20,623				14,001				15,340				1,155,484				15,055				1,170,539

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

Adecoagro S.A.

Condensed Consolidated Interim Statements of Cash Flows

for the three-month periods ended March 31, 2011 and 2010

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

						March 31,				March 31,
		Note				2011				2010
						(unaudited)				(unaudited)
Cash flows from operating activities:
Gain /(Loss) for the period							15,361				(16,816	)
Adjustments for :
Income tax loss/(benefit)			16				9,356				(2,348	)
Depreciation			20				4,192				4,069
Amortization			7				92				81
Gain from disposal of other property items			22				(218	)			(242	)
Employee share options granted			21				349				582
Gain/(loss) from derivative financial instruments and forwards			22, 23				4,387				(11,109	)
Interest and other expense, net			23				7,648				5,074
Initial recognition and changes in fair value of non harvested biological assets (unrealized)							(49,668	)			315
Changes in net realizable value of agricultural produce after harvest (unrealized)							(210	)			215
Provision and allowances							5,232				(1,152	)
Foreign exchange gains, net			23				1,484				2,451
Changes in operating assets and liabilities:
Decrease in trade and other receivables							1,528				5,521
Increase in inventories							(39,614	)			(6,940	)
Decrease in biological assets							21,683				11,081
Decrease in other assets							1				8
Decrease in derivative financial instruments							(9,287	)			(4,684	)
Increase in trade and other payables							2,982				1,325
Increase in payroll and social security liabilities							1,104				131
Increase in provisions for other liabilities							—				(682	)
Net cash used in operating activities before interest and taxes paid							(23,598	)			(13,120	)
Interest paid							(6,988	)			(5,168	)
Income tax paid							(3,282	)			1,602
Net cash used in operating activities							(33,868	)			(16,686	)

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

Adecoagro S.A.
Condensed Consolidated Interim Statements of Cash Flows
for the three-month periods ended March 31, 2011 and 2010 (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

						March 31,				March 31,
		Note				2011				2010
						(unaudited)				(unaudited)
Cash flows from investing activities:
Purchases of property, plant and equipment							(7,121	)			(26,561	)
Purchases of intangible assets			7				(1	)			(9	)
Purchase of cattle and non current biological assets planting cost							(15,081	)			(15,054	)
Interest received			23				601				303
Proceeds from sale of property, plant and equipment							278				684
Net cash used in investing activities							(21,324	)			(40,637	)
Cash flows from financing activities:
Net proceeds from IPO and Private placement			12				422,177				—
Proceeds from long-term borrowings							7,500				—
Payments of long-term borrowings							(5,395	)			(3,888	)
Net increase in short-term borrowings							10,928				12,223
Net cash generated from financing activities							435,210				8,335
Net increase/(decrease) in cash and cash equivalents							380,018				(48,988	)
Cash and cash equivalents at beginning of period							70,269				74,806
Effect of exchange rate changes on cash and cash equivalents							959				10,036
Cash and cash equivalents at end of period							451,246				35,854

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

Adecoagro S.A.

Notes to the Condensed Consolidated Interim Financial Statements

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

1. General information and Reorganization

     Adecoagro S.A. (the “Company” or “Adecoagro”) is a holding company primarily engaged through its operating subsidiaries in agricultural and agro-industrial activities. The Company and its operating subsidiaries are collectively referred to hereinafter as the “Group”. These activities are carried out through three major lines of business, namely, Farming; Sugar, Ethanol and Energy; and Land Transformation. Farming is further comprised of five reportable segments, which are described in detail in Note 5 to these condensed consolidated interim financial statements.

     The Group was established in 2002 and has subsequently grown significantly both organically and through acquisitions. The Group currently has operations in Argentina, Brazil and Uruguay.

     The Company is the Group’s ultimate parent company and is a Societe Anonyme corporation incorporated and domiciled in the Grand Duchy of Luxembourg. The address of its registered office is 13-15 Avenue de la Liberté, L-1931, Luxembourg.

