LUXEMBOURG, Aug. 15, 2019 /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 second quarter of 2019.
Main highlights for the period:
- 2Q19 Adjusted EBITDA(3) was $86.9 million, marking a 36.5% decrease year-over-year. Adjusted EBITDA margin net of 3rd party commercialization, reached 46.1%.
- Gross sales reached $219.9 million in 2Q19, 1.9% higher year-over year.
Financial & Operational Highlights
- In our Sugar, Ethanol & Energy business, Adjusted EBITDA reached $81.6 million in 2Q19, 0.9% higher compared to the same period of last year. This increase is mainly explained by: (i) the maximization of ethanol production mix (75% of total TRS produced), extracting the higher value per ton crushed, (ii) higher energy revenues mainly driven by the 35.9% increase in selling volumes; and (iii) the 6.7% reduction in total production costs, on cents per pound basis, due to the combined effect of higher crushing activities coupled with enhanced industrial efficiencies. These positive effects were partially offset by a reduction of $9.9 million in the mark-to-market effect of our sugar derivatives position, when compared to the same period last year, result of a smaller position as we are maximizing ethanol production.
On a year-to-date basis, Adjusted EBITDA totaled $112.8 million, marking a 12.5% or $16.1 million decrease compared to 6M18. Adjusted by the non - operating results ("Other operating income" and "Changes in fair value - Unharvested"), Adjusted EBITDA for the first half of 2019 totaled $110.3 million, 3.1% or $3.3 million higher compared to the same period of last year. Higher operational margins were mainly explained by the reduction in production costs. Total production costs decreased by 7.4% on a cents per pound basis, as a result of our ongoing focus on enhancing agricultural and industrial efficiencies.
- Adjusted EBITDA for the Farming and Land Transformation businesses reached $10.5 million in 2Q19, $50.7 million or 82.9% lower year-over-year. However, $36.2 million is explained by the fact that no farm sale was made during 2Q19, compared to 2Q18 when we sold Rio de Janeiro and Conquista farms generating $36 million. On an accumulated basis, Adjusted EBITDA in our Farming business (excluding Land Transformation) totaled $33.0 million, $10.8 million lower year-over-year. The reasons for the decrease vary from business to business. However, overall, lower average selling grain prices offset enhanced efficiencies reflected in the reduction of production costs.
In the Rice business, higher margins were explained by higher selling volumes. This increase was mainly explained by our commercial decision to postpone export sales during the 2018 fourth quarter. At the same time, enhanced efficiencies at the mills´ processing capacity further contribute to the increase in volumes.
In the Dairy business, higher selling prices and volumes were responsible for the increase in financial performance. Raw milk prices increased as a result of the shortage of raw milk due to weather related issues. Thanks to our confined free stall system, milk production was not affected allowing us to fully profit from higher prices. In addition, production volumes increased 17.1% as a result of the increase in our average cow herd.
Regarding the recently acquired milk processing facilities, by March we concluded what proved to be a successful takeover. Both are currently operating and delivering strong financial results, favored by rising domestic prices.
Adjusted EBITDA for our Crops business totaled $8.4 million during the first semester of 2019, $15.8 million or 65.2% lower compared to the same period of last year. Higher yields, enhanced operational efficiencies and a cost dilution as a result of the year-over-year depreciation of the Argentine peso, was fully offset by lower average selling prices and by a lower harvested area as of June 30, compared to the same period of last year.
- Net Income in 2Q19 was a gain of $23.3 million, compared to a $31.0 million loss recorded during the same period of last year. The $54.3 million increase was primarily explained by the $147.2 million difference generated in "Financial Results". The $2.9 million gain recognized in 2Q19, is explained by the 2.0% nominal appreciation of the Argentine Peso, in sharp contrast with the 43.2% nominal depreciation registered during the second quarter of 2018, which resulted in a $121.2 million loss. The nominal appreciation of the Brazilian Real, in turn, further contribute to explain the difference. This positive result was partially offset by the $530 million lower Adjusted EBITDA generation.
- Adjusted Net Income, a concept we introduced in 2018 excludes, by definition, (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) and (v) revaluation surplus of farmland sold. We believe Adjusted Net Income is a more appropriate metric to reflect the Company´s performance. Adjusted Net Income reached $15.3 million for 6M19, 86.1% lower year-over-year. This was mainly explained by: (i) $53.7 million lower EBITDA, primarily driven by lower farmland sales, (ii) higher depreciation expenses due to the expansion in sugarcane area; and (iii) higher accrued taxes.
Weather Update - Mato Grosso do Sul
- During July, a frost in Brazil affected most of the cane area in the Center-South region, including part of our cane plantation at the cluster. After thoroughly scouting out affected area (approximately 20%) we expect a 5% reduction in crushing activities for the year. However, neither EBITDA nor cash generation should be compromised. Thanks to our continuous focus in enhancing efficiencies and upgrading our industrial assets, we were able to increase our daily ethanol production capacity by 400 thousand liters. Considering the c0onstructive ethanol price scenario going forwards, we are confident that the combination of higher production coupled with a less aggressive carrying strategy, will offset the impact of lower crushing operations, due to the combined effect of the frost and dry weather
Development of new technologies at the Cluster
- In line with our focus on continue enhancing operational efficiencies that contribute to further reduce production costs, we are developing and already implementing new agricultural and industrial technologies.
There are two projects to increase agricultural productivity, Pre Sprouted Seedling (Muda Pre-Brotada) coupled with Meiosi; and the Automation of the Agricultural Process. The first one allows us to (i) speed up the multiplication of sugarcane varieties, (ii) increase yields; (iii) increase the cane area available for crushing; and most importantly (iv) reduce average distances in the planting process. We expect the combination of all these advantages will likely lead to a considerable reduction in planting costs. This technology will be applied to almost two thirds of the planted area for the year. As for the second project, it is already fully implemented and consists of the on-line tracking of all the agricultural machinery and operations logistics. This allows us to reduce idle time and fuel consumption of our equipment. We are currently working on the implementation of 4G technology in our fields to further improve connectivity and the monitoring of the operations.
We define Adjusted Net Income as (i) (Profit/Loss) of the period year, plus (ii) any non-cash finance costs resulting from foreign exchange losses for such period, which breakdown composed both Exchange Differences and Cash Flow Hedge Transfer from Equity, net of the related income tax effects plus (iii) gains or losses from disposals of non-controlling interests in subsidiaries whose main underlying asset is farmland, which are relieved in our Shareholders Equity under the line item. "Reserve from the sale of non-controlling interests in subsidiaries plus (iv) the reversal of the aforementioned income tax effect, plus (v) the inflation accounting effects, plus (vi) the revaluation results from the hectares hold as investment property and plus (vii) the revaluation surplus of the farmland sold.
Non-Gaap Financial Measures: For a full reconciliation of non-gaap financial measures please refer to page 27 of our 2Q19 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 2Q19 earnings release, please access ir.adecoagro.com. A conference call to discuss 2Q19 results will be held on August 16, 2019 with a live webcast through the internet:
August 16, 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: 10133780
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.