Adecoagro reported Adjusted EBITDA of $157.0 million in 3Q21 and $367.6 million in 9M21, 53.7% and 50.4%higher year-over-year, respectively.

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Nov 10, 2021, 16:15 ET

LUXEMBOURG, Nov. 10, 2021 /PRNewswire/ -- Adecoagro S.A. (NYSE: AGRO, Bloomberg: AGRO US, Reuters: AGRO.K), a sustainable production company in South America, announced today its results for the third quarter ended September 30, 2021. The financial information contained in this press release is based on unaudited condensed consolidated interim financial statements presented in US dollars and prepared in accordance with International Financial Reporting Standards (IFRS) except for Non - IFRS measures. Please refer to page 37 for a definition and reconciliation to IFRS of the Non - IFRS measures used in this earnings release.

Main highlights for the period:

Net Sales reached $757.7 million during 9M21, 34.1% higher year-over-year.
Adjusted EBITDA in the Sugar, Ethanol & Energy segment registered a year-over-year growth of 56.2% during 9M21 while the Farming & Land Transformation segment grew 32.6% during the same period.

Financial & Operational Highlights

In our Sugar, Ethanol & Energy business, Adjusted EBITDA reached $138.1 million in 3Q21, 59.8%, or $51.7 million higher compared to the same period of last year. Crushing volume was only 0.2 million tons lower compared to 3Q20, despite lower than expected agricultural productivity indicators caused by the frost that affected Brazil's main productive areas during June and July. This achievement was possible as we increased harvested area and the amount of cane purchased from third parties, in addition to speeding up harvesting activities to minimize the weather impact. Price scenario for sugar, ethanol and energy continued to improve as the market factored in the impact of the frost and of the dry weather in CenterSouth Brazil. 3Q21's financial results were positively impacted by (i) a $36.0 million year-over-year increase in net sales mainly driven by an increase in the price of all three products, coupled with (ii) our strategy of extracting the highest value per ton crushed by maximizing production of the product with the highest marginal contribution (55% of total TRS produced was diverted to ethanol, especially anhydrous ethanol); (iii) our strategy of increasing energy production to capture high spot prices; and (iv) a $20.0 million yearover-year gain in the mark-to-market of our harvested cane led by an increase in Consecana prices of 67.0%. These positive effects were partially offset by a $25.2 million increase in cost mostly explained by (i) an increase in harvested area; (ii) an increase in the price of fuel and lubricants among other inputs and (iii) higher purchased volume of third party cane, bagasse and wood chips. During the quarter we sold 255.8 thousand CBios at an average price of 46 BRL/CBio (approximately $8.7/CBio). End of period stocks amounted to $135.1 million, marking a 2.3x year-over-year increase, led by our commercial strategy to carry stocks towards year end in order to benefit from higher expected prices.

On a year-to-date basis, Adjusted EBITDA reached $269.8 million, 56.2% higher compared to the same period of last year. Higher results were explained by (i) a 60.0% increase in net sales driven by higher average selling prices measured in U.S. dollars for all three products and higher selling volume of ethanol and energy; (ii) a 1.1 million ton increase in crushing volume; coupled with (iii) a $39.8 million gain derived from the mark-to-market of our sugarcane, mainly related to harvested cane (realized margin). This waspartially offset by an increase in costs combined with a $23.4 million loss in our commodity hedge position and by a $9.4 million increase in selling expenses in line with the increase in sales.
Adjusted EBITDA in the Farming and Land Transformation businesses stood at $24.8 million in 3Q21 and at $113.4 million in 9M21 marking an year-over-year increase of 19.9% and 32.6%, respectively. Solely focusing on the Farming business, results stood at $23.9 million in 3Q21 and $107.8 million in 9M21, marking a year-over-year increase of 30.6% and 55.7%, respectively.

Adjusted EBITDA in our Crops segment was $13.7 million in 3Q21, $7.9 million higher compared to the same period of last year. This was explained by (i) an increase in average selling prices ($127/Mt increase in the case of soybean and $71/Mt in the case of corn), coupled with a year-over-year gain in the mark-to-market of our biological asset on account of an increase in hectares, yield and prices. This was partially offset mostly by an increase in costs driven by inflation of the Argentine Peso being higher than currency depreciation - inflation in U.S. dollar terms -. Year-to-date Adjusted EBITDA amounted to $47.9 million, 89.5% or $22.6 million higher compared to 9M20 also mostly explained by a year-over-year gain in the mark-to-market of our biological asset on account of an increase in prices. End of period stocks were 2.3x higher than in 9M20 amounting to over $50 million mainly as a consequence of our commercial strategy to carry stock in order to benefit from higher expected prices.

