LUXEMBOURG, May 14, 2020 /PRNewswire/ -- Adecoagro S.A.
(NYSE: AGRO, Bloomberg: AGRO US,
Reuters: AGRO.K), a leading agro-industrial company in South America, announced today its results for
the first quarter ended March 31,
2020. The financial information contained in this press
release is based on unaudited condensed consolidated financial
statements presented in US dollars and prepared in accordance with
International Financial Reporting Standards (IFRS) except for Non -
IFRS measures.
Main highlights for the period:
- Adjusted EBITDA in 1Q20 was 4.7% higher compared to the same
period of last year, despite the fact that no farms were sold
during the quarter compared to one farm sale made during 1Q19.
Excluding results from Land Transformation, Adjusted EBITDA
increased $12.1 million or 24.8%
year-over-year.
- Adjusted Net Income in 1Q20 was $43.9
million, 202.6% higher compared to 1Q19.
Financial & Operational Highlights
- In our Sugar, Ethanol & Energy business, Adjusted EBITDA
reached $40.9 million in 1Q20, 31.2%,
or $9.7 million higher compared to
the same period last year. Financial results were positively
impacted by: (i) our continuous strategy of maximizing production
of the product with the highest marginal contribution, ethanol, as
to which we diverted 95% of total TRS production in 1Q20, enabling
us to extract the highest value from our sugarcane and capture high
ethanol prices during the quarter, (ii) lower cost of production,
driven by the combined effect of enhanced agricultural and
industrial efficiencies along with the depreciation of the
Brazilian Real, that further contributed to reduce costs measured
in U.S dollar; coupled with (iii) the $16.8
million gain in the mark-to-market of our commodity hedge
position. These positive effects were partially offset by the
$7.1 million reduction in the market
value of our unharvested sugarcane due to lower ethanol
prices.
- Adjusted EBITDA for the Farming and Land Transformation
businesses reached $24.7 million in
1Q20, $7.3 million or 22.7% lower
year-over-year. The decrease is fully attributable to the
$9.4 million lower results derived
from the absence of farm sales during the quarter, compared to 1Q19
when Alto Alegre farm was sold. Excluding results from Land
Transformation, Adjusted EBITDA for the Farming business in 1Q20
was $2.1 million or 9.4% higher
compared to 1Q19.
The Rice business was the main
contributor to our Farming business EBITDA results during 1Q20,
amounting to $15.2 million driven by
high yields and high average prices both in the domestic and export
market. The $1.2 million increase
year-over-year is mainly explained by lower operating costs in
dollar terms, as a result of the depreciation of the Argentine
peso, coupled with lower selling expenses.
In our Crops business, the 18.5%
higher selling volume and the higher mark-to-market of our
biological assets were responsible for the 15.6% or $0.8 million higher EBITDA performance
year-over-year, despite lower average grain prices.
- Net Income in 1Q20 resulted in a loss of $54.4 million, compared to a loss of $2.2 million recorded during the same period of
last year. The $52.2 million decrease
is primarily explained by the non-cash loss derived from the
revaluation of our U.S. dollar denominated financial debt, measured
in local currency.
- Adjusted Net Income by definition excludes, (i) any non-cash
result derived from bilateral exchange variations, (ii) any
revaluation result from the hectares held as investment property,
(iii) any inflation accounting result; and includes (iv) any gains
or losses from disposals of non-controlling interests in
subsidiaries whose main underlying asset is farmland (the latter is
already included in Adj. EBITDA). We believe Adjusted Net Income is
a more appropriate metric to reflect the Company´s performance.
Adjusted Net Income in 1Q20 reached $43.9
million, $29.4 million or
202.6% higher compared to 1Q19, mainly explained by $81.4 million higher FX loss year-over-year.
Strategy Execution
Covid-19 Impact
- As is publicly known, the COVID-19 pandemic outbreak has
unleashed social and economic turmoil, with global impact. The
virus outbreak is generating a huge drop in demand for oil as
billions of people across the globe are in quarantine, with air and
ground transport almost fully paralyzed. On top of this, on
March 9, 2020 the 3-year relationship
between the Saudis and the Russians was destroyed and sparked an
all-out price and market share war, with the Kingdom slashing the
price of Arab Light crude and increasing production to full
capacity. This fall in demand and increased supply caused an
unprecedented reduction in international oil prices.
In Argentina the national government implemented
a mandatory isolation regime on March 20,
2020, prohibiting the circulation of people on routes, roads
and public spaces. However, a number of activities were exempted
from this regime for being considered "essential", among them, the
activities carried out by our company in agricultural production,
processing, commercialization and distribution. As of the date of
this report, our businesses in Argentina are all operating without major
disruptions, both at the farm and industry level as well as on the
roads and in ports.
In Brazil the national government has not imposed
a mandatory isolation regime, but most Brazilian states have
adopted preventive measures and a lockdown, which led to a drop of
30% in the demand for ethanol since mid-March, according to UNICA.
