LUXEMBOURG, May 14, 2020 /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 first quarter ended March 31, 2020. The financial information contained in this press release is based on unaudited 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:
- Adjusted EBITDA in 1Q20 was 4.7% higher compared to the same period of last year, despite the fact that no farms were sold during the quarter compared to one farm sale made during 1Q19. Excluding results from Land Transformation, Adjusted EBITDA increased $12.1 million or 24.8% year-over-year.
- Adjusted Net Income in 1Q20 was $43.9 million, 202.6% higher compared to 1Q19.
Financial & Operational Highlights
- In our Sugar, Ethanol & Energy business, Adjusted EBITDA reached $40.9 million in 1Q20, 31.2%, or $9.7 million higher compared to the same period last year. Financial results were positively impacted by: (i) our continuous strategy of maximizing production of the product with the highest marginal contribution, ethanol, as to which we diverted 95% of total TRS production in 1Q20, enabling us to extract the highest value from our sugarcane and capture high ethanol prices during the quarter, (ii) lower cost of production, driven by the combined effect of enhanced agricultural and industrial efficiencies along with the depreciation of the Brazilian Real, that further contributed to reduce costs measured in U.S dollar; coupled with (iii) the $16.8 million gain in the mark-to-market of our commodity hedge position. These positive effects were partially offset by the $7.1 million reduction in the market value of our unharvested sugarcane due to lower ethanol prices.
- Adjusted EBITDA for the Farming and Land Transformation businesses reached $24.7 million in 1Q20, $7.3 million or 22.7% lower year-over-year. The decrease is fully attributable to the $9.4 million lower results derived from the absence of farm sales during the quarter, compared to 1Q19 when Alto Alegre farm was sold. Excluding results from Land Transformation, Adjusted EBITDA for the Farming business in 1Q20 was $2.1 million or 9.4% higher compared to 1Q19.
The Rice business was the main contributor to our Farming business EBITDA results during 1Q20, amounting to $15.2 million driven by high yields and high average prices both in the domestic and export market. The $1.2 million increase year-over-year is mainly explained by lower operating costs in dollar terms, as a result of the depreciation of the Argentine peso, coupled with lower selling expenses.
In our Crops business, the 18.5% higher selling volume and the higher mark-to-market of our biological assets were responsible for the 15.6% or $0.8 million higher EBITDA performance year-over-year, despite lower average grain prices.
- Net Income in 1Q20 resulted in a loss of $54.4 million, compared to a loss of $2.2 million recorded during the same period of last year. The $52.2 million decrease is primarily explained by the non-cash loss derived from the revaluation of our U.S. dollar denominated financial debt, measured in local currency.
- 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. Adjusted Net Income in 1Q20 reached $43.9 million, $29.4 million or 202.6% higher compared to 1Q19, mainly explained by $81.4 million higher FX loss year-over-year.
- As is publicly known, the COVID-19 pandemic outbreak has unleashed social and economic turmoil, with global impact. The virus outbreak is generating a huge drop in demand for oil as billions of people across the globe are in quarantine, with air and ground transport almost fully paralyzed. On top of this, on March 9, 2020 the 3-year relationship between the Saudis and the Russians was destroyed and sparked an all-out price and market share war, with the Kingdom slashing the price of Arab Light crude and increasing production to full capacity. This fall in demand and increased supply caused an unprecedented reduction in international oil prices.
In Argentina the national government implemented a mandatory isolation regime on March 20, 2020, prohibiting the circulation of people on routes, roads and public spaces. However, a number of activities were exempted from this regime for being considered "essential", among them, the activities carried out by our company in agricultural production, processing, commercialization and distribution. As of the date of this report, our businesses in Argentina are all operating without major disruptions, both at the farm and industry level as well as on the roads and in ports.
In Brazil the national government has not imposed a mandatory isolation regime, but most Brazilian states have adopted preventive measures and a lockdown, which led to a drop of 30% in the demand for ethanol since mid-March, according to UNICA. In light of these events which negatively affect our Sugar, Ethanol and Energy business, we reassessed our strategy to adapt it to the new scenario. We decided to slow down crushing and start maximizing sugar production. We have both cane availability and the flexibility that will allow us to return to full capacity as soon as a recovery takes place, slanting output towards the product with the highest marginal contribution. As of the date of this report, our business in Brazil is operating without major disruptions.
- Immediately after the World Health Organization declared the Pandemic, we summoned a permanent interdisciplinary Committee and outlined an action plan. Our focus is to preserve the health of our employees and guarantee hygienic and safe working conditions at all of our facilities. Safety measures and protocols have been activated and tailored for each activity.
Main measures adopted include but are not limited to: (i) body temperature controls, (ii) mandatory social distancing in the workplace, (iii) reduction of maximum capacity at lunch and dining rooms, transportation and cars, (iv) increase number and/or up-grade sanitary barriers, and provide with hand sanitizer and periodic clothes changing and cleaning, (v) set aside risk groups (elderly, pregnant or pre-existing health condition), (vi) home office for corporate office employees, (vii) mandatory quarantine for travelers and those who have close contact with travelers and/or symptomatic persons, (viii) develop an intense capacitation and communication program, including local authorities.
- Our constant discipline and strategy of focusing on increasing operational efficiencies and being the low cost producer, is now more relevant than ever. In the face of a challenging and dynamic macroeconomic scenario, where the duration of the lockdown remains an uncertain variable, we maintain a day to day focus. We have been reassessing our cost structure across all our businesses as well as our capital expenditures (both maintenance and expansion). Specifically, we have put on hold many uncommitted expenses. It is important to underscore that even at current prices we continue to generate positive margins, and that this strategic deferment does not jeopardize productivity going forward. As of the date of this report we have successfully reduced close to $40 million. We will continue to evaluate and modify our response to the pandemic as the lockdown remains in place.
Agro´s Liquidity Position
- Our balance sheet is in a healthy position. We have moderate overall debt levels with over 80% having a long term tenor. As of March 31, 2020, our cash position amounted to $235 million. Our Net Debt ratio (Net Debt/ EBITDA) reached 2.31x, and our Liquidity ratio (cash & equivalents/short term debt), measured without taking account of marketable inventories, reached 1.15x. This value, which is above 1.0x, shows the capacity of Adecoagro to repay its short term debt using its cash balance.
Non-Gaap Financial Measures: For a full reconciliation of non-gaap financial measures please refer to page 26 of our 1Q19 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 1Q20 earnings release, please access ir.adecoagro.com. A conference call to discuss 1Q20 results will be held on May 15, 2020 with a live webcast through the internet:
May 15, 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: 10142222
Investor Relations Department
Charlie Boero Hughes
Juan Ignacio Galleano
Email: [email protected]
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.