Adecoagro reported Adjusted EBITDA of $101.4 million in 2Q21 and $210.6 million in 6M21, 24.9% and 48.0% higher year-over-year, respectively.

Rhea-AI Summary

Adecoagro S.A. (NYSE: AGRO) reported strong financial results for the second quarter of 2021, with net sales reaching $278.8 million, a 54% increase year-over-year, while 6-month sales totaled $449.1 million. Adjusted EBITDA for the Sugar, Ethanol & Energy segment rose 62.1% to $73.6 million. However, the Farming segment saw a 19.2% decline in adjusted EBITDA, totaling $32.4 million. The company also announced a share repurchase program, having bought back over 3 million shares, and reported a net income of $15.7 million.

Positive

• Net sales increased 54% year-over-year to $278.8 million in Q2 2021.
• Adjusted EBITDA for the Sugar, Ethanol & Energy segment up 62.1% to $73.6 million.
• Share repurchase program executed, buying back over 3 million shares valued at $28 million.

Negative

• Adjusted net income decreased to negative $13.8 million due to changes in Argentina's tax regime.
• Adjusted EBITDA for the Farming segment declined 19.2% to $32.4 million.

LUXEMBOURG, Aug. 12, 2021 /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 second quarter ended June 30, 2021. The financial information contained in this press release is based on unaudited condensed consolidated interim financial statements presented in US dollars and prepared in accordance with International Financial Reporting Standards (IFRS) except for Non - IFRS measures. Please refer to page 34 for a definition and reconciliation to IFRS of the Non - IFRS measures used in this earnings release.

Main highlights for the period:

• Net Sales reached $278.8 million during 2Q21 and $449.1 million during 6M21, marking a 54.0% and 35.0% increase year-over-year, respectively.
• During 2Q21 adjusted EBITDA in the Sugar, Ethanol & Energy segment registered a 62.1% increase year-over-year, totaling $73.6 million. The Farming segment, excluding Land Transformation, increased 14.7% during the same period, reaching $32.8 million.

Financial & Operational Highlights

• In our Sugar, Ethanol & Energy business, Adjusted EBITDA reached $73.6 million in 2Q21, 62.1%, or $28.2 million higher compared to the same period of last year. Financial results were positively impacted by (i) an increase in crushing volume of 0.6 million tons coupled with a TRS content of 135 kg/ton, which resulted in a 30% increase in TRS production; and (ii) our strategy of continuously extracting the highest value per ton crushed by maximizing production of the product with the highest marginal contribution (59% of total TRS produced was diverted to ethanol compared to 46% during 2Q20). The combination of these factors enabled us to profit from the high prices of sugar, ethanol and energy throughout the quarter. These positive effects were partially offset by (i) a $12.7 million non-cash loss in the mark-to-market of our sugarcane mainly driven by the negative impact of the frost in our unharvested cane (please refer to the Remarks section on page 5), (ii) a non-cash loss in the mark-to-market of our commodity hedge position driven by higher expected prices; and (iii) an $8.4 million increase in selling expenses (higher freight costs and PIS COFINS taxes) in line with the increase in sales. End of period stocks amounted to over $70 million, marking a 2x increase year-over-year, led by our commercial strategy to carry over stocks in order to benefit from higher expected prices.

On a year-to-date basis, Adjusted EBITDA reached $131.7 million, 52.6% higher compared to the same period of last year. Higher results were explained by (i) a 1.3 million ton increase in crushing volume; (ii) an 85.7% increase in net sales driven by higher selling volumes and higher prices measured in U.S. dollars for all three products, coupled with (iii) a $19.7 million gain derived from the mark-to-market of our sugarcane, mainly related to harvested cane (realized margin). This was partially offset by a $25.6 million loss in our commodity hedge position and by a $9.4 million increase in selling expenses in line with the increase in sales.

• Adjusted EBITDA in the Farming and Land Transformation businesses stood at $32.4 million in 2Q21 marking a 19.2% year-over-year decrease, and $88.6 million in 6M21 marking a 36.6% year-over-year increase. The Land Transformation business registered a year-over-year decrease as farm sales were made during 2Q20 compared to no sales during 2Q21. Solely focusing on the Farming business, results stood at $32.8 million in 2Q21 and $83.9 million in 6M21, marking a year-over-year increase of 14.7% and 64.7%, respectively.

Adjusted EBITDA in the Rice business totaled $9.6 million in 2Q21 and $37.9 million in 6M21, marking an increase of 16.2% and 61.9% compared to the same period of the prior year, respectively. The positive financial performance was mostly explained by an increase in yields (record high of 7.8 Mt/Ha), area and prices, which led to a year-over-year gain in the value of our biological asset and agricultural produce. We successfully achieved these results due to our continuous focus on (i) productivity as the key variable to minimize costs per ton, (ii) rice quality to improve industrial efficiencies; and (iii) efficiency throughout the value chain by focusing on synergies at every stage of our production process. Improvements achieved were possible as a result of the investments made at the farm and industry level generally, and in particular the consolidation and experience of our operational teams.

Adjusted EBITDA in our Crops segment was $16.3 million in 2Q21, 4.8% higher compared to the same period of last year. This was explained by (i) an increase in average selling prices (100 $/Mt increase in the case of soybean and 60 $/Mt in the case of corn), partially offset by a reduction in selling volumes as a consequence of our commercial strategy to carry stocks in order to benefit from higher expected future prices. The increase in gross sales was partially offset by an increase in costs driven by inflation in dollar terms. Year-to-date Adjusted EBITDA amounted to $34.2 million, 75.7% higher compared to 6M20.

