(Photo: Chart above shows a large increase in its dairy business, with milk production 20% up YoY)
Buenos Aires, November 15th. Company press release. Adecoagro S.A. (AGRO), a leading agro-industrial company in South America, announced today its results for the third quarter of 2019.
Main highlights for the period:
- 3Q19 Adjusted EBITDA(3) was $93.5 million, marking a 17.4% increase year-over-year. Adjusted EBITDA margin reached 40.3%, 2.2% higher year-over-year.
- Gross sales reached $219.9 million in 3Q19, 14.4% higher year-over year.
Financial & Operational Highlights
- In our Sugar, Ethanol & Energy business, Adjusted EBITDA reached $85.1 million in 3Q19, 33.0%, or $21.1 million higher compared to the same period last year. Financial results were positively impacted by: (i) our continued strategy of maximizing ethanol (87% of total TRS production) enabling us to make the best use and extract the highest value from our sugarcane, (ii) the high level of cogeneration efficiency of 76.2 KWh, which resulted in higher energy sales, (iii) the dilution of industrial costs, on a per ton basis, thanks to higher crushing activities, coupled with efficiency enhancements and the implementation of a cost saving program; and (iv) the $17.0 million gain in the mark-to-market of our unharvested sugarcane driven by higher sugar prices and the depreciation of the Brazilian real. These positive effects were partially offset by adverse weather conditions – specifically dry weather and frost -, which resulted in lower yields and thus in a higher harvested area. This, in turn, translated into higher agricultural costs, year-over-year.
On a year-to-date basis, Adjusted EBITDA totaled $197.9 million, marking a 2.6% increase compared to the same period last year. The main drivers for the increase were lower production costs, coupled with a higher gain resulted from the mark-to-market of our sugarcane biological asset. Positive results were mainly offset by the $48.8 million lower result generated from the mark-to-market of our sugar future contracts.
- Adjusted EBITDA for the Farming and Land Transformation businesses reached $13.4 million in 3Q19, $7.0 million lower year-over-year. The decrease is mainly attributable to the performance of both our Crops and Rice businesses.
In our crops business, the combined effect of higher yields, enhanced operational efficiencies and the cost dilution as a result of the year-over-year depreciation of the Argentine peso, was fully offset by lower average selling prices.
As for the Rice business, the re-introduction of export taxes coupled with lower sales volumes – as a result of shipment delay – were responsible for the lower year-over-year financial performance.
On an accumulated basis, Adjusted EBITDA in our Farming business (excluding Land Transformation) totaled $46.4 million, $17.8 million lower year-over-year. The reasons for the decrease vary from business to business. However, overall, lower average selling grain prices and lower selling volumes in our Rice business offset lower production costs stemming from enhanced operational efficiency.
- Net Income in in 3Q19 resulted in a loss of $30.3 million, compared to a gain of $3.5 million recorded during the same period of last year. The $33.5 million decrease was primarily explained by the $62.3 million difference generated in “Financial Results”. The higher balance of U.S dollar denominated debt in Argentina, coupled with the depreciation of the Brazilian real explain this difference year-over-year.
- Adjusted Net Income excludes, by definition, (i) any non-cash result derived from bilateral exchange variations, (ii) any revaluation of 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) and (v) revaluation surplus of farmland sold. We believe Adjusted Net Income is a more appropriate metric to reflect the Company´s performance. Adjusted Net Income reached $45.5 million for 9M19.