     These condensed consolidated interim financial statements have been approved for issue by the Board of Directors on May 13, 2011.

      Reorganization

     On October 30, 2010 the members of International Farmland Holdings LLC (“IFH”) completed the contribution of 98% of their respective interests in IFH on a pro rata basis to a newly formed entity, Adecoagro, as contribution in kind in exchange for 100% of the common shares of Adecoagro outstanding as of that date. (the “Reorganization”). This Reorganization was done, among other things, to facilitate the initial public offering of the Group, which occurred on January 28, 2011. Adecoagro had no prior assets, holdings or operations.

     The consolidated financial statements of Adecoagro at December 31, 2010 and for the three month period ended March 31, 2010, are presented using the historical values from the consolidated financial statements of IFH. However, the issued share capital reflects that of Adecoagro as of that date. The Reorganization is retroactively reflected in the consolidated financial statements of Adecoagro as of that date, in the period in which the Reorganization occurred. The Reorganization did not qualify as a business combination under common control; rather, it was a simple Reorganization of the capital of IFH, the existing organization. As such, the Reorganization is a non-adjusting event under IAS 10 and therefore it is recognized retroactively in the consolidated financial statements of the period in which the Reorganization occurs.

     On January 28, 2011 the Company successfully completed an initial public offering and a private placement (see Note 12).

Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2. Basis of preparation

     The information presented in the accompanying interim three-month financial statements is unaudited. In the opinion of management, the accompanying condensed consolidated interim financial statements reflect all adjustments necessary to present fairly the financial position of the Group at March 31, 2011, results of operations and cash flows for the three months ended March 31, 2011 and 2010. All such adjustments are of a normal recurring nature. In preparing the accompanying condensed consolidated interim financial statements, management has made certain estimates and assumptions that affect reported amounts in the financial statements and disclosures of contingencies. Actual results may differ from those estimates. The results for interim periods are not necessarily indicative of annual results. These condensed consolidated interim financial statements follow the same accounting policies and methods of their application as the Group’s audited December 31, 2010 annual financial statements, except as stated in (a) below. Accordingly, these condensed consolidated interim financial statements should be read in conjunction with the audited financial statements of the Group as of that date.

     These condensed consolidated interim financial information as of March 31, 2011 and for the three-month periods ended March 31, 2011 and 2010 have been prepared in accordance with IAS 34, ‘Interim financial reporting’. The annual financial statements for the year ended December 31, 2010 have been prepared in accordance with International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB) and the Interpretations of the International Financial Reporting Interpretations Committee (IFRIC). The condensed consolidated interim financial statements are presented in United States Dollars.

      (a) Standards, amendments and interpretations to existing standards effective in 2011

     An amendment to IAS 32 (Financial Instruments: Presentation) was issued in October 2009. The amendment clarifies that rights issues, options and warrants denominated in a currency other than the issuer’s functional currency and offered on a pro-rata basis to all owners of the same class of equity must be classified as equity. Such rights issues have so far been accounted for as liabilities. The change relates only to issues of a fixed number of shares at a fixed foreign-currency exercise price. The amendment is to be applied for annual periods beginning on or after February 1, 2010. Earlier application is permitted. The amendment was effective for the Group’s three-month period ended March 31, 2011, and did not have a material impact on the presentation of the Group’s financial position, results of operations or earnings per share.

     IFRIC 19 “Extinguishing Financial Liabilities with Equity Instruments” was issued in November 2009. The interpretation addresses the accounting treatment in cases where a company settles all or part of a financial liability by issuing equity instruments to the creditor. It is to be applied for annual periods beginning on or after July 1, 2010. Earlier application is permitted. The amendment was effective for the Group’s three-month period ended March 31, 2011, and did not have a material impact on the presentation of the Group’s financial position, results of operations or earnings per share.