The Dairy business generated an Adjusted EBITDA of $7.3 million during 2Q21 and $12.1 million during 6M21, an increase of 46.7% and 47.5% compared to the same period of last year, respectively. Higher results were explained by (i) an increase in sales volume which fully offset the decrease in average prices; and (ii) our continuous focus on achieving efficiencies in our vertically integrated operations and increasing our productivity in every stage of the value chain. Results were partially offset by the higher cost of feed. However, once (i) interest expenses and (ii) the foreign exchange loss related to the financial debt are taken into account, the year-to-date result of the business decreases to negative $10.7 million.

• Net Income in 2Q21 resulted in a gain of $15.7 million, compared to a loss of $12.1 million recorded during the same period of last year. The $27.7 million increase is mainly explained by the year-over-year increase in EBITDA generation coupled with a lower FX loss. The year-over-year positive impact of foreign exchange variations on our dollar-denominated monetary assets and liabilities is due to (i) a depreciation of the Brazilian Real of 5.3% during 2Q20 compared to an appreciation of 12.2% in 2Q21; and (ii) a reduction in the nominal depreciation of the Argentine Peso from 9.3% in 2Q20 to 4.0% in 2Q21. Year-to-date the $101.5 million gain in Net Income is explained by the same drivers.
  
  
• Adjusted Net Income in 2Q21 was negative $13.8 million, $33.6 million lower than in 2Q20. Despite the year-over-year increase in EBITDA generation, the loss in Adjusted Net Income is mostly explained by a change in Argentina's income tax regime, which established rates starting at 25% and reaching 35% for income over $50 million Argentine Pesos ($0.5 million). Adjusted Net Income excludes, (i) any non-cash result derived from bilateral exchange variations; (ii) any revaluation resulting 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.

Remarks

Share repurchase program update

• Adecoagro has entered a path where we are generating positive cash flow in a structural way and, as stated in past releases, cash distribution is a priority for capital allocation. As previously communicated, the preferred vehicle to distribute cash to shareholders during 2021 will be share repurchase under our buyback program. During the first seven months of the year, we have purchased over 3 million shares at an average price of $9.18 per share, totaling $28.0 million. Going forward we expect to continue repurchasing shares at the current pace, in line with our commitment to generate long term value for our shareholders.

Weather update in Brazil

• In addition to the dry weather that has been impacting cane yields in the Center-South region of Brazil, a cold front hit most of the country's productive areas during the end of June and July. Low temperatures caused frost damaging sugarcane plantations in various regions including Sao Paulo and Paraná states, as well as Mato Grosso do Sul and Minas Gerais. After inspecting our plantation, we believe that the frost will cause a reduction in sugarcane availability towards year-end and beginning of 2022, resulting in a drop in productivity. Although it is still too early for a final and definitive assessment of the real impact, we estimate that crushing volume for 2021 will be roughly in line with 2020, and yields will be reduced approximately by 10%. The evolution of weather going forward, in particular the amount of precipitation during summertime, will be key to determine the impact on 2022. In order to mitigate the impact of the frost we are speeding up harvesting pace and acquiring sugarcane from third parties.

Due to the magnitude of the frost which affected most of Brazil's sugarcane areas, we expect a constructive price scenario for both sugar and ethanol, which will improve the already positive scenario caused by the dry weather in the Center-South region. We are in a good position to capture a possible increase in prices as 53% of our current TRS production and 100% of our 22/23 production remain unhedged. In addition, as a result of our continuous focus on enhancing efficiencies and upgrading our industrial assets, we have a high degree of flexibility to switch from producing sugar to ethanol and vice versa. This will enable us to divert our TRS to produce the product which offers the higher marginal contribution at each time. Consequently, we believe that neither our EBITDA nor our cash generation will be materially affected.

Development of new technologies at the Cluster

• In line with our strategy of enhancing operational efficiencies, on July 2021 we inaugurated a peneira molecular in our Ivinhema mill with capacity to dehydrate 500 m3 of ethanol per day. Prior to this, the production of anhydrous ethanol was entirely concentrated in our Angélica mill. This increase in installed capacity continues to add value to our operations, serves as a commercial tool as it will enable us to further profit from the price premium over hydrous ethanol (currently 15%), and heightens our production flexibility which is one of our main competitive advantages.

Non-Gaap Financial Measures: For a full reconciliation of non-gaap financial measures please refer to page 34 of our 2Q21 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 2Q21 earnings release, please access ir.adecoagro.com. A conference call to discuss 2Q21 results will be held on August 13, 2021 with a live webcast through the internet:

Conference Call

August 13, 2021
10 a.m. (US EST)
11 a.m. Buenos Aires
11 a.m. Sao Paulo
4 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: 10158085

Investor Relations Department
Charlie Boero Hughes
CFO

Victoria Cabello
IRO
Email: ir@adecoagro.com
Tel: +54 (11) 4836-8651 

About Adecoagro:
Adecoagro is a leading agricultural company in South America. Adecoagro owns over 220 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.

FAQ

What were Adecoagro's net sales for Q2 2021 (AGRO)?

Adecoagro reported net sales of $278.8 million for Q2 2021, a 54% increase year-over-year.

How did Adecoagro's EBITDA perform in Q2 2021 (AGRO)?

The company's adjusted EBITDA for the Sugar, Ethanol & Energy segment rose 62.1% to $73.6 million in Q2 2021.

What is the adjusted net income for Adecoagro in Q2 2021 (AGRO)?

Adecoagro reported an adjusted net income of negative $13.8 million in Q2 2021, down $33.6 million compared to the previous year.

How many shares has Adecoagro repurchased in 2021 (AGRO)?

Adecoagro has repurchased over 3 million shares at an average price of $9.18 per share during the first seven months of 2021.

What were the challenges faced by Adecoagro in Q2 2021 (AGRO)?

The Farming segment's adjusted EBITDA decreased by 19.2% due to lower farm sales and changes in the tax regime in Argentina.