Adjusted EBITDA in the Rice business reached $2.8 million during 3Q21 marking a 54.2% decrease compared to 3Q20 as a consequence of higher costs, in particular logistic costs, driven by inflation in U.S. dollar terms. However, during 9M21 Adjusted EBITDA stood at $40.7 million, 37.9% or $11.2 million higher than during 9M20. The positive financial performance was mostly explained by an increase in yields (record high of 7.8 Mt/Ha), area and prices, which led to a year-over-year gain in the value of our biological asset and agricultural produce. This was mostly captured during the first quarter of the year which is when the crop is harvested. We successfully achieved these results due to our continuous focus on (i) productivity as the key variable to minimize costs per ton, (ii) rice quality to improve industrial efficiencies; and (iii) efficiency throughout the value chain by focusing on synergies at every level. Improvements achieved were possible as a result of the investments we made at the farm and industry level and improvements to the consolidation and maturity of our operational teams.

The Dairy business generated an Adjusted EBITDA of $7.2 million during 3Q21 and $19.3 million during 9M21, an increase of 13.5% and 32.6% compared to the same period of last year, respectively. In both cases, higher results were explained by (i) an increase in gross sales coupled with (ii) our continuous focus on achieving efficiencies in our vertically integrated operations and increasing our productivity levels in every stage of the value chain. Results were partially offset by the higher cost of feed on account of higher commodity prices and the higher cost of raw milk. Once (i) interest expenses and (ii) the foreign exchange loss related to the financial debt are taken into account, the year-to-date result of the Dairy business decreased to negative $10.2 million.
Net Income amounted to $37.0 million during 3Q21 and to $72.0 million during 9M21, marking a year-overyear gain of $16.7 million and $118.2 million, respectively. This was mostly explained by the year-over-year increase in Adjusted EBITDA generation.
Adjusted Net Income in 3Q21 reached $59.2 million, $21.3 million higher than in 3Q20. Adjusted Net Income excludes, (i) any non-cash result derived from bilateral exchange variations; (ii) any revaluation resulting from the hectares held as investment property; (iii) any inflation accounting result; and includes (iv) any gains or losses from disposals of non-controlling interests in subsidiaries whose main underlying asset is farmland (the latter is already included in Adj. EBITDA). We believe Adjusted Net Income is a more appropriate metric to reflect the Company´s performance.

Remarks

Distribution policy

Adecoagro announces the implementation of a distribution policy as of January 1, 2022. The Company intends to distribute to shareholders annually a minimum of 40% of the Adjusted Free Cash from Operations(1) generated during the previous year.

The Distribution Policy shall consist of a minimum cash dividend payable on the Company's outstanding common stock in the aggregate amount of $30 million per year, in addition to share repurchases under the Company's existing share repurchase program from time to time as deemed appropriate.

Dividend payments are intended to be made in two installments in May and November of each year.

Any dividend distribution is subject to the conditions of applicable law and approval of Adecoagro´s shareholders.

Further details of our distribution policy will be communicated in our 4Q21 Earnings Release report.

(1) We define Adjusted Free Cash Flow from Operations as (i) net cash generated from operating activities net of the combined effect of the application of IAS 29 and IAS 21 less (ii) net cash used in investing activities net of the combined effect of the application of IAS 29 and IAS 21, less (iii) interest paid net of the combined effect of the application of IAS 29 and IAS 21 to the Argentine operations, plus (iv) proceeds from the sale of non-controlling interest in subsidiaries; less (v) lease payments; less (vi) dividends paid to noncontrolling interest plus (vii) expansion capital expenditures.