     The IASB issued IAS 24 (revised) in November 2009. The revisions provide a partial exemption from the disclosure requirements for government-related entities and simplify the definition of a related party. The revisions are applicable for accounting periods beginning on or after 1 January 2011. Earlier application is permitted. The revised standard was effective for the Group’s three-month period ended March 31, 2011, and did not have a material impact on the presentation of the Group’s financial position, results of operations or earnings per share.

     In November 2009 amendments were issued to IFRIC 14 “IAS 19 — The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction”, an interpretation of IAS 19 (Employee Benefits). The amendments apply when a company is subject to minimum pension plan funding requirements. They enable prepayments of the respective contributions to be recognized as an asset. The amendments are to be applied for annual periods beginning on or after January 1, 2011. Earlier application is permitted. The amendment was effective for the Group’s three-month period ended March 31, 2011, and did not have a material impact on the presentation of the Group’s financial position, results of operations or earnings per share.

Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2. Basis of preparation (continued)

     On 6 May 2010, the IASB issued Improvements to IFRSs — a collection of amendments to seven IFRSs — as part of its program of annual improvements to its standards. The amendments are effective for annual periods beginning on or after July 1, 2010 and January 1, 2011 (thus effective for the Group’s three-month period ended March 31, 2011), although entities are permitted to adopt them earlier. These amendments relate to IFRS 1 “First Time Adoption of IFRS”, IFRS 3 “Business Combination”, IFRS 7 “Financial Instruments: Disclosures”, IAS 1 “Presentation of Financial Statements”, IAS 27 “Consolidated and separate financial statements”, IAS 34 “Interim Financial Reporting” and IFRIC 13 “Customer Loyalty Programmes”. The amendments did not have a material impact on the presentation of the Group’s financial position, results of operations or earnings per share.

      Seasonality of operations

     Our business activities are inherently seasonal. We generally harvest and sell our grains (corn, soybean, rice and sunflower) between February and June, with the exception of wheat, which is harvested from December to January. Coffee and cotton are different in that while both are typically harvested from June to August, they require a conditioning process which takes about two to three months. Sales in other business segments, such as in our Cattle and Dairy business segments, tend to be more stable. However, the raising of cattle and sale of milk is generally higher during the fourth quarter, when the weather is warmer and pasture conditions are more favorable. The sugarcane harvesting period typically begins April/May and ends in November/December. This creates fluctuations in our sugarcane inventory, usually peaking in December to cover sales between crop harvests (i.e., January through April). As a result of the above factors, there may be significant variations in our results of operations from one quarter to another, as 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 commodities prices, production yields and costs on the determination of initial recognition and changes in fair value of biological assets and agricultural produce.

3. Financial risk management

      Risk management principles and processes

     There have been no significant changes on the risks the Group’s activities are exposed to.

     The Group’s approach to the identification, assessment and mitigation of risk is carried out by a Strategy Committee, which focuses on timely and appropriate management of risk. This Strategy Committee has overall accountability for the identification and management of risk across the Group.

     The principal financial risks arising from financial instruments are raw material price risk, end-product price risk, exchange rate risk, interest rate risk, liquidity risk and credit risk.

     The principal risks and uncertainties facing the business, which you could find in the annual Financial Statements of the Company, are the following:

•

End-product price risk

     The Group uses a variety of commodity-based derivative instruments to manage its exposure to price volatility stemming from its integrated crop production activities. These instruments consist mainly of crop future contracts, but also includes occasionally put and call options.

Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3. Financial risk management (continued)

     Contract positions are designed to ensure that the Group would receive a defined minimum price for certain quantities of its production. The counterparties to these instruments generally are major financial institutions. In entering into these contracts, the Group has assumed the risk that might arise from the possible inability of counterparties to meet the terms of their contracts. The Group does not expect any losses as a result of counterparty defaults. The Group is also obliged to pay margin deposits and premiums for these instruments. These estimates represent only the sensitivity of the financial instruments to market risk and not the Group exposure to end product price risks as a whole, since the crops and cattle products sales are not financial instruments within the scope of IFRS 7 disclosure requirements.

