Adecoagro S.A. AGRO

LUXEMBOURG, Nov. 9, 2022 /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 third quarter ended September 30, 2022. 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 31 for a definition and reconciliation to IFRS of the Non - IFRS measures used in this earnings release.

Main highlights for the period:

• Net sales presented a year-over-year increase of 22.6% in 3Q22 and 25.5% in 9M22 on a solid commercial strategy from all our business units.
• Despite the 11.0% year-over-year reduction in Adjusted EBITDA during 9M22, adjusted net income presented an outperformance of 5.8% compared to the same period of last year.

Financial & Operational Highlights:

Sugar, Ethanol & Energy business

• Adjusted EBITDA in our Sugar, Ethanol & Energy business reached $111.0 million in 3Q22, 19.6% or $27.1 million lower compared to the same period of last year. This was mostly driven by a reduction in crushing volume of 0.4 million tons compared to 3Q21, coupled with higher costs of inputs, diesel and salaries, among others - partially mitigated by our strategy to produce our own biofertilizer. Despite having good sugarcane availability and achieving a monthly crushing record of 1.5 million tons in July, increased precipitation registered during August and September resulted in frequent interruptions in crushing activities. However, it is important to highlight that rain favors cane development, hence the sugarcane left on the ground will be carried into the following quarters with an improved productivity outlook. This will ensure the implementation of our continuous harvest model, enabling us to crush cane year-round and maximize production of the product with the highest marginal contribution. During the quarter, the price scenario of ethanol experienced significant changes in light of regulatory measures (reduction of ICMS and zeroing of federal taxes) and of the reduction in international oil prices. Nonetheless we were able to rapidly adapt our strategy thanks to (i) our flexibility to switch our production mix and extract the highest value per ton crushed at all times; (ii) our capacity to sell ethanol into Europe and capture a premium versus domestic prices – thanks to our certifications and ability to meet product specification; (iii) our strategy to focus on the commercialization of sugar and anhydrous ethanol, while we built inventory of hydrous ethanol – which can either be carried over or converted into more anhydrous ethanol (in light of low energy spot prices, we are using our bagasse as fuel for the dehydration process); and (iv) our hedging strategy which enabled us to secure sugar at 19.4 cts/lb.
• Year-to-date, Adjusted EBITDA reached $272.6 million, $2.8 million higher year-over-year. Crushing volume presented a 2.4 million ton reduction, as we resumed harvesting activities in our Cluster in mid- March, following a short interharvest period. Despite the lower production volume, our commercial strategy enabled us to benefit from attractive prices of ethanol and sugar, especially during the first half of the year. This was possible because we (i) carried-over production from 2021 into 2022 to be sold at higher prices; (ii) cleared out our tanks at the peak of prices achieving record sale volumes; and (iii) leveraged our competitive advantage to sell into the export and domestic market.

Farming & Land Transformation businesses

• Adjusted EBITDA in the Farming and Land Transformation business amounted to $17.1 million in 3Q22, marking a 31.1% or $7.7 million reduction compared to the same period of last year. The decline is fully explained by a lower contribution from our Crops and Rice businesses.
• Focusing on our year-to-date results, which offer better insight than a standalone quarter, Adjusted EBITDA was $72.6 million, 35.9% lower than the previous year. This was driven by our Crops and Rice businesses, which fully offset the improved performance in our Dairy business. Results were mainly impacted by higher costs, lower 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 fertilizer, agrochemicals and diesel, as well as higher logistic costs, among others. In terms of yields, rice presented a 12.5% reduction (1.0 Tn/Ha) compared to the previous campaign as a consequence of La Niña weather effect, 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). Regarding prices, while soybean, corn and wheat experienced a year-over-year increase, peanut and rice were 3.0% and 7.2% lower, respectively. In addition, rice prices at the time of harvest were 9% lower year-over-year which, together with the impact in yields, further contributed to a reduction in the mark-to-market of the biological asset.

Net Income & Adjusted Net Income

• Net Income amounted to $22.6 million during 3Q22, marking a $14.4 million reduction compared to the same period of last year. This was mostly explained by a $34.7 million year-over-year reduction in EBITDA generation compared to 3Q21. Results were partially offset by a decrease in income tax expense to $4.8 million versus expenses of $15.3 million in 3Q21. Net income in 9M22 reached $105.9 million, $33.9 million or 47.1% higher compared to the previous year. This was driven by the above mentioned impact on taxes coupled with the effect of inflation accounting (higher exposure of our negative net monetary position to an inflation rate of 66.1% in 9M22 compared to 37.0% in 9M21).
• Adjusted Net Income reached $47.2 million during 3Q22, $12.2 million lower than in 3Q21. Nevertheless, during the first nine months of the year it reached $106.0 million, presenting an outperformance of $5.8 million compared to the previous year, despite the year-over-year reduction in Adjusted EBITDA. We believe Adjusted Net Income is a more appropriate metric to reflect the Company's performance.

Remarks

Shareholder Distribution Policy Update

• During the first ten months of the year, we repurchased 3.6 million shares at an average price of $8.06 per share, totaling $28.8 million. Going forward we expect to continue repurchasing shares, in line with our commitment to generate long term value for our shareholders.
• On November 17th, we will make our second cash dividend payment of $17.5 million (approximately $0.1603 per share) to shareholders of the Company of record at close of business on November 2nd. The first installment of our cash dividend was paid on May 17th in an equal cash amount (approximately $0.1571 per share), resulting in an annual cash dividend of $35 million. A Luxembourg withholding tax of 15% has been and will be applied to each installment of the gross cash dividend amount.
• Share repurchases and dividend distribution are part of the company's distribution policy, which consists of a minimum distribution of 40% of the Adjusted Free Cash Flow from Operations (NCFO) generated during the previous year. In 2021, we generated $152.1 million of NCFO.

Independent Farmland Appraisal Report

• As of September 30, 2022, Cushman & Wakefield (C&W) updated its independent appraisal of Adecoagro's farmland which consists of 219,850 hectares valued at $727.5 million. On a comparable basis, current valuation of our land portfolio represents a year-over-year increase of 2.5%.

Non-Gaap Financial Measures: For a full reconciliation of non-gaap financial measures please refer to page 31 of our 3Q22 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 3Q22 earnings release, please access ir.adecoagro.com. A conference call to discuss 3Q22 results will be held on November 10, 2022 with a live webcast through the internet:

Conference Call

November 10, 2022
8 a.m. US EST
10 a.m. Buenos Aires
10 a.m. Sao Paulo
2 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: 5119012

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 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.