Adecoagro’s Adjusted EBITDA in 2018 reached $314.7 million, 13.9% higher year-over-year


LUXEMBOURG, March 14, 2018 — 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:

  • Full year 2018 Adjusted EBITDA(3) was $314.7, marking a 13.9% increase compared to the previous year. Adjusted EBITDA margin net of 3rd party commercialization, reached 47.3%, 96 basis points higher than 2017.     
  • Gross sales reached $810.6 million in 2018, 13.1% lower year-over year.     
  • Full year 2018 Adjusted Net Income was $91.3 million, marking a 30.2% increase compared to the previous year.

Financial & Operational Highlights

  • In our Sugar, Ethanol & Energy business, Adjusted EBITDA reached 238.3 million in 2018, $9.0 million or  3.6% lower year-over-year. Adjusted EBITDA was positively affected by: (i) the full maximization of  ethanol production, allowing us to profit from higher relative prices (hydrous and anhydrous ethanol traded at a 26.1% and 32.0% premium to sugar, respectively) almost 74% total TRS produced was erted to ethanol, an all-time record, (ii) higher crushing activities which contributed to fixed costs dilution, resulting in a 22.8% reduction in total cash cost of production. Higher cane availability, coupled with adequate weather during November and December, explained the 10.9% increase in milling operations. At the same time, improved efficiencies at the agricultural and industrial level contributed to higher crushing activities. These were reflected in the 2.8% increase in milling per hour, year-over-year; (iii) a $12.9 million higher gain derived from the mark-to-market of our commodity hedge position. These positive effects were offset by lower sales mainly as a result of lower average realized selling prices, measured in USD, higher ethanol carry to profit from higher prices in the off-season; coupled with a non-cash loss resulting from the fair value of the unharvested cane.

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.

  • Adjusted EBITDA in our Farming and Land Transformation businesses reached $96.4 million in 2018, $45.8 million or 90.3% higher year-over-year. This increase is primarily related to (i) the $36.2 million in EBITDA generated by the sale of Rio de Janeiro and Conquista farms during 2Q18, (ii) the better performance of our Crops and Rice businesses. Enhanced operational efficiencies and the depreciation of the Argentine Peso, which allowed us to further reduce total cost of production, were responsible for the $9.0 and $6.6 million increase in our Crops and Rice businesses’ EBITDA, respectively. These positive results were partially offset by the $5.1 million EBITDA reduction in results in our dairy business, mainly driven by lower average selling prices.

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.

  • Net Income in 2018 resulted in a loss of $23.2 million, compared to a $15.0 million gain recorded in the same period of last year. Higher EBITDA generation, as a result of better economic performance was offset by: (i) the $183.2 million non-cash loss derived from the revaluation of our U.S. dollar denominated financial debt, measured in local currency; coupled with (ii) a $15.7 million loss resulting from the application of IAS 21: “The Effects of Changes in Foreign Exchange Rates” . 
  • Adjusted Net Income, a concept we introduced in 2018 to more accurately provide a proxy cash metric, by definition, excludes: (i) any non-cash result derived from bilateral exchange variations, (ii) any revaluation result 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. In 2018, Adjusted Net Income reached $91.3 million, $21.2 million or 30.2% higher compared 2017. (Please refer to page 33 for a reconciliation of Adjusted Net Income to Profit/Loss).

Strategy Execution

5 –Year Plan Update

  • The execution of our 5-year Plan is advancing according to plan. As explained in detail at last investor day, projects are estimated to contribute to a 50% increase in EBITDA and strong cash generation. It should be noted that the projects are of a additional nature, thereby reducing execution risk. This fits perfectly in our long term growth strategy, by vertically integrating our business and making them more robust.   
  • The expansion of our cluster in Mato Grosso do Sul is proceeding according to plan. A total of 48,201 hectares have been secured for planting so far, representing 90.0% of the total hectares needed to fully supply the 3 million tons of additional crushing capacity. Planting operations are also well underway. As a matter of fact, 20,100 hectares have already been planted. We feel confident that we will be able to plant the remaining hectares throughout 2020 and 2021, dependent on normal weather conditions.

Milk Processing Facilities Investment Update

  • On February 11th, we completed the acquisition of two milk processing plants. The $45 million deal was structured as a cash-for-asset, totally free of debt and other liabilities.

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:

  • Our crops are going through their respective critical stage. Actual conditions are, so far, optimal and we expect yields to be above historical average and significantly higher compared to the previous harvest year. At the same time, higher yields will offset lower planted area due to flooding during December and January of some fields.

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:

  • During January 2019, we completed the sale of Alto Alegre farm, located in Tocantins, for $16.8 million, to be paid in 7 installments. The selling price represents a 33% premium to the latest Cushman and Wakefield’s independent appraisal, as of September 30, 2018.

Adjusted Free Cash Flow:

  • During 2018, our operations have delivered $77.8 million of Adjusted Free Cash Flow from Operations (Adjusted Free Cash Flow before expansion capex), in line with the previous year. Lower sales volume in our Crops business as a result of the drought that hit Argentina at the beginning of 2018, compromising production volumes for the 2017/18 harvest season, coupled with the ethanol carry strategy that we pursued, were offset by lower production costs as a result of enhanced efficiencies and the sale of Rio de Janeiro and Conquista farms during 2Q18. 

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 (

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 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

Juan Ignacio Galleano
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.

SOURCE Adecoagro S.A.

Related Links