     The Group estimates that, for the periods ended March 31, 2011, other factors being constant, and a 5% increase (or decrease) in prices of the Group’s end products would increase Gain Before Income Tax by approximately US$2,703.

•

Liquidity risk

     There have been no significant changes regarding Credit Risk Group’s exposure since December 31, 2010.

•

Interest rate risk

     There have been no significant changes regarding interest rate risk’ss exposure since December 31, 2010.

     The following table shows a breakdown of the Group’s fixed-rate and floating-rate borrowings per currency denomination and functional currency of the subsidiary issuing the loans (excluding finance leases) at March 31, 2011 (all amounts are shown in US dollars):

		March 31, 2011
		Functional currency
		Argentine				Brazilian				Uruguayan
Rate per currency denomination		Peso				Reais				Peso				Total
		(unaudited)
Fixed rate:
Argentine Peso			13				—				—				13
Brazilian Reais			—				83,407				—				83,407
US Dollar			39,758				7,104				1,413				48,275
Subtotal Fixed-rate borrowings			39,771				90,511				1,413				131,695
Variable rate:
Brazilian Reais			—				103,009				—				103,009
US Dollar			67,480				101,333				—				168,813
Subtotal Variable-rate borrowings			67,480				204,342				—				271,822
Total borrowings as per analysis			107,251				294,853				1,413				403,517
Finance leases			160				209				—				369
Total borrowings at March 31, 2011			107,411				295,062				1,413				403,886

Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3. Financial risk management (continued)

     At March 31, 2011, if interest rates on floating-rate borrowings had been 1% higher (or lower) with all other variables held constant, Gain Before Income Tax for the period would decrease as follows:

		March 31, 2011
		Functional currency
		Argentine				Brazilian				Uruguayan
Rate per currency denomination		Peso				Reais				Peso				Total
		(unaudited)
Variable rate:
Brazilian Reais			—				1,030				—				1,030
US Dollar			675				1,013				—				1,688
Total effects on Gain Before Income Tax			675				2,043				—				2,718

•

Credit risk

     There have been no significant changes regarding Credit Risk Group’s exposure arising from outstanding receivables and from the use of derivative financial instruments since December 31, 2010. As of March 31, 2011, 1 bank accounted for more than 93% of the total cash deposited (HSBC).

•

Derivative financial instruments

     As part of its business operations, the Group uses a variety of derivative financial instruments to manage its exposure to the financial risks discussed above. As part of this strategy, the Group may enter into (i) interest rate derivatives to manage the composition of floating and fixed rate debt; (ii) currency derivatives to hedge certain foreign currency cash flows and to adjust the currency composition of its assets and liabilities; and (iii) crop future contracts and put and call options to manage its exposure to price volatility stemming from its integrated crop production activities. The Group’s policy is not to use derivatives for speculative purposes.

     The Group’s primary objective for holding derivative financial instruments is to manage currency exchange rate risk, interest rate risk and commodity price risk. The Group generally enters into derivative transactions with high-credit-quality counterparties and, by policy, limit the amount of credit exposure to any one counterparty based on an analysis of that counterparty’s relative credit standing. The amounts subject to credit risk related to derivative instruments are generally limited to the amounts, if any, by which a counterparty’s obligations exceed the obligations with that counterparty.

     Similarly, transactions involving derivative financial instruments are with counterparties with high credit ratings. Management does not expect any counterparty to fail to meet its obligations.

     Derivative financial instruments involve, to a varying degree, elements of market and credit risk not recognized in the financial statements. The market risk associated with these instruments resulting from price movements is expected to offset the market risk of the underlying transactions, assets and liabilities, being hedged. The counterparties to the agreements relating to the Group’s contracts generally are large institutions with credit ratings equal to or higher than the Group’s. The Group continually monitors the credit rating of such counterparties and seeks to limit its financial exposure to any one financial institution. While the contract or notional amounts of derivative financial instruments provide one measure of the volume of these transactions, they do not represent the amount of the Group’s exposure to credit risk. The amounts potentially subject to credit risk (arising from the possible inability of counterparties to meet the terms of their contracts) are generally limited to the amounts, if any, by which the counterparties’ obligations under the contracts exceed the Group’s obligations to the counterparties.

Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3. Financial risk management (continued)

     Non-hedging derivatives are classified as current when realization within 12 months is expected. Otherwise they are classified as non-current, although any portion that is expected to be realized within 12 months of the date of the statement of financial position is presented as current. The Group did not apply hedge accounting to these instruments.

     The following table shows the outstanding positions for each type of derivative contract as of the date of each statement of financial position:

§

Futures / Options

     As of March 31, 2011

		March 31, 2011
										Market
Type of						Notional				Value Asset/				(Loss)/ Gain
derivative contract		Tons				amount				(Liability)				(*)
										(unaudited)				(unaudited)
Futures:
Sale
Corn			34				561				67				—
Soybean			30				429				(1,090	)			1,699
Wheat			1				185				(5	)			(1	)
Sugar			27,572				12,995				(2,135	)			1,092
Coffee			851				3,216				(1,729	)			(490	)
Options:
Corn			20				14				74				—
Total			28,508				17,400				(4,818	)			2,301

     Commodity future contract fair values are computed with reference to quoted market prices on future exchanges.

4. Critical accounting estimates and judgments

     Critical accounting policies are those that are most important to the portrayal of the Group’s financial condition, results of operations and cash flows, and require management to make difficult, subjective or complex judgments and estimates about matters that are inherently uncertain. Management bases its estimates on historical experience and other assumptions that it believes are reasonable. The Group’s critical accounting policies are consistent with those of the annual statements for the year ended December 31, 2010. Further discussion on critical accounting policies for the period ended March 31, 2011 is included below.

     Actual results could differ from estimates used in employing the critical accounting policies and these could have a material impact on the Group’s results of operations. The Group also has other policies that are considered key accounting policies, such as the policy for revenue recognition. However, these other policies, which are discussed in the notes to the Group’s financial statements, do not meet the definition of critical accounting estimates, because they do not generally require estimates to be made or judgments that are difficult or subjective.

Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

4. Critical accounting estimates and judgments (continued)

      (a) Impairment testing

     For the three-month period ended March 31, 2011 there were no new events or circumstances that indicates that an impairment had occurred.

      (b) Biological assets

     The discounted cash flow model requires the input of highly subjective assumptions including observable and unobservable data. Generally the estimation of the fair value of biological assets and certain agricultural produce is based on models or inputs that are not observable in the market and the use of unobservable inputs is significant to the overall valuation of the assets. Unobservable inputs are determined based on the best information available, for example by reference to historical information of past practices and results, statistical and agronomical information, and other analytical techniques. Key assumptions include future market prices, estimated yields at the point of harvest, estimated production cycle, future cash flows, future costs of harvesting and other costs, and estimated discount rate.

      (c) Fair value of derivatives and other financial instruments

     Fair values of derivative financial instruments are computed with reference to quoted market prices on trade exchanges, when available. The fair values of commodity options are calculated using period-end market rates together with common option pricing models. The fair value of interest rate swaps has been calculated using a discounted cash flow analysis.

5. Segment information

     The Group operates in three major lines of business, namely, Farming; Sugar, Ethanol and Energy; and Land Transformation.

1.

The Group’s ‘Farming’ is further comprised of five reportable segments: Crops, Rice, Dairy, Coffee and Cattle.

     The measurement principles for the Group’s segment reporting structure are based on the IFRS principles adopted in the condensed consolidated interim financial statements. Revenue generated and goods and services exchanged between segments are calculated on the basis of market prices.

     The following table presents information with respect to the Group’s reportable segments. Certain other activities of a holding function nature not allocable to the segments are disclosed in the column ‘Corporate’.

Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

5. Segment information (continued)

Segment analysis for the three-month period ended March 31, 2011(unaudited)

		Farming																								Sugar,
																						Farming				ethanol and				Land
		Crops				Rice				Dairy				Coffee				Cattle				subtotal				energy				transformation				Corporate				Total
Sales of manufactured products and services rendered			31				15,555				—				713				1,089				17,388				8,953				—				—				26,341
Cost of manufactured products sold and services rendered			—				(14,594	)			—				(629	)			—				(15,223	)			(6,721	)			—				—				(21,944	)
Gross Profit from Manufacturing Activities			31				961				—				84				1,089				2,165				2,232				—				—				4,397
Sales of agricultural produce and biological assets			25,740				25				4,443				1,456				247				31,911				—				—				—				31,911
Cost of agricultural produce sold and direct agricultural selling expenses			(25,740	)			(25	)			(4,443	)			(1,456	)			(247	)			(31,911	)			—				—				—				(31,911	)
Initial recognition and changes in fair value of biological assets and agricultural produce			23,759				9,177				2,847				(2,560	)			44				33,267				25,191				—				—				58,458
Gain from changes in net realizable value of agricultural produce after harvest			2,933				—				—				(313	)			—				2,620				—				—				—				2,620
Gross Profit/ (Loss) from Agricultural Activities			26,692				9,177				2,847				(2,873	)			44				35,887				25,191				—				—				61,078
Margin on Manufacturing and Agricultural Activities Before Operating Expenses			26,723				10,138				2,847				(2,789	)			1,133				38,052				27,423				—				—				65,475
General and administrative expenses			(2,516	)			(3,496	)			(680	)			(313	)			(28	)			(7,033	)			(5,179	)			—				(5,095	)			(17,307	)
Selling expenses			(259	)			(2,599	)			(76	)			(114	)			(12	)			(3,060	)			(2,810	)			—				—				(5,870	)
Other operating income, net			(6,629	)			81				—				(549	)			—				(7,097	)			1,282				—				119				(5,696	)
Profit/ (Loss) from Operations Before Financing and Taxation			17,319				4,124				2,091				(3,765	)			1,093				20,862				20,716				—				(4,976	)			36,602
Depreciation and amortization			357				385				117				118				38				1,015				3,269				—				—				4,284
Initial recognition and changes in fair value of biological assets (unrealized)			19,229				580				1,441				(319	)			—				20,931				29,426				—				—				50,357
Initial recognition and changes in fair value of agricultural produce (unrealized)			762				5,025				—				(2,241	)			—				3,546				(4,235	)			—				—				(689	)
Initial recognition and changes in fair value of biological assets and agricultural produce (realized)			3,768				3,572				1,406				—				44				8,790				—				—				—				8,790
Gain from changes in net realizable value of agricultural produce after harvest (unrealized)			285				—				—				(75	)			—				210				—				—				—				210
Gain from changes in net realizable value of agricultural produce after harvest (realized)			2,648				—				—				(238	)			—				2,410				—				—				—				2,410
Property, plant and equipment, net			209,859				43,781				4,202				25,806				19,568				303,216				451,873				—				—				755,089
Investment property			—				—				—				—				20,852				20,852				—				—				—				20,852
Goodwill			4,892				6,943				—				1,140				316				13,291				13,406				—				—				26,697
Biological assets			46,878				3,292				8,102				22,062				302				80,636				152,284				—				—				232,920
Investment in joint ventures			—				—				6,182				—				—				6,182				—				—				—				6,182
Inventories			28,333				32,449				2,231				2,751				13				65,777				31,217				—				—				96,994
Total segment assets			289,962				86,465				20,717				51,759				41,051				489,954				648,780				—				—				1,138,734
Borrowings			67,170				42,965				10,740				16,072				—				136,947				266,939				—				—				403,886
Total segment liabilities			67,170				42,965				10,740				16,072				—				136,947				266,939				—				—				403,886

Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

5. Segment information (continued)

Segment analysis for the three-month period ended March 31, 2010 (unaudited)

