Adecoagro's Adj EBITDA reached $433 million in 2022, in line with 2021 despite higher global costs and challenging weather. During 2022 the company distributed 47% of NCFO via cash dividend and share repurchases.

Rhea-AI Summary

Adecoagro S.A. (NYSE: AGRO) reported its fourth quarter and full-year results for 2022, highlighting a significant growth in net sales, which increased by 19.3% in 4Q22 and 23.8% for the year. The firm achieved an adjusted EBITDA of $433 million, consistent with 2021, despite rising global costs. Key highlights include an adjusted free cash flow from operations of $141 million, enabling a minimum distribution of $56.5 million in 2023 via dividends and buybacks. Notably, the Sugar, Ethanol & Energy segment drove a 55.5% growth in 4Q22 adjusted EBITDA. The company remains optimistic, predicting a 15% increase in crushing volume for 2023.

Positive

• Adjusted free cash flow from operations was $141 million, ensuring $56.5 million distribution in 2023.
• Net sales grew by 19.3% in 4Q22 and 23.8% for the full year.
• Adjusted EBITDA reached $433 million for 2022, consistent with 2021.

Negative

• Adjusted EBITDA for Farming and Land Transformation business fell 33% compared to 2021.
• Reduced yields in crop production due to La Niña, impacting overall agricultural performance.

LUXEMBOURG, March 9, 2023 /PRNewswire/ -- Adecoagro S.A. (NYSE: AGRO, Bloomberg: AGRO US, Reuters: AGRO.K), a leading sustainable production company in South America, announced today its results for the fourth quarter ended December 31, 2022. The financial information contained in this press release is based on consolidated 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 35 for a definition and reconciliation to IFRS of the Non - IFRS measures used in this earnings release.

Main highlights for the period:

• Adjusted Free Cash Flow from Operations (also referred to as NCFO) amounted to $141 million in 2022, guaranteeing a minimum distribution of $56.5 million to be paid in 2023 via dividend and share repurchases.
• Net sales presented a year-over-year increase of 19.3% in 4Q22 and 23.8% in 2022 on a solid commercial strategy in all of our business units.
• Adjusted EBITDA in 4Q22 was 52.2% higher year-over-year driven by an outperformance of the Sugar, Ethanol & Energy business whereas for the full year it amounted to $433 million, in line with 2021.

Financial & Operational Highlights:

Sugar, Ethanol & Energy business

• Adjusted EBITDA in our Sugar, Ethanol & Energy business reached $101.1 million in 4Q22, 55.5% or $36.1 million higher compared to the same period of last year. This was positively impacted by (i) an increase in crushing volume of 1.9 million tons compared to 4Q21 driven by greater cane availability and enhanced agricultural productivity indicators; (ii) our flexibility to continuously maximize production of the product with the highest marginal contribution (44% of total TRS production diverted to sugar compared to only 7% during 4Q21; and 93% of total ethanol production was anhydrous ethanol compared to 64% last year); coupled with (iii) lower cost of production and higher mark-to-market of our harvested cane, both driven by higher volume.
• In 2022 Adjusted EBITDA in our Sugar, Ethanol & Energy business reached $373.8 million, $38.9 million higher year-over-year. Crushing volume amounted to 10.5 million tons, 0.5 million tons lower than in 2021, due to the start of crushing activities in mid-March, following a short inter-harvest period. Despite lower volumes, higher results were mostly explained by an increase in net sales driven by our operational and commercial flexibility which enabled us to benefit from attractive prices of ethanol and sugar, especially during the first half of the year. Throughout 2022, the price scenario of our products experienced significant changes. The late start of harvesting activities in Center-South Brazil and strong international oil prices were constructive for prices at the beginning of the year. To benefit from this scenario we (i) carried-over production from 2021 into 2022 to be sold at higher prices; and (ii) cleared out our tanks at the peak of prices achieving record sale volumes (23% of ethanol sales at prices over 26 ct/lb sugar equivalent). By mid-year prices, especially of ethanol, experienced downward pressure caused by regulatory changes in Brazil (reduction of ICMS and zeroing of federal taxes) and by the delay in adjusting domestic gasoline prices to reflect international parity. We were able to rapidly adapt our strategy to the current context by focusing on (i) the commercialization of sugar and anhydrous ethanol, while we built inventory of hydrous ethanol; (ii) exporting 35% of our anhydrous ethanol production into Europe to capture a premium versus domestic prices – thanks to our certifications and ability to meet product specification; and (iii) using our bagasse as fuel to dehydrate ethanol stocks rather than to produce energy due to lower spot prices. Results were partially offset by higher costs of inputs, such as diesel and salaries, among others - partially mitigated by our strategy to be self-sufficient in potash fertilizer, which accounts for 48% of our total agricultural inputs' requirements. This not only reduces our exposure to spot prices but improves our sustainability profile.
• We have entered into 2023 with good sugarcane availability and solid productivity indicators. As expected, this has enabled us to resume our continuous harvest model. We are currently one of the few players in Brazil crushing and the only player producing sugar. Being able to crush cane year-round, even during the traditional inter-harvest period, is one of our main competitive advantages. While the Sugar & Ethanol industry in Brazil has to rely on inventories carried over from the past year, we are able to supply new production into the market and continuously maximize the product that offers the highest marginal contribution, which nowadays is sugar (40% hedged at 19.4 ct/lb). Weather going normal, we expect our crushing volume in 2023 to be around 15% higher than in 2022 on account of (i) better productivity outlook; and (ii) greater sugarcane availability. This, in turn, will result in a reduction in unitary cash cost, due to better dilution of fixed costs

