Adecoagro reported 9M17 Adjusted EBITDA(1) of $187.2 million and Net Income of $6.8 million, respectively $3.0 and $15.0 million higher year-over-year

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Nov 13, 2017, 16:31 ET

LUXEMBOURG, Nov. 13, 2017 /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 third quarter of 2017.

Main highlights for the period:

Adecoagro reported Adjusted EBITDA⁽¹⁾ of $75.3 million in 3Q17, marking a 16.2% decrease compared to 3Q16. Adjusted EBITDA year-to-date stands at $187.2 million, 1.6% higher than 9M16.
Gross sales reached $262.9 million in 3Q17 and $657.6 million in 9M17, 6.7% and 22.4% higher year-over year, respectively.
Net income in 3Q17 was a loss of $2.9 million, compared to a $6.8 million gain in 3Q16. Year-to-date, Net Income stands at $6.8 million, $15.0 million higher than the previous year.

Financial & Operational Highlights

Adjusted EBITDA for the Farming and Land Transformation businesses in 3Q17 was $6.9 million, $9.1 million or 56.8% lower than 3Q16. These results are primarily explained by (i) an $8.1 million extraordinary gain recorded in 3Q16 corresponding to the settlement of an arbitration dispute related to the early termination of land leasing contracts; (ii) a $1.1 million decrease in our Rice segment, driven by the postponement of rice sales volumes to the fourth quarter to capture higher prices; and (iii) partially offset by a $0.4 million increase in our Dairy segment as a result of higher milk prices. Year-to-date, Adjusted EBITDA reached $37.6 million, compared to $47.3 million for the same period last year.
In the Sugar, Ethanol & Energy business, Adjusted EBITDA during 3Q17 was $74.3 million, 7.4% lower than 3Q16. Adjusted EBITDA was positively affected by: (i) an 8.4% increase in sugarcane crushing coupled with a 1.8% growth in TRS per ton of sugarcane, which led to an 11.6% increase in total TRS produced; (ii) higher sales volumes for sugar, ethanol and energy, 2.2%, 8.2% and 32.0% respectively, coupled with a 21.8% increase in energy prices; and, (iii) a $9.6 million higher result from the mark-to-market effect of our commodity hedge position (a $0.2 million gain in 3Q17 compared to a $10.8 million loss in 3Q16). These positive effects were offset by a 14.2% increase in production cash costs per ton of TRS produced in BRL terms. Approximately half of this cost increase is temporary and will be reversed in the fourth quarter. The net increase in cost is explained by lower sugarcane yields which have increased the amount of hectares harvested, leased and treated and purchases of sugarcane from suppliers.

On a cumulative basis, Adjusted EBITDA in 9M17 grew by 8.5% reaching $165.9 million. The main drivers for the increase were (i) a 30.6% increase in net sales, as a result of higher sugar, ethanol and energy sales volumes and realized prices; (ii) the mark-to-market effect of our sugar hedge position in 9M17 generated a gain of $36.5 million, $59.5 million higher than in 9M16. These positive results were partially offset by (i) a $37.5 million decrease in Changes in Fair Value, generated by the mark-to-market effect of our unharvested sugarcane plantation, primarily as a result of lower projected sugar prices and productivity; coupled with (ii) a 15.5% increase in unitary production cash costs as explained previously.

Strategy Execution

10-Year Bond Issuance: On September 21, 2017, Adecoagro completed the issuance of a 10-year $500 million bond with a 6.0% coupon. The notes are guaranteed on a senior unsecured basis by certain of Adecoagro's subsidiaries.
The Company will use the proceeds of the transaction primarily to repay existing debt of our Brazilian subsidiaries, and for general corporate purposes.
This transaction has enhanced Adecoagro's ability to manage and allocate capital more efficiently, has strengthened our balance sheet and improved our long term financial flexibility.
Organic Growth Update:

Cluster Expansion: The expansion of the cluster in Mato Grosso do Sul is moving forward according to plan. As previously announced, investments at the Angelica mill are complete and the mill has reached a nominal crushing capacity of 1,050 tons/hour. We are currently working on laying the foundations for a new milling roller in the Ivinhema mill. In terms of sugarcane plantation, we have successfully leased a total 23.9 thousand hectares of farmland or 47% of total expansion land needs. A total of 7.9 thousand hectares have already been planted.
The expansion of the cluster will generate important efficiency gains and cost dilution. Even at current forward sugar prices, this project is highly accretive and generates returns well above our cost of capital.

Dairy Bio-digester: The construction of our first bio-digester was completed during the end of October. The facility generates electricity by burning biogas extracted from the effluents produced by our seven thousand milking cows. On November 3, 2017, we began generating and delivering 1.4 MW of electricity to the local power grid. In addition to increasing revenues and securing our energy requirements, this facility enhances the sustainability of our free stall dairy operation by reducing greenhouse gas emissions, improving the effluent management and concentrating valuable nutrients which are applied back to the fields.
Share Repurchase Update: Over the last 12-months and as of the date of this report, Adecoagro has repurchased a total of 1.5 million shares or 1.2% of outstanding shares for a total dollar amount of $15.7 million, at an average price per share of $10.35.
Since the inception of the program in August 2013, Adecoagro has repurchased an aggregate of 4.0 million shares equivalent to 3.2% of outstanding shares or $35.1 million, at an average price per share of $8.79.
Independent Farmland Appraisal: As of September 30, 2017, Cushman & Wakefield (C&W) updated its independent appraisal of Adecoagro's farmland. Adecoagro's subsidiaries held 266,532 hectares valued by C&W at $900.7 million. Net of minority interests, Adecoagro's land portfolio consists of 246,139 hectares valued at $840.7 million. Year-over-year, our farmland value decreased by $30.7 million or 3.5%.
We believe the decrease in the valuation of our land portfolio is in line with the decrease in land prices in Brazil and Uruguay following four years of weak row crop prices resulting in deterioration of crop margins.
These gains or losses are not reflected in Adecoagro's financial statements since the Company does not mark-to-market the value of farmland assets on its balance sheet. However, land transformation and appreciation are an important part of Adecoagro's business strategy and a component of total return on invested capital.
Please visit http://www.ir.adecoagro.com for the Cushman & Wakefield 2017 Appraisal Report. The appraisals of our farmland are only intended to provide an indicative approximation of the market value of our farmland property as of the date of such appraisal based on current market conditions. Accordingly, these appraisals are subject to change based on a host of variables and market conditions. Please also refer to page 66 of our Annual Report on Form 20-F for the methodology employed in the appraisals of our farmland by Cushman & Wakefield.

(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 21 of our 3Q17 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 3Q17 earnings release, please access ir.adecoagro.com. A conference call to discuss 3Q17 results will be held on November 14, 2017 with a live webcast through the internet:

Conference Call

November 14, 2017
9 a.m. (US EST)
11 a.m. Buenos Aires
12 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: 10113176

Investor Relations Department
Charlie Boero Hughes
CFO

Hernan Walker
IRO
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 1.9 million tons of agricultural products including sugar, ethanol, bio-electricity, milled rice, corn, wheat, soybean and dairy products, among others.

SOURCE Adecoagro S.A.