		Farming																								Sugar,
																						Farming				ethanol and				Land
		Crops				Rice				Dairy				Coffee				Cattle				subtotal				energy				transformation				Corporate				Total
Sales of manufactured products and services rendered			61				14,462				—				2,173				703				17,399				15,782				—				—				33,181
Cost of manufactured products sold and services rendered			—				(13,556	)			—				(2,059	)			—				(15,615	)			(19,632	)			—				—				(35,247	)
Gross Profit from Manufacturing Activities			61				906				—				114				703				1,784				(3,850	)			—				—				(2,066	)
Sales of agricultural produce and biological assets			14,764				9				2,469				1,051				827				19,120				49				—				—				19,169
Cost of agricultural produce sold and direct agricultural selling expenses			(14,764	)			(9	)			(2,469	)			(1,051	)			(827	)			(19,120	)			(49	)			—				—				(19,169	)
Initial recognition and changes in fair value of biological assets and agricultural produce			11,293				2,986				1,791				(1,367	)			173				14,876				(16,843	)			—				—				(1,967	)
Gain from changes in net realizable value of agricultural produce after harvest			1,660				—				—				(26	)			—				1,634				—				—				—				1,634
Gross Profit/ (Loss) from Agricultural Activities			12,953				2,986				1,791				(1,393	)			173				16,510				(16,843	)			—				—				(333	)
Margin on Manufacturing and Agricultural Activities Before Operating Expenses			13,014				3,892				1,791				(1,279	)			876				18,294				(20,693	)			—				—				(2,399	)
General and administrative expenses			(1,847	)			(1,294	)			(654	)			(341	)			(116	)			(4,252	)			(5,434	)			—				(4,297	)			(13,983	)
Selling expenses			(179	)			(1,929	)			(87	)			(250	)			(26	)			(2,471	)			(3,533	)			—				—				(6,004	)
Other operating income, net			1,918				166				—				(18	)			—				2,066				9,891				—				(427	)			11,530
Profit/ (Loss) from Operations Before Financing and Taxation			12,906				835				1,050				(1,888	)			734				13,637				(19,769	)			—				(4,724	)			(10,856	)
Depreciation and amortization			502				448				93				20				121				1,184				2,966				—				—				4,150
Initial recognition and changes in fair value of biological assets (unrealized)			9,948				1,662				1,299				(267	)			(39	)			12,603				(13,809	)			—				—				(1,206	)
Initial recognition and changes in fair value of agricultural produce (unrealized)			516				2,574				—				(1,100	)			—				1,990				(1,099	)			—				—				891
Initial recognition and changes in fair value of biological assets and agricultural produce (realized)			829				(1,250	)			492				—				212				283				(1,935	)			—				—				(1,652	)
Gain from changes in net realizable value of agricultural produce after harvest (unrealized)			(134	)			—				—				(81	)			—				(215	)			—				—				—				(215	)
Gain from changes in net realizable value of agricultural produce after harvest (realized)			1,794				—				—				55				—				1,849				—				—				—				1,849
As of December 31, 2010:
Property, plant and equipment, net			204.454				50,898				4,202				25,265				18,831				303,650				448,342				—				—				751,992
Investment property			—				1,168				—				—				20,249				21,417				—				—				—				21,417
Goodwill			4,672				7,023				577				1,115				—				13,387				13,107				—				—				26,494
Biological assets			31,247				21,555				7,130				21,577				401				81,910				104,847				—				—				186,757
Investment in joint ventures			—				—				6,271				—				—				6,271				—				—				—				6,271
Inventories			22,926				8,422				883				7,023				61				39,315				17,855				—				—				57,170
Total segment assets			263,299				89,066				19,063				54,980				39,542				465,950				584,151				—				—				1,050,101
Borrowings			59,339				41,050				10,262				13,651				—				124,302				265,170				—				—				389,472
Total segment liabilities			59,339				41,050				10,262				13,651				—				124,302				265,170				—				—				389,472