6-K 1 a6ker12312019.htm FORM 6-K Document
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549  
 
FORM 6-K  
 
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of March 2020
Commission File Number: 001-35052  
 
Adecoagro S.A.
(Translation of registrant’s name into English)
 
 
Vertigo Naos Building 6,
Rue Eugene Ruppert,
L-2453, Luxembourg
Grand Duchy of Luxembourg
(Address of principal executive offices)  
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F  x            Form 40-F  ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Yes  ¨            No   x
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Yes  ¨            No   x
Indicate by check mark whether by furnishing the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
Yes  ¨            No   x
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A 
 



 
ANNOUNCEMENT OF RESULTS OF OPERATIONS FOR THE YEAR END, DECEMBER 2019
 
On March 12, 2020, the registrant issued a press release pertaining to its results of operations for the year end December, 2019 (the “Release”). Registrant hereby furnishes the attached copy of the Release to the Securities and Exchange Commission. The financial and operational information contained in the Release is based on audited consolidated financial statements presented in U.S. dollars and prepared in accordance with International Financial Reporting Standards.
 
The attachment contains forward-looking statements. The registrant desires to qualify for the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995, and consequently is hereby including cautionary statements identifying important factors that could cause the registrant’s actual results to differ materially from those set forth in the attachment.
 
The registrant’s forward-looking statements are based on the registrant’s current expectations, assumptions, estimates and projections about the registrant and its industry. These forward-looking statements can be identified by words or phrases such as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “is/are likely to,” “may,” “plan,” “should,” “would,” or other similar expressions.
 
The forward-looking statements included in the attached relate to, among others: (i) the registrant’s business prospects and future results of operations; (ii) weather and other natural phenomena; (iii) developments in, or changes to, the laws, regulations and governmental policies governing the registrant’s business, including limitations on ownership of farmland by foreign entities in certain jurisdictions in which the registrant operate, environmental laws and regulations; (iv) the implementation of the registrant’s business strategy; (v) the registrant’s plans relating to acquisitions, joint ventures, strategic alliances or divestitures; (vi) the implementation of the registrant’s financing strategy and capital expenditure plan; (vii) the maintenance of the registrant’s relationships with customers; (viii) the competitive nature of the industries in which the registrant operates; (ix) the cost and availability of financing; (x) future demand for the commodities the registrant produces; (xi) international prices for commodities; (xii) the condition of the registrant’s land holdings; (xiii) the development of the logistics and infrastructure for transportation of the registrant’s products in the countries where it operates; (xiv) the performance of the South American and world economies; and (xv) the relative value of the Brazilian Real, the Argentine Peso, and the Uruguayan Peso compared to other currencies; as well as other risks included in the registrant’s other filings and submissions with the United States Securities and Exchange Commission.
 
These forward-looking statements involve various risks and uncertainties. Although the registrant believes that its expectations expressed in these forward-looking statements are reasonable, its expectations may turn out to be incorrect. The registrant’s actual results could be materially different from its expectations. In light of the risks and uncertainties described above, the estimates and forward-looking statements discussed in the attached might not occur, and the registrant’s future results and its 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 the attached relate only to events or information as of the date on which the statements are made in the attached. The registrant undertakes 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.
  

 
 
 



SIGNATURES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
Adecoagro S.A.
 
 
 
By /s/ Carlos A. Boero Hughes
 
 
 
Name: Carlos A. Boero Hughes
 
 
 
Title: Chief Financial Officer and Chief Accounting Officer





Date: March 12, 2020



capturaa49.jpg
 
argro23.jpg
 
 
 
 
 
 
 
 
 
 
 
Adecoagro´s Net Sales in 2019 reached $847.7 million, 10.1% higher year-over-year
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
4Q19 Earning Release Conference Call
 
 
 
 
 
 
 
 
 
English Conference Call
 
Luxembourg, March 12, 2020 - Adecoagro S.A. (NYSE: AGRO, Bloomberg: AGRO US, Reuters: AGRO.K), a leading agroindustrial company in South America, announced today its results for the fourth quarter ended December 31, 2019. The financial information contained in this press release is based on audited condensed 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 32 for a definition and reconciliation to IFRS of the Non - IFRS measures used in this report.
 
 
 
March 13, 2020
 
 
 
 
9 a.m. (US EST)
 
 
 
 
10 a.m. (Buenos Aires and Sao Paulo time)
 
 
 
 
2 p.m. (Luxembourg time)
 
 
 
 
 
 
 
 
 
 
 
Tel: +1 (412) 317-6366
 
 
Highlights
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Participants calling from other
countries outside the US
 
 
Financial & Operating Performance
 
 
 
 
 
 
 
 
 
 
 
 
$ thousands
4Q19
4Q18
Chg %
12M19
12M18
Chg %
 
 
 
Tel: +1 (844) 435-0324
 
 
Gross Sales
265,815
226,170
17.5%
891,554
810,609
10.0%
 
 
 
Participants calling from the US
 
 
Net Sales (1)
251,991
213,570
18.0%
847,745
770,196
10.1%
 
 
 
 
 
 
Adjusted EBITDA (2)
 
 
 
 
 
 
 
 
 
Investor Relations
 
 
   Farming & Land Transformation
15,960
(4,004)
 n.a.
71,739
96,418
(25.6)%
 
 
 
Charlie Boero Hughes
 
 
   Sugar, Ethanol & Energy
55,179
45,434
21.4%
253,069
238,284
6.2%
 
 
 
CFO
 
 
   Corporate Expenses
(4,789)
(5,285)
(9.4)%
(19,639)
(19,971)
(1.7)%
 
 
 
Juan Ignacio Galleano
 
 
Total Adjusted EBITDA
66,350
36,145
83.6%
305,169
314,731
(3.0)%
 
 
 
IR Manager
 
 
Adjusted EBITDA Margin (2)
26.3%
16.9%
55.6%
36.0%
40.9%
(11.9)%
 
 
 
 
 
 
 
Net Income
9,622
(4,255)
 n.a.
342
(23,233)
(101.5)%
 
 
 
Email
 
 
Adjusted Net Income (4)
(5,236)
(16,927)
(69.1)%
40,304
91,318
(55.9)%
 
 
 
ir@adecoagro.com
 
 
 
Farming Planted Area (Hectares)
225,115
230,207
(2.2)%
225,115
230,207
(2.2)%
 
 
 
 
 
 
 
Sugarcane Plantation Area (Hectares)
166,041
153,690
8.0%
166,041
153,690
8.0%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  • Full year 2019 Adjusted EBITDA(3) was $305.2 million, a 3.0% decrease compared to the previous year. Excluding results from Land Transformation, Adjusted EBITDA reached $295.8 million, 6.2% higher compared to 2018.
 
 
 
Website:
 
 
 
 
 
www.adecoagro.com
 
 
 
 
 
 
 
 
•  Gross sales reached $891.5 million in 2019, 10.0% higher year-over-year.
 
 
 
 
 
 
 
 
 
 
 
 
       •  Full year 2019 Net Income registered a gain of $0.3 million, while Adjusted Net Income totaled $40.3 million.
 
 
 
argoa11.jpg
 
 
(1) Net Sales are equal to Gross Sales minus sales taxes related to sugar, ethanol and energy.
(2) Please see “Reconciliation of Non-IFRS measures” starting on page 32 for a reconciliation of Adjusted EBITDA and Adjusted EBIT to Profit/(Loss). Adjusted EBITDA is defined as consolidated profit from operations before financing and taxation, depreciation of PP&E, and amortization of intangible assets plus the gains or losses from disposals of non-controlling interests in subsidiaries. Adjusted EBIT is defined as consolidated profit from operations before financing and taxation plus the gains or losses from disposals of non-controlling interests in subsidiaries. Adjusted EBITDA margin and Adjusted EBIT margin are calculated as a percentage of net sales.
(3) Adjusted EBITDA margin excluding third party commercialization activities is defined as the consolidated Adjusted EBITDA net of the Adjusted EBITDA generated by the commercialization of third party sugar, grains and energy, divided by consolidated gross sales net of those generated by the commercialization of third party sugar, grains and energy. We net third party commercialization results to highlight the margin generated by our own production.
(4) We define Adjusted Net Income as (i) Profit/(Loss) of the period year, plus (ii) any non cash finance costs resulting from foreign exchange losses for such period, which breakdown composed both Exchange Differences and Cash Flow Hedge Transfer from Equity, net of the related income tax effects plus (iii) gains or losses from disposals of non controlling interests in subsidiaries whose main underlying asset is farmland, which are relieved in our Shareholders Equity under the line item. "Reserve from the sale of non-controlling interests in subsidiaries plus (iv) the reversal of the aforementioned income tax effect, plus (v) the inflation accounting effects, plus (vi) the revaluation results from the hectares hold as investment property.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



4

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Financial & Operational Performance Highlights

◦
Adjusted EBITDA in our Sugar, Ethanol & Energy business reached $253.1 million in 2019, $14.8 million higher than 2018, a 6.2% increase year-over-year. This higher result was achieved despite unfavorable weather during 2019, when our Cluster in Mato Grosso do Sul was hit by both dry weather and a frost, resulting in lower yields (14.6% decrease year-over-year) and in a decrease in our crushing volume of 0.5 million tons when compared to the previous year. In light of the aforementioned weather events, we decided to reassess our crushing strategy to secure cane availability for 2020. Accordingly, we reduced crushing activities with the double purpose of leaving the cane on the field to grow further while at the same time maximize ethanol production. 85% of total TRS was diverted towards ethanol production which, coupled with enhancements in our distillery, led to an increase in ethanol selling volumes (20.2% increase year-over-year). At the same time, we implemented a cost reduction plan, which coupled with enhanced industrial and agricultural efficiencies as well as the effects from the depreciation of Brazilian Real led to a decrease in costs. Financial results were further increased by the $53.6 million higher results derived from the mark-to-market of our unharvested sugarcane, due to better weather conditions in late 2019 and higher relative prices for sugar and ethanol. These positive effects were partially offset by $48.3 million lower results derived from the mark-to-market of our sugar future contracts. Total cash cost in 2019 stood at 9.0 ct/lb while EBITDA price (considering Other Operating Income) reached 12.4 ct/lb, resulting in a 3.4 ct/lb margin.

On a quarterly basis, adjusted EBITDA in the Sugar, Ethanol & Energy business was $55.2 million, 21.4% higher than 4Q18 driven by a higher ethanol mix, which reached a record high of 94% of total TRS, lower costs and $5.8 million higher results derived from the mark-to-market of our unharvested sugarcane.

Adjusted EBITDA in the Farming and Land Transformation businesses reached $71.7 million in 2019, $24.7 million or 25.6% lower year-over-year. The decrease in financial performance is primarily explained by the $26.9 million lower results generated from farm sales ($9.4 million EBITDA generated by the sale of Alto Alegre farm in 2019, compared to $36.2 million generated in 2018 by the sale of Rio de Janeiro and Conquista farms).

Adjusted EBITDA solely from the Farming business, stood at $62.4 million in 2019, an increase of $2.2 million or 3.6% year-over-year. The Dairy business was responsible for an increase of $7.8 million generated by higher production and selling volumes coupled with a price increase. Our Rice business contributed with an increase of $1.5 million due to higher selling volumes. These positive results were partially offset by a decrease of $7.8 million in the Crops business due to lower commodity prices coupled with lower results from the mark-to-market effect of our commodity hedge position.


2
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On a quarterly basis, Adjusted EBITDA for the Farming business was $15.9 million in 4Q19, an increase of $20.0 million compared to the same period of last year. This increase is mainly explained by the performance of our Crops and Rice businesses. The $11.3 million increase in adjusted EBITDA from the Crops business was mainly driven by positive results in initial recognition and changes in fair value of biological assets and agricultural produce as well as from gains from changes in net realizable value of agricultural produce after harvest. As for Rice, the $5.1 million increase was led by more than doubling in sales volume.

Net Income in 2019 resulted in a gain of $0.3 million, compared to a loss of $23.2 million recorded in the same period of last year. This improvement is mainly due to a lower FX loss, deriving in lower financial results that fully offset the lower EBITDA generation, lower revaluation of investment property, higher depreciation and higher income tax.

◦
Adjusted Net Income 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 2019, Adjusted Net Income reached $40.3 million, $51.0 million or 55.9% lower compared to 2018. Lower Adjusted EBITDA year-over-year, coupled with the $74.7 million lower Fx losses were responsible for the reduction (Please refer to page 36 for a reconciliation of Adjusted Net Income to Profit/Loss).

