Adjusted EBITDA increased to $140.0 million in 2Q24. Strong crushing pace and volume recovery in Farming. Shareholder distribution YTD above policy minimum.

Rhea-AI Summary

Adecoagro S.A. (NYSE: AGRO) reported its Q2 2024 results, showing mixed performance across its business segments. Adjusted EBITDA increased by 2.7% year-over-year to $140.0 million in Q2, driven by strong performance in the Crops segment and improved Dairy operations. However, the Sugar, Ethanol & Energy business saw an 8.5% decline in Adjusted EBITDA due to lower commodity prices.

Key highlights include:

• Gross sales down 2.3% in Q2 due to lower commodity prices
• Strong crushing pace and volume recovery in Farming
• Year-to-date shareholder distribution of $86.4 million, exceeding policy minimum
• Successful sale of La Pecuaria farm, generating $15.3 million in Adjusted EBITDA
• Continued share repurchase program, with 5.2 million shares bought back year-to-date

Positive

• Adjusted EBITDA increased by 2.7% year-over-year to $140.0 million in Q2 2024
• Farming business Adjusted EBITDA up 55.2% to $37.8 million in Q2 2024
• Sale of La Pecuaria farm generated $15.3 million in Adjusted EBITDA
• $86.4 million committed to shareholder distribution, $16.1 million above policy minimum
• 5.2 million shares repurchased at an average price of $9.98 per share
• Board approved renewal of share buyback program for additional 5% of company equity

Negative

• Gross sales down 2.3% year-over-year in Q2 2024 due to lower commodity prices
• Sugar, Ethanol & Energy business Adjusted EBITDA decreased 8.5% to $106.9 million in Q2 2024
• Year-over-year loss in biological asset due to lower expected yields
• Lower prices for soybean, corn, and wheat affecting Farming segment
• Higher costs in U.S. dollar terms impacting Farming operations

Insights

Financial Analyst

Adecoagro's Q2 2024 results show a mixed performance. The $140.0 million Adjusted EBITDA represents a 2.7% YoY increase, indicating improved operational efficiency. However, gross sales declined 2.3% YoY, primarily due to lower commodity prices. The company's strategic focus on shareholder returns is evident, with $86.4 million distributed YTD, exceeding the policy minimum by $16.1 million. This aggressive capital return strategy, including dividends and share repurchases, could boost investor confidence. The sale of La Pecuaria farm contributed $15.3 million to EBITDA, highlighting effective asset management. While the Sugar, Ethanol & Energy segment faced headwinds, the Farming business showed strong growth. Investors should monitor commodity price trends and the impact of climate conditions on yields, as these factors significantly influence Adecoagro's performance.

Agricultural Commodities Expert

Adecoagro's performance reflects the volatile nature of agricultural commodities. The company's sugar max scenario (49% production mix) demonstrates agility in responding to market conditions, as sugar prices outperformed hydrous ethanol. The 4.0% increase in crushing volume during Q2 is positive, but lower commodity prices offset this gain. The 84% ethanol carry-over strategy could pay off if prices rise as expected. However, lower-than-average rainfall impacting yields is concerning and highlights the ongoing climate risks in agriculture. The crops segment benefited from better yields and increased area, while rice operations saw improved prices. The divergence between higher rice prices and lower soybean, corn and wheat prices underscores the importance of Adecoagro's diversified portfolio in mitigating market risks. Investors should closely monitor weather patterns and global commodity demand, as these factors will be important for Adecoagro's future performance.

Corporate Finance Expert

Adecoagro's financial strategy in Q2 2024 demonstrates a strong commitment to shareholder value. The company's aggressive share repurchase program, buying back 4.9% of equity at an average price of $9.98 per share, suggests management believes the stock is undervalued. The renewal of the buyback program for an additional 5% of equity signals continued confidence. The $35 million cash dividend, split into two installments, provides a balanced approach to capital returns. With $86.4 million already committed to distributions, representing 49% of 2023's Adjusted Free Cash Flow from Operations, Adecoagro is significantly exceeding its minimum distribution policy. This could attract income-focused investors but may raise questions about the balance between shareholder returns and reinvestment for growth. The company's ability to maintain this level of distribution will depend on its operational performance and commodity price environment in the coming quarters.

LUXEMBOURG, Aug. 12, 2024 /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 second quarter ended June 30, 2024. The financial information contained in this press release is based on 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 23 for a definition and reconciliation to IFRS of the Non - IFRS measures used in this earnings release.

Main highlights for the period:

• Gross sales were down 2.3% and 0.5% year-over-year during 2Q24 and 6M24, respectively. Higher volumes sold given the year-over-year increase in production were fully offset by lower prices of our main commodities.
• Adjusted EBITDA was up 2.7% and 2.0% year-over-year during 2Q24 and 6M24. This was explained by an outperformance of our Crops segment on the sale of La Pecuaria farm, and better results of our Dairy operations.
• Year-to-date we have already committed to distribution $16.1 million more than the annual minimum figure required by our policy ($86.4 million vs $70.3 million - via dividend and share repurchase). During the rest of the year, we expect to continue returning cash to shareholders.

Sugar, Ethanol & Energy business:

• Adjusted EBITDA reached $106.9 million and $158.7 million during 2Q24 and 6M24, 8.5% and 18.0% lower YoY, respectively.

(+) Higher year-over-year crushing during 2Q24 and 6M24 (4.0 million tons and 6.1 million tons, respectively) on greater sugarcane availability and higher effective milling days.

(+) Sugar max scenario (49% production mix) as prices traded above hydrous ethanol in MS. Ethanol carry-over (84% of year-to-date production) to profit from higher expected prices.

(+) Low cost producers: unitary cost of production in line versus prior year on better cost dilution.

(-) Decline in net sales on lower prices compared to the prior year.

(-) Year-over-year loss in biological asset due to lower expected yields versus 2023, on lower-than-average rains.

Farming business:

• Adjusted EBITDA amounted to $37.8 million during 2Q24 and $81.8 million during 6M24, 55.2% and 90.8% higher YoY, respectively. 

(+) Farm sale conducted in April 2024 (La Pecuaria farm in Uruguay), which generated an Adjusted EBITDA of $15.3 million, reflected in our Crops segment.

(+) Year-over-year gains in the mark-to-market of our biological asset and agricultural produce for our Crops (better yields and area) and Rice operations (better prices and area).

(+) Higher prices for Rice and Dairy's higher value-added products.

(-) Lower prices for soybean, corn and wheat.

(-) Higher costs in U.S. dollar terms.

Remarks

2024 Shareholder Distribution

• As of the date of this report, we have already committed $86.4 million to distribution, equivalent to 49% of the Adjusted Free Cash Flow from Operations (NCFO) generated in 2023. This represents $16.1 million above the annual minimum stated in our distribution policy.
  • Cash dividends of $35 million approved. First installment of $17.5 million paid on May 29th (approximately $0.1682 per share); second installment of $17.5 million shall be payable in or about November 2024.
  • Year-to-date we invested $51.4 million in repurchasing 5.2 million shares (4.9% of the company's equity) at an average price of $9.98 per share.

• Going forward we expect to continue returning cash to our shareholders via share repurchase. To execute this, in July 2024 the Company's Board of Directors approved the renewal of our existing buyback program until December 31, 2024 to repurchase up to an additional 5% of the company's equity - in addition to the 4.9% equity that we have already repurchased year-to-date, as noted above.

Non-Gaap Financial Measures: For a full reconciliation of non-gaap financial measures please refer to page 23 of our 2Q24 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 2Q24 earnings release, please access ir.adecoagro.com. A conference call to discuss 2Q24 results will be held on August 13, 2024, with a live webcast through the internet:

Conference Call

August 13, 2024
10 a.m. US EST
11 a.m. Buenos Aires
11 a.m. Sao Paulo
4 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 210.4 thousand hectares of farmland and several industrial facilities spread across the most productive regions of Argentina, Brazil and Uruguay, where it produces over 2.8 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 (AGRO) Adjusted EBITDA for Q2 2024?

Adecoagro's Adjusted EBITDA for Q2 2024 was $140.0 million, representing a 2.7% increase year-over-year.

How much did Adecoagro (AGRO) commit to shareholder distribution in 2024?

As of the report date, Adecoagro committed $86.4 million to shareholder distribution in 2024, which is $16.1 million above the annual minimum stated in their distribution policy.

What was the impact of the La Pecuaria farm sale on Adecoagro's (AGRO) Q2 2024 results?

The sale of La Pecuaria farm in Uruguay, conducted in April 2024, generated an Adjusted EBITDA of $15.3 million for Adecoagro's Crops segment.

How many shares did Adecoagro (AGRO) repurchase in 2024 as of the Q2 report?

Adecoagro repurchased 5.2 million shares (4.9% of the company's equity) at an average price of $9.98 per share year-to-date as of the Q2 2024 report.