UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 under the
Securities Exchange Act of 1934
For the month of April, 2011
Commission File Number 001-35052
Adecoagro S.A.
(Translation of registrant’s name into English)
13-15 Avenue de la Liberté
L-1931 Luxembourg
R.C.S. Luxembourg B 153 681
(Address of principal executive office)
L-1931 Luxembourg
R.C.S. Luxembourg B 153 681
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-Fþ Form 40-Fo
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):o
Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yeso Noþ
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- .
ANNOUNCEMENT OF RESULTS OF OPERATIONS FOR THE THREE AND TWELVE MONTH PERIODS ENDED DECEMBER 31, 2010
On March 31, 2011, the registrant issued a press release pertaining to its results of operations for the three month and twelve month periods ended December 31, 2010. Attached hereto is a copy of the press release. The financial and operational information contained in the press release is based on audited consolidated financial statements presented in U.S. Dollars and prepared in accordance with International Financial Reporting Standards.
The attachment contains forward-looking statements. The registrant desires to qualify for the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995, and consequently is hereby filing cautionary statements identifying important factors that could cause the registrant’s actual results to differ materially from those set forth in the attachment.
The registrant’s forward-looking statements are based on the registrant’s current expectations, assumptions, estimates and projections about the registrant and its industry. These forward-looking statements can be identified by words or phrases such as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “is/are likely to,” “may,” “plan,” “should,” “would,” or other similar expressions.
The forward-looking statements included in the attached relate to, among others: (i) the registrant’s business prospects and future results of operations; (ii) the implementation of the registrant’s business strategy, including its development of the Ivinhema project; (iii) the registrant’s plans relating to acquisitions, joint ventures, strategic alliances or divestitures; (iv) the implementation of the registrant’s financing strategy and capital expenditure plan; (v) the maintenance of the registrant’s relationships with its customers; (vi) the competitive nature of the industries in which the registrant operates; (vii) the cost and availability of financing; (viii) future demand for the commodities the registrant produces; (ix) international prices for commodities; (x) the condition of the registrant’s land holdings; (xi) the development of the logistics and infrastructure for transportation of the registrant’s productions in the countries where it operates; (xii) the performance of the South American and world economies; (xiii) weather and other natural phenomena; (xiv) the relative value of the Brazilian Real, the Argentine Peso, and the Uruguayan Peso compared to other currencies; and (xv) developments in, or changes to, the laws, regulations and governmental policies governing the registrant’s business, including environmental laws and regulations; as well as other risks included in the registrant’s other filings and submissions with the United States Securities and Exchange Commission.
These forward-looking statements involve various risks and uncertainties. Although the registrant believes that its expectations expressed in these forward-looking statements are reasonable, its expectations may turn out to be incorrect. The registrant’s actual results could be materially different from its expectations. In light of the risks and uncertainties described above, the estimates and forward-looking statements discussed in the attached might not occur, and the registrant’s future results and its performance may differ materially from those expressed in these forward-looking statements due to, inclusive, but not limited to, the factors mentioned above. Because of these uncertainties, you should not make any investment decision based on these estimates and forward-looking statements.
The forward-looking statements made in the attached relate only to events or information as of the date on which the statements are made in the attached. The registrant undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Adecoagro S.A. | ||||||
| By | /s/ Carlos A. Boero Hughes | |||||
| Title: Chief Financial Officer and Chief Accounting Officer | ||||||
Date: April 1, 2011
 |
Adecoagro recorded Adjusted EBITDA of $95.1 million in 2010
Luxembourg, March 31st, 2011— Adecoagro S.A. (NYSE: AGRO, Bloomberg: AGRO US, Reuters: AGRO.K), one of the leading agricultural companies in South America, announced today its results for the fourth quarter and twelve month period ended December 31, 2010. The financial and operational information contained in this press release is based on audited consolidated financial statements presented in U.S. dollars and prepared in accordance with International Financial Reporting Standards (IFRS).