Adjusted Net Income
 
 
 
 
 
 
$ thousands
4Q19
4Q18
Chg %
12M19
12M18
Chg %
Net Income
9.622
(4.255)
n.a
342
(23,233)
n.a
Foreign exchange losses, net
7.765
(5.009)
n.a
108,458
183,195
(40.8)%
Cash flow hedge - transfer from equity
4.836
18.847
(74.3)%
15,594
26,693
(41.6)%
Inflation Accounting Effects
(29,853)
(31,558)
(5.4)%
(92,437)
(81,928)
12.8%
Revaluation Result - Investment Property
2,394
5,048
(52.6)%
325
(13,409)
n.a
Revaluation surplus of farmland sold
—
—
n.a
8,022
—
n.a
Adjusted Net Income
(5,236)
(16,927)
(69.1)%
40,304
91,318
(55.9)%




3
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Strategy Execution
5-Year Plan Update
◦
We are reaching the final phase of our 5-year Plan, with only 15% of total projected capex left to be deployed. Out of the remaining $60 million, Brazil will absorb most of it in expanding the sugarcane plantation. Projects are estimated to contribute to a 50% increase in EBITDA and strong cash generation. It should be noted that the remaining projects are marginal in nature, thereby bearing low execution risk.
SE&E Update
The expansion of our cluster in Mato Grosso do Sul continues to proceed according to plan. Virtually all the necessary hectares to fully supply the 3 million tons of additional crushing capacity have already been secured, taking the execution risk of the project to its minimum. Planting operations are also well underway and we feel confident that we will be able to plant the remaining hectares throughout 2020 and 2021, dependent on normal weather conditions.
The combined effect of the frost and dry weather that hit our cluster in 2019, led us to slow down our cane crushing pace for superior agricultural results and a recovery of our sugarcane fields. The reassessment of our crushing strategy derived in a slight delay in our 5-Year-Plan in terms of cash generation. As previously explained, this has been partially mitigated by our ability to divert a record-high of TRS production to ethanol and benefit from higher relative prices. Our continuous focus on enhancing efficiencies and upgrading our industrial assets is a key aspect of our plan, since it allows us to make a more efficient use of our fixed assets and sell the product with the highest marginal contribution.
Processing Facilities Update
Since February 2019 we have been operating our two state-of-the art milk processing facilities with a focus on both quality and cost. The plants' high degree of flexibility has allowed us to sell into the export and domestic markets based on relative profitability, with a view to generate attractive returns.
Our peanut processing facility, acquired in February 2019, has all the necessary certifications and permits, enabling us to control processing activities, avoid tolling and brokerage fees and have access to the most strict markets worldwide which demand Argentine peanut for its superior quality, and are willing to pay a premium for it. In our first campaign as peanut processors, we achieved solid results both in terms of production as well as financial figures, enhancing our crops business, as originally planned.



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Adjusted Free Cash Flow
◦
During 2019, our operations have delivered $68.4 million of Adjusted Free Cash Flow from Operations (Adjusted Free Cash Flow before expansion capex), in line with the previous year. Lower crushing activities coupled with higher working capital needs explain the 14.4% reduction in Adjusted Free Cash Flow from Operations.
◦
Adjusted Free Cash Flow totaled negative $60.7 million, $42.5 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 benefit from bigger, more efficient and vertically integrated operations.
Adjusted Free Cash Flow Summary
 
 
 
$ thousands
2019
2018
Chg %
Net cash generated from operating activities
298,556
210,915
41.6%
Net cash used in investing activities
(252,562)
(179,044)
41.1%
Interest paid
(58,404)
(50,021)
16.8%
Expansion Capex reversal
129,074
98,011
31.7%
Lease Payments
(48,264)
—
n.a
Adjusted Free Cash Flow from Operations
68,400
79,861
(14.4)%
Expansion Capex
(129,074)
(98,011)
31.7%
Adjusted Free Cash Flow
(60,674)
(18,150)
234.3%
(1) Does not include the full application of IASB 21 and 29.


5
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Market Overview

◦
Ethanol prices presented a significant improvement throughout 4Q19. According to the ESALQ index, hydrous and anhydrous prices increased 10.2% and 9.2% above 3Q19, respectively. Compared to the same period last year, hydrous and anhydrous prices during 4Q19 were 10.2% and 9.5% higher, respectively.

◦
Sugar prices recovered from the lows observed during 3Q19 and were, on average, 9.3% higher than the previous quarter. Compared to the same period last year, prices were 0.3% lower. The rally was supported by negative prospects for sugar production from the E.U., Thailand and USA, and a slow and delayed production in India and Mexico. The macro scenario was also constructive for sugar prices: the rally in crude after OPEC and Russia agreed to increase their production cuts and expectations of an agreement between USA and China.

◦
Energy spot prices in the southeast region of Brazil during 4Q19 were 58% higher than during the same period of last year. During October, November and December, prices reached 273.89 BRL/MWh, 317.28 BRL/MWh and 227.30 BRL/MWh, respectively. Prices went up during January to 327 BRL/MWh due to dry weather conditions, but are expected to fall during February based on weather forecast. Reservoir levels stand at 26% and consumption has been increasing on a monthly basis.

◦
Soybean prices during 4Q19 traded 4.0% higher compared to the previous quarter and were, on average, 4.3% higher year-over-year. Corn prices traded almost flat in the quarter and were on average 3% higher compared to the same period of last year. Prices were mainly supported by the good prospects around Phase I agreement between China and USA.







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Operational Performance
2018/19 Harvest Year
Farming Production Data
 
 
 
 
 
 
 
 
Planting & Production
Planted Area (hectares)
 
2018/19 Harvested Area
 
Yields (Tons per hectare)
 
2018/19
2017/18
Chg %
 
Hectares
% Harvested
Production
 
2018/19
2017/18
Chg %
Soybean
47,690
58,119
(17.9)%
 
47,679
100.0%
150,362
 
3.2
2.2
45.5%
Soybean 2nd Crop
25,620
23,150
10.7%
 
25,620
100.0%
36,863
 
1.4
1.2
16.7%
Corn (1)
43,396
45,894
(5.4)%
 
43,164
99.5%
295,486
 
6.8
4.6
47.8%
Corn 2nd Crop
4,272
10,847
(60.6)%
 
4,272
100.0%
18,065
 
4.2
3.6
16.7%
Wheat (2)
40,210
36,533
10.1%
 
40,213
100.0%
114,809
 
2.9
2.3
26.1%
Sunflower
3,825
2,869
33.3%
 
3,824
100.0%
5,937
 
1.6
1.8
(11.1)%
Cotton
5,316
3,132
69.7%
 
1,210
22.8%
422
 
0.3
0.3
—%
Peanut
15,479
9,375
65.1%
 
15,478
100.0%
48,542
 
3.1
2.1
47.6%
Total Crops
185,807
189,918
(2.2)%
 
181,461
97.7%
652,169
 
 
 
 
Rice
39,308
40,289
(2.4)%
 
39,308
100.0%
239,779
 
6.1
6.9
(11.6)%
Total Farming
225,115
230,207
(2.2)%
 
220,769
98.1%
891,948
 
 
 
36.1%
Owned Croppable Area
107,681
122,144
(11.8)%
 
 
 
 
 
 
 
 
Leased Area
86,307
72,115
19.7%
 
 
 
 
 
 
 
 
Second Crop Area
31,127
35,948
(13.4)%
 
 
 
 
 
 
 
 
Total Farming Area
225,115
230,207
(2.2)%
 
 
 
 
 
 
 
 
 
Milking Cows (Average Heads)
 
Milk Production (MM liters)
 
Productivity (Liters per cow per day)
Dairy
4Q19
4Q18
 Chg %
 
4Q19
4Q18
 Chg %
 
4Q19
4Q18
 Chg %
Milk Production
9,544
7,545
26.5%
 
33.0
26.1
26.5%
 
37.6
37.6
—%

By the beginning of February 2020 we successfully completed the harvest of 220,769 hectares related to the 2018/19 crop season, representing 98.1% of total planted area, and produced 891,948 tons of aggregate grains.


7
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2019/2020 Planting Plan
 
 
 
 
 
 
 
 
 
Planting & Production
Planting Plan (hectares)
 
2019/20 Planting Progress
 
2019/2020
 
2018/2019
 
Chg %
 
2019/2020
 
Chg %
Soybean
47,530
 
47,411
 
0.2%
 
47,530
 
100.0%
Soybean 2nd Crop
27,169
 
25,621
 
6.0%
 
25,391
 
93.5%
Corn (1)
53,914
 
43,449
 
24.0%
 
53,458
 
99.2%
Corn 2nd Crop
7,319
 
7,913
 
(7.5)%
 
7,121
 
97.3%
Wheat (2)
32,925
 
40,271
 
(18.2)%
 
32,925
 
100.0%
Sunflower
6,818
 
3,825
 
78.2%
 
6,818
 
100.0%
Cotton
4,461
 
5,316
 
(16.1)%
 
4,461
 
100.0%
Peanut
16,814
 
15,608
 
7.7%
 
16,814
 
100.0%
Total Crops
196,950
 
189,412
 
4.0%
 
194,518
 
98.8%
Rice
41,544
 
40,435
 
2.7%
 
41,544
 
100.0%
Total Farming
238,494
 
229,847
 
3.8%
 
236,062
 
99.0%
Owned Croppable Area
106,513
 
110,974
 
(4.0)%
 
 
 
 
Leased Area
97,493
 
86,450
 
12.8%
 
 
 
 
Second Crop Area
34,488
 
32,423
 
6.4%
 
 
 
 
Total Farming Area
238,494
 
229,847
 
3.8%
 
 
 
 

(1) Includes chia.
(2) Includes barley.

During the second half of 2019, we began our planting activities for the 2019/20 harvest year. Planting activities continued throughout early 2020, and we have so far seeded a total of 236,062 hectares, representing a planting progress of 99.0%. 2019/20 planting plan of 238,494 represents a 3.8% increase in planting area compared to the previous season. Owned croppable area reached 106,513 hectares, 4.0% or 4,461 hectares lower than the 2018/19 season. Leased area, which varies in size on the basis of return on invested capital, has increased by 12.8%, reaching 97,493 hectares.















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Crops Update

Soybean: 47,530 hectares have been successfully seeded, which represent 100% of our revised planting plan.
We planted the soybean crop between mid-October and December, according to schedule. Timely and abundant rainfalls during January 2020 allowed the crop to develop optimally and we expect above-average yields.

Soybean 2nd crop: 25,391 hectares have been successfully planted, representing a 93.5% planting progress. Crops are developing well.

Corn: 53,458 hectares have been successfully planted, representing almost 100% of the planting plan. In an effort to diversify our crop risk and minimize our water requirements, approximately 35% of the area was planted with early corn seeds in August and September and the remaining 65% of the area was planted with late seed varieties during the end of November and December of 2019. Early corn grew under favorable conditions with adequate rains in December 2019 and the beginning of January 2020, which occurred during the plant flowering or critical growth stage, resulting in higher than expected yields. Late corn planted areas are expected to develop normally.

Peanut: 16,814 hectares have been successfully seeded, 7.7% higher compared to the 2018/19 harvest season. The crop is developing in excellent conditions with favorable rainfall during the December-February period. We expect yields to be good, and in line with our budget.







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Farming & Land Transformation Financial Performance
Farming & Land transformation business - Financial highlights
 
 
$ thousands
4Q19
4Q18
 Chg %
12M19
12M18
 Chg %
Gross Sales
 
 
 
 
 
 
Farming
94,709
71,541
32.4%
359,771
299,671
20.1%
Total Sales
94,709
71,541
32.4%
359,771
299,671
20.1%
Adjusted EBITDA (1)
 
 
 
 
 
 
Farming
15,960
(4,004)
(498.6)%
62,363
60,191
3.6%
Land Transformation
—
—
 n.a
9,376
36,227
(74.0)%
Total Adjusted EBITDA (1)
15,960
(4,004)
(498.6)%
71,739
96,418
(25.6)%
Adjusted EBIT (1)
   
 
 
   
 
 
Farming
8,948
(9,259)
(196.6)%
45,462
50,224
(9.5)%
Land Transformation
—
—
 n.a
1,354
36,227
(96.0)%
Total Adjusted EBIT (1)
8,948
(9,259)
 n.a
46,816
86,451
(45.8)%
(1) Please see “Reconciliation of Non-IFRS measures” starting on page 32 for a reconciliation of Adjusted EBITDA and Adjusted EBIT to Profit/Loss. Adjusted EBITDA is defined as consolidated profit from operations before financing and taxation, depreciation and amortization plus the gains or losses from disposals of non-controlling interests in subsidiaries. Adjusted EBIT is defined as consolidated profit from operations before financing and taxation plus the gains or losses from disposals of non-controlling interests in subsidiaries. Adjusted EBITDA margin and Adjusted EBIT margin are calculated as a percentage of net sales.
In 2019 Adjusted EBITDA in the Farming and Land Transformation businesses reached $71.7 million, $24.7 million, or 25.6% lower year-over-year. The decrease in financial performance is mostly explained by the $26.9 million lower results generated from farm sales. Indeed, during January 2019, the company completed the sale of Alto Alegre farm located in Tocantins, for $16.8 million, to be paid in 7 installments. This transaction generated an EBITDA of $9.4 million, a 74.0% decrease compared to the $36.2 million generated by the sale of Rio de Janeiro and Conquista farms during 2018. Adjusted EBITDA solely from the Farming business, stood at 62.4 million in 2019, an increase of $2.2 million or 3.6% year-over-year.

The Dairy business was responsible for an increase in Adjusted EBITDA of 108.2% or $7.7 million compared to last year, totaling $15.0 million in 2019. Since the integration of our farming and industrial operations in early 2019, we were able to benefit from strong domestic demand as a result of the milk shortage during the first half of the year, which led to higher production and selling volumes, in addition to a price increase which enhanced margins. Having our own facilities allowed us to process our own raw milk in addition to third-party milk, enter into profitable tolling agreements, and have the flexibility to divert sales either to the domestic or international market, based on profitability.

The Rice business accounted for an increase in Adjusted EBITDA of 8.0% or $1.5 million compared to the previous year, reaching $20.3 million in 2019. Positive results were driven by the first quarter´s dynamics in which the combination of carried stocks coupled with enhanced industrial efficiencies allowed us to increase processing activities and thus, selling volumes. However, this was partially offset by lower selling volumes

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during the second half of the year, in addition to lower selling prices as a result of the re-introduction of export taxes.

The Crops business generated an Adjusted EBITDA of $26.8 million during 2019, 22.6% or $7.8 million lower compared to 2018. This decrease is mainly explained by the combination of lower commodity prices throughout the year, coupled with lower results from the mark-to-market effect of our commodity hedge position.

