Adecoagro recorded Adjusted EBITDA of $51.2 million in 2Q16 and $94.4 million for 6M16, 7.6% and 39.2% higher year-over-year, respectively

LUXEMBOURG, Aug. 11, 2016 /PRNewswire/ -- Adecoagro S.A. (NYSE: AGRO, Bloomberg: AGRO US, Reuters: AGRO.K), one of the leading agricultural companies in South America, announced today its results for the first quarter of 2016.

Main highlights for the period:

• Adecoagro recorded Adjusted EBITDA⁽¹⁾ of $51.2 million in 2Q16, marking a 7.6% increase compared to 2Q15.

• Adjusted EBITDA margin⁽¹⁾ during 2Q16 reached 31.1% in 2Q16, compared to 28.9% in 2Q15.

• Adjusted EBITDA year-to-date stands at $94.4 million, 39.2% higher year-over-year.

Financial & Operational Highlights

• Adjusted EBITDA for our Farming and Land Transformation businesses' in 2Q16 was $5.1 million, 84.9%  higher than in 2Q15. The increase is primarily explained by a $24.1 million increase in margins, mostly stemming from our Crops segment as a result of: (i) higher realized corn and soybean prices driven by the elimination/reduction of export taxes and export quotas and the recent rebound in international markets; (ii) coupled with lower production costs in US dollars resulting from the devaluation of the Argentine peso and lower input prices for seeds, fertilizers and agrochemicals.

Results were partially offset by a $21.0 million loss generated by the mark-to-market of our commodity hedge positions, of which $8.7 million or 41.5% is related to the current crop and $12.3 million or 58.5% is related to the new crop. The hedging losses related to the current crop are offset by the higher fair value of biological assets and the mark-to-market of grain inventories. Hedging losses related to next year's crop are offset the following fiscal year as the crop is planted and harvested.

Year-to-date, Adjusted EBITDA reached $31.3 million compared to $25.8 million. The increase is explained by the same drivers influencing quarterly results.

• In our Sugar, Ethanol & Energy business, Adjusted EBITDA in 2Q16 reached $50.6 million, 3.3% higher than 2Q15. Adjusted EBITDA margin grew from 57.0% in 2Q15 to 58.7% in the current quarter. Despite  a 7.7% reduction in sugarcane crushing due to excess rains, lower ethanol sales as a result of the implementation of an ethanol carry strategy to capture higher prices towards the end of the season, and a $13.1 million mark-to-market loss from our sugar hedge position; we were able to increase margins. The main factors contributing to enhanced financial performance during the quarter are: (i) a 4.6% reduction in unitary production costs measured in BRL as a result of our focus on low cost and operational efficiency; (ii) a 14% year-over-year average devaluation of the BRL, which further dilutes production costs and depreciation expenses in US dollar terms; and (iii) higher sugar prices and sugarcane yields resulted in a $17.7 million increase in Changes in Fair Value of unharvested sugarcane, offsetting the negative mark-to-market result of our sugar hedge position.

On a cumulative basis, Adjusted EBITDA for 6M16 grew by 41.5% reaching $72.7 million. Adjusted EBITDA margin expanded to 46.7%. These results are primarily explained by (i) a 24.2% increase in crushing volumes, coupled with a 17.0% increase in TRS sold, as a result of the early start of the harvest due to the implementation of the "continuous harvest" model; (ii) enhanced agricultural efficiencies and BRL devaluation resulting in a 20.4% dilution of unitary production costs; and (iv) higher sugar prices and yields resulted in a $27.7 million year-over-year gain from the Fair Value of unharvested sugarcane. Results were partially offset by a $12.3 million loss generated by the mark-to-market of our sugar hedge position, compared to a $13.9 million gain generated in 6M15.

Since mid-June and throughout July, rainfalls in Mato Grosso do Sul in Brazil have normalized, returning to the historical average. As a result, our mills have been able to accelerate the pace of harvest and compensate the crushing delay generated in the second quarter.

• Net Income in 2Q16 was a loss of $17.7 million, compared to a loss of $5.3 million in 2Q15. Despite higher Adjusted EBITDA, net income year-over-year was lower primarily as a result of (i) higher financial results losses ($38.3 million loss in 2Q16 versus $14.4 million loss in 2Q15) mainly driven by the devaluation of the Argentine Peso on our net monetary position in foreign currency, and a negative mark-to-market result from foreign exchange futures contracts; and offset by (ii) an $8.8 million decrease in depreciation and amortization expenses; and (iii) a $2.3 million decrease in income taxes.

• Free Cash Flow: The seasonal nature of our business during the first and second quarter of the year necessitates us to be net consumers of cash as we finance working capital requirements. The bulk of our crops and sugarcane are harvested during the second and third quarters. Accordingly, the majority of sales and cash collections are concentrated during the third and fourth quarters of the year.
  Free cash flow, net of changes in borrowings (Operating CF minus Investing CF minus interests paid) was negative $36.2 million in 2Q16 and negative $66.2 million year-to-date. Free cash flow generation in the first semester of 2016 was negatively affected by: (i) a delay in soybean and corn harvesting as a result of excess rains during the end of March and early April; (ii) a delay in sugarcane crushing in May and early June in our cluster in Mato Grosso do Sul due to record-high rains; (iii) the implementation of an ethanol carry strategy to capture higher prices towards year-end as we have successfully done the last two years; and (iv) the rally in commodity prices in the second quarter has resulted in temporary cash requirements to cover margin calls related to our commodity derivative hedges. Once the contracts expire and the crop is sold, the cash is recovered. We believe that, as a result of these weather and market-related issues, sales and cash flow generation during 2016 will be highly concentrated in the fourth quarter.
  Despite these delays, we remain confident of our ability to meet our operational, economic and financial objectives. Our target expectations remain unchanged.

⁽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.

To read the full 2Q16 earnings release, please access ir.adecoagro.com. A conference call to discuss 2Q16 results will be held on August 12, 2016 with a live webcast through the internet:

English Conference Call

August 12, 2016
11 a.m. (US EST)
12 p.m. Buenos Aires
12 p.m. Sao Paulo
5 p.m. Luxembourg

Tel: +1 (844) 836-8746
Participants calling from the US
Tel: +1 (412) 317-2501
Participants calling from other countries
Access Code: Adecoagro

Investor Relations Department
Charlie Boero Hughes
CFO

Hernan Walker
IR Manager
Email: [email protected]
Tel: +54 (11) 4836-8651

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 1.7 million tons of agricultural products including corn, wheat, soybeans, rice, dairy products, sugar, ethanol and electricity among others.

SOURCE Adecoagro S.A.

Related Links

http://ir.adecoagro.com