Adecoagro S.A.
Condensed Consolidated Interim Financial Statements as of March 31, 2019 and for the three-month periods ended March 31, 2019 and 2018
Legal information
Denomination: Adecoagro S.A.
Legal address:Vertigo Naos Building, 6, Rue Eugène Ruppert, L-2453, Luxembourg
Company activity:Agricultural and agro-industrial
Date of registration: June 11, 2010
Expiration of company charter: No term defined
Number of register (RCS Luxembourg): B153.681
Issued Capital Stock:: 122,381,815 common shares
Outstanding Capital Stock: 116,555,699 common shares
Treasury Shares: 5,826,116
F - 1
Adecoagro S.A.
Condensed Consolidated Interim Statements of Income for the three periods ended March 31, 2019 and 2018
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Note | March 31, | March 31, | ||
2019 | 2018 (*) | |||
(unaudited) | ||||
Sales of goods and services rendered | 4 | 159,815 | 155,567 | |
Cost of goods sold and services rendered | 5 | (123,938) | (120,948) | |
Initial recognition and changes in fair value of biological assets and agricultural | 15 | 23,168 | 16,081 | |
produce | ||||
Changes in net realizable value of agricultural produce after harvest | 1,356 | (691) | ||
Margin on manufacturing and agricultural activities before operating expenses | 60,401 | 50,009 | ||
General and administrative expenses | 6 | (13,461) | (15,172) | |
Selling expenses | 6 | (20,372) | (16,326) | |
Other operating (loss) / income, net | 8 | (2,431) | 22,088 | |
Profit from operations before financing and taxation | 24,137 | 40,599 | ||
Finance income | 9 | 2,933 | 3,006 | |
Finance costs | 9 | (44,374) | (28,217) | |
Other financial results - Net gain of inflation effects on the monetary items | 9 | 17,786 | - | |
Financial results, net | 9 | (23,655) | (25,211) | |
Profit before income tax | 482 | 15,388 | ||
Income tax (expense) | 10 | (2,717) | (4,492) | |
(Loss)/Profit for the period | (2,235) | 10,896 | ||
Attributable to: | ||||
Equity holders of the parent | (3,153) | 9,265 | ||
Non-controlling interest | 918 | 1,631 | ||
(Loss)/Earnings per share attributable to the equity holders of the parent | ||||
during the period: | ||||
Basic | (0.027) | 0.079 | ||
Diluted | (0.027) | 0.078 |
- Prior period have been recast to reflect the Company's change in accounting policy for investment properties as described in Note 29.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 3
Adecoagro S.A.
Condensed Consolidated Interim Statements of Comprehensive Income
for the three periods ended March 31, 2019 and 2018
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
March 31, | March 31, | ||
2019 | 2018 (*) | ||
(unaudited) | |||
Profit / (Loss) for the period | |||
(2,235) | 10,896 | ||
Other comprehensive income / (loss): | |||
Items that may be reclassified subsequently to profit or loss: | |||
Exchange differences on translating foreign operations | (22,481) | (6,998) | |
Cash flow hedge, net of tax (Note 2) | (5,614) | (3,620) | |
Items that will not be reclassified to profit or loss: | |||
Revaluation surplus net of tax | 17,237 | - | |
Other comprehensive loss for the period | (10,858) | (10,618) | |
Total comprehensive (loss) / income for the period | (13,093) | 278 | |
Attributable to: | |||
Equity holders of the parent | (13,949) | (881) | |
Non-controlling interest | 856 | 1,159 |
- Prior period have been recast to reflect the Company's change in accounting policy for investment properties as described in Note 29.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 4
Adecoagro S.A.
Condensed Consolidated Interim Statements of Financial Position
as of March 31, 2019 and December 31, 2018
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
March 31, | December 31, | |||
Note | 2019 | 2018 | ||
(unaudited) | ||||
ASSETS | ||||
Non-Current Assets | ||||
Property, plant and equipment | 11 | 1,586,758 | 1,480,439 | |
Right of use assets | 12 | 206,001 | - | |
Investment property | 13 | 40,725 | 40,725 | |
Intangible assets | 14 | 33,075 | 27,909 | |
Biological assets | 15 | 12,503 | 11,270 | |
Deferred income tax assets | 10 | 17,054 | 16,191 | |
Trade and other receivables, net | 17 | 48,956 | 38,820 | |
Other assets | 1,144 | 1,184 | ||
Total Non-Current Assets | 1,946,216 | 1,616,538 | ||
Current Assets | ||||
Biological assets | 15 | 99,234 | 94,117 | |
Inventories | 18 | 130,089 | 128,102 | |
Trade and other receivables, net | 17 | 133,255 | 158,686 | |
Derivative financial instruments | 16 | 5,372 | 6,286 | |
Other assets | 6 | 8 | ||
Cash and cash equivalents | 19 | 156,889 | 273,635 | |
Total Current Assets | 524,845 | 660,834 | ||
TOTALASSETS | 2,471,061 | 2,277,372 | ||
SHAREHOLDERS EQUITY | ||||
Capital and reserves attributable to equity holders of the parent | ||||
Share capital | 20 | 183,573 | 183,573 | |
Share premium | 20 | 900,503 | 900,503 | |
Cumulative translation adjustment | (675,824) | (666,037) | ||
Equity-settled compensation | 17,178 | 16,191 | ||
Cash flow hedge | (62,498) | (56,884) | ||
Other reserves | 38,964 | 32,380 | ||
Treasury shares | (8,741) | (8,741) | ||
Revaluation surplus | 383,200 | 383,889 | ||
Reserve from the sale of non-controlling interests in subsidiaries | 41,574 | 41,574 | ||
Retained earnings | 232,745 | 237,188 | ||
Equity attributable to equity holders of the parent | 1,050,674 | 1,063,636 | ||
Non-controlling interest | 45,365 | 44,509 | ||
TOTAL SHAREHOLDERS EQUITY | 1,096,039 | 1,108,145 | ||
LIABILITIES | ||||
Non-Current Liabilities | ||||
Trade and other payables | 22 | 3,430 | 211 | |
Borrowings | 23 | 710,658 | 718,484 | |
Lease liabilities | 24 | 143,375 | - | |
Deferred income tax liabilities | 10 | 175,647 | 168,171 | |
Payroll and social security liabilities | 25 | 1,347 | 1,219 | |
Provisions for other liabilities | 26 | 3,131 | 3,296 | |
Total Non-Current Liabilities | 1,037,588 | 891,381 | ||
Current Liabilities | ||||
Trade and other payables | 22 | 98,004 | 106,226 | |
Current income tax liabilities | 1,704 | 1,398 | ||
Payroll and social security liabilities | 25 | 26,251 | 25,978 | |
Borrowings | 23 | 175,299 | 143,632 | |
Lease liabilities | 24 | 34,884 | - | |
Derivative financial instruments | 16 | 1,006 | 283 | |
Provisions for other liabilities | 26 | 286 | 329 | |
Total Current Liabilities | 337,434 | 277,846 | ||
TOTAL LIABILITIES | 1,375,022 | 1,169,227 | ||
TOTAL SHAREHOLDERS EQUITY AND LIABILITIES | 2,471,061 | 2,277,372 | ||
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 5
Adecoagro S.A.
Condensed Consolidated Interim Statements of Changes in Shareholders' Equity for the three-month periods ended March 31, 2019 and 2018 (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Attributable to equity holders of the parent | |||||||||||
Reserve from | |||||||||||
Cumulative | the sale of | Non- | Total | ||||||||
Share Capital | Share | Equity-settled | Cash flow | Treasury | non- | Retained | |||||
Translation | Subtotal | Controlling | Shareholders' | ||||||||
(Note 19) | Premium | Compensation | hedge | shares | controlling | Earnings | |||||
Adjustment | Interest | Equity | |||||||||
interests in | |||||||||||
subsidiaries | |||||||||||
Balance at January 1, 2018 | 183,573 | 908,934 | (552,604) | 17,852 | (24,691) | (6,967) | 41,574 | 106,209 | 673,880 | 9,139 | 683,019 |
Profit for the period | - | - | - | - | - | - | - | 9,265 | 9,265 | 1,631 | 10,896 |
Other comprehensive income: | |||||||||||
- Items that may be reclassified subsequently to profit or loss: | |||||||||||
Exchange differences on translating foreign operations | - | - | (6,526) | - | - | - | - | - | (6,526) | (472) | (6,998) |
Cash flow hedge (*) | - | - | - | - | (3,620) | - | - | - | (3,620) | - | (3,620) |
Other comprehensive income for the period | - | - | (6,526) | - | (3,620) | - | - | - | (10,146) | (472) | (10,618) |
Total comprehensive income for the period | - | - | (6,526) | - | (3,620) | - | - | 9,265 | (881) | 1,159 | 278 |
Employee share options (Note 21) | |||||||||||
- Exercised/ Forfeited | - | - | - | (12) | - | - | - | 12 | - | - | - |
Restricted shares (Note 21): | |||||||||||
- Value of employee services | - | - | - | 1,345 | - | - | - | - | 1,345 | - | 1,345 |
- Vested | - | - | - | - | - | - | - | - | - | - | - |
-Purchase of own shares (Note 20) | - | (11,398) | - | - | - | (2,094) | - | - | (13,492) | - | (13,492) |
Balance at March 31, 2018 (unaudited) (**) | 183,573 | 897,536 | (559,130) | 19,185 | (28,311) | (9,061) | 41,574 | 115,486 | 660,852 | 10,298 | 671,150 |
(*) Net of 1,294 of Income Tax.
(**) 2018 information has been recast to reflect the Company's change in accounting policy for investment properties as described in Note 29.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 6
Adecoagro S.A.
Condensed Consolidated Interim Statements of Changes in Shareholders' Equity for the three-month periods ended March 31, 2019 and 2018 (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Attributable to equity holders of the parent | |||||||||||||
Reserve | |||||||||||||
Cumulative | Cash | from the | Non- | Total | |||||||||
Share Capital | Share | Equity-settled | Other | Treasury | Revaluation | sale of non- | Retained | Subtotal | |||||
Translation | flow | Controlling | Shareholder | ||||||||||
(Note 19) | Premium | Adjustment | Compensation | hedge | reserves | shares | surplus (**) | controlling | Earnings | Interest | s' Equity | ||
interests in | |||||||||||||
subsidiaries | |||||||||||||
Balance at January 1, 2019 | 183,573 | 900,503 | (666,037) | 16,191 | (56,884) | 32,380 | (8,741) | 383,889 | 41,574 | 237,188 | 1,063,636 | 44,509 | 1,108,145 |
Loss for the period | - | - | - | - | - | - | - | - | (3,153) | (3,153) | 918 | (2,235) | |
Other comprehensive loss: | |||||||||||||
- Items that may be reclassified subsequently to profit or loss: | |||||||||||||
Exchange differences on translating foreign operations | - | - | (9,787) | - | - | - | - | (11,310) | - | - | (21,097) | (1,384) | (22,481) |
Cash flow hedge (*) | - | - | - | - | (5,614) | - | - | - | - | - | (5,614) | - | (5,614) |
- Items that will not be reclassified to profit or loss: | |||||||||||||
Revaluation surplus | - | - | - | - | - | - | - | 15,915 | - | - | 15,915 | 1,322 | 17,237 |
Reserve of the revaluation surplus derived from the disposals | - | - | - | - | - | - | - | (5,294) | - | 5,294 | - | - | - |
of assets | |||||||||||||
Other comprehensive income for the period | - | - | (9,787) | - | (5,614) | - | - | (689) | - | 5,294 | (10,796) | (62) | (10,858) |
Total comprehensive income for the period | - | - | (9,787) | - | (5,614) | - | - | (689) | - | 2,141 | (13,949) | 856 | (13,093) |
Reserves for the benefit of government grants (1) | - | - | - | - | - | 6,584 | - | - | - | (6,584) | - | - | - |
Restricted shares (Note 21): | |||||||||||||
- Value of employee services | - | - | - | 987 | - | - | - | - | - | - | 987 | - | 987 |
Balance at March 31, 2019 (unaudited) | 183,573 | 900,503 | (675,824) | 17,178 | (62,498) | 38,964 | (8,741) | 383,200 | 41,574 | 232,745 | 1,050,674 | 45,365 | 1,096,039 |
-
Net of 1,579 of Income tax. (**) Net of 5,741 of Income tax.
(1) Correspond to the presumed credit of ICMS (Imposto sobre Circulação de Mercadorias e Prestação de Serviços) over the sale values in our Sugar, ethanol and energy business).
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 7
Adecoagro S.A.