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Crops Segment
Crops - Highlights









metric
4Q19
4Q18
Chg %
12M19
12M18
Chg %
Gross Sales
$ thousands
34,900
49,222
(29.1)%
168,938
164,538
2.7%


 tons
122,205
224,148
(45.5)%
762,489
690,012
10.5%


$ per ton
285.6
219.6
30.0%
221.6
238.5
(7.1)%
Adjusted EBITDA
$ thousands
8,930
(2,356)
n.a
26,804
34,635
(22.6)%
Adjusted EBIT
$ thousands
7,823
(2,951)
(365.1)%
22,142
32,938
(32.8)%
Planted Area
hectares
194,518
60,836
219.7%
194,518
60,836
219.7%

Agricultural activities during 4Q19 consisted mainly of the harvest of winter crops and the planting of summer crops. Adjusted EBITDA during the quarter amounted to $8.9 million, $11.3 million higher compared to the same period last year.
Profit during the quarter derived from (i) the harvest of winter crops - wheat & barley -, (ii) the fair value recognition of summer crops with significant growth as of December 31, 2019, (iii) the mark-to-market effect of grain inventories and (iv) the mark-to-market effect of commodity hedges.
Adjusted EBITDA in our Crops segment amounted to $26.8 million in 2019, $7.8 million or 22.6% lower compared to the same period of last year. This is mainly explained by: (i) $6.1 million decrease in Changes in Fair Value of Biological Assets and Agricultural Produce and $1.2 million decrease in Changes in Net Realizable Value, which reflect the margin recognized throughout the biological growth cycle of our crops; and (ii) $6.5 million lower result derived from the mark-to-market of our commodity hedge position. These results were partially offset by higher sales.
Crop sales in 2019 reached $168.9 million, $4.4 million or 2.7% higher year-over-year. Lower commodity prices were fully offset by higher selling volumes for most of our crops, as a result of higher yields.
On an annual basis the total cost of goods sold of our crops' segment (calculated as cost of goods sold and services rendered, plus selling expenses) remained flat, which coupled with higher selling volumes led to a 10% decrease in our cost per ton sold. This cost reduction is mostly explained by our peanut operation. Our increased focus in the segment, in hand with the acquisition of a peanut processing facility in 1Q19 allowed us to reduce costs by (i) saving in tolling and brokerage fees, (ii) consolidating and exporting our production from our on-site customs, and (iii) having access to land at competitive prices by managing crop rotation ourselves. In addition, having our own facility allowed us to cater to the most selective global markets which pay a premium for Argentine peanut.

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Crops - Gross Sales Breakdown
 
 
 
 
 
 
 
 
 
 
Amount ($ '000)
 
Volume
 
$ per unit
Crop
4Q19
4Q18
Chg %
 
4Q19
4Q18
Chg %
 
4Q19
4Q18
Chg %
Soybean
5,815
14,008
(58.5)%
   
23,965
47,371
(49.4)%
 
243
296
(17.9)%
Corn (1)
6,841
6,962
(1.7)%
 
44,751
41,085
8.9%
 
153
169
(9.8)%
Wheat (2)
6,841
25,223
(72.9)%
 
40,359
131,337
(69.3)%
 
170
192
(11.7)%
Sunflower
2,743
144
1,804.9%
 
1,628
—
 n.a
 
1,685
 n.a
 n.a
Cotton Lint
616
—
 n.a
 
832
—
 n.a
 
740
 n.a
 n.a
Peanut
11,781
1,676
602.9%
 
10,670
4,355
145.0%
 
1,104
385
  186.9%
Others
263
1,209
(90.9)%
 
—
—
 
 
 
 
 
Total
34,900
49,222
(31.4)%
 
122,205
224,148
(45.5)%
 
 
 
 
Crops - Gross Sales Breakdown
 
 
 
 
 
 
 
 
 
 
Amount ($ '000)
 
Volume
 
$ per unit
Crop
12M19
12M18
Chg %
 
12M19
12M18
Chg %
 
12M19
12M18
Chg %
Soybean
46,386
84,217
(44.9)%
 
197,752
264,109
(25.1)%
 
235
319
(26.4)%
Corn (1) (3)
61,332
38,251
60.3%
 
413,903
242,407
70.7%
 
148
158
(6.1)%
Wheat (2)
20,318
32,706
(37.9)%
 
108,814
174,541
(37.7)%
 
187
187
(0.4)%
Sunflower
8,430
1,598
428%
 
10,581
4,599
130.1%
 
797
347
  129.3%
Cotton Lint
616
—
 n.a
 
832
—
 n.a
 
740
 n.a
 n.a
Peanut
28,994
1,676
1,630.0%
 
30,608
4,355
602.8%
 
947
385
146.2%
Others
2,862
6,090
(63.1)%
 
 
 
 
 
 
 
 
Total
168,938
164,538
2.7%
 
762,489
690,012
10.5%
 
 
 
 
(1) Includes sorghum and peanut
(2) Includes barley
(3) Includes commercialization of third party: 156.5k tons ($25,1MM) in 2019

The table on the next page shows the gains or losses from crop production generated in 2019. Our crop operations related to the 2018/19 season, which were harvested between January and June 2019, generated Changes in Fair Value of $23.7 million. As of December 31, 2019, 42.3 thousand hectares pertaining to the 2019/20 harvest (mainly corn, peanut, soybean, wheat and sunflower) had attained significant biological growth, generating initial recognition and Changes in Fair Value of biological assets of $2.2 million. In addition, 26.9 thousand hectares of 2019/20 winter crops (wheat and barley) had been harvested, generating Changes in Fair Value and Agricultural Produce during 2019 of $4.4 million. As a result, total Changes in Fair Value of Biological Assets and Agricultural Produce during 2019, reached $30.3 million, compared to $36.4 million generated in 2018. The decrease is mainly explained by lower prices expected for 19/20 harvest, as a result of international dynamics.

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 Crops - Changes in Fair Value Breakdown - as of December 31, 2019
 
 
 
 
12M19
metric
Soy
Soy 2nd Crop
Corn
Corn 2nd Crop
Wheat
Sunflower
Cotton
Peanut
Total
 
 
 
 
 
 
 
 
 
 
 
2018/19 Harvest Year
 
 
 
 
 
 
 
 
 
 
Total Harvested Area
Hectares
48,573
25,620
42,812
4,458
40,611
3,930
5,158
15,608
186,770
Area harvested in previous periods
Hectares
—
—
—
—
37,459
—
—
—
37,459
Area harvested in current period
Hectares
48,573
25,620
42,812
4,458
3,152
3,930
5,158
15,608
149,311
Changes in Fair Value 12M19 from planted area 2018/19 (ii)
$ thousands
5,677
2,737
7,600
785
(376)
(34)
(356)
7,652
23,685
2019/20 Harvest Year
 
 
 
 
 
 
 
 
 
 
Total Planted Area
Hectares
47,855
21,261
47,543
1,387
3,661
7,535
4,461
16,677
150,380
Area planted in initial growth stages
Hectares
42,558
21,261
25,946
1,387
—
4,483
4,461
8,014
108,110
Area planted with significant biological growth
Hectares
5,297
—
21,597
—
3,661
3,052
—
8,663
42,270
Area harvested in current period
Hectares
—
—
—
—
26,862
—
—
—
26,862
Changes in Fair Value 12M19 from planted area 2019/20 (ii)
$ thousands
(192)
—
1,969
—
325
31
—
36
2,168
Changes in Fair Value 12M19 from harvested area 2019/20 (i)
$ thousands
—
—
—
—
4,438
—
—
—
4,438
Total Changes in Fair Value in 12M19
$ thousands
5,485
2,737
9,569
785
4,387
(3)
(356)
7,688
30,290

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Rice Segment

Rice - Highlights
 
 
 
 
 
 
 
 
metric
4Q19
4Q18
Chg %
12M19
12M18
Chg %
Gross Sales
$ thousands
27,333
12,531
118.1%
102,162
100,013
2.1%
      Sales of white rice
thousand tons
50.0
21.0
138.1%
192.0
182.1
5.4%
$ per ton
458.0
469.5
(2.4)%
432.0
447.0
(3.4)%
$ thousands
22,911
9,846
132.7%
82,716
81,442
1.6%
      Sales of By-products
$ thousands
4,422
2,685
64.7%
19,446
18,572
4.7%
Adjusted EBITDA
$ thousands
2,757
(2,384)
(215.7)%
20,328
18,827
8.0%
Adjusted EBIT
$ thousands
850
(5,540)
n.a
13,334
12,981
2.7%
Area under production
hectares
39,308
40,289
(2.4)%
39,308
40,289
(2.4)%
 
 
 
 
 
 
 
 
Rice Mills
 
 
 
 
 
 
 
Total Processed Rough Rice (1)
thousand tons
37.0
36.0
2.8%
177.0
169.0
4.7%
Ending stock - White Rice
thousand tons
24.0
31.0
(22.6)%
 
 
 
(1) Expressed in white rice equivalent.

Adjusted EBITDA corresponding to the Rice segment in 2019 is primarily explained by the harvest of the 2018/19 crop season which took place during 1Q19 and 2Q19, and the biological growth of the 2019/20 season at year-end. Rice crop is planted during the end of the third quarter, grows mainly throughout the fourth quarter, and is mostly harvested during the first quarter of the following year. Harvested rough rice is processed throughout the year and transformed into white rice, which is sold in the local and export markets year round. The majority of the segment’s margins are generated in the first quarter as the crop is harvested, while only a small portion of the margin is generated as the rice is processed and sold during the fourth quarter.
Rice sales during 2019 reached $102.2 million, 2.1% higher year-over-year. This was attributable to the 5.4% increase in selling volumes. Rough rice availability coupled with enhanced efficiencies at the industry level, enabled us to increase processing operations from 169.0 thousand tons to 177.0 thousand tons, 4.7% increase year-over-year. Total sales were partially offset by a slight reduction in average selling prices, as a consequence of the re-introduction of export taxes.
Adjusted EBITDA totaled $20.3 million in 2019, marking a 8.0% increase compared to the same period of last year. The increase was driven by: i) higher selling volumes and a lower carry of inventories (5.4% increase and 22.6% decrease, respectively); ii) $4.2 million increase in Changes in Fair Value of Biological Assets and Agricultural Produce iii) higher operational efficiencies at farm and industry level, coupled with the cost dilution effect as a result of the depreciation of the Argentine peso during 2019, partially offset by lower selling prices due to export taxes.

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On a quarterly basis, Adjusted EBITDA resulted in a gain of $2.8 million, $5.1 million higher compared to the same period of last year, explained by higher selling volumes due to a strategy of carrying lower inventories.
Dairy Segment

Dairy - Highlights
 
 
 
 
 
 
 
 
metric
4Q19
4Q18
Chg %
12M19
12M18
Chg %
Gross Sales
$ thousands (1)
30,821
9,017
241.8%
84,767
33,201
155.3%
 
million liters (2)
32.4
27.9
16.1%
120.6
89.5
34.7%
 
$ per liter (3)
0.30
0.29
3.4%
0.33
0.29
13.8%
Adjusted EBITDA
$ thousands
3,658
1,049
248.7%
14,965
7,189
108.2%
Adjusted EBIT
$ thousands
2,209
(360)
n.a
9,901
4,936
100.6%
Milking Cows
Average Heads
9,544
7,545
26.5%
9,066
7,581
19.6%
Cow Productivity
Liter/Cow/Day
37.6
37.6
—%
36.3
36.6
(0.9)%
Total Milk Produced
million liters
33.0
26.1
26.5%
120.1
101.3
18.5%
(1) includes sales of powdered milk, cream, electricity and culled cows
 
(2) Includes sales of fluid milk to third parties and powder milk sales expressed in milk equivalent
 
(3) Sales price includes the sale of fluid milk and whole milk powder and excludes cattle and whey sales
 

Milk production during 2019 reached 120.1 million liters, 18.7 million or 18.5% higher compared to the same period of last year. This increase is fully attributable to the 19.6% increase in our dairy cow herd as we continue populating our third free-stall dairy facility. Despite a larger herd, we successfully maintained cow productivity at high levels, reaching 36.3 liters per cow per day.

In February 2019, we acquired two milk processing facilities. On a year-to-date basis, we have processed 136.9 million liters of raw milk, out of which 76.4 million were sourced from our own dairy farm operations.

Adjusted EBITDA for the Dairy business reached $15.0 million, 108.2% higher year-over-year. This increase is mainly explained by higher selling volumes as a result of the vertical integration of the business. However, once interest expenses, and the foreign exchange loss related to the financial debt are factored, the result of the business falls to $2.1 million.


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All Other Segments
All Other Segments - Highlights








metric
4Q19
4Q18
Chg %
12M19
12M18
Chg %
Gross Sales
$ thousands
1,655
771
114.7%
3,904
1,919
103.4%
Adjusted EBITDA
$ thousands
615
(314)
n.a
266
(460)
n.a
Adjusted EBIT
$ thousands
(1,934)
(409)
372.4%
85
(631)
n.a
All Other Segments primarily encompasses our cattle business. Our cattle segment consists of pasture land that is not suitable for crop production due to soil quality and is leased to third parties for cattle grazing activities.
Adjusted EBITDA for All Other Segment was 0.3 million in 2019 and negative 0.5 million in 2019.
Land transformation business
Land transformation - Highlights








metric
4Q19
4Q18
Chg %
12M19
12M18
Chg %
Adjusted EBITDA
$ thousands
—
—
 n.a
9,376
36,227
(74.1)%
Adjusted EBIT
$ thousands
—
—
 n.a
1,354
36,227
(96.3)%
Land sold
Hectares
—
—
 n.a
6,080
9,300
(34.6)%
Adjusted EBITDA for our Land Transformation business during 2019 totaled $9.4 million, corresponding to the sale of Alto Alegre farm during 1Q19 for $16.8 million. The selling price marked a 33% premium to September 30, 2018´s Cushman and Wakefield´s independent appraisal.