Highlights
Financial & Operating Performance
| $ thousand | 2010 | 2009 | (chg%) | 4Q10 | 4Q09 | (chg%) | ||||||||||||||||||
| Gross Sales | 426,267 | 313,603 | 35.9 | % | 147,381 | 103,472 | 42.4 | % | ||||||||||||||||
Adjusted EBITDA | ||||||||||||||||||||||||
| Farming & Land Transformation | 65,735 | 51,662 | 27.2 | % | 35,871 | 34,617 | 3.6 | % | ||||||||||||||||
| Sugar & Ethanol | 51,735 | (26,903 | ) | — | 24,977 | (3,103 | ) | — | ||||||||||||||||
| Corporate Expenses | (22,353 | ) | (22,262 | ) | 0.4 | % | (6,704 | ) | (5,142 | ) | 30.4 | % | ||||||||||||
Total Adjusted EBITDA | 95,116 | 2,497 | 3709.2 | % | 54,143 | 26,372 | 105.3 | % | ||||||||||||||||
| Grains & Oilseeds Production (tons) | 618,834 | 414,962 | 49.1 | % | — | — | — | |||||||||||||||||
| Sugarcane Crushed (thousand tons) | 4,066 | 2,215 | 83.6 | % | 1,125 | 850 | 32.4 | % | ||||||||||||||||
| Farming Planted Area (Hectares) | 183,454 | 153,026 | 19.9 | % | — | — | — | |||||||||||||||||
| Sugarcane Plantation Area (Hectares) | 53,799 | 49,470 | 8.8 | % | ||||||||||||||||||||
| o | Adecoagro recorded Adjusted EBITDA(1) of $54.1 million in 4Q10, driving Adjusted EBITDA for the 2010 fiscal year to $95.1 million, representing a $92.6 million increase compared to 2009. |
| 1 | Please see “Reconciliation of Non-IFRS measures” on page 24 for reconciliation of Adjusted EBITDA and Adjusted EBIT to Profit/Loss. Adjusted EBITDA is defined as consolidated profit from operations before financing and taxation, depreciation, amortization and unrealized changes in fair value of long-term biological assets. Adjusted EBIT is defined as consolidated profit from operations before financing and taxation, and unrealized changes in fair value of long-term biological assets. Adjusted EBITDA margin and Adjusted EBIT margin are calculated as a percentage of gross sales. |
| o | Gross Sales in 2010 reached $426.3 million, 35.9% higher than 2009. | |
| o | Sugar, Ethanol and Energy business Adjusted EBITDA increased $78.6 million, from $(26.9) million in 2009 to $51.7 million in 2010. This was driven by an 83.6% increase in sugarcane crushing volume as a result of the completion of the Angelica mill greenfield project and the upgrade made in the Usina Monte Alegre mill. | |
| o | Farming and Land Transformation businesses Adjusted EBITDA grew 27.2% in 2010 compared to 2009, from $51.7 million in 2009 to $65.7 million in 2010. The main drivers of Adjusted EBITDA growth were: |
| o | A 19.9% increase in total crop and rice planted area and a significant increase in soybean and corn yields in the 2009/10 harvest year compared to 2008/09 harvest year, resulting in a 49.1% increase in production volume. | ||
| o | The sale of La Macarena, a 5,086 hectare farm located in Uruguay. |
| o | Net loss in 2010 totaled $44.8 million, mainly affected by the recognition of a non-cash loss (unrealized changes in fair value of long term biological assets) of $96.8 million. The loss was generated by a decrease in the fair value of our sugarcane plantation primarily as a result of lower sugar price estimates used in our sugarcane valuation model. | |
| o | Adecoagro began the 2010/11 harvest year and as of December 31st, 2010, succesfully planted 156.3K hectares. Total planted area is forecasted to reach approximately 190.0K hectares, 3.6% above the previous harvest year. Rice planted area has increased by 50.8%, reaching a total of 27.4K hectares in the 2010/11 harvest year. |
Market Overview
| o | Rising standards of living in fast developing economies such as Brazil and China, coupled with ambitious mandates to expand biofuels production, and extreme climate issues in the world’s most productive countries (Australia, Russia, Brazil, Thailand, Argentina, China, etc) have tightened stock-to-use ratios across all agricultural products. Although supply continues to grow, driven by new investments and opening of new areas for agricultural production, it is not being able to keep up with the rapid growth in demand around the globe. This new scenario has caused an upward shift in long term agricultural commodity prices, setting an attractive environment for low cost commodity producers. |
Strategy Execution
| o | The Company continues executing its strategy of transforming and adding value to its farms. During 2010, Adecoagro, |
| o | transformed and put into production 6.5K hectares of undermanaged/undeveloped farmland, including 4.1K hectares of rice in the San Joaquin farm, our most important ongoing transformation project. | ||