Condensed Consolidated Interim Statements of Cash Flows for the three-month periods ended March 31, 2019 and 2018
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Note | March 31, | March 31, | ||
2019 | 2018 (*) | |||
(unaudited) | ||||
Cash flows from operating activities: | ||||
(Loss)/Profit for the period | (2,235) | 10,896 | ||
Adjustments for: | ||||
Income tax expense | 10 | 2,717 | 4,492 | |
Depreciation | 11 | 25,978 | 24,228 | |
Amortization | 14 | 328 | 265 | |
Depreciation of right of use assets | 12 | 10,411 | - | |
Gain from the sale of farmland and other assets | 27 | (1,472) | - | |
Gain from disposal of other property items | (362) | (120) | ||
Acquisition of subsidiaries | (149) | - | ||
Net gain from the Fair value adjustment of Investment properties | 13 | (1,280) | (3,152) | |
Equity settled share-based compensation granted | 7, 21 | 1,378 | 1,345 | |
Loss / (gain) from derivative financial instruments | 8, 9 | 3,047 | (16,572) | |
Interest and other expense, net | 9 | 13,121 | 11,225 | |
Initial recognition and changes in fair value of non harvested biological assets | (25,695) | (9,296) | ||
(unrealized) | ||||
Changes in net realizable value of agricultural produce after harvest (unrealized) | 515 | (910) | ||
Provision and allowances | - | 29 | ||
Net gain of inflation effects on the monetary items | 9 | (17,786) | - | |
Foreign exchange losses, net | 9 | 20,196 | 9,348 | |
Cash flow hedge - transfer from equity | 9 | 7,601 | 2,101 | |
Subtotal | 36,313 | 33,879 | ||
Changes in operating assets and liabilities: | ||||
(Increase) in trade and other receivables | (7,989) | (32,399) | ||
(Increase) in inventories | (2,552) | (17,801) | ||
Decrease in biological assets | 18,527 | 9,332 | ||
Decrease in other assets | 3 | 6 | ||
(Increase) / Decrease in derivative financial instruments | (1,946) | 12,579 | ||
(Decrease) in trade and other payables | (10,875) | (13,699) | ||
Increase in payroll and social security liabilities | 1,211 | 3,690 | ||
(Decrease) in provisions for other liabilities | (174) | (221) | ||
Net cash generated from (used in) operating activities before taxes paid | 32,518 | (4,634) | ||
Income tax paid | (124) | (131) | ||
Net cash generated from operating activities | (a) | 32,394 | (4,765) |
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 8
Adecoagro S.A.
Condensed Consolidated Interim Statements of Cash Flows
for the three-month periods ended March 31, 2019 and 2018 (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Note | March 31, | March 31, | ||
2019 | 2018 (*) | |||
(unaudited) | ||||
Cash flows from investing activities: | ||||
Acquisition of a business, net of cash and cash equivalents acquired | 684 | - | ||
Purchases of property, plant and equipment | 11 | (119,157) | (62,418) | |
Purchases of cattle and non current biological assets | (1,463) | (1,464) | ||
Purchases of intangible assets | 14 | (6,645) | (456) | |
Interest received | 9 | 2,129 | 2,463 | |
Proceeds from sale of property, plant and equipment | 332 | 508 | ||
Proceeds from sale of farmlands and other assets | 27 | 5,833 | - | |
Net cash used in investing activities | (b) | (118,287) | (61,367) | |
Cash flows from financing activities: | ||||
Proceeds from long-term borrowings | 8,016 | 8,728 | ||
Payments of long-term borrowings | (32,067) | (6,074) | ||
Proceeds from short-term borrowings | 76,114 | 39,335 | ||
Payment of short-term borrowings | (37,529) | (23,934) | ||
Proceeds / (Payments) of derivatives financial instruments | 557 | (190) | ||
Lease payments | (14,320) | - | ||
Interest paid | (22,640) | (21,035) | ||
Purchase of own shares | - | (13,492) | ||
Dividends paid to non-controlling interest | - | (1,195) | ||
Net cash used in financing activities | (c) | (21,869) | (17,857) | |
Net decrease in cash and cash equivalents | (d) | (107,762) | (83,989) | |
Cash and cash equivalents at beginning of period | 19 | 273,635 | 269,195 | |
Effect of exchange rate changes and inflation on cash and cash equivalents | (8,984) | (1,431) | ||
Cash and cash equivalents at end of period | 19 | 156,889 | 183,775 | |
- Prior period have been recast to reflect the Company's change in accounting policy for investment properties as described in Note 29.
- Includes 9,074 of the combine effect of IAS 29 and IAS 21 of the Argentine subsidiaries.
- Includes 2,608 of the combine effect of IAS 29 and IAS 21 of the Argentine subsidiaries.
- Includes (1,621) of the combine effect of IAS 29 and IAS 21 of the Argentine subsidiaries.
- Includes (10,062) of the combine effect of IAS 29 and IAS 21 of the Argentine subsidiaries.
Other Non-cash investing and financing for the transactions disclosed in other notes are the seller financing of Subsidiaries in Note 27.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 9
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
1. General information
Adecoagro S.A. (the "Company" or "Adecoagro") is the Group's ultimate parent company and is a société anonyme (stock corporation) organized under the laws of the Grand Duchy of Luxembourg. Adecoagro is a holding company primarily engaged through its operating subsidiaries in agricultural and agro-industrial activities. The Company and its operating subsidiaries are collectively referred to hereinafter as the "Group". These activities are carried out through three major lines of business, namely, Farming; Sugar, Ethanol and Energy and Land Transformation. Farming is further comprised of three reportable segments, which are described in detail in Note 3 to these condensed consolidated interim financial statements.
Adecoagro is a public company listed in the New York Stock Exchange as a foreign registered company under the symbol of AGRO.
These condensed consolidated interim financial statements have been approved for issue by the Board of Directors on May 20, 2019.
2. Financial risk management
Risk management principles and processes
The Group is exposed to several risks arising from financial instruments including price risk, exchange rate risk, interest rate risk, liquidity risk and credit risk. A thorough explanation of the Group´s risks and the Group´s approach to the identification, assessment and mitigation of risks is included in Note 2 to the annual financial statements. There have been no changes to the Group ´s exposure and risk management principles and processes since December 31, 2018 and refers readers to the annual financial statements for information.
However, the Group considers that the following tables below provide useful information to understand the Group´s interim resultsforthethreemonthperiodendedMarch 31,2019.Thesedisclosuresdonotappearinanyparticularorderofpotentialmateriality or probability of occurrence.
- Exchange rate risk
ThefollowingtablesshowtheGroup'snetmonetarypositionbrokendownbyvariouscurrenciesforeachfunctionalcurrency in which the Group operates at March 31, 2019. All amounts are shown in US dollars.
March 31, 2019 | |||||
(unaudited) | |||||
Functional currency | |||||
Net monetary position (Liability)/ Asset | Argentine | Brazilian | Uruguayan | US Dollar | Total |
Peso | Reais | Peso | |||
Argentine Peso | (29,925) | - | - | (534) | (30,459) |
Brazilian Reais | - | 4,425 | - | - | 4,425 |
US Dollar | (286,361) | (488,695) | 21,771 | 53,341 | (699,944) |
Uruguayan Peso | - | - | (269) | - | (269) |
Total | (316,286) | (484,270) | 21,502 | 52,807 | (726,247) |
The Group's analysis shown on the tables below is carried out based on the exposure of each functional currency subsidiary againsttheUSdollar.TheGroupestimatedthat,otherfactorsbeingconstant,a10%appreciationoftheUSdollaragainsttherespective functional currencies for the period ended March 31, 2019 would have increased the Group's Loss before income tax for the period. A10%depreciationoftheUSdollaragainstthefunctionalcurrencieswouldhaveanequalandoppositeeffectontheincomestatement. A portion of this effect would be recognized as other comprehensive income since a portion of the Company's borrowings was used
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 10
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2. Financial risk management (continued)
ascashflowhedgeoftheforeignexchangerateriskofaportionofitshighlyprobablefuturesalesinUSdollars(seeHedgeAccounting - Cash Flow Hedge below for details).
March 31, 2019 | |||||
(unaudited) | |||||
Functional currency | |||||
Net monetary position | Argentine | Brazilian | Uruguayan | US Dollar | Total |
Peso | Reais | Peso | |||
US Dollar | (28,636) | (48,870) | 2,177 | - | (75,329) |
(Decrease) or increase in Profit before income tax | (28,636) | (48,870) | 2,177 | - | (75,329) |
Hedge Accounting - Cash flow hedge
Effective July 1, 2013, the Group 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, currency forwards and foreign currency floating-to-fixed interest rate swaps.
The Group expects that the cash flows will occur and affect profit or loss between 2019 and 2024.
For the period ended March 31, 2019, a loss before income tax of US$ 15,425 was recognized in other comprehensive income and a loss of US$ 8,232 was reclassified from equity to profit or loss within "Financial results, net".
- Interest rate risk
The following table shows a breakdown of the Group's fixed-rate and floating-rate borrowings per currency denomination and functional currency of the subsidiary issuing the loans at March 31, 2019 (all amounts are shown in US dollars):
March 31, 2019 | |||||
(unaudited) | |||||
Functional currency | |||||
Rate per currency denomination | Argentine | Brazilian | Uruguayan | US | Total |
Peso | Reais | Peso | Dollar | ||
Fixed rate: | |||||
Argentine Peso | 10,818 | - | - | - | 10,818 |
Brazilian Reais | - | 58,648 | - | - | 58,648 |
US Dollar | 78,156 | 83,554 | 9,996 | 496,980 | 668,686 |
Subtotal Fixed-rate borrowings | 88,974 | 142,202 | 9,996 | 496,980 | 738,152 |
Variable rate: | |||||
Brazilian Reais | - | 25,950 | - | - | 25,950 |
US Dollar | 114,457 | 7,398 | - | - | 121,855 |
Subtotal Variable-rate borrowings | 114,457 | 33,348 | - | - | 147,805 |
Total borrowings as per analysis | 203,431 | 175,550 | 9,996 | 496,980 | 885,957 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 11
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2. Financial risk management (continued)
At March 31, 2019, if interest rates on floating-rate borrowings had been 1% higher (or lower) with all other variables held constant, Profit before income tax for the period would decrease as follows:
March 31, 2019 | ||||
(unaudited) | ||||
Functional currency | ||||
Rate per currency denomination | Argentine | Brazilian | Total | |
Peso | Reais | |||
Variable rate: | ||||
Brazilian Reais | - | (260) | (260) | |
US Dollar | (1,145) | (74) | (1219) | |
Decrease in profit before income tax | (1,145) | (334) | (1,479) | |
• | Credit risk |
As of March 31, 2019, six banks accounted for more than 82% of the total cash deposited (J.P. Morgan, HSBC, Banco do Brasil, Banco Safra, Banco Santander, Banco Bradesco).
- Derivative financial instruments
The following table shows the outstanding positions for each type of derivative contract as of March 31, 2019:
Futures / Options | ||||||||
Type of | March 31, 2019 | |||||||
Quantities | Notional | Market | Profit / (Loss) | |||||
(thousands) | Value Asset/ | |||||||
derivative contract | amount | (*) | ||||||
(**) | (Liability) | |||||||
(unaudited) | (unaudited) | |||||||
Futures: | ||||||||
Sale | ||||||||
Corn | 20 | 2,152 | (698) | (586) | ||||
Soybean | 86 | 28,260 | 1,116 | 715 | ||||
Wheat | 15 | 2,825 | 305 | 305 | ||||
Sugar | 206,512 | 66,179 | 3,471 | (1,211) | ||||
Options: | ||||||||
Buy call | ||||||||
Corn | (13) | 353 | 95 | (258) | ||||
Total | 206,620 | 99,769 | 4,289 | (1,035) | ||||
- Included in line "Gain / (Loss) from commodity derivative financial instruments" Note 8. (**) All quantities expressed in tons except otherwise indicated.
Commodity future contract fair values are computed with reference to quoted market prices on future exchanges.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 12
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2. Financial risk management (continued)
Other derivative financial instruments
As of March 31, 2019, the Group has floating-to-fixed interest rate swap, foreign currency fixed-to-floating interest rate swap and foreign currency floating-to fixed interest rate swap agreements, which were also outstanding as of December 31, 2018.
During the period ended March 31, 2019 and 2018, the Group entered into several currency forward contracts with Brazilian banks in order to hedge the fluctuation of the Brazilian Reais against US Dollar for a total notional amount of US$ 2.1 million and US$ 14.8 million, respectively. Those contracts entered in 2019 had maturity dates April 2019. The outstanding contracts resulted in the recognition of a loss of US$ 0.01 million in the period ended March 31, 2019.
During the period ended on March 31, 2019 and 2018, the Group entered into several currency forward contracts in order tohedgethefluctuationoftheUSDollaragainstEuroforatotalnotionalamountofUS$4.5millionandUS$11.0million,respectively. ThecurrencyforwardcontractsmaturitydatearebetweenMarchandJune2019,andMayandJune2018,respectively.Theoutstanding contracts resulted in the recognition of a gain of US$ 0.08 million and US$ 0.04 million, respectively.
Gain and losses on currency forward contracts are included within "Financial results, net" in the statement of income.
3. Segment information
IFRS8"OperatingSegments"requiresanentitytoreportfinancialanddescriptiveinformationaboutitsreportablesegments, which are operating segments or aggregations of operating segments that meet specified criteria. Operating segments are components of an entity about which separate financial information is available that is evaluated regularly by the chief operating decision maker ("CODM") in deciding how to allocate resources and in assessing performance. The CODM evaluates the business based on the differences in the nature of its operations, products and services. The amount reported for each segment item is the measure reported to the CODM for these purposes.
The Group operates in three major lines of business, namely, Farming; Sugar, Ethanol and Energy; and LandTransformation.