Over the last 12 years, we have been able to generate gains of over $200 million by strategically selling at least one of our fully mature farms per year. Monetizing a portion of our land transformation gains allows us to redeploy the capital into higher yielding activities, enabling us to continue growing and enhancing shareholder value.



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SE&E - Operational Performance
Sugar, Ethanol & Energy - Selected Information





metric
4Q19
4Q18
Chg %
2019
2018
Chg %
Milling







Sugarcane Milled
tons
1,803,758
2,747,229
(34.3)%
10,845,136
11,359,204
(4.5)%
Own Cane
tons
1,785,682
2,644,642
(32.5)%
10,411,801
10,748,091
(3.1)%
Third Party Cane
tons
18,076
102,587
(82.4)%
433,335
611,112
(29.1)%
Production

 
 
 
 
 
 
TRS Equivalent Produced
tons
275,068
354,731
(22.5)%
1,508,869
1,506,048
0.2%
Sugar
tons
14,707
61,663
(76.1)%
213,256
344,137
(38.0)%
Ethanol
M3
152,309
170,884
(10.9)%
756,494
675,001
12.1%
Hydrous Ethanol
M3
91,980
118,147
(22.1)%
510,358
470,448
8.5%
Anhydrous Ethanol
M3
60,329
52,738
14.4%
246,136
204,553
20.3%
Sugar mix in production
%
6%
20%
(70.0)%
15%
26%
(42.3)%
Ethanol mix in production
%
94%
80%
17.5%
85%
74%
14.9%
Energy Exported (sold to grid)
MWh
177,479
151,329
17.3%
853,139
705,539
20.9%
Cogen efficiency (KWh sold per ton crushed)
KWh/ton
98
55
78.6%
79
62
26.7%
Agricultural Metrics

 
 
 
 
 
 
Harvested own sugarcane
tons
1,785,682
2,644,642
(32.5)%
10,411,801
10,748,091
(3.1)%
Harvested area
Hectares
26,049
30,181
(13.7)%
137,730
120,401
14.4%
Yield
tons/hectare
68
88
(22.7)%
76
89
(14.6)%
TRS content
kg/ton
145
124
16.9%
133
128
4.2%
TRS per hectare
kg/hectare
9,912
10,860
(8.7)%
10,049
11,392
(11.8)%
Mechanized harvest
%
98.2%
98.7%
(0.6)%
98.4%
98.7%
(0.3)%
Area

 
 
 
 
 
 
Sugarcane Plantation
hectares
166,041
153,690
8.0%
166,041
153,690
8.0%
Expansion & Renewal Area
hectares
6,026
6,054
(0.5)%
29,594
29,653
(0.2)%

We milled a total of 1.8 million tons of sugarcane in 4Q19 and 10.8 million during 2019, a decrease of 34.3% and 4.5% respectively compared to the same period last year. The reduction in tons crushed is explained by the combination of dry weather that affected Mato Grosso do Sul during the first three quarters of the year, impacting 2019 yields (14.6% lower), and the frost that hit the region during July. We continued with our strategy of slowing down our crushing pace, on a per hour basis, which in hand with the favorable weather conditions experienced during 4Q19 (average rains for the period were 456mm, in line with 10 year average), will allow our sugarcane plantation to reach optimal conditions in the following quarters.


18
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Despite the adverse weather conditions, we were able to extract the highest value of each ton crushed, explained by: (i) the maximization of the production mix, with ethanol mix reaching 94% in 4Q19 and 85% on a yearly basis, allowing us to profit from higher relative prices during the year (in 2019 hydrous and anhydrous ethanol traded on average at sugar equivalent prices of cts/lb 14.72 and cts/lb 15.66, 19.2% and 26.77% premium to sugar, respectively), and (ii) our focus on efficiencies and cost reduction plan, which resulted in a lower cash cost per unit, despite the decrease in sugarcane crushing (it is worth highlighting that almost 80% of our costs are fixed, therefore as more sugarcane is crushed more fixed cost will be diluted).

Ethanol production in 2019 was 12.1% higher year-over-year, reaching 756.5 thousand cubic meters - an all-time record -, whereas our sugar production was 213.3 thousand tons, 38.0% lower than in 2018. Ethanol production was driven by (i) higher alcohol content in the cane juice, and (ii) minor investments made during the year in the industrial process, including accumulation in storage tanks that enabled us to store sugar molasses (a sub-product of the sugar production process). This allowed us to produce ethanol during rainy days - when no cane is being crushed - thus maximizing total ethanol production.

Exported energy totaled 177.5 thousand MWh in 4Q19 and 853.1 thousand MWh during 2019, 17.3% and 20.9% higher compared to the same period last year, respectively. The increase is driven by our strategy of burning bagasse that was carried from 2018, coupled with the burning of wood chips. Our cogeneration efficiency ratio was 98 KWh per ton crushed in 4Q19, marking a record high, and 79 KWh/ton in 2019, an increase of 78.6% and 26.7% respectively. This fits into our sustainability model and situates us in a solid position as green power suppliers.

As of December 31, 2019, our sugarcane plantation consisted of 166.0 thousand hectares, 8.0% higher compared to 2018. Sugarcane planting continues to be a key strategy to supply our mills with quality raw material at low cost. During 2019, we planted a total of 29.6 thousand hectares of sugarcane. Of this total area, 12.3 thousand hectares corresponded to expansion areas planted to supply our growing crushing capacity, and 17.2 thousand hectares corresponded to areas planted to renew old plantations with newer and high-yielding sugarcane, thus allowing us to maintain the productivity of our plantation.

19
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Financial Performance
Sugar, Ethanol & Energy - Highlights






$ thousands
4Q19
4Q18
Chg %
12M19
12M18
Chg %
Net Sales (1)
157,282
142,029
10.7%
487,974
470,525
3.7%
Margin on Manufacturing and Agricultural Act. Before Opex
46,693
37,562
24.3%
184,327
141,469
30.3%
Adjusted EBITDA
55,179
45,434
21.4%
253,069
238,284
6.2%
Adjusted EBITDA Margin
35.1%
32.0%
9.7%
51.9%
50.6%
2.4%
(1) Net Sales are calculated as Gross Sales net of sales taxes.







Net sales in 4Q19 reached $157.3 million, 10.7% higher than in 4Q18. This increase was primarily driven by 22.1% higher ethanol selling volumes as a result of diverting 94% of total TRS produced to ethanol, coupled with a decrease of 7.1% on ethanol inventories due to lower carry during the last quarter of 2019.
On an annual basis, net sales amounted to $488.0 million, marking an increase of 3.7% compared to 2018.
Adjusted EBITDA amounted to 55.2 million in 4Q19 and $253.1 million in 2019, marking an increase compared to the same period last year of 21.4% and 6.2% respectively. Adjusted EBITDA for 2019 was positively affected by: (i) a 15.5% increase in ethanol sales - 12.1% increase in ethanol production, coupled with lower carry; (ii) higher results derived from the mark-to-market of our unharvested sugarcane, partially offset by a loss derived from the mark-to-market of our commodity hedge position; (iii) 3.8% reduction in total costs, on a per pound basis, as result of our cost reduction plan, agricultural and industrial efficiencies, and the depreciation of the Brazilian Real.

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The table below reflects the breakdown of net sales for the Sugar, Ethanol & Energy business.
Sugar, Ethanol & Energy - Net Sales Breakdown (1)









$ thousands


Units



($/unit)

 
4Q19
4Q18
Chg %
 
4Q19
4Q18
Chg %
 
4Q19
4Q18
Chg %
Sugar (tons)
30,038
32,798
(8.4)%
 
111,006
130,018
(14.6)%
 
271
252
7.5%
Ethanol (cubic meters)(1)
115,960
97,678
18.7%
 
260,438
213,367
22.1%
 
445
458
(2.8)%
Energy (Mwh)(2)
11,285
11,552
(2.3)%
 
224,293
162,853
37.7%
 
50
71
(29.6)%
TOTAL
157,282
142,029
10.7%
 
 
 
 
 
 
 
 

$ thousands


Units



($/unit)


12M19
12M18
Chg %
 
12M19
12M18
Chg %
 
12M19
12M18
Chg %
Sugar (tons)
97,200
127,875
(24.0)%
 
337,447
451,509
(25.3)%
 
288
283
1.8%
Ethanol (cubic meters)(1)
337,101
291,746
15.5%
 
766,573
637,506
20.2%
 
440
458
(3.9)%
Energy (Mwh)(2)
53,673
50,904
5.4%
 
994,367
744,639
33.5%
 
54
68
(20.6)%
TOTAL
487,974
470,525
3.7%
 
 
 
 
 
 
 
 
(1) Net Sales are calculated as Gross Sales net of ICMS, PIS COFINS, INSS and IPI taxes.
(2) Includes commercialization of energy from third parties.
 
 
 
 
 
 
 
 
During 4Q19, ethanol selling volumes increased by 22.1% while prices remained relatively flat.

On an annual basis, ethanol selling volumes increased 20.2% driven by our strategic decision to maximize ethanol production to profit from higher relative prices. Measured in US dollars, ethanol prices went down by 3.9% year-over-year. In 2019 hydrous and anhydrous ethanol traded, on average, at sugar equivalent prices of cts/lb 14.72 and cts/lb 15.66, 19.2% and 26.77% premium to sugar, respectively.

In 4Q19 net sales of sugar reached 30.0 million, 8.4% lower than 4Q18. This decrease is explained by lower selling volumes (14.6%), partially offset by 7.5% higher selling prices measured in US dollars, as result of the rally experienced by sugar during 4Q19.

The full maximization of ethanol production during 2019, led to a 25.3% reduction in sugar sales volumes compared to 2018, which is reflected on a decrease of 24.0% or 30.7 million on net sales for 2019.

In the case of energy, net sales were 11.3 million in 4Q19, in line with the same period of last year. During 2019 selling volumes reached 994 thousand MWh, 33.5% higher than in 2018. This is fully explained by: (i) our commercial strategy to carry bagasse from 2018 with the goal of capturing higher energy prices during the first part of the year, and (ii) our decision of burning wood chips from the beginning of the year. As a result, on a yearly basis, we had an increase of net sales of 5.4%.

As shown below, total production costs excluding depreciation and amortization reached 6.5 cents per pound in 2019, 0.3% higher year-over-year.The decrease on total production cost was driven by our cost reduction plan

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and enhanced operational efficiencies, resulting in 3.6% decrease in industrial costs, coupled with higher depreciation due to higher harvested area during 2019. Unit costs, measured in US dollars, were further reduced by the year-over-year depreciation of the Brazilian Real. These positive effects, were partially offset by an increase of 6.0% on agricultural costs, as a result of the increase in harvested area due to the weather conditions that impacted Mato Grosso do Sul throughout 2019.

Sugar, Ethanol & Energy - Production Costs








Total Cost (´000)

Total Cost per Pound (cts/lbs)

4Q19
4Q18
Chg %
 
4Q19
4Q18
Chg %
Industrial costs
23,208
20,733
11.9%
 
4.2
2.9
44.8%
Industrial costs
22,409
18,621
20.3%
 
4.1
2.6
57.7%
Cane from 3rd parties
800
2,112
(62.1%)
 
0.1
0.3
(66.7)%
Agricultural costs
56,541
65,287
(13.4%)
 
10.3
9.1
13.2%
Harvest costs
23,039
24,924
(7.6%)
 
4.2
3.5
20.0%
Cane depreciation
12,729
15,114
(15.8)%
 
2.3
2.1
9.5%
Agricultural Partnership costs
4,019
8,922
(55)%
 
0.7
1.2
(41.7)%
Maintenance costs
16,754
16,327
2.6%
 
3.0
2.3
30.4%
Total Production Costs
79,749
86,020
(7.3%)
 
14.5
12.0
20.7%
Depreciation & amortization PP&E
(36,993)
(36,847)
0.4%
 
(6.7)
5.1
(231.4)%
Total Production Costs (excl. D&A)
42,756
49,173
(13.0%)
 
7.8
6.8
13.2%
Total Production Costs (Excl. D&A e IFRS 16)
44,004
49,173
(10.5%)
 
8.0
6.8
17.6%
Sugar, Ethanol & Energy - Production Costs








Total Cost (´000)

Total Cost per Pound (cts/lbs)

12M19
12M18
Chg %
 
12M19
12M18
Chg %
Industrial costs
83,429
85,453
(2.4%)
 
2.7
2.8
(3.6)%
Industrial costs
72,185
72,299
(0.2%)
 
2.4
2.4
—%
Cane from 3rd parties
11,244
13,154
(14.5%)
 
0.4
0.4
—%
Agricultural costs
271,647
255,686
6.2%
 
8.9
8.4
6.0%
Harvest costs
103,116
102,275
0.8%
 
3.4
3.4
—%
Cane depreciation
68,725
60,206
14.2%
 
2.3
2.0
15%
Agricultural Partnership costs
32,372
34,639
(6.5%)
 
1.1
1.1
—%
Maintenance costs
67,434
58,567
15.1%
 
2.2
1.9
15.8%
Total Production Costs
355,075
341,139
4.1%
 
11.7
11.2
4.7%
Depreciation & amortization PP&E
(157,657)
(143,202)
10.1%
 
(5.2)
(4.7)
10.7%
Total Production Costs (excl. D&A)
197,418
197,938
(0.3%)
 