Share repurchase program update

Adecoagro is generating positive cash flow in a structural way and, as stated in past releases, cash distribution is a priority for capital allocation. As previously communicated, the preferred vehicle to distribute cash to shareholders during 2021 has been share repurchases under our buyback program. Throughout the year we effectively completed our 2020/21 buyback program by repurchasing 5% of our outstanding shares, and have since started repurchasing shares under our 2021/22 program. In this line, during the first ten months of the year we have purchased over 6 million shares at an average price of $9.21 per share, totaling $56.9 million. Going forward we expect to continue repurchasing shares, in line with our commitment to generate long term value for our shareholders.

Independent farmland appraisal report

As of September 30, 2021, Cushman & Wakefield (C&W) updated its independent appraisal of Adecoagro's farmland.

Adecoagro held 240,243 hectares valued by C&W at $759.6 million. Net of minority interests, Adecoagro's land portfolio consists of 219,850 hectares valued at $709.8 million. On a comparable basis, current valuation of our land portfolio represents a yearover-year increase of 2.4%.

Anhydrous ethanol production

In line with our strategy to maximize production of the product with the highest marginal contribution, 63.1% of total ethanol production during 3Q21 was anhydrous ethanol. This enabled us to capture high market prices during the quarter as anhydrous ethanol traded at a sugar equivalent price of 21.2 cts/lb on average, marking a 13.2% premium to sugar and a 16.0% premium to hydrous ethanol. The 37.7% increase in anhydrous ethanol production compared to 3Q20 was possible thanks to (i) our open hedge position which provided us with the necessary flexibility as sugar commitments were low; and to (ii) the inauguration of our molecular sieve in Ivinhema which increased by 50% our dehydration capacity. This project entailed a minor investment of approximately $4.0 million, had an internal rate of return of over 150%, and a payback period of less than one year. The increase in our dehydration capacity serves as a commercial tool, enhances the efficiency and sustainability of our operations and heightens our production flexibility. Combined with our high ethanol storage capacity, it enables us to carry-over stocks and

places us in a solid position to continue to benefit from higher expected prices. In this line, we were able to profit from anhydrous prices trading at a 10-year-high by beginning of 4Q21, capturing prices over 24.0 cts/lb.

Non-Gaap Financial Measures: For a full reconciliation of non-gaap financial measures please refer to page 37 of our 3Q21 Earnings Release found on Adecoagro's website (ir.adecoagro.com)

Forward-Looking Statements: This press release contains forward-looking statements that are based on our current expectations, assumptions, estimates and projections about us and our industry. These forward-looking statements can be identified by words or phrases such as "anticipate," "forecast", "believe," "continue," "estimate," "expect," "intend," "is/are likely to," "may," "plan," "should," "would," or other similar expressions.

These forward-looking statements involve various risks and uncertainties. Although we believe that our expectations expressed in these forward-looking statements are reasonable, our expectations may turn out to be incorrect. Our actual results could be materially different from our expectations. In light of the risks and uncertainties described above, the estimates and forward-looking statements discussed in this press release might not occur, and our future results and our performance may differ materially from those expressed in these forward-looking statements due to, inclusive, but not limited to, the factors mentioned above. Because of these uncertainties, you should not make any investment decision based on these estimates and forward-looking statements.

The forward-looking statements made in this press release relate only to events or information as of the date on which the statements are made in this press release. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.

To read the full 3Q21 earnings release, please access ir.adecoagro.com. A conference call to discuss 3Q21 results will be held on November 12, 2021 with a live webcast through the internet:

Conference Call

November 12, 2021
08 a.m. US EST
10 a.m. Buenos Aires
10 a.m. Sao Paulo
2 p.m. Luxembourg

Participants calling from the US: Tel: +1 (844) 435-0324
Participants calling from other countries: Tel: +1 (412) 317-6366
Access Code: Adecoagro

Conference Call Replay
Participants calling from the US: Tel: +1 (877) 344-7529
Participants calling from other countries: Tel: +1 (412) 317-0088

Access Code: 10160835

Investor Relations Department
Charlie Boero Hughes CFO
Victoria Cabello

IRO
Email: [email protected]
Tel: +54 (11) 4836-8651

About Adecoagro:

Adecoagro is a sustainable production company in South America. Adecoagro owns over 220 thousand hectares of farmland and several industrial facilities spread across the most productive regions of Argentina, Brazil and Uruguay, where it produces over 1.9 million tons of agricultural products including sugar, ethanol, bio-electricity, milled rice, corn, wheat, soybean and dairy products, among others.

SOURCE Adecoagro S.A.