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PRNewswire 14-Mar-2019 7:01 PM
LUXEMBOURG, March 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 fourth quarter of 2018.
Main highlights for the period:
Financial & Operational Highlights
On a quarterly basis, the Sugar, Ethanol & Energy business delivered outstanding operational performance. The combination of dry weather during November and December, sugarcane availability and operational efficiency enabled our mills to crush 2.7 million tons, 24.8% higher compared to 4Q17. Our lower costs of production were fully offset by lower selling prices coupled with a negative non-cash result derived from the mark-to-market of the unharvested sugarcane.
On a quarterly basis, Adjusted EBITDA was negative $4.0 million, $17.1 million lower compared to the same period of last year. This decrease is primarily explained by the performance of our Rice and Dairy businesses. The postponement of rice sales towards to 1Q19 resulted in lower EBITDA generation. As for dairy, the 15.1% reduction in average selling prices explain the $3.6 million decrease, year-over-year.
Strategy Execution
5 –Year Plan Update
Milk Processing Facilities Investment Update
Both plants are well equipped and strategically located. One is in the city of Morteros , Province of Cordoba, in the center of Argentina's largest dairy basin. With a total processing capacity of 910 thousand liters per day, this facility will produce powder milk and cheese for the export market. The other plant, located in the city of Chivilcoy,Province of Buenos Aires, is halfway between our dairy free stalls facilities and the City of Buenos Aires, the largest fluid dairy market. Total processing capacity of this facility is to 700 thousand liters per day. This transaction, as was announced in our last investor day is in line with our 5 year Plan and fits perfectly our long term growth strategy. In fact, we are following the same strategy as in our rice and sugar, ethanol and energy businesses. In both cases, being vertically integrated has proven to be the right thing to do. Controlling the supply chain allow us to enhance efficiencies and increase margins. At the same time, apart from synergizing with our already efficient upstream operation, this transaction will enable us with the flexibility to sell into the export and domestic market, based on relative profitability with a view to generate attractive returns.
It's worth highlighting that we are entering the consumer retail market with products that bear similar characteristics with those of commodities. Indeed, powder milk and UHT milk are largely commoditized and do not require large investment in marketing and branding.
We are confident that this transaction will be accretive to our existing shareholders, with expected ROIC in 20 - 25% range, once stabilized. Results are based on three main pillars; namely (i) being efficient raw milk producers (raw milk constitutes almost 50% of final products' total cost), (ii) being efficient processors by having state-of-the art facilities with focus on both quality and cost; and (iii) operating an efficient logistic chain. On this final point, we will rely on third party trucks and distribute exclusively to large distribution centers. At the same time, we are exploring different business-to-business agreements to further enhance margins, going from private label agreements with supermarkets to specific supply agreements. We may also be able to leverage the high quality in milk and stable production of our free stall facilities..
Crops Update:
Over the last five years, we have been systematically increasing peanut area, reaching the current 15,608 hectares. This is a crop that fits well into the traditional corn/beans/wheat rotation, reason why we are strategically increasing production, specifically over leased area.
On February 8th, we acquired a peanut processing facility for a total of $10 million - half of its replacement cost - to be paid in three equal yearly installments. The plant is equipped with cutting-edge technology and it has been granted with all the necessary certifications and export permits. It's worth highlighting that the yearly installment cost fully offset the tolling expenses we paid before the acquisition.
This transaction is in line with our strategy to increase peanut area as it will enable us to control processing activities and develop direct and long term relations with different customers around the world. We expect IRR to be above 30%.
Farmland sale at premium to independent appraisal:
Adjusted Free Cash Flow:
Adjusted Free Cash Flow totaled negative $18.1 million, $25.2 million lower compared to the same period of last year. The decrease is fully explained by the higher expansion capex, as we are advancing in the execution of our 5 Year Plan investment projects.
We are confident Adjusted EBITDA and cash flows will increase as we complete the investment cycle and start ramping up our operations.
(1) Adjusted EBITDA is defined as (i) consolidated net profit (loss) for the year, as
applicable, before interest expense, income taxes, depreciation and amortization, net
gain from fair value adjustments of investment property land, foreign exchange gains or
losses, other net financial expenses; and (ii) adjusted by profit or loss from discontinued
operations if any; and (iii) adjusted by those items, that do not impact profit and loss,
but are recorded directly in shareholders' equity, i.e., (x) the gains or losses from
disposals of non-controlling interests in subsidiaries whose main underlying asset is
farmland , reflected under the line item: "Reserve from the sale of non-controlling
interests in subsidiaries; and (y) the net increase in value of sold farmland, which has
been recognized in either Revaluation surplus or retained earnings.
Non-Gaap Financial Measures: For a full reconciliation of non-gaap financial measures please refer to page 30 of our 4Q18 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 4Q18 earnings release, please access ir.adecoagro.com. A conference call to discuss 4Q18 results will be held on March 15, 2018 with a live webcast through the internet:
Conference Call
November 16, 2018
8 a.m. (US EST)
9 a.m. Buenos Aires
9 p.m. Sao Paulo
13 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: 10128248
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.