ADECOAGRO S.A. ADECOAGRO S.A.
ANNUAL REPORT DECEMBER 31, 2020
MANAGEMENT REPORT
COMPANY PROFILE
Adecoagro S.A. (the "Company" or "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 five reportable segments, which are described in detail in Note 3 to these consolidated financial statements.
The Group was established in 2002 and has subsequently grown significantly both organically and through acquisitions. The Group currently has operations in Argentina, Brazil and Uruguay. See Note 31 for a description of the Group companies.
The Company is the Group's ultimate parent company and is a Societe Anonyme corporation incorporated and domiciled in the Grand Duchy of Luxembourg. The address of its registered office is 6 Eugené Ruppert, L-2453, Luxembourg.
The authorized share capital is of USD 220,287,267 and the Board of Directors is authorized to issue up to 146,858,178 shares of a nominal value of USD 1.5 each out of such authorized unissued share capital. As of December 31, 2020, the total unissued share capital totaled USD 36,714,543. From the total number of outstanding shares as of December 31, 2020, the Company held 5,084,864 treasury shares.
Information related to COVID-19 pandemic
In December 2019, a novel strain of coronavirus ("COVID-19") was reported to have surfaced in China and started spreading to the rest of the world in early 2020. The COVID-19 virus is impacting economic activity worldwide and poses the risk that Adecoagro or its employees, contractors, suppliers, customers and other business partners may be prevented from conducting certain business activities for an indefinite period of time, including due to shutdowns mandated by governmental authorities or otherwise adopted by companies as a preventive measure. Given the uncertainty around the extent and timing of the future spread of COVID-19 and the imposition or relaxation of protective measures, it is not possible to predict the COVID-19's effects on the industry, generally, and to reasonably estimate the financial effect on the Company.
In Brazil, the government created a crisis committee to monitor the impact of COVID-19 in March 2020. Since then, it has announced several measures (tax and others) to address the effects of COVID-19. In this regard, the Brazilian health authorities, as well as several state and municipal authorities have adopted or recommended social distancing measures.
In Argentina, on March 20, 2020 the Argentine government implemented a social, preventive and mandatory isolation regime, prohibiting the circulation of people on routes, roads and public spaces (the "Mandatory Isolation Regime") which has already been partially reverted as of the day of this report.
As of the date of this report, the activities pursued by our Argentine subsidiaries, related to agricultural production, distribution and commercialization, were exempted from the Mandatory Isolation Regime for being considered "essential" activities. Also our activities in Brazil have no restrictions
In order to guarantee the hygiene and safety conditions established by the Ministry of Health and to preserve the health of the employees in our subsidiaries, Adecoagro has enacted Prevention and Action Protocols tailored foreach facility, in addition to constituting Crisis Committees. Measures taken include but are not limited to: (i) daily temperature check upon arrival to the facility, (ii) mandatory distancing in the workplace, (iii) maximum limit of people in the lunch room and vehicles (iv) sanitary barriers, (iv) special protective attire. Additionally, remote work has been guaranteed for the duration of the Mandatory Isolation Regime for employees based in central offices, and a rotation scheme has been implemented for administrative employees based in the farms or industrial facilities.
Most of our businesses are operating without any major disruption both at the farm and industry level as well as on the road and at the ports. However, the demand of our products, mainly ethanol in Brazil, has been reduced as a consequence of the lockdown decided by the authorities in connection with the pandemic. Nevertheless, we are optimizing our production mix, in order to mitigate such reduction in demand.
The Company is closely monitoring the situation and taking all necessary measures at its disposal to preserve human life and its operation.
Business overview
Adecoagro is an agricultural company with operations in Argentina, Brazil and Uruguay. We are currently involved in a broad range of businesses, including farming crops and other agricultural products, and dairy operations, sugar, ethanol and energy production and land transformation.
1. Farming Business: As of December 31, 2020 we owned 206,896 hectares (excluding sugarcane farms) of farmland in Argentina and Uruguay, of which 104,758 hectares are croppable, 14,054 hectares are being evaluated for transformation, 55,228 hectares are suitable for raising beef cattle and are mostly leased to third party cattle farmers, constituting a total of 189,448 productive hectares, and 36,183 hectares are legal land reserves pursuant to local regulations or other land reserves. During the 2019/2020 harvest year we held leases or have entered into agriculture partnerships for an additional 97,367 croppable hectares. We own the facilities and have the resources to store and condition 100% of our crop and rice production. We do not depend on third parties to condition our production for sale. Our farming business is subdivided into four main businesses:
• Crop business: We produce a wide range of agricultural commodities including soybeans, corn, wheat, sunflower, peanut and cotton, among others. In Argentina, our farming activities are conducted mainly in the Argentine humid pampas region, where agro-ecological conditions are optimal for low-cost production. Since 2004, we have expanded our operations throughout the center-west region of Uruguay and the western part of the state of Bahia, Brazil, as well as in the northern region of Argentina. During the 2019/2020 harvest year, we planted approximately 196,262 hectares of crops, including second harvests, producing 720,059 tons of grains, including soybeans, wheat, corn, sunflower, cotton and peanut among others. We also planted an additional 6,758 hectares where we produced over 226,821 tons of forage that we used for cow feed in our dairy operation. During the current 2020/21 harvest year, we planted approximately 216,209 hectares of crops, including second harvest, and also planted an additional 5,337 hectares of forage.
• Rice business: We own a fully-integrated rice operation in Argentina. We produce irrigated rice in the northeast provinces of Argentina, where the availability of water, sunlight, and fertile soil results in one of the most ideal regions in the world for producing rice at low cost. We believe that we are one of the largest producers of rough (unprocessed) rice in Argentina, producing 278,348 tons during the 2019/2020 harvest year, which accounted for 23% of the total Argentine production according to Conmasur. We own three rice mills that process our own production, as well as rice purchased from third parties. We produce different types of white and brown rice that are sold both in the domestic Argentine retail market under our own brand; and exported. During the current 2020/21 harvest year, we planted 44,282 hectares of rice.
• Dairy business: We believe that we are a leading dairy producer in South America in terms of our utilization of cutting-edge technology, productivity per cow and grain conversion efficiencies. Through the production of raw milk, we are able to transform forage and grains into value-added animal protein. Our free-stall dairies in
Argentina allow us to optimize our use of resources (land, dairy cow feed and capital), increase our productivity and maximize the conversion of forage and grain into raw milk. We produced 145.2 million liters of raw milk during 2020, with a daily average of 10,876 milking cows, delivering an average of 36.5 liters of milk per cow per day. On October, 2017 we completed the construction of our first bio-digestor with 1.4MWH of installed capacity. The facility generates electricity by burning biogas extracted from the effluents produced by our milking cows. In addition to increasing revenues and securing our energy requirements, this facility enhances the sustainability of our free-stall dairy operation by reducing greenhouse gas emissions, improving the effluent management and concentrating valuable nutrients which are applied back to the fields. In 2019 we acquired two milk processing facilities which produce UHT and UP milk, milk powder and semi-hard cheese with flexibility to sell into both the domestic and export market based on relative profitability. During 2020 our facilities produced 115 million liters of fluid milk, over 3,600 tons of semi-hard cheese and over 18,400 tons of milk powder.
• All Other Segments business: Our all other segments business consists of leasing pasture land to cattle farmers in Argentina. We lease over 13,546 hectares of pasture land which is not suitable for crop production to third party cattle farmers.
2.
Sugar, Ethanol and Energy Business: We cultivate and harvest sugarcane that is processed in our own mills to produce sugar, ethanol and energy. As of December 31, 2019, our total sugarcane plantation consisted of 176,651 hectares, planted over both owned and leased land. We currently own and operate three sugar and ethanol mills, UMA, Angélica and Ivinhema, with a total crushing capacity of 14.2(1) million tons of sugarcane per year as of December 31, 2020. UMA is a small but efficient mill located in the state of Minas Gerais, Brazil, with a sugarcane crushing capacity of 1.2(2) million tons per year, full cogeneration capacity and an associated sugar brand with strong presence in the regional retail market (Açúcar Monte Alegre). We plant and harvest 99.7% of the sugarcane milled at UMA, with the remaining 0.3% acquired from third parties. Angélica and Ivinhema are two new, modern mills, which we built in the state of Mato Grosso do Sul, Brazil, with current sugarcane crushing capacities of 5.6(3) and 7.4(4) million tons per year, respectively. Both mills are located 45 km apart, and form a cluster surrounded by one large sugarcane plantation. Angelica and Ivinhema are equipped with high pressure steam boilers and turbo-generators with the capacity to use all the sugarcane bagasse by-product to generate electricity. Approximately 28% of the electricity generated is used to power the mill and the excess electricity is sold to the local power grid, resulting in the mills having full cogeneration capacity.
For the year ended December 31, 2020, we crushed 11.1 million tons of sugarcane. Our mills produce both sugarand ethanol, and accordingly, we have some flexibility to adjust our production (within certain capacity limits that generally vary between 40% and 80%) between sugar and ethanol, to take advantage of more favorable market demand and prices at given points in time. For the year ended December 31, 2020 we produced 646,981 tons of sugar and 502,170 cubic meters of ethanol.
As of December 31, 2020, our overall sugarcane plantation consisted of 176,651 hectares of sugarcane in the states of Mato Grosso do Sul and Minas Gerais, Brazil, of which 13,291 hectares of sugarcane were planted on owned land, and 163,360 hectares were planted on land leased from third parties under long term agreements.
3.
Land Transformation Business: We acquire farmlands we believe are undeveloped or underutilized and, by implementing cutting-edge production technology and agricultural best practices, transform the land to be suitable for more productive uses, enhance yields and increase the value of the land. During the seventeen-year period since our inception, we have effectively put into production 171,000 hectares of land that were previously undeveloped or undermanaged. During 2019, we continued the transformation process of over 132,936 hectares we own. We realize and capture land transformation value through the strategic disposition of assets that have reached full development potential. We believe that the rotation of our land portfolio allows us to re-allocate capital efficiently, maximizing our return on invested capital. Our current owned land portfolio consists of
225,630 hectares, distributed throughout our operating regions as follows: 93% in Argentina, 6% in Brazil, and 1% in Uruguay. During the last thirteen years, we sold 23 of our fully mature farms, generating capital gains of approximately $240 million.
We promote sustainable land use through our land transformation activities, which seek to promote environmentally responsible agricultural production and a balance between production and ecosystem preservation. We do not operate in heavily wooded areas or wetland areas.
From time to time, the company seeks to recycle its capital by disposing of a portion of its fully developed farms. This allows the company to monetize the capital gains generated by its land transformation activities and allocate its capital to acquire land with higher transformation potential or to deploy it in other businesses, thereby enhancing the return on invested capital.
FINANCIAL RISK AND UNCERTAINTIES
The Group manages exposures to financial and commodity risks using hedging instruments that provide the appropriate economic outcome. The principal hedging instruments used may include commodity future contracts, put and call options, foreign exchange forward contracts and interest rate swaps. The Group does not use derivative financial instruments for speculative purposes.
For a detailed analysis of financial risk and uncertainties of the Company, see Note 2 to the Company´s consolidated financial statements as of December 31, 2020.
OPERATING AND FINANCIAL REVIEW AND PROSPECTS
The following tables present selected historical consolidated financial data of Adecoagro S.A. for the years indicated below. We have derived the selected historical statement of income, cash flow and balance sheet data as of and for the years ended December 31, 2020, and 2019 from the consolidated financial statements.
The consolidated financial statements are prepared in accordance with IFRS as issued by the IASB and the interpretations of the IFRIC and in accordance with IFRS adopted by the European Union. You should read the information contained in these tables in conjunction with the consolidated financial statements.
Statement of Income
$ thousands | 12M20 | 12M19 | Chg % |
Sales of goods and services rendered | 817,764 | 887,138 | (7.8)% |
Cost of goods sold and services rendered | (611,946) | (671,173) | (8.8)% |
Initial recognition and changes in fair value of biological assets | |||
and agricultural produce | 122,729 | 68,589 | 78.9 % |
Changes in net realizable value of agricultural produce after | |||
harvest | 7,005 | 1,825 | 283.8 % |
Margin on manufacturing and agricultural activities before | |||
operating expenses | 335,552 | 286,379 | 17.2 % |
General and administrative expenses | (53,428) | (57,202) | (6.6)% |
Selling expenses | (95,058) | (106,972) | (11.1)% |
Other operating income, net | 1,987 | (822) | (341.7)% |
Profit from operations before financing and taxation | 189,053 | 121,383 | 55.7 % |
Finance income | 26,054 | 8,979 | 190.2 % |
Finance costs | (213,776) | (126,111) | 69.5 % |
Other financial results - Net gain of inflation effects on the | |||
monetary items | 12,064 | 16,911 | (28.7)% |
Financial results, net | (175,658) | (100,221) | 75.3 % |
Profit before income tax | 13,395 | 21,162 | (36.7)% |
Income tax (expense) | (12,325) | (20,820) | (40.8)% |
Profit for the period | 1,070 | 342 | 212.9 % |
4 |
The Group´s Profit from operations before financing and taxation for the year ended December 31, 2020 totaled $189 million, compared to a gain of $121.4 million in 2019. This increased was primarily caused by the improvement in the operating level, with an increase of 55% of profit from operations (please refer to "BUSINESS SEGMENT HIGHLIGHTS" below)
Net financial results in 2020 totaled a loss of $175.7 million compared to a loss of $100.2 million in 2019. These results are primarily composed of Foreign exchange gains and inflation accounting effects, as explained below:
(i) Foreign exchange losses (composed of "Cash Flow Hedge - Transfer from Equity (1) and "Fx Gain/Loss line" items) reflect the impact of foreign exchange variations on our dollar denominated monetary assets and liabilities. The $109.3 million loss is explained by our negative net foreign currency position. During 12M20, the Brazilian Real registered a 28.9% nominal depreciation, compared to a depreciation of 4.0% during 12M19. At the same time, and further contributing to the foreign exchange loss, the Argentine Peso depreciated 40.5% during 2020, compared to a 58.9% nominal depreciation registered during 2019. These results are non-cash in nature and do not impact the net worth of the Company, in U.S. dollars.
(ii) Inflation accounting effects reflect the results derived from the exposure of our net monetary position to inflation. Monetary assets generate a loss when exposed to inflation while monetary liabilities generate a gain every time inflation reduces the owed balance, in real terms. During 2020 we had a negative net monetary position (monetary liabilities were higher than monetary assets), so we registered a $12.1 million gain, 28.7% lower compared to 2019. The decrease was primarily explained by the higher inflation registered during 2019, which amounted to 53.8% in 2019 compared to 36.1% in 2020.
In addition, the $20.2 million year-over-year increase in Other Expenses is mostly driven by our financial strategy to capitalize on the gap between Argentina's official and blue chip rate.
BUSINESS SEGMENT HIGHLIGHTS
Farming & Land transformation business - Financial highlights
$ thousands | 12M20 | 12M19 | Chg % |
Gross Sales | |||
Farming | 411,016 | 359,771 | 14.2% |
Total Sales | 411,016 | 359,771 | 14.2% |
Adjusted EBITDA (1) | |||
Farming | 89,575 | 61,213 | 46.3% |
Land Transformation | 18,132 | 10,526 | 72.3% |
Total Adjusted EBITDA (1) | 107,707 | 71,739 | 50.1% |
Adjusted EBIT (1) | |||
Farming | 70,679 | 44,312 | 59.5% |
Land Transformation | 7,934 | 2,504 | n.m |
Total Adjusted EBIT (1) | 78,613 | 46,816 | 67.9% |
(1) Please see "Reconciliation of Non-IFRS measures" for a reconciliation of Adjusted EBITDA and Adjusted EBIT to Profit/Loss. Adjusted EBITDA is defined as consolidated profit from operations before financing and taxation, depreciation and amortization plus the gains or losses from disposals of non-controlling interests in subsidiaries. Adjusted EBIT is defined as consolidated profit from operations before financing and taxation plus the gains or losses from disposals of non-controlling interests in subsidiaries. Adjusted EBITDA margin and Adjusted EBIT margin are calculated as a percentage of net sales.
In 2020 Adjusted EBITDA in the Farming and Land Transformation businesses reached $107.7 million, $35.9 million, or 50.1% higher year-over-year. The increase in financial performance is mostly explained by the $28.3 million higher results generated by the Farming business, although the Land Transformation business contributed with a $7.6 million increase following the completion of two land sales during 2020.
The Rice business accounted for an increase in Adjusted EBITDA of 67.8% or $13.7 million compared to the previous year, reaching $34.1 million in 2020. This was mostly driven by: (i) a $6.3 million gain in the mark-to-market of our biological assets explained by the increase in commodity prices coupled with an increase in area and yields, as a result of recent investments which enhance productivity; and ii) a $6.9 million reduction in selling expenses due to a 4% reduction in export taxes and the cost dilution effect as a result of the depreciation of the Argentine peso during 2020.
The Crops business generated an Adjusted EBITDA of $35.7 million during 2020, 39.1% or $10.0 million higher compared to 2019. This is mainly explained by (i) a $17.0 million gain in the mark-to-market of our biological asset and of our grain inventory, as a consequence of the increase in commodity prices, the higher planted area and the increase in yields for most of our crops; and by (ii) a cost dilution in U.S. dollars on account of enhanced efficiencies and the depreciation of the Argentine Peso. These results were partially offset by a $10.5 million loss in the mark-to-market of our commodity hedge position.
The Dairy business was responsible for an increase in Adjusted EBITDA of 21.3% or $3.8 million compared to last year, totaling $18.2 million during 2020. This increase was driven by (i) our enhanced efficiencies at the farm and industry level, led by our continuous focus on increasing productivity in every stage of our value chain; (ii) our production flexibility which enabled us to capture the increase in demand in the domestic market driven by the Covid-19 pandemic; and (iii) an increase in gross sales thanks to a 58.7% increase in sales volume, partially due to the three month gap in 2019's industrial operations. This increase was partially offset by higher costs and expenses on account of the larger volume.
Crops
Crops - Highlights
metric | 12M20 | 12M19 | Chg % | |
Gross Sales | $ thousands | 170,114 | 168,938 | 0.7% |
tons | 644,242 | 762,489 | (15.5)% | |
$ per ton | 264.1 | 221.6 | 19.2% | |
Adjusted EBITDA | $ thousands | 35,694 | 25,654 | 39.1% |
Adjusted EBIT | $ thousands | 30,297 | 20,992 | 44.3% |
Planted Area | hectares | 237,806 | 225,115 | 5.6% |
During 2020, gross sales in our Crops segment reached $170.1 million, marking a $1.1 million increase compared to the same period of last year. Selling volume decreased by 15.5% year-over-year, despite an increase in yields, due to our carry-over strategy to benefit from the positive outlook on commodity prices. This decrease in volume was fully offset by a 19.2% increase in average selling prices, mostly driven by the higher year-over-year prices of peanut, which is a crop in which we have increased our production and processing capacity, as well as the share of total net sales from
17.2% in 2019 to 27.6% in 2020. Sunflower and peanuts are a good fit into our crop rotation system, fits well in our portfolio of traditional crops, offers higher margins and strengthens our diversification strategy. In this line, in the 2020/21 season we almost doubled the planted area of peanut and sunflower, as well as continued enhancing industrial efficiencies in our processing facilities.
Adjusted EBITDA amounted to $35.7 million during 2020, $10.0 million or 39.1% higher year-over-year. This increase was mainly driven by (i) an increase in the margin recognized throughout the biological growth cycle of our crops, namely a $11.5 million gain in the mark-to-market of our biological assets and a $5.5 million gain in the mark-to-market of our inventories, impacted by the increase in commodity prices, the higher planted area and the increase in yields for most of our crops; coupled with (ii) cost dilution in U.S. dollars on account of enhanced efficiencies and the depreciation of the Argentine Peso. These results were partially offset by a $10.5 million loss in the mark-to-market of our commodity hedge position.
Crops - Gross Sales Breakdown
Volume | $ per unit | ||||||||
Crop | 12M20 | 12M19 | Chg % | 12M20 | 12M19 | Chg % | 12M20 | 12M19 | Chg % |
Soybean | 44,732 | 46,386 | (3.6)% | 189,273 | 197,752 | (4.3)% | 236 | 235 | 0.8% |
Corn (1) (3) | 45,088 | 61,332 | (26.5)% | 313,195 | 413,903 | (24.3)% | 144 | 148 | (2.8)% |
Wheat (2) | 15,109 | 20,318 | (25.6)% | 81,683 | 108,814 | (24.9)% | 185 | 187 | (0.9)% |
Sunflower | 10,925 | 8,430 | 29.6% | 13,856 | 10,581 | 30.9% | 788 | 797 | (1.0%) |
Cotton Lint | 1,996 | 616 | n.m | 1,644 | 832 | 97.6% | 1,214 | 740 | 64.0% |
Peanut | 46,983 | 28,994 | 62.0% | 43,062 | 30,608 | 40.7% | 1,091 | 947 | 15.2% |
Others | 5,281 | 2,862 | 84.5% | 1,530 | - | n.a | |||
Total | 170,114 | 168,938 | 0.7% | 644,242 | 762,489 | (15.5)% | |||
(1) Includes sorghum | |||||||||
(2) Includes barley |
(3) Includes commercialization of third party: 119.9 thousand tons ($18.8 million) in 2019 and 102.2 thousand tons ($15.1 million) in 2020.
Amount ($ '000)
The table on the next page shows the gains or losses from crop production generated in 2020. Our crop operations related to the 2019/20 season, which were harvested between January and June 2020, generated Changes in Fair Value of $29.8 million. As of December 31, 2020, 46,093 hectares pertaining to the 2020/21 harvest (mainly corn, peanut and sunflower) had attained significant biological growth, generating initial recognition and Changes in Fair Value of biological assets of $1.6 million. In addition, 42,996 hectares of 2020/21 winter crops (wheat and barley) had been harvested, generating Changes in Fair Value and Agricultural Produce during 2020 of $9.6 million. As a result, total Changes in Fair Value of Biological Assets and Agricultural Produce during 2020, reached $41.0 million, compared to $30.3 million generated in 2019. The increase is mainly explained by higher prices expected for 2020/2021 harvest, as a result of international dynamics.
Crops - Changes in Fair Value Breakdown - as of December 31, 2020
12M20
metricSoySoy 2nd Crop
CornCorn 2nd Crop
Whea Sunflow Cotto Peanu Total t er n t
2019/20 Harvest Year
Total Harvested Area
Hectares
50,249
26,733
53,484
7,308
30,509
6,818
4,461
16,814
196,376
Area harvested in previous periods
Area harvested in current period
Hectares
Hectares
50,249
-
26,733
-
53,484
-
7,308
-
26,862 3,647
6,818
-
4,461
-
16,814
-
26,862 169,514
Changes in Fair Value 12M20 from planted area 2019/20 (ii)
$ thousands
5,361
2,852
10,467
1,430
719
445
373
8,201
29,848
2020/21 Harvest Year
Total Planted Area
Hectares
44,833
25,420
38,526
3,379
44,037
16,508
3,518
26,078 202,300
Area planted in initial growth stages
Hectares
41,342
25,420
22,663
3,379
-
4,414
3,518
12,475 113,211
Area planted with significant biological growth
Hectares
3,492
-
15,863
-
1,041
12,094
-
13,603
46,093
Area harvested in current period
Hectares
-
-
-
-
42,996
-
-
-
42,996
Changes in Fair Value 12M20 from planted area 2020/21 (ii)
$ thousands
(130)
-
2,133
-
227
(538)
-
(131)
1,561
Changes in Fair Value 12M20 from harvested area 2020/21 (i)
$ thousands
-
-
-
-
9,630
-
-
-
9,630
Total Changes in Fair Value in 12M20
$ thousands
5,231
2,852
12,600
1,430
10,576
(93)
373
8,070
41,039
Rice
Rice - Highlights
Gross Sales
$ thousands thousand tons
metric
12M20 102,886
12M19 102,162
Chg % 0.7%
180.0
191.6
(6.1)%Sales of white rice
$ per ton $ thousands
Sales of By-products Adjusted EBITDA Adjusted EBIT
$ thousands
$ thousands
Area under production
$ thousands hectares
471.4 84,853 18,033 34,108 27,456 41,544
431.6 82,716 19,446 20,328 13,334 39,308
9.2% 2.6% (7.3)% 67.8% n.m 5.7%
Rice Mills
Total Processed Rough Rice (1)
Ending stock - White Rice
(1) Expressed in white rice equivalent.
thousand tons thousand tons
185 24
177 24
4.6%
(0.7)%
Adjusted EBITDA corresponding to the Rice segment in 2020 is primarily explained by the harvest of the 2019/20 crop season which took place during 1Q20 and 2Q20, and the biological growth of the 2020/21 season at year-end. Rice crop is planted during the end of the third quarter, grows mainly throughout the fourth quarter, and is mostly harvested during the first quarter of the following year. Harvested rough rice is processed throughout the year and transformed into white rice, which is sold in the local and export markets year round. The majority of the segment's margins are generated in the first quarter as the crop is harvested, while only a small portion of the margin is generated as the rice is processed and sold during the fourth quarter.
During 2020 total processed rice increased by 4.6% driven by a 5.7% increase in area and a 9.8% increase in yields, coupled with enhanced efficiencies at the industry level. Higher yields are the result of investments we made during the past years to increase productivity and reduce costs such as (i) the implementation of zero level technology in over 30,000 hectares which considerably reduces water consumption at the farm, increases yields by providing better germination, uniform irrigation and lower losses during harvest; (ii) the increasing use of our own machinery for planting and harvesting activities which allows us to seek the optimal harvest timing; and (iii) the installment of an on-site dryer at Oscuro farm which allows our grain storage and handling to be more efficient and reduces transportation costs, among others. Increased efficiencies at the industrial level, such as an improvement in conversion factor and the construction of a parboil plant, allow us to increase our processing volume.
However, selling volume decreased by 6.1% year-over-year explained by the fact that the beginning of period inventories in 2019 were 21.4% higher than in 2020. Average selling prices, in turn, increased by 9.2% year-over-year, fully offsetting the decrease in volume and resulting in a 0.7% increase in gross sales which amounted to $102.9 million.
Adjusted EBITDA totaled $34.1 million in 2020, $13.7 million or 67.8% higher compared to the same period of last year. The increase was mostly driven by: (i) a $6.3 million gain in the mark-to-market of our biological assets explained by the increase in commodity prices coupled with an increase in area and yields, as a result of recent investments which enhance productivity; and ii) a $6.9 million reduction in selling expenses due to the combined effect of a cost dilution following the depreciation of the Argentine peso and the reduction in export taxes from 9% to 5%.
Dairy
Dairy - Highlights
metric | 12M20 | 12M19 | Chg % | |
Gross Sales | $ thousands (1) | 135,471 | 84,767 | 59.8% |
million liters (2)(3) | 342.1 | 215.5 | 58.7% | |
Adjusted EBITDA | $ thousands | 18,153 | 14,965 | 21.3% |
Adjusted EBIT | $ thousands | 11,444 | 9,901 | 15.6% |
Milking Cows | average heads | 10,876 | 9,066 | 20.0% |
Cow Productivity | liter/cow/day | 36.5 | 36.3 | 0.5% |
Total Milk Produced | million liters | 145.2 | 120.1 | 20.9% |
(1) Includes sales of powder milk, cream, electricity and culled cows and processed dairy products
(2) Includes sales of fluid milk, powder milk and cheese, in milk equivalent
(3) The difference between volume processed and volume sold is explained by the sales of raw milk to third parties.
On a full year basis, milk production reached 145.2 million liters during 2020, 20.9% higher year-over-year on account of a 20.0% increase in our cow herd and 0.5% in our productivity which stood at 36.5 liters per cow per day, well above national average.
At an industry level, we processed 297.6 million liters during 2020, 0.6% and 63.3% higher compared to the same period of last year, respectively. On an annual basis the increase is partially explained by the fact that our processing facilities started operations in March 2019. Out of the total processed volume approximately 30% was sourced from our dairy farm operations, while the balance was sourced from local producers in nearby areas or supplied by partners to whom we provide tolling services.
On a full year basis, gross sales increased by 59.8% to $84.8 million and Adjusted EBITDA increased by 21.3% to $18.2 million during 2020. The year-over-year increase was driven by (i) our continuous focus on achieving efficiencies in our vertically integrated operations and increasing our productivity levels in every stage of the value chain; (ii) our flexibility to divert milk to the production of a variety of dairy products, as well as to shift sales across markets, which enabled us to capture the increase in demand in the domestic market driven by the Covid-19 pandemic; and (iii) the three month gap in 2019's industrial operations. This increase was partially offset by higher costs and expenses on account of the larger volume.
Adjusted EBIT amounted to $11.4 million in 2020. However, once interest expenses and the foreign exchange loss related to the financial debt are taken into account, the year-to-date result of the business decreases to negative $7.3 million.