| o | purchased a 14.7K hectare rice farm with high potential for land transformation and value creation. | ||
| o | continued operating its land under a sustainable production model based on no-till technology and other best practices |
2
| o | Adecoagro continues implementing its growth plan in the Sugar, Etanol and Energy business. On November 26, 2010, the Ivinhema greenfield mill was granted the preliminary license by IMASUL (“Instituto de Meio Ambiente de Mato Grosso do Sul”). This is an important milestone for this greenfield project, and we are now finalizing the process to obtain the installation license to commence construction operations at the industrial site by mid 2011. | |
| Environmental and Social Commitments | ||
| o | During 2010 we continued strengthening our environmental and social commitment. Together with TNC (The Nature Conservancy) we are encouraging and helping land owners in Mato Grosso do Sul upgrade their environmental standards in accordance with Brazilian environmental legislation. | |
| o | We continue supporting rural areas surrounding our operations. Our main focus is education and nutrition. Through partnerships with highly qualified foundations such as “Cimientos” in Argentina and “Fundacao Bradesco” in Brazil, we are engaged in projects to promote access to equal and quality education for all children. |
3
Operating Performance
Farming Business
Farming — Selected Production Data
| Planted Area (hectares) | Production (In Tons) | Yields (Tons per hectare) | ||||||||||||||||||||||||||||||||||
| 2009/2010 | 2008/2009 | (chg %) | 2009/2010 | 2008/2009 | (chg %) | 2009/2010 | 2008/2009 | (chg %) | ||||||||||||||||||||||||||||
| Soybean | 62,443 | 38,315 | 63.0 | % | 192,951 | 55,728 | 246.2 | % | 3.1 | 1.5 | 112.5 | % | ||||||||||||||||||||||||
Soybean 2nd Crop | 25,079 | 25,658 | -2.3 | % | 48,897 | 41,254 | 18.5 | % | 1.9 | 1.6 | 21.3 | % | ||||||||||||||||||||||||
Corn(1) | 30,577 | 18,265 | 67.4 | % | 187,549 | 99,298 | 88.9 | % | 6.1 | 5.4 | 12.8 | % | ||||||||||||||||||||||||
Corn 2nd Crop | 4,040 | 3,492 | 15.7 | % | 16,024 | 20,053 | -20.1 | % | 4.0 | 5.7 | -30.9 | % | ||||||||||||||||||||||||
Wheat(2) | 26,332 | 28,708 | -8.3 | % | 61,208 | 69,903 | -12.4 | % | 2.3 | 2.4 | -4.5 | % | ||||||||||||||||||||||||
| Sunflower | 14,784 | 16,539 | -10.6 | % | 17,193 | 22,128 | -22.3 | % | 1.2 | 1.3 | -13.1 | % | ||||||||||||||||||||||||
| Cotton | 425 | 3,159 | -86.5 | % | 1,068 | 9,218 | -88.4 | % | 2.5 | 2.9 | -13.9 | % | ||||||||||||||||||||||||
Total Crops | 163,680 | 134,136 | 22.0 | % | 524,890 | 317,582 | 65.3 | % | 3.2 | 2.4 | 35.4 | % | ||||||||||||||||||||||||
| Rice | 18,142 | 17,258 | 5.1 | % | 91,723 | 94,968 | -3.4 | % | 5.1 | 5.5 | -8.1 | % | ||||||||||||||||||||||||
| Coffee (perennial) | 1,632 | 1,632 | 0.0 | % | 2,221 | 2,412 | -7.9 | % | 1.4 | 1.5 | -7.9 | % | ||||||||||||||||||||||||
Total Farming | 183,454 | 153,026 | 19.9 | % | 618,834 | 414,962 | 49.1 | % | 3.4 | 2.7 | 24.4 | % | ||||||||||||||||||||||||
| Owned Croppable Area | 106,626 | 110,231 | -3.3 | % | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Leased Area | 47,709 | 13,645 | 249.6 | % | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Second Crop Area | 29,119 | 29,150 | -0.1 | % | — | — | — | — | — | — | ||||||||||||||||||||||||||
Total Farming Area | 183,454 | 153,026 | 19.9 | % | — | — | — | — | — | — | ||||||||||||||||||||||||||
| Productivity | |||||||||||||||||||||||||||||||||||||
| Milking Cows (Average Heads) | Milk Production (MM of liters) | (Liters per cow per day) | |||||||||||||||||||||||||||||||||||
| Dairy | 2010 | 2009 | % Change | 2010 | 2009 | % Change | 2010 | 2009 | % Change | ||||||||||||||||||||||||||||
| Milk Production | 4,225 | 4,594 | -8.0 | % | 41.60 | 47.48 | -12.4 | % | 27.0 | 28.3 | -4.7 | % | |||||||||||||||||||||||||
| Processed Rice (Tons) | ||||||||||||
| Rice | 2010 | 2009 | % Change | |||||||||
| Processed Rice | 128.7 | 157.1 | -18.1 | % | ||||||||
| (1) | Includes sorghum | |
| (2) | Includes barley, safflower and rapeseed for 2008/09 harvest year and barley for 2009/10 harvest year |
Adecoagro’s farming production increased 49.1% during the 2009/10 harvest year compared to the 2008/09 harvest year driven by an increase in planted area and an improvement in yields. Total planted area increased 19.9% from 153.0 thousand hectares in the 2008/09 harvest year to 183.5 thousand hectares in the 2009/10 harvest year.