6.5
6.5
0.3%
Total Production Costs (Excl. D&A e IFRS 16)
197,494
197,938
(0.2%)
 
6.5
6.5
0.3%

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Sugar, Ethanol & Energy - Total Cost of Production







$ thousands
Total Cost (´000)

Total Cost per Pound (cts/lbs)

12M19
12M18
Chg %
 
12M19
12M18
Chg %
Total Production Costs (excl. D&A)
197,418
197,938
(0.3)%
 
6.5
6.5
—%
Maintenance Capex
119,902
117,269
2.2%
 
3.9
3.8
2.6%
SG&A
45,232
54,331
(16.7)%
 
1.5
1.8
(16.7)%
Cogeneration
(53,673)
(50,904)
5.4%
 
(1.8)
(1.7)
5.9%
Tax Recovery
(34,721)
(32,057)
8.3%
 
(1.1)
(1.0)
10.0%
Total Cost
274,158
286,576
(4.3)%
 
9.0
9.4
(3.8)%
Total cost of production reflects, on a cash basis, how much it costs us to produce one pound of sugar and ethanol (in sugar equivalent). Maintenance capex is included in the calculation since it is a recurring investment, necessary to maintain the productivity of the sugarcane plantation. As we are calculating sugar and ethanol costs, energy is deemed a by-product and thus deducted from total costs. As for the tax recovery line item, it includes the ICMS tax incentive that the state of Mato Grosso do Sul granted us until 2032. (Please visit our Investor Education section at ir.adecoagro.com for more information)
As shown in the table above, on a yearly basis, total cash cost on a per pound basis reached 9.0 cents per pound, 3.8% lower compared to 2018. This decrease is explained by: (i) 16.7% reduction in SG&A, as a result of the cost reduction plan carried out during 2019, (ii) higher cogeneration due to an increase of 20.9% in exported energy coupled with a higher tax recovery (iii) devaluation of the Brazilian Real that contributed to dilute costs in US dollars, since most of our cost structure is denominated in local currency.
All of our efforts are devoted to further enhance efficiencies to continue reducing total cash cost. As we ramp up operations in our cluster, cash cost will continue its downward trend as more fixed costs will be diluted.
Sugar, Ethanol & Energy - Changes in Fair Value







$ thousands
4Q19
4Q18
Chg %
 
12M19
12M18
Chg %
Sugarcane Valuation Model current period
55,355
47,475
16.6%
 
55,354
47,475
16.6%
Sugarcane Valuation Model previous period
56,631
54,575
3.8%
 
47,475
93,177
(49)%
Total Changes in Fair Value
(1,276)
(7,100)
(82.0%)
 
7,881
(45,702)
n.a

Total Changes in Fair Value of Unharvested Biological Assets (what is currently growing on the fields and will be harvested during the next 12 months) represented a gain of $7.9 million. This is fully attributable to an improvement in expected yields as a result of better average rainfalls during 4Q19 and the first month of 2020, coupled with an increase in Consecana price as a result of projected sugar price dynamics.

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Corporate Expenses

Corporate Expenses






$ thousands
4Q19
4Q18
Chg %
12M19
12M18
Chg %
Corporate Expenses
(4,789)
(5,285)
(9.4)%
(19,639)
(19,971)
(1.7)%
Adecoagro’s corporate expenses include items that have not been allocated to a specific business segment, such as executive officers and headquarter staff, certain professional fees, travel expenses, and office lease expenses, among others. As shown in the table above, corporate expenses for 2019 were $19.6 million, 1.7% lower compared to 2018, mainly as a result of the depreciation of the Brazilian Real and the Argentine peso.
Other Operating Income
Other Operating Income






$ thousands
4Q19
4Q18
Chg %
12M19
12M18
Chg %
(Loss)/gain from commodity derivative financial instruments
(401)
4,398
 n.a
(492)
54,694
 n.a
Gain from disposal of farmland and other assets
(118)
—
 n.a
1,354
36,350
  (96.3%)
Loss from onerous contracts - forwards
52
421
(87.6)%
(15)
(180)
  (91.7%)
Gain from disposal of other property items
(559)
(65)
760%
(313)
(95)
  229.5%
Net gain from Fair value adjustment of Investment property
(2,549)
(6,349)
  (59.9%)
(927)
13,409
 n.a
Others
1,974
(776)
n.a
(744)
178
 n.a
Total
(1,601)
(2,371)
  (32.5%)
(1,137)
104,356
 n.a
Other Operating Income on an annual basis reported a loss of $1.1 million, compared to a gain of $104 million in 2018. This decrease is mainly related to: (i) $55.2 million lower results derived from the mark-to-market of our commodity hedge position; coupled with (ii) $14.3 million lower registered gains derived from the fair value adjustment of investment property; fully explained by a lower depreciation of the Argentine peso, together with the decrease in the fair value of our land portfolio according to the latest independent valuation by Cushman & Wakefield (9.6% reduction year-over-year for our farmland in Argentina and 8.7% on a consolidated basis); coupled with (iii) the $34.9 million lower registered gain from farm sales(1) .
(1) It´s worth remembering that the Adj. EBITDA generated during 2019 by the sale of farms is $9.4 MM. The difference was already booked under the "revaluation surplus" line of the equity




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Commodity Hedging
Adecoagro’s financial performance is affected by the volatile price environment inherent to agricultural commodities. The company uses forward and derivative markets to mitigate swings in commodity prices by locking-in margins and stabilizing cash flows.
The table below shows the average selling price of our hedged production volumes, including volumes that have already been invoiced and delivered, forward contracts with fixed-price and volumes hedged through derivative instruments.
Commodity Hedge Position - as of December 31, 2019
 
 
Consolidated Hedge Position
Farming
 
Avg. FAS Price
CBOT FOB
Results Booked in FY2018
 
Volume
USD/Ton
USD/Bu
$ thousands
2018/2019 Harvest season
 
 
 
 
Soybeans
172,923
298.5
1,100.4
0.9
Corn
267,561
133.3
353.0
(3.0)
2019/2020 Harvest season
 
 
 
 
Soybeans
144,368
189.3
782.7
933
Corn
293,026
91.0
279.7
(3,042)
 
 
 
 
 
 
Consolidated Hedge Position
Sugar, Ethanol & Energy
 
Avg. FOB Price
ICE FOB
Results Booked in FY2018
 
Volume (1)
USD/Unit
Cents/Lb
$ thousands
2019/2020 Harvest season
 
 
 
 
Sugar (tons)
174,447
344.1
15.6
3.0
Ethanol (m3)
666,003
666,003.0
n.a
(0.1)
Energy (MW/h)
842,999
63.0
n.a
—
2020/2021 Harvest season
 
 
 
 
Sugar (tons)
101,498
344.1
15.6
(3.1)
Ethanol (m3)
—
—
—
—
Energy (MW/h)
481,944
59.0
n.a
—

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Financial Results
Financial Results






$ thousands
4Q19
4Q18
Chg %
12M19
12M18
Chg %
Interest Expenses, net
(13,751)
(13,119)
4.8%
(52,815)
(43,662)
21%
Cash Flow Hedge - Transfer from Equity
(4,836)
(18,847)
  (74.3%)
(15,594)
(26,693)
(41.6)%
FX (Losses), net
(7,765)
5,009
 n.a.
(108,458)
(183,195)
(40.8)%
Gain/loss from derivative financial Instruments
170
2,812
(94)%
1,189
(3,024)
 n.a.
Taxes
(1,486)
(1,055)
  40.9%
(4,364)
(3,136)
  39.2%
Finance Cost - Right-of-use Assets
(107)
—
 n.a.
(9,524)
—
 n.a
Inflation accounting effects
29,853
31,558
(5.4)%
92,437
81,928
12.8%
Other Expenses, net
(1,315)
(1,634)
  (19.5%)
(3,092)
(2,972)
4%
Total Financial Results
763
4,724
(83.9)%
(100,221)
(180,754)
(44.6)%

Net financial results in 2019 totaled a loss of $100.2 million compared to a loss of $180.8 million in 2018. These results are primarily composed of Foreign exchange gains and inflation accounting effects, as explained below:
(i)
Foreign exchange losses (composed of “Cash Flow Hedge - Transfer from Equity (1) and “Fx Gain/Loss line” items) reflect the impact of foreign exchange variations on our dollar denominated monetary assets and liabilities. The $108.5 million loss is explained by the 58.9% nominal depreciation of the Argentine Peso, compared to the 102.2% nominal depreciation registered during 2018, which resulted in a $183.2 million loss. At the same time, and further contributing to the foreign exchange loss, the Brazilian Real depreciated 4.0% during 2019 compared to 17.1% in 2018. These results are non-cash in nature and do not impact the net worth of the Company, in US dollars.

(ii)
Inflation accounting effects reflect the results derived from the exposure of our net monetary position to inflation. In this line, monetary assets generate a loss when exposed to inflation while monetary liabilities generate a gain, every time inflation reduces the owed balance, in real terms. During 2019, since we had a negative net monetary position (monetary liabilities were higher than monetary assets), we registered a $92.4 million gain, 12.8% or $10.5 million higher compared to 2018.


(1) Effective July 1, 2014, Adecoagro formally documented and designated cash flow hedging relationships to hedge the foreign exchange rate risk of a portion of its highly probable future sales in US dollars using a portion of its borrowings denominated in US dollars and foreign currency forward contracts. Cash flow hedge accounting permits that gains and losses arising from the effect of changes in foreign currency exchange rates on derivative and non-derivative hedging instruments not be immediately recognized in profit or loss, but be reclassified from equity to profit or loss in the same periods during which the future sales occur, thus allowing for a more appropriate presentation of the results for the period reflecting Adecoagro's Risk Management Policy.

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Indebtedness
Net Debt Breakdown





$ thousands
4Q19
3Q19
Chg %
4Q18
Chg %
Farming
223,465
244,453
(8.6)%
180,097
24.1%
Short term Debt
152,633
173,557
(12.1)%
97,598
56.4%
Long term Debt
70,832
70,896
(0.1)%
82,499
(14.1)%
Sugar, Ethanol & Energy
744,815
654,814
13.7%
682,021
9.2%
Short term Debt
35,445
32,007
10.7%
46,033
(23.0)%
Long term Debt
709,370
622,807
13.9%
635,988
11.5%
Total Short term Debt
188,078
205,564
(8.5)%
143,632
30.9%
Total Long term Debt
780,202
693,703
12.5%
718,484
8.6%
Gross Debt
968,280
899,267
7.7%
862,116
12.3%
Cash & Equivalents
290,276
145,833
99.0%
273,635
6.1%
Net Debt
678,004
753,434
(10.0)%
588,481
15.2%
EOP Net Debt / Adj. EBITDA LTM
2.22x
2.74x
(18.9)%
1.87x
18.8%

Adecoagro´s net debt as of December 31, 2019 stood at $678.0 million, a 15.2% or $89.5 million increase compared to 2018. This increase was mainly driven by higher investments in our farming businesses, specifically the acquisition of the industrial facilities (both dairy and peanuts).
On a consolidated basis, gross debt reached $968.3 million, 12.3% higher year-over-year.
Compared to the previous quarter, net debt in 4Q19 decreased 10% or $75.4 million, as a result of the beginning of a positive free cash flow cycle, as most of the investments related to our 5-Year-Plan have already been deployed and we are consolidating and ramping up the operations.
Our net debt ratio (Net Debt / EBITDA) reached 2.22x, 18.9% below 3Q19. Cash and equivalents in 4Q19 stood at $290.3 million, 6.1% higher compared to the same period of last year and 99% higher than the previous quarter .
We consider our balance sheet to be in a solid position, considering not only the conservative debt levels but also its long term structure.

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Capital Expenditures & Investments
Capital Expenditures & Investments
 
 
 
 
 
 
$ thousands
4Q19
4Q18
Chg %
12M19
12M18
Chg %
Farming & Land Transformation
3,837
9,433
(59.3)%
75,407
43,132
74.8%
Expansion
3,438
7,819
(56.0)%
69,457
38,675
79.6%
Maintenance
398
1,614
(75.3)%
5,950
4,457
33.5%
Sugar, Ethanol & Energy
43,062
45,120
(4.6)%
181,563
176,605
2.8%
Maintenance
26,137
18,553
40.9%
121,946
117,269
4.0%
Planting
12,137
11,693
3.8%
51,198
57,351
(10.7)%
Industrial & Agricultural Machinery
14,000
6,860
104.1%
70,748
59,918
18.1%
Expansion
16,925
26,568
(36.3)%
59,617
59,336
0.5%
Planting
16,143
16,214
(0.4)%
47,435
38,764
22.4%
Industrial & Agricultural Machinery
782
10,354
(92.4)%
12,182
20,572
(40.8)%
Total
46,899
54,553
(14.0)%
256,970
219,737
16.9%
In 2019 Adecoagro´s capital expenditures totaled $257.0 million, 16.9% higher compared to 2018.

The Sugar, Ethanol and Energy business accounted for 70.7% or $181.6 million of total capex. Investments related to the expansion of our plantation to supply the growing nominal crushing capacity explain the increase in expansion capex.

Farming & Land Transformation businesses accounted for 29.3%, or $75.4 million of total capex in 2019. The increase is mainly driven by the expansion capex in the Dairy and Crops businesses. These investments were related to the acquisition of the two milk processing facilities and two brands from SanCor; and to the peanut processing facility we acquired from Olam.