All other Segments
All Other Segments - Highlightsmetric
12M20 | 12M19 | Chg % | ||
Gross Sales | $ thousands | 2,545 | 3,904 | (34.8)% |
Adjusted EBITDA | $ thousands | 1,620 | 266 | n.m |
Adjusted EBIT | $ thousands | 1,482 | 85 | n.m |
All Other Segments primarily encompasses our cattle business. Our cattle segment consists of pasture land that is not suitable for crop production due to soil quality and is leased to third parties for cattle grazing activities.
Adjusted EBITDA for All Other Segment was 1.6 million in 2020, six times higher than during 2019.
Land transformation business
Land transformation - Highlights
metric | 12M20 | 12M19 | Chg % | |
Adjusted EBITDA | $ thousands | 18,132 | 10,526 | 72.3% |
Adjusted EBIT | $ thousands | 7,934 | 2,504 | n.m |
Land sold | Hectares | 5,444 | 6,080 | (10.5)% |
10 |
During 4Q20 we completed the sale of Huelen, a 4,633 hectare farm located in the Province of La Pampa, Argentina.
The selling price marked a 70.0% premium to September 30, 2020´s Cushman and Wakefield´s independent appraisal.
During 2020, Adjusted EBITDA in the Land Transformation segment reached $18.1 million, marking a 72.3% year-over-year increase, mostly led by the sale of Huelen farm and of a 811 hectare plot of Abolengo farm, located in Argentina's Humid Pampas.
Over the last 13 years, we have been able to generate gains of over $200 million by strategically selling at least one of our fully mature farms per year. Monetizing a portion of our land transformation gains allows us to redeploy the capital into higher yielding activities, enabling us to continue growing and enhancing shareholder value.
Sugar, Ethanol & Energy business
Sugar, Ethanol & Energy - Highlights
$ thousands | 12M20 | 12M19 | Chg % |
Net Sales (1) | 385,254 | 487,974 | (21.1)% |
Margin on Manufacturing and Agricultural Act. Before Opex | 190,171 | 184,327 | 3.2% |
Adjusted EBITDA | 253,052 | 253,069 | -% |
Adjusted EBITDA Margin | 65.7% | 51.9% | 26.7% |
(1) Net Sales are calculated as Gross Sales net of sales taxes. |
Please see "Reconciliation of Non-IFRS measures" for a reconciliation of Adjusted EBITDA and Adjusted EBIT to Profit/Loss.
On an annual basis, net sales amounted to $385.3 million, marking a 21.1% decrease compared to 2019. This reduction was driven by the lower average selling prices of sugar, ethanol and energy measured in U.S. dollars (despite an increase in prices measured in BRL of all three products), and the lower volumes of ethanol and energy, partially offset by higher volumes of sugar.
On a full year basis, results were impacted by the effects of the pandemic, however Adjusted EBITDA amounted to $253.1 million, in line with last year.
The table below reflects the breakdown of net sales for the Sugar, Ethanol & Energy business.
Sugar, Ethanol & Energy - Net Sales Breakdown (1)
$ thousands | Units | ||||||||
12M20 | 12M19 | Chg % | 12M20 | 12M19 | Chg % | 12M20 | 12M19 | Chg % | |
Sugar (tons)(2) | 167,832 | 97,200 | 72.7% | 641,068 | 337,447 | 90.0% | 262 | 288 | (9.1)% |
Ethanol (cubic meters) | 180,569 | 337,101 | (46.4)% | 489,873 | 766,573 | (36.1)% | 369 | 440 | (16.2)% |
Energy (Mwh)(3) | 36,853 | 53,673 | (31.3)% | 941,291 | 994,367 | (5.3)% | 39 | 54 | (27.5)% |
TOTAL | 385,254 | 487,974 | (21.1)% |
($/unit)
(1) Net Sales are calculated as Gross Sales net of ICMS, PIS COFINS, INSS and IPI taxes.
(2) Includes commercialization of third party sugar: 38.9k tons ($10.4 MM) in 4Q19 and 119.8k tons ($35.4 MM) in 12M19; 217 tons (-$1.5MM) in 12M20.
(3) Includes commercialization of energy from third parties.
On a year-to-date basis, net sales of sugar increased by 72.7% compared to the same period of 2019, reaching $167.8 million. Sales volume increased by 90.0% year-over-year led by an increase in production mix and volume, which fully offset the 9.1% decrease in average selling prices measured in U.S. dollars despite an increase in pricesmeasured in BRL. Although sugar is traded in U.S. dollars, the depreciation of the Brazilian Real does have an impact on prices due to the fact that our functional currency is BRL and our reporting currency is U.S. dollars.
In addition, during 2020 we started exporting certified organic sugar produced at our UMA mill. Certification is required by the European market and is only granted after having produced organic sugar for a period of three years. We successfully exported approximately 5 thousand tons of organic sugar at an average price of 25 cts/lb, capturing a significant premium over VHP sugar, and plan on doubling the exported figure in 2021. In this way, we not only have a highly efficient Cluster model in place but we also continue to add value to UMA.
On a year-to-date basis net sales of ethanol amounted to $180.6 million, a 46.4% decrease year-over-year. This was driven by a 16.2% decrease in average selling prices measured in U.S. dollars to sugar equivalent prices of 13.2 cts/lb and a 36.1% decrease in volume as a consequence of our strategy to maximize sugar production due to the lagging impact of the pandemic on ethanol prices and demand, in particular during the first semester of the year. During 2020 hydrous and anhydrous ethanol traded, on average, at sugar equivalent prices of 12.0 cts/lb and 13.01 cts/lb, 6.7% discount and 1.3% premium to sugar, respectively.
As part of the RenovaBio program and in hand with our ethanol sales, during 2020 Adecoagro became the first company to sell carbon credits (CBios) at Brazil's stock exchange. During the year we sold 492 thousand CBios at an average price of 40.9 BRL/CBio (7.5 USD/CBio) which is captured in the Other Operating Income line and thus, reflected in our Adjusted EBITDA. We expect to continue increasing the sustainability of our operations and thus, improving our RenovaBio score which will in turn allow us to issue a greater amount of CBios per m3 of ethanol sold.
Year-to-date, net sales of energy amounted to $36.9 million, a 31.3% decrease compared to 2019, driven by a 5.3% decrease in volume and a 27.5% decrease in average selling prices measured in U.S. dollars.
As shown in the table below, total production costs excluding depreciation and amortization reached 4.6 cents per pound in 2020, 29.0% lower year-over-year. This cost reduction was mainly explained by the impact of the higher crushing volume which allowed us to dilute fixed costs, coupled with the year-over-year depreciation of the Brazilian Real, which further contributed to reduce unit costs measured in U.S. dollars. Additionally (i) enhanced agricultural efficiencies; (ii) lower industrial costs due to reduced third party services and temporary suspension of wood chips purchases; and (iii) higher cost capitalization during the interharvest period, also had a positive impact on production costs. These positive effects, were partially offset by the higher cost of third party cane, both as a result of higher purchased volume and higher Consecana prices.
Sugar, Ethanol & Energy - Total Production Costs
12M20
Industrial costs
Industrial costs Cane from 3rd parties Agricultural costs
Harvest costs Cane depreciation Agricultural Partnership costs Maintenance costs
Total Production Costs
Depreciation & Amortization
Total Production Costs (excl. D&A)
66,924 53,377 13,547 197,558 70,381 49,851 25,954 51,372 264,482 (122,515) 141,967
Total Cost (´000) | |||
12M19 | 12M20 | 12M19 | Chg % |
2.2 | 2.7 | (20.8)% | |
1.7 | 2.4 | (27.0)% | |
0.4 | 0.4 | 18.9% | |
6.4 | 8.9 | (28.2)% | |
2.3 | 3.4 | (32.6)% | |
1.6 | 2.3 | (28.4)% | |
0.8 | 1.1 | (20.8)% | |
1.7 | 2.2 | (24.8)% | |
8.6 | 11.7 | (26.5)% | |
(4.0) | (5.2) | (23.3)% | |
4.6 | 6.5 | (29.0)% |
Total Cost per Pound (cts/lbs)
Chg %
83,429 72,185 11,244 271,647 103,116 68,725 32,372 67,434 355,075 (157,657) 197,418
(19.8)%
(26.1)% 20.5% (27.3)%
(31.7)% (27.5)% (19.8)% (23.8)%
(25.5)%
(22.3)%
(28.1)%
Sugar, Ethanol & Energy - Total Cost of Production
Total Production Costs (excl. D&A)
Maintenence Capex
SG&A Cogeneration Tax Recovery Total Cash Cost
Chg % | ||
141,967 | 197,418 | (28.1)% |
105,420 | 119,902 | (12.1)% |
40,963 | 45,232 | (9.4)% |
(27,832) | (53,673) | (48.1)% |
(18,062) | (34,721) | (48.0)% |
242,454 | 274,158 | (11.6)% |
12M20
Total Cost (´000) | |||
12M19 | 12M20 | 12M19 | Chg % |
4.6 | 6.5 | (29.0)% | |
3.4 | 3.9 | (13.2)% | |
1.3 | 1.5 | (10.6)% | |
(0.9) | (1.8) | (48.8)% | |
(0.6) | (1.1) | (48.6)% | |
7.9 | 9.0 | (12.7)% |
Total Cost per Pound (cts/lbs)
Total cost of production reflects, on a cash basis, how much it costs us to produce one pound of sugar and ethanol (in sugar equivalent). Maintenance capex is included in the calculation since it is a recurring investment, necessary to maintain the productivity of the sugarcane plantation. As we are calculating sugar and ethanol costs, energy is deemed a by-product and thus deducted from total costs. As for the tax recovery line item, it includes the ICMS tax incentive that the state of Mato Grosso do Sul granted us until 2032. (Please visit our Investor Education section at ir.adecoagro.com for more information).
As shown in the table above, on a yearly basis, total cash cost on a per pound basis reached 7.9 cents per pound, 12.7% lower compared to 2019. This decrease is explained by: (i) the previously mentioned 29.0% reduction in total production cost; (ii) a 13.2% lower maintenance cost on account of enhanced efficiencies; and (iii) a 10.6% reduction in SG&A, as a result of lower PIS/COFINS tax in line with the lower ethanol sales, partially offset by higher freight costs due to higher sugar sales. The depreciation of the Brazilian Real further contributed to dilute costs in US dollars, since most of our cost structure is denominated in local currency. However, this was partially offset by a 48.6% lower tax recovery on account of the lower ethanol sales and a 48.8% lower cogeneration as a result of the reduced purchase of wood chips.
All of our efforts are devoted to further enhance efficiencies to continue reducing total cash cost. As we ramp up operations in our cluster, cash cost will continue its downward trend as more fixed costs will be diluted.
Sugar, Ethanol & Energy - Changes in Fair Value
$ thousands | 12M20 | 12M19 | Chg % |
Sugarcane Valuation Model current period | 71,506 | 55,355 | 29.2% |
Sugarcane Valuation Model previous period | 55,355 | 47,475 | 16.6% |
Total Changes in Fair Value | 16,151 | 7,881 | 104.9% |
Total Changes in Fair Value of Unharvested Biological Assets (what is currently growing on the fields and will be harvested during the next 12 months) represented a gain of $16.2 million during 2020. The year-over-year growth is attributable to an increase in Consecana prices as a result of higher expected sugar prices, coupled with the depreciation of the Brazilian Real.
Corporate Expenses
Corporate Expenses
$ thousands | 12M20 | 12M19 | Chg % |
Corporate Expenses | (18,806) | (19,639) | (4.2)% |
Adecoagro's corporate expenses include items that have not been allocated to a specific business segment, such as executive officers and headquarter staff, certain professional fees, travel expenses, and office lease expenses, among others. As shown in the table above, corporate expenses for 2020 were $18.8 million, 4.2% lower compared to 2019, mainly as a result of the depreciation of the Brazilian Real and the Argentine peso.
Other Operating Income
Other Operating Income
$ thousands
Gain from the sale of subsidiaries
12M20 (554)
12M19 -
Gain/(Loss) from commodity derivative financial instruments
(8,307)
(492)
Gain from disposal of farmland and other assets (Loss) from onerous contracts - forwards
2,084
1,354
(1,624)
(15)
Gain from disposal of other property items
2,247
(313)
Net gain from fair value adjustment of investment property Others
1,080
(927)
Total
7,106 2,032
(744)
(1,137)
Chg % n.a n.m 53.9% n.m n.m n.m n.m n.m
During 2020 Other Operating Income reported a gain of $2.0 million, compared to a loss of $1.1 million in 2019. This increase is mainly related to the $7.8 million higher results in the Other line, which mainly includes (i) a $6.3 million gain in the mark-to-market of an account receivable corresponding to the latest sale of farms in Brazil, positively impacted by the increase in soybean prices; coupled with (ii) a $2.6 million gain from the sale of carbon credits (CBio) as part of Brazil's RenovaBio program. In fact, during 2020 we completed the sale of 492 thousand CBios at an average price of 40.9 BRL/CBio, resulting in revenues of $3.7 million and net profit of $2.6 million, after taxes. Results were partially offset by a $7.8 million loss attributable to the negative impact of the increase in commodity prices, namely sugar, soybean and corn, in the mark-to-market of our commodity hedge position.
Remarks
Adjusted Free Cash Flow
◦ 2020 marked the first year in which we became Free Cash Flow positive since we started our 5-Year-Plan. Back in 2017 when our investment cycle commenced, we identified expansion projects across all our businesses which, once consolidated, would significantly drive our EBITDA and cash generation. Today, the main capital deployments of our 5-Year-Plan are already behind us and we are in the final stages of our plan, as evidenced by a 56.1% year-over-year decrease in expansion capex during 2020. Now we are focused on continuing to ramp up and consolidate our operations, achieving efficiencies throughout the whole value chain. This has translated into a 12.1% year-over-year increase in Adjusted EBITDA in 2020, in spite of the impact caused by the Covid-19 pandemic. 2020 was a turning point for us and marks a path where we start to generate cash in a structural way. We are confident Adjusted EBITDA and cash flow will continue to increase as we benefit from bigger, more efficient and vertically integrated operations.
◦ During 2020, our operations delivered $108.6 million of Adjusted Free Cash Flow from Operations (Adjusted Free Cash Flow before expansion capex), 60.7% higher year-over-year and $51.9 million of Adjusted Free Cash Flow, $113.3 million higher compared to the same period of last year.
Adjusted Free Cash Flow Summary
$ thousands | 2020 | 2019 | Chg % |
Net cash generated from operating activities (1) | 272,080 | 298,560 | (8.9)% |
Net cash used in investing activities (1) | (121,487) | (252,561) | (51.9)% |
Interest paid (1) | (58,387) | (58,404) | -% |
Expansion Capex reversal | 56,719 | 129,074 | (56.1)% |
Lease Payments | (40,336) | (49,081) | (17.8)% |
Adjusted Free Cash Flow from Operations | 108,589 | 67,588 | 60.7% |
Expansion Capex | (56,719) | (129,074) | (56.1)% |
Adjusted Free Cash Flow | 51,870 | (61,486) | n.a. |
(1) Net of the combined effect of IAS 29 and IAS 21 of the Argentine subsidiaries. Please refer to "Reconciliation of Non-IFRS measures" starting on page 36 for a definition of Adjusted Free Cash Flow and a reconciliation of Adjusted Free Cash Flow to Cash and Equivalents at end of period.
Farmland sale at premium to independent appraisal
◦ In December 2020, we completed the sale of Huelen farm located in the Province of La Pampa, Argentina, for a selling price of $30.1 million of which $10.1 million were collected at the closing date, and the balance will be collected in two annual installments. The selling price represents a 70.0% premium to the latest Cushman and Wakefield´s independent appraisal dated September 30, 2020. We continue to see opportunities for land sales in Argentina and remain optimistic about the possibility to strategically monetize part of our matured farmland portfolio and re-deploy the capital into higher yielding activities.
Certified organic sugar exporters
◦ During 2020 we started exporting organic sugar produced at our UMA mill, becoming one of the few Brazilian players to have obtained the certification required by the European market. In fact, certification is only grantedafter having produced organic sugar for a period of three years. We exported approximately 5 thousand tons at an average price of 25 cts/lb, capturing a significant premium over VHP sugar, and we plan on doubling the exported figure in 2021. In this way, we not only have a highly efficient Cluster model in place but we also continue to add value to our UMA mill.
RenovaBio update
◦ During 2020 a total of 239 mills in Brazil were audited and certified by ANP to issue carbon credits (CBios).
Throughout the year, a total of 18.7 million CBios were generated, of which 14.5 million were purchased by fuel distributors, representing 97.6% of the annual target set by the National Energy Policy Council (CNPE). In June 2020 Adecoagro kickstarted CBio commercialization in the Brazilian stock exchange and we concluded the year selling 492 thousand CBios at an average price of 40.9 BRL/CBio (7.5 USD/CBio). We expect to continue increasing the sustainability of our operations and thus, improving our RenovaBio score which will in turn allow us to issue a greater amount of CBios per m3 of ethanol sold.
Research & Developments, Patents and Licenses, etc
We are involved in rice breeding and development of new varieties with respect to our rice seed business in Argentina. Our efforts are aimed to improve all processes related to the selection of better materials. The objective is to obtain superior cultivars with better yields, industrial performance, commercial quality and culinary parameters, with market demand being the main driver. For that, we constantly do cross-breeding with many varieties in order to achieve new ones with enhanced features. We do that for different rice types, such as long grain, short grain, and round grain among others. At the field level, we aim our breeding of new varieties and rice hybrids adapted to local conditions and production parameters. At the lab level, we are working with molecular markers, that help us to identify specific DNA details, and thus we can improve quality parameters of the seed, such as purity.
In relation to these objectives, we have concluded agreements with selected research and development institutions such as INTA in Argentina, FLAR and HIAAL in Colombia, EPAGRI, IRGA, BASF and others. Our rice seed research team continuously tests and develops new varieties, applying a highly technified and efficient breeding and selection system. We continue strengthening our partnership with HIAAL (Híbridos de Arroz para América Latina or Rice Hybrids for Latam) to develop hybrid rice seeds, with the goal of expanding the scale of hybrid seed production. In addition to this, we keep working with the National University of Northeast of Argentina, aiming to develop double-haploid seeds, which will help us to reduce the selection process from five to one year.
Since 2008, we have developed and released four new varieties of rice on the market. The latest released variety, called SCS121 CL, was introduced to the program in 2017 and includes Clearfield® technology, developed in collaboration with BASF, and is tolerant to the herbicides that control harmful weeds. In 2020 we have registered a new variety, Ita Caabo 109, which is best suited for the center-south of the rice region. Currently, we have an additional cultivar in the registration process. We have registered our own varieties of rice seeds with the corresponding Argentine authorities, the National Seed Institute (INASE) and the National Registry of Seed Variety Properties (RNPC). With respect to the intellectual property of our seeds, we operate under the standards of ArPOV (Argentine Association of Plant Variety Protection).
We use our seed varieties on our farms and sell them to rice producers in Argentina, Brazil, Uruguay and Paraguay.
We have also developed Zero Grade Level technology in most of our farms, which help us to reduce water consumption and so energy consumption as well. For hilly farms, we are implementing Polypipe irrigation system, where we can also save water an energy. Additionally, for all the farms, we are developing an Irrigation Surveillance methodology based on the use of Drones, water sensors connected through IoT and digital platforms, from which we are improving water management efficiencies and enhancing rice yield performance. In addition to this, we are developing a digital platform where we can centralized all the technical information (seed, planting date, fertilizers,irrigation, farmworks, harvest, etc.) All this information is avaliable online through desk computers and mobile phones. See more details for both cases in "Technology and Best Practices" section.
Regarding our Sugar & Ethanol business, we have effectively implemented state-of-the-art technologies such as high pressure boilers for high cogeneration capacity, full mechanization of agricultural operations with online GPS tracking systems on all vehicles (trucks, combines, planters), and concentrated vinasse system among others. In order to optimize fertilization of sugarcane, we are currently enriching the vinasse with different nutrient concentrations, such as nitrogen, phosphorus, sulfur, boron and zinc. We are also using drones in our plantations in order to improve some operational efficiencies such as planting quality, biological control, weed monitor and pesticide spraying among others.
During the last years, we have been developing a seedling production method called "MPB" (Muda Pre Brotada or Pre-Sprout Seedling). It briefly consist of making the seedling sprout in a greenhouse and planting them directly on the fields, instead of the traditional planting of billets (sugarcane stalk pieces). Two main goals are pursued through this technique. One is to introduce new promising and healthy varieties quickly. Second goal is to obtain a reduction of planting cost, which is achieved by using much less volume of planting seedling per hectare. In addition, and because of this, more land can be applied to sugarcane for milling, instead of using that sugarcane for seedling purposes. In 2020, we have produced as much as 17 million of MPB, enough to plant 1,600 hectares of sugarcane.
We are developing vinasse-to-biogas technology in our Cluster in Mato Grosso do Sul (For more details see "Sugar, Ethanol and Energy" in "Operations and Principal Activities" Section). In 2017, we have obtained a patent for the process to produce biogas from sugarcane vinasse. This patent is owned in equal parts with Methanum Engenharia Ambiental. In the industry, we have recently implemented Artificial Intelligence alongside automation process, which is based on Real Time Optimization. By assessing mass balance and measuring main KPIs every other 10 seconds, the system help us to enhance efficiencies all along the industrial processes.
With regards to our Dairy segment in Argentina, we have successfully adapted and implemented the Free Stall model in our operations. Additionally, we have invested in technology to improve the genetics, health and feeding techniques of our cows in order to enhance our milk production. Currently, we are implementing Sexed Semen Technology in all our cows, which is delivering excellent results. The primary goal is to enhance the production of females from our own herd. This allows us to increase the speed-capacity of organic growth by 20% annually, and/or to intensify our cow-genetic selection process. The former being critical to our current Dairy growth project, and the latter being key to improve cow performance (productivity, health, and fertility) (See more details in "Dairy Business" in "Operations and Principal Activities" Section).
In the crop business, we are also implementing the same digital platform mentioned above in the rice section, although some features are still being developed for the particularities of each crop. Currently, we are managing all grain stored in silobags through this platform. In order to enhance efficiencies in the operations, we are developing other digital in-house solutions related to Precision Agriculture such as crop yield estimation, soil quality classification and production dashboard among others. We have also developed a Traceability App for the Peanut segment, where we can track all main production and commercial information, with special focus on quality assurance for customers. We are introducing automation in our Peanut facility, where we are sensing processes with high accuracy and timing, and thus helping us to achieve energy savings.
In addition to traditional R&D activities, since we are constantly looking to improve efficiencies in each of our businesses, we are also constantly researching and analyzing all the available technologies that could be applied in our operations. In addition, we do not only select the best technologies and techniques, but we are strongly involved in their adaptation to our specific needs and local circumstances. Our internal research group is comprised of interdisciplinary teams (agronomists, veterinarians, industrial engineers, technicians, finance and commercial). The group offers support to all business lines and through different levels, from the optimization of current operations, evaluation of new technologies, development of new products, to the assessment of a whole new production system.
Currently we are actively involved in the local AgTech (Agricultural digital-based Technology) ecosystems to identify any high-potential Startup that would not only be able to provide alternative solutions for our operations and potentially the market. We continue to evaluate potential investment in Startups that fit our business (see "Technology and Best Practices" section)
We do not own any registered patents, industrial models or designs, apart from those described in the paragraphs of this section.
Forward-looking Statements
This press release contains forward-looking statements that are based on our current expectations, assumptions, estimates and projections about us and our industry. These forward-looking statements can be identified by words or phrases such as "anticipate," "forecast", "believe," "continue," "estimate," "expect," "intend," "is/are likely to," "may," "plan," "should," "would," or other similar expressions.
The forward-looking statements included in this press release relate to, among others: (i) our business prospects and future results of operations; (ii) weather and other natural phenomena; (iii) developments in, or changes to, the laws, regulations and governmental policies governing our business, including limitations on ownership of farmland by foreign entities in certain jurisdictions in which we operate, environmental laws and regulations; (iv) the implementation of our business strategy, including the expansion of our sugarcane cluster in Mato Grosso do Sul and other current projects; (v) our plans relating to acquisitions, joint ventures, strategic alliances or divestitures; (vi) the implementation of our financing strategy and capital expenditure plan; (vii) the maintenance of our relationships with customers; (viii) the competitive nature of the industries in which we operate; (ix) the cost and availability of financing; (x) future demand for the commodities we produce; (xi) international prices for commodities; (xii) the condition of our land holdings; (xiii) the development of the logistics and infrastructure for transportation of our products in the countries where we operate; (xiv) the performance of the South American and world economies; and (xv) the relative value of the Brazilian Reais, the Argentine Peso, and the Uruguayan Peso compared to other currencies; as well as other risks included in the registrant's other filings and submissions with the United States Securities and Exchange Commission.
These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may turn out to be incorrect. Our actual results could be materially different from our expectations. In light of the risks and uncertainties described above, the estimates and forward-looking statements discussed in this press release might not occur, and our future results and our performance may differ materially from those expressed in these forward-looking statements due to, inclusive, but not limited to, the factors mentioned above. Because of these uncertainties, you should not make any investment decision based on these estimates and forward-looking statements.
The forward-looking statements made in this press release related only to events or information as of the date on which the statements are made in this press release. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.
OPERATING PERFORMANCE
Farming Business
2020/21 Harvest Year
2020/2021 Planting Plan Planting & Production
Planting Plan (hectares)
2020/21 Planting Progress
2020/20212019/2020 Chg %2020/2021Progress %
Soybean | 36,973 | 47,530 | (22.2)% | 36,973 | 100.0% |
Soybean 2nd Crop | 31,342 | 27,169 | 15.4% | 31,342 | 100.0% |
Corn (1) | 47,324 | 53,914 | (12.2)% | 47,324 | 100.0% |
Corn 2nd Crop | 10,294 | 7,319 | 40.7% | 10,294 | 100.0% |
Wheat (2) | 44,391 | 32,925 | 34.8% | 44,391 | 100.0% |
Sunflower | 16,164 | 6,818 | n.m | 16,164 | 100.0% |
Cotton | 3,519 | 4,461 | (21.1)% | 3,519 | 100.0% |
Peanut (3) | 27,827 | 16,814 | 65.5% | 27,791 | 99.9% |
Total Crops | 217,833 | 196,950 | 10.6% | 217,797 | 100.0% |
Rice | 44,282 | 41,544 | 6.6% | 44,282 | 100.0% |
Total Farming | 262,116 | 238,494 | 9.9% | 262,080 | 100.0% |
Owned Croppable Area | 110,891 | 106,513 | 4.1% | ||
Leased Area | 109,299 | 97,493 | 12.1% | ||
Second Crop Area | 41,926 | 34,488 | 21.6% | ||
Total Farming Area | 262,116 | 238,494 | 9.9% | ||
(1) Includes chia and sorghum. | |||||
(2) Includes barley. | |||||
(3) Includes beans. |
During the second half of 2020, we began our planting activities for the 2020/21 harvest year, which continued throughout early 2021. We successfully completed our planting plan, seeding a total of 262,080 hectares, which represents a 9.9% increase in planting area compared to the previous season. Owned croppable area reached 110,891 hectares, 4.1% or 4,378 hectares higher than the 2019/20 season. Leased area, which varies in size on the basis of return on invested capital, has increased by 12.1%, reaching 109,299 hectares.
Crops Update
Soybean: 36,973 hectares have been successfully seeded, representing 100% of our planting plan.
We planted the soybean crop between mid-October and December, according to schedule. Despite being a La Niña year which normally means drier weather, weather conditions have been adequate and rainfall has been abundant during January, allowing the crop to develop according to plan. However, increased precipitation will be necessary as yields are currently being defined.
Soybean 2nd crop: 31,342 hectares have been successfully planted and are developing well.
Corn: 47,324 hectares have been successfully planted, representing 100% of the planting plan. In an effort to diversify our crop risk and minimize our water requirements, we planted early corn seeds in August and September and late seedvarieties during the end of November and December of 2020. Harvesting activities for early corn have already started in the Northern region of Argentina. Although yields are in line with our budget, some specific areas were more exposed to dry weather during spring, resulting in below average yields in those regions. Soil humidity for late corn has been adequate during the development of the crop, favored by abundant rainfalls during January. Rains will be necessary in the upcoming weeks, as yields are being defined.
Peanut: 27,791 hectares have been successfully seeded, representing a 65.5% increase in planted area compared to the 2019/20 harvest season. The crop is developing in adequate conditions but rainfall will be needed in the upcoming weeks when yields are defined.
