LUXEMBOURG, March 12, 2020 /PRNewswire/ -- Adecoagro S.A. (NYSE: AGRO) (Bloomberg: AGRO US) (Reuters: AGRO.K), a leading agroindustrial company in South America, announced today its results for the fourth quarter ended December 31, 2019. The financial information contained in this press release is based on audited 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:
- Full year 2019 Adjusted EBITDA(3) was $305.2 million, a 3.0% decrease compared to the previous year. Excluding results from Land Transformation, Adjusted EBITDA reached $295.8 million, 6.2% higher compared to 2018.
- Gross sales reached $891.5 million in 2019, 10.0% higher year-over-year.
- Full year 2019 Net Income registered a gain of $0.3 million, while Adjusted Net Income totaled $40.3 million.
Financial & Operational Highlights
- Adjusted EBITDA in our Sugar, Ethanol & Energy business reached $253.1 million in 2019, $14.8 million higher than 2018, a 6.2% increase year-over-year. This higher result was achieved despite unfavorable weather during 2019, when our Cluster in Mato Grosso do Sul was hit by both dry weather and a frost, resulting in lower yields (14.6% decrease year-over-year) and in a decrease in our crushing volume of 0.5 million tons when compared to the previous year. In light of the aforementioned weather events, we decided to reassess our crushing strategy to secure cane availability for 2020. Accordingly, we reduced crushing activities with the double purpose of leaving the cane on the field to grow further while at the same time maximize ethanol production. 85% of total TRS was diverted towards ethanol production which, coupled with enhancements in our distillery, led to an increase in ethanol selling volumes (20.2% increase year-over-year). At the same time, we implemented a cost reduction plan, which coupled with enhanced industrial and agricultural efficiencies as well as the effects from the depreciation of Brazilian Real led to a decrease in costs. Financial results were further increased by the $53.6 million higher results derived from the mark-to-market of our unharvested sugarcane, due to better weather conditions in late 2019 and higher relative prices for sugar and ethanol. These positive effects were partially offset by $48.3 million lower results derived from the mark-to-market of our sugar future contracts. Total cash cost in 2019 stood at 9.0 ct/lb while EBITDA price (considering Other Operating Income) reached 12.4 ct/lb, resulting in a 3.4 ct/lb margin.
On a quarterly basis, adjusted EBITDA in the Sugar, Ethanol & Energy business was $55.2 million, 21.4% higher than 4Q18 driven by a higher ethanol mix, which reached a record high of 94% of total TRS, lower costs and $5.8 million higher results derived from the mark-to-market of our unharvested sugarcane.
- Adjusted EBITDA in the Farming and Land Transformation businesses reached $71.7 million in 2019, $24.7 million or 25.6% lower year-over-year. The decrease in financial performance is primarily explained by the $26.9 million lower results generated from farm sales ($9.4 million EBITDA generated by the sale of Alto Alegre farm in 2019, compared to $36.2 million generated in 2018 by the sale of Rio de Janeiro and Conquista farms).
Adjusted EBITDA solely from the Farming business, stood at $62.4 million in 2019, an increase of $2.2 million or 3.6% year-over-year. The Dairy business was responsible for an increase of $7.8 million generated by higher production and selling volumes coupled with a price increase. Our Rice business contributed with an increase of $1.5 million due to higher selling volumes. These positive results were partially offset by a decrease of $7.8 million in the Crops business due to lower commodity prices coupled with lower results from the mark-to-market effect of our commodity hedge position
On a quarterly basis, Adjusted EBITDA for the Farming business was $15.9 million in 4Q19, an increase of $20.0 million compared to the same period of last year. This increase is mainly explained by the performance of our Crops and Rice businesses. The $11.3 million increase in adjusted EBITDA from the Crops business was mainly driven by positive results in initial recognition and changes in fair value of biological assets and agricultural produce as well as from gains from changes in net realizable value of agricultural produce after harvest. As for Rice, the $5.1 million increase was led by more than doubling in sales volume.
- Net Income in 2019 resulted in a gain of $0.3 million, compared to a loss of $23.2 million recorded in the same period of last year. This improvement is mainly due to a lower FX loss, deriving in lower financial results that fully offset the lower EBITDA generation, lower revaluation of investment property, higher depreciation and higher income tax.