Consolidated capex spending will be lower going forward. Most of the committed expansion capex has now been deployed. We expect maintenance capex to go down in our Sugar, Ethanol and Energy business, even as we are increasing sugarcane area, as a result of efficiency enhancements.


 

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Inventories
End of Period Inventories
 
 
 
 
 
 
 
 
 
 
Volume
 
thousand $
Product
Metric
4Q19
4Q18
% Chg
 
4Q19
4Q18
% Chg
Soybean
tons
4,887
22,790
(78.6)%
 
1,092
5,085
(78.5)%
Corn (1)
tons
14,074
53,784
(73.8)%
 
1,744
6,581
(73.5)%
Wheat (2)
tons
51,509
65,605
(21.5)%
 
8,413
11,700
(28.1)%
Sunflower
tons
1,301
30
4,236.7%
 
422
7
6,202.0%
Cotton
tons
73
49
49.0%
 
167
55
203.6%
 Rice (3)
tons
24,219
30,832
(21.4)%
 
5,661
9,369
(39.6)%
Peanut
tons
7,085
6,086
16.4%
 
5,014
4,835
3.7%
Sugar
tons
9,209
10,023
(8.1)%
 
1,713
3,910
(56.2)%
Organic Sugar
tons
1,804
3,845
(53.1)%
 
993
588
69.1%
Ethanol
m3
93,442
100,571
(7.1)%
 
34,157
36,026
(5.2)%
Fluid milk (UHT)
Th Lts
6,082
—
 n.a
 
2,636
—
 n.a
Milk powder
tons
717
405
77.3%
 
1,920
1,170
64.1%
Others
tons
3,666
4,061
(9.7)%
 
1,346
1,018
32.2%
Total
 
218,067
298,082
(26.8)%
 
65,278
80,344
(18.8)%
(1) Includes sorghum.
(2) Includes barley.
(3) Expressed in white rice equivalent

Variations in inventory levels between 4Q19 and 4Q18 are attributable to changes in (i) production volumes resulting from changes in planted area, (ii) production mix between different crops and in yields obtained, (ii) different percentage of area harvested during the period, and (iii) commercial strategy or selling pace for each product.














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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.
The forward-looking statements included in this press release relate to, among others: (i) our business prospects and future results of operations; (ii) weather and other natural phenomena; (iii) developments in, or changes to, the laws, regulations and governmental policies governing our business, including limitations on ownership of farmland by foreign entities in certain jurisdictions in which we operate, environmental laws and regulations; (iv) the implementation of our business strategy, including the expansion of our sugarcane cluster in Mato Grosso do Sul and other current projects; (v) our plans relating to acquisitions, joint ventures, strategic alliances or divestitures; (vi) the implementation of our financing strategy and capital expenditure plan; (vii) the maintenance of our relationships with customers; (viii) the competitive nature of the industries in which we operate; (ix) the cost and availability of financing; (x) future demand for the commodities we produce; (xi) international prices for commodities; (xii) the condition of our land holdings; (xiii) the development of the logistics and infrastructure for transportation of our products in the countries where we operate; (xiv) the performance of the South American and world economies; and (xv) the relative value of the Brazilian Reais, the Argentine Peso, and the Uruguayan Peso compared to other currencies; as well as other risks included in the registrant’s other filings and submissions with the United States Securities and Exchange Commission.
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 related 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.

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Reconciliation of Non-IFRS measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with IFRS, we use the following non-IFRS financial measures in this press release:
•
Adjusted EBITDA
•
Adjusted EBIT
•
Adjusted EBITDA margin
•
Net Debt
•
Net Debt to Adjusted EBITDA
•
Adjusted Net Income
•
Adjusted Free Cash Flow
•
Adjusted Free Cash Flow from Operations

In this section, we provide an explanation and a reconciliation of each of our non-IFRS financial measures to their most directly comparable IFRS measures. The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with IFRS.
We believe these non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management for financial and operational decision making and as a means to evaluate period-to-period.
There are limitations associated with the use of non-IFRS financial measures as an analytical tool. In particular, many of the adjustments to our IFRS financial measures reflect the exclusion of items, such as depreciation and amortization, changes in fair value and the related income tax effects of the aforementioned exclusions and exchange differences generated by the net liability monetary position in USD in the countries where the functional currency is the local currency, that are recurring and will be reflected in our financial results for the foreseeable future. In addition, these measures may be different from non-IFRS financial measures used by other companies, limiting their usefulness for comparison purposes.

Adjusted EBITDA, Adjusted EBIT & Adjusted EBITDA margin
We define Adjusted EBITDA for each of our operating segments as the segment’s share of consolidated profit from operations before financing and taxation for the year or period, as applicable, before depreciation and amortization, excluding the revaluation result of the hectares hold as investment property, and adjusted by profit or loss from discontinued operations and by gains or losses from disposals of non-controlling interests in

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subsidiaries whose main underlying asset is farmland which are reflected in our Shareholders Equity under the line item “Reserve from the sale of minority interests in subsidiaries.” Revaluation results from the farmland held as Property, Plant & Equipment
We define “Adjusted Consolidated EBITDA” as (i) consolidated net profit (loss) for the year, as applicable, before interest expense, income taxes, depreciation of PP&E and amortization of intangible assets, 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.
We believe that Adjusted EBITDA and Adjusted EBIT are for the Company and each operating segment, respectively important measures of operating performance because they allow investors and others to evaluate and compare our consolidated operating results and to evaluate and compare the operating performance of our segments, respectively, including our return on capital and operating efficiencies, from period to period by removing the impact of our capital structure (interest expense from our outstanding debt), asset base (depreciation and amortization), tax consequences (income taxes), foreign exchange gains or losses and other financial expenses. In addition, by including the gains or losses from disposals of non-controlling interests in subsidiaries whose main underlying asset is farmland, investors can evaluate the full value and returns generated by our land transformation activities. Other companies may calculate Adjusted EBITDA and Adjusted EBIT differently, and therefore Adjusted EBITDA and Adjusted EBIT may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA and Adjusted EBIT are not measure of financial performance under IFRS, and should not be considered in isolation or as an alternative to consolidated net profit (loss), cash flows from operating activities, profit from operations before financing and taxation and other measures determined in accordance with IFRS.
We define Adjusted EBITDA margin as Adjusted EBITDA to net sales. We consider that the presentation of adjusted EBITDA margin provides useful information on how successfully we operate our Company and enhances the ability of investors to compare profitability between segments, periods and with other public companies.
Reconciliation of both Adjusted EBITDA and Adjusted EBIT starts on page 33.

Net Debt & Net Debt to Adjusted EBITDA
Net debt is defined as the sum of long- and short-term debt less cash and cash equivalents. This measure is widely used by management and investment analysts and we believe it shows the financial strength of the Company
Management is consistently tracking our leverage position and our ability to repay and service our debt obligations over time. We have therefore set a leverage ratio target that is measured by net debt divided by Adjusted EBITDA.

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We believe that this metric provides useful information to investors because management uses it to manage our debt-equity ratio in order to promote access to debt financing instruments in the capital markets and our ability to meet scheduled debt service obligations.    
Reconciliation - Net Debt
 
 
 
 
 
$ thousands
4Q19
3Q19
Chg %
4Q18
Chg %
Total Borrowings
968,280
899,267
7.7%
862,116
12.3%
Cash and Cash equivalents
290,276
145,833
99.0%
273,635
6.1%
Net Debt
678.004
753,434
(10.0)%
588,481
15.2%
Adjusted Net Income
We define Adjusted Net Income as (i) Profit/ (Loss) of the period/year before net gain from fair value adjustments of investment property land; plus (ii) any non-cash finance costs resulting from foreign exchange gain/losses for such period, which are composed by both Exchange Differences and Cash Flow Hedge Transfer from Equity, included in Financial Results, net, in our statement of income; net of the related income tax effects, plus (iii) gains or losses from disposals of non-controlling interests in subsidiaries whose main underlying asset is farmland, which are reflected in our Shareholders Equity under the line item. “Reserve from the sale of non-controlling interests in subsidiaries”, plus (iv) the reversal of the aforementioned income tax effect, plus (v) any inflation accounting effect; plus (vi) the net increase in value of sold farmland, which has been recognized in either Revaluation surplus or Retained earnings, net of the related income tax effect.
We believe that Adjusted Net Income is an important measure of performance for our company allowing investors to properly assess the impact of the results of our operations in our Equity. In effect, results arising from the revaluation effect of our net monetary position held in foreign currency in the countries where our functional currency is the local currency do not affect the Equity of the Company, when measured in foreign / reporting currency. Conversely, the tax effect resulting from the aforementioned revaluation effect does impact the Equity of the Company, since it reduces/increases the income tax to be paid in each country; which is why we decided to add back the income tax effect to the Adjusted Net Income considering this tax effect.
In addition, by including the gains or losses from disposals of non-controlling interests in subsidiaries whose main underlying asset is farmland, investors can also include the full value and returns generated by our land transformation activities.
Other companies may calculate Adjusted Net Income differently, and therefore our Adjusted Net Income may not be comparable to similarly titled measures used by other companies. Adjusted Net Income is not a measures of financial performance under IFRS, and should not be considered in isolation or as an alternative to consolidated net profit (loss). This non-IFRS measure should be considered in addition to, but not as a substitute for or superior to, the information contained in our financial statements.


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Adjusted Net Income
 
 
 
 
 
 
$ thousands
4Q19
4Q18
Chg %
12M19
12M18
Chg %
Net Income
9,622
(4,255)
n.a
342
(23,233)
n.a
Foreign exchange losses, net
7,765
(5,009)
n.a
108,458
183,195
(40.8)%
Cash flow hedge - transfer from equity
4,836
18,847
(74.0)%
15,594
26,693
(41.6)%
Inflation Accounting Effects
(29,853)
(31,558)
(5.0)%
(92,437)
(81,928)
12.8%
Revaluation Result - Investment Property
2,394
5,048
(53.0)%
325
(13,409)
n.a
Revaluation surplus of farmland sold
—
—
n.a
8,022
—
n.a
Adjusted Net Income
(5,236)
(16,927)
791.6%
40,304
91,318
(59.9)%

Adjusted Free Cash Flow and Adjusted Free Cash Flow from Operations
We believe that the measures of Adjusted Free Cash Flow and Adjusted Free Cash Flow from Operations are important measures of liquidity that enable investors to draw important comparisons year to year of the amount of cash generated by the Company’s principal business and financing activities, which includes the cash generated from our land transformation activities, after paying for recurrent items, including interest, taxes and maintenance capital expenditures.

We define Adjusted Free Cash Flow as (i) net cash generated from operating activities, net of the combine effect of the application of     from the Argentine operations , less (ii) net cash used in investing activities, net of he combine effect of the application of IAS 29 and IAS 21 from the Argentine operations, less (iii) interest paid, plus (iv) proceeds from the sale of non-controlling interest in farming subsidiaries. We define Adjusted Free Cash Flow from Operations as (i) net cash generated from operating activities, net of the combine effect of the application of IAS 29 and IAS 21 from the Argentine operations , less (ii) net cash used in investing activities, net of he combine effect of the application of IAS 29 and IAS 21 from the Argentine operations, less (iii) interest paid, plus (iv) proceeds from the sale of non-controlling interest in subsidiaries; plus (v) expansion capital expenditures ("expansion capex").

Expansion capex is defined as the required investment to expand current production capacity including organic growth, joint ventures and acquisitions. We define maintenance capital expenditures ("maintenance capex") as the necessary investments in order to maintain the current level of productivity both at an agricultural and at an industrial level. Proceeds from the sale of non-controlling interest in farming subsidiaries is a measure of the cash generated from our land transformation business that is included under cash from financing activities pursuant to IFRS.


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We believe Adjusted Free Cash Flow is an important liquidity measure for the Company because it allows investors and others to evaluate and compare the amount of cash generated by the Company business and financing activities to undertake growth investments, to fund acquisitions, to reduce outstanding financial debt. and to provie a return to shareholders in the form of dividends and/or share repurchases, among other things.

We believe Adjusted Free Cash Flow from Operations is an additional important liquidity metric for the Company because it allows investors and others to evaluate and compare the total amount of cash generated by the Company´s business and financing activities after paying for recurrent items including interest, taxes and maintenance capex. We believed this metric is relevant in evaluating the overall performance of our business.

Other companies may calculate Adjusted Free Cash Flow and Adjusted Free Cash Flow from Operations differently, and therefore our formulation may not be comparable to similarly titled measures used by other companies. Adjusted Free Cash Flow and Adjusted Free Cash Flow from Operations are not measures of liquidity under IFRS, and should not be considered in isolation or as an alternative to consolidated cash flows from operating activities, net increase (decrease) in cash and cash equivalents and other measures determined in accordance with IFRS.

Reconcilliation - Adjusted Free Cash Flow
 
 
$ thousands
2019
2018
Net Increase / (decrease) in cash and cash equivalents
35,537
22,737
Interest Paid
(57,662)
(50,021)
Lease payments
(49,081)
 
Cash Flow from Financing Activities
37,863
20,854
IAS 29 & IAS 21 Effect for Investing Activities
(3,851)
(7,598)
IAS 29 & IAS 21 Effect for Operating Activities
(23,550)
(4.122)
Adjusted Free Cash Flow
(60,744)
(18,150)



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Reconcilliation - Adjusted Free Cash Flow from Operations
 
$ thousands
2019
2018
Net Increase in cash and cash equivalents
35,537
22,737
Expansion Capex
129,074
98,011
Interest Paid
(57,662)
(50,021)
Lease payments
(49,081)
—
Cash Flow from Financing Activities
37,863
20,854
IAS 29 & IAS 21 Effect for Investing Activities
(3,851)
(7,598)
IAS 29 & IAS 21 Effect for Operating Activities
(23,550)
(4,122)
Adjusted Free Cash Flow from Operations
68,330
79,861



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Adjusted EBITDA & Adjusted EBITDA Reconciliation to Profit/Loss - 4Q19
 
 
 
 
 
 
 
 
 
$ thousands
 
Crops
Rice
Dairy
Others
Farming
 
Sugar, Ethanol & Energy
 
Land Transformation
 
Corporate
 
Total
Sales of goods and services rendered
 
34,900
27,333
30,821
1,655
94,709
 
171,106
 
—
 
—
 
265,815
Cost of goods sold and services rendered
 
(29,392)
(17,033)
(28,415)
(1,535)
(76,375)
 
(122,638)
 
—
 
—
 
(199,013)
Initial recog. and changes in FV of BA and agricultural produce
 
5,745
(2,246)
3,604
538
7,641
 
(1,775)
 
—
 
—
 
5,866
Gain from changes in NRV of agricultural produce after harvest
 
368
—
(27)
—
341
 
—
 
—
 
—
 
341
Margin on Manufacturing and Agricultural Act. Before Opex
 
11,621
8,054
5,983
658
26,316
 
46,693
 
—
 
—
 
73,009
General and administrative expenses
 
(1,823)
(1,931)
(1,107)
(41)
(4,902)
 
(5,080)
 
—
 
(4,864)
 
(14,846)
Selling expenses
 
(4,048)
(5,299)
(2,698)
(22)
(12,067)
 
(22,153)
 
—
 
(59)
 
(34,279)
Other operating income, net
 
2,073
26
31
(2,571)
(441)
 
(1,274)
 
—
 
114
 
(1,601)
Profit from Operations Before Financing and Taxation
 
7,823
850
2,209
(1,976)
8,906
 
18,186
 
—
 
(4,809)
 
22,283
Net gain from Fair value adjustment of Investment property
 



42
42
 

 
 
 

 
42
Adjusted EBIT
 
7,823
850
2,209
(1,934)
8,948
 
18,186
 
—
 
(4,809)
 
22,325
(-) Depreciation and Amortization
 
1.107
1.907
1.449
—
4.463
 
36.993
 
—
 
20,000
 
41.476
Reverse of revaluation surplus derived from the disposals of assets
 



2.549
2.549
 

 
—
 

 
2.549
Adjusted EBITDA
 
8,930
2,757
3,658
615
15,960
 
55,179
 
—
 
(4,789)
 
66,350
Reconciliation to Profit/(Loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
 
 
 
66,350
(+) Depreciation
 
 
 
 
 
 
 
 
 
 
 
 
 
(41,476)
(+) Financial result, net
 
 
 
 
 
 
 
 
 
 
 
 
 
763
(+) Revaluation Result - Investment Property
 
 
 
 
 
 
 
 
 
 
 
 
 
(42)
(+) Income Tax (Charge)/Benefit
 
 
 
 
 
 
 
 
 
 
 
 
 
(15,605)
Reverse of revaluation surplus derived from the disposals of assets
 
 
 
 
 
 
 
 
 
 
 
 
 
(2,549)
(+) Translation Effect (IAS 21)
 
 
 
 
 
 
 
 
 
 
 
 
 
2,181
Profit/(Loss) for the Period
 
 
 
 
 
 
 
 
 
 
 
 
 
9,622



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Adjusted EBITDA & Adjusted EBITDA Reconciliation to Profit/Loss - 4Q18









$ thousands

Crops
Rice
Dairy
Others
Farming

Sugar, Ethanol & Energy

Land Transformation

Corporate

Total
Sales of goods and services rendered
 
49,222
12,531
9,017
771
71,541
 
154,629
 
—
 
—
 
226,170
Cost of goods sold and services rendered
 
(50,539)
(9,702)
(8,511)
(651)
(69,402)
 
(111,065)
 
—
 
—
 
(180,467)
Initial recog. and changes in FV of BA and agricultural produce
 
8,892
(4,225)
1,032
(350)
5,349
 
(6,002)
 
—
 
—
 
(653)
Gain from changes in NRV of agricultural produce after harvest
 
(11,880)
—
—
—
(11,880)
 
—
 
—
 
—
 
(11,880)
Margin on Manufacturing and Agricultural Act. Before Opex
 
(4,305)
(1,396)
1,537
(229)
(4,392)
 
37,562
 
—
 
—
 
33,170
General and administrative expenses
 
(1,128)
(1,627)
(1,423)
(96)
(4,274)
 
(5,121)
 
—
 
(5,166)
 
(14,561)
Selling expenses
 
(1,422)
(2,545)
(566)
(74)
(4,607)
 
(21,986)
 
—
 
(51)
 
(26,644)
Other operating income, net
 
3,904
28
92
(9,088)
(5,064)
 
(1,868)
 
—
 
(68)
 
(7,000)
Profit from Operations Before Financing and Taxation
 
(2,951)
(5,540)
(360)
(9,487)
(18,337)
 
8,587
 
—
 
(5,285)
 
(15,035)
Net gain from Fair value adjustment of Investment property
 
—
—
—
9,078
9,078
 
—
 
 
 
 
 
9,078
Adjusted EBIT
 
(2,951)
(5,540)
(360)
(409)
(9,259)
 
8,587
 
—
 
(5,285)
 
(5,957)
(-) Depreciation and Amortization
 
595
3,156
1,409
95
5,255
 
36,847
 
—
 
—
 
42,102
Reverse of revaluation surplus derived from the disposals of assets
 
—
—
—
 
—
 
—
 
—
 
—
 
—
Adjusted EBITDA
 
(2,356)
(2,384)
1,049
(314)
(4,004)
 
45,434
 
—
 
(5,285)
 
36,145
Reconciliation to Profit/(Loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
 
 
 
36,145
(+) Depreciation
 
 
 
 
 
 
 
 
 
 
 
 
 
(42,102)
(+) Financial result, net
 
 
 
 
 
 
 
 
 
 
 
 
 
4,724
(+) Revaluation Result - Investment Property
 
 
 
 
 
 
 
 
 
 
 
 
 
9,078
(+) Income Tax (Charge)/Benefit
 
 
 
 
 
 
 
 
 
 
 
 
 
(2,127)
Reverse of revaluation surplus derived from the disposals of assets
 
 
 
 
 
 
 
 
 
 
 
 
 
—
(+) Translation Effect (IAS 21)
 
 
 
 
 
 
 
 
 
 
 
 
 
(9,973)
Profit/(Loss) for the Period
 
 
 
 
 
 
 
 
 
 
 
 
 
(4,255)


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Adjusted EBITDA & Adjusted EBITDA Reconciliation to Profit/Loss - 12M19
 
 
 
 
 
 
 
 
 
$ thousands
 
Crops
Rice
Dairy
Others
Farming
 
Sugar, Ethanol & Energy
 
Land Transformation
 
Corporate
 
Total
Sales of goods and services rendered
 
168,938
102,162
84,767
3,904
359,771
 
531,783
 
—
 
—
 
891,554
Cost of goods sold and services rendered
 
(159,197)
(74,480)
(77,532)
(3,412)
(314,621)
 
(360,566)
 
—
 
—
 
(675,187)
Initial recog. and changes in FV of BA and agricultural produce
 
30,290
13,194
13,741
(40)
57,185
 
13,110
 
—
 
—
 
70,295
Gain from changes in NRV of agricultural produce after harvest
 
1,542
—
—
—
1,542
 
—
 
—
 
—
 
1,542
Margin on Manufacturing and Agricultural Act. Before Opex
 
41,573
40,876
20,976
452
103,877
 
184,327
 
—
 
—
 
288,204
General and administrative expenses
 
(5,446)
(6,752)
(4,188)
(167)
(16,553)
 
(21,925)
 
—
 
(19,319)
 
(57,797)
Selling expenses
 
(12,852)
(21,072)
(6,252)
(171)
(40,347)
 
(67,116)
 
—
 
(165)
 
(107,628)
Other operating income, net
 
(1,133)
282
(635)
(956)
(2,442)
 
126
 
1,354
 
(175)
 
(1,137)
Profit from Operations Before Financing and Taxation
 
22,142
13,334
9,901
(842)
44,535
 
95,412
 
1,354
 
(19,659)
 
121,642
Net gain from Fair value adjustment of Investment property
 
—
—
—
927
927
 
—
 
—
 
—
 
927
Adjusted EBIT
 
22,142
13,334
9,901
85
45,462
—
95,412
—
1,354
—
(19,659)
—
122,569
(-) Depreciation and Amortization
 
4,662
6,994
5,064
181
16,901
 
157,657
 
—
 
20
 
174,578
Reverse of revaluation surplus derived from the disposals of assets
 
—
—
—
—

 
—
 
8,022
 
—
 
8,022
Adjusted EBITDA
 
26,804
20,328
14,965
266
62,363
 
253,069
 
9,376
 
(19,639)
 
305,169
Reconciliation to Profit/(Loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
 
 
 
305,169
(+) Depreciation
 
 
 
 
 
 
 
 
 
 
 
 
 
(174,578)
(+) Financial result, net
 
 
 
 
 
 
 
 
 
 
 
 
 
(100,221)
(+) Revaluation Result - Investment Property
 
 
 
 
 
 
 
 
 
 
 
 
 
(927)
(+) Income Tax (Charge)/Benefit
 
 
 
 
 
 
 
 
 
 
 
 
 
(20,820)
Reverse of revaluation surplus derived from the disposals of assets
 
 
 
 
 
 
 
 
 
 
 
 
 
(8,022)
(+) Translation Effect (IAS 21)
 
 
 
 
 
 
 
 
 
 
 
 
 
(259)
Profit/(Loss) for the Period
 
 
 
 
 
 
 
 
 
 
 
 
 
342


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Adjusted EBITDA & Adjusted EBITDA Reconciliation to Profit/Loss - 12M18









$ thousands

Crops
Rice
Dairy
Others
Farming

Sugar, Ethanol & Energy

Land Transformation

Corporate

Total
Sales of goods and services rendered
 
164,538
100,013
33,201
1,919
299,671
 
510,938
 
—
 
—
 
810,609
Cost of goods sold and services rendered
 
(165,988)
(75,739)
(31,488)
(1,412)
(274,627)
 
(348,616)
 
—
 
—
 
(623,243)
Initial recog. and changes in FV of BA and agricultural produce
 
36,422
8,967
7,295
(806)
51,878
 
(20,853)
 
—
 
—
 
31,025
Gain from changes in NRV of agricultural produce after harvest
 
2,704
—
—
—
2,704
 
—
 
—
 
—
 
2,704
Margin on Manufacturing and Agricultural Act. Before Opex
 
37,676
33,241
9,008
(299)
79,626
 
141,469
 
—
 
—
 
221,095
General and administrative expenses
 
(4,239)
(5,070)
(2,034)
(155)
(11,498)
 
(25,302)
 
—
 
(19,626)
 
(56,426)
Selling expenses
 
(5,921)
(15,465)
(983)
(165)
(22,534)
 
(69,442)
 
—
 
(178)
 
(92,154)
Other operating income, net
 
5,422
275
(1,055)
10,668
15,310
 
48,357
 
36,227
 
(167)
 
99,727
Profit from Operations Before Financing and Taxation
 
32,938
12,981
4,936
10,049
60,904
 
95,082
 
36,227
 
(19,971)
 
172,242
Net gain from Fair value adjustment of Investment property
 
—
—
—
(10,680)
(10,680)
 
—
 
 
 
 
 
(10,680)
Adjusted EBIT
 
32,938
12,981
4,936
(631)
50,224
 
95,082
 
36,227
 
(19,971)
 
161,562
(-) Depreciation and Amortization
 
1,697
5,846
2,253
171
9,967
 
143,202
 
—
 
—
 
153,169
Reverse of revaluation surplus derived from the disposals of assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA
 
34,635
18,827
7,189
(460)
60,191
 
238,284
 
36,227
 
(19,971)
 
314,731
Reconciliation to Profit/(Loss)
 
 
 
 
 
 
 
 
 
 
 
 
 
—
Adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
 
 
 
314,731
(+) Depreciation
 
 
 
 
 
 
 
 
 
 
 
 
 
(153,169)
(+) Financial result, net
 
 
 
 
 
 
 
 
 
 
 
 
 
(180,754)
(+) Revaluation Result - Investment Property
 
 
 
 
 
 
 
 
 
 
 
 
 
10,680
(+) Income Tax (Charge)/Benefit
 
 
 
 
 
 
 
 
 
 
 
 
 
1,024
Reverse of revaluation surplus derived from the disposals of assets
 
 
 
 
 
 
 
 
 
 
 
 
 
—
(+) Translation Effect (IAS 21)
 
 
 
 
 
 
 
 
 
 
 
 
 
(15,745)
Profit/(Loss) for the Period
 
 
 
 
 
 
 
 
 
 
 
 
 
(23,233)







40
heder.jpg

Consolidated Statement of Income
Statement of Income
 
 
 
 
 
 
 
 
 
 
 
$ thousands
4Q19
 
4Q18
 
Chg %
 
12M19
 
12M18
 
Chg %
 
 
 
 
 
 
 
 
 
 
 
 
Sales of goods and services rendered
279,225

 
243,009

 
14.9
 %
 
887,138

 
793,239

 
11.8
 %
Cost of goods sold and services rendered
(210,220
)
 
(194,516
)
 
8.1
 %
 
(671,173
)
 
(609,965
)
 
10.0
 %
Initial recognition and changes in fair value of biological assets and agricultural produce
9,271

 
4,056

 
128.6
 %
 
68,589

 
16,195

 
323.5
 %
Changes in net realizable value of agricultural produce after harvest
580

 
(10,461
)
 
(105.5
)%
 
1,825

 
(909
)
 
(300.8
)%
Margin on manufacturing and agricultural activities before operating expenses
78,856

 
42,088

 
87.4
 %
 
286,379

 
198,560

 
44.2
 %
General and administrative expenses
(16,715
)
 
(16,768
)
 
(0.3
)%
 
(57,202
)
 
(56,080
)
 
2.0
 %
Selling expenses
(36,240
)
 
(28,883
)
 
25.5
 %
 
(106,972
)
 
(90,215
)
 
18.6
 %
Other operating income, net
(1,437
)
 
(3,289
)
 
(56.3
)%
 
(822
)
 
104,232

 
(100.8
)%
Profit from operations before financing and taxation
24,464

 
(6,852
)
 
(457.0
)%
 
121,383

 
156,497

 
(22.4
)%
Finance income
2,618

 
2,087

 
25.4
 %
 
9,908

 
8,581

 
15.5
 %
Finance costs
(31,708
)
 
(28,921
)
 
9.6
 %
 
(202,566
)
 
(271,263
)
 
(25.3
)%
Other financial results - Net gain of inflation effects on the monetary items

29,853

 
31,558

 
(5.4
)%
 
92,437

 
81,928

 
12.8
 %
Financial results, net
763

 
4,724

 
(83.8
)%
 
(100,221
)
 
(180,754
)
 
(44.6
)%
(Loss)/Profit before income tax
25,227

 
(2,128
)
 
(1,285.5
)%
 
21,162

 
(24,257
)
 
(187.2
)%
Income tax benefit/(expense)
(15,605
)
 
(2,127
)
 
633.7
 %
 
(20,820
)
 
1,024

 
(2,133.2
)%
(Loss)/Profit for the period
9,622

 
(4,255
)
 
(326.1
)%
 
342

 
(23,233
)
 
(101.5
)%


41
heder.jpg

Condensed Consolidated Statement of Cash Flow
Statement of Cashflows
 
 
 
 
 
 
 
 
 
 
 
$ thousands
4Q19
 
4Q18
 
Chg %
 
12M19
 
12M18
 
Chg %
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from operating activities:
 
 
 
 
 
 
 
 
 
 
 
Profit / (Loss) for the year
9,622
 
(4,255)
 
(326.1)%
 
342
 
(23,233)
 
(101.5)%
Adjustments for:
 
 
 
 
 
 

 
 
 
 
Income tax expense / (benefit)
15,605
 
2,127
 
633.7%
 
20,820
 
(1,024)
 
(2,133.2)%
Depreciation
41,982
 
40,978
 
2.5%
 
173,208
 
153,034
 
13.2%
Amortization
254
 
419
 
(39.4)%
 
1,231
 
1,220
 
0.9%
Depreciation of right of use assets
12,241
 
—
 
n . a
 
45,168
 
—
 
n . a
Loss from the disposal of other property items
523
 
(122)
 
(528.7)%
 
329
 
95
 
246.3%
Gain from the sale of farmland and other assets
—
 
—
 
n . a
 
(1,354)
 
(36,227)
 
(96.3)%
Acquisition of subsidiaries
—
 
—
 
n . a
 
(149)
 
—
 
n . a
Net (loss) / gain from the Fair value adjustment of Investment properties
2,394
 
5,048
 
(52.6)%
 
325
 
(13,409)
 
(102.4)%
Equity settled share-based compensation granted
1,318
 
976
 
35.0%
 
4,734
 
4,728
 
0.1%
Gain from derivative financial instruments and forwards
132
 
(5,358)
 
(102.5)%
 
(469)
 
(51,504)
 
(99.1)%
Interest, finance cost related to lease liabilities and other financial expense, net
13,865
 
13,411
 
3.4%
 
62,653
 
44,347
 
41.3%
Initial recognition and changes in fair value of non harvested biological assets (unrealized)
21,909
 
22,695
 
(3.5)%
 
(1,720)
 
30,299
 
(105.7)%
Changes in net realizable value of agricultural produce after harvest (unrealized)
1,910
 
12,002
 
(84.1)%
 
481
 
647
 
(25.7)%
Provision and allowances
3,218
 
1,181
 
172.5%
 
2,778
 
2,126
 
30.7%
Net gain of inflation effects on the monetary items
(29,853)
 
(31,558)
 
(5.4)%
 
(92,437)
 
(81,928)
 
12.8%
Foreign exchange losses, net
7,765
 
(5,009)
 
(255.0)%
 
108,458
 
183,195
 
(40.8)%
Cash flow hedge – transfer from equity
4,836
 
18,847
 
(74.3)%
 
15,594
 
26,693
 
(41.6)%
Subtotal
107,721
 
71,382
 
50.9%
 
339,992
 
239,059
 
42.2%
 
 
 
 
 
 
 
 
 
 
 
 
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
 
 
 
 
Increase in trade and other receivables
2,417
 
46,796
 
(94.8)%
 
(17,664)
 
(65,942)
 
(73.2)%
(Increase) / Decrease in inventories
84,509
 
28,185
 
199.8%
 
9,998
 
(41,531)
 
(124.1)%
(Increase) / Decrease in biological assets
(57,796)
 
(34,936)
 
65.4%
 
(27,037)
 
2,958
 
(1,014.0)%
(Increase) / Decrease in other assets
(3)
 
(503)
 
(99.4)%
 
(210)
 
(777)
 
(73.0)%
Decrease in derivative financial instruments
(49)
 
(1,002)
 
(95.1)%
 
3,997
 
50,021
 
(92.0)%
Increase in trade and other payables
18,619
 
7,940
 
134.5%
 
13,102
 
31,148
 
(57.9)%
Increase in payroll and social security liabilities
(1,534)
 
(280)
 
448%
 
2,565
 
5,876
 
(56.3)%
(Decrease) / Increase in provisions for other liabilities
10
 
(97)
 
(110.3)%
 
(351)
 
(430)
 
(18.4)%
Net cash generated from operating activities before taxes paid
153,894
 
117,485
 
31.0%
 
324,392
 
220,382
 
47.2%
Income tax paid
(478)
 
(396)
 
20.7%
 
(2,282)
 
(1,869)
 
22.1%
Net cash generated from operating activities
153,416
 
(117,089)
 
(231.0)%
 
322,110
 
218,513
 
47.4%
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from investing activities:
 
 
 
 
 
 
 
 
 
 
 
Acquisition of subsidiary, net of cash acquired
47
 
—
 
n . a
 
683
 
—
 
n . a
Purchases of property, plant and equipment
(53,010)
 
(54,573)
 
(2.9)%
 
(252,450)
 
(207,069)
 
21.9%
Purchase of cattle and non current biological assets
—
 
(2,159)
 
(100.0)%
 
(4,950)
 
(5,706)
 
(13.2)%
Purchases of intangible assets
(1,627)
 
(962)
 
69.1%
 
(8,617)
 
(3,321)
 
159.5%
Interest received and others
3,029
 
2,135
 
41.9%
 
8,139
 
7,915
 
2.8%
Proceeds from disposal of other property items
848
 
515
 
64.7%
 
2,652
 
1,748
 
51.7%
Proceeds from sale of farmland and other assets
—
 
—
 
 n . a
 
5,833
 
31,511
 
(81.5)%
Proceeds from the sale of farmland and other assets
(50,713)
 
(55,044)
 
(7.9)%
 
(248,710)
 
(174,922)
 
42.2%
 
 
 
 
 
 
 
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
 
 
 
 
 
 
 
Proceeds from long-term borrowings
95,677
 
8,319
 
1,050.1%
 
108,271
 
45,536
 
137.8%
Payments of long-term borrowings
(22,058)
 
(74,515)
 
(70.4)%
 
(101,826)
 
(124,349)
 
(18.1)%
Proceeds from short-term borrowings
21,566
 
138,981
 
(84.5)%
 
193,977
 
318,108
 
(39.0)%
Payments of short-term borrowings
(38,189)
 
(38,963)
 
(2.0)%
 
(127,855)
 
(190,630)
 
(32.9)%
Interest paid
(6,124)
 
(6,538)
 
(6.3)%
 
(57,662)
 
(50,021)
 
15.3%
Payment of derivatives financial instruments
(4)
 
(1.348)
 
196.7%
 
1,481
 
(2,578)
 
(157.4)%
Lease payments
(7,777)
 
—
 
n . a
 
(49,081)
 
—
 
n . a
Purchase of own shares
(2,522)
 
—
 
n . a
 
(4,263)
 
(15,725)
 
(72.9)%
Dividends paid to non-controlling interest
(302)
 
—
 
n . a
 
(905)
 
(1,195)
 
(24.3)%
Net cash (used) / generated from financing activities
40,267
 
25,936
 
55.3%
 
(37,863)
 
(20,854)
 
81.6%
Net increase in cash and cash equivalents
142,970
 
87,981
 
62.5%
 
35,537
 
22,737
 
56.3%
Cash and cash equivalents at beginning of year
273,635
 
180,828
 
51.3%
 
273,635
 
269,195
 
1.6%
Effect of exchange rate changes and inflation on cash and cash equivalents
1,473
 
4,827
 
(69.5)%
 
(18,896)
 
(18,297)
 
3.3%
Cash and cash equivalents at end of year
418,078
 
273,636
 
52.8%
 
290,276
 
273,635
 
6.1%

42
heder.jpg

Condensed Consolidated Statement of Financial Position
Statement of Financial Position
 
 
 
 
 
 
$ thousands
 
December 31, 2019
 
December 31, 2018
 
Chg %
ASSETS
 
 
 
 
 
 
Non-Current Assets
 
 
 
 
 
 
Property, plant and equipment
 
1,493,220
 
1,480,439
 
0.9%
Right of use assets
 
238,053
 
—
 
n.a
Investment property
 
34,295
 
40,725
 
(15.8)%
Intangible assets
 
33,679
 
27,909
 
20.7%
Biological assets
 
13,303
 
11,270
 
18.0%
Deferred income tax assets
 
13,664
 
16,191
 
(15.6)%
Trade and other receivables, net
 
44,993
 
38,820
 
15.9%
Other assets
 
1,034
 
1,184
 
(12.7)%
Total Non-Current Assets
 
1,872,241
 
1,616,538
 
15.8%
Current Assets
 
 
 
 
 
 
Biological assets
 
117,133
 
94,117
 
24.5%
Inventories
 
112,790
 
128,102
 
(12.0)%
Trade and other receivables, net
 
127,338
 
158,686
 
(19.8)%
Derivative financial instruments
 
1,435
 
6,286
 
(77.2)%
Other assets
 
94
 
8
 
1,075.0%
Cash and cash equivalents
 
290,276
 
273,635
 
6.1%
Total Current Assets
 
649,066
 
660,834
 
(1.8)%
TOTAL ASSETS
 
2,521,307
 
2,277,372
 
10.7%
SHAREHOLDERS EQUITY
 
 
 
 
 
 
Capital and reserves attributable to equity holders of the parent
 
 
 
 
 
 
Share capital
 
183,573
 
183,573
 
(99.9)%
Share premium
 
901,739
 
900,503
 
(99.9)%
Cumulative translation adjustment
 
(680,315)
 
(666,037)
 
(99.9)%
Equity-settled compensation
 
15,354
 
16,191
 
(99.9)%
Cash flow hedge
 
(76,303)
 
(56,884)
 
(99.9)%
Other reserves
 
66,047
 
32,380
 
n . a
Treasury shares
 
(7,946)
 
(8,741)
 
(99.9)%
Revaluation surplus
 
337,877
 
383,889
 
(99.9)%
Reserve from the sale of non-controlling interests in subsidiaries
 
41,574
 
41,574
 
(99.9)%
Retained earnings
 
206,669
 
237,188
 
(99.9)%
Equity attributable to equity holders of the parent
 
988,269
 
1,063,636
 
(99.9)%
Non-controlling interest
 
40,614
 
44,509
 
(99.9)%
TOTAL SHAREHOLDERS EQUITY
 
1,028,883
 
1,108,145
 
(99.9)%
LIABILITIES
 
 
 
 
 
 
Non-Current Liabilities
 
 
 
 
 
 
Trade and other payables
 
3,599
 
211
 
1,605.7%
Borrowings
 
780,202
 
718,484
 
8.6%
Lease liabilities
 
174,570
 
—
 
n . a
Deferred income tax liabilities
 
165,508
 
168,171
 
(1.6)%
Payroll and social liabilities
 
1,209
 
1,219
 
(0.8)%
Provisions for other liabilities
 
2,936
 
3,296
 
(10.9)%
Total Non-Current Liabilities
 
1,128,024
 
891,381
 
26.5%
Current Liabilities
 
 
 
 
 
 
Trade and other payables
 
106,887
 
106,226
 
0.6%
Current income tax liabilities
 
754
 
1,398
 
(46.1)%
Payroll and social liabilities
 
25,208
 
25,978
 
(3.0)%
Borrowings
 
188,078
 
143,632
 
30.9%
Lease liabilities
 
41,814
 
—
 
n . a
Derivative financial instruments
 
1,423
 
283
 
402.8%
Provisions for other liabilities
 
236
 
329
 
(28.3)%
Total Current Liabilities
 
364,400
 
277,846
 
31.2%
TOTAL LIABILITIES
 
1,492,424
 
1,169,227
 
27.6%
TOTAL SHAREHOLDERS EQUITY AND LIABILITIES
 
2,521,307
 
2,277,372
 
10.7%

43