Sugar, Ethanol & Energy Business
Sugar, Ethanol & Energy - Selected Information metric
12M20
12M19
Chg %
Milling Sugarcane Milled Own Cane
Third Party Cane Production
tons tons tons
11,103,200 10,845,136 10,464,893 10,411,801
2.4% 0.5%
638,307
433,335
47.3%
TRS Equivalent Produced Sugar
Ethanol Hydrous Ethanol Anhydrous Ethanol Sugar mix in production Ethanol mix in production Energy Exported (sold to grid)
tons tons M3
M3
M3 % % MWh
Cogen efficiency (KWh sold per ton crushed)
KWh/ton
1,527,292 646,981 502,170 318,257 183,913 44% 56% 717,915 64.7
1,508,869 213,256 756,494 510,358 246,136 15% 85% 853,139 78.7
1.2% n.m
(33.6)%
(37.6)%
(25.3)%
n.m (34.5)% (15.9)%
(17.8)%
Agricultural Metrics
Harvested own sugarcane Harvested area
tons
10,464,893 10,411,801
0.5%
Yield
TRS content TRS per hectare Mechanized harvest Area
Hectares tons/hectare kg/ton kg/hectare %
132,374
137,730
(3.9)%
79
76
4.6%
132
133
(1.1)%
10,396
10,049
3.5%
99.4%
98.4%
1.0%
Sugarcane Plantation Expansion & Renewal Areahectares hectares
176,651 27,490
166,041 29,594
6.4% (7.1)%
On a full year basis, we crushed a total of 11.1 million tons of sugarcane, 2.4% higher than during 2019. The first semester of 2020 was marked by the effect of the Covid-19 pandemic, mainly in the ethanol business which experienced a decrease in prices on account of the decrease in international oil prices, and a decrease in demand as a consequence of the reduced circulation of people in response to the pandemic. In light of these factors, we slowed down our crushing pace, implemented a cost reduction plan and maintained the workforce sized to our operational needs. As signs of a partial recovery started to emerge we revamped our operations and accelerated our crushing pace during the second semester, more than offsetting the lower initial crushing. Indeed, during July we reached a record of 1.7 million tons of sugarcane crushed.
On a full year basis we maximized sugar production in 44% compared to 15% during 2019, despite a first quarter of full ethanol maximization prior to the pandemic. This high degree of flexibility constitutes one of our most important competitive advantages, since it allows us to make an efficient use of our fixed assets.
Exported energy totaled 718 thousand MWh during 2020, 15.9% lower compared to the same period last year. The decrease in annual volume was explained by our commercial strategy to carry bagasse and postpone energy sales in the spot market, expecting prices to increase towards year end as a consequence of both the economic recovery and the low level of water reservoirs. In line with this strategy, throughout the year we suspended the purchase of wood chips, which also derived in a cost reduction. Our cogeneration efficiency ratio amounted to 64.7 KWh/ton in 2020, a decrease of 17.8%.
As of December 31, 2020, our sugarcane plantation consisted of 176,651 hectares, 6.4% higher compared to the same period of last year. Sugarcane planting continues to be a key strategy to supply our mills with quality raw material at low cost. During 2020, we planted a total of 27,490 hectares of sugarcane. Of this total area, 39% or 10,610 hectares corresponded to expansion areas planted to supply our growing crushing capacity and 61% or 16,880 hectares corresponded to areas planted to renew old plantations with newer and high-yielding sugarcane, thus allowing us to maintain the productivity of our plantation.
RECONCILIATION OF NON-IFRS MEASURES
To supplement our consolidated financial statements, which are prepared and presented in accordance with IFRS, we use the following non-IFRS financial measures in this press release:
• Adjusted EBITDA
• Adjusted EBIT
• Adjusted EBITDA margin
• Net Debt
• Net Debt to Adjusted EBITDA
• Adjusted Net Income
• Adjusted Free Cash Flow
• Adjusted Free Cash Flow from Operations
In this section, we provide an explanation and a reconciliation of each of our non-IFRS financial measures to their most directly comparable IFRS measures. The presentation of these financial measures is not intended to be considered in isolation or as a substitute for, or superior to, financial information prepared and presented in accordance with IFRS.
We believe these non-GAAP financial measures provide investors with useful supplemental information about the financial performance of our business, enable comparison of financial results between periods where certain items may vary independent of business performance, and allow for greater transparency with respect to key metrics used by management for financial and operational decision making and as a means to evaluate period-to-period.
There are limitations associated with the use of non-IFRS financial measures as an analytical tool. In particular, many of the adjustments to our IFRS financial measures reflect the exclusion of items, such as depreciation and amortization, changes in fair value and the related income tax effects of the aforementioned exclusions and exchange differences generated by the net liability monetary position in USD in the countries where the functional currency is the local currency, that are recurring and will be reflected in our financial results for the foreseeable future.
In addition, these measures may be different from non-IFRS financial measures used by other companies, limiting their usefulness for comparison purposes.
Adjusted EBITDA, Adjusted EBIT & Adjusted EBITDA margin
We define Adjusted EBITDA for each of our operating segments as the segment's share of consolidated profit from operations before financing and taxation for the year or period, as applicable, before depreciation and amortization, excluding the revaluation result of the hectares hold as investment property, and adjusted by profit or loss from discontinued operations and by gains or losses from disposals of non-controlling interests in subsidiaries whose main underlying asset is farmland which are reflected in our Shareholders Equity under the line item "Reserve from the sale of minority interests in subsidiaries." Revaluation results from the farmland held as Property, Plant & Equipment
We define "Adjusted Consolidated EBITDA" as (i) consolidated net profit (loss) for the year, as applicable, before interest expense, income taxes, depreciation of PP&E and amortization of intangible assets, net gain from fair value adjustments of investment property land, foreign exchange gains or losses, other net financial expenses; and (ii) adjusted by profit or loss from discontinued operations if any; and (iii) adjusted by those items, that do not impact profit and loss, but are recorded directly in shareholders' equity, i.e., (x) the gains or losses from disposals of non-controlling interests in subsidiaries whose main underlying asset is farmland , reflected under the line item: "Reserve from the sale of non-controlling interests in subsidiaries; and (y) the net increase in value of sold farmland, which has been recognized in either Revaluation surplus or retained earnings.
We believe that Adjusted EBITDA and Adjusted EBIT are for the Company and each operating segment, respectively important measures of operating performance because they allow investors and others to evaluate and compare our consolidated operating results and to evaluate and compare the operating performance of our segments, respectively, including our return on capital and operating efficiencies, from period to period by removing the impact of our capital structure (interest expense from our outstanding debt), asset base (depreciation and amortization), tax consequences (income taxes), foreign exchange gains or losses and other financial expenses. In addition, by including the gains or losses from disposals of non-controlling interests in subsidiaries whose main underlying asset is farmland, investors can evaluate the full value and returns generated by our land transformation activities. Other companies may calculate Adjusted EBITDA and Adjusted EBIT differently, and therefore Adjusted EBITDA and Adjusted EBIT may not be comparable to similarly titled measures used by other companies. Adjusted EBITDA and Adjusted EBIT are not measure of financial performance under IFRS, and should not be considered in isolation or as an alternative to consolidated net profit (loss), cash flows from operating activities, profit from operations before financing and taxation and other measures determined in accordance with IFRS.
We define Adjusted EBITDA margin as Adjusted EBITDA to net sales. We consider that the presentation of adjusted EBITDA margin provides useful information on how successfully we operate our Company and enhances the ability of investors to compare profitability between segments, periods and with other public companies.
Net Debt & Net Debt to Adjusted EBITDA
Net debt is defined as the sum of long- and short-term debt less cash and cash equivalents. This measure is widely used by management and investment analysts and we believe it shows the financial strength of the CompanyManagement is consistently tracking our leverage position and our ability to repay and service our debt obligations over time. We have therefore set a leverage ratio target that is measured by net debt divided by Adjusted EBITDA.
We believe that this metric provides useful information to investors because management uses it to manage our debt-equity ratio in order to promote access to debt financing instruments in the capital markets and our ability to meet scheduled debt service obligations.
Reconciliation - Net Debt
$ thousands | 4Q20 | 4Q19 | Chg % |
Total Borrowings | 971,090 | 968,280 | 0.3% |
Cash and Cash equivalents | 336,282 | 290,276 | 15.8% |
Net Debt | 634,808 | 678,004 | (6.4)% |
Adjusted Net Income |
We define Adjusted Net Income as (i) Profit/ (Loss) of the period/year before net gain from fair value adjustments of investment property land; plus (ii) any non-cash finance costs resulting from foreign exchange gain/ losses for such period, which are composed by both Exchange Differences and Cash Flow Hedge Transfer from Equity, included in Financial Results, net, in our statement of income; net of the related income tax effects, plus (iii) gains or losses from disposals of non-controlling interests in subsidiaries whose main underlying asset is farmland, which are reflected in our Shareholders Equity under the line item. "Reserve from the sale of non-controlling interests in subsidiaries", plus (iv) the reversal of the aforementioned income tax effect, plus (v) any inflation accounting effect; plus (vi) the net increase in value of sold farmland, which has been recognized in either Revaluation surplus or Retained earnings, net of the related income tax effect
We believe that Adjusted Net Income is an important measure of performance for our company allowing investors to properly assess the impact of the results of our operations in our Equity. In effect, results arising from the revaluation effect of our net monetary position held in foreign currency in the countries where our functional currency is the local currency do not affect the Equity of the Company, when measured in foreign / reporting currency. Conversely, the tax effect resulting from the aforementioned revaluation effect does impact the Equity of the Company, since it reduces/increases the income tax to be paid in each country; which is why we decided to add back the income tax effect to the Adjusted Net Income considering this tax effect.
In addition, by including the gains or losses from disposals of non-controlling interests in subsidiaries whose main underlying asset is farmland, investors can also include the full value and returns generated by our land transformation activities.
Other companies may calculate Adjusted Net Income differently, and therefore our Adjusted Net Income may not be comparable to similarly titled measures used by other companies. Adjusted Net Income is not a measures of financial performance under IFRS, and should not be considered in isolation or as an alternative to consolidated net profit (loss). This non-IFRS measure should be considered in addition to, but not as a substitute for or superior to, the information contained in our financial statements.
Adjusted Net Income
$ thousands | 12M20 | 12M19 | Chg % |
Net Income | 1,070 | 342 | n.m |
Foreign exchange losses, net | 109,266 | 25,779 | n.m |
Cash flow hedge - transfer from equity | 24,363 | 25,484 | (4.4)% |
Inflation Accounting Effects | (12,064) | (16,911) | (28.7)% |
Revaluation Result - Investment Property | (1,080) | 927 | n.a |
Revaluation surplus of farmland sold | 10,198 | 8,022 | 27.1% |
Adjusted Net Income | 131,753 | 43,643 | n.m |
Adjusted Free Cash Flow and Adjusted Free Cash Flow from Operations
We believe that the measures of Adjusted Free Cash Flow and Adjusted Free Cash Flow from Operations are important measures of liquidity that enable investors to draw important comparisons year to year of the amount of cash generated by the Company's principal business and financing activities, which includes the cash generated from our land transformation activities, after paying for recurrent items, including interest, taxes and maintenance capital expenditures.
We define Adjusted Free Cash Flow as (i) net cash generated from operating activities, net of the combine effect of the application of from the Argentine operations, less (ii) net cash used in investing activities, net of the combine effect of the application of IAS 29 and IAS 21 from the Argentine operations, less (iii) interest paid, net of the combine effect of the application of IAS 29 and IAS 21 from the Argentine operations plus (iv) proceeds from the sale of non-controlling interest in farming subsidiaries. We define Adjusted Free Cash Flow from Operations as (i) net cash generated from operating activities, net of the combine effect of the application of IAS 29 and IAS 21 from the Argentine operations , less (ii) net cash used in investing activities, net of he combine effect of the application of IAS 29 and IAS 21 from the Argentine operations, less (iii) interest paid, plus (iv) proceeds from the sale of non-controlling interest in subsidiaries; plus (v) expansion capital expenditures ("expansion capex").
Expansion capex is defined as the required investment to expand current production capacity including organic growth, joint ventures and acquisitions. We define maintenance capital expenditures ("maintenance capex") as the necessary investments in order to maintain the current level of productivity both at an agricultural and at an industrial level. Proceeds from the sale of non-controlling interest in farming subsidiaries is a measure of the cash generated from our land transformation business that is included under cash from financing activities pursuant to IFRS.
We believe Adjusted Free Cash Flow is an important liquidity measure for the Company because it allows investors and others to evaluate and compare the amount of cash generated by the Company business and financing activities to undertake growth investments, to fund acquisitions, to reduce outstanding financial debt. and to provie a return to shareholders in the form of dividends and/or share repurchases, among other things.
We believe Adjusted Free Cash Flow from Operations is an additional important liquidity metric for the Company because it allows investors and others to evaluate and compare the total amount of cash generated by the Company´s business and financing activities after paying for recurrent items including interest, taxes and maintenance capex. We believed this metric is relevant in evaluating the overall performance of our business.
Other companies may calculate Adjusted Free Cash Flow and Adjusted Free Cash Flow from Operations differently, and therefore our formulation may not be comparable to similarly titled measures used by other companies. Adjusted Free Cash Flow and Adjusted Free Cash Flow from Operations are not measures of liquidity under IFRS, andshould not be considered in isolation or as an alternative to consolidated cash flows from operating activities, net increase (decrease) in cash and cash equivalents and other measures determined in accordance with IFRS.
Reconcilliation - Adjusted Free Cash Flow
$ thousands | 2020 | 2019 |
Net Increase / (decrease) in cash and cash equivalents | 81,290 | 34,608 |
Interest Paid | (60,026) | (53,996) |
Lease payments | (40,336) | (49,081) |
Cash Flow from Financing Activities | 53,919 | 37,863 |
IAS 29 & IAS 21 Effect for Investing Activities | 429 | (2,922) |
IAS 29 & IAS 21 Effect for Operating Activities | 14,956 | (23,550) |
IAS 29 & IAS 21 Effect for Interest Paid | 1,638 | (4,408) |
Adjusted Free Cash Flow | 51,870 | (61,486) |
Reconcilliation - Adjusted Free Cash Flow from Operations | ||
$ thousands | 2020 | 2019 |
Net Increase in cash and cash equivalents | 81,290 | 34,608 |
Expansion Capex | 56,720 | 129,074 |
Interest Paid | (60,026) | (53,996) |
Lease payments | (40,336) | (49,081) |
Cash Flow from Financing Activities | 53,919 | 37,863 |
IAS 29 & IAS 21 Effect for Investing Activities | 429 | (2,922) |
IAS 29 & IAS 21 Effect for Operating Activities | 14,956 | (23,550) |
IAS 29 & IAS 21 Effect for Interest Paid | 1,638 | (4,408) |
Adjusted Free Cash Flow from Operations | 108,589 | 67,588 |
Adjusted EBITDA & Adjusted EBITDA Reconciliation to Profit/Loss - 12M20
$ thousands
Sales of goods and services rendered
Cost of goods sold and services rendered
Initial recog. and changes in FV of BA and agricultural produce
Gain from changes in NRV of agricultural produce after harvest
Crops 170,114
Rice 102,886
(150,745) (74,395)
41,777 19,449
Dairy 135,471
Others 2,545
(117,754) (1,984)
12,638 1,269
Farming411,016
Sugar, Ethanol & Energy 411,459
(344,878) (270,897)Land
TransformationCorporate
- -
- -
Total 822,475
(615,775)
75,133 49,609 - - 124,742
7,078 -
(2)
-
7,076
- - - 7,076
Margin on Manufacturing and Agricultural Act. Before Opex
68,224
47,940
30,353
1,830
148,347
190,171
-
-
338,518
General and administrative expenses Selling expenses
Other operating income, net
(6,816) (18,265)
(7,045) (14,170)
(12,846) 731
(4,896) (13,824) (189)
(120) (217) 1,069
(18,877) (46,476)
(15,942) (49,188)
(11,235) 5,495
- - 7,934
(19,319) (54,138)
(202) (95,866)
(161)
2,033
Profit from Operations Before Financing and Taxation
30,297
27,456
11,444
2,562
71,759
130,536
7,934
(19,682)
190,547
Net gain from Fair value adjustment of Investment property
-
-
-
(1,080)
(1,080)
-
-
-
(1,080)
Adjusted EBIT
30,297
27,456
11,444
1,482
70,679
130,536
7,934
(19,682)
189,467
(-) Depreciation of PP&E and Amortization Intangible assets
Reverse of revaluation surplus derived from the disposals of assets
5,397
6,652
6,709
138 -
18,896
122,516
- 10,198
876 142,288
-
-
-
-
-
- 10,198
Adjusted EBITDA Reconciliation to Profit/(Loss)
35,694
34,108
18,153
1,620
89,575
253,052
18,132
(18,806)
341,953
Adjusted EBITDA
341,953
(+) Depreciation of PP&E and Amortization Intangible assets
(+) Financial result, net
(+) Revaluation Result - Investment Property (+) Income Tax (Charge)/Benefit
Reverse of revaluation surplus derived from the disposals of assets
(+) Translation Effect (IAS 21)
(142,288)
(175,658)
1,080
(12,325)
(10,198)
Profit/(Loss) for the Period
(1,494) 1,070
Adjusted EBITDA & Adjusted EBITDA Reconciliation to Profit/Loss - 12M19
$ thousands
Sales of goods and services rendered
Crops 168,938
Rice 102,162
Dairy 84,767
Others 3,904
Farming359,771
Sugar, Ethanol & Energy 531,783
Land
TransformationCorporate
-
-
Total 891,554
Cost of goods sold and services rendered
(159,197) (74,480)
(77,532)
(3,412)
(314,621) (360,566) - - (675,187)
Initial recog. and changes in FV of BA and agricultural produce
30,290 13,194
13,741
(40)
57,185 13,110 - - 70,295
Gain from changes in NRV of agricultural produce after harvest
1,542 -
-
-
1,542
- - - 1,542
Margin on Manufacturing and Agricultural Act. Before Opex
41,573
40,876
20,976
452
103,877
184,327
-
-
288,204
General and administrative expenses Selling expenses
(5,446) (12,852)
(6,752) (21,072)
(4,188) (6,252)
Other operating income, net
(2,283) 282
(635)
(167) (171) (956)
(16,553) (40,347) (3,592)
(21,925) (67,116)
126
- - 2,504
(19,319) (57,797)
(165) (107,628)
(175) (1,137)
Profit from Operations Before Financing and Taxation
20,992
13,334
9,901
(842) 43,385
95,412
2,504
(19,659)
121,642
Net gain from Fair value adjustment of Investment property
-
-
-
927
927
-
-
-
927
Adjusted EBIT
20,992
13,334
9,901
85
44,312
95,412
2,504
(19,659)
122,569
(-) Depreciation of PP&E and Amortization Intangible assets
4,662
6,994
5,064
Reverse of revaluation surplus derived from the disposals of assets
-
-
-
181 -
16,901
157,657
-
- 8,022
20 174,578
- 8,022
Adjusted EBITDA Reconciliation to Profit/(Loss)
25,654
20,328
14,965
266
61,213
253,069
10,526
(19,639)
305,169
Adjusted EBITDA
305,169
(+) Depreciation of PP&E and Amortization Intangible assets
(174,578)
(+) Financial result, net
(100,221)
(+) Revaluation Result - Investment Property (+) Income Tax (Charge)/Benefit
(927)
(20,820)
Reverse of revaluation surplus derived from the disposals of assets
(8,022)
(+) Translation Effect (IAS 21)
(259)
Profit/(Loss) for the Period
342
Share Repurchase Program
On September 24, 2013, the Board of Directors of the Company has authorized a share repurchase program for up to 5% of its outstanding shares. The repurchase program has commenced on September 24, 2013 and is reviewed by the Board of Directors after each 12-month period. On August 11, 2020, the Board of Directors approved the extension of the program for an additional twelve-month period, ending September 23, 2021.
Repurchases of shares under the program are made from time to time 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. 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.
As of December 31, 2020, the Company repurchased 9,957,078 shares under this program, of which 4,406,246 have been applied to some exercise of the Company's stock option plan and restricted stock units plan. In 2020, 2019 and 2018 the Company repurchased shares for an amount of US$ 4,365, US$ 4,263 and US$ 15,725, respectively. The outstanding treasury shares as of December 31, 2020 totaled 5,084,864.
MANAGEMENT
Board of Directors
The following table sets forth information for our directors as of the date of this management report:
Position | Date of Appointment | Age | |
Plínio Musetti | Chairman | 2020 | 67 |
Mariano Bosch | Director /CEO | 2020 | 51 |
Daniel González | Director | 2020 | 51 |
Guillaume van der Linden | Director | 2018 | 61 |
Mark Schachter | Director | 2018 | 41 |
Ivo Sarjanovic | Director | 2018 | 56 |
Alan Leland Boyce | Director | 2019 | 61 |
Andrés Velasco Brañes | Director | 2019 | 60 |
Alejandra Smith | Director | 2019 | 65 |
Name
A description of the main tasks currently performed by each director as well as a description of each director's employment history and education follows:
Plínio Musetti. Mr. Musetti has been a member of the Company's board of directors since 2011 and an observer since 2010. Mr. Musetti is a Managing Partner of Janos Holding responsible for long term equity investments for Family offices in Brazil, following his role as Partner of Pragma Gestão de Patrimonio, since June 2010. From 2008 to 2009, Mr. Musetti served as the Chief Executive Officer of Satipel Industrial S.A., leading the company's initial public offering process and aiding its expansion plan and merger with Duratex S.A. From 2002 to 2008, Mr. Musetti served as a partner at JP Morgan Partners and Chief Executive Officer of Vitopel S.A. (JP Morgan Partners' portfolio company) where he led its private equity investments in Latin America. From 1992 to 2002, Mr. Musetti served as the Chief Executive Officer of Elevadores Atlas, during which time he led the company's operational restructuring, initial public offering process and the sale to the Schindler Group. Mr. Musetti. In addition, Mr. Musetti is currently serving as a Board member of Raia Drogasil S.A. and Grupo Notredame Intermédica. Mr. Musetti graduated in Civil Engineering and Business Administration from Mackenzie University and attended the Program for Management Development at Harvard Business School in 1989. Mr. Musetti is a Brazilian citizen.
Mariano Bosch. Mr. Bosch is a co-founder of Adecoagro and has been the Chief Executive Officer and a member of the Company's board of directors since inception (2002). From 1995 to 2002, Mr. Bosch served as the founder and Chief Executive Officer of BLS Agribusiness, an agricultural consulting, technical management and administration company. Mr. Bosch has over 22 years of experience in agribusiness development. Currently he is an independent board member of the SPAC, Replay Acquisition CORP (RPLA). He is involved in business organizations such as IDEA, AEA, YPO, AACREA, FPC and AAPRESID. He graduated with a degree in Agricultural Engineering from the University of Buenos Aires. In 2018, he received a Konex award and in 2019, the Businessman of the year Award, by Endeavor.
Alan Leland Boyce. Mr. Boyce is a co-founder of Adecoagro and has been a member of the Company's Board of Directors since 2002 and has been Chairman of the Risk and Commercial Committee since 2011. Mr. Boyce is co-founder and Chairman of Materra LLC, a California based owner and operator of 15,000 acres of farmland where it grows pistachios, dates, citrus and organic vegetables. Since 1985, Mr. Boyce has served as the Chief Financial Officer of Boyce Land Co. Inc., a farmland management company in the United States. Mr. Boyce is co-founder and CEO of Westlands Solar Farms, the only farmer-owned utility scale solarPV developer in California and recently co-founded Prairie Harvest, which has developed efficient hemp growing and harvesting processing in Canada and the USA. Mr. Boyce formerly served as the director of special situations at Soros Fund Management from 1999 to 2007, where he managed an asset portfolio of the Quantum Fund and had principal operational responsibilities for the fund's investments in South America. Mr. Boyce also served as managing director at Bankers Trust from 1986 to 1999 where he was in charge of fixed-income arbitrage proprietary trading, the bank's mortgage portfolio and Community Reinvestment Act compliance. In addition, Mr Boyce was senior managing director for investment strategy at Countrywide Financial from 2007 to 2008, and worked at the U.S. Federal Reserve Board from 1982 to 1984. Hegraduated with a degree in Economics from Pomona College, and has a Masters in Business Administration from Stanford University. Mr. Boyce is an American citizen.
Andres Velasco Brañes. Mr. Velasco has been a member of the Company's board of directors since 2011. Mr. Velasco was the Minister of Finance of Chile between March 2006 and March 2010, and was also the president of the Latin American and Caribbean Economic Association from 2005 to 2007. Prior to entering the government sector, Mr. Velasco was Sumitomo-FASID Professor of Development and International Finance at Harvard University's John F. Kennedy School of Government, an appointment he had held since 2000. From 1993 to 2000, he was Assistant and then Associate Professor of Economics and the director of the Center for Latin American and Caribbean Studies at New York University. During 1988 to 1989, he was Assistant Professor at Columbia University. Currently Mr. Velasco serves as Adjunct Professor of Public Policy at Harvard University, and a Tinker Visiting Professor at Columbia University. He also performs consulting services on various economic matters rendering economic advice to an array of clients, including certain of our shareholders. Mr. Velasco has been appointed Dean of New School of Public Policy at London School of Economics. Mr. Velasco holds a Ph.D. in economics from Columbia University and was a postdoctoral fellow in political economy at Harvard University and the Massachusetts Institute of Technology. He received an B.A. in economics and philosophy and an M.A. in international relations from Yale University. Mr. Velasco is a Chilean citizen.
Daniel C. Gonzalez. Mr. Gonzalez has been a member of the Company's board of directions since April 16, 2014. Mr. Gonzalez holds a degree in Business Administration from the Argentine Catholic University. He served for 14 years in the investment bank Merrill Lynch & Co in Buenos Aires and New York, holding the positions of Head of Mergers and Acquisitions for Latin America and President for the Southern Cone (Argentina, Chile, Peru and Uruguay), among others. While at Merrill Lynch, Mr. Gonzalez played a leading role in several of the most important investment banking transactions in the region and was an active member of the firm's global fairness opinion committee. He remained as a consultant to Bank of America Merrill Lynch after his departure from the bank. Previously, he was Head of Financial Planning and Investor Relations in Transportadora de Gas del Sur SA. Mr. Gonzalez is currently the Chief Executive Officer of YPF Sociedad Anónima, where he is also a member of its Board of Directors. Mr Gonzalez is also a member of the Board of Directors of Hidroeléctrica Piedra del Aguila S.A. Mr. González is an Argentine citizen.
Guillaume van der Linden. Mr. van der Linden has been a member of the Company's board of directors since 2009. Since 2007, Mr. van der Linden has been Senior Investment Manager at PGGM Vermogensbeheer B.V., currently responsible for investments in emerging markets local currency sovereign debt. From 1993 to 2007, Mr. van der Linden worked for ING Bank in various roles, including in risk management and derivatives trading. From 1988 to 1993, Mr. van der Linden was employed as a management consultant for KPMG and from 1985 to 1988 as a corporate finance analyst for Bank Mees & Hope. Mr. van der Linden graduated with Masters degrees in Economics from Erasmus University Rotterdam and Business Administration from the University of Rochester. Mr. van der Linden is a Dutch citizen.
Mark Schachter. Mr. Schachter has been a member of the Company's board of directors since 2009. Mr. Schachter has been a Managing Partner of Elm Park Capital Management since 2010. From 2004 to 2010, he was a Portfolio Manager with HBK Capital Management where he was responsible for the firm's North American private credit activities. His responsibilities included corporate credit investments with a primary focus on middle-market lending and other special situation investment opportunities. From 2003 to 2004, Mr. Schachter worked for American Capital, a middle-market private equity and mezzanine firm and worked in the investment banking division of Credit Suisse Group from 2001 to 2003. Mr. Schachter received a degree in Business Administration from the Ivey Business School at the University of Western Ontario and completed the Program for Leadership Development at Harvard Business School. Mr. Schachter is a Canadian citizen and has permanent American residence.
Ivo Andrés Sarjanovic. Mr. Sarjanovic served for more than 25 years in Cargill International, starting as trader in the Grain and Oilseeds business. While in Cargill he held between years 2000-2011 the position of Vice-president and Global Trading Manager of Oilseeds in Geneva, coordinating worldwide trading and crushing activities, and between 2007-2011 he was also the Africa and Middle East General Manager of Agriculture. From 2011 to 2014
Mr. Sarjanovic held the position of Vice-president and World Manager of Cargill Sugar Operations, playing a leading role in the radical transformation of the organization that led to the strategic decision to spin-off in 2014 the sugar business of Cargill creating Alvean Sugar SL, a joint venture integrated with Copersucar, Brazil. Mr. Sarjanovic served as the Chief Executive Officer of Alvean until 2017, during which time he led the company to become the biggest sugar trader in the world. Mr. Sarjanovic is currently non executive director in Sucafina and is serving lectures of "Agricultural Commodities" at the University of Geneva, University Di Tella and Austral. Mr. Sarjanovic holds a B.A. in Economic Sciences, major in Accounting, from the National University of Rosario, Argentina and a Master in Economics from the University Francisco Marroquin. Additionally, he completed executive studies at IMD in Lausanne, at Oxford University and at Harvard Business School, and was a PhD candidate in Economics at New York University. Mr. Sarjanovic is an Argentine/Italian/Swiss citizen.