- The Group's'Farming'line of business is further comprised of three reportable segments:
TheGroup's'Crops'Segmentconsistsofplanting,harvesting,saleandprocessinggrains,oilseedsandfibers(including wheat, corn, soybeans, cotton and sunflowers, among others), and to a lesser extent the provision of grain warehousing/ conditioning, handling and drying services to third parties, and the purchase and sale of crops produced by third parties crops. Each underlying crop in the Crops segment does not represent a separate operating segment. Management seeks to maximize the use of the land through the cultivation of one or more type of crops. Types and surface amount of crops cultivated may vary from harvest year to harvest year depending on several factors, some of them out of the Group´s control. Management is focused on the long-term performance of the productive land, and to that extent, the performance is assessed considering the aggregated combination, if any, of crops planted in the land.Asingle manager is responsible for the management of operating activity of all crops rather than for each individual crop. (For disposals and acquisitions see Note 27),
The Group's 'Rice'Segment consists of planting, harvesting, processing and marketing of rice;
The Company's 'Dairy'Segment consists of the production and sale of raw milk and industrialized products, including UHT, cheese and powder milk among others;
The Group's 'All Other Segments'column consists of the aggregation of the remaining non-reportable operating segments, which do not meet the quantitative thresholds for disclosure and for which the Group's management does not consider them to be significance Coffee and Cattle.
-
The Group's'Sugar, Ethanol and Energy'Segment consists of cultivating sugarcane which is processed in owned sugar mills, transformed into ethanol, sugar and electricity and marketed;
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 13
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3. Segment information (continued)
- The Group's'Land Transformation'Segment comprises the (i) identification and acquisition of underdeveloped and undermanaged farmland businesses; and (ii) realization of value through the strategic disposition of assets (generating profits). (For disposals and acquisitions see Note 27).
Total segment assets and liabilities are measured in a manner consistent with that of the consolidated financial statements. These assets and liabilities are allocated based on the operations of the segment and the physical location of the asset.
Effective July 1, 2018, the Group applied IAS 29 "Financial Reporting in Hyperinflationary Economies" ("IAS 29") to its operations in Argentina. IAS 29 "Financial Reporting in Hyperinflationary Economies" requires that the financial statements of entities whose functional currency is that of a hyperinflationary economy be adjusted for the effects of changes in the general price index and be expressed in terms of the current unit of measurement at the closing date of the reporting period ("inflation accounting"). In order to determine whether an economy is classified as hyperinflationary, IAS 29 sets forth a series of factors to be considered, including whether the amount of cumulative inflation nears or exceeds a threshold of 100 %. Accordingly, Argentina has been classified as a hyperinflationary economy under the terms of IAS 29 from July 1, 2018.
According to IAS 29, allArgentine Peso-denominatednon-monetary items in the statement of financial position are adjusted by applying a general price index from the date they were initially recognized to the end of the reporting period. Likewise, all Argentine Peso-denominated items in the statement of income should be expressed in terms of the measuring unit current at the end of the reporting period, consequently, income statement items are adjusted by applying a general price index on a monthly basis from the dates they were initially recognized in the financial statements to the end of the reporting period. This process is called "re- measurement".
Once the re-measurement process is completed, all Argentine Peso denominated accounts are translated into U.S. Dollars, the Group's reporting currency, applying the guidelines in IAS 21 "The Effects of Changes in Foreign Exchange Rates"("IAS 21"). IAS 21 requires that amounts be translated at the closing rate at the date of the most recent statement of financial position. This process is called "translation".
The re-measurement and translation processes are applied on a monthly basis until year-end. Due to this process, the remeasured and translated results of operations for a given month are subject to change until year-end, affecting comparison and analysis.
Following the adoption of IAS 29 to the Argentine operations of the Group, management revised the information reviewed by the CODM. Accordingly, as from July 1, 2018, (commencement of hyper-inflation accounting in Argentina), the information provided to the CODM departs from the application of IAS 29 and IAS 21 re-measurement and translation processes as follows. The segment results of the Argentinean operations for each reporting period were adjusted for inflation and translated into the Group's reporting currency using the reporting period average exchange rate. The translated amounts were not subsequently re-measured and translated in accordance with the IAS 29 and IAS 21 procedures outlined above. From January 1, 2018 through June 30, 2018, the Group's segment results were still based on the IFRS measurement principles adopted until June 30, 2018.
In order to evaluate the economic performance of businesses on a monthly basis, results of operations inArgentina are based on monthly data that have been adjusted for inflation and converted into the average exchange rate of the U.S. Dollar each month. These already converted figures are subsequently not readjusted and reconverted as described above under IAS 29 and IAS 21. It should be noted that this translation methodology for evaluating segment information is the same that the company uses to translate results of operation from its other subsidiaries from other countries that have not been designated hyperinflationary economies because it allows for a more accurate analysis of the economic performance of its business as a whole.
The Group's CODM believes that the exclusion of the re-measurement and translation processes from the segment reporting structure allows for a more useful presentation and facilitates period-to-period comparison and performance analysis.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 14
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3. Segment information (continued)
The following tables show a reconciliation of each reportable segment for the three-month period ended March 31, 2019, as per the information reviewed by the CODM and the reportable segment measured in accordance with IAS 29 and IAS 21 as per the consolidated financial statements.
Crops | Rice | Dairy | ||||||||||||||||||||||||||||||||
Total | Total as | Total | Total as | Total | Total as | |||||||||||||||||||||||||||||
per | per | per | ||||||||||||||||||||||||||||||||
segment | Adjustment | segment | Adjustment | segment | Adjustment | |||||||||||||||||||||||||||||
statement | statement | statement | ||||||||||||||||||||||||||||||||
reporting | reporting | reporting | ||||||||||||||||||||||||||||||||
of income | of income | of income | ||||||||||||||||||||||||||||||||
Sales of goods sold and services rendered | 34,117 | (1,291) | 32,826 | 29,411 | (633) | 28,778 | 8,110 | (330) | 7,780 | |||||||||||||||||||||||||
Cost of goods and services rendered | (35,111) | 1,357 | (33,754) | (22,510) | 259 | (22,251) | (7,855) | 310 | (7,545) | |||||||||||||||||||||||||
Initial recognition and changes in fair value of | 9,900 | (335) | 9,565 | 13,844 | (868) | 12,976 | 2,742 | (120) | 2,622 | |||||||||||||||||||||||||
biological assets and agricultural produce | ||||||||||||||||||||||||||||||||||
Gain from changes in net realizable value of | 1,427 | (71) | 1,356 | - | - | - | - | - | - | |||||||||||||||||||||||||
agricultural produce after harvest | ||||||||||||||||||||||||||||||||||
Margin on Manufacturing and Agricultural | 10,333 | (340) | 9,993 | 20,745 | (1,242) | 19,503 | 2,997 | (140) | 2,857 | |||||||||||||||||||||||||
Activities Before Operating Expenses | ||||||||||||||||||||||||||||||||||
General and administrative expenses | (1,369) | 74 | (1,295) | (1,807) | 104 | (1,703) | (918) | 57 | (861) | |||||||||||||||||||||||||
Selling expenses | (1,588) | 64 | (1,524) | (6,830) | 340 | (6,490) | (483) | 28 | (455) | |||||||||||||||||||||||||
Other operating income, net | (2,863) | 12 | (2,851) | 145 | (7) | 138 | 144 | (6) | 138 | |||||||||||||||||||||||||
Profit from Operations Before Financing and | 4,513 | (190) | 4,323 | 12,253 | (805) | 11,448 | 1,740 | (61) | 1,679 | |||||||||||||||||||||||||
Taxation | ||||||||||||||||||||||||||||||||||
Depreciation and amortization | (953) | 16 | (937) | (1,776) | 110 | (1,666) | (1,037) | 60 | (977) | |||||||||||||||||||||||||
Net gain from Fair value adjustment of | - | - | - | - | - | - | - | - | - | |||||||||||||||||||||||||
Investment property | ||||||||||||||||||||||||||||||||||
All other segments | Corporate | Total | ||||||||||||||||||||||||||||||||
Total | Total as | Total | Total as | Total | Total as | |||||||||||||||||||||||||||||
per | per | per | ||||||||||||||||||||||||||||||||
segment | Adjustment | segment | Adjustment | segment | Adjustment | |||||||||||||||||||||||||||||
statement | statement | statement | ||||||||||||||||||||||||||||||||
reporting | reporting | reporting | ||||||||||||||||||||||||||||||||
of income | of income | of income | ||||||||||||||||||||||||||||||||
Sales of goods sold and services rendered | 425 | (29) | 396 | - | - | - | 162,098 | (2,283) | 159,815 | |||||||||||||||||||||||||
Cost of goods and services rendered | (303) | 21 | (282) | - | - | - | (125,885) | 1,947 | (123,938) | |||||||||||||||||||||||||
Initial recognition and changes in fair value of | 222 | (26) | 196 | - | - | - | 24,517 | (1,349) | 23,168 | |||||||||||||||||||||||||
biological assets and agricultural produce | ||||||||||||||||||||||||||||||||||
Gain from changes in net realizable value of | - | - | - | - | - | - | 1,427 | (71) | 1,356 | |||||||||||||||||||||||||
agricultural produce after harvest | ||||||||||||||||||||||||||||||||||
Margin on Manufacturing and | ||||||||||||||||||||||||||||||||||
Agricultural Activities Before Operating | 344 | (34) | 310 | - | - | - | 62,157 | (1,756) | 60,401 | |||||||||||||||||||||||||
Expenses | ||||||||||||||||||||||||||||||||||
General and administrative expenses | (41) | (29) | (70) | (4,575) | 174 | (4,401) | (13,841) | 380 | (13,461) | |||||||||||||||||||||||||
Selling expenses | (49) | - | (49) | (79) | 4 | (75) | (20,808) | 436 | (20,372) | |||||||||||||||||||||||||
Other operating income, net | 1,330 | (56) | 1,274 | (184) | 14 | (170) | (2,388) | (43) | (2,431) | |||||||||||||||||||||||||
Profit from Operations Before Financing | 1,584 | (119) | 1,465 | (4,838) | 192 | (4,646) | 25,120 | (983) | 24,137 | |||||||||||||||||||||||||
and Taxation | ||||||||||||||||||||||||||||||||||
Depreciation and amortization | (46) | 3 | (43) | - | - | - | (26,495) | 189 | (26,306) | |||||||||||||||||||||||||
Net gain from Fair value adjustment of | 1,336 | (56) | 1,280 | - | - | - | 1,336 | (56) | 1,280 | |||||||||||||||||||||||||
Investment property |
Sugar, Ethanol and Energy, and Land Transformation segments have not been reconciliated due to the lack of differences.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 15