Soybean and corn yields increased significantly in 2009/10 harvest year as a result of improved climatic conditions compared to the previous harvest year, which had been affected by a severe drought that impacted our main productive regions from mid 2008 to mid 2009. This fast recovery in yields is largely due to the company’s focus on constantly transforming and improving the productivity of its land through application of no-till technology and other best practices (crop rotation, water management, balanced fertilization, integrated pest management, etc).
4
Farming — 2010/2011 Harvest Year Planting Plan
| Current | Area to be | Total | Harvested | |||||||||||||||||||||
| Planted Area | Planted | Planted Area | Area | Production | Yields | |||||||||||||||||||
| (hectares) | (hectares) | (hectares) | (hectares) | (tons) | (ton/hect) | |||||||||||||||||||
| Soybean | 52,028 | 6,162 | 58,190 | — | — | — | ||||||||||||||||||
Soybean 2nd Crop | 11,608 | 20,212 | 31,820 | — | — | — | ||||||||||||||||||
Corn(1) | 22,250 | 6,210 | 28,460 | — | — | — | ||||||||||||||||||
Corn 2nd Crop | 175 | 1,109 | 1,284 | — | ||||||||||||||||||||
Wheat(2) | 28,029 | — | 28,029 | 25,258 | 80,574 | 3.2 | ||||||||||||||||||
| Sunflower | 9,951 | — | 9,951 | — | — | — | ||||||||||||||||||
| Cotton | 3,242 | — | 3,242 | — | — | — | ||||||||||||||||||
Total Crops | 127,283 | 33,694 | 160,976 | 25,258 | 80,574 | 3.2 | ||||||||||||||||||
| Rice | 27,362 | — | 27,362 | — | — | — | ||||||||||||||||||
| Coffee (perennial) | 1,632 | — | 1,632 | — | — | — | ||||||||||||||||||
Total Farming | 156,277 | 33,694 | 189,970 | 25,258 | 80,574 | 3.2 | ||||||||||||||||||
| Owned Croppable Area | 108,210 | 11,240 | 119,449 | — | — | — | ||||||||||||||||||
| Leased Area | 36,459 | 958 | 37,417 | — | — | — | ||||||||||||||||||
| Double Crop Area | 11,608 | 21,496 | 33,104 | — | — | — | ||||||||||||||||||
Total Farming | 156,277 | 33,694 | 189,970 | — | — | — | ||||||||||||||||||
| (1) | Includes sorghum | |
| (2) | Includes barley |
During 3Q10 and 4Q10, the Company began its planting activities for the 2010/11 harvest year. As of December 31st, 2010, 156.3 thousand hectares were successfully planted. The planting of wheat, sunflower, cotton and rice was completed as of December 31st, 2010, while planting for soybean and corn is expected to continue until mid February. The Company forecasts, subject to climatic conditions, overall planted area for the 2010/11 harvest year to reach approximately 190.0 thousand hectares, a 3.6% increase compared to the 2009/10 harvest year. Owned planted area has increased by 12.8 thousand hectares versus the previous season as a result of the ongoing transformation of the San Joaquin, Santa Lucia and El Ombu farms, and the purchase of a rice farm. Leased area in turn fell by 10.3 thousand hectares mainly as a result of an increase in lease prices which reduced expected margins and returns below our hurdle rates.
Also, during the end of the fourth quarter, we began the harvest of our wheat crop, which was 90.1% complete by year end. The crop has achieved average yields of 3.2 tons per hectare, showing a 39.1% increase compared to the previous harvest year.