In light of these events which negatively affect our Sugar, Ethanol
and Energy business, we reassessed our strategy to adapt it to the
new scenario. We decided to slow down crushing and start maximizing
sugar production. We have both cane availability and the
flexibility that will allow us to return to full capacity as soon
as a recovery takes place, slanting output towards the product with
the highest marginal contribution. As of the date of this report,
our business in Brazil is
operating without major disruptions.
Disease outbreak
- Immediately after the World Health Organization declared the
Pandemic, we summoned a permanent interdisciplinary Committee and
outlined an action plan. Our focus is to preserve the health of our
employees and guarantee hygienic and safe working conditions at all
of our facilities. Safety measures and protocols have been
activated and tailored for each activity.
Main measures adopted include but
are not limited to: (i) body temperature controls, (ii) mandatory
social distancing in the workplace, (iii) reduction of maximum
capacity at lunch and dining rooms, transportation and cars, (iv)
increase number and/or up-grade sanitary barriers, and provide with
hand sanitizer and periodic clothes changing and cleaning, (v) set
aside risk groups (elderly, pregnant or pre-existing health
condition), (vi) home office for corporate office employees, (vii)
mandatory quarantine for travelers and those who have close contact
with travelers and/or symptomatic persons, (viii) develop an
intense capacitation and communication program, including local
authorities.
Cost Reassessment
- Our constant discipline and strategy of focusing on increasing
operational efficiencies and being the low cost producer, is now
more relevant than ever. In the face of a challenging and dynamic
macroeconomic scenario, where the duration of the lockdown remains
an uncertain variable, we maintain a day to day focus. We have been
reassessing our cost structure across all our businesses as well as
our capital expenditures (both maintenance and expansion).
Specifically, we have put on hold many uncommitted expenses. It is
important to underscore that even at current prices we continue to
generate positive margins, and that this strategic deferment does
not jeopardize productivity going forward. As of the date of this
report we have successfully reduced close to $40 million. We will continue to evaluate and
modify our response to the pandemic as the lockdown remains in
place.
Agro´s Liquidity
Position
- Our balance sheet is in a healthy position. We have moderate
overall debt levels with over 80% having a long term tenor. As of
March 31, 2020, our cash position
amounted to $235 million. Our Net
Debt ratio (Net Debt/ EBITDA) reached 2.31x, and our Liquidity
ratio (cash & equivalents/short term debt), measured without
taking account of marketable inventories, reached 1.15x. This
value, which is above 1.0x, shows the capacity of Adecoagro to
repay its short term debt using its cash balance.
Non-Gaap Financial Measures: For a full
reconciliation of non-gaap financial measures please refer to page
26 of our 1Q19 Earnings Release found on Adecoagro's website
(ir.adecoagro.com)
Forward-Looking Statements: This press release
contains forward-looking statements that are based on our current
expectations, assumptions, estimates and projections about us and
our industry. These forward-looking statements can be
identified by words or phrases such as "anticipate," "forecast",
"believe," "continue," "estimate," "expect," "intend," "is/are
likely to," "may," "plan," "should," "would," or other similar
expressions.
These forward-looking statements
involve various risks and uncertainties. Although we believe that
our expectations expressed in these forward-looking statements are
reasonable, our expectations may turn out to be incorrect. Our
actual results could be materially different from our
expectations. In light of the risks and uncertainties
described above, the estimates and forward-looking statements
discussed in this press release might not occur, and our future
results and our performance may differ materially from those
expressed in these forward-looking statements due to, inclusive,
but not limited to, the factors mentioned above. Because of
these uncertainties, you should not make any investment decision
based on these estimates and forward-looking
statements.
The forward-looking statements made in this
press release relate only to events or information as of the date
on which the statements are made in this press release. We
undertake no obligation to update any forward-looking statements to
reflect events or circumstances after the date on which the
statements are made or to reflect the occurrence of unanticipated
events.
To read the full 1Q20 earnings release, please access
ir.adecoagro.com. A conference call to discuss 1Q20 results will be
held on May 15, 2020 with a live
webcast through the internet:
Conference Call
May 15, 2019
9 a.m. (US EST)
10 a.m. Buenos Aires
10 p.m. Sao
Paulo
3 p.m. Luxembourg
Participants calling from the US: Tel: +1 (844) 435-0324
Participants calling from other countries: Tel: +1 (412)
317-6366
Access Code: Adecoagro
Conference Call Replay
Participants calling from the US: Tel: +1 (877) 344-7529
Participants calling from other countries: Tel: +1 (412)
317-0088
Access Code: 10142222
Investor Relations Department
Charlie Boero Hughes
CFO
Juan Ignacio Galleano
IRO
Email: ir@adecoagro.com
Tel: +54 (11) 4836-8624
About Adecoagro:
Adecoagro is a leading agricultural
company in South America.
Adecoagro owns over 247 thousand hectares of farmland and several
industrial facilities spread across the most productive regions of
Argentina, Brazil and Uruguay, where it produces over 1.9 million
tons of agricultural products including sugar, ethanol,
bio-electricity, milled rice, corn, wheat, soybean and dairy
products, among others.
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SOURCE Adecoagro S.A.