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3. Segment information (continued)
Segment analysis for the three-month period ended March 31, 2019 (unaudited)
Farming | Sugar, | Land | |||||||||||||||
Ethanol and | Corporate | Total | |||||||||||||||
All Other | Farming | ||||||||||||||||
Crops | Rice | Dairy | Transformation | ||||||||||||||
Energy | |||||||||||||||||
Segments | subtotal | ||||||||||||||||
Sales of goods and services rendered | 34,117 | 29,411 | 8,110 | 425 | 72,063 | 90,035 | - | - | 162,098 | ||||||||
Cost of goods sold and services rendered | (35,111) | (22,510) | (7,855) | (303) | (65,779) | (60,106) | - | - | (125,885) | ||||||||
Initial recognition and changes in fair value of biological assets and agricultural produce | 9,900 | 13,844 | 2,742 | 222 | 26,708 | (2,191) | - | - | 24,517 | ||||||||
Changes in net realizable value of agricultural produce after harvest | 1,427 | - | - | - | 1,427 | - | - | - | 1,427 | ||||||||
Margin on manufacturing and agricultural activities before operating expenses | 10,333 | 20,745 | 2,997 | 344 | 34,419 | 27,738 | - | - | 62,157 | ||||||||
General and administrative expenses | (1,369) | (1,807) | (918) | (41) | (4,135) | (5,131) | - | (4,575) | (13,841) | ||||||||
Selling expenses | (1,588) | (6,830) | (483) | (49) | (8,950) | (11,779) | - | (79) | (20,808) | ||||||||
Other operating income, net | (2,863) | 145 | 144 | 1,330 | (1,244) | (2,314) | 1,354 | (184) | (2,388) | ||||||||
Profit / (loss) from operations before financing and taxation | 4,513 | 12,253 | 1,740 | 1,584 | 20,090 | 8,514 | 1,354 | (4,838) | 25,120 | ||||||||
Depreciation and amortization | (953) | (1,776) | (1,037) | (46) | (3,812) | (22,683) | - | - | (26,495) | ||||||||
Net gain from Fair value adjustment of Investment property | - | - | - | 1,336 | 1,336 | - | - | - | 1,336 | ||||||||
Reverse of revaluation surplus derived from the disposals of assets before taxes | - | - | - | - | - | - | 8,022 | - | 8,022 | ||||||||
Initial recognition and changes in fair value of biological assets and agricultural produce | 9,368 | 13,285 | 214 | 865 | 23,732 | 1,963 | - | - | 25,695 | ||||||||
(unrealized) | |||||||||||||||||
Initial recognition and changes in fair value of biological assets and agricultural produce | 532 | 559 | 2,528 | (643) | 2,976 | (4,154) | - | - | (1,178) | ||||||||
(realized) | |||||||||||||||||
Changes in net realizable value of agricultural produce after harvest (unrealized) | (515) | - | - | - | (515) | - | - | - | (515) | ||||||||
Changes in net realizable value of agricultural produce after harvest (realized) | 1,942 | - | - | - | 1,942 | - | - | - | 1,942 | ||||||||
Farmlands and farmland improvements, net | 539,061 | 169,954 | 2,297 | 22,866 | 734,178 | 50,771 | - | - | 784,949 | ||||||||
Machinery, equipment, building and facilities, and other fixed assets, net | 33,716 | 27,034 | 65,864 | 506 | 127,120 | 360,245 | - | - | 487,365 | ||||||||
Bearer plants, net | 447 | - | - | - | 447 | 246,227 | - | - | 246,674 | ||||||||
Work in progress | 9,808 | 7,271 | 21,361 | 17 | 38,457 | 29,313 | - | - | 67,770 | ||||||||
Right of use asset | 2,323 | 598 | 839 | - | 3,760 | 202,241 | - | - | 206,001 | ||||||||
Investment property | - | - | - | 40,725 | 40,725 | - | - | - | 40,725 | ||||||||
Goodwill | 9,166 | 4,012 | - | 1,429 | 14,607 | 5,603 | - | - | 20,210 | ||||||||
Biological assets | 37,845 | 713 | 11,110 | 4,386 | 54,054 | 57,683 | - | - | 111,737 | ||||||||
Finished goods | 24,002 | 7,378 | 1,940 | - | 33,320 | 19,651 | - | - | 52,971 | ||||||||
Raw materials, Stocks held by third parties and others | 11,052 | 37,122 | 5,472 | 87 | 53,733 | 23,385 | - | - | 77,118 | ||||||||
Total segment assets | 667,420 | 254,082 | 108,883 | 70,016 | 1,100,401 | 995,119 | - | - | 2,095,520 | ||||||||
Borrowings | |||||||||||||||||
119,522 | 85,693 | 3,587 | 4,625 | 213,427 | 582,490 | - | 90,040 | 885,957 | |||||||||
Lease liabilities | 2,917 | 578 | 887 | - | 4,382 | 173,877 | - | - | 178,259 | ||||||||
Total segment liabilities | 122,439 | 86,271 | 4,474 | 4,625 | 217,809 | 756,367 | - | 90,040 | 1,064,216 | ||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 16
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3. Segment information (continued)
Segment analysis for the three-month period ended March 31, 2018 (*) (unaudited)
Farming | Sugar, | Land | |||||||||||||||
Ethanol and | Corporate | Total | |||||||||||||||
Crops | Rice | Dairy | All Other | Farming | Transformation | ||||||||||||
Energy | |||||||||||||||||
Segments | subtotal | ||||||||||||||||
Sales of goods and services rendered | 33,701 | 15,348 | 8,263 | 344 | 57,656 | 97,911 | - | - | 155,567 | ||||||||
Cost of goods sold and services rendered | (33,996) | (16,457) | (8,040) | (220) | (58,713) | (62,235) | - | - | (120,948) | ||||||||
Initial recognition and changes in fair value of biological assets and agricultural produce | 17,894 | 10,622 | 2,250 | (185) | 30,581 | (14,500) | - | - | 16,081 | ||||||||
Changes in net realizable value of agricultural produce after harvest | (691) | - | - | - | (691) | - | - | - | (691) | ||||||||
Margin on manufacturing and agricultural activities before operating expenses | 16,908 | 9,513 | 2,473 | (61) | 28,833 | 21,176 | - | - | 50,009 | ||||||||
General and administrative expenses | (905) | (1,310) | (391) | (40) | (2,646) | (7,651) | - | (4,875) | (15,172) | ||||||||
Selling expenses | (1,401) | (2,593) | (60) | (43) | (4,097) | (12,219) | - | (10) | (16,326) | ||||||||
Other operating (loss)/income, net | (5,214) | 135 | (22) | 3,150 | (1,951) | 24,033 | - | 6 | 22,088 | ||||||||
Profit / (loss) from operations before financing and taxation | 9,388 | 5,745 | 2,000 | 3,006 | 20,139 | 25,339 | - | (4,879) | 40,599 | ||||||||
Depreciation and amortization | (461) | (1,038) | (304) | (41) | (1,844) | (22,649) | - | - | (24,493) | ||||||||
Net gain from Fair value adjustment of Investment property | - | - | - | 3,152 | 3,152 | - | - | - | 3,152 | ||||||||
Initial recognition and changes in fair value of biological assets and agricultural produce | 13,818 | 10,622 | 67 | 108 | 24,615 | (15,319) | - | - | 9,296 | ||||||||
(unrealized) | |||||||||||||||||
Initial recognition and changes in fair value of biological assets and agricultural produce | 4,076 | - | 2,183 | (293) | 5,966 | 819 | - | - | 6,785 | ||||||||
(realized) | |||||||||||||||||
Changes in net realizable value of agricultural produce after harvest (unrealized) | 910 | - | - | - | 910 | - | - | - | 910 | ||||||||
Changes in net realizable value of agricultural produce after harvest (realized) | (1,601) | - | - | - | (1,601) | - | - | - | (1,601) | ||||||||
As of December 31, 2018: | |||||||||||||||||
Farmlands and farmland improvements, net | 547,842 | 173,481 | 727 | 22,891 | 744,941 | 51,567 | - | - | 796,508 | ||||||||
Machinery, equipment, building and facilities, and other fixed assets, net | 5,049 | 23,135 | 32,821 | 459 | 61,464 | 338,607 | - | - | 400,071 | ||||||||
Bearer plants, net | 427 | - | - | - | 427 | 232,529 | - | - | 232,956 | ||||||||
Work in progress | 8,690 | 5,214 | 14,317 | 18 | 28,239 | 22,665 | - | - | 50,904 | ||||||||
Investment property | - | - | - | 40,725 | 40,725 | - | - | - | 40,725 | ||||||||
Goodwill | 9,463 | 4,142 | - | 2,110 | 15,715 | 5,635 | - | - | 21,350 | ||||||||
Biological assets | 27,347 | 17,173 | 10,298 | 3,094 | 57,912 | 47,475 | - | - | 105,387 | ||||||||
Finished goods | 29,144 | 9,507 | 1,170 | - | 39,821 | 39,937 | - | - | 79,758 | ||||||||
Raw materials, Stocks held by third parties and others | 15,834 | 7,394 | 2,217 | 121 | 25,566 | 22,778 | - | - | 48,344 | ||||||||
Total segment assets | 643,796 | 240,046 | 61,550 | 69,418 | 1,014,810 | 761,193 | - | - | 1,776,003 | ||||||||
Borrowings | 111,692 | 58,999 | 543 | 4,860 | 176,094 | 600,810 | - | 85,212 | 862,116 | ||||||||
Total segment liabilities | 111,692 | 58,999 | 543 | 4,860 | 176,094 | 600,810 | - | 85,212 | 862,116 | ||||||||
(*) Prior period have been recast to reflect the Company's change in accounting policy for investment properties as described in Note 29.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 17
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
4. | Sales | |||
March 31, | March 31, | |||
2019 | 2018 | |||
(unaudited) | ||||
Sales of manufactured products and services rendered: | ||||
Ethanol | 69,817 | 73,788 | ||
Sugar (*) | 10,774 | 19,553 | ||
Soybean oil and meal | 1,062 | 2,991 | ||
Rice (*) | 27,903 | 14,513 | ||
Energy (*) | 9,187 | 4,532 | ||
Powder milk | 3,249 | 429 | ||
Operating leases | 123 | 177 | ||
Services | 797 | 245 | ||
Others | 2,097 | 2,532 | ||
125,009 | 118,760 | |||
Sales of agricultural produce and biological assets: | ||||
Soybean | 3,215 | 8,725 | ||
Cattle for dairy production | 663 | 725 | ||
Corn (*) | 19,609 | 13,631 | ||
Milk | 4,043 | 7,314 | ||
Wheat (*) | 5,913 | 4,435 | ||
Sunflower | 530 | 710 | ||
Barley | 688 | 1,090 | ||
Seeds | 40 | 62 | ||
Others | 105 | 115 | ||
34,806 | 36,807 | |||
Total sales | 159,815 | 155,567 | ||
-
Includes sales of corn, rice, sugar, mhw of energy and wheat produced by third parties for an amount of US$ 12.6 million, US$
1.6 million, US$ 7.7 million, US$ 0.6 and US$ 0.14 million respectively.
Commitments to sell commodities at a future date
The Group entered into contracts to sell non-financial instruments, mainly, sugar, soybean and corn through sales forward contracts. Those contracts are held for purposes of delivery the non-financial instrument in accordance with the Group's expected sales. Accordingly, as the own use exception criteria are met, those contracts are not recorded as derivatives.
The notional amount of these contracts is US$80 million as of March 31, 2019 (March 31, 2018: US$ 89 million) comprised primarily of 15,751 tons of sugar (US$ 4.4 million), 13,856 m³ of ethanol (US$ 7.6 million), 662,484 mhw of energy (U$S 42.7 million), 36,487 tons of soybean (US$ 8.8 million), 94,846 tons of corn (US$ 14.5 million), 8,436 tons of wheat (US$ 1.8 million) and other products (US$ 0.3 million) which expire between April 2019 and December 2019.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 18
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
5. Cost of goods sold and services rendered
As of March 31, 2019 :
March 31, 2019 | |||||||||||
All other | Sugar, | ||||||||||
Crops | Rice | Dairy | Ethanol and | Total | |||||||
segments | |||||||||||
Energy | |||||||||||
Finished goods at the beginning of 2019 (Note 18) | 29,144 | 9,507 | 1,170 | - | 39,937 | 79,758 | |||||
Cost of production of manufactured products | 1,780 | 18,232 | 3,908 | - | 37,977 | 61,897 | |||||
Purchases | 14,035 | 2,483 | 134 | - | 8,000 | 24,652 | |||||
Agricultural produce | 13,107 | - | 4,425 | 282 | - | 17,814 | |||||
Transfer to raw material | (3,907) | - | - | - | - | (3,907) | |||||
Direct agricultural selling expenses | 2,680 | - | - | - | - | 2,680 | |||||
Tax recoveries (i) | - | - | - | - | (6,469) | (6,469) | |||||
Changes in net realizable value of agricultural produce | 1,356 | - | - | - | - | 1,356 | |||||
after harvest | |||||||||||
Finished goods as of March 31, 2019 (Note 18) | (24,002) | (7,378) | (1,940) | - | (19,651) | (52,971) | |||||
Exchange differences | (439) | (593) | (152) | - | 312 | (872) | |||||
Cost of goods sold and services rendered, and direct | 33,754 | 22,251 | 7,545 | 282 | 60,106 | 123,938 | |||||
agricultural selling expenses period | |||||||||||
(i): Correspond to the presumed credit of ICMS (Imposto sobre Circulação de Mercadorias e Prestação de Serviços) over the sale values.