5
Sugar, Ethanol & Energy Business
Sugar, Ethanol & Energy — Selected Production Data
| 2010 | 2009 | (chg %) | 4Q10 | 4Q09 | (chg %) | |||||||||||||||||||
| Crushed Cane (Tons) | 4,066,115 | 2,215,029 | 83.6 | % | 1,125,236 | 849,882 | 32.4 | % | ||||||||||||||||
| Own Cane | 95.2 | % | 93.7 | % | 1.6 | % | 94.1 | % | 97.3 | % | -3.2 | % | ||||||||||||
| Third Party Cane | 4.8 | % | 6.3 | % | -23.1 | % | 5.9 | % | 2.7 | % | 114.9 | % | ||||||||||||
| Sugar (Tons) | 235,690 | 52,968 | 345.0 | % | 69,689 | 19,788 | 252.2 | % | ||||||||||||||||
| Ethanol (M3) | 174,303 | 132,492 | 31.6 | % | 40,217 | 51,007 | -21.2 | % | ||||||||||||||||
| Exported Energy (MWh) | 168,644 | 128,291 | 31.5 | % | 68,565 | 80,617 | -14.9 | % | ||||||||||||||||
| Expansion & Renewal Area (Hectares) | 7,998 | 17,670 | -54.7 | % | 1,102 | 2,072 | -46.8 | % | ||||||||||||||||
| Harvested Area (Hectares) | 40,263 | 22,222 | 81.2 | % | 11,092 | 8,815 | 25.8 | % | ||||||||||||||||
| Sugarcane Plantation (Hectares) | 53,799 | 49,470 | 8.8 | % | 53,799 | 49,470 | 8.8 | % | ||||||||||||||||
Cane crushing volume increased 83.6% as a result of the expansion of the Angelica mill and the upgrade of the Usina Monte Alegre (“UMA”) mill. By the end of 2010, Adecoagro completed the construction and assembly of the Angelica mill, which reached a nominal crushing capacity of 4 million tons per year. Construction of Angelica’s sugar factory was also concluded and became operational in June 2010.
During 2009, we completed the installation of a new high pressure steam boiler at the UMA, which allowed the mill to expand crushing capacity from 0.8 million tons of sugarcane to 1.2 million. Furthermore, this investment allows UMA to use all the bagasse byproduct to cogenerate electricity for both the mill’s own use and to sell to the power grid. Actual crushing volumes during 2010 reached 2.9 million tons in Angelica (73% of nominal capacity) and 1.1 million tons in UMA (92% of nominal capacity). The company expects to achieve full utilization of installed capacity in its two mills (4.0 million tons in Angelica and 1.2 million tons in UMA) during the next couple of years, as the company’s sugarcane plantations continue to expand.
6
Financial Performance
Farming & Land Transformation Businesses
Farming & Land Transformation Business — Financial Highlights
| $ thousands | 2010 | 2009 | (chg %) | 4Q10 | 4Q09 | (chg %) | ||||||||||||||||||
Gross Sales | ||||||||||||||||||||||||
| Farming | 197,742 | 216,016 | -8.5 | % | 43,460 | 64,486 | -32.6 | % | ||||||||||||||||
Total Gross Sales | 197,742 | 216,016 | -8.5 | % | 43,460 | 64,486 | -32.6 | % | ||||||||||||||||
Adjusted EBITDA | ||||||||||||||||||||||||
| Farming | 44,898 | 32,823 | 36.8 | % | 15,034 | 15,778 | -4.7 | % | ||||||||||||||||
| Land Transformation | 20,837 | 18,839 | 10.6 | % | 20,837 | 18,839 | 10.6 | % | ||||||||||||||||
Total Adjusted EBITDA | 65,735 | 51,662 | 27.2 | % | 35,871 | 34,617 | 3.6 | % | ||||||||||||||||
Adjusted EBIT | ||||||||||||||||||||||||
| Farming | 39,902 | 27,979 | 42.6 | % | 13,357 | 14,451 | -7.6 | % | ||||||||||||||||
| Land Transformation | 20,837 | 18,839 | 10.6 | % | 20,837 | 18,839 | 10.6 | % | ||||||||||||||||
Total Adjusted EBIT | 60,739 | 46,818 | 29.7 | % | 34,194 | 33,290 | 2.7 | % | ||||||||||||||||
Adjusted EBIT(1) of the Farming and Land Transformation businesses increased 29.7%, from $46.8 million in 2009 to $60.7 million in 2010, mainly driven by a $12.8 million increase in the crops segment.
Adecoagro uses the Adjusted EBIT performance measure rather than Adjusted EBITDA to compare its different farming businesses. Different farming businesses or production models may have more or less depreciation or amortization based on the ownership of fixed assets employed in production. Consequently, similar type costs may be expensed or capitalized. For example, Adecoagro’s farming business in Argentina is based on a “contractor” production model, wherein the Company hires planting, harvesting and spraying services from specialized third party machine operators. This model minimizes the ownership of fixed assets, thus, reducing depreciation and amortