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 August, 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-___________.

 

 

CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2011 AND FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2011 AND 2010

     This report on Form 6-K is being furnished for the purpose of providing a copy of the registrant’s condensed consolidated financial statements as of June 30, 2011 and for the six-month periods ended June 30, 2011 and 2010 (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) 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.

Date: August 16, 2011

Adecoagro S.A.

Condensed Consolidated Interim Financial Statements as of June 30, 2011 and for the six-month periods ended June 30, 2011 and 2010

Report of Independent Registered Public Accounting Firm

To the Shareholders of
Adecoagro S.A.

We have reviewed the accompanying condensed consolidated interim statements of financial position of Adecoagro S.A. and its subsidiaries as of June 30, 2011, and the related condensed consolidated interim statements of income and comprehensive income for each of the three-month and six-month periods ended June 30, 2011 and 2010 and the condensed consolidated interim statements of changes in shareholders´ equity and of cash flows for the six-month periods ended June 30, 2011 and 2010. This interim financial information is the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial statements for them to be in conformity with International Accounting Standard 34, ‘Interim Financial Reporting’, as issued by the International Accounting Standards Board.

Buenos Aires, Argentina
August 12, 2011

PRICE WATERHOUSE & CO. S.R.L.

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: 26.446.938 shares

Adecoagro S.A.
Condensed Consolidated Interim Statements of Financial Position
as of June 30, 2011 and December 31, 2010 and 2009

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

				June 30,				December 31,				December 31,
		Note		2011				2010				2009
				(unaudited)				(restated) (*)				(restated) (*)
ASSETS
Non-Current Assets
Property, plant and equipment		6			781,737				751,992				682,878
Investment property					20,568				21,417				21,246
Intangible assets		7			29,222				28,653				21,859
Biological assets		8			162,937				133,593				190,714
Investments in joint ventures					5,453				6,271				6,506
Deferred income tax assets		16			56,792				67,463				45,113
Trade and other receivables		9			25,265				30,752				22,065
Other assets					25				26				34
Total Non-Current Assets					1,081,999				1,040,167				990,415
Current Assets
Biological assets		8			24,757				53,164				39,740
Inventories		10			135,833				57,170				57,902
Trade and other receivables		9			134,237				119,205				106,212
Derivative financial instruments					215,604				876				99
Short-term investments					48,000				—				—
Cash and cash equivalents		11			209,006				70,269				74,806
Total Current Assets					767,437				300,684				278,759
TOTAL ASSETS					1,849,436				1,340,851				1,269,174
SHAREHOLDERS EQUITY
Capital and reserves attributable to equity holders of the parent
Share capital		12			180,104				120,000				120,000
Share premium					926,269				563,343				563,343
Cumulative translation adjustment					42,108				11,273				2,516
Equity-settled compensation					13,713				13,659				11,914
Retained earnings					28,904				257				44,161
Equity attributable to equity holders of the parent					1,191,098				708,532				741,934
Non controlling interest					15,762				14,570				15,222
TOTAL SHAREHOLDERS EQUITY					1,206,860				723,102				757,156
LIABILITIES
Non-Current Liabilities
Trade and other payables		14			11,224				11,785				6,822
Borrowings		15			254,060				250,672				203,134
Derivative financial instruments					—				—				280
Deferred income tax liabilities		16			93,714				111,495				107,045
Payroll and social security liabilities		17			1,230				1,178				1,106
Provisions for other liabilities					4,265				4,606				3,326
Total Non-Current Liabilities					364,493				379,736				321,713
Current Liabilities
Trade and other payables		14			74,129				69,236				62,098
Current income tax liabilities					4,063				978				222
Payroll and social security liabilities		17			18,296				15,478				10,079
Borrowings		15			179,016				138,800				103,647
Derivative financial instruments					1,309				8,920				12,607
Provisions for other liabilities					1,270				4,601				1,652
Total Current Liabilities					278,083				238,013				190,305
TOTAL LIABILITIES					642,576				617,749				512,018
TOTAL SHAREHOLDERS EQUITY AND LIABILITIES					1,849,436				1,340,851				1,269,174

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 and six-month periods ended June 30, 2011 and 2010

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

				Six-months ended June 30								Three-months ended June 30
		Note		2011				2010				2011				2010
				(unaudited)
Sales of manufactured products and services rendered		19			146,178				86,660				119,837				53,479
Cost of manufactured products sold and services rendered		20			(96,086	)			(75,560	)			(74,142	)			(40,313	)
Gross Profit/(Loss) from Manufacturing Activities					50,092				11,100				45,695				13,166
Sales of agricultural produce and biological assets		19			88,693				68,641				56,782				49,472
Cost of agricultural produce sold and direct agricultural selling expenses		20			(88,693	)			(68,641	)			(56,782	)			(49,472	)
Initial recognition and changes in fair value of biological assets and agricultural produce					55,969				(53,556	)			(2,489	)			(51,589	)
Changes in net realizable value of agricultural produce after harvest.					4,069				118				1,449				(1,516	)
Gross Profit/(Loss) from Agricultural Activities					60,038				(53,438	)			(1,040	)			(53,105	)
Margin on Manufacturing and Agricultural Activities Before Operating Expenses					110,130				(42,338	)			44,655				(39,939	)
General and administrative expenses		20			(33,508	)			(28,655	)			(16,201	)			(14,672	)
Selling expenses		20			(24,074	)			(17,455	)			(18,204	)			(11,451	)
Other operating (loss)/ income, net		22			(304	)			9,588				5,392				(1,942	)
Share of loss of joint ventures					(350	)			(220	)			(350	)			(220	)
Gain/(Loss) from Operations Before Financing and Taxation					51,894				(79,080	)			15,292				(68,224	)
Finance income		23			13,611				2,408				10,188				1,554
Finance costs		23			(24,654	)			(18,558	)			(9,346	)			(9,396	)
Financial results, net		23			(11,043	)			(16,150	)			842				(7,842	)
Gain/(Loss) Before Income Tax					40,851				(95,230	)			16,134				(76,066	)
Income tax (charge) / benefit		16			(12,754	)			24,650				(3,398	)			22,302
Gain/(Loss) for the Period					28,097				(70,580	)			12,736				(53,764	)
Attributable to:
Equity holders of the parent					27,569				(69,170	)			12,486				(52,786	)
Non controlling interest					528				(1,410	)			250				(978	)
Gains/(Losses) per share for loss attributable to the equity holders of the parent during the period:
Basic		24			0.2320				(0.5764	)			0.1040				(0.4399	)
Diluted		24			0.2304				(0.5764	)			0.1033				(0.4399	)

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 and six-month periods ended June 30, 2011 and 2010

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

		Six-months ended June 30								Three-months ended June 30
		2011				2010				2011				2010
						(unaudited)
Gain/(Loss) for the period			28,097				(70,580	)			12,736				(53,764	)
Other comprehensive income:
Exchange differences on translating foreign operations			31,477				(18,500	)			21,927				(8,261	)
Other comprehensive income/ (loss) for the period			31,477				(18,500	)			21,927				(8,261	)
Total comprehensive income/(loss) for the period			59,574				(89,080	)			34,663				(62,025	)
Attributable to:
Equity holders of the parent			58,404				(87,293	)			33,971				(60,887	)
Non controlling interest			1,170				(1,787	)			692				(1,138	)

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 six-month periods ended June 30, 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				Share				Translation				Equity-settled				Retained								Controlling				Shareholders’
		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			—				—				(18,123	)			—				(69,170	)			(87,293	)			(1,787	)			(89,080	)
Employee share options granted			—				—				—				970				—				970				20				990
Balance at June 30, 2010 (unaudited)			120,000				563,343				(15,607	)			12,884				(25,009	)			655,611				13,455				669,066
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			—				—				30,835				—				27,569				58,404				1,170				59,574
Net proceeds from IPO and Private placement (Note 12)			60,104				362,926				—				—				—				423,030				—				423,030
Employee share options granted (Note 13)			—				—				—				458				—				458				9				467
Restricted shares granted (Note 13)			—				—				—				674				—				674				13				687
Employee share options forfeited			—				—				—				(1,078	)			1,078				—				—				—
Balance at June 30, 2011 (unaudited)			180,104				926,269				42,108				13,713				28,904				1,191,098				15,762				1,206,860

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 six-month periods ended June 30, 2011 and 2010

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

				June 30,				June 30,
		Note		2011				2010
				(unaudited)				(unaudited)
Cash flows from operating activities:
Gain /(Loss) for the period					28,097				(70,580	)
Adjustments for :
Income tax charge/(benefit)		16			12,754				(24,650	)
Depreciation		20			13,799				13,754
Amortization		7			189				196
Gain from disposal of other property items		22			(335	)			(654	)
Employee share options granted		21			1,154				990
Loss from derivative financial instruments and forwards		22, 23			(7,829	)			(9,586	)
Interest and other expense, net		23			14,667				11,475
Initial recognition and changes in fair value of non harvested biological assets (unrealized)					(16,665	)			68,717
Changes in net realizable value of agricultural produce after harvest (unrealized)					(28	)			136
Provision and allowances					(2,406	)			(902	)
Share of loss from joint venture					350				220
Foreign exchange (gains)/ losses, net		23			(713	)			4,221
Changes in operating assets and liabilities:
(Increase)/ decrease in trade and other receivables					(10,002	)			21,902
Increase in inventories					(73,828	)			(34,899	)
Decrease in biological assets					50,835				39,313
Decrease in other assets					1				9
Decrease in derivative financial instruments					(9,510	)			(2,390	)
Increase/ (decrease) in trade and other payables					3,811				(13,027	)
Increase in payroll and social security liabilities					2,870				3,320
Decrease in provisions for other liabilities					(3	)			(765	)
Net cash generated from/ (used in) operating activities before interest and taxes paid					7,208				6,800
Interest paid					(16,682	)			(14,699	)
Income tax paid					(15,527	)			(2,925	)
Net cash used in operating activities					(25,001	)			(10,824	)

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 six-month periods ended June 30, 2011 and 2010 (Continued)

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

						June 30,				June 30,
		Note				2011				2010
						(unaudited)				(unaudited))
Cash flows from investing activities:
Purchases of property, plant and equipment							(23,577	)			(50,170	)
Purchases of intangible assets			7				(37	)			(36	)
Purchase of cattle and non current biological assets planting cost							(24,801	)			(25,367	)
Interest received			23				2,468				647
Proceeds from sale of property, plant and equipment							890				1,203
Short-term investments							(48,000	)			—
Acquisition of currency forward							(205,000	)			—
Net cash used in investing activities							(298,057	)			(73,723	)
Cash flows from financing activities:
Net proceeds from IPO and Private placement			12				421,778				—
Proceeds from long-term borrowings							17,167				12,725
Payments of long-term borrowings							(13,709	)			(18,626	)
Net increase in short-term borrowings							39,931				60,589
Net cash generated from financing activities							465,167				54,688
Net increase/(decrease) in cash and cash equivalents							142,109				(29,859	)
Cash and cash equivalents at beginning of period							70,269				74,806
Effect of exchange rate changes on cash and cash equivalents							(3,372	)			6,284
Cash and cash equivalents at end of period							209,006				51,231

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 August 12, 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 six- month period ended June 30, 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 six-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 June 30, 2011, results of operations and cash flows for the six months ended June 30, 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 2.2 and 2.3 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 June 30, 2011 and for the six-month periods ended June 30, 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.

2.1 New accounting standards

     The impact of new accounting standards, amendments and interpretations on the Group’s financial statements for the six-month period ended June 30, 2011 is set out below:

     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 six-month period ended June 30, 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 six-month period ended June 30, 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 six-month period ended June 30, 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 six-month period ended June 30, 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)

2.1 New accounting standards (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 six-month period ended June 30, 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.

2.2 New significant accounting policies

     The following significant accounting policies were applied for the first time in the preparation of these condensed consolidated interim financial statements.

      Short-term investments

     Short-term investments includes fixed-term deposits not repayable on demand and with original maturities of more than three months.

2.3 Revision of previously issued financial statements

     During the six-month period ended June 30, 2011, the Group changed its accounting policy for the classification of certain bearer biological assets, mainly sugar cane and coffee plantations, on the statement of financial position. As from June 30, 2011, the Group classified these biological assets as non-current assets in the statement of financial position. This is consistent with the trend of industry financial statements published in Brazil, which are based on IFRS recently adopted in that country. Comparative financial statements were revised as a result of such change, reducing current biological assets and increasing non-current biological assets in US$ 29,377 and US$ 20,367 as of December 31, 2010 and 2009, respectively.

2.4 Seasonality of operations

     The Group’s business activities are inherently seasonal. The Group generally harvest and sell its 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 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 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 the 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, 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.

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

      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 Risk and Commercial Committee, which focuses on timely and appropriate management of risk. This Risk and Commercial 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 sales forwards contracts, but also includes occasionally put and call options.

     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, including sales forward contracts, are not financial instruments within the scope of IFRS 7 disclosure requirements.

     The Group estimates that for the period ended June 30, 2011, other factors being constant, and a 5% increase (or decrease) in prices of the Group’s end products would increase (or decrease) Gain Before Income Tax by approximately US$ 4,646.

•

Liquidity risk

     There have been no significant changes regarding exposure to liquidity risk since December 31, 2010.

•

Interest rate risk

     There have been no significant changes regarding interest rate risk 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 June 30, 2011 (all amounts are shown in US dollars):

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)

		June 30, 2011
		Functional currency
		Argentine				Brazilian
Rate per currency denomination		Peso				Reais				Uruguayan Peso				Total
						(unaudited)
Fixed rate:
Argentine Peso			91				—				—				91
Brazilian Reais			—				83,569				—				83,569
US Dollar			49,106				—				1,195				50,301
Subtotal Fixed-rate borrowings			49,197				83,569				1,195				133,961
Variable rate:
Brazilian Reais			—				109,741				—				109,741
US Dollar			54,755				134,348				—				189,103
Subtotal Variable-rate borrowings			54,755				244,089				—				298,844
Total borrowings as per analysis			103,952				327,658				1,195				432,805
Finance leases			126				145				—				271
Total borrowings at June 30, 2011			104,078				327,803				1,195				433,076

     At June 30, 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 (or increase) as follows:

		June 30, 2011
		Functional currency
		Argentine				Brazilian
Rate per currency denomination		Peso				Reais				Uruguayan Peso				Total
						(unaudited)
Variable rate:
Brazilian Reais			—				1,097				—				1,097
US Dollar			548				1,343				—				1,891
Total effects on Gain Before Income Tax			548				2,440				—				2,989

•

Credit risk

     There have been no significant changes regarding exposure to credit risk arising from outstanding receivables since December 31, 2010. As of June 30, 2011, one bank accounted for more than 75% of the total cash deposited (HSBC). Additionally, during the six-month period ended June 30, 2011, the Group entered into a derivative contract (currency forward) with the Deutsche Bank for a notional amount of US$ 205 million.

•

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.

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)

     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 large institutions with high-credit-quality (usually equal or higher than the Group’s). 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.

     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 June 30, 2011:

•

Futures / Options

     As of June 30, 2011

		June 30, 2011
										Market
Type of						Notional				Value Asset/				(Loss)/ Gain
derivative contract		Tons				amount				(Liability)				(*)
										(unaudited)				(unaudited)
Futures:
Sale
Corn			9				2,478				210				210
Soybean			33				13,828				627				627
Wheat			1				170				9				(13	)
Sugar			15,545				8,459				(528	)			(1,587	)
Coffee			1,344				7,981				112				(304	)
Cotton			91				292				46				46
Options:
Corn			10				106				(13	)			(13	)
Total			17,033				33,314				463				(1,034	)

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

•

Currency forward

     The Company intends to use approximately US$ 230 million of the net proceeds from the Initial Public Offering to finance part of the construction costs of Ivinhema, the new sugar and ethanol mill in Brazil. Considering this, in April 2011, and in order to hedge the fluctuation of the Brazilian Reais against the US dollar, the Group bought a ninety-day Zero Coupon Note from Deutsche Bank AG London Branch for a notional amount of US$ 205 million (equivalent to Reais 328 million), where the amount of Brazilian Reais to receive at maturity is fixed. The Zero Coupon Note matured on August 2, 2011 and the Group received US$ 211 million, which resulted in the recognition of a gain of US$ 6 million included within “Finance income”.

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

     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 financial statements for the year ended December 31, 2010. Further discussion on critical accounting policies for the period ended June 30, 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.

      (a) Impairment testing

     For the six-month period ended June 30, 2011 there were no new events or circumstances that indicate 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.

     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 six-month period ended June 30, 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			176				33,884				—				713				2,345				37,118				109,060				—				—				146,178
Cost of manufactured products sold and services rendered			—				(29,720	)			—				(629	)			(191	)			(30,540	)			(65,546	)			—				—				(96,086	)
Gross Profit from Manufacturing Activities			176				4,164				—				84				2,154				6,578				43,514				—				—				50,092
Sales of agricultural produce and biological assets			75,973				35				8,963				3,204				518				88,693				—				—				—				88,693
Cost of agricultural produce sold and direct agricultural selling expenses			(75,973	)			(35	)			(8,963	)			(3,204	)			(518	)			(88,693	)			—				—				—				(88,693	)
Initial recognition and changes in fair value of biological assets and agricultural produce			37,030				8,275				3,424				2,338				351				51,418				4,551				—				—				55,969
Gain from changes in net realizable value of agricultural produce after harvest			5,832				—				—				(1,763	)			—				4,069				—				—				—				4,069
Gross Profit from Agricultural Activities			42,862				8,275				3,424				575				351				55,487				4,551				—				—				60,038
Margin on Manufacturing and Agricultural Activities Before Operating Expenses			43,038				12,439				3,424				659				2,505				62,065				48,065				—				—				110,130
General and administrative expenses			(4,806	)			(4,016	)			(798	)			(635	)			(164	)			(10,419	)			(11,265	)			—				(11,824	)			(33,508	)
Selling expenses			(813	)			(5,605	)			(188	)			(235	)			(27	)			(6,868	)			(17,206	)			—				—				(24,074	)
Other operating (loss)/ income, net			(3,047	)			113				—				241				—				(2,693	)			2,411				—				(22	)			(304	)
Share of loss of joint ventures			—				—				(350	)			—				—				(350	)			—				—				—				(350	)
Gain/ (Loss) from Operations Before Financing and Taxation			34,372				2,931				2,088				30				2,314				41,735				22,005				—				(11,846	)			51,894
Depreciation and amortization			(658	)			(1,351	)			(232	)			(281	)			(120	)			(2,642	)			(11,346	)			—				—				(13,988	)
Initial recognition and changes in fair value of biological assets (unrealized)			5,074				—				1,485				(817	)			—				5,742				(10,650	)			—				—				(4,908	)
Initial recognition and changes in fair value of agricultural produce (unrealized)			10,026				4,123				—				3,155				—				17,304				4,269				—				—				21,573
Initial recognition and changes in fair value of biological assets and agricultural produce (realized)			21,930				4,152				1,939				—				351				28,372				10,932				—				—				39,304
Gain from changes in net realizable value of agricultural produce after harvest (unrealized)			—				—				—				28				—				28				—				—				—				28
Gain from changes in net realizable value of agricultural produce after harvest (realized)			5,832				—				—				(1,791	)			—				4,041				—				—				—				4,041
Property, plant and equipment, net			209,372				48,017				4,275				27,083				19,226				307,973				473,764				—				—				781,737
Investment property			—				—				—				—				20,568				20,568				—				—				—				20,568
Goodwill			4,770				6,717				—				1,190				308				12,985				14,190				—				—				27,175
Biological assets			22,142				2,435				7,946				22,742				219				55,484				132,210				—				—				187,694
Investment in joint ventures			—				—				5,453				—				—				5,453				—				—				—				5,453
Inventories			43,581				33,854				1,638				8,390				16				87,479				48,354				—				—				135,833
Total segment assets			279,865				91,023				19,312				59,405				40,337				489,942				668,518				—				—				1,158,460
Borrowings			66,029				41,631				10,408				15,638				—				133,706				299,370				—				—				433,076
Total segment liabilities			66,029				41,631				10,408				15,638				—				133,706				299,370				—				—				433,076

     

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 six-month period ended June 30, 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			184				30,768				—				2,709				1,708				35,369				51,291				—				—				86,660
Cost of manufactured products sold and services rendered			—				(26,692	)			—				(2,546	)			—				(29,238	)			(46,322	)			—				—				(75,560	)
Gross Profit from Manufacturing Activities			184				4,076				—				163				1,708				6,131				4,969				—				—				11,100
Sales of agricultural produce and biological assets			59,836				153				5,951				1,310				1,342				68,592				49				—				—				68,641
Cost of agricultural produce sold and direct agricultural selling expenses			(59,836	)			(153	)			(5,951	)			(1,310	)			(1,342	)			(68,592	)			(49	)			—				—				(68,641	)
Initial recognition and changes in fair value of biological assets and agricultural produce			20,357				2,342				5,207				161				524				28,591				(82,147	)			—				—				(53,556	)
Gain from changes in net realizable value of agricultural produce after harvest			(863	)			—				—				981				—				118				—				—				—				118
Gross Profit/ (Loss) from Agricultural Activities			19,494				2,342				5,207				1,142				524				28,709				(82,147	)			—				—				(53,438	)
Margin on Manufacturing and Agricultural Activities Before Operating Expenses			19,678				6,418				5,207				1,305				2,232				34,840				(77,178	)			—				—				(42,338	)
General and administrative expenses			(3,685	)			(2,167	)			(1,307	)			(416	)			(180	)			(7,755	)			(9,394	)			—				(11,506	)			(28,655	)
Selling expenses			(660	)			(4,204	)			(166	)			(469	)			(140	)			(5,639	)			(11,816	)			—				—				(17,455	)
Other operating income, net			1,406				84				—				41				(12	)			1,519				8,639				—				(570	)			9,588
Share of loss of joint ventures			—				—				(220	)			—				—				(220	)			—				—				—				(220	)
Gain/ (Loss) from Operations Before Financing and Taxation			16,739				131				3,514				461				1,900				22,745				(89,749	)			—				(12,076	)			(79,080	)
Depreciation and amortization			(937	)			(950	)			(186	)			(53	)			(209	)			(2,335	)			(11,615	)			—				—				(13,950	)
Initial recognition and changes in fair value of biological assets (unrealized)			1,270				—				3,056				(789	)			—				3,537				(82,296	)			—				—				(78,759	)
Initial recognition and changes in fair value of agricultural produce (unrealized)			7,204				1,811				—				901				—				9,916				126				—				—				10,042
Initial recognition and changes in fair value of biological assets and agricultural produce (realized)			11,883				531				2,151				49				524				15,138				23				—				—				15,161
Gain from changes in net realizable value of agricultural produce after harvest (unrealized)			—				—				—				(136	)			—				(136	)			—				—				—				(136	)
Gain from changes in net realizable value of agricultural produce after harvest (realized)			(863	)			—				—				1,117				—				254				—				—								254
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