(Photo: Mariano Bosch, CEO of Adecoagro, poses in front a banner of Molinos Ala, one its rice brand)
Buenos Aires, May 22nd. Adecoagro, one of the largest farming and food companies in Argentina, presented the financial results of the first quarter (ended March 31st) of the fiscal year, exhibiting 4.6% incomes increase to US$162 million, but with Adjusted EBITDA decreasing 5.9% to US$58.3 million.
As it happened with Cresud financial results, farming is supplying the strongest results to the company, instead of other business units. In the 1Q Farming and Land Transformation business reached 70% increase in its EBITDA, year to year, to US$31.9 million, versus a 35% drop in the Sugar, Ethanol, and Energy business unit. According to the company “the improvement in financial performance (of
Farming and Land Transforming) is primarily explained by higher margins in our Rice and Dairy businesses, coupled with the completion of the sale of Alto Alegre farm, which contributed $9.4 million to EBITDA”.
Adecoagro planted 232K hectares this season 2018/19, of which rice occupied 40k, with 239K tons of production (+2.8% versus 2018). Meanwhile, milk production improved 15% reaching 26.9 million liters from a 8,338 cows herd.
“Regarding our Dairy business, higher selling volumes and average prices were responsible for the increase in financial performance. Indeed, as a result of the shortage of raw milk due to weather-related issues, prices increased margins. At our confined free stall system, milk production was not affected allowing us to fully profit from higher prices”, the company says.
The rice business EBITDA jumped from US$6.8 million in the 1Q 2018 to US$14.1 million this year. The remained crops are showing a 44.5% decrease in its EBITDA, passing from US$9.8 to 5.5 million this year.
But if farming performances are going well, financial results not. The net debt grew from US$645 million in 2018 to US$729 million this 1Q. The average life of the debt rounds 6.2 years and 90% of them is structured in dollars, with a 6% average interest rate. Therefore, the 1Q Financial Results exhibit US$2.2 million loss for the period versus US$10.1 million profit in 1Q 2018.
This bounced in the stock value of Adecoagro, currently priced around US$6.50 versus US$8.50 a year ago, and one of the lowest prices along the last year. Stock analysts stressed that the company is losing value and they recommend sell the stocks.