Farming & Land Transformation businesses

• Adjusted EBITDA in the Farming and Land Transformation business amounted to $10.3 million in 4Q22, in line with 4Q21. Our Rice and Dairy businesses presented an outperformance compared to the same period of last year, which was fully offset by the $7.4 million year-over-year reduction in the Adjusted EBITDA of our Crops business.
• As we had already anticipated in our previous reports, Adjusted EBITDA for the full year was 33.0% lower than in 2021, reaching $82.9 million. Higher results of our Dairy business driven by volume and better mix of higher value added products, were fully offset by an underperformance of our Crops and Rice businesses. Results were mainly impacted by higher costs, an uneven performance of yields and lower rice prices. Margins were pressured by the global inflationary environment which led to an overall increase in costs of agricultural inputs in U.S. dollars, including diesel and agrochemicals, as well as higher logistic costs, among others. In terms of yields, rice presented a reduction of 1.0 Tn/Ha compared to the previous campaign as a consequence of La Niña weather event, while peanut and sunflower also performed below last year's average (5.3% and 3.9% lower, respectively). Moreover, yields for both of our second crops (soybean and corn) also reported a decline compared to the previous campaign (19.2% and 6.0% lower, respectively).
• La Niña weather event has extended its effects during the beginning of 2023 and continue affecting production as of today. Almost all of the productive regions of Argentina and Uruguay are experiencing losses in their summer crop productions. Although we are diversified in terms of crops and geographical regions, due to lack of soil moisture because of the drought, we had to adjust our planting calendar and reduce area. We are constantly reviewing the evolution of each crop and expect yields to be lower than the previous harvest year. On the other hand, our Rice and Dairy businesses, which were less affected by the drought, have a much better outlook for the current campaign

Remarks

2022 Shareholder Distribution Update

• 2022 was the first year of distribution as per our Distribution Policy announced in November 2021. This policy consists of a minimum distribution of 40% of the Adjusted Free Cash Flow from Operations (NCFO) generated during the previous year, via a combination of share repurchases and dividends.
• During 2022 we distributed a total of $71.8 million, or 47% of the NCFO generated in 2021, representing a distribution yield of 7.1%. This was executed via the repurchase of 4.6 million shares at an average price of $8.02 per share (average market price for the year stood at $9.13), totaling $36.8 million. In addition, we distributed cash dividends in the amount of $35.0 million, paid in two installments of $17.5 million each in May and November 2022, representing approximately $0.1571 and $0.1603 per share, respectively.

2023 Announced Shareholder Distribution

• In 2022, we generated $141.3 million of NCFO, which equals to a minimum distribution of $56.5 million during 2023. Cash dividends will amount to $35.0 million to be paid in two installments of $17.5 million each, on or about May and November 2023. Such dividend distribution is subject to the approval of the annual shareholder meeting to be held next April 19th. The balance will be distributed via buybacks and/or dividends as the case may be.
• During the first two months of the year, we repurchased 0.7 million shares at an average price of $7.95 per share, totaling $5.5 million. Going forward we expect to continue repurchasing shares, in line with our commitment to generate long term value for our shareholders

Non-Gaap Financial Measures: For a full reconciliation of non-gaap financial measures please refer to page 35 of our 4Q22 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 4Q22 earnings release, please access ir.adecoagro.com. A conference call to discuss 4Q22 results will be held on March 10, 2023 with a live webcast through the internet:

Conference Call

March 10, 2023
9 a.m. US EST
11 a.m. Buenos Aires
11 a.m. Sao Paulo
3 p.m. Luxembourg

To participate, please register at the link

Investor Relations Department
Emilio Gnecco
CFO

Victoria Cabello
IRO
Email: ir@adecoagro.com

About Adecoagro:
Adecoagro is a leading sustainable production company in South America. Adecoagro owns 219.8 thousand hectares of farmland and several industrial facilities spread across the most productive regions of Argentina, Brazil and Uruguay, where it produces over 2.7 million tons of agricultural products and over 1 million MWh of renewable electricity.

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SOURCE Adecoagro S.A.

FAQ

What was Adecoagro's adjusted EBITDA for 2022?

Adecoagro's adjusted EBITDA for 2022 was $433 million.

How much is Adecoagro distributing in dividends and share repurchases in 2023?

Adecoagro is distributing a minimum of $56.5 million in 2023 through dividends and share repurchases.

What were the main drivers of Adecoagro's net sales increase?

The increase in Adecoagro's net sales was driven by a solid commercial strategy across all business units.

When will Adecoagro's 2023 dividends be paid?

Adecoagro's dividends will be paid in two installments of $17.5 million each in May and November 2023.

What was the impact of La Niña on Adecoagro's crops?

La Niña resulted in lower yields for several crops, negatively affecting the Farming and Land Transformation business.