Adecoagro recorded 1Q18 Adjusted EBITDA of $61.9 MM, 38.4% higher year over year

LUXEMBOURG, May 14, 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 first quarter of 2018.

Main highlights for the period:

• Adecoagro reported Adjuested EBITDA of $61.9 million in 1Q18, marking a 38.4% increase compared to 1Q17.
• Adjusted EBITDA margin net of third party commercilaization reached 47.9%, 44.9% higher year-over-year.
• Net income in 1Q18 was a gain of $8.5 million , $2.6 million, or 43.0% higher compared to 1Q17.

Financial & Operational Highlights

• Adjusted EBITDA of our Sugar, Ethanol & Energy business in 1Q18 reached $48.0 million, $17.7 million or 58.6% higher than 1Q17. Results were mainly driven by (i) a 16% increase in milling per hour, offsetting the 10% decrease in effective milling days as a result of rainfalls, (ii) the maximization of ethanol production (87% of TRS went towards ethanol), which enabled us to profit from significantly higher relative prices. Indeed, anhydrous and hydrous ethanol traded at cts/lb20.4 and cts/lb19.1 sugar equivalent during the quarter, implying a 40% premium to sugar, (iii) a $13.1 million increase driven by the mark-to-market of our hedging derivatives position; and (iv) lower production costs as a result of higher crushing volumes and enhanced operating efficiencies. The offsetting effect of lower sugar prices were twofold. On the one hand, it resulted in lower sales revenues while on the other, it implied a lower margin recognition of our unharvested biological asset, captured in the Changes in Fair Value line.

• Adjusted EBITDA for the Farming and Land Transformation businesses in 1Q18 was $18.8 million, slightly below 1Q17. Results were primarily explained by a $2.7 million lower gain in our Crops business partially offset by a $1.9 million higher gain in our Rice business.

In our Crops business, results were mainly explained by lower registered and projected yields as a result of the dry weather that has been affecting Argentina since the beginning of the year. At the same time, soybean and corn prices in the local market increased significantly during the quarter resulting in: (i) a higher margin recognition of our unharvested biological asset; and (ii) a negative mark-to-market of our commodity hedge position.

As for the Rice business, higher results were explained by the enhancements in farming margins, which are captured in the Changes in Fair Value line, driven by productivity gains (yields were 15.9% higher compared to the previous harvest year); coupled with the depreciation of the Argentine peso.

Net Income in 1Q18 was a $8.5 million, $2.6 million or 43.0% higher compared to 1Q17. This increase is explained by a $17.2 million increase in Adjusted EBITDA; partially offset by (i) a $6.8 million increase in depreciation and amortization charges, coupled with (ii) a $7.9 million increase in financial losses.

Strategy Execution

• 5 Year Plan Update The expansion of the cluster in Mato Grosso do Sul is moving forward according to plan. As previously announced, investments in Angelica mill are completed and the mill has reached a nominal crushing capacity of 1,050 tons/hour. Investments in Ivinhema mill are advancing well and we expect to conclude them during the next quarter. The expansion of our sugarcane to supply the additional nominal crushing capacity is also advancing well.

As for Adjusted Free Cash Flow, we delivered $7.2 million in 2017. As previously announced, we are currently undertaking several organic expansion projects across all our existing businesses. This has driven expansion capex to $70.8 million in 2017. We believe Adjusted EBITDA and Free Cash Flow generation will increase substantially as we ramp-up and consolidate these projects.

• Organic Businesses Growth Update (5 Year Plan):

Cluster Expansion: The expansion of the cluster in Mato Grosso do Sul is moving forward according to plan. As previously announced, investments in Angelica are already complete and crushing capacity has increased by 17%, from 900 tons/hour to 1,050 tons/hour. As for investments in Ivinhema mill, we are advancing according to schedule and budget and we expect to conclude them by the first half of 2018. 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 Business: The construction of free stall #3 is almost fully completed. We expect to soon start populating the facility and start operating activities by August. By the end of the year, we target to operate at 45% of total capacity. The free stall will be populated with cows of our own breed to avoid sanitary issues and guarantee high quality milk. As a result, the ramp up pace is mainly determined by the biological reproductive cycle of the cow herd. By mid-2019, we expect to be operating at full capacity. Free stall #4 is under construction and will be populated with cows in 2019.

Rice Business: We expect to conclude the investments of the packaging machine for branded white rice and the expansion of finished goods storage capacity during the second quarter. This will allow us to improve our rice processing and distribution, enhancing margins.

• SanCor Investment Proposal: On March 23, Adecoagro submitted an investment proposal to partner with SanCor, one of the largest milk processors in Argentina. The offer remains subject to the full compliance of specific conditions, including but not limited to the restructuring of its fiscal and financial liabilities; and the negotiations of definitive agreements. We are currently in the due-diligence phase, ensuring the fulfillment of all the necessary conditions to make this deal accretive for existing shareholders.

• Share Repurchase Update: Since January 1, we purchased 1,6 million shares equivalent to 1.4% of outstanding shares or $15.4 million, at an average price per share of $9.39. We expect to continue our share repurchases under the program during 2018 subject to the already committed investments in our expansion projects.

• Farmland sales at strong premium to independent appraisal: In May 2018, we signed sale agreements for Rio de Janeiro and Conquista farms, located in western Bahia and Tocantins, respectively. The farms total 9,300 of croppable hectares and the selling price for both farms was $53.0 million (70% in cash), representing a 37% premium to Cushman and Wakefield´s independent farmland appraisal dated September 30, 2017.  At the agreed selling price, we estimate that we would record capital gains in excess of $35.0 million, which would be recognized in the second quarter 2018. The sale of the farms remains subject to the completion of due-diligence.

(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 4Q17 earnings release, please access ir.adecoagro.com. A conference call to discuss 4Q17 results will be held on March 16, 2018 with a live webcast through the internet:

Conference Call

May 16, 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: 10116540

Investor Relations Department
Charlie Boero Hughes
CFO

Juan Ignacio Galleano
IRO
Email: ir@adecoagro.com
Tel: +54 (11) 4836-8624

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.

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SOURCE Adecoagro S.A.