As of March 31, 2018:
March 31, 2018 | |||||||||||
Crops | Rice | Dairy | All other | Sugar, | Total | ||||||
Ethanol and | |||||||||||
segments | |||||||||||
Energy | |||||||||||
Finished goods at the beginning of 2018 | 21,146 | 8,476 | - | - | 32,266 | 61,888 | |||||
Cost of production of manufactured products (Note | 1,657 | 18,030 | 172 | 49 | 47,337 | 67,245 | |||||
6) | |||||||||||
Purchases | 10,586 | 542 | - | - | 10,743 | 21,871 | |||||
Agricultural produce | 27,065 | - | 7,868 | 171 | - | 35,104 | |||||
Transfer to raw material | (4,942) | - | - | - | - | (4,942) | |||||
Direct agricultural selling expenses | 4,167 | - | - | - | - | 4,167 | |||||
Tax recoveries (i) | - | - | - | - | (7,998) | (7,998) | |||||
Changes in net realizable value of agricultural | (691) | - | - | - | - | (691) | |||||
produce after harvest | |||||||||||
Finished goods as of March 31, 2018 | (21,938) | (9,907) | - | - | (20,585) | (52,430) | |||||
Exchange differences | (3,054) | (684) | - | - | 472 | (3,266) | |||||
Cost of goods sold and services rendered, and | 33,996 | 16,457 | 8,040 | 220 | 62,235 | 120,948 | |||||
direct agricultural selling expenses period | |||||||||||
(i): Correspond to the presumed credit of ICMS (Imposto sobre Circulação de Mercadorias e Prestação de Serviços) over the sale values.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 19
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
6. Expenses by nature
The following table provides the additional disclosure required on the nature of expenses and their relationship to the function within the Group:
Expenses by nature for the period ended March 31, 2019:
Cost of production of manufactured products (Note 5) | General and | Selling | ||||||||||||||||
Sugar, | ||||||||||||||||||
All other | Administrative | Total | ||||||||||||||||
Crops | Rice | Dairy | Ethanol and | Total | Expenses | |||||||||||||
segments | Expenses | |||||||||||||||||
Energy | ||||||||||||||||||
Salaries, social security expenses and employee benefits | 46 | 1,467 | 19 | - | 4,608 | 6,140 | 6,287 | 1,715 | 14,142 | |||||||||
Raw materials and consumables | 19 | 2,265 | 36 | - | 2,682 | 5,002 | - | - | 5,002 | |||||||||
Depreciation and amortization | 484 | 471 | 214 | - | 12,023 | 13,192 | 2,711 | 191 | 16,094 | |||||||||
Depreciation of right-of-use assets | - | - | 47 | - | 1,394 | 1,441 | 644 | 3 | 2,088 | |||||||||
Fuel, lubricants and others | - | 27 | 79 | - | 3,671 | 3,777 | 191 | 63 | 4,031 | |||||||||
Maintenance and repairs | 9 | 287 | - | - | 2,413 | 2,709 | 324 | 131 | 3,164 | |||||||||
Freights | 41 | 4,154 | 140 | - | 247 | 4,582 | - | 3,223 | 7,805 | |||||||||
Export taxes / selling taxes | - | - | - | - | - | - | - | 10,439 | 10,439 | |||||||||
Export expenses | - | - | - | - | - | - | - | 1,134 | 1,134 | |||||||||
Contractors and services | 198 | 79 | 173 | - | 1,419 | 1,869 | - | - | 1,869 | |||||||||
Energy transmission | - | - | - | - | - | - | - | 854 | 854 | |||||||||
Energy power | 25 | 473 | - | - | 325 | 823 | 59 | 22 | 904 | |||||||||
Professional fees | 4 | 10 | - | - | 62 | 76 | 1,740 | 80 | 1,896 | |||||||||
Other taxes | - | 31 | - | - | 263 | 294 | 238 | 10 | 542 | |||||||||
Contingencies | - | - | - | - | - | - | 198 | - | 198 | |||||||||
Lease expense and similar arrangements | - | 62 | - | - | - | 62 | 274 | 13 | 349 | |||||||||
Third parties raw materials | - | 747 | 36 | - | 216 | 999 | - | - | 999 | |||||||||
Tax recoveries | - | - | - | - | (1,816) | (1,816) | - | - | (1,816) | |||||||||
Others | 30 | 264 | 16 | - | 127 | 437 | 795 | 2,494 | 3,726 | |||||||||
Subtotal | 856 | 10,337 | 760 | - | 27,634 | 39,587 | 13,461 | 20,372 | 73,420 | |||||||||
Own agricultural produce consumed | 924 | 7,895 | 3,148 | - | 10,343 | 22,310 | - | - | 22,310 | |||||||||
Total | 1,780 | 18,232 | 3,908 | - | 37,977 | 61,897 | 13,461 | 20,372 | 95,730 | |||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 20
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
6. Expenses by nature (continued)
Expenses by nature for the period ended March 31, 2018:
Cost of production of manufactured products (Note 5) | General and | Selling | ||||||||||||||||
Sugar, | ||||||||||||||||||
All other | Administrative | Total | ||||||||||||||||
Crops | Rice | Dairy | Total | Expenses | ||||||||||||||
segments | Ethanol | Expenses | ||||||||||||||||
and Energy | ||||||||||||||||||
Salaries, social security expenses and employee benefits | - | 2,087 | 38 | 49 | 6,260 | 8,434 | 8,961 | 1,697 | 19,092 | |||||||||
Raw materials and consumables | 42 | 1,286 | - | - | 1,052 | 2,380 | - | - | 2,380 | |||||||||
Depreciation and amortization | - | 174 | 69 | - | 15,317 | 15,560 | 1,671 | 218 | 17,449 | |||||||||
Fuel, lubricants and others | - | 51 | - | - | 4,426 | 4,477 | 79 | 56 | 4,612 | |||||||||
Maintenance and repairs | - | 536 | 13 | - | 2,255 | 2,804 | 358 | 97 | 3,259 | |||||||||
Freights | - | 1,416 | 9 | - | 99 | 1,524 | - | 3,058 | 4,582 | |||||||||
Export taxes / selling taxes | - | - | - | - | - | - | - | 8,042 | 8,042 | |||||||||
Export expenses | - | - | - | - | - | - | - | 476 | 476 | |||||||||
Contractors and services | 150 | 191 | - | - | 1,122 | 1,463 | - | - | 1,463 | |||||||||
Energy transmission | - | - | - | - | 275 | 275 | - | 773 | 1,048 | |||||||||
Energy power | - | 492 | 30 | - | - | 522 | 68 | 14 | 604 | |||||||||
Professional fees | - | 15 | 10 | - | 147 | 172 | 1,714 | 90 | 1,976 | |||||||||
Other taxes | - | 17 | - | - | 286 | 303 | 451 | 2 | 756 | |||||||||
Contingencies | - | - | - | - | - | - | 497 | - | 497 | |||||||||
Lease expense and similar arrangements | - | 59 | - | - | - | 59 | 292 | 4 | 355 | |||||||||
Third parties raw materials | - | 893 | - | - | 414 | 1,307 | - | - | 1,307 | |||||||||
Tax recoveries | - | - | - | - | - | - | 3 | - | 3 | |||||||||
Others | - | 345 | 3 | - | 1,045 | 1,393 | 1,078 | 1,799 | 4,270 | |||||||||
Subtotal | 192 | 7,562 | 172 | 49 | 32,698 | 40,673 | 15,172 | 16,326 | 72,171 | |||||||||
Own agricultural produce consumed | ||||||||||||||||||
1,465 | 10,468 | - | - | 14,639 | 26,572 | - | - | 26,572 | ||||||||||
Total | 1,657 | 18,030 | 172 | 49 | 47,337 | 67,245 | 15,172 | 16,326 | 98,743 | |||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 21
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
7. Salaries and social security expenses
March 31, | March 31, | ||||
2019 | 2018 | ||||
(unaudited) | |||||
Wages and salaries | 23,640 | 30,540 | |||
Social security costs | 8,123 | 8,191 | |||
Equity-settledshare-based compensation | 1,378 | 1,345 | |||
33,141 | 40,076 | ||||
8. | Other operating income / (loss), net | ||||
March 31, | March 31, | ||||
2019 | 2018 (*) | ||||
(unaudited) | |||||
Gain from disposals of farmland and other assets (Note 27 ) | 1,472 | - | |||
(Loss) / gain from commodity derivative financial instruments | (3,358) | 19,790 | |||
Net gain from fair value adjustment of Investment property | 1,280 | 3,152 | |||
Others | (1,825) | (854) | |||
(2,431) | 22,088 | ||||
- Prior period have been recast to reflect the Company's change in accounting policy for investment properties as described in Note 29.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 22
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
9. | Financial results, net | ||||
March 31, | March 31, | ||||
2019 | 2018 | ||||
(unaudited) | |||||
Finance income: | |||||
- Interest income | 2,169 | 2,463 | |||
- Gain from interest rate/foreign exchange rate derivative financial instruments | 311 | - | |||
- Other income | 453 | 543 | |||
Finance income | 2,933 | 3,006 | |||
Finance costs: | |||||
- Interest expense | (13,517) | (13,630) | |||
- Finance cost related to lease liabilities | (1,923) | - | |||
- Cash flow hedge - transfer from equity | (7,601) | (2,101) | |||
- Foreign exchange losses, net | (20,196) | (9,348) | |||
- Taxes | (761) | (1,050) | |||
- Loss from interest rate/foreign exchange rate derivative financial instruments | - | (1,458) | |||
- Other expenses | (376) | (630) | |||
Finance costs | (44,374) | (28,217) | |||
Other financial results -Net gain of inflation effects on the monetary items | 17,786 | - | |||
Total financial results, net | (23,655) | (25,211) | |||
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 23
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
10. Taxation
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
March 31, | March 31, | ||
2019 | 2018 (*) | ||
(unaudited) | |||
Current income tax | 2,054 | (476) | |
Deferred income tax | (4,771) | (4,016) | |
Income tax (expense) | (2,717) | (4,492) | |
During 2017, theArgentine Government introduced changes in the income tax. The income tax enforce is 30% for the years 2018 and 2019, and will be 25% from 2020 onwards. There has been no other changes in the statutory tax rates in the countries where the Group operates since December 31, 2018.
The gross movement on the deferred income tax account is as follows:
March 31, | March 31, | ||
2019 | 2018 (*) | ||
(unaudited) | |||
Beginning of period (liability) / asset | (151,980) | 20,351 | |
Exchange differences | 4,820 | 760 | |
Effect of fair value valuation for farmlands | (5,741) | - | |
Acquisition of subsidiary (Note 27) | (4,856) | - | |
Disposal of subsidiary (Note 27) | 2,747 | - | |
Tax charge relating to cash flow hedge (i) | 1,579 | 1,294 | |
Others | (391) | - | |
Income tax benefit/ expense | (4,771) | (4,016) | |
End of period (liability) / asset | (158,593) | 18,389 | |
- It relates to the amount reclassified of US$ 8,232 loss and US$ 7,015 loss from equity to profit and loss for the three- month period ended March 31, 2019 and 2018, respectively.
The tax on the Group's profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 24
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
10. Taxation (continued)
March 31, | March 31, | ||
2019 | 2018 (*) | ||
(unaudited) | |||
Tax calculated at the tax rates applicable to profits in the respective countries | (1,426) | (5,176) | |
Non-deductible items | (682) | (253) | |
Effect of the changes in the statutory income tax rate in Argentina | 1,264 | (124) | |
Non-taxable income | 2,812 | 361 | |
Tax losses where no deferred tax asset was recognized | 15 | 82 | |
Utilization of previously unrecognized tax | - | 178 | |
Effect of IAS 29 on Argentina´s Shareholder´s equity and deferred income tax. | (5,264) | - | |
Unused tax losses | (217) | - | |
Others | 781 | 440 | |
Income tax expense | (2,717) | (4,492) | |
(*) Prior period have been recast to reflect the Company's change in accounting policy for investment properties as described in Note 29.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 25
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
11. Property, plant and equipment
Changes in the Group's property, plant and equipment for the three-month periods ended March 31, 2019 and 2018 were as follows:
Farmland | Buildings and | Machinery, | Work in | ||||||||||||
Farmlands | equipment, | Bearer plants | Others | Total | |||||||||||
improvements | facilities | furniture and | progress | ||||||||||||
Fittings | |||||||||||||||
Three-month period ended March | |||||||||||||||
31, 2018 | |||||||||||||||
Opening net book amount. | 110,743 | 9,007 | 192,844 | 246,080 | 238,910 | 4,158 | 29,635 | 831,377 | |||||||
Exchange differences | (3,987) | (671) | (2,257) | (5,058) | (1,317) | (176) | 1,367 | (12,099) | |||||||
Additions | - | - | 5,520 | 29,910 | 17,823 | 913 | 14,161 | 68,327 | |||||||
Transfers | - | 4 | 814 | 2,882 | - | - | (3,700) | - | |||||||
Disposals | - | - | (16) | (597) | - | (11) | - | (624) | |||||||
Reclassification to non-income tax credits (*) | - | - | (16) | (93) | - | - | (39) | (148) | |||||||
Depreciation (Note 6) | - | (568) | (3,387) | (11,058) | (8,820) | (395) | - | (24,228) | |||||||
Closing net book amount | 106,756 | 7,772 | 193,502 | 262,066 | 246,596 | 4,489 | 41,424 | 862,605 | |||||||
At March 31, 2018 (unaudited) | |||||||||||||||
. | |||||||||||||||
Cost | 106,756 | 20,115 | 314,791 | 661,559 | 389,087 | 16,374 | 41,424 | 1,550,106 | |||||||
Accumulated depreciation | - | (12,343) | (121,289) | (399,493) | (142,491) | (11,885) | - | (687,501) | |||||||
Net book amount | 106,756 | 7,772 | 193,502 | 262,066 | 246,596 | 4,489 | 41,424 | 862,605 | |||||||
Three-month period ended March 31, 2019 | |||||||||||||||
Opening net book amount | 780,184 | 16,324 | 188,622 | 205,148 | 232,956 | 6,301 | 50,904 | 1,480,439 | |||||||
Exchange differences | (22,741) | (519) | (1,777) | (2,321) | (1,833) | (168) | (1,121) | (30,480) | |||||||
Additions | - | - | 37,277 | 42,879 | 23,321 | 1,371 | 24,621 | 129,469 | |||||||
Revaluation surplus | 22,789 | - | - | - | - | - | - | 22,789 | |||||||
Acquisition of subsidiaries | 455 | - | 17,850 | 3,462 | - | 437 | - | 22,204 | |||||||
Transfers | - | - | 825 | 5,802 | - | 7 | (6,634) | - | |||||||
Disposals | - | - | - | (300) | - | (7) | - | (307) | |||||||
Disposal of subsidiaries | (10,770) | - | (571) | (12) | - | - | - | (11,353) | |||||||
Reclassification to non-income tax credits (*) | - | - | - | (25) | - | - | - | (25) | |||||||
Depreciation (Note 6) | - | (773) | (4,690) | (12,283) | (7,770) | (462) | - | (25,978) | |||||||
Closing net book amount | 769,917 | 15,032 | 237,536 | 242,350 | 246,674 | 7,479 | 67,770 | 1,586,758 | |||||||
At March 31, 2019 (unaudited) | |||||||||||||||
Cost | 769,917 | 32,199 | 398,519 | 768,463 | 501,537 | 23,251 | 67,770 | 2,561,656 | |||||||
Accumulated depreciation | - | (17,167) | (160,983) | (526,113) | (254,863) | (15,772) | - | (974,898) | |||||||
Net book amount | 769,917 | 15,032 | 237,536 | 242,350 | 246,674 | 7,479 | 67,770 | 1,586,758 | |||||||
(*) Brazilian federal tax law allows entities to take a percentage of the total cost of the assets purchased as a tax credit. As of March 31, 2019, ICMS tax credits were reclassified to trade and other receivables.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 26
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued) (All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
11. Property, plant and equipment (continued)
Since September 2018 the Company changes the accounting policy for its Farmlands (See Note 28 - Basis of presentation
- Changes in accounting policies), adopting the valuation at Fair Value. For all Farmlands with a total valuation of US$ 772 million as of March 31, 2019 , the valuation was determined using sales Comparison Approach prepared by an independent expert. Sale prices of comparable properties are adjusted considering the specific aspects of each property, the most relevant premise being the
price per hectare. (Level 3). The Group estimated that, other factors being constant, a 10% reduction on the Sales price for the period ended March 31, 2019 would have reduced the value of the Farmlands on US$ 77.2 million, which would impact, net of its tax effect on the "Revaluation surplus" item in the statement of Changes in Shareholders' Equity.
Depreciation charges are included in "Cost of production of Biological Assets", "Cost of production of manufactures products", "General and administrative expenses", "Selling expenses" and capitalized in "Property, plant and equipment" for the nine-months period ended March 31, 2019 and 2018.
As of March 31, 2019, borrowing costs of US$ 3,764 (March 31, 2018: US$ 1,481) were capitalized as components of the cost of acquisition or construction of qualifying assets.
Certain of the Group's assets have been pledged as collateral to secure the Group's borrowings and other payables. The net book value of the pledged assets amounts to US$ 344,041 as of March 31, 2019.
12. Right of use assets
Changes in the Group's right of use assets for the three-month periods ended March 31, 2019 were as follows:
Agricultural | Others | Total | |||
partnership | |||||
(unaudited) | |||||
Three-months period ended March 31, 2019 | |||||
Adoption of IFRS 16 | 194,763 | 10,174 | 204,937 | ||
Exchange differences | (2,923) | (330) | (3,253) | ||
Additions | 7,155 | 7,573 | 14,728 | ||
Depreciation | (8,922) | (1,489) | (10,411) | ||
Closing net book amount | 190,073 | 15,928 | 206,001 | ||
Since January 1,2019, the Company mandatory adopted IFRS 16. (Note 29). Agricultural partnership has an average of 6 years duration.
As of March 31, 2019 included within Right of use assets balances are US$ 539 related to the net book value of assets under finance leases.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 27
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
13. Investment property
Changes in the Group's investment property for the three-month periods ended March 31, 2019 and 2018 were as
follows:
March 31, | March 31, | ||
2019 | 2018 (*) | ||
(unaudited) | |||
Beginning of the period | 40,725 | 42,342 | |
Net gain from fair value adjustment (Note 8) | 1,280 | 3,152 | |
Exchange differences | (1,280) | (3,152) | |
End of the period | 40,725 | 42,342 | |
Cost | 40,725 | 42,342 | |
Net book amount | 40,725 | 42,342 |
Since September 2018 the Company changes the accounting policy for all Investment properties. (See Note 29 - Basis of presentation-Changesinaccountingpolicies),adoptingthevaluationatFairValue.ForallInvestmentpropertieswithatotalvaluation of US$ 40.7 million as of March 31, 2019 , the valuation was determined using Sales Comparison Approach prepared by an independent expert. Sale prices of comparable properties are adjusted considering the specific aspects of each property, the most relevant premise being the price per hectare. (Level 3). The increase /decrease in the Fair value is recognized in the Statement of income under the line item "Other operating income, net". There were no changes of the valuation techniques during March 31, 2019
and 2018. The Group estimated that, other factors being constant, a 10% reduction on the Sales price for the period ended March 31, 2019 would have reduced the value of the Investment properties on US$ 4.0 million, which would impact the line item "Net gain from fair value adjustment ".
The following amounts have been recognized in the statement of income in the line "Sales of manufactured products and services rendered", and "Other operating income, net", respectively.
March 31, | March 31, | ||
2019 | 2018 | ||
(unaudited) | |||
Rental income | 115 | 170 | |
Net gain from fair value adjustment (Note 8) | 1,280 | 3,152 |
(*) Prior period have been recast to reflect the Company's change in accounting policy for investment properties as described in Note 29.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 28
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
14. Intangible assets
Changes in the Group's intangible assets in the three-month periods ended March 31, 2019 and 2018 were as follows:
Goodwill | Software | Trademarks | Others | Total | |||||
Three-month period ended March 31, | |||||||||
2018 | |||||||||
Opening net book amount | 12,412 | 3,851 | 928 | 1 | 17,192 | ||||
Exchange differences | (410) | (119) | (3) | (1) | (533) | ||||
Additions | - | 443 | - | 13 | 456 | ||||
Amortization charge (i) (Note 6) | - | (255) | - | (10) | (265) | ||||
Closing net book amount | 12,002 | 3,920 | 925 | 3 | 16,850 | ||||
At March 31, 2018 (unaudited) | |||||||||
Cost | 12,002 | 7,575 | 2,620 | 84 | 22,281 | ||||
Accumulated amortization | - | (3,655) | (1,695) | (81) | (5,431) | ||||
Net book amount | 12,002 | 3,920 | 925 | 3 | 16,850 | ||||
Three-month period ended March 31, | |||||||||
2019 | |||||||||
Opening net book amount | 21,350 | 5,596 | 886 | 77 | 27,909 | ||||
Exchange differences | (505) | (77) | - | - | (582) | ||||
Acquisition of subsidiary | - | 204 | 6,431 | 10 | 6,645 | ||||
Additions | - | 66 | - | - | 66 | ||||
Disposal | (635) | - | - | - | (635) | ||||
Amortization charge (i) (Note 6) | - | (303) | - | (25) | (328) | ||||
Closing net book amount | 20,210 | 5,486 | 7,317 | 62 | 33,075 | ||||
At March 31, 2019 (unaudited) | |||||||||
Cost | 20,210 | 10,357 | 9,012 | 1,905 | 41,484 | ||||
Accumulated amortization | - | (4,871) | (1,695) | (1,843) | (8,409) | ||||
Net book amount | 20,210 | 5,486 | 7,317 | 62 | 33,075 | ||||
- Amortization charges are included in "General and administrative expenses" and "Selling expenses" for the period ended March 31, 2019 and 2018, respectively.
TheGrouptestsannuallywhethergoodwillhassufferedanyimpairment.Thelastimpairmenttestofgoodwillwasperformed as of September 30, 2018.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 29
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
15. Biological assets
Changes in the Group's biological assets in the three-month periods ended March 31, 2019 and 2018 were as follows:
March 31, 2019 | |||||||||||
Crops (i) | Rice (i) | Dairy | All other | Sugarcan | Total | ||||||
segments | e (i) | ||||||||||
Beginning of the year | 27,347 | 17,173 | 10,298 | 3,094 | 47,475 | 105,387 | |||||
Increase due to purchases | - | - | - | 210 | - | 210 | |||||
Initial recognition and changes in fair value | 9,565 | 12,976 | 2,622 | 196 | (2,191) | 23,168 | |||||
of biological assets | |||||||||||
Decrease due to harvest / disposals | (13,107) | (38,061) | (3,148) | (281) | (11,127) | (65,724) | |||||
Decrease due to sales of agricultural | - | - | (4,425) | - | - | (4,425) | |||||
produce | |||||||||||
Costs incurred during the period | 17,100 | 8,585 | 6,791 | 437 | 24,051 | 56,964 | |||||
Exchange differences | (3,060) | 40 | (1,028) | 730 | (525) | (3,843) | |||||
End of the period (unaudited) | 37,845 | 713 | 11,110 | 4,386 | 57,683 | 111,737 | |||||
March 31, 2018 | |||||||||||
Crops (i) | Rice (i) | Dairy | All other | Sugarcan | Total | ||||||
segments | e (i) | ||||||||||
Beginning of the year | 31,745 | 29,717 | 9,338 | 4,016 | 93,178 | 167,994 | |||||
Increase due to purchases | - | - | - | 430 | - | 430 | |||||
Initial recognition and changes in fair value | 17,894 | 10,622 | 2,250 | (185) | (14,500) | 16,081 | |||||
of biological assets | |||||||||||
Decrease due to harvest / disposals | (27,065) | (47,257) | (550) | (172) | (15,434) | (90,478) | |||||
Decrease due to sales of agricultural | - | - | (7,318) | - | - | (7,318) | |||||
produce | |||||||||||
Costs incurred during the period | 27,598 | 13,359 | 6,717 | 414 | 22,042 | 70,130 | |||||
Exchange differences | (2,875) | (2,208) | (697) | (303) | (302) | (6,385) | |||||
End of the period (unaudited) | 47,297 | 4,233 | 9,740 | 4,200 | 84,984 | 150,454 | |||||
- Biological assets that are measured at fair value within level 3 of the hierarchy.
The discounted cash flow valuation technique and the significant unobservable inputs used to calculate the fair value of these biological assets are consistent with those of the audited annual financial statements for the year ended December 31, 2018 described in Note 16. Please see Level 3 definition in Note 16.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 30
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
15. Biological assets (continued)
Cost of production as of March 31, 2019:
March 31, 2019 | |||||||||||
(unaudited) | |||||||||||
Crops | Rice | Dairy | All other | Sugar, | Total | ||||||
Ethanol and | |||||||||||
segments | |||||||||||
Energy | |||||||||||
Salaries, social security expenses and employee benefits | 568 | 1,630 | 1,044 | 149 | 1,971 | 5,362 | |||||
Depreciation and amortization | - | - | - | - | 764 | 764 | |||||
Depreciation of right-of-use assets | - | - | - | - | 8,323 | 8,323 | |||||
Fertilizers, agrochemicals and seeds | 9,338 | 717 | - | - | 9,994 | 20,049 | |||||
Fuel, lubricants and others | 183 | 206 | 221 | 8 | 595 | 1,213 | |||||
Maintenance and repairs | 265 | 459 | 403 | 45 | 290 | 1,462 | |||||
Freights | 17 | 78 | 16 | 65 | - | 176 | |||||
Contractors and services | 5,002 | 4,370 | - | - | 1,912 | 11,284 | |||||
Feeding expenses | - | - | 2,869 | - | - | 2,869 | |||||
Veterinary expenses | - | - | 452 | 55 | - | 507 | |||||
Energy power | 16 | 762 | 321 | 3 | - | 1,102 | |||||
Professional fees | 27 | 15 | 26 | 2 | 42 | 112 | |||||
Other taxes | 287 | 20 | 2 | 20 | 18 | 347 | |||||
Lease expense and similar arrangements | 1,098 | 12 | - | 2 | - | 1,112 | |||||
Others | 299 | 316 | 73 | 9 | 142 | 839 | |||||
Subtotal | 17,100 | 8,585 | 5,427 | 358 | 24,051 | 55,521 | |||||
Own agricultural produce consumed | - | - | 1,364 | 79 | - | 1,443 | |||||
Total | 17,100 | 8,585 | 6,791 | 437 | 24,051 | 56,964 | |||||
Cost of production as of March 31, 2018:
March 31, 2018 | |||||||||||
(unaudited) | |||||||||||
Crops | Rice | Dairy | All other | Sugar, | Total | ||||||
Ethanol and | |||||||||||
segments | |||||||||||
Energy | |||||||||||
Salaries, social security expenses and employee benefits | 910 | 2,494 | 1,012 | 122 | 1,931 | 6,469 | |||||
Depreciation and amortization | 127 | - | - | - | 432 | 559 | |||||
Fertilizers, agrochemicals and seeds | 15,612 | 1,542 | - | - | 9,366 | 26,520 | |||||
Fuel, lubricants and others | 290 | 199 | 182 | 21 | 610 | 1,302 | |||||
Maintenance and repairs | 298 | 719 | 450 | 47 | 272 | 1,786 | |||||
Freights | 56 | 161 | 11 | 18 | - | 246 | |||||
Contractors and services | 6,264 | 6,323 | - | 20 | 2,248 | 14,855 | |||||
Feeding expenses | - | - | 2,523 | 58 | - | 2,581 | |||||
Veterinary expenses | - | - | 491 | 37 | - | 528 | |||||
Energy power | 39 | 1,603 | 247 | - | - | 1,889 | |||||
Professional fees | 51 | 5 | - | - | 84 | 140 | |||||
Other taxes | 385 | 41 | 2 | 31 | 16 | 475 | |||||
Lease expense and similar arrangements | 2,872 | 165 | - | - | 6,917 | 9,954 | |||||
Others | 694 | 107 | 44 | 3 | 166 | 1,014 | |||||
Subtotal | 27,598 | 13,359 | 4,962 | 357 | 22,042 | 68,318 | |||||
Own agricultural produce consumed | |||||||||||
- | - | 1,755 | 57 | - | 1,812 | ||||||
Total | 27,598 | 13,359 | 6,717 | 414 | 22,042 | 70,130 | |||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 31
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
15. Biological assets (continued)
Biological assets as of March 31, 2019 and December 31, 2018 were as follows: | |||
March 31, | December 31, | ||
2019 | 2018 | ||
(unaudited) | |||
Non-current | |||
Cattle for dairy production | 10,901 | 9,859 | |
Breeding cattle | 1,482 | 1,310 | |
Other cattle | 120 | 101 | |
12,503 | 11,270 | ||
Current | |||
Breeding cattle | 2,784 | 1,683 | |
Other cattle | 209 | 439 | |
Sown land - crops | 37,845 | 27,347 | |
Sown land - rice | 713 | 17,173 | |
Sown land - sugarcane | 57,683 | 47,475 | |
99,234 | 94,117 | ||
Total biological assets | 111,737 | 105,387 | |
16. Financial instruments
As of March 31, 2019, the financial instruments recognized at fair value on the statement of financial position comprise derivative financial instruments.
In the case of Level 1, valuation is based on unadjusted quoted prices in active markets for identical financial assets that the Group can refer to at the date of the statement of financial position. A market is deemed active if transactions take place with sufficient frequency and in sufficient quantity for price information to be available on an ongoing basis. Since a quoted price in an active market is the most reliable indicator of fair value, this should always be used if available. The financial instruments the Group has allocated to this level mainly comprise crop futures and options traded on the stock market. In the case of securities, the Group allocates them to this level when either a stock market price is available or prices are provided by a price quotation on the basis of actual market transactions.
Derivatives not traded on the stock market allocated to Level 2 are valued using models based on observable market data. For this, the Group uses inputs directly or indirectly observable in the market, other than quoted prices. If the financial instrument concerned has a fixed contract period, the inputs used for valuation must be observable for the whole of this period. The financial instruments the Group has allocated to this level mainly comprise interest-rate swaps and foreign-currencyinterest-rate swaps.
In the case of Level 3, the Group uses valuation techniques not based on inputs observable in the market. This is only permissible insofar as no observable market data are available. The inputs used reflect the Group's assumptions regarding the factors, which market players would consider in their pricing. The Group uses the best available information for this, including internal company data. The Group does not have financial instruments allocated to this level for any of the periods presented.
There were no transfer between any levels during the period.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 32
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
16. Financial instruments (continued)
The following tables present the Group's financial assets and financial liabilities that are measured at fair value as of March 31, 2019 and their allocation to the fair value hierarchy:
2019 | |||||
Level 1 | Level 2 | Total | |||
Assets | |||||
Derivative financial instruments | 5,288 | 84 | 5,372 | ||
Total assets | 5,288 | 84 | 5,372 | ||
Liabilities | |||||
Derivative financial instruments | (999) | (7) | (1,006) | ||
Total liabilities | (999) | (7) | (1,006) | ||
When no quoted prices in an active market are available, fair values (particularly with derivatives) are based on recognized valuation methods. The Group uses a range of valuation models for this purpose, details of which may be obtained from the following table:
Class | Pricing | Parameters | Pricing Model | Level | Total | |||||
Method | ||||||||||
Futures | Quoted price | - | - | 1 | 4,194 | |||||
Options | Quoted price | - | - | 1 | 95 | |||||
NDF | Quoted price | Foreign-exchange curve | Present value method | 2 | 77 | |||||
4,366 | ||||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 33
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
17. | Trade and other receivables, net | |||
March 31, | December 31, | |||
2019 | 2018 | |||
(unaudited) | ||||
Non current | ||||
Advances to suppliers | 32 | 2,343 | ||
Income tax credits | 4,397 | 4,429 | ||
Non-income tax credits (i) | 17,740 | 15,998 | ||
Judicial deposits | 2,997 | 2,908 | ||
Receivable from disposal of subsidiary | 21,708 | 10,944 | ||
Other receivables | 2,082 | 2,198 | ||
Non current portion | 48,956 | 38,820 | ||
Current | ||||
Trade receivables | 60,909 | 60,167 | ||
Receivables from related parties (Note 28) | - | 8,337 | ||
Less: Allowance for trade receivables | (2,262) | (2,503) | ||
Trade receivables - net | 58,647 | 66,001 | ||
Prepaid expenses | 12,672 | 9,396 | ||
Advance to suppliers | 19,574 | 43,365 | ||
Income tax credits | 21,561 | 2,560 | ||
Non-income tax credits (i) | 12,534 | 28,232 | ||
Receivable from disposal of subsidiary | 13 | 3,709 | ||
Cash collateral | 122 | 1,505 | ||
Receivables from related parties (Note 28) | - | 324 | ||
Other receivables | 8,132 | 3,594 | ||
Subtotal | 74,608 | 92,685 | ||
Current portion | 133,255 | 158,686 | ||
Total trade and other receivables, net | 182,211 | 197,506 | ||
- Includes US$ 25 for thethree-month period ended March 31, 2019 reclassified from property, plant and equipment (for the year ended December 31, 2018: US$ 1,086).
The fair values of current trade and other receivables approximate their respective carrying amounts due to their short-term nature. The fair values of non-current trade and other receivables approximate their carrying amount, as the impact of discounting is not significant.
The carrying amounts of the Group's trade and other receivables are denominated in the following currencies (expressed in US dollars):
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 34
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
17. Trade and other receivables, net (continued)
March 31, | December 31, | ||
2019 | 2018 | ||
(unaudited) | |||
Currency | |||
US Dollar | 54,577 | 52,342 | |
Argentine Peso | 47,553 | 42,896 | |
Uruguayan Peso | 495 | 534 | |
Brazilian Reais | 79,586 | 101,734 | |
182,211 | 197,506 | ||
As of March 31, 2019 trade receivables of US$ 5,720 (December 31, 2018: US$ 5,052) were past due but not impaired. The ageing analysis of these receivables indicates that US$ 386 and US$ 318 are over 6 months in March 31, 2019 and December 31, 2018, respectively.
The creation and release of allowance for trade receivables have been included in 'Selling expenses' in the statement of income. Amounts charged to the allowance account are generally written off, when there is no expectation of recovering additional cash.
The other classes within other receivables do not contain impaired assets.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above.
18. Inventories
March 31, | December 31, | ||||||
2019 | 2018 | ||||||
(unaudited) | |||||||
Raw materials | 76,948 | 48,140 | |||||
Finished goods (Note 5) (i) | 52,971 | 79,758 | |||||
Others | 170 | 204 | |||||
130,089 | 128,102 | ||||||
(i): Finished goods of Crops reportable segment are valued at fair value. | |||||||
19. | Cash and cash equivalents | ||||||
March 31, | December 31, | ||||||
2019 | 2018 | ||||||
(unaudited) | |||||||
Cash at bank and on hand | 105,244 | 197,544 | |||||
Short-term bank deposits | 51,645 | 76,091 | |||||
156,889 | 273,635 | ||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 35
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
20. Shareholder´s contribution
Number of shares | Share capital and | ||
(thousands) | share premium | ||
At January 1, 2018 | 122,382 | 1,092,507 | |
Purchase of own shares | - | (11,398) | |
At March 31, 2018 | 122,382 | 1,081,109 | |
At January 1, 2019 | 122,382 | 1,084,076 | |
At March 31, 2019 | 122,382 | 1,084,076 | |
Share Repurchase Program
On September 12, 2013, the Board of Directors of the Company authorized a share repurchase program for up to 5% of its outstanding shares. The repurchase program has been renewed by the Board of Directors after each 12-month period. On August 14, 2018, the Board of Directors approved the renewal of the Program and extension of the term for an additional twelve-month period ending on September 23, 2019.
Repurchases of shares under the program may be made from time to time (i) in open market transactions in compliance with the trading conditions of Rule 10b-18 under the U.S. Securities Exchange Act of 1934, as amended, and applicable rules and regulations; and (ii) through privately negotiated transactions. The share repurchase program does not require Adecoagro to acquire any specific number or amount of shares and may be modified, suspended, reinstated or terminated at any time in the Company's discretion and without prior notice. The size and the timing of repurchases will depend upon market conditions, applicable legal requirements and other factors.
As of March 31, 2019, the Company repurchased an aggregate of 8,421,549 shares under the program, of which 2,598,423 have been utilized to cover the exercise of the Company's employee stock option plan and restricted stock units plan. During the period ended March 31, 2019 and 2018 the Company repurchased shares for an amount of nill and US$ 13,492, respectively. The outstanding treasury shares as of March 31, 2019 totaled 5,826,116.
21. Equity-settledshare-based payments
The Group has set a "2004 Incentive Option Plan" and a "2007/2008 Equity Incentive Plan" (collectively referred to as "Option Schemes") under which the Group grants equity-settled options to senior managers and selected employees of the Group´s subsidiaries. Additionally, in 2010 the Group has set a "Adecoagro Restricted Share and Restricted Stock Unit Plan" (referred to as "Restricted Share Plan") under which the Group grants restricted shares, or restricted stock units to senior and medium management and key employees of the Group's subsidiaries.
(a) Option Schemes
No expense was accrued for both periods under the Options Schemes.
As of March 31, 2019, nil options (March 31, 2018: nil) were exercised, and nil options (March 31, 2018: 2,575) were forfeited, and 594,879 options were expired (March 31, 2018: nil).
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 36
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
21. Equity-settledshare-based payments (Continued)
(b) Restricted Share and Restricted Stock Unit Plan
As of March 31, 2019, the Group recognized compensation expense US$ 1.4 million related to the restricted shares granted under the Restricted Share Plan (March 31, 2018: US$ 1.3 million). For the three-month period ended March 31, 2019, 514 Restricted Stock Units were forfeited (March 31, 2018: 4,906).
22. Trade and other payables
March 31, | December 31, | ||
2019 | 2018 | ||
(unaudited) | |||
Non-current | |||
Payable from acquisition of property, plant and equipment (Note 27) | 3,202 | - | |
Other payables | 228 | 211 | |
3,430 | 211 | ||
Current | |||
Trade payables | 86,541 | 94,483 | |
Advances from customers | 1,886 | 3,813 | |
Amounts due to related parties (Note 28) | - | 354 | |
Taxes payable | 4,900 | 6,457 | |
Payables from acquisition of property, plant and equipment (Note 27) | 4,030 | - | |
Other payables | 647 | 1,119 | |
98,004 | 106,226 | ||
Total trade and other payables | 101,434 | 106,437 | |
The fair values of current trade and other payables approximate their respective carrying amounts due to their short-term nature. The fair values of non-current trade and other payables approximate their carrying amount, as the impact of discounting is not significant.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 37
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
23. | Borrowings | |||
March 31, | December 31, | |||
2019 | 2018 | |||
(unaudited) | ||||
Non-current | ||||
Senior Notes (*) | 496,229 | 496,118 | ||
Bank borrowings (*) | 214,429 | 221,971 | ||
Obligations under finance leases | - | 395 | ||
710,658 | 718,484 | |||
Current | ||||
Senior Notes (*) | 750 | 8,250 | ||
Bank overdrafts | 10,811 | 2,320 | ||
Bank borrowings (*) | 163,738 | 132,862 | ||
Obligations under finance leases | - | 200 | ||
175,299 | 143,632 | |||
Total borrowings | 885,957 | 862,116 | ||
(*) The Group was in compliance with the related covenants under the respective loan agreements.
As of March 31, 2019, total bank borrowings include collateralized liabilities of US$ 81,974 (December 31, 2018: US$ 87,738). These loans are mainly collateralized by property, plant and equipment sugarcane plantations, sugar export contracts and shares of certain subsidiaries of the Group.
Notes 2027
On September 21, 2017, the Company issued senior notes (the "Notes") for US$ 500 million, at an annual nominal rate of 6%. The Notes will mature on September 21, 2027. Interest on the Notes are payable semi-annually in arrears on March 21 and September 21 of each year. The total proceeds nets of expenses was US$ 496.5 million.
The Notes are fully and unconditionally guaranteed on a senior unsecured basis by certain of our current and future subsidiaries, currently: Adeco Agropecuaria S.A., Adecoagro Brasil Participações S.A., Adecoagro Vale do Ivinhema S.A., Pilagá S.A. and Usina Monte Alegre Ltda. are the only Subsidiary Guarantors.
The Notes contain customary financial covenants and restrictions which require us to meet pre-defined financial ratios, among other restrictions.
The maturity of the Group's borrowings (excluding obligations under finance leases) and the Group's exposure to fixed and variable interest rates is as follows:
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 38
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
23. Borrowings (continued)
March 31, | December 31, | ||
2019 | 2018 | ||
(unaudited) | |||
Fixed rate: | |||
Less than 1 year | 124,834 | 105,708 | |
Between 1 and 2 years | 16,197 | 16,287 | |
Between 2 and 3 years | 25,627 | 25,704 | |
Between 3 and 4 years | 39,766 | 43,507 | |
Between 4 and 5 years | 26,135 | 26,415 | |
More than 5 years | 505,593 | 505,456 | |
738,152 | 723,077 | ||
Variable rate: | |||
Less than 1 year | 50,465 | 37,724 | |
Between 1 and 2 years | 21,072 | 17,278 | |
Between 2 and 3 years | 26,332 | 29,861 | |
Between 3 and 4 years | 20,190 | 22,886 | |
Between 4 and 5 years | 17,246 | 18,251 | |
More than 5 years | 12,500 | 12,444 | |
147,805 | 138,444 | ||
885,957 | 861,521 | ||
The breakdown of the Group´s borrowing by currency is included in Note 2 - Interest rate risk.
The carrying amount of short-term borrowings is approximate its fair value due to the short-term maturity. Long term borrowings subject to variable rate approximate their fair value. The fair value of long-term subject to fix rate do not significant differ from their fair value. The fair value (level 2) of the notes equals US$ 470 million, 94% of the nominal amount.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 39
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
24. | Lease liabilities | |||
March 31, | December 31, | |||
2019 | 2018 | |||
(unaudited) | ||||
Lease liabilities | ||||
Non-current | 143,375 | - | ||
Current (*) | 34,884 | - | ||
178,259 | - |
(*) Includes US$ 8,321 of Related parties.
