LUXEMBOURG, August 16, 2018 /PRNewswire/ -- Adecoagro S.A. (NYSE: AGRO, Bloomberg: AGRO US, Reuters: AGRO.K), a leading agricultural company in South America, announced today its results for the second quarter of 2018.
Main highlights for the period:
- Adecoagro reported Adjuested EBITDA of $137.0 million in 2Q18, marking a 103.9% increase compared to 2Q17.
- Net Income was negative $31.0 million in 2Q18, $34.8 million lower compared to 2Q17.
- Adjusted Net Income was $90.1 million in 2Q18, $74.2 million higher compared to 2Q17.
Financial & Operational Highlights
- Adjusted EBITDA for our Sugar, Ethanol & Energy business reached $80.9 in 2Q18, $19.5 million or 31.8% higher than 2Q17. This increase is mainly explained by: (i) the maximization of ethanol production (72.5% of total TRS), enabling us to profit from higher prices. Anhydrous and hydrous ethanol traded at 16.0 cts/lb and 14.7 cts/lb sugar equivalent during the quarter, equivalent to 34.1% and 22.7% premium to sugar respectively, (ii) higher energy revenues due to the combined effect of a 20.7% increase in selling volumes and a 9.9% increase in average selling prices, in dollar terms, (iii) the 53.9% increase in crushing activities as a result of larger cane availability; explained by enhanced industrial efficiencies, together with an increase in effective milling days due to favorable weather conditions; (iv) the reduction in production costs, measured on a per ton basis, driven by higher crushing activities, coupled with the 14% depreciation of the Brazilian Real.
Year-to-date, Adjusted EBITDA totaled $128.9 million, marking a 40.7% increase compared to the same period of last year. In addition to the previously referred drivers, higher Adjusted EBITDA is explained by a $3.9 million increase derived from the mark-to-market of our commodity hedge positions, partially offset by lower sugar prices.
- In our Farming & Land Transformation businesses, Adjusted EBITDA reached $61.2 million, $50.2 million higher than 2Q17. The improvement in financial performance is mainly explained by the $6.5 million and $7.2 million increase in results in our crops and rice businesses respectively as a result of enhanced operational efficiencies and the 30% depreciation of the Argentine Peso, which together resulted in a reduction of production costs. Furthermore, the increase in Adjusted EBITDA is also explained by the proceeds obtained from the sale of Rio de Janeiro and Conquista farms, which recorded a $36.2 million capital gain, compared to a zero result in 2Q17.
On a year-to-date basis, Adjusted EBITDA grew by 161.2%, reaching $80.0 million. This increase is primarily explained by: (i) a $3.8 million increase in our Crops business, due to a higher margin recognition as a result of higher commodity prices in the local market coupled with a reduction in production costs, (ii) a $9.2 million increase in our Rice business, as a result of a significant 17% increase in agricultural yields, coupled with lower production costs, measured in U.S dollar. These effects were partially offset by the negative mark-to-market of our commodity hedge position.
- Net Income in the first half of the year was a loss of $22.5 million, compared to a $9.8 million gain recorded in the same period of last year. This is almost entirely explained by the $125.3 million non-cash loss derived from the revaluation of our U.S dollar denominated financial debt, measured in local currency. Indeed, as a result of the sharp depreciation suffered by the Brazilian Real and Argentine Peso during 6M18, we registered a significant loss in our Net Financial Result line. It´s worth mentioning that this result is non-cash in nature and represent no equity loss when measured in U.S dólar.
- Adjusted Net Income, by definition, excludes any non-cash result derived from bilateral exchange variations and includes any gain or losses from disposals of non-controlling interests in subsidiaries whose main underlying asset is farmland (the latter is already included in Adj. EBITDA). During the first half of the year, Adjusted Net Income reached $110.1 million, $85.2 million higher compared to 6M17. It is worth noticing that this increase is in line with the one reported in Adjusted EBITDA (Please refer to page 34 for a reconciliation of Adjusted Net Income to Profit/Loss).
- Farmland sales at a strong premium to independet appraial: During June 2018, we completed the sale of Rio de Janeiro and Conquista farms, located in western Bahia and Tocantins, respectively for a total of 9,300 croppable hectares. The aggregate selling price reached $53.0 million, out of which $34.5 million are paid cash (partially in 2Q18, and the rest during 3Q18); while the balance is payable in four installments. The selling price represent a 37% premium to the latest Cushman and Wakefield´s independent appraisal, as of September 30, 2017.
- 5 Year Plan:
Cluster Expansion: The expansion of the cluster in Mato Grosso do Sul is moving forward according to plan and budget. Investments in Angelica mill, as previously announced, are already done and the mill reached a nominal crushing capacity of 1,050 tons/hour. As for the Ivinhema mill, most of the investments are completed.
At the same time, based on projected relative sugar and ethanol prices, we commenced minor investments in order to increase our maximum ethanol production capacity by 5%, reaching 73% of total TRS production by 2019. It´s worth highlighting that, during the first half of the year, 77% of TRS went to ethanol and we feel very optimistic with our 70% target for the year. We believe that this investment, will result in higher margins and returns as we will be making a better use of our assets by producing products with higher margin contribution.
(1) Adjusted EBITDA is defined as consolidated profit from operations before financing and taxation, depreciation, amortization plus the gains or losses from disposals of non-controlling interests in subsidiaries. Adjusted EBIT is defined as consolidated profit from operations before financing and taxation, plus the gains or losses from disposals of non-controlling interests in subsidiaries. Adjusted EBITDA margin and Adjusted EBIT margin are calculated as a percentage of net sales.
Non-Gaap Financial Measures: For a full reconciliation of non-gaap financial measures please refer to page 29 of our 4Q17 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 2Q18 earnings release, please access ir.adecoagro.com. A conference call to discuss 2Q18 results will be held on August 17, 2018 with a live webcast through the internet:
August 17, 2018
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) 836-8746
Participants calling from other countries: Tel: +1 (412) 317-2501
Access Code: Adecoagro
Conference Call Replay
Participants calling from the US: Tel: +1 (877) 344-7529
Participants calling from other countries: Tel: +1 (412) 317-0088
Access Code: 10122948
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.
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