Alejandra Smith. Ms. Smith is the founder of Edge Consultants, a management consulting firm, which helps its clients grow their businesses´ market share profitably, by leveraging strategic and operational expertise. Ms. Smith began her career in Procter & Gamble in 1983, where she acted as Director of the Health & Beauty Business Unit. She held posts in Mexico, Canada and throughout Latin America. In 1994 Ms. Smith joined PepsiCo, initially co-leading the beverages Go to Market technological transformation in the USA. She was later appointed to the team in charge of the M&A of bottlers in Mexico, the largest international division, where she also established a profitable bottled water category. Subsequently, Ms. Smith transferred to the company's Snacks & Food Division to work in the Latin America and Asia Pacific regions as Commercial SVP and Quaker CEO. Ms. Smith worked for two multinational Fortune 100 Companies across the Americas and Asia Pacific. Ms. Smith concurrently serves as an independent member of the board of directors of BEPENSA (where she serves in the Compensation and Evaluation Committee), and City Express Hotels (as well as in the Audit, Risks and Societal Practices Committee) . Ms. Smith is fully bicultural and bilingual, holds degrees in Business Administration & Economics from the Instituto Tecnológico Autónomo de Mexico (ITAM). Ms. Smith is a Mexican citizen.
Executive Officers
The following table shows certain information with respect to our senior management as of the date of this prospectus:
Year
Name Mariano Bosch
Position
Carlos A. Boero Hughes Emilio F. Gnecco Renato Junqueira Santos Pereira
Chief Executive Officer & Co-founder Chief Financial Officer
Chief Legal Officer
Director of Sugar and Ethanol Operations
Mario José Ramón Imbrosciano Leonardo Berridi
Director of Business Development
Country Manager for Brazil
Ezequiel Garbers
Country Manager for ARG/URU & Co-founder
designated 2002 2008 2005 2014 2003 2004 2004
Age 51 55 45 44 51 61 54
Mariano Bosch. See "-Board of Directors."
Carlos A. Boero Hughes. Mr. Boero Hughes is our Chief Financial Officer, covering the company's operations in Argentina, Brazil and Uruguay, and a member of Adecoagro's Senior Management since 2008. He began working at Adecoagro in August 2008 overseeing our finance and administrative departments. Mr. Boero Hughes has over 20 years of experience in agricultural business and financial markets. Mr Boero Hughes is also a member of the Board of Directors of Loma Negra C.I.A.S.A. Prior to joining us, he was Chief Financial Officer for South America and Co-Chief Executive Officer for Noble Group LTD operations in Argentina, Uruguay and Paraguay from October 2006 to July 2008. From 2003 to 2006, he worked at Noble Group LTD as Financial Director for Argentina andStructure Finance Manager for South America. He worked at Citibank N.A. from 1997 to 2003 as Relationship and Product Manager, focused in the agribusiness industry, and at Banco Privado de Inversiones S.A. as Relationship Manager. He also worked for six years at Carlos Romano Boero S.A.I.C., a flour and dairy cow feed mill family company, as Commercial Manager, Local Grain Elevator and Nursery Manager and finally as General Manager. Mr. Boero Hughes holds a degree in Business Administration from the University of Buenos Aires and a Masters in Business Administration from the Argentine Catholic University. He also graduated from INSEAD's Executive Program in 2007.
Emilio Federico Gnecco. Mr. Gnecco is our Chief Legal Officer for all operations in Argentina, Brazil and Uruguay and a member of Adecoagro's Senior Management since 2005. He is responsible for all legal and corporate matters and compliance. Before joining us, he was a corporate law associate at the law firm of Marval, O'Farrell & Mairal for more than 8 years, where he specialized in mergers and acquisitions, project financing, structured finance, corporate financing, private equity, joint ventures and corporate law and business contracts in general. Mr. Gnecco was in charge of Adecoagro's corporate matters including mergers and acquisitions since our inception in 2002. Prior to that, he worked at the National Civil Court of Appeals of the City of Buenos Aires for four years. Mr. Gnecco has a law degree from the University of Buenos Aires, where he graduated with honors.
Renato Junqueira Santos Pereira. Renato Junqueira Santos Pereira is the VP of Sugar, Ethanol & Energy business and has been a member of the senior management team since 2014. He began working at Adecoagro in 2010 as the Operations Manager for our Sugar, Ethanol & Energy business and has vast experience in the Brazilian sugarcane industry. Before joining Adecoagro, he served as the CFO of Moema Group, one of the largest sugarcane clusters in Brazil. His main responsibilities at Moema included designing the optimal capital structure to finance the construction of five greenfield mills, preparing the company for an IPO and coordinating the M&A process which culminated in a $1.5 billion dollar sale to Bunge Ltda. Previously, Mr. Pereira held responsibilities as Mill Director and Agricultural Manager in Moema's mills. He is an Agricultural Engineer from Universidade de Sao Paulo and holds an MBA from the University of California, Davis.
Mario José Ramón Imbrosciano. Mr. Imbrosciano is the head of our Business Development Department for all operations in Argentina, Brazil and Uruguay where he oversees all new business initiatives, and a member of Adecoagro's Senior Management since 2003. He has over 27 years of experience in farm management and agriculture production. Prior to joining Adecoagro, Mr. Imbrosciano was the Chief Operating Officer of Beraza Hnos. S.C., a farming company that owns farms in the humid pampas region of Argentina. He was in charge of production, commercialization and logistics for a 60,000 hectare operation. Mr. Imbrosciano has also worked as a private consultant for various clients. Mr. Imbrosciano received a degree in Agricultural Production Engineering from the Argentine Catholic University and holds a Masters in Business Administration from the Instituto de Altos Estudios of the Universidad Austral.
Leonardo Raúl Berridi. Mr. Berridi is our VP of Business Development and, prior to the Reorganization, had been Adecoagro's Country Manager for Brazil since the beginning of its operations in Brazil and a member of Adecoagro's Senior Management since 2004. Mr. Berridi has over 37 years of international experience in agricultural business. Prior to joining us, Mr. Berridi was Vice President of Pago Viejo S.A., a company dedicated to agriculture production and dairy farming in Argentina. He also worked for Trans-Continental Tobacco Corporation as Chief Operating Officer of Epasa (Exportadora de Productos Agrarios S.A.), a company dedicated to producing, processing and exporting tobacco in the north east and north west of Argentina, and Production Manager of World Wide Tobacco España S.A. in the Caceres and Zamora provinces in Spain. Mr. Berridi holds a degree in Forestry Engineering from the Universidad Nacional de La Plata.
Ezequiel Garbers. Mr. Garbers is the Country Manager for Argentina and Uruguay, cofounder and a member of Adecoagro's Senior Management. He coordinates all of our production and human resources development activities in Argentina and Uruguay. Mr. Garbers has over 20 years of experience in Integrated Agroindustrial Chains. Prior to joining Adecoagro, he was the Chief Operating Officer of an agricultural consulting and investment company he co-founded, developing projects both within and outside of Argentina, related to crop production and the cattle and dairybusiness. Mr. Garbers holds a degree in Agronomic Engineering from the University of Buenos Aires and a Masters in Business Administration from the Instituto de Altos Estudios of the Austral University.
Our managers supervise our day-to-day transactions so as to ensure that all of our general strategic objectives are carried out, and they report to our board of directors.
Directors, Senior Management and Committees
Pursuant to our articles of incorporation, the board of directors must be composed for a minimum of three and maximum of eleven members. The number of directors is determined and the directors are appointed at the general meeting of shareholders (except in case of a vacancy in the office of a director because of death, retirement, resignation, dismissal, removal or otherwise, the remaining directors may fill such vacancy and appoint a successor in accordance with applicable Luxembourg law).
The directors are appointed by the general meeting of shareholders for a period of up to three years; provided, however, the directors shall be elected on a staggered basis, with one-third of the directors being elected each year and provided further that such three year term may be exceeded by a period up to the annual general meeting held following the third anniversary of the appointment. Directors may be removed with or without cause (ad nutum) by the general meeting of shareholders by a simple majority of votes cast at a general meeting of shareholders. The directors are eligible for re-election indefinitely.
There are no agreements with majority shareholders, customers, suppliers or others governing the selection of any of the directors or members of senior management. None of our non-executive directors has a service contract with us that provides for benefits upon termination of employment.
The board of directors is empowered to manage Adecoagro S.A. and carry out our operations. The board of directors is vested with the broadest powers to manage the business of the Company and to authorize and/or perform all acts of disposal, management and administration falling within the purposes of Adecoagro S.A. and all powers not expressly reserved by Luxembourg law or by our articles of incorporation to the general meeting of shareholders is within the competence of the board of directors.
Accordingly, within the limitations established by Luxembourg law and in particular the Luxembourg law of August 10, 1915 on commercial companies (as amended) and our articles of incorporation, the board of directors can take any action (by resolution or otherwise) it deems necessary, appropriate, convenient or fit to implement the purpose of the Company, including without limitation:
• execute any acts or contracts on our behalf aimed at fulfilling our corporate purpose, including those for which a special power of attorney is required;
• carry out any transactions;
• agree, establish, authorize and regulate our operations, services and expenses;
• delegate special tasks to directors, regulate the formation and operation of committees and fix the remuneration and compensation of expenses of advisors and/or staff with special duties, with a charge to overhead;
• appoint, suspend or remove agents or employees, establish their duties, remuneration, -and bonuses and grant them the powers that it deems advisable;
• grant signature authorization to directors and officers, grant general or special powers of attorney, including those to prosecute;
• call regular and special shareholders' meetings and establish agendas, submit for the shareholders' approval our inventory, annual report, balance sheet, statement of income and exhibits, propose depreciation, amortization and reserves that it deems advisable, establish the amount of gains and losses, propose the distribution of earnings and submit all this to the shareholders' meeting for consideration and resolution;
• fix the date for the payment of dividends established by the shareholders´ meeting and make their payment; and
• make decisions relating to the issuance, subscription or payment of shares pursuant to our articles of incorporation and decision of the regular or special shareholders´ meetings.
Audit Committee
The Company's articles of incorporation provide that the board of directors may set up an audit committee. The board of directors has set up an Audit Committee and has appointed, pursuant to board resolutions dated May 19, 2019, Mr. Andrés Velasco Brañes, Mr. Mark Schachter (Chairman since May, 2017), and Ivo Sarjanovic as members of its audit committee.
The Company's articles of incorporation provide that the audit committee shall (a) assist the board of directors in fulfilling its oversight responsibilities relating to the integrity of the Company's financial statements, including periodically reporting to the board of directors on its activity and the adequacy of the Company's systems of internal controls over financial reporting; (b) make recommendations for the appointment, compensation, retention and oversight of, and consider the independence of, the Company's external auditors; (c) review material transactions (as defined in the articles) between the Company or its subsidiaries with related parties (other than transactions that were reviewed and approved by the independent members of the board of directors (as defined in the articles of the Company) or other governing body of any subsidiary of the Company or through any other procedures as the board of directors may deem substantially equivalent to the foregoing) to determine whether their terms are consistent with market conditions or are otherwise fair to the Company and its subsidiaries; and (d) perform such other duties imposed on it by the laws and regulations of the regulated market(s) on which the shares of the Company are listed, applicable to the Company, as well as any other duties entrusted to it by the board of directors.
In addition, the charter of the audit committee sets forth, among other things, the audit committee's purpose and responsibilities.
Compensation Committee
The Company has a Compensation Committee that reviews and approves the compensation and benefits of the executive officers and other key employees, and makes recommendations to the board of directors regarding principles for compensation, performance evaluation, and retention strategies. It is responsible for administering our share option plans and our restricted share plan for executive officers and other key employees. See "-E. Share Ownership-Share Options and Restricted Share Plan." The committee has the discretion to interpret and amend the Plan, and delegate to the Chief Executive Officer the right to award equity-based compensation to executive officers and other key employees.
The committee meets at least once a year and as needed on the initiative of the Chief Executive Officer or at the request of one of its members. The members of the Compensation Committee, appointed pursuant to board resolutions dated May 19, 2019 are Mr. Guillaume Van der Linden (Chairman since April 16, 2014), Plínio Musetti, and Mr. Daniel González.
Risk and Commercial Committee
The Company has a Risk and Commercial Committee that has the duty to (i) make such inquiries as are necessary or advisable to understand and evaluate material business risks and risk management processes as they evolve from time to time; (ii) review with the board of directors and management the guidelines and policies to govern the process for assessing and managing risks; (iii) discuss and review with the board of directors management's efforts to evaluate and manage the Company's business from a risk perspective; (iv) request input from the board of directors, management and operating staff, as well as from outside resources, as it may deem necessary; (v) discuss with the board of directors and management which elements of enterprise risk are most significant, the prioritization of business risks, and make recommendations as to resource allocation for risk management and risk mitigation strategies and activities; and (vi) oversee the development of plans for risk mitigation in any area which it deems to be a material risk to the Company; and monitor management's implementation of such plans, and the effectiveness generally of its risk mitigation strategies and activities.
The committee meets at least four times a year and as often as deemed necessary or appropriate in its judgment. The members of the Risk and Commercial Committee appointed by the board meeting held on May 19, 2019 are Mr. Ivo Sarjanovic (Chairman since May 19, 2019), Mr. Andrés Velasco Brañes, and Guillaume van der Linden.
Strategy Committee
The Company's Strategy Committee has the duty to: (i) discuss and review with the board management's identification and setting of strategic goals; including potential acquisitions, joint ventures and strategic alliances and dispositions; (ii) make recommendations to the board of directors as to the means of pursuing strategic goals; and (iii) review with the board management's progress in implementing its strategic decisions and suggest appropriate modifications to reflect changes in market and business conditions.
The committee meets at least four times a year and as often as deemed necessary or appropriate in its judgment. The members of Strategy Committee appointed by the board meetings held on May 19, 2019 are Mr. Plínio Musetti (Chairman since May 10, 2018), Mr. Alan Leland Boyce, Mrs. Alejandra Smith, and Daniel Gonzalez.
Adecoagro S.A.
Consolidated Financial Statements as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 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: 117,296,951 common shares Treasury shares: 5,084,864 common shares
Adecoagro S.A.
Consolidated Statements of Income for the years ended December 31, 2020, 2019 and 2018
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Note | 2020 | 2019 (*) | 2018 (*) | |
Sales of goods and services rendered | 4 | 817,764 | 887,138 | 793,239 |
Cost of goods sold and services rendered | 5 | (611,946) | (671,173) | (609,965) |
Initial recognition and changes in fair value of biological assets and | ||||
agricultural produce | 16 | 122,729 | 68,589 | 16,195 |
Changes in net realizable value of agricultural produce after harvest | 7,005 | 1,825 | (909) | |
Margin on manufacturing and agricultural activities before | ||||
operating expenses | 335,552 | 286,379 | 198,560 | |
General and administrative expenses | 6 | (53,428) | (57,202) | (56,080) |
Selling expenses | 6 | (95,058) | (106,972) | (90,215) |
Other operating income, net | 8 | 1,987 | (822) | 104,232 |
Profit from operations | 189,053 | 121,383 | 156,497 | |
Finance income | 9 | 26,054 | 8,979 | 8,394 |
Finance costs | 9 | (213,776) | (126,111) | (163,937) |
Other financial results - Net gain of inflation effects on the | ||||
monetary items | 9 | 12,064 | 16,911 | (25,211) |
Financial results, net | 9 | (175,658) | (100,221) | (180,754) |
Profit / (Loss) before income tax | 13,395 | 21,162 | (24,257) | |
Income tax (expense) / benefit | 10 | (12,325) | (20,820) | 1,024 |
Profit / (Loss) for the year | 1,070 | 342 | (23,233) | |
Attributable to: | ||||
Equity holders of the parent | 412 | (772) | (24,622) | |
Non-controlling interest | 658 | 1,114 | 1,389 | |
Earnings / (Loss) per share from operations attributable to the | ||||
equity holders of the parent during the year: | ||||
Basic earnings per share | 11 | 0.003 | (0.007) | (0.211) |
Diluted earnings per share | 11 | 0.003 | (0.007) | (0.211) |
(*) Prior periods have been recast to reflect the Company's change in accounting policy for the reclassification within financial results as explained in Note 34.1.
The accompanying notes are an integral part of these consolidated financial statements.
Adecoagro S.A.
Consolidated Statements of Comprehensive Income for the years ended December 31, 2020, 2019 and 2018
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2020 | 2018 | ||
Profit / (Loss) for the year | 1,070 | 342 | (23,233) |
Other comprehensive income: | |||
- Items that may be reclassified subsequently to profit or loss: | |||
Exchange differences on translating foreign operations | (78,961) | (27,828) | (121,296) |
Cash flow hedge, net of income tax | (14,386) | (19,420) | (32,195) |
- Items that will not be reclassified to profit or loss: | |||
Revaluation surplus net of income tax (Note 12, 14) | 29,453 | (31,929) | 405,906 |
Other comprehensive (loss) / income for the year | (63,894) | (79,177) | 252,415 |
Total comprehensive (loss) / income for the year | (62,824) | (78,835) | 229,182 |
Attributable to: | |||
Equity holders of the parent | (63,353) | (75,437) | 213,641 |
Non-controlling interest | 529 | (3,398) | 15,541 |
2019
The accompanying notes are an integral part of these consolidated financial statements.
Adecoagro S.A.
Consolidated Statements of Financial Position as of December 31, 2020 and 2019
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Note | 2020 | 2019 (*) | |
ASSETS | |||
Non-Current Assets | |||
Property, plant and equipment | 12 | 1,358,292 | 1,493,220 |
Right of use assets | 13 | 209,694 | 238,053 |
Investment property | 14 | 31,179 | 34,295 |
Intangible assets | 15 | 26,930 | 33,679 |
Biological assets | 16 | 14,725 | 13,303 |
Deferred income tax assets | 10 | 19,821 | 13,664 |
Trade and other receivables, net | 19 | 52,266 | 44,993 |
Derivative financial instruments | 18 | 1,951 | - |
Other assets | 809 | 1,034 | |
Total Non-Current Assets | 1,715,667 | 1,872,241 | |
Current Assets | |||
Biological assets | 16 | 150,968 | 117,133 |
Inventories | 20 | 133,461 | 112,790 |
Trade and other receivables, net | 19 | 145,662 | 127,338 |
Derivative financial instruments | 18 | 151 | 1,435 |
Other assets | 45 | 94 | |
Cash and cash equivalents | 21 | 336,282 | 290,276 |
Total Current Assets | 766,569 | 649,066 | |
TOTAL ASSETS | 2,482,236 | 2,521,307 | |
SHAREHOLDERS EQUITY | |||
Capital and reserves attributable to equity holders of the parent | |||
Share capital | 23 | 183,573 | 183,573 |
Share premium | 23 | 902,815 | 901,739 |
Cumulative translation adjustment | (555,044) | (492,374) | |
Equity-settled compensation | 14,795 | 15,354 | |
Cash flow hedge | 2 | (90,689) | (76,303) |
Other reserves | 83,406 | 66,047 | |
Treasury shares | (7,630) | (7,946) | |
Revaluation surplus | 343,570 | 337,877 | |
Reserve from the sale of non-controlling interests in subsidiaries | 41,574 | 41,574 | |
Retained earnings | 8,671 | 18,728 | |
Equity attributable to equity holders of the parent | 925,041 | 988,269 | |
Non-controlling interest | 38,683 | 40,614 | |
TOTAL SHAREHOLDERS EQUITY | 963,724 | 1,028,883 | |
LIABILITIES | |||
Non-Current Liabilities | |||
Trade and other payables | 26 | 290 | 3,599 |
Borrowings | 27 | 813,464 | 780,202 |
Lease liabilities | 28 | 159,435 | 174,570 |
Deferred income tax liabilities | 10 | 182,377 | 165,508 |
Payroll and social liabilities | 29 | 1,075 | 1,209 |
Provisions for other liabilities | 30 | 2,705 | 2,936 |
Total Non-Current Liabilities | 1,159,346 | 1,128,024 | |
Current Liabilities | |||
Trade and other payables | 26 | 126,315 | 106,887 |
Current income tax liabilities | 760 | 754 | |
Payroll and social liabilities | 29 | 23,333 | 25,208 |
Borrowings | 27 | 157,626 | 188,078 |
Lease liabilities | 28 | 36,337 | 41,814 |
Derivative financial instruments | 18 | 13,141 | 1,423 |
Provisions for other liabilities | 30 | 1,654 | 236 |
Total Current Liabilities | 359,166 | 364,400 | |
TOTAL LIABILITIES | 1,518,512 | 1,492,424 | |
TOTAL SHAREHOLDERS EQUITY AND LIABILITIES | 2,482,236 | 2,521,307 |
(*) Prior periods have been recast to reflect the Company's change in accounting policy for the reclassification within shareholders equity of the initial application of IAS 29 as explained in Note 34.1.
The accompanying notes are an integral part of these consolidated financial statements.
Adecoagro S.A.
Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2020, 2019 and 2018
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Attributable to equity holders of the parent
Share capital
(Note 23)Share premium (Note 23)
Cumulative translation adjustment
Equity-settled compensation
Cash flow hedgeOther ReservesTreasury sharesRevaluation surplusReserve from the sale of non-controlling interests in subsidiaries
Retained earningsSubtotalNon-controlling interest
Total shareholders'
equity
Balance at January 1, 2018
183,573
908,934
(552,604)
17,852
(24,691)
(6,967)
41,574
294,150
861,821
29,376
891,197
Reclassification of "adjustment of opening balance for the application of IAS 29 (Note 29) (***)
Total equity at the beginning of financial year Loss for the year
Other comprehensive income:
- Items that may be reclassified subsequently to profit or loss:
- 183,573 -
- 908,934 -
187,941 (364,663)
- 17,852 -
- (24,691)
- - -
- (6,967)
- - -
- 41,574
(187,941) 106,209
-
-
-
- (24,622)
- 861,821 (24,622)
-
-
29,376 891,197
1,389 (23,233)
Exchange differences on translating foreign operations
- (113,433)
-
-
(113,433) (7,863) (121,296)
Cash flow hedge (*)
- -
-
-
- (32,193)
- -
- -
- -
(32,193)
(2) (32,195)
- Items that will not be reclassified subsequently to profit or loss:
Revaluation surplus (**)
- - -
- - -
-
- - -
- (32,193) (32,193)
- - -
- 383,889
-
- 383,889
22,017 405,906
Other comprehensive income for the year
(113,433)
14,152 252,415
Total comprehensive income for the year
(113,433)
- -
383,889 383,889
- -
- (24,622)
238,263 213,641
15,541 229,182
Reserves for the benefit of government grants (1)
Employee share options (Note 24)
- Forfeited
Restricted shares (Note 24):
- Value of employee services
- Vested
Purchase of own shares (Note 23)
Dividends
Balance at December 31, 2018
(*) Net of 11,322 of income tax. (**) Net of 139,223 of Income tax.
-
-
-
-
- -
- 4,775
- (13,206)
-
-
-
32,380
-
-
- (32,380)
-
(40)
-
-
-
-
-
- 183,573
- 900,503
- - - -
3,899 (5,520)
- -
- - - -
- - - -
- 745 (2,519)
-
- - - -
- - - -
(478,096)
16,191
(56,884)
32,380
(8,741)
383,889
41,574
(***) Prior periods have been recast to reflect the Company's change in accounting policy for the classification of the adjustment of opening balance for the application of IAS 29 as explained in Note 34. (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. (please see Note 25).
F- 9
-
40
-
- -
3,899 -
- (15,725)
-
-
-
-
- -
3,899 -
- (15,725)
- 49,247
- 1,063,636
(408) 44,509
(408) 1,108,145
Adecoagro S.A.
Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2020, 2019 and 2018
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Attributable to equity holders of the parent
Reserve from theShare capital
(Note 23)Share premium (Note 23)
Cumulative translation adjustment
Equity-settled compensation
Cash flow hedgeOther ReservesTreasury sharesRevaluation surplussale of non-controlling interests in subsidiaries
Retained earningsSubtotalNon-controlling interest
Total shareholders'
equity
Balance at January 1, 2019 ( **** )
(478,096)
(56,884)
(8,741)
49,247
1,063,636
44,509 1,108,145
Profit for the year
Other comprehensive income:
- Items that may be reclassified subsequently to profit or loss:
183,573 -
900,503 -
-
16,191 -
-
32,380 -
-
383,889 -
41,574 -
(772)
(772)
1,114
342
- (14,278)
-
-
(12,183)
(26,461) (1,367) (27,828)
Exchange differences on translating foreign operations Cash flow hedge (*)
- -
-
-
- (19,419)
- -
- -
-
- -
- -
(19,419)
(1) (19,420)
- Items that will not be reclassified subsequently to profit or loss:
-
-
Revaluation surplus (**)
- - - -
- - - -
-
- - - -
-
- - - -
- - - -
(28,785)
- - - -
- (28,785)
(3,144)
(31,929)
Reserve of the revaluation surplus derived from the disposals of assets (***)
-
-
-
-
Other comprehensive (loss) / income for the year
Total comprehensive income for the year
(3,398) (78,835)
(14,278) (14,278)
(19,419) (19,419)
(5,044) (46,012) (46,012)
5,044 5,044 4,272
- (74,665) (75,437)
(4,512) (79,177)
Reserves for the benefit of government grants (1)
- (34,791)
- Forfeited
- -
- -
- -
- -
- -
34,791 5
- (5)
- -
-
-
- -
- -
- -
Restricted shares and restricted units (Note 21):
- Value of employee services
- Vested
Purchase of own shares (Note 23)
- - - - - 183,573
- 4,455 (3,219)
- - - - -
3,612 (4,449)
- - - - -
- - - (1,129)
- 715 (1,044) 1,129 - (7,946)
- - - - -
- - - - -
- - - - -
3,612 721 (4,263)
- - - - (497)
3,612
721
- - - 15,354
(4,263)
- Granted (***)
- - 901,739
- -
-
Dividends
-
(497)
Balance at December 31, 2019
(492,374)
(76,303)
66,047
337,877
41,574
18,728
988,269
40,614
1,028,883
(*) Net of 6,752 of Income tax. (**) Net of 10,480 of Income tax. (***) Net of 2,978 of Income tax.
( **** ) Prior periods have been recast to reflect the Company's change in accounting policy for the classification of the adjustment of opening balance for the application of IAS 29 as explained in Note 34. (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. (please see Note 25).
F- 10
Adecoagro S.A.
Consolidated Statements of Changes in Shareholders' Equity for the years ended December 31, 2020, 2019 and 2018
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Attributable to equity holders of the parentShare capital
(Note 23)Share premium (Note 23)
Cumulative translation adjustment
Equity-settled compensation
Cash flow hedge
Other reservesTreasury sharesRevaluation surplusReserve from the sale of non-controlling interests in subsidiaries
Retained earningsSubtotalNon-controlling interest
Total shareholders'
equity
Balance at January 1, 2020
Profit for the year
Other comprehensive income:
- Items that may be reclassified subsequently to profit or loss:
183,573 -
901,739 -
(492,374)
-
15,354 -
(76,303)
-
66,047 -
(7,946)
-
337,877 -
41,574 -
18,728 412
988,269 412
40,614 658
1,028,883 1,070
Exchange differences on translating foreign operations
(62,670)
(15,173)
(1,118) (78,961)
Cash flow hedge (*)
- -
- -
-
- -
- (14,386)
- -
- -
-
- -
- -
(77,843) (14,386)
- (14,386)
- Items will not be reclassified to profit or loss:
Revaluation surplus (**)
- - - -
- - - -
-
- - - -
-
-
- - - -
28,464
- - - -
-
28,464
989 -
29,453
Reserve of the revaluation surplus derived from the disposals of assets (***)
-
-
-
Other comprehensive income for the year
(62,670)
(14,386) (14,386)
- - -
(7,598) 5,693 5,693
7,598 7,598 8,010
- (63,765)
(129) (63,894)
Total comprehensive income for the year
(62,670)
(63,353)
529 (62,824)
Reserves for the benefit of government grants (1)
-
-
-
-
-
18,067
-
-
-
(18,067)
-
-
-
Restricted shares (Note 24):
- Value of employee services
-
-
3,266 - 3,266
- Vested
- Forfeited
- Granted
- - -
- 4,182 -
- - -
- - - - 14,795
3,266 (3,825)
- - - -
383 484
36 (36)
(1,127) 1,127
- - -
- - -
- - -
1,224 - 1,224
-
-
-
Purchase of own shares (Note 23)
(3,106)
(1,259)
(4,365) - (4,365)
Dividends
Balance at December 31, 2020
38,683
963,724
(*) Net of 5,729 of Income tax. (**) Net of 11,790 of Income tax. (***) Net of 3,458 of Income tax.