The maturity of the Group's lease liabilities is as follows:
March 31,
2019
Less than 1 year Between 1 and 2 years Between 2 and 3 years Between 3 and 4 years Between 4 and 5 years More than 5 years
34,884
8,787
8,693
6,261
5,559
114,075
178,259
25. Payroll and social security liabilities
March 31, | December 31, | ||
2019 | 2018 | ||
(unaudited) | |||
Non-current | |||
Social security payable | 1,347 | 1,219 | |
1,347 | 1,219 | ||
Current | |||
Salaries payable | 11,678 | 8,841 | |
Social security payable | 2,597 | 3,112 | |
Provision for vacations | 8,327 | 9,770 | |
Provision for bonuses | 3,649 | 4,255 | |
26,251 | 25,978 | ||
Total payroll and social security liabilities | 27,598 | 27,197 | |
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 40
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
26. Provisions for other liabilities
The Group is subject to several laws, regulations and business practices of the countries where it operates. In the ordinary course of business, the Group is subject to certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings, including those involving tax, labor and social security, administrative and civil and other matters. The Group accrues liabilities when it is probable that future costs will be incurred and it can reasonably estimate them. The Group bases its accruals on up-to-date developments, estimates of the outcomes of the matters and legal counsel experience in contesting, litigating and settling matters. As the scope of the liabilities becomes better defined or more information is available, the Group may be required to change its estimates of future costs, which could have a material effect on its results of operations and financial condition or liquidity. There have been no material changes to claimed amounts and current proceedings since December 31, 2018.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 41
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
27. Disposals and acquisitions
Acquisitions
In January 2019, the Company acquired, the remaining 50% of CHS Agro S.A. a joint venture between the Company and CHS Argentina S.A. After this acquisition, we own 100% of CHS Agro S.A. which has since been renamed as Girasoles del Plata S.A. The consideration for this operation was nominal. As a result of this transaction, the Company recognized a gain in the line item Other Operating Income of USD 0.2 million.
Net assets acquired are as follows:
Property, plant and equipment | 21,800 |
Intangible assets, net | 41 |
Inventories | 1,866 |
Trade and other receivables, net | 4,492 |
Deferred income tax liabilities | (4,546) |
Trade and other payables | (1,031) |
Current income tax liabilities | (5) |
Payroll and Social liabilities | (153) |
Borrowings | (23,062) |
Cash and cash equivalents added as a result of the business combination | 747 |
Total net assets added as a result of business combination | 149 |
Fair value of previously held equity interest | |
74 | |
Gain for bargain purchase | 75 |
In January 2019, the Company acquired 100% of OlamAlimentos S.A. whose principal asset is a peanuts processing facility located in the Province of Córdoba, (currently Mani del Plata S.A.) from Olam International Ltd.The consideration for this acquisition was USD 10 million to be disbursed in three installments, with the first payment made at closing. This transaction qualifies as a purchase of assets.
In February 2019, the Company acquired two dairy facilities from SanCor Cooperativas Unidas Limitada ("SanCor"). The first facility is located in Chivilcoy, Province of BuenosAires and processes fluid milk while the second facility is located in Morteros, Province of Cordoba and produces powder milk and cheese. Together with this facilities, we also acquired the brands Las Tres Niñas and Angelita. The total consideration for this operations was US$ 47 million. This transaction qualifies as a purchase of assets.
Disposals
In May 2018, the Group completed the sale of Q45 Negócios Imobiliários Ltda., a wholly owned subsidiary, which main underlying asset is the Rio De Janeiro Farm, for a selling price of US$ 34 million (Reais 120 million), which was fully collected as of the date of these financial statements. This transaction resulted in a gain of US$ 22 million included in "Other operating income" under the line item "Gain from the sale of farmland and other assets".
In June 2018, the Group completed the sale of Q43 Negócios Imobiliários Ltda., a wholly owned subsidiary , which main underlying asset is the Conquista Farm, for a selling price of US$ 18.4 million (Reais 68 million), of which US$ 5.6 million (Reais
21.4 million) has already been collected and the balance will be collected in four annual installments starting in June 2019. This transaction resulted in a gain of US$ 14 million, included in "Other operating income" under the line item "Gain from the sale of farmland and other assets"
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 42
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
27. Disposals and acquisitions (continued)
In January 2019, we completed the sale of Q065 Negócios Imobiliários Ltda., a wholly owned subsidiary , which main underlying asset is the Alto Alegre Farm, for a selling price of US$ 16.6 million (Reais 62.5 million), of which US$ 2.2 million (Reais 8.4 million) has already been collected and the balance will be collected in seven annual installments starting in June 2019.
This transaction resulted in a gain before tax of US$ 1.5 million, and also in the reclassification of Revaluation surplus to retained earnings of U$S 8.0 million.
28. Related-party transactions
The following is a summary of the balances and transactions with related parties:
Income / (loss) included in the | Balance receivable / (payable) | |||||||||
Related party | Relationship | Description of | statement of income | |||||||
transaction | ||||||||||
March 31, | March 31, | March 31, | December 31, | |||||||
2019 | 2018 | 2019 | 2018 | |||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||
Mario Jorge de Lemos | (i) | Receivables (Note | ||||||||
Vieira/ Cia Agropecuaria | 17) | - | - | - | 324 | |||||
Monte Alegre/ Alfenas | ||||||||||
Agricola Ltda/ Marcelo | Cost of | |||||||||
Weyland Barbosa Vieira/ | manufactured | |||||||||
Paulo Albert Weyland | products sold and | |||||||||
Vieira | services rendered | 56 | 90 | - | - | |||||
Payables (Note | - | (160) | ||||||||
22) | ||||||||||
Leases liabilities | - | - | (8,321) | - | ||||||
(Note 24) | ||||||||||
Girasoles del Plata S.A. | Joint venture | Services | - | 18 | - | - | ||||
(ii) | ||||||||||
Sales of goods | - | 44 | - | - | ||||||
Payables (Note | - | - | - | (194) | ||||||
22) | ||||||||||
Interest income | - | 78 | - | - | ||||||
Receivables (Note | - | - | - | 8,337 | ||||||
17) (iii) | ||||||||||
Directors and senior | Employment | Compensation | ||||||||
management | ||||||||||
selected | (1,779) | (981) | (17,353) | (16,353) | ||||||
employees |
- Shareholder of the Company.
- Since February 2019, Girasoles del Plata S.A. (formerly CHS Agro S.A.) is fully part of the Group.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 43
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
29. Basis of preparation and presentation
The information presented in the accompanying condensed consolidated interim financial statements ("interim financial statements") as of March 31, 2019 and for the three-month periods ended March 31, 2019 and 2018 is unaudited and in the opinion of management reflect all adjustments necessary to present fairly the financial position of the Group as of March 31, 2019, results of operations and cash flows for the three-month periods ended March 31, 2019 and 2018. All such adjustments are of a normal recurring nature. In preparing these accompanying interim financial statements, management has made certain estimates and assumptions that affect reported amounts in the financial statements and disclosures of contingencies. Actual results may differ from those estimates. The results for interim periods are not necessarily indicative of annual results.
These interim financial statements have been prepared in accordance with IAS 34, 'Interim financial reporting' and they should be read in conjunction with the annual financial statements for the year ended December 31, 2018, which have been prepared in accordance with IFRSs.
A complete list of standards, amendments and interpretations to existing standards published but not yet effective for the Group is described in Note 2.1 to the annual financial statements.
The accounting policies adopted in the preparation of the interim financial statements are consistent with those followed in the preparation of the Group's annual consolidated financial statements for the year ended December 31, 2018 except for the changes in connection with the implementation of IFRS 16 - Leases, explained in Note 24 of these Consolidated Condensed Interim Financial Statements.
Description of accounting policies changed during the period.
Revaluation model for investment property
During the period ended September 30, 2018, the Company adopted the revaluation model for its investment property. The higher valuation resulted in the condensed consolidated statement of income for the three-month period ended March 31, 2018, as follows:
March 31, | Increase/ | March 31, | |
2018 | (Decrease) | 2018 (recast) | |
Other operating income | 18,936 | 3,152 | 22,088 |
Profit before income tax | 12,236 | 3,152 | 15,388 |
Income tax expense | (3,704) | (788) | (4,492) |
Profit for the period | 8,532 | 2,364 | 10,896 |
Basic earnings per share | 0.059 | 0.020 | 0.079 |
Diluted earnings per share | 0.058 | 0.020 | 0.078 |
Leases
For fiscal years beginning on January 1st 2019 and onward it is mandatory the adoption of IFRS 16 - Leases.We disclose herein the new accounting policies that have been applied from January 1, 2019, where they are different to those applied in prior periods.
IFRS 16 was adopted following the simplified approach, without restating comparative. The reclassifications and the adjustments arising from the new lease accounting rules are directly recognized in the opening balance sheet on January 1, 2019.
The Company has adopted IFRS 16 Leases from January 1, 2019, but has not restated comparatives for previous reporting period as permitted under the specific transition provisions in the Standard.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 44
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
29. Basis of preparation and presentation (continued)
On adoption of IFRS 16, the Company recognized lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17 Leases. In the previous year, the Company only recognize lease liabilities in relation to leases that were classified as "Finance leases" under IAS 17 Leases. For the initial recognition, these liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of January 1, 2019.
The adoption of IFRS 16 Leases from January 1, 2019, resulted in changes in accounting policies and adjustments to the amounts recognized in the financial statements.
Short term leases are recognized on a straight line basis as an expense in the income statement.
Right-of-use assets
The total of the right-of-use assets are included under such type in the Statement of Financial Position:
Right of use | Lease liabilities | ||
Closing balance as of December 31, 2018 | - | - | |
Initial recognition | 204,937 | (204,937) | |
Reclassifications from Trade and other receivables, net | - | 26,794 | |
Opening balance as of January 1, 2019 | 204,937 | (178,143) |
The impact of the adoption of IFRS 16 did not have effect in retained earnings at January 1, 2019.
According with the adoption of IFRS 16, the new accounting policy for leases is as follows;
Leases are recognized as a right-of-use asset and corresponding liability at the date of which the leased asset is available for use by the group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.
In determining the lease term, the Company considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).
Short term leases are recognized on a straight line basis as an expense in the income statement.
Accounting as lessee
The Company recognizes a right-of-use asset and a lease liability at the commencement date of each lease contract that grants the right to control the use of an identified asset during a period of time. The commencement date is the date in which the lessor makes an underlying asset available for use by the lessee.
The Company applied exemptions for leases with a duration lower than 12 months, with a value lower than thirty thousand dollars and/or with clauses related to variable payments. These leases have been considered as short-term leases and, accordingly, no right-of-use asset or lease liability have been recognized.
The weighted average lessee's incremental borrowing rate applied to lease liabilities recognised in the statement of financial osition at the date of initial application was 7.04%.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 45
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
29. Basis of preparation and presentation (continued)
At initial recognition, the right-of-use asset is measured considering:
- The value of the initial measurement of the lease liability;
- Any lease payments made at or before the commencement date, less any lease incentives; and
- Any initial direct costs incurred by the lessee; and
After initial recognition, the right-of-use assets are measured at cost, less any accumulated depreciation and/or impairment losses, and adjusted for any re-measurement of the lease liability.
Depreciation of the right-of-use asset is calculated using the straight-line method over the estimated duration of the lease
contract.
The lease liability is initially measured at the present value of the lease payments that are not paid at such date, including the following concepts:
- Variable lease payments that depend on an index or rate, initially measured using the index or rate as of the commencement date;
- Amounts expected to be payable by the lessee under residual value guarantees;
- The exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
- Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease;
- Fixed payments, less any lease incentives receivable;
- Variable lease payments that depend on an index or rate, initially measured using the index or rate as of the commencement date;
- Amounts expected to be payable by the lessee under residual value guarantees;
- The exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
- Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.
After the commencement date, the Company measures the lease liability by:
- Increasing the carrying amount to reflect interest on the lease liability;
- Reducing the carrying amount to reflect lease payments made; and
- Re-measuringthe carrying amount to reflect any reassessment or lease modifications.
The above mentioned inputs for the valuation of the right of use assets and lease liabilities including the determination of the contracts within the scope of the standard, the contract term ant interest rat used in the discounted cash flow involved a high degree of management´s estimations.
Early adoption of IFRS 3 Amendment
The IASB has issued narrow-scope amendments to IFRS 3,'Business combinations', to improve the definition of a business.
The amended definition emphasizes that the output of a business is to provide goods and services to customers, whereas the previous definition focused on returns in the form of dividends, lower costs or other economic benefits to investors and others.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 46
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
29. Basis of preparation and presentation (continued)
Entities are required to apply the amendments to transactions for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2020. The Company applied this amendment form the period beginning on 1 January 2019.
Seasonality of operations
The Group's business activities are inherently seasonal. The Group generally harvest and sell its grains (corn, soybean, rice and sunflower) between February and August, with the exception of wheat, which is harvested from December to January. Cotton is a unique in that while it is typically harvested from June to August, it requires processing which takes about two to three months to complete. Sales in our Dairy business segment tend to be more stable. However, milk production is generally higher during the fourth quarter, when the weather is more suitable for production. Although our Sugar, Ethanol and Electricity cluster is currently operating under a "non-stop" or "continuous" harvest and without stopping during traditional off-season, the rest of the sector in Brazil is still primarily operating with large off-season periods from December/January to March/April. The result of large off-season periods is fluctuations in our sugar and ethanol sales and in our inventories, usually peaking in December to take advantage of higher prices during the traditional off-season period (i.e., January through April). As a result of the above factors, there may be significant variations in our financial results from one quarter to another. In addition, our quarterly results may vary as a result of the effects of fluctuations in commodities prices, production yields and costs on the determination of initial recognition and changes in fair value of biological assets and agricultural produce.
30. Critical accounting estimates and judgments
The Group's critical accounting policies are also consistent with those of the audited annual financial statements for the year ended December 31, 2018 described in Note 33.
The accompanying notes are an integral part of these condensed consolidated interim financial statements
F- 47
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Adecoagro SA published this content on 21 May 2019 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 21 May 2019 21:32:08 UTC