- 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. In 2019, Adjusted Net Income reached $40.3 million, $51.0 million or 55.9% lower compared to 2018. Lower Adjusted EBITDA year-over-year, coupled with the $74.7 million lower Fx losses were responsible for the reduction.
Independent Farmland Appraisal Report
- As of September 30, 2019, Cushman & Wakefield (C&W) updated its independent appraisal of Adecoagro´s farmland. Adecoagro´s subsidiaries held 225,631 hectares valued at $716.7 million, 8.7% lower year-overyear. Political and economic uncertainty in Argentina resulted in a sharp decrease in transactions, negatively impacting our land portfolio valuation. Farmland value in Argentina went down by 9.6% while farm valuation in Brazil and Uruguay were unchanged.
Please visit ir.adecoagro.com for the Cushman & Wakefield 2019 Appraisal Report. These appraisals are subject to change based on host of variables and market conditions. Please also refer to page 72 of our Annual Report on Form 20-F, for the year ended December 31, 2018 for the methodology employed in the appraisals of our farmland by Cushman & Wakefield.
Weather Update - Mato Grosso do Sul
- We are reaching the final phase of our 5-year Plan, with only 15% of total projected capex left to be deployed. Out of the remaining $60 million, Brazil will absorb most of it in expanding the sugarcane plantation. Projects are estimated to contribute to a 50% increase in EBITDA and strong cash generation. It should be noted that the remaining projects are marginal in nature, thereby bearing low execution risk.
The expansion of our cluster in Mato Grosso do Sul continues to proceed according to plan. Virtually all the necessary hectares to fully supply the 3 million tons of additional crushing capacity have already been secured, taking the execution risk of the project to its minimum. Planting operations are also well underway and we feel confident that we will be able to plant the remaining hectares throughout 2020 and 2021, dependent on normal weather conditions.
The combined effect of the frost and dry weather that hit our cluster in 2019, led us to slow down our cane crushing pace for superior agricultural results and a recovery of our sugarcane fields. The reassessment of our crushing strategy derived in a slight delay in our 5-Year-Plan in terms of cash generation. As previously explained, this has been partially mitigated by our ability to divert a record-high of TRS production to ethanol and benefit from higher relative prices. Our continuous focus on enhancing efficiencies and upgrading our industrial assets is a key aspect of our plan, since it allows us to make a more efficient use of our fixed assets and sell the product with the highest marginal contribution.
Processing Facilities Update
Since February 2019 we have been operating our two state-of-the art milk processing facilities with a focus on both quality and cost. The plants' high degree of flexibility has allowed us to sell into the export and domestic markets based on relative profitability, with a view to generate attractive returns.
Our peanut processing facility, acquired in February 2019, has all the necessary certifications and permits, enabling us to control processing activities, avoid tolling and brokerage fees and have access to the most strict markets worldwide which demand Argentine peanut for its superior quality, and are willing to pay a premium for it. In our first campaign as peanut processors, we achieved solid results both in terms of production as well as financial figures, enhancing our crops business, as originally planned.
Adjusted Free Cash Flow
During 2019, our operations have delivered $68.4 million of Adjusted Free Cash Flow from Operations (Adjusted Free Cash Flow before expansion capex), in line with the previous year. Lower crushing activities coupled with higher working capital needs explain the 14.4% reduction in Adjusted Free Cash Flow from Operations.
Adjusted Free Cash Flow totaled negative $60.7 million, $42.5 million lower compared to the same period of last year. The decrease is fully explained by the higher expansion capex, as we are advancing in the execution of our 5 Year Plan investment projects. We are confident Adjusted EBITDA and cash flows will increase as we complete the investment cycle and benefit from bigger, more efficient and vertically integrated operations.
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 4Q19 earnings release, please access ir.adecoagro.com. A conference call to discuss 4Q19 results will be held on March 13, 2020 with a live webcast through the internet:
March 13, 2020
9 a.m. (US EST)
10 a.m. Buenos Aires
10 p.m. Sao Paulo
2 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: 10138073
Investor Relations Department
Charlie Boero Hughes
Juan Ignacio Galleano
Tel: +54 (11) 4836-8624
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.
SOURCE Adecoagro S.A.