- - 183,573
- 902,815
- - (555,044)
- - (90,689)
- - 83,406
- (7,630)
- - 343,570
- - 41,574
(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. (please see Note 25).
F- 11
- - 8,671
- 925,041
(2,460) (2,460)
Adecoagro S.A.
Consolidated Statements of Cash Flows for the years ended December 31, 2020, 2019 and 2018
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Note | 2020 | 2019 (*) | 2018 (*) | |
Cash flows from operating activities: | ||||
Profit / (Loss) for the year | 1,070 | 342 | (23,233) | |
Adjustments for: | ||||
Income tax expense / (benefit) | 10 | 12,325 | 20,820 | (1,024) |
Depreciation | 12 | 140,579 | 173,208 | 153,034 |
Amortization | 15 | 1,293 | 1,231 | 1,220 |
Depreciation of right of use assets | 13 | 40,820 | 45,168 | - |
Loss from the disposal of other property items | 8 | (2,198) | 329 | 95 |
Gain from the sale of farmland and other assets | 8 | (2,064) | (1,354) | (36,227) |
Loss from the sale of subsidiary | 554 | - | - | |
Acquisition of subsidiaries | 22 | - | (149) | - |
Net (gain) / loss from the fair value adjustment of Investment | ||||
properties | 8 | (1,077) | 325 | (13,409) |
Equity settled share-based compensation granted | 7 | 4,316 | 4,734 | 4,728 |
Loss / (gain) from derivative financial instruments and forwards | 8, 9 | 10,058 | (469) | (51,504) |
Interest, finance cost related to lease liabilities and other financial | ||||
expense, net | 9 | 47,686 | 59,916 | 40,223 |
Initial recognition and changes in fair value of non harvested | ||||
biological assets (unrealized) | (32,975) | (1,720) | 30,299 | |
Changes in net realizable value of agricultural produce after harvest | ||||
(unrealized) | 481 | 481 | 647 | |
Provision and allowances | 1,940 | 2,778 | 2,126 | |
Net (gain) / loss of inflation effects on the monetary items | 9 | (12,064) | (16,911) | 25,211 |
Foreign exchange losses, net | 9 | 109,266 | 25,779 | 68,787 |
Cash flow hedge - transfer from equity | 9 | 24,363 | 25,484 | 38,086 |
Subtotal | 344,373 | 339,992 | 239,059 | |
Changes in operating assets and liabilities: | ||||
Increase in trade and other receivables | (55,233) | (17,664) | (65,942) | |
(Increase) / Decrease in inventories | (30,165) | 9,998 | (41,531) | |
(Increase) / Decrease in biological assets | (10,290) | (27,037) | 2,958 | |
(Increase) / Decrease in other assets | (35) | (210) | (777) | |
Decrease in derivative financial instruments | 5,234 | 3,997 | 50,021 | |
Increase in trade and other payables | 828 | 13,102 | 31,148 | |
Increase in payroll and social security liabilities | 4,120 | 2,565 | 5,876 | |
Increase / (Decrease) in provisions for other liabilities | 380 | (351) | (430) | |
Net cash generated from operating activities before taxes paid | 259,212 | 324,392 | 220,382 | |
Income tax paid | (2,087) | (2,282) | (1,869) | |
Net cash generated from operating activities | (a) | 257,125 | 322,110 | 218,513 |
(*) Prior periods have been recast to reflect the Company's change in accounting policy for the reclassification within financial results as explained in Note 34.1
The accompanying notes are an integral part of these consolidated financial statements.
F- 12
Adecoagro S.A.
Consolidated Statements of Cash Flows (Continued) for the years ended December 31, 2020, 2019 and 2018
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Note | 2019 (*) | 2018 (*) | ||
Cash flows from investing activities: | ||||
Acquisition of business, net of cash and cash equivalents acquired | - | 683 | - | |
Purchases of property, plant and equipment | 12 | (168,529) | (252,450) | (207,069) |
Purchase of cattle and non current biological assets | 16 | (7,339) | (4,950) | (5,706) |
Purchases of intangible assets | 15 | (1,122) | (8,617) | (3,321) |
Interest received and others | 9 | 25,421 | 7,210 | 7,728 |
Proceeds from disposal of other property items | 3,482 | 2,652 | 1,748 | |
Proceeds from the sale of farmland and other assets | 22 | 16,022 | 5,833 | 31,511 |
Proceeds from the sale of subsidiary | 22 | 10,149 | - | - |
Net cash used in investing activities | (b) | (121,916) | (249,639) | (175,109) |
Cash flows from financing activities: | ||||
Proceeds from long-term borrowings | 27 | 116,015 | 108,271 | 45,536 |
Payments of long-term borrowings | 27 | (34,750) | (101,826) | (124,349) |
Proceeds from short-term borrowings | 27 | 207,217 | 193,977 | 318,108 |
Payments of short-term borrowings | 27 | (233,540) | (131,521) | (190,630) |
Interest paid | (60,026) | (53,996) | (50,021) | |
(Payments) / collections of derivatives financial instruments | (1,687) | 1,481 | (2,578) | |
Lease payments | (40,336) | (49,081) | - | |
Purchase of own shares | (4,365) | (4,263) | (15,725) | |
Dividends paid to non-controlling interest | (2,447) | (905) | (1,195) | |
Net cash used from financing activities | (c) | (53,919) | (37,863) | (20,854) |
Net increase in cash and cash equivalents | 81,290 | 34,608 | 22,550 | |
Cash and cash equivalents at beginning of year | 21 | 290,276 | 273,635 | 269,195 |
Effect of exchange rate changes and inflation on cash and cash | ||||
equivalents | (d) | (35,284) | (17,967) | (18,110) |
Cash and cash equivalents at end of year | 21 | 336,282 | 290,276 | 273,635 |
2020
(a) Includes (14,956), 23,550 and 7,598 of the combined effect of IAS 29 and IAS 21 of the Argentine subsidiaries for 2020, 2019 and 2018, respectively.
(b) Includes (429), 2,922 and 3,935 of the combined effect of IAS 29 and IAS 21 of the Argentine subsidiaries for 2020, 2019 and 2018, respectively.
(c) Includes 15,694, (14,340) and (8,231) of the combined effect of IAS 29 and IAS 21 of the Argentine subsidiaries for 2020, 2019 and 2018, respectively.
(d) Includes (309), (12,132) and (3,302) of the combined effect of IAS 29 and IAS 21 of the Argentine subsidiaries for 2020, 2019 and 2018, respectively.
Non-cash investing and financing transactions disclosed in other notes are the seller financing of Subsidiaries in Note 22.
(*) Prior periods have been recast to reflect the Company's change in accounting policy for the reclassification within financial results as explained in Note 34.1
The accompanying notes are an integral part of these consolidated financial statements.
F- 13
Notes to the Consolidated Financial Statements
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 consolidated 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 consolidated financial statements have been approved for issue by the Board of Directors on March 9, 2021.
2.
Financial risk management
Risk management principles and processes
The Group's activities are exposed to a variety of financial risks. The Group's overall risk management program focuses on the unpredictability of financial markets and seeks to minimize the Group's capital costs by using suitable means of financing and to manage and control the Group's financial risks effectively. The Group uses financial instruments to hedge certain risk exposures.
The Group's approach to the identification, assessment and mitigation of risk is carried out by a Risk and Commercial Committee, which focuses on timely and appropriate management of risk.
The principal financial risks are related to raw material price, end-product price, exchange rate, interest rate, liquidity and credit. This section provides a description of the principal risks and uncertainties that could have a material adverse effect on the Group's strategy, performance, results of operations and financial condition. These risks do not appear in any particular order of potential materiality or probability of occurrence.
In Argentina, ongoing economical events forced the government to impose certain restrictions in the exchange markets, such as:
- Dividends payments to non residents.
- Set specific deadlines to enter and settle exports
- Prior authorization of the BCRA for the formation of external assets for companies
- Prior authorization of the BCRA for the payment of debts related to companies abroad
- Deferral of payment of certain public debt instruments.
- Fuel price control
• Exchange rate risk
The Group's cash flows, statement of income and statement of financial position are presented in U.S. Dollars and may be affected by fluctuations in exchange rates. Currency risks as defined by IFRS 7 arise on account of monetary assets and liabilities being denominated in a currency that is not the functional currency.
A significant majority of the Group's business activities is conducted in the respective functional currencies of the subsidiaries (primarily the Brazilian Reais and the Argentine Peso). However, the Group may transact in currencies other than the respective functional currencies, mainly the U.S. Dollars. As such, these subsidiaries may hold U.S. Dollar denominated monetary balances at each year-end as indicated in the tables below.
2. Financial risk management (continued)
The Group's net financial position exposure to the U.S. Dollar is managed on a case-by-case basis, partly by hedging certain expected cash flows with foreign exchange derivative contracts.
The following tables show the net monetary position of the respective subsidiaries within the Group categorized by functional currency. Non-U.S. Dollar amounts are presented in U.S. Dollars for purpose of these tables.
2020
Subsidiaries' functional currency
Net monetary position
ArgentineBrazilianUruPgeusaoyan U.S. Dollar Total
(Liability)/ Asset
Peso
Reais
(115,097)
(288) (115,385)
(307,611) 20,720
47,122 (433,122)
Argentine Peso Brazilian Reais U.S. Dollar Uruguayan Peso Total
- (193,353)
- (298,039)
- -
- (298,039)
- (308,450)
- (605,650)
(655) 20,065
- 46,834
(655) (847,201)
2019
Subsidiaries' functional currencyNet monetary position
ArgentineBrazilianUruPgeusaoyan U.S. Dollar Total
(Liability)/ Asset
Peso
Reais
(19,733)
(560) (20,293)
(438,604) 21,586
48,091 (686,223)
47,531 (904,683)
Argentine Peso Brazilian Reais U.S. Dollar Uruguayan Peso Total
- (317,296)
- (196,081)
- -
- (196,081)
- (337,029)
- (634,685)
(2,086) 19,500
- (2,086)
The Group's analysis shown on the tables below is carried out based on the exposure of each functional currency subsidiary against the U.S. Dollar. The Group estimated that, other factors being constant, a hypothetical 10% appreciation/ depreciation of the U.S. Dollar against the respective functional currencies for the years ended December 31, 2020 and 2019 would have decreased/increased the Group's Profit before income tax for the year. A 10% depreciation of the U.S. Dollar against the functional currencies would have an equal and opposite effect on the income statement. A portion of this effect would have been recognized as other comprehensive income since a portion of the Company's borrowings was used as cash flow hedge of the foreign exchange rate risk of a portion of its highly probable future sales in U.S. Dollars (see Hedge Accounting - Cash Flow Hedge below for details).
Functional currency
Net monetary positionArgentineBrazilianUruguayanTotal
Peso
Reais
Peso
2,072 (48,024)
2020 2019
U.S. Dollar U.S. Dollar
(19,335) (31,730)
(30,761) (43,860)
2,159 (73,431)
The tables above only consider the effect of a hypothetical appreciation / depreciation of the U.S. Dollars on the Group's net financial position. A hypothetical appreciation / depreciation of the U.S. Dollar against the functional currencies of the Group's subsidiaries has historically had a positive / negative effect, respectively, on the fair value of the Group's biological assets and the end prices of the Group's agriculture produce, both of which are generally linked to the U.S. Dollar.
2. Financial risk management (continued)
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 U.S. Dollars using a portion of its borrowings denominated in U.S. Dollars, currency forwards and foreign currency floating-to-fixed interest rate swaps.
Principal amounts of long-term borrowings (non-derivative financial instruments) and notional values of foreign currency forward contracts (derivative financial instruments) were designated as hedging instruments. These instruments are exposed to Brazilian Reais/ U.S. Dollar foreign currency risks related to operations in Brazil and Argentine Peso/U.S. Dollar in Argentina, respectively. As of December 31, 2020 and 2019, approximately 15.0% and 19.5%, respectively, of projected sales qualify as highly probable forecast transactions for hedge accounting purposes and were designated as hedged items.
The Group has prepared formal documentation in order to support the designation above, including an explanation of how the designation of the hedging relationship is aligned with the Group's Risk Management Policy, identification of the hedging instrument, the hedged transactions, the nature of the risk being hedged and an analysis which demonstrates that the hedge is expected to be highly effective. The Group reassesses the prospective and retrospective effectiveness of the hedge on an ongoing basis comparing the foreign currency component of the carrying amount of the hedging instruments and of the highly probable future sales.
Under cash flow hedge accounting, effect of changes in foreign currency exchange rates on derivative and non-derivative hedging instruments not be immediately recognized in profit or loss, but be reclassified from equity to profit or loss in the periods when the future sales occur, thus allowing for a more appropriate presentation of the results for the period reflecting the strategy in the Group's Risk Management Policy.
The Company expects that the cash flows will occur and affect profit or loss between 2021 and 2025.
For the year ended December 31, 2020, a total amount before income tax of US$ 46,145 gain (US$ 54,312 gain in 2019) was recognized in other comprehensive income and an amount of US$ 26,031 loss (US$ 15,594 loss in 2019) was reclassified from equity to profit or loss within "Financial results, net".
• Raw material price risk
Inflation in the costs of raw materials and goods and services from industry suppliers and manufacturers presents risks to project economics. A significant portion of the Group's cost structure includes the cost of raw materials primarily seeds, fertilizers and agrochemicals, among others. Prices for these raw materials may vary significantly.
• End-product price risk
Prices for commodity products have historically been cyclical, reflecting overall economic conditions and changes in capacity within the industry, which affect the profitability of entities engaged in the agribusiness industry. The Group combines different actions to minimize price risk. A percentage of crops are to be sold during and post harvest period. The Group manages minimum and maximum prices for each commodity as well as gross margin per each crop as to decide when and how to sell. End-product price risks are hedged if economically viable and possible by entering into forward contracts with major trading houses or by using derivative financial instruments, consisting mainly of crops and sugar future contracts, but also includes occasionally put and call options. A movement in end-product futures prices would result in a change in the fair value of the end product hedging contracts. These fair value changes, after taxes, are recorded in the consolidated statement of income.
2. Financial risk management (continued)
Contract positions are designed to ensure that the Group would receive a defined minimum price for certain quantities of its production. The counterparties to these instruments generally are major financial institutions. In entering into these contracts, the Group has assumed the risk that might arise from the possible inability of counterparties to meet the terms of their contracts. The Group does not expect any material losses as a result of counterparty defaults. The Group is also obliged to pay margin deposits and premiums for these instruments. These estimates represent only the sensitivity of the financial instruments to market risk and not the Group exposure to end product price risks as a whole, since the crops and cattle products sales are not financial instruments within the scope of IFRS 7 disclosure requirements.
Liquidity risk
The Group is exposed to liquidity risks, including risks associated with refinancing borrowings as they mature, and that borrowing facilities are not available to meet cash requirements. Failure to manage liquidity risks could have a material impact on the Group's cash flow and statement of financial position.
Prudent liquidity risk management includes managing the profile of debt maturities and funding sources close oversight of cash flows projections, maintaining sufficient cash, and ensuring the availability of funding from an adequate amount of committed credit facilities and the ability to close out market positions. The Group's ability to fund its existing and prospective debt requirements is managed by maintaining diversified funding sources with adequate available funding lines from high quality lenders; and reaching to have long-term financial facilities.
As of December 31, 2020, cash and cash equivalents of the Group totaled US$ 336.3 million, which could be used for managing liquidity risk.
The tables below analyzes the Group's non-derivative financial liabilities and derivative financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows and as a result they do not reconcile to the amounts disclosed on the statement of financial position except for short-term payables where discounting is not applied.
At December 31, 2020
Less than 1 year
Between 1 and 2 yearsBetween 2 and 5 yearsOver 5 YearsTotal
Trade and other payables Borrowings
Leases Liabilities
779,213
1,655,596
Derivative financial instruments Total
114,523 286,588 36,714 13,141 450,966
15 132,266 20,608 - 152,889
22 197,941 74,565 - 272,528
253
114,813
713,321 1,330,116
65,639 197,526 - 13,141
At December 31, 2019
Less than 1 year
Between 1 and 2 yearsBetween 2 and 5 yearsOver 5 YearsTotal
Trade and other payables Borrowings
Leases Liabilities
803,070
1,597,887
Derivative financial instruments Total
94,821 122,403 46,370 1,423 265,017
3,399 154,682 52,372 - 210,453
30 230,058 89,259 - 319,347
170
98,420
681,819 1,188,962
121,081 309,082 - 1,423
• Interest rate risk
The Group's interest rate risk arises from long-term borrowings at floating rates, which expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The interest rate profile of the Group's borrowings is set out in Note 27.
2. Financial risk management (continued)
The Group occasionally manages its cash flow interest rate risk exposure by using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates.
The following tables show a breakdown of the Group's fixed-rate and floating-rate borrowings per currency denomination and functional currency of the subsidiary issuing the loans. These analyses are performed after giving effect to interest rate swaps.
The analysis for the year ended December 31, 2020 and 2019 is as follows:
2020
Subsidiaries' functional currency
Rate per currency denominationArgentine Brazilian Uruguayan
Peso Reais PesoU.S. DollarTotal
Fixed rate: Argentine Peso Brazilian Reais U.S. Dollar
Subtotal fixed-rate borrowings Variable rate:
81,283 - 30,671 111,954
- 22,834
- -
- 81,283
- 22,834
75,592 2,002
98,426
2,002
505,259 613,524 505,259 717,641
Brazilian Reais U.S. Dollar
Subtotal variable-rate borrowings
Total borrowings as per statement of financial position
- 66,584 66,584 178,538
184,123 2,742 186,865 285,291
- - - 2,002
- 184,123
- 69,326
- 253,449 505,259 971,090
2019
Subsidiaries' functional currencyRate per currency denominationArgentine BrazilianUruguayanPesoReais
PesoU.S. DollarTotal
Fixed rate: Argentine Peso Brazilian Reais U.S. Dollar
Subtotal fixed-rate borrowings Variable rate:
549 - 128,464 129,013
- 142,142
- -
-
549
- 142,142
77,378 15,113
219,520
15,113
504,814 725,769 504,814 868,460
Brazilian Reais U.S. Dollar
Subtotal variable-rate borrowings
Total borrowings as per statement of financial position
- 79,339 79,339 208,352
13,604 6,877 20,481 240,001
- - - 15,113
- 13,604
- 86,216
- 99,820 504,814 968,280
For the years ended December 31, 2020 and 2019, if interest rates on floating-rate borrowings had been 1% higher with all other variables held constant, the Group's Profit before income tax for the years would have decreased as shown below. A 1% decrease in interest rates would have an equal and opposite effect on the income statement.
2. Financial risk management (continued)
2020
Subsidiaries' functional currencyRate per currency denominationArgentine Brazilian Uruguayan
Peso Reais PesoU.S. DollarTotal
Variable rate:
Brazilian Reais U.S. Dollar
- (666)
(1,841)
-
- (1,841)
(27)
-
(693)
Total effects on profit before income tax
(666)
(1,868)
-
-
(2,534)
2019
Subsidiaries' functional currencyRate per currency denominationArgentine Brazilian Uruguayan
Peso Reias PesoU.S. DollarTotal
Variable rate:
(69) - - (862)
Brazilian Reais U.S. Dollar
- (793)
(136) - - (136)
Total effects on profit before income tax
(793)
(205)
-
- (998)
The sensitivity analysis has been determined assuming that the change in interest rates had occurred at the date of the statement of financial position and had been applied to the exposure to interest rate risk for financial instruments in existence at that date. The 100 basis point increase or decrease represents management's assessment of a reasonable possible change in those interest rates, which have the most impact on the Group, specifically the United States and Brazilian rates over the period until the next annual statement of financial position date.
• Credit risk
The Group's exposures to credit risk arise in certain agreements in relation to amounts owed for physical product sales, the use of derivative instruments, and the investment of surplus cash balances. The Group is also exposed to political and economic risk events, which may cause non-payment of foreign currency obligations to the Group.
The Group's policy is to manage credit exposure to trading counterparties within defined trading limits. All of the Group's significant counterparties are assigned internal credit limits.
The Group sells to a large base of customers. Type and class of customers may differ depending on the Group's business segments. For the years ended December 31, 2020 and 2019, more than 80% and 96%, respectively, of the Group's sales of crops were sold to 36 and 42 well-known customers (both multinational and local) with good credit history with the Group. In the Sugar, Ethanol and Energy segment, sales of ethanol were concentrated in 46 and 52 customers, which represented 100% of total sales of ethanol for the years ended December 31, 2020 and 2019, respectively. Approximately 78% and 86% of the Group's sales of sugar were concentrated in 76 and 66 well-known traders for the years ended December 31, 2020 and 2019, respectively. The remaining 22% and 14%, which mainly relates to "crystal sugar", were dispersed among several customers. In 2020 and 2019, energy sales are 96% and 94% concentrated in 52 major customers. In the dairy segment, 65% and 70% of the sales were concentrated in 21 and 36 well-known customers in 2020 and 2019, respectively.
No credit limits were exceeded during the reporting periods and management does not expect any losses from non-performance by these counterparties. If any of the Group's customers are independently rated, these ratings are used. Otherwise, the Group assesses the credit quality of the customer taking into account its financial position, past experience and other factors (see Note 18 for details). The Group may seek cash collateral, letter of credit or parent company guarantees, as considered appropriate. Sales to customers are primarily made by credit with customary payment terms. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position after deducting any impairment allowance. The Group's exposure of credit risk arising from trade receivables is set out in Note 19.
2. Financial risk management (continued)
The Group is exposed to counterparty credit risk on cash and cash equivalent balances. The Group holds cash on deposit with a number of financial institutions. The Group manages its credit risk exposure by limiting individual deposits to clearly defined limits. The Group only deposits with high quality banks and financial institutions. As of December 31, 2020 and 2019, the total amount of cash and cash equivalents mainly comprise cash in banks and short-term bank deposits. The Group is authorized to transact with banks rated "BBB+" or higher. As of December 31, 2020 and 2019, 6 and 8 banks (primarily JP Morgan, Banco Safra, Itaú Nassau, Credit Agricole, Credit Suisse and Banco Itaú) accounted for more than 81% and 85%, respectively, of the total cash deposited. The remaining amount of cash and cash equivalents relates to cash in hand. Additionally, during the year ended December 31, 2020, the Group invested in fixed-term bank deposits with mainly five bank (ING, Credit Agricole, Credit Suisse, JP Morgan and Banco Galicia y Buenos Aires) and also entered into derivative contracts (currency forward). The Group's exposure of credit risk arising from cash and cash equivalents is set out in Note 21.
The Group's primary objective for holding derivative financial instruments is to manage currency exchange rate risk, interest rate risk and commodity price risk. The Group generally enters into derivative transactions with high-credit-quality counterparties and, by policy, limits the amount of credit exposure to any one counterparty based on an analysis of that counterparty's relative credit standing. The amounts subject to credit risk related to derivative instruments are generally limited to the amounts, if any, by which counterparty's obligations exceed the obligations with that counterparty.
The Group also entered into crop commodity futures traded in the established trading markets of Argentina and Brazil through well-rated brokers. Management does not expect any counterparty to fail to meet its obligations.
• Capital risk management
The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, it may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or buy own shares or sell assets to reduce debt. Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as total debt (including current and non-current borrowings as shown in the consolidated statement of financial position, if applicable) divided by total capital. Total capital is calculated as equity, as shown in the consolidated statement of financial position, plus total borrowings. During the year ended December 31, 2020, the strategy was to maintain the gearing ratio within 0.40 to 0.60, as follows:
2020 | 2019 | |
Total borrowings | 971,090 | 968,280 |
Total equity | 963,724 | 1,028,883 |
Total capital | 1,934,814 | 1,997,163 |
Gearing ratio | 0.50 | 0.48 |
• Derivative financial instruments
As part of its business operations, the Group uses a variety of derivative financial instruments to manage its exposure to the financial risks discussed above. As part of this strategy, the Group may enter into derivatives of (i) interest rate to manage the composition of floating and fixed rate debt; (ii) currency to manage exchange rate risk, and (iii) crop (future contracts and put and call options) to manage its exposure to price volatility stemming from its integrated crop production activities. The Group's policy is not to use derivatives for speculative purposes.
2. Financial risk management (continued)
Derivative financial instruments involve, to a varying degree, elements of market and credit risk not recognized in the financial statements. The market risk associated with these instruments resulting from price movements is expected to offset the market risk of the underlying transactions, assets and liabilities, being hedged. The counterparties to the agreements relating to the Group's contracts generally are large institutions with credit ratings equal to or higher than BBB+. The Group continually monitors the credit rating of such counterparties and seeks to limit its financial exposure to any one financial institution. While the contract or notional amounts of derivative financial instruments provide one measure of the volume of these transactions, they do not represent the amount of the Group's exposure to credit risk. The amounts potentially subject to credit risk (arising from the possible inability of counterparties to meet the terms of their contracts) are generally limited to the amounts, if any, by which the counterparties' obligations under the contracts exceed the Group's obligations to the counterparties.
The following tables show the outstanding positions for each type of derivative contract as of the date of each statement of financial position:
▪ Futures/ options
As of December 31, 2020:
2020
Type of derivative contractQuantities (thousands)
(**)Notional amountFair Value Asset/ (Liability)
(Loss)/Gain
(*)
52
6,027
(2,846) 2,846
(19)
(4,272)
151 (151)Futures: Sale Corn Soybean Wheat Sugar Ethanol Total
32
7,242
(3,380) 3,380
217
63,025
(6,738) 5,538
1 283
277 72,299
(20)
(12,833)
3 11,616
As of December 31, 2019:
2019
Type of derivative contractQuantities (thousands)
(**)Notional amountFair Value Asset/ (Liability)
(Loss)/Gain
(*)
445 (446)
(28) 28
(166) 50
Futures: Sale Corn Soybean Wheat Sugar Total
221 107 13 101 442
923 7,118 515 29,409 37,965
759 (687)
(1,342) 1,155
(*) Included in the line item "(Loss) / Gain from commodity derivative financial instruments" of Note 8. (**) All quantities expressed in tons and m3.
Commodity future contract fair values are computed with reference to quoted market prices on future exchanges.
2. Financial risk management (continued)
▪ Interest rate swap
In December 31, 2020 the Group's subsidiary in Brazil, Adecoagro Vale do Ivinhema entered into a interest rate swap operation with Itaú BBA in an aggregate amount of US$ 400 million. In these operation Adecoagro Vale do Ivinhema receives IPCA (Extended National Consumer Price Index) plus 4.24% per year, and pays CDI (an interbank floating interest rate in Reais) plus 1.85% per year. This swap expires semiannually until December, 2026. This contract resulted in a recognition of a gain of US$ 1.8 million in 2020.
▪ Currency forward
During the year ended December 31, 2020 and 2019 the Group entered into several currency forward contracts with Brazilian banks in order to hedge the fluctuation of the Brazilian Reais against the U.S. Dollar for a total aggregate amount of US$ 23.8 million. These contracts resulted in a recognition of a loss of US$ 1.9 million and US$ 1.1 million in 2020 and 2019 respectively.
During the year ended on December 31, 2020, the Group entered into several currency forward contracts in order to hedge the fluctuation of the U.S. Dollar against Euro for a total notional amount of US$ 2.4 millions. The currency forward contracts maturity date was March 2021. The outstanding contracts resulted in the recognition of a loss amounting to US$ 0.03 million in 2020.
Gains and losses on currency forward contracts are included within "Financial results, net" in the statement of income.
▪ Euro-bob price swap
As Petrobras (the Brazilian oil state company) started to track the movements of the international gasoline to set its domestic prices in 2017, the Group's subsidiary in Brazil, Adecoagro Vale do Ivinhema entered into a swap operation in March 2018, which intention was to mitigate the effects of the gasoline volatility in the ethanol prices sold by the company. The swaps expired according to the due dates and as of December 31, 2018 all the swaps positions were already liquidated. The Group recorded a loss of US$ 1.6 million.
3.
Segment information
According to IFRS 8, operating segments are identified based on the 'management approach'. 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 Group's CODM is the Management Committee. IFRS 8 stipulates external segment reporting based on the Group's internal organizational and management structure and on internal financial reporting to the chief operating decision maker.
The Group operates in three major lines of business, namely, Farming; Sugar, Ethanol and Energy; and Land Transformation.
•
The Company's 'Farming' is further comprised of three reportable segments:
•
The Company's 'Crops' Segment consists of planting, harvesting and sale of grains, oilseeds and fibers
(including wheat, corn, soybeans, cotton and sunflowers, among others), and to a lesser extent the provision of grain warehousing/conditioning and handling and drying services to third parties. Each underlying crop in this 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. A single manager is responsible for the management of operating activity of all crops rather than for each individual crop.
•
The Company'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 Company's 'All Other Segments' consists of the aggregation of the remaining non-reportable operating segments, which do not meet the quantitative thresholds for disclosure, namely, Coffee and Cattle.
• The Company'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 Company'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).
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. (Please see Note 34
- Basis of preparation and presentations).
According to IAS 29, all Argentine Peso-denominated non-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
3. Segment information (continued)
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 re-measured 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 in Argentina are based on monthly data that has 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 following tables show a reconciliation of each reportable segment 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 for the years ended December 31, 2020, 2019 and 2018.
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3.
Segment information (continued)
Segment reconciliation for the year ended December 31, 2020:
Sales of goods sold and services rendered
2020
Cost of goods and services rendered (150,745)
Initial recognition and changes in fair value of biological assets and agricultural produce 41,777
Gain from changes in net realizable value of agricultural produce after harvest 7,078
Margin on Manufacturing and Agricultural Activities Before Operating Expenses
General and administrative expenses (6,816)
Selling expenses (18,265)
Other operating income, net (12,846)
Profit from Operations Before Financing and Taxation
Depreciation and amortization
Net (loss) / gain from Fair value adjustment of investment property
-
Sales of goods sold and services rendered Cost of goods and services rendered
Initial recognition and changes in fair value of biological assets and agricultural produce
All other segmentsTotal segment reporting
AdjustmentTotal as per statement of incomeTotal segment reporting
170,114
68,224
30,297
(5,397)
Crops | Rice | Dairy | |||||
Total as per | Total | Total as per | Total | Total as per | |||
Adjustment | statement of | segment | Adjustment | statement of | segment | Adjustment | statement of |
income | reporting | income | reporting | income | |||
(1,653) | 168,461 | 102,886 | (1,024) | 101,862 | 135,471 | (1,997) | 133,474 |
1,495 | (149,250) | (74,395) | 565 | (73,830) | (117,754) | 1,747 | (116,007) |
(934) | 40,843 | 19,449 | (772) | 18,677 | 12,638 | (294) | 12,344 |
(71) | 7,007 | - | - | - | (2) | - | (2) |
(1,163) | 67,061 | 47,940 | (1,231) | 46,709 | 30,353 | (544) | 29,809 |
122 | (6,694) | (7,045) | 146 | (6,899) | (4,896) | 108 | (4,788) |
267 | (17,998) | (14,170) | 247 | (13,923) | (13,824) | 284 | (13,540) |
(7) | (12,853) | 731 | (18) | 713 | (189) | 3 | (186) |
(781) | 29,516 | 27,456 | (856) | 26,600 | 11,444 | (149) | 11,295 |
111 | (5,286) | (6,652) | 147 | (6,505) | (6,709) | 141 | (6,568) |
- | - | - | - | - | - | - | - |
2020 | |||||||
Total | |||||||
Total as | |||||||
per | |||||||
statement | |||||||
of income |
Corporate
Land transformationTotal segment reportingAdjustme ntTotal as per statement of incomeTotal segment reporting
AdjustmentTotal as per statement of incomeTotal segment reporting
2,545 (1,984)
(37) 2,508
Adjustment
22 (1,962)
- - - -
- - - -
- - - -
- - - -
- - - -
- 822,475
- (615,775)
(4,711) 3,829
817,764 (611,946)
1,269
(13) 1,256
- -
124,742
(2,013) 122,729
Gain from changes in net realizable value of agricultural produce after harvest
-
-
-
7,076
(71) 7,005
Margin on Manufacturing and Agricultural Activities Before Operating Expenses
General and administrative expenses Selling expenses
1,830 (120) (217)
(28)
1,802 (118) (214)
- - - 7,934 7,934
- (4) - (14)
- (4) - 7,920 7,916
- (19,319)
- 336 7
- (18,983)
338,518 (54,138) (95,866)
(2,966) 335,552
2 3 (2)
710 (53,428)
(202)
(195)
808 (95,058)
Other operating income, net
(161)
(169) 2,033
(46) 1,987
Profit from Operations Before Financing and Taxation
1,069 2,562
(25)
1,067 2,537
(18)
(19,682)
(8) 335
(19,347)
190,547
(1,494) 189,053
Depreciation and amortization
(138) 1,080
3 (3)
(135) 1,077
- -
- -
- -
(876)
14 -
(862)
(142,288)
416
Net (loss) / gain from Fair value adjustment of investment property
-
-
1,080
(3)
1,077
Sugar, Ethanol and Energy segment has not been reconciled due to the lack of difference.
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3.
Segment information (continued)
Segment reconciliation for the year ended December 31, 2019:
Sales of goods sold and services rendered
Crops
2019
Rice
DairyTotal segment reporting
AdjustmentTotal as per statement of incomeTotal segment reporting
AdjustmentTotal as per statement of incomeTotal segment reporting
AdjustmentTotal as per statement of income
168,938
(2,492)
166,446
102,162
(1,006)
101,156
84,767
(945)
83,822
Cost of goods and services rendered
(159,197)
2,687
(156,510) (74,480)
529
(73,951)
(77,532)
838
(76,694)
Initial recognition and changes in fair value of biological assets and agricultural produce
30,290 1,542
(549)
29,741 13,194
(979)
12,215
13,741
(231)
13,510
Gain from changes in net realizable value of agricultural produce after harvest
283
1,825
-
-
-
-
-
-
Margin on Manufacturing and Agricultural Activities Before Operating Expenses General and administrative expenses
Selling expenses
Other operating income, net
Profit from Operations Before Financing and Taxation
41,573 (5,446) (12,852) (2,283) 20,992
(87) 128 (225)
(255)
(71)
41,502 (5,533) (12,724) (2,508) 20,737
40,876 (6,752) (21,072)
(1,456)
39,420 (6,605) (20,574)
20,976 (4,188) (6,252)
(338)
20,638
147 498 (15)
90 (4,098)
18 (6,234)
282 13,334
(826)
267 12,508
(635) 9,901
(298)
(68)
(703) 9,603
Depreciation and amortization
(4,662)
(137)
(4,799)
(6,994)
171 -
(6,823)
(5,064)
98 -
(4,966)
Net (loss) / gain from Fair value adjustment of investment property
-
-
-
-
-
-
-
Sales of goods sold and services rendered Cost of goods and services rendered
Initial recognition and changes in fair value of biological assets and agricultural produce
All other segments
2019
Corporate
TotalTotal segment reporting
AdjustmentTotal as per statement of incomeTotal segment reporting
AdjustmentTotal as per statement of incomeTotal segment reporting
AdjustmentTotal as per statement of income
3,904 (3,412)
27 (40)
3,931 (3,452)
- - - -
- - - -
- 891,554
(4,416)
887,138
- - -
(675,187)
4,014 (671,173)
(40)
53 -
13 -
70,295 1,542
(1,706) 68,589
Gain from changes in net realizable value of agricultural produce after harvest
-
283 1,825
Margin on Manufacturing and Agricultural Activities Before Operating Expenses General and administrative expenses
452 (167) (171) (956)
40 17 (11) 602 648
492 (150) (182) (354)
- (19,319)
- 428 23 23 474
- (18,891)
288,204
(1,825)
286,379
(57,797)
595 (57,202)
Selling expenses
(165)
(142)
(107,628)
656 (106,972)
Other operating income, net
(175)
(152)
(1,137)
Profit from Operations Before Financing and Taxation
(842)
(194)
(19,659)
(19,185)
121,642
315 (259)
(822) 121,383
Depreciation and amortization
(181)
4 602
(177)
(20)
20 -
- (174,578)
Net (loss) / gain from Fair value adjustment of investment property
(927)
(325)
-
-
(927)
(325)
Sugar, Ethanol and Energy, and Land Transformation segments have not been reconciled due to the lack of differences.
337 602
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3.
Segment information (continued)
Segment reconciliation for the year ended December 31, 2018:
2018 | ||||||
Crops | Rice | |||||
Total | Total as per | Total | Total as per | |||
segment | Adjustment | statement of | segment | Adjustment | statement of | |
reporting | income | reporting | income | |||
Sales of goods sold and services rendered | 164,538 | (9,120) | 155,418 | 100,013 | (4,610) | 95,403 |
Cost of goods and services rendered | (165,988) | 9,052 | (156,936) | (75,739) | 766 | (74,973) |
Initial recognition and changes in fair value of biological assets and agricultural produce | 36,422 | (7,755) | 28,667 | 8,967 | (4,842) | 4,125 |
Gain from changes in net realizable value of agricultural produce after harvest | 2,704 | (3,613) | (909) | - | - | - |
Margin on Manufacturing and Agricultural Activities Before Operating Expenses | 37,676 | (11,436) | 26,240 | 33,241 | (8,686) | 24,555 |
General and administrative expenses | (4,239) | 37 | (4,202) | (5,070) | (869) | (5,939) |
Selling expenses | (5,921) | 474 | (5,447) | (15,465) | 1,375 | (14,090) |
Other operating income, net | 4,799 | 1,741 | 6,540 | 275 | (58) | 217 |
Profit from Operations Before Financing and Taxation | 32,315 | (9,184) | 23,131 | 12,981 | (8,238) | 4,743 |
Depreciation and amortization | (1,697) | (329) | (2,026) | (5,846) | (470) | (6,316) |
Net (loss) / gain from Fair value adjustment of investment property | - | - | - | - | - | - |
2018 | ||||||
Corporate | ||||||
Total | Total | Total as per | ||||
segment | segment | Adjustment | statement of | |||
reporting | reporting | income | ||||
Sales of goods sold and services rendered | 1,919 | - | - | |||
Cost of goods and services rendered | (1,412) | - | - | |||
Initial recognition and changes in fair value of biological assets and agricultural produce | (806) | - | - | |||
Gain from changes in net realizable value of agricultural produce after harvest | - | - | - | |||
Margin on Manufacturing and Agricultural Activities Before Operating Expenses | (299) | - | - | |||
General and administrative expenses | (155) | (19,626) | 1,433 | |||
Selling expenses | (165) | (178) | 33 | |||
Other operating income, net | 10,668 | (167) | 36 | |||
Profit from Operations Before Financing and Taxation | 10,049 | (19,971) | 1,502 | |||
Depreciation and amortization | (171) | - | - | |||
Net (loss) / gain from Fair value adjustment of investment property | 10,680 | - | - |
All other segments
Adjustment
Total as perstatement of income
(149)
1,770
99 (1,313)
(393) (1,199)
-
-
(443)
(742)
(9) (164)
16 (149)
2,728 13,396
2,292
2,729
(6)
12,341
13,409
(177)
Dairy | |||
Total | Total as per | ||
segment | Adjustment | statement of | |
reporting | income | ||
33,201 | (3,491) | 29,710 | |
(31,488) | 3,361 | (28,127) | |
7,295 | (1,840) | 5,455 | |
- | - | - | |
9,008 | (1,970) | 7,038 | |
(2,034) | (246) | (2,280) | |
(983) | 41 | (942) | |
(1,055) | 58 | (997) | |
4,936 | (2,117) | 2,819 | |
(2,253) | (280) | (2,533) | |
- | - | - | |
Total | |||
Total | Total as per | ||
segment | Adjustment | statement of | |
reporting | income | ||
- | 810,609 | (17,370) | 793,239 |
- | (623,243) | 13,278 | (609,965) |
- | 31,025 | (14,830) | 16,195 |
- | 2,704 | (3,613) | (909) |
- | 221,095 | (22,535) | 198,560 |
(18,193) | (56,426) | 346 | (56,080) |
(145) | (92,154) | 1,939 | (90,215) |
(131) | 99,727 | 4,505 | 104,232 |
(18,469) | 172,242 | (15,745) | 156,497 |
- | (153,169) | (1,085) | (154,254) |
- | 10,680 | 2,729 | 13,409 |
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3.
Segment information (continued)
The following table presents information with respect to the Group's reportable segments. Certain other activities of a holding function nature not allocable to thesegments are disclosed in the column 'Corporate'.
Segment analysis for the year ended December 31, 2020:
Farming
CropsRiceDairyAll other segments
Farming subtotal
Sugar, Ethanol and EnergyLand TransformationCorporateTotal
170,114
102,886
135,471
2,545
411,016
- 822,475
Sales of goods and services rendered Cost of goods sold and services rendered
(150,745) (74,395)
(117,754) (1,984)
41,777 19,449
12,638 1,269
75,133
49,609
- 124,742
Initial recognition and changes in fair value of biological assets and agricultural produce Changes in net realizable value of agricultural produce after harvest
Margin on manufacturing and agricultural activities before operating expenses General and administrative expenses
(344,878)
411,459 (270,897)
- - -
- (615,775)
Selling expenses
(46,476)
(202) (95,866)
Other operating income, net
7,078 68,224 (6,816) (18,265)
- 47,940 (7,045) (14,170)
(12,846) 731
(2) 30,353 (4,896) (13,824)
(189)
- 1,830 (120) (217) 1,069
7,076
- - - 7,076
148,347
(18,877)
190,171 (15,942) (49,188)
(11,235)
- - -
- 338,518
(19,319) (54,138)
5,495
7,934 (161) 2,033
Profit / (loss) from operations before financing and taxation
30,297
27,456
11,444
2,562
71,759
130,536
7,934
(19,682) 190,547
Depreciation and amortization
(5,397)
(6,652)
(6,709)
(18,896)
(122,516)
-
(876)
(142,288)
Net (loss) / gain from Fair value adjustment of investment property
Reverse of revaluation surplus derived from the disposals of assets before taxes
-
10,198 - 10,198
29,566
15,474 17,789
29,927 - - 91,767
- -
Initial recognition and changes in fair value of biological assets and agricultural produce (unrealized) Initial recognition and changes in fair value of biological assets and agricultural produce (realized) Changes in net realizable value of agricultural produce after harvest (unrealized)
- -
- -
12,211
3,975 (5,151)
(138) 1,080 - 2,258 (989)
1,080 - - - 1,080
- 13,293 61,840
19,682 - - 32,975
Changes in net realizable value of agricultural produce after harvest (realized)
7,559
7,557 - - - 7,557
(481)
- -
- (2)
- -
(481) - - - (481)
Farmlands and farmland improvements, net
454,212
141,661
1,911 53,902
651,686
- 715,751
Machinery, equipment and other fixed assets, net Bearer plants, net
Work in progress Right of use assest Investment property Goodwill Biological assets Finished goods
Raw materials, stocks held by third parties and others Total segment assets
39,517
685
18,567 -
67,859 -
539 -
820
23,381
18,365 1,178
4,275 -
126,482
685
64,065 153,490 304,144
- - -
- 279,972
- 304,829
43,744
13,996 - - 57,740
2,472 -
1,288 - 3,769
5,720
- 31,179 -
792
8,035
201,365
-
294 209,694
31,179
10,281
- - - 31,179 4,201 - - 14,482
47,489
29,062
12,933 4,703
94,187
71,506
-
- 165,693
21,893 604,878 37,111 5,920 43,031
30,267
4,519 226,424 39,686 3,063 42,749
5,970
6,489 7,377 119,991 103,742 1,311 105,053
- 318 91,819 - - -
42,726
34,107
34,315 - - 77,041 22,313 - - 56,420
Lease liabilities
10,294
323 195,772
Borrowings
Total segment liabilities
1,043,112
869,395 632,985 185,155 818,140
180,539
190,833
-
294
1,912,801
- 157,566 971,090
- -
157,889
1,166,862
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3.
Segment information (continued)
Segment analysis for the year ended December 31, 2019
Sales of goods and services rendered Cost of goods sold and services rendered
Initial recognition and changes in fair value of biological assets and agricultural produce Changes in net realizable value of agricultural produce after harvest
Margin on manufacturing and agricultural activities before operating expenses General and administrative expenses
CropsRice
168,938
102,162
(159,197) (74,480)
30,290 13,194
Farming
All other segments
Farming subtotal
Sugar, Ethanol and
Dairy
Land Transformation
EnergyCorporateTotal
84,767 (77,532) 13,741 - 20,976 (4,188) (6,252)
3,904 (3,412)
(314,621)
359,771
531,783 (360,566)
- -
- 891,554 - (675,187)
Selling expenses
(40,347)
(165) (107,628)
Other operating income, net
1,542 41,573 (5,446) (12,852)
- 40,876 (6,752) (21,072)
(2,283) 282
(635)
(40) - 452 (167) (171) (956)
57,185
1,542
13,110 - - 70,295 - - - 1,542
103,877
(16,553)
184,327 (21,925) (67,116)
(3,592)
- - -
-
288,204
(19,319) (57,797)
126
2,504 (175) (1,137)
Profit / (loss) from operations before financing and taxation
20,992
13,334
9,901
(842)
43,385
95,412
2,504
(19,659)
121,642
Depreciation and amortization
(4,662)
(6,994)
(5,064)
(181) (16,901)
(157,657)
-
(20)
(174,578)
Net (loss) / gain from Fair value adjustment of investment property
- - 6,091
- - 509
- - (3,957) 17,698 - -
(927) (927) - - - (927)
Reverse of revaluation surplus derived from the disposals of assets before taxes
-
8,022 - 8,022
24,199 12,685
13,961 - - 68,575
Changes in net realizable value of agricultural produce after harvest (realized)
2,023 - - - 2,023
Initial recognition and changes in fair value of biological assets and agricultural produce (unrealized) Initial recognition and changes in fair value of biological assets and agricultural produce (realized) Changes in net realizable value of agricultural produce after harvest (unrealized)
(481) 2,023
- -
- (72) 32 - -
- 2,571 54,614
(851) - - 1,720
(481) - - - (481)
Farmlands and farmland improvements, net
142,864
611
52,874
671,271
- 734,865
Machinery, equipment and other fixed assets, net Bearer plants, net
Work in progress
Right of use assets Investment property Goodwill Biological assets Finished goods
Raw materials,Stocks held by third parties and others Total segment assets
Borrowings
Lease liabilities
Total segment liabilities
474,922 29,038
25,425 74,403
592
-
11,457 15,669
4,378 -
567 -
9,896
3,890
38,404
21,484
17,830
5,805
17,187 603,704
4,876 220,580
28,045 45,602
-
507 -
129,373
592
63,594 316,304 252,928
- - -
- 445,677
- 253,520
15,394
1,214
43,734
15,424 - - 59,158
371 - -
-
5,316
231,832
-
905 238,053
34,295
817
34,295
14,603
- - - 34,295 5,417 - - 20,020
11,521
3,673 -
75,082
55,354
-
- 130,436
5,156 112,235
4,779
90 93,470
28,414
27,309
36,864 - - 65,278 20,203 - - 47,512
1,029,989
997,920
4,857 32,902
490 46,092
100,262 378 100,640
- - -
173,909 5,725 179,634
612,329 209,700 822,029
-
905
2,028,814
- 182,042 968,280
- -
959 216,384
183,001
1,184,664
Adecoagro S.A.
Notes to the Consolidated Financial Statements (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3.
Segment information (continued)
Segment analysis for the year ended December 31, 2018
Farming
Sugar,
CropsRiceDairyAll other segments
Farming subtotal
Ethanol and EnergyLand TransformationCorporateTotal
164,538
100,013
299,671
510,938
-
-
810,609
Sales of goods and services rendered Cost of goods sold and services rendered
(165,988) (75,739)
33,201 (31,488)
1,919 (1,412)
(274,627)
(348,616) - - (623,243)
36,422 8,967
(806)
51,878
(20,853) - - 31,025
Initial recognition and changes in fair value of biological assets and agricultural produce Changes in net realizable value of agricultural produce after harvest
Margin on manufacturing and agricultural activities before operating expenses General and administrative expenses
2,704 37,676
- 33,241
7,295 - 9,008
(4,239) (5,921) 4,799
(5,070) (2,034)
- (299)
2,704
- - - 2,704
79,626
141,469
-
-
221,095
Selling expenses
(15,465) (983)
(178) (92,154)
Other operating income, net
(155) (165)
(11,498) (22,534)
275 12,981
(1,055)
10,668 14,687
Profit / (loss) from operations before financing and taxation
32,315
4,936
10,049 60,281
(25,302) (69,442) 48,357 95,082
- - 36,850 36,850
(19,626) (56,426)
(167) (19,971)
99,727 172,242
Depreciation and amortization
(1,697)
(5,846)
(2,253)
(171)
(9,967) (143,202)
(153,169)
Net (loss) / gain from Fair value adjustment of investment property
-
-
- (599) 7,894 - -
10,680
10,680
-
- -
- -
10,680
8,205 (181)
102
7,527 (37,808) - - (30,281)
(647) - - - (647)
Initial recognition and changes in fair value of biological assets and agricultural produce (unrealized) Initial recognition and changes in fair value of biological assets and agricultural produce (realized) Changes in net realizable value of agricultural produce after harvest (unrealized)
Changes in net realizable value of agricultural produce after harvest (realized)
28,217 9,148
(908)
44,351 16,955 - - 61,306
(647) 3,351
- -
- -
3,351 - - - 3,351
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.
3.
Segment information (continued)
Total reportable segments' assets and liabilities are reconciled to total assets as per the statement of financial positionas follows:
2020 | 2019 | |
Total reportable assets as per segment information | 1,912,801 | 2,028,814 |
Intangible assets (excluding goodwill) | 12,448 | 13,659 |
Deferred income tax assets | 19,821 | 13,664 |
Trade and other receivables | 197,928 | 172,331 |
Other assets | 854 | 1,128 |
Derivative financial instruments | 2,102 | 1,435 |
Cash and cash equivalents | 336,282 | 290,276 |
Total assets as per the statement of financial position | 2,482,236 | 2,521,307 |
2020 | 2019 | |
Total reportable liabilities as per segment information | 1,166,862 | 1,184,664 |
Trade and other payables | 126,605 | 110,486 |
Deferred income tax liabilities | 182,377 | 165,508 |
Payroll and social liabilities | 24,408 | 26,417 |
Provisions for other liabilities | 4,359 | 3,172 |
Current income tax liabilities | 760 | 754 |
Derivative financial instruments | 13,141 | 1,423 |
Total liabilities as per the statement of financial position | 1,518,512 | 1,492,424 |
Non-current assets and revenues and fair value gains and losses are shown by geographic region. These are the regions in which the Group is active: Argentina, Brazil and Uruguay.
As of and for the year ended December 31, 2020:
Argentina | Brazil | Uruguay | Total | |
Property, plant and equipment | 811,653 | 535,857 | 10,782 | 1,358,292 |
Investment property | 31,179 | - | - | 31,179 |
Goodwill | 10,280 | 4,202 | - | 14,482 |
Non-current portion of biological assets | 14,725 | - | - | 14,725 |
Sales of goods and services rendered | 389,018 | 411,779 | 21,678 | 822,475 |
Initial recognition and changes in fair value of biological assets | ||||
and agricultural produce | 72,391 | 50,348 | 2,003 | 124,742 |
Changes in net realizable value of agricultural produce after | ||||
harvest | 6,770 | (88) | 394 | 7,076 |
3.
Segment information (continued)
As of and for the year ended December 31, 2019:
Sales of goods and services rendered
Changes in net realizable value of agricultural produce after harvest
Argentina | Brazil | |
Property, plant and equipment | 834,248 | 648,471 |
Investment property | 34,295 | - |
Goodwill | 14,603 | 5,417 |
Non-current portion of biological assets | 13,303 | - |
Sales of goods and services rendered | 229,547 | 462,174 |
Initial recognition and changes in fair value of biological assets | ||
and agricultural produce | 55,760 | 13,167 |
Changes in net realizable value of agricultural produce after | ||
harvest | 2,682 | (8) |
Argentina | ||
207,480 | ||
45,985 | ||
1,148 |
As of and for the year ended December 31, 2018:
Initial recognition and changes in fair value of biological assets and agricultural produce
Uruguay | Total | |
10,501 | 1,493,220 | |
- | 34,295 | |
- | 20,020 | |
- | 13,303 | |
199,833 | 891,554 | |
1,368 | 70,295 | |
(1,132) | 1,542 | |
Brazil | Uruguay | Total |
496,966 | 106,163 | 810,609 |
(13,541) | (1,419) | 31,025 |
1,436 | 120 | 2,704 |
4.
Sales
2020 | 2019 | 2018 | |
Manufactured products and services rendered: | |||
Ethanol | 32,706 | 373,847 | 324,661 |
Sugar | 4,196 | 97,710 | 128,377 |
Energy | 1,598 | 60,913 | 57,797 |
Peanut | - | 28,928 | - |
Sunflower | 7,534 | - | |
Cotton | 5,246.00000000002 | 623 | - |
Rice | (9,120) | 97,515 | 92,560 |
Fluid milk (UHT) | 95,403 | 38,441 | - |
Powder milk | 29,710 | 20,722 | 8,646 |
Other diary products | 8,856 | - | |
Soybean oil and meal | - | 1,062 | 14,059 |
Services | 57,797 | 4,521 | 487 |
Rental income | 103 | 564 | 643 |
Others | 793,239 | 3,401 | 7,826 |
1,010,878 | 744,637 | 635,056 | |
Agricultural produce and biological assets: | |||
Soybean | 44,538 | 66,471 | |
Corn | 59,714 | 33,106 | |
Wheat | 18,733 | 30,091 | |
Peanut | - | - | 1,752 |
Sunflower | 701 | 1,314 | |
Barley | 1,085 | 1,203 | |
Seeds | 734 | 461 | |
Milk | 9,977 | 19,267 | |
Cattle | 3,452 | 1,279 | |
Cattle for dairy | 2,169 | 1,612 | |
Others | 1,398 | 1,627 | |
- | 142,501 | 158,183 | |
Total sales | 1,010,878 | 887,138 | 793,239 |
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$ 42.2 million as of December 31, 2020 (2019: US$ 71.7 million; 2018: US$ 63.3 million) comprised primarily of 3,419 thousand m3 of ethanol (US$ 1.7 million), 698,868 thousand mwh of energy (US$ 30.3 million), 9,045 thousand tons of soybean (U$S 2.5 million), 15,517 thousand tons of wheat (US$ 3.1 million), and 23,242 thousand tons of corn (US$ 3.4 million) which expire between January and December 2021.
5.
Cost of goods sold and services rendered
As of December 31, 2020:
2020
CropsRiceDairyAll other segmentsSugar, Ethanol and Energy
TotalFinish goods at the beginning of 2020 (Note 20)
17,830
36,864 65,278
3,648
6,088 9,736
(46,192)
(4,256)
- (50,448)
Cost of production of manufactured products (Note 6) Purchases
Agricultural produce Transfer to raw material
44,074
Direct agricultural selling expenses Tax recoveries (i)
5,805 79,507 -
4,779 102,933 -
137,204
- 15,546
16,467 - 7,007
- - -
- - -
- - - 1,962 - -
285,627 512,141
- 154,712
- 16,467
- (21,765)
(21,765)
Changes in net realizable value of agricultural produce after harvest
(2)
- - -
-
7,005
Finished goods at the end of December 31, 2020 (Note 20)
(30,267)
(5,970) (6,489)
(34,315) (77,041)
Exchange differences
(521)
(1,256) (760)
(1,602) (4,139)
Cost of goods sold and services rendered, and direct agricultural selling expenses
149,250
73,830
116,007
1,962
270,897
611,946
(i) Correspond to the presumed credit of ICMS (Imposto sobre Circulação de Mercadorias e Prestação de Serviços) over the sale values.
As of December 31, 2019:
2019
Sugar,
CropsRiceDairyAll other segmentsEthanol and Energy
TotalFinished goods at the beginning of 2019
29,144
39,937 79,758
21,715
44,577 69,387
(35,757)
- (35,757)
Cost of production of manufactured products (Note 6) Purchases
Agricultural produce Transfer to raw material
33,952
Direct agricultural selling expenses Tax recoveries (i)
9,507 66,386 3,095
1,170 68,851 -
108,732
- 12,146
15,752 - 1,825
- - - -
- - - -
- - - 3,452 - -
354,964 524,153
- 124,330
- 15,752
- (32,995)
(32,995)
Changes in net realizable value of agricultural produce after harvest
- - -
-
1,825
Finished goods at the end of December 31, 2019 (Note 20)
(17,830) (5,805)
(4,779)
(36,864) (65,278)
Exchange differences
(1,023) 768
(694)
(9,053) (10,002)
Cost of goods sold and services rendered, and direct agricultural selling expenses
156,510
73,951
76,694
3,452
360,566
671,173
(i) Correspond to the presumed credit of ICMS (Imposto sobre Circulação de Mercadorias e Prestação de Serviços) over the sale values.
5.
Cost of goods sold and services rendered (continued)
As of December 31, 2018:
2018
CropsRiceDairyAll other segmentsSugar, Ethanol and Energy
TotalFinished goods at the beginning of 2018
21,146
-
- 32,266 61,888
Adjustment of opening net book amount for the application of IAS 29
17,930
349,495 436,607
Cost of production of manufactured products (Note 6) Purchases
104,941
20,879 1,277
- 127,097
Agricultural produce Transfer to raw material
Direct agricultural selling expenses Tax recoveries (i)
Changes in net realizable value of agricultural produce after harvest
-
(909)
(24,375)
(909) (29,144) (8,857)
63,533
12,629 -
42
8,476 1,354 61,600 15,540 - - - - -
- 7,546 872
- - - -
Finished goods at the end of December 31, 2018 Exchange differences
(9,507) (1,170)
- 36 -
- 1,396
43,531 123,476
- -
- (24,375)
- 12,629
- (32,380)
(32,380)
(2,490)
-
(4,359) (15,706)
Cost of goods sold and services rendered, and direct agricultural selling expenses
- - -
(39,937) (79,758)
156,936
74,973
28,127
1,313
348,616
609,965
(i) Correspond to the presumed credit of ICMS (Imposto sobre Circulação de Mercadorias e Prestação de Serviços) over the sale values.
6.
Expenses by nature
The Group presents the statement of income under the function of expense method. Under this method, expenses are classified according to their function as part of the line items "cost of goods sold and direct agricultural selling expenses", "general and administrative expenses" and "selling expenses".
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 year ended December 31, 2020:
Cost of production of manufactured products (Note 5)
CropsRiceDairyAll other segmentsSugar, Ethanol and Energy
General and AdministrativeTotalSelling ExpensesTotal
Expenses
Salaries, social security expenses and employee benefits
2,348
4,466
7,452
26,341
40,607
5,206 71,332
2,016
2,812
93,211
100,968
985 114,443
131
68
2,030
16,543
18,772
187 19,387
Raw materials and consumables Depreciation and amortization Depreciation of right of use assets Fuel, lubricants and others Maintenance and repairs Freights
448
3,072
14,486
2,929 -
19
461
639
1,492
1,141
32
35
103
617
1,060 7,938
Export taxes / selling taxes Export expenses Contractors and services Energy transmission Energy power Professional fees Other taxes Contingencies
172 - -
4,617 - -
1,708 - -
- - - - - - - - -
8,743
26,749
6,208
6,688
12,581
15,853
649 - -
7,146 - -
1,358 -
116 -
54 -
- 5,086
803
1,015
1,879
20 -
76 -
97 -
- 13,547
65,433
- 65,433
Lease expense and similar arrangements Third parties raw materials
111
182
137
- - - - - -
- 764 447 2,312 - -
6,614 -
4,461
2,505 -
25,519 - 12,490 3,557 428 954 - - - - - 137 6,261 376 703
- 26,749
24 10,269
476 17,283
33,111 40,257
35,966 35,966
8,801 8,801
- 6,614
2,231 2,231
114 4,712
21 2,902
- 703
430
283 226 939
Tax recoveries
3,257 -
6,578 -
42,051 -
- (1,087)
(1,087)
- 1,613
5,331
6,650
14,701
Others Subtotal
Own agricultural produce consumed
- 211,054
Total
524 12,772 31,302 44,074
1,219 24,971 54,536 79,507
1,975 76,386 26,547 102,933
- - 2,720
- (1,087)
- - -
186,958 98,669 285,627
301,087 211,054 512,141
53,428 - 53,428
95,058 449,573
95,058 660,627
6.
Expenses by nature (continued)
Expenses by nature for the year ended December 31, 2019:
Cost of production of manufactured products (Note 5)All other segmentsSugar, Ethanol and Energy
General and AdministrativeCropsRiceDairy
TotalSelling ExpensesTotal
Expenses
Salaries, social security expenses and employee benefits
1,880
4,738
4,412
39,768
50,798
6,211 84,501
Raw materials and consumables Depreciation and amortization Depreciation of right of use assets Fuel, lubricants and others Maintenance and repairs Freights
314
6,527
10,151
- - - - - - - - -
15,683
32,675
27,492 -
- 32,675
1,897
2,140
122,025
128,643
11,212
868 140,723
2,581 -
116
344
6,794
7,254
2,007
5 9,266
228
83
1,381
25,430
27,122
593
225 27,940
290
1,120
985
19,694
22,089
1,755 - - - -
534 24,378
146 - -
2,405 - -
1,959 - -
784 - -
5,294 - -
23,130 28,424
Export taxes / selling taxes Export expenses Contractors and services Energy transmission Energy power Professional fees Other taxes Contingencies
52,312 52,312
5,552 5,552
1,051 -
138 -
40 -
- 9,381
10,610 -
- 10,610
- - - - - - - - - - - -
-
88
3,057 3,145
725
1,298
1,659
1,181
4,863
145
145 5,153
20
65
127
175
387
8,065
1,047 9,499
1 -
74 -
81 -
1,241 - -
1,397 -
1,089
28 2,514
459
- 459
Lease expense and similar arrangements Third parties raw materials
83
171
78
332
831 125 1,288
11,243
42,139
-
- 42,139
Tax recoveries
7,136 -
5,629 -
18,131 -
(396)
(396) - - (396)
Others Subtotal
Own agricultural produce consumed
- 186,815
Total
431 14,886 19,066 33,952
695 24,956 41,430 66,386
681 42,169 26,682 68,851
2,324 255,327 99,637 354,964
4,131 337,338 186,815 524,153
3,466 57,202 - 57,202
13,733 21,330
106,972 501,512
106,972 688,327
6.
Expenses by nature (continued)
Expenses by nature for the year ended December 31, 2018:
Cost of production of manufactured products (Note 5)
Sugar,CropsRice DairysAelglmotehnetrs Ethanol and EnergyTotalGeneral and Administrative
ExpensesSelling ExpensesTotal
Salaries, social security expenses and employee benefits
5,055
46,106
51,312
5,908 86,465
1,764
115,253
117,135
767 127,569
1,452
19,715
21,197
365 23,135
- 7,901
- 12,319
1,239 138
1,340
2,717
57 2,919
Raw materials and consumables Depreciation and amortization Fuel, lubricants and others Maintenance and repairs Freights
Export taxes / selling taxes Export expenses Contractors and services Energy transmission Energy power Professional fees Other taxes Contingencies
Lease expense and similar arrangements Third parties raw materials
Others
1,697 223
5,067
6,990
10,070 20,384
- 733 - - - 47 - - 2,885 - - - - - - - 3 3,668 14,262 17,930
4,391
2,519 - -
2,913
117
254 -
276
52
71 -
115 282 118 - 30 436 - - 1,279 -
- - - 3 -
36 - - - - - - -
- - - - - - - -
10,122
26,267
13,154
1,841 - -
685 - -
484
-
15,528
26,384
12,319 -
16,067
3,687 - -
1,912 -
536
279
29,245 - 9,667 614 1,573 - - - - - 145 7,781 1,309 1,345 1,077 - 3,324
Own agricultural produce consumed
- 160,544
Subtotal
- 15,528
192 27,190
24,700 28,387
42,074 42,074
2,774 2,774
2,689 2,689
556 8,873
10 3,231
- 1,345
53 1,409
- 16,067
21,800 39,800 61,600
Total
2,624 4,922 7,546
36 - 36
247,935 101,560 349,495
276,063 160,544 436,607
56,080 - 56,080
90,215 422,358
90,215 582,902
2020
2019
2018
Fees for legal audit
1,180 1,166
Fees for other assurance services
1,288 1,282
1,088 171 1,259
108 116
7.
Salaries and social security expenses
Wages and salaries (i) Social security costs
2020
2019
2018
Equity-settled share-based compensation
89,662 27,430 4,316 121,408
104,400 105,931 30,888 29,865 4,734 4,728 140,022 140,524
(i) Includes US$ 27,544, US$ 32,714 and US$ 32,636, capitalized in Property, Plant and Equipment for the years 2020, 2019 and 2018, respectively.
Employees as at 31 December | |||
Directors and managers | 143 | 134 | 127 |
Employees | 8,573 | 8,103 | 7,612 |
8,716 | 8,237 | 7,739 |
2020
2019
2018
8. Other operating income, net 2020
9. Financial results, net
Gain from disposal of farmland and other assets (Note 22) |
Loss from the sale of subsidiaries (Note 22) |
(Loss) / gain from commodity derivative financial instrument |
Gain / (loss) from disposal of other property items |
Net gain / (loss) from fair value adjustment of investment property |
Others |
2019 | 2018 | ||
(1) | 1,354 | 36,227 | |
- | - | ||
(618) | 54,694 | ||
2,198 | (329) | (95) | |
1,077 | (325) | 13,409 | |
5,522 | (904) | (3) | |
8,796 | (822) | 104,232 | |
2020 | 2019 (*) | 2018 (*) | |
Finance income: | |||
- Interest income | 4,084 | 6,390 | 7,728 |
- Gain from interest rate/foreign exchange rate derivative financial instruments | 92 | 1,189 | - |
- Other income | 21,878 | 1,400 | 666 |
Finance income | 26,054 | 8,979 | 8,394 |
Finance costs: | |||
- Interest expense | (58,282) | (56,468) | (47,266) |
- Finance cost related to lease liabilities | (12,532) | (9,524) | - |
- Cash flow hedge - transfer from equity (Note 2) | (24,363) | (25,484) | (38,086) |
- Foreign exchange losses, net | (109,266) | (25,779) | (68,787) |
- Taxes | (4,559) | (4,364) | (3,136) |
- Loss from interest rate/foreign exchange rate derivative financial instruments | - | - | (3,024) |
- Other expenses | (4,774) | (4,492) | (3,638) |
Finance costs | (213,776) | (126,111) | (163,937) |
Other financial results - Net gain of inflation effects on the monetary items | 12,064 | 16,911 | (25,211) |
Total financial results, net | (175,658) | (100,221) | (180,754) |
(*) Prior periods have been recast to reflect the Company's change in accounting policy for the reclassification within financial results as explained in Note 34.1.
10.
Taxation
Adecoagro is subject to the applicable general tax regulations in Luxembourg.
The Group's income tax has been calculated on the estimated assessable taxable results for the year at the rates prevailing in the respective foreign tax jurisdictions. The subsidiaries of the Group are required to calculate their income taxes on a separate basis according to the rules and regulations of the jurisdictions where they operate. Therefore, the Group is not legally permitted to compensate subsidiaries' losses against subsidiaries' income. The details of the provision for the Group's consolidated income tax are as follows:
2020 | 2018 | ||
Current income tax | (2,840) | 666 | (2,846) |
Deferred income tax | (9,485) | (21,486) | 3,870 |
Income tax (expense) / benefit | (12,325) | (20,820) | 1,024 |
2019
10. Taxation (continued)
The statutory tax rate in the countries where the Group operates for all of the years presented are:
Tax Jurisdiction
Income Tax Rate
Argentina (i) Brazil Uruguay Spain Luxembourg
30 %
34 %
25 %
25 %
24.94 %
(i) During 2017 and 2019, the Argentine Government introduced changes in the income tax. The income tax rate will be reduced to 30% for the years 2018 to 2020, and to 25% from 2021 onwards. A new tax on dividends is created with a rate of 7% for the years 2018 to 2020, and 13% from 2021 onwards. Considering 2018, 2019 and 2020 resulted in losses for Argentine subsidiaries, no deferred income tax liability was recognized for future withholding tax on dividends.
Deferred tax assets and liabilities of the Group as of December 31, 2020 and 2019, without taking into consideration the offsetting of balances within the same tax jurisdiction, will be recovered or settled as follows:
2020 | 2019 | |
Deferred income tax asset to be recovered after more than 12 months | 105,424 | 108,294 |
Deferred income tax asset to be recovered within 12 months | 23,744 | 35,973 |
Deferred income tax assets | 129,168 | 144,267 |
Deferred income tax liability to be settled after more than 12 months | (278,035) | (292,871) |
Deferred income tax liability to be settled within 12 months | (13,689) | (3,240) |
Deferred income tax liability | (291,724) | (296,111) |
Deferred income tax (liability) / assets, net | (162,556) | (151,844) |
The gross movement on the deferred income tax account is as follows: | ||
2020 | 2019 | |
Beginning of year | (151,844) | (151,980) |
Exchange differences | 1,536 | 4,877 |
Changes of fair value valuation for farmlands | (11,790) | 10,480 |
Acquisition of subsidiary | - | (3,515) |
Disposal of subsidiary | 3,458 | 3,730 |
Others | (159) | (705) |
Tax credit relating to cash flow hedge (i) | 5,728 | 6,755 |
Income tax benefit expense | (9,485) | (21,486) |
End of year | (162,556) | (151,844) |
(i) Relates to the gain or loss before income tax of cash flow hedge recognized in other comprehensive income amounting to US$ 46,145 for the year ended December 31, 2020 (2019: US$ 75,822); net of the reclassification from Equity to the Income
Statement of US$ (26,031) for the year ended December 31, 2020 (2019: US$ (32,305))
10. Taxation (continued)
The movement in the deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:
Deferred income tax liabilitiesProperty, plant and equipmentInvestment propertyBiological assets
Others
Total
At January 1, 2019
(1,939) 31,049
Charged / (credited) to the statement of income Acquisition of subsidiary
270,583 31,745
11,954 331
3,466 912
2,408 288,411
3,603 - - - 3,603
(10,480) - - - (10,480)
(1,303) (12,742)
Farmlands revaluation Disposals of subsidiaries Exchange differences At December 31, 2019
(3,730) - - - (3,730)
6,463 - 16,116
Charged / (credited) to the statement of income Farmlands revaluation
- - - (3,513)
11,152
(834)
291,724
Disposals of subsidiaries Exchange differences At December 31, 2020
(10,862) 280,859 11,581 11,521 (3,513) (28,920) 271,528
(378) 11,907 (1,928)
(199) 4,179
(834) 296,111
269 - - 11,790
(370) 9,878
510 - (28,780)
Deferred income tax assets
ProvisionsTax loss carry forwardsEquity-settled share-based compensation
BorrowingsBiological assets
OthersTotal
At January 1, 2019
3,960
80,220
5,302
4,594
42,355 136,431
Charged / (credited) to the statement of income
(604)
8,017
(1,214)
2,709
(117)
772 9,563
Acquisition of subsidiaries
Others
(705) - - - (705)
Tax charge relating to cash flow hedge
31 (2,902)
(7,865)
Exchange differences At December 31, 2019
7 - - (126) 3,237
134 - 6,755 (3,707) 91,419
-
-
-
(53) 88
- - 3,383
- (1,161) 1,548
-
- 6,755
4,508
40,172 144,267
(Credited) / charged to the statement of income
(5,843)
(835)
(4,508)
(21,141) 6,631
Disposal of subsidiary Others
Tax charge relating to cash flow hedge
Exchange differences At December 31, 2020
4,941 - - - (1,152) 7,026
- - 5,728 (20,363) 70,941
- (60)
- - 2,488
34,017 - - - (9,460) 26,105
- - -
(55) (55) (99) (159)
- 5,728
- 3,731
-
22,608
(27,244) 129,168
Tax loss carry forwards in Argentina and Uruguay generally expire within 5 years. Tax loss carry forwards in Brazil and Luxembourg do not expire. However, in Brazil, the taxable profit for each year can only be reduced by tax loss carry forward up to a maximum of 30%.
In order to fully realize the deferred tax asset, the Group will need to generate future taxable income in the countries where the tax loss carry forward were incurred. Based upon the level of historical taxable income and projections for future
10. Taxation (continued)
taxable income over the periods in which the deferred tax assets are deductible, management believes that as at December 31, 2020, it is probable that the Group will realize some portion of the deferred tax assets in Brazil and Argentina.
As of December 31, 2020, the Group's tax loss carry forwards and their corresponding jurisdictions are as follows:
Tax loss carry
Expiration period
Argentina (1) |
Brazil |
Uruguay |
Luxembourg |
Jurisdiction | forward |
92,845 | 5 years |
123,509 | No expiration date. |
4,895 | 5 years |
34,832 | No expiration date. |
(1) As of December 31, 2020, the aging of the determination tax loss carry forward in Argentina is as follows:
Year of
generation | Amount |
2016 | 701 |
2017 | 6,966 |
2018 | 19,181 |
2019 | 52,126 |
2020 | 13,871 |
Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through future taxable profits is probable. The Group did not recognize deferred income tax assets of US$ 5.3 million as of December 31, 2020, in respect of losses amounting to US$ 20.2 million that can be carried forward against future taxable income.
The tax on the Group's profit before income tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:
2020 | 2019 | 2018 | |
Tax calculated at the tax rates applicable to profits in the respective countries | (4,184) | (7,250) | 2,956 |
Non-deductible items | (7,642) | (1,511) | (2,249) |
Effect of the changes in the statutory income tax rate in Argentina | 6,324 | 3,115 | (1,013) |
Unused tax losses | (710) | (3,742) | (4,181) |
Tax losses where no deferred tax asset was recognized | - | - | (2,368) |
Non-taxable income | 11,060 | 11,545 | 13,069 |
Previously unrecognized tax losses now recouped to reduce tax expenses | 1,529 | 1,910 | - |
Effect of IAS 29 and tax adjustment per inflation in Argentina | (19,239) | (23,805) | (5,825) |
Others | 537 | (1,082) | 635 |
Income tax (expense) / benefit | (12,325) | (20,820) | 1,024 |
11.
Earnings per share
(a) Basic
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Group by the weighted average number of shares in issue during the period excluding ordinary shares held as treasury shares (Note 24).
2019 | 2018 | ||
Profit / (loss) from operations attributable to equity holders of the Group | 412 | (772) | (24,622) |
Weighted average number of shares in issue (thousands) | 117,453 | 117,252 | 116,637 |
Basic earnings / (loss) per share from operations | 0.003 | (0.007) | (0.211) |
(b) Diluted |
2020
Diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding to assume conversion of all dilutive potential shares. The Group has two categories of dilutive potential shares: equity-settled share options and restricted units. For these instruments, a calculation is done to determine the number of shares that could have been acquired at fair value, based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the equity-settled share options. As of December 31, 2020, there were 261 thousands (2019: 645 thousands; 2018: 851 thousands) share options/restricted units outstanding that could potentially have a dilutive impact in the future but were antidilutive for the periods presented.
2020 | 2019 | 2018 | |
Profit / (loss) from operations attributable to equity holders of the Group | 412 | (772) | (24,622) |
Weighted average number of shares in issue (thousands) | 117,453 | 117,252 | 116,637 |
Adjustments for: | |||
- Employee share options and restricted units (thousands) | 261 | 645 | 1,198 |
Weighted average number of shares for diluted earnings per share (thousands) | 117,714 | 117,897 | 117,835 |
Diluted earnings / (loss) per share from operations | 0.003 | (0.007) | (0.211) |
12.
Property, plant and equipment
Changes in the Group's property, plant and equipment in 2020 and 2019 were as follows:
At January 1, 2019
Cost
Accumulated depreciation Net book amount
At December 31, 2019
Opening net book amount Exchange differences Additions Revaluation surplus Acquisition of subsidiaries Reclassification from investment property Transfers
Disposals
Disposals of subsidiaries
Reclassification to non-income tax credits (*) Depreciation
Closing net book amount
FarmlandsFarmland improvementsBuildings and facilitiesMachinery, equipment, furniture and fittingsBearer plantsOthersWork in progress
780,184 -
Total
32,718 (16,394) 16,324
344,915 (156,293) 188,622
718,978 (513,830) 205,148
480,049 (247,093) 232,956
21,611 (15,310)
50,904 -
780,184
2,429,359 (948,920)
6,301
50,904 1,480,439
780,184 (25,205)
16,324 188,622
(536) (6,846)
205,148
232,956
6,301 50,904 1,480,439
1,738 (42,384)
62 38,570
62,320 -
(8,770)
(9,802) 102,813 - - - -
(207) (3,170) 2,160 54,488
815 4,816 - - (10,379)
(54,536) 262,151
-
- 24,126
-
5,280 -
- 437
- (42,384) - 30,658
- 12,643 - - - (3,213) 25,280
-
- - 4,816
13,614
16,772
35
(43,064)
-
(81)
(3,308)
- (129) - (3,518)
709,585
(571)
(22)
- - (72,447) 253,520
- - (1,913) 6,684
- (10,972)
- -
-
(226)
-
(226)
(24,714) 232,720
(70,921) 206,273
- (173,208)
59,158
1,493,220
FarmlandsFarmland improvements
At December 31, 2019
Fair value for farmlands / Cost Accumulated depreciation Net book amount
709,585 -
Buildings and facilitiesMachinery, equipment, furniture and fittings
Bearer plantsOthersWork in progressTotal
44,887 (19,607)
709,585
413,727 (181,007)
791,024 (584,751)
573,060 (319,540)
23,907 (17,223)
59,158 -
2,615,348 (1,122,128)
25,280
232,720
206,273
253,520
6,684
59,158 1,493,220
Year ended December 31, 2020
Opening net book amount Exchange differences Additions Revaluation surplus
(432)
(617) (6,445)
(181,077)
709,585 (36,422)
25,280
232,720 (55,368)
-
- 11,279
206,273 (112,657)
253,520 30,864 72,592
6,684 59,158 1,493,220
52,350
1,877 31,192 169,290
41,490 - - - - - - 41,490
Reclassification from investment property Transfers
3,127 - - - - - - 3,127
(177)
10,101
16,182
59 (26,165)
-
Disposals
Disposals of subsidiaries
-
- (13,496)
Reclassification to non-income tax credits (*) Depreciation
Closing net book amount At December 31, 2020
Fair value for farmlands / Cost Accumulated depreciation Net book amount
- (10,118) (13,496)
- -
- - - (3,086)
694,166
21,585
694,166 -
44,278 (22,693)
694,166
21,585
(73) - - (21,055)
(62,788) 95,905
(3,092)
(363)
- - - - (52,147)
(37) - - (1,503) 6,463
- (13,320)
-
(363)
- (140,579)
177,604
304,829
57,740 1,358,292
379,666 (202,062)
743,444 (647,539)
676,516 (371,687)
25,189 (18,726)
57,740 2,620,999
177,604
95,905
304,829
6,463
- 57,740
(1,262,707) 1,358,292
12. Property, plant and equipment (continued)
(*) Brazilian federal tax law allows entities to take a percentage of the total cost of the assets purchased as a tax credit. As of December 31, 2020 and 2019, ICMS (Imposto sobre Circulação de Mercadorias e Prestação de Serviços) tax credits were reclassified to trade and other receivables.
Depreciation is calculated using the straight-line method to allocated their cost over the estimated usefull lives. Farmlands are not depreciated.
Farmland improvements | 5-25 years |
Buildings and facilities | 20 years |
Furniture and fittings | 10 years |
Computer equipment | 3-5 years |
Machinery and equipment | 4-10 years |
Vehicles | 4-5 years |
Bearer plants | 6 years - based on productivity |
The assets' residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date.
Farmlands are measured at fair value. For all farmlands with a total valuation of US$ 694 million as of December 31, 2020, 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 December 31, 2020 would have reduced the value of the farmlands on US$ 69 million (2019: US$71 million), which would impact, net of its tax effect on the "Revaluation surplus" item in the statement of Changes in Shareholders' Equity. If farmlands were stated on the historical cost basis, the amount as of December 31, 2020 would be US$ 194 million.
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 years ended December 31, 2020 and 2019.
During the year ended December 31, 2020, borrowing costs of US$ 3,861 (2019:US$ 13,904) were capitalized as components of the cost of acquisition or construction for 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$ 451,904 as of December 31, 2020 (2019: US$ 324,129).
13.
Right of use assets
Changes in the Group's right of use assets in 2020 were as follows:
Agricultural partnerships (*)
Others
TotalAt January 1, 2019
Adoption of IFRS 16 Exchange differences Additions and re-measurements Depreciation
194,763 1,582 60,770 (37,278)
10,174 (14,364) 30,296 (7,890)
204,937 (12,782) 91,066 (45,168)
Closing net book amount
219,837
18,216 238,053
At December 31, 2020
18,216 238,053
Opening net book amount Exchange differences Additions and re-measurements Depreciation
219,837 (47,186) 53,149 (33,530)
Closing net book amount
192,270
(3,969) 10,467 (7,290) 17,424
(51,155) 63,616 (40,820) 209,694
(*) Agricultural partnership has an average of 6 years duration.
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 year ended December 31, 2020.
14.
Investment property
Changes in the Group's investment property in 2020 and 2019 were as follows:
2020 | 2019 | |
Beginning of the year | 34,295 | 40,725 |
Net gain / (loss) from fair value adjustment (Note 8) | 1,077 | (325) |
Reclassification to property, plant and equipment (i) | (3,127) | (4,816) |
Exchange difference | (1,066) | (1,289) |
End of the year | 31,179 | 34,295 |
Fair value | 31,179 | 34,295 |
Net book amount | 31,179 | 34,295 |
(i) Relates with the expiration of contracts with third parties.
The accounting policy for all Investment properties are measured at Fair Value. For all Investment properties with a total valuation of US$ 31.2 million and US$ 34.2 million as of December 31, 2020 and 2019 respectively, 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". The Group estimated that, other factors being constant, a 10% reduction on the Sales price for the period ended December 31,
The accompanying notes are an integral part of these consolidated financial statements.
F- 46
14.
Investment property (continued)
2020 and 2019 would have reduced the value of the Investment properties on US$ 3.1 million and US$ 3.4 million respectively, which would impact the line item "Net gain from fair value adjustment ".
15.
Intangible assets
Changes in the Group's intangible assets in 2020 and 2019 were as follows:
Others | Total | ||||
At January 1, 2019 | |||||
Cost | 21,350 | 10,165 | 2,442 | 338 | 34,295 |
Accumulated amortization | - | (4,568) | (1,556) | (262) | (6,386) |
Net book amount | 21,350 | 5,597 | 886 | 76 | 27,909 |
Year ended December 31, 2019 | |||||
Opening net book amount | 21,350 | 5,597 | 886 | 76 | 27,909 |
Exchange differences | (695) | (329) | (1) | (16) | (1,041) |
Additions | - | 2,080 | 6,431 | 106 | 8,617 |
Acquisition of subsidiaries | - | 66 | - | - | 66 |
Disposal | (635) | (6) | - | - | (641) |
Amortization charge (i) | - | (1,147) | - | (84) | (1,231) |
Closing net book amount | 20,020 | 6,261 | 7,316 | 82 | 33,679 |
At December 31, 2019 | |||||
Cost | 20,020 | 11,976 | 8,872 | 428 | 41,296 |
Accumulated amortization | - | (5,715) | (1,556) | (346) | (7,617) |
Net book amount | 20,020 | 6,261 | 7,316 | 82 | 33,679 |
Year ended December 31, 2020 | |||||
Opening net book amount | 20,020 | 6,261 | 7,316 | 82 | 33,679 |
Exchange differences | (1,687) | (954) | (80) | (35) | (2,756) |
Additions | - | 823 | 326 | 94 | 1,243 |
Disposal | - | (46) | - | (46) | (92) |
Disposal of subsidiary | (3,851) | - | - | - | (3,851) |
Amortization charge (i) | - | (820) | (412) | (61) | (1,293) |
Closing net book amount | 14,482 | 5,264 | 7,150 | 34 | 26,930 |
At December 31, 2020 | |||||
Cost | 14,482 | 11,799 | 9,118 | 441 | 35,840 |
Accumulated amortization | - | (6,535) | (1,968) | (407) | (8,910) |
Net book amount | 14,482 | 5,264 | 7,150 | 34 | 26,930 |
Goodwill Software Trademarks
(i) Amortization charges are included in "General and administrative expenses" and "Selling expenses" for the years ended
December 31, 2020 and 2019, respectively. There were no impairment charges for any of the years presented (see Note 33 (a)).
16.
Biological assets
Changes in the Group's biological assets in 2020 and 2019 were as follows: 2020
Crops
(ii)Rice (ii)
DairyAll other segments
SugarcaneTotal
(ii)
Beginning of the year Increase due to purchases
38,404 -
Initial recognition and changes in fair value of biological assets (i)
Decrease due to harvest / disposals Costs incurred during the year Exchange differences
40,843 (137,204) 106,889
21,484 - 18,677 (51,673) 41,243
11,521 - 12,344 (42,641) 32,043
3,673 55,354
580
-
1,256 49,609
(2,760) (101,967)
2,003 81,193
End of the year
(1,443) 47,489
(669) 29,062
(334) 12,933
(49) (12,683)
4,703
71,506
130,436 580 122,729 (336,245) 263,371 (15,178) 165,693
2019
Crops
(ii)Rice (ii)
DairyAll other segments
SugarcaneTotal
(ii)
3,094 47,475 105,387
Beginning of the year Increase due to purchases
27,347 -
Initial recognition and changes in fair value of biological assets (i)
13 13,110 68,589
3,035 100,775
Decrease due to harvest / disposals Costs incurred during the year Exchange differences
29,741 (108,732)
End of the year
3,673
55,354
93,715 (3,667) 38,404
17,173 - 12,215 (39,331) 32,802 (1,375) 21,484
10,298 - 13,510 (38,828) 26,735
1,080
- 1,080
(3,452) (103,551)
(293,894) 257,062
(194) 11,521
(97) (2,455)
(7,788) 130,436
(i) Biological asset with a production cycle of more than one year (that is dairy and cattle) generated "Initial recognition and changes in fair value of biological assets" amounting to US$ 13,600 for the year ended December 31, 2020 (2019: US$ 4,257). In 2020, an amount of US$ 966 (2019: US$ 2,414) was attributable to price changes, and an amount of US$ 12,634 (2019: US$ 1,843) was attributable to physical changes.
(ii) Biological assets that are measured at fair value within level 3 of the hierarchy.
16.
Biological assets (continued)
Cost of production as of December 31, 2020:
CropsRiceDairyAll other segmentsSugar, Ethanol and
EnergyTotal
Salaries, social security expenses and employee benefits
2,739
672 9,084 22,532
27,862 27,862
Depreciation and amortization Depreciation of right of use assets Fertilizers, agrochemicals and seeds Fuel, lubricants and others Maintenance and repairs Freights
716
51
2,053 4,108
40 -
46,406
5,822 - - 9,655 534
4,215 - - 10 754
1,040
4,451 1,820
- - -
3,852 3,892
29,416 85,487
229
1,921 9,461
1,832
453
49
- 2,452
285
- 13,377
Contractors and services Feeding expenses Veterinary expenses Energy power Professional fees Other taxes
30,819 - -
15,681 - -
118 - 13,092
19
4,951 51,470
2,395 189 - 2,584
51
2,138
863
6 - 3,058
565
1,838
162
4
343 2,912
1,185
100
8
83
51 1,427
Lease expense and similar arrangements Others
Subtotal
Own agricultural produce consumed Total
19,694
1,802 106,889 - 106,889
109
462 41,243 - 41,243
3
460 23,900 8,143 32,043
2
9 1,598 405 2,003
1,004 20,812
656 3,389
81,193 254,823
- 8,548
81,193 263,371
16.
Biological assets (continued)
Cost of production as of December 31, 2019:
CropsRiceDairyAll other segmentsSugar, Ethanol and
EnergyTotal
Salaries, social security expenses and employee benefits
2,600
582 10,657 22,807
31,190 31,190
Depreciation and amortization Depreciation of right of use assets Fertilizers, agrochemicals and seeds Fuel, lubricants and others Maintenance and repairs Freights
40,767
3 -
5,192 - -
9,924
3,776 - - -
- -
5,465 5,468
33
40,355 91,079
886
678
889
77
3,031 5,561
996
2,648
1,582
253
2,254 7,733
1,446
318
89
151
- 2,004
Contractors and services Feeding expenses Veterinary expenses Energy power Professional fees Other taxes
27,782
10,745 - -
3
96
5,161 43,787
10,538
810
- 11,351
3 -
2,020 209 - 2,229
69
2,310
979 10 - 3,368
196
74
138 8 3
4 96 8 28 2,357 678 3,035
214 626
1,182
105
43 1,434
Lease expense and similar arrangements Others
Subtotal
Own agricultural produce consumed Total
14,767
3,018 93,715 - 93,715
53
755 32,802 - 32,802
Biological assets in December 31, 2020 and 2019 were as follows:
Non-current
Cattle for dairy production (i)
Breeding cattle (ii)
Other cattle (ii)
307 20,332 6,403 26,735
12,600 11,397
2,0031,783
122 123
1,417 16,248
988 5,096
100,775 249,981
- 7,081
100,775 257,062
2020
14,72513,303
Current
Breeding cattle (iii)
Other cattle (iii)
Sown land - crops (ii)
Sown land - rice (ii)
Sown land - sugarcane (ii)
Total biological assets
(i) Classified as bearer and mature biological assets.
(ii) Classified as consumable and immature biological assets.
(iii) Classified as consumable and mature biological assets.
2,5781,677
2019
333 214
47,48938,404
29,062 21,484
71,50655,354
150,968 117,133
165,693130,436
16.
Biological assets (continued)
The fair value less estimated point of sale costs of agricultural produce at the point of harvest amounted toUS$ 290,844 for the year ended December 31, 2020 (2019: US$ 251,614).
The following table presents the Group´s biological assets that are measured at fair value at December 31, 2020 and 2019 (see Note 18 to see the description of each fair value level):
2020
2019
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |
Cattle for dairy production | - | 12,600 | - | 12,600 | - | 11,397 | - | 11,397 |
Breeding cattle | 4,581 | - | - | 4,581 | 3,460 | - | - | 3,460 |
Other cattle | - | 455 | - | 455 | - | 337 | - | 337 |
Sown land - sugarcane | - | - | 71,506 | 71,506 | - | - | 55,354 | 55,354 |
Sown land - crops | - | - | 47,489 | 47,489 | - | - | 38,404 | 38,404 |
Sown land - rice | - | - | 29,062 | 29,062 | - | - | 21,484 | 21,484 |
There were no transfers between any levels during the year.
The following significant unobservable inputs were used to measure the Group´s biological assets using the discounted cash flow valuation technique:
Description
Sown land - sugarcaneSown land - crops
Unobservable inputs
Sugarcane yield - tonnes per hectare; Sugarcane TRS (kg of sugar per ton of cane) Production Costs - US$ per hectare. (Include maintenance, harvest and leasing costs)
Crops yield - tonnes per hectare; Commercial Costs - US$ per hectare; Production Costs - US$ per hectare.
Range of unobservable inputs
2020
-Sugarcane yield: 60-100 tn/ha -Sugarcane TRS: 120-140 kg of sugar/ton of cane -Maintenance costs: 400-600 US$/ha -Harvest costs: 6.0-12.0 US$/ton of cane -Leasing costs: 12.0-14.4 tn/ha
- Crops yield: 0.95 - 5.5 tn/ha for Wheat, 2.5 - 11 tn/ha for Corn, 0.8 - 3.8 tn/ ha for Soybean, 0.6-3 for Sunflower and 2.5-3.5 tn/ ha for Peanut - Commercial Costs: 6-43 US$/tn for Wheat, 2-51 US$/ton for Corn, 7-59 US$/ton for Soybean, 1-71 US$/ton for Sunflower and 22-31 US$/ha for Peanut - Production Costs: 115-612 US$/ha for Wheat, 198-990 US$/ha for Corn, 159-750 US$/ha for Soybean, 233-641 US$/ha for Sunflower and 695-1400 US$/ha for Peanut
2019
-Sugarcane yield: 60-100tn/ha - Sugarcane TRS:120-140kg of sugar/ ton of cane - Maintenance costs: 500-700US$/ha - Harvest costs: 9.0-15.0US$/ton of cane - Leasing costs: 12. -14.4 tn/ ha
- Crops yield: 0.95 - 4.69 tn/ha for Wheat, 2.5 - 10 tn/ha for Corn, 1.19 - 3.8 tn/ha for Soybean and 1.6-3 for Sunflower
- Commercial Costs: 6-43 US$/ha for Wheat, 2-51 US$/ha for Corn, 7-59 US$/ha for Soybean and 2-71 US$/ha for Sunflower
- Production Costs: 115-574 US$/ha for Wheat, 198-859 US$/ha for Corn, 159-679 US$/ha for Soybean and 233-641 US$/ha for Sunflower
Relationship of unobservable inputs to fair value
The higher the sugarcane yield, the higher the fair value. The higher the maintenance, harvest and leasing costs per hectare, the lower the fair value. The higher the TRS of sugarcane, the higher the fair value.
The higher the crops yield, the higher the fair value. The higher the commercial and direct costs per hectare, the lower the fair value.
Sown land - riceRice yield - tonnes per hectare;
Commercial Costs - US$ per hectare;
-Rice yield: 6.5 -7.5 tn/ha - Commercial Costs: 8-16 US$/ha -Production Costs: 750-950 US$/ha
-Rice yield: 6.5 -7.5 tn/ha -Commercial Costs: 8-12 US$/ha
The higher the rice yield, the higher the fair value. The higher the commercial and direct costs per hectare, the lower the fair value.
Production Costs - US$ per hectare.
-Production Costs: 750-950 US$/ha
16. Biological assets (continued)
As of December 31, 2020, the impact of a reasonable 10% increase (decrease) in estimated costs, with all other variables held constant, would result in a decrease (increase) in the fair value of the Group's plantations less cost to sell of US$ 14.7 million for sugarcane, US$ 3.7 million for crops and US$ 3.7 million for rice.
As of December 31, 2019, the impact of a reasonable 10% increase (decrease) in estimated costs, with all other variables held constant, would result in a decrease (increase) in the fair value of the Group's plantations less cost to sell of US$ 7.9 million for sugarcane, US$ 2.8 million for crops and US$ 2.0 million for rice.
17.
Investments in joint ventures
The table below lists the Group's investment in joint ventures for the year ended December 31 2018:
% of ownership interest heldName of the entity
Country of incorporation and operation
2018
CHS AGRO S.A.
Argentina
50 %On February 26, 2013, the Group formed CHS AGRO, a joint venture with CHS Inc. CHS Inc. is a leading farmer-owned energy, grains and foods company based in the United States. The Group holds a 50% interest in CHS AGRO. On October 2014, CHS AGRO finished its sunflower processing plant in the city of Pehuajo, Province of Buenos Aires, Argentina.
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, the Company own 100% of CHS Agro S.A. which has since been renamed as Girasoles del Plata S.A. (See Note 22). Thus, the Company is not part of any Joint Venture as of December 31, 2020 and 2019.
The following amounts represent the income and expenses of the joint ventures:
2018
Income | 9,305 |
Expenses | (31,989) |
Loss before income tax | (22,684) |
When the share of losses of an investee equals or exceeds the carrying amount of an investment the Group discontinue applying the equity method, the investment is reduced to zero and does not record additional losses. This was the case in 2018.
18.
Financial instruments by category
The Group classified its financial assets in the following categories:
(a) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. Derivatives are also categorized as held for trading unless they are designated as hedges. For all years presented, the Group's financial assets at fair value through profit or loss comprise mainly derivative financial instruments.
(b) Financial assets at amortized cost.
Financial assets at amortized cost, namely loans and receivables, are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables comprise "trade and other receivables" and "cash and cash equivalents" in the statement of financial position.
The following tables show the carrying amounts of financial assets and financial liabilities by category of financial instrument and reconciliation to the corresponding line item in the statements of financial position, as appropriate. Since the line items "Trade and other receivables, net" and "Trade and other payables" contain both financial instruments and non-financial assets or liabilities (such as other tax receivables or advance payments for services to be received in the future), the reconciliation is shown in the columns headed "Non-financial assets" and "Non-financial liabilities".
December 31, 2020 Assets as per statement of financial position
Trade and other receivables Derivative financial instruments Cash and cash equivalents Total
Liabilities at fair value through profit or loss
Liabilities as per statement of financial position
Trade and other payables Borrowings (i)
Leases Liabilities
Derivative financial instruments (i)
Total
Financial assets at amortized cost
Assets at fair | Subtotal | Non- | Total | |
value through | financial | financial | ||
profit or loss | assets | assets | ||
- | 109,231 | 88,697 | 197,928 | |
2,102 | 2,102 | - | 2,102 | |
- | 336,282 | - | 336,282 | |
2,102 | 447,615 | 88,697 | 536,312 | |
Financial | Subtotal | Non- | Total | |
liabilities at | financial | financial | ||
amortized cost | liabilities | liabilities | ||
- | 114,813 | 114,813 | 11,792 | 126,605 |
- | 971,090 | 971,090 | - | 971,090 |
- | 195,772 | 195,772 | - | 195,772 |
13,141 | - | 13,141 | - | 13,141 |
13,141 | 1,281,675 | 1,294,816 | 11,792 | 1,306,608 |
109,231 - 336,282 445,513
(i) 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 U.S. Dollars using a portion of its borrowings denominated in U.S. Dollars, currency forwards and foreign currency floating-to-fixed interest rate swaps (see Note 2).
18. Financial instruments by category (continued)
December 31, 2019 Assets as per statement of financial position
Trade and other receivables Derivative financial instruments Cash and cash equivalents Total
Liabilities at fair value through profit or loss
Liabilities as per statement of financial position
Trade and other payables Borrowings (i)
Leases Liabilities
Derivative financial instruments (i)
Total
amortized cost
Assets at fair | Subtotal | Non- | Total | |
value through | financial | financial | ||
profit or loss | assets | assets | ||
- | 88,113 | 84,218 | 172,331 | |
1,435 | 1,435 | - | 1,435 | |
- | 290,276 | - | 290,276 | |
1,435 | 379,824 | 84,218 | 464,042 | |
Financial | Subtotal | Non- | Total | |
liabilities at | financial | financial | ||
amortized cost | liabilities | liabilities | ||
- | 98,420 | 98,420 | 12,066 | 110,486 |
- | 968,280 | 968,280 | - | 968,280 |
- | 216,384 | 216,384 | - | 216,384 |
1,423 | - | 1,423 | - | 1,423 |
1,423 | 1,283,084 | 1,284,507 | 12,066 | 1,296,573 |
Financial
assets at
88,113 - 290,276 378,389
(i) 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 U.S. Dollars using a portion of its borrowings denominated in U.S. Dollars, currency forwards and foreign currency floating-to-fixed interest rate swaps (see Note 2).
Because of the short maturities of most trade accounts receivable and payable, other receivables and liabilities, and cash and cash equivalents, their carrying amounts at the closing date do not differ significantly from their respective fair values. The fair value of long-term borrowings is disclosed in Note 27.
Income, expense, gains and losses on financial instruments can be assigned to the following categories:
Financial
asset /
liabilities at
amortized cost
December 31, 2020
Interest income (i) Interest expense (i)
4,084
(58,282)
Foreign exchange (losses) / gain (i)
(109,266)
Loss from derivative financial instruments (ii) Finance cost related to lease liabilities
-
(12,532)
Assets/ liabilities | Other financial | Total |
at fair value | liabilities at | |
through profit or | amortized cost | |
loss | ||
- | 4,084 | |
- | (58,282) | |
- | (109,266) | |
- | (8,228) | |
- | (12,532) |
- - - (8,228)
-
18. Financial instruments by category (continued)
Financial
assets /
liabilities at
amortized cost
December 31, 2019
Interest income (i) Interest expense (i)
Foreign exchange gains losses (i)
6,390 (56,441) (19,807)
(Loss) / gain from derivative financial instruments (ii)
Finance cost related to lease liabilities
(870) (9,524)
Assets/ liabilities | Other financial | Total |
at fair value | liabilities at | |
through profit or | amortized cost | |
loss | ||
- | 6,390 | |
(56,468) | ||
- | (25,779) | |
- | 571 | |
- | (9,524) |
-
(27) (5,972)
1,441 -
(i) Included in "Financial Results, net" in the consolidated statement of income.
(ii) Included in "Other operating income, net" and "Financial Results, net" in the consolidated statement of income.
Determining fair values
IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. All financial instruments recognized at fair value are allocated to one of the valuation hierarchy levels of IFRS 13. This valuation hierarchy provides for three levels. The allocation reflects which of the fair values derive from transactions in the market and where valuation is based on models because market transactions are lacking. The level in the fair value hierarchy is categorized in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.
As of December 31, 2020 and 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. The financial instruments the Group has allocated to this level mainly comprise crop futures and options traded on the stock market.
Derivatives not traded on the stock market allocated to Level 2 are valued using models based on observable market data. The financial instruments the Group has allocated to this level mainly comprise interest-rate swaps and foreign-currency interest-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 Group does not have financial instruments allocated to this level for any of the years presented.
The following tables present the Group's financial assets and financial liabilities that are measured at fair value as of December 31, 2020 and 2019 and their allocation to the fair value hierarchy:
Level 1 | Level 2 | Total | ||
Assets | ||||
Derivative financial instruments | 2020 | 151 | 1,951 | 2,102 |
Derivative financial instruments | 2019 | 1,257 | 178 | 1,435 |
Liabilities | ||||
Derivative financial instruments | 2020 | (12,984) | (157) | (13,141) |
Derivative financial instruments | 2019 | (1,423) | - | (1,423) |
18. Financial instruments by category (continued)
There were no transfers within level 1 and 2 during the years ended December 31, 2020 and 2019.
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 Method
Parameters
Pricing Model
Level
Total
Futures
Quoted price
-
-
(12,833)
NDF
Quoted price
Swap curve
Present value method
(30)
1 2
Interest-rate swaps
Theoretical price
Money market interest-rate curve
Present value method
2
1,824 (11,039)
19.
Trade and other receivables, net
2020
2019
Non-current
Advances to suppliers | 1,704 | 723 |
Income tax credits | 5,283 | 5,240 |
Non-income tax credits (i) | 18,195 | 16,895 |
Judicial deposits | 2,188 | 2,596 |
Receivable from disposal of subsidiary (Note 22) | 23,093 | 17,047 |
Other receivables | 1,803 | 2,492 |
Non-current portion | 52,266 | 44,993 |
Current | ||
Trade receivables | 58,530 | 55,271 |
Less: Allowance for trade receivables | (3,965) | (3,773) |
Trade receivables - net | 54,565 | 51,498 |
Prepaid expenses | 10,427 | 12,521 |
Advances to suppliers | 17,751 | 14,417 |
Income tax credits | 1,709 | 1,059 |
Non-income tax credits (i) | 33,628 | 33,363 |
Receivable from disposal of subsidiary (Note 22) | 15,506 | 5,716 |
Cash collateral | 36 | 23 |
Other receivables | 12,040 | 8,741 |
Subtotal | 91,097 | 75,840 |
Current portion | 145,662 | 127,338 |
Total trade and other receivables, net | 197,928 | 172,331 |
(i) Includes US$ 363 (2019: US$ 226) reclassified from property, plant and equipment. |
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 U.S. Dollars):
2020 | 2019 | |
Currency | ||
U.S. Dollar | 56,531 | 37,131 |
Argentine Peso | 55,433 | 45,520 |
Uruguayan Peso | 811 | 999 |
Brazilian Reais | 85,153 | 88,681 |
197,928 | 172,331 |
As of December 31, 2020 trade receivables of US$ 11,623 (2019: US$ 5,052) were past due but not impaired. The aging analysis of these receivables indicates that US$ 977 and US$ 318 are over 6 months in December 31, 2020 and 2019, respectively.
Since January 1, 2018, for trade receivables, the Company applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognized from initial recognition of the receivables.
19. Trade and other receivables, net (continued)
Delinquency in payments was an indicator that a receivable may be impaired. However, management considers all available evidence in determining when a receivable is impaired. Generally, trade receivables, which are more than 180 days past due are fully provided for. However, certain receivables 180+ days overdue are not provided for based on a case-by-case analysis of credit quality analysis. Furthermore, receivables, which are not 180+ days overdue, may be provided for if specific analysis indicates a potential impairment.
Movements on the Group's allowance for trade receivables are as follows:
2020 | 2019 | 2018 | |
At January 1 | 3,773 | 2,503 | 1,002 |
Charge of the year | 2,192 | 3,656 | 2,468 |
Acquisition of subsidiary | - | 46 | - |
Unused amounts reversed | (769) | (1,314) | (237) |
Used during the year | (446) | (48) | (281) |
Exchange differences | (785) | (1,070) | (449) |
At December 31 | 3,965 | 3,773 | 2,503 |
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 maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above.
As of December 31, 2020, approximately 50% (2019: 25%) of the outstanding unimpaired trade receivables (neither past due not impaired) relate to sales to 24 well-known multinational companies with good credit quality standing, including but not limited to Itersnack Procurement B.V., Camara de Comercializacao de Energia Electrica CCEE, The Real Peunats Company, Interfood Americas S.A., Mastellone Hnos. S.A., Companhia de Distribuição Araguaia, among others. Most of these entities or their parent companies are externally credit-rated. The Group reviews these external ratings from credit agencies.
The remaining percentage as of December 31, 2020 and 2019 of the outstanding unimpaired trade receivables (neither past due nor impaired) relate to sales to a dispersed large quantity of customers for which external credit ratings may not be available. However, the total base of customers without an external credit rating is relatively stable.
New customers with less than six months of history with the Group are closely monitored. The Group has not experienced credit problems with these new customers to date. The majority of the customers for which an external credit rating is not available are existing customers with more than six months of history with the Group and with no defaults in the past. A minor percentage of customers may have experienced some non-significant defaults in the past but fully recovered.
20.
Inventories
2020 | 2019 | |
Raw materials | 56,420 | 47,501 |
Finished goods (Note 5) (1) | 77,041 | 65,278 |
Others | - | 11 |
133,461 | 112,790 | |
(1) Finished goods of Crops reportable segment are valued at fair value. |
21. Cash and cash equivalents
2020
2019
Cash at bank and on hand
178,079
124,701
Short-term bank deposits
158,203
165,575
336,282
290,276
22. 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. At the day of the acquisition, we had our participation valued at 0. 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 Olam Alimentos 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 and second payments 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 Buenos Aires and processes fluid milk while the second facility is located in Morteros, Province of Cordoba and produces powder milk and cheese. Together with these facilities, we also acquired the brands Las Tres Niñas and Angelita. The total consideration for these operations was US$ 47 million. This transaction qualifies as a purchase of assets.
Disposals
In December 2020, the Company completed the sale of Global Seward S.L.U. and Peak City S.L.U. wholly owned subsidiaries, which main underlying asset is Huelen Farm at the selling price of US$ 30.1 millions, USD 10.1 million were collected at the closing date, and the balance will be collected in two annual installments. This transaction resulted in a loss
The accompanying notes are an integral part of these consolidated financial statements.
F- 59
22. Disposals and acquisitions (continued)
before tax of US$ 0.6 million included in the line item "Other operating income", and also in the reclassification of Revaluation surplus to retained earnings of US$ 2.2 million.
In June 2020, the Company collected US$ 12.1 million in consideration of the sale of 811.70 hectares farm in the Province of Santa Fe, Argentina. This transaction resulted in a gain before tax of US$ 2.1 million included in the line item "Other operating income" and also in the reclassification of Revaluation surplus to retained earnings before income tax of US$ 8.0 million reflected in the Statements of changes in shareholders equity.
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 US$ 8.0 million.
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".
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".
23.
Shareholders' contributions
The share capital of the Group is represented by common shares with a nominal value of US$ 1.5 per share and one vote each.
Share capital and | ||
Number of shares | share premium | |
At January 1, 2018 | 122,382 | 1,092,507 |
Employee share options exercised (Note 24) (1) | - | - |
Restricted shares and units vested (Note 24) | - | 4,775 |
Purchase of own shares | - | (13,206) |
At December 31,2018 | 122,382 | 1,084,076 |
Restricted shares and units vested (Note 24) | - | 4,455 |
Purchase of own shares | - | (3,219) |
At December 31,2019 | 122,382 | 1,085,312 |
Restricted shares units vested (Note 24) | - | 4,182 |
Purchase of own shares | - | (3,106) |
At December 31,2020 | 122,382 | 1,086,388 |
(1) Treasury shares were used to settle these options and units. | ||
Share Repurchase Program |
On September 24, 2013, the Board of Directors of the Company has authorized a share repurchase program for up to 5% of its outstanding shares. The repurchase program has commenced on September 24, 2013 and is reviewed by the Board of Directors after each 12-month period. On August 11, 2020, the Board of Directors approved the extension of the program for an additional twelve-month period, ending September 23, 2021.
Repurchases of shares under the program are made from time to time 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. 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.
As of December 31, 2020, the Company repurchased 9,957,078 shares under this program, of which 4,406,246 have been applied to some exercise of the Company's stock option plan and restricted stock units plan. In 2020, 2019 and 2018 the Company repurchased shares for an amount of US$ 4,365, US$ 4,263 and US$ 15,725, respectively. The outstanding treasury shares as of December 31, 2020 totaled 5,084,864.
24.
Equity-settled share-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 granted equity-settled options to senior managers and selected employees of the Group's subsidiaries with a term of ten years. 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 stock units and restricted shares to senior and medium management and key employees of the Group's subsidiaries.
(a) Option Schemes
The fair value of the options under the Option Schemes was measured at the date of grant using the Black-Scholes valuation technique.
As of the date of these financial statements all options has already been vested and expensed.
The Adecoagro/ IFH 2004 Stock Incentive Option Plan was effectively established in 2004 and is administered by the
Compensation Committee of the Company. Options are exercisable over a ten-year period. In May 2014 this period was extended for another ten year-period.
Movements in the number of equity-settled options outstanding and their related weighted average exercise prices under the Adecoagro/ IFH 2004 Stock Incentive Option Plan are as follows:
2020
2019
2018
Average | Average | Average | ||||
exercise | Options | exercise | Options | exercise | Options | |
price per | (thousands) | price per | (thousands) | price per | (thousands) | |
share | Share | Share | ||||
At January 1 | 6.66 | 1,634 | 6.66 | 1,634 | 6.66 | 1,634 |
Exercised | - | - | - | - | - | - |
At December 31 | 6.66 | 1,634 | 6.66 | 1,634 | 6.66 | 1,634 |
Options outstanding at year end under this Plan have the following expiry date and exercise prices:
Exercise | ||||
price per | ||||
Expiry date (i): | share | |||
May 1, 2024 | 5.83 | 496 | 496 | 496 |
May 1, 2025 | 5.83 | 452 | 452 | 452 |
January 1, 2026 | 5.83 | 142 | 142 | 142 |
February 16, 2026 | 7.11 | 103 | 103 | 103 |
October 1, 2026 | 8.62 | 441 | 441 | 441 |
Shares (in thousands)
2020
2019
2018
(i) On May 2014, the Board of directors decided to extend the expired date of the Plan.
The Adecoagro/ IFH 2007/ 2008 Equity Incentive Plan was effectively established in late 2007 and expired during 2020, with no options excercised.
24. Equity-settled unit-based payments (continued)
(b) Restricted Share / Restricted Stock Unit Plan
The Restricted Share and Restricted Stock Unit Plan was effectively established in 2010 and amended in November
2011. It is administered by the Compensation Committee of the Company. Restricted shares or units under these Plan vest over a 3-year period from the date of grant at 33% on each anniversary of the grant date. Participants are entitled to receive one common share of the Company for each restricted share or restricted unit granted. There are no performance requirements for the delivery of common shares, except that a participant's employment with the Group must not have been terminated prior to the relevant vesting date. If the participant ceases to be an employee for any reason, any unvested restricted share or unit shall not be converted into common shares. The maximum number of ordinary shares with respect to which awards may be made under the Plan is 5,379,164, of which 3,809,322 have already been vested and 1,396,221 will be vested on future periods. The maximum numbers of ordinary shares are revised annually.
At December 31, 2020, the Group recognized compensation expense US$ 4.5 million related to the restricted stock units granted under the Restricted Share Plan (2019: US$ 4.8 million and 2017: US$ 4.9 million).
The restricted shares under the Restricted Share Plan were measured at fair value at the date of grant.
Key grant-date fair value and other assumptions under the Restricted Share Plan are detailed below:
Apr 1, | May 15, | Apr 1, | May 15, | Apr 1, | May 12, | |
2018 | 2018 | 2019 | 2019 | 2020 | 2020 | |
Fair value | 8.43 | 9.10 | 7.00 | 7.20 | 5.65 | 7.45 |
Possibility of ceasing employment before vesting | -% | -% | -% | -% | -% | - % |
Grant Date
Movements in the number of restricted shares outstanding under the Restricted Share Plan are as follows:
Restricted shares (thousand)
Restricted stock units (thousands)
2020
2019
2020
2019
2018
At January 1 | 750 | - | 508 | 976 | 969 |
Granted (1) | 751 | 753 | - | 20 | 530 |
Forfeited | (24) | (3) | (10) | (12) | (25) |
Vested | (255) | - | (324) | (476) | (498) |
At December 31 | 1,222 | 750 | 174 | 508 | 976 |
(1) Approved by the Board of Directors of March 10, 2020 and the Shareholders Meeting of April 15, 2020.
25.
Legal and other reserves
According to the laws of certain of the countries in which the Group operates, a portion of the profit of the year (5%) is separated to constitute legal reserves until they reach legal capped amounts. These legal reserves are not available for dividend distribution and can only be released to absorb losses. The legal limit of these reserves has not been met.
Legal and other reserves amount to US$ 9.662 as of December 31, 2020 (2019: US$ 8,375) and are included within the balance of retained earnings in the statement of changes in shareholders' equity.
The Company may make distributions in the form of dividends or otherwise to the extent that it has distributable retained earnings or available distributable reserves (including share premium) that result from the Stand Alone Financial Statements prepared in accordance with Luxembourg GAAP. No distributable retained earning result from the Stand Alone Financial Statements of the Company as of December 31, 2020, but the Company has distributable reserves in excess of US$ 935,297.
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Adecoagro SA published this content on 16 March 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 March 2021 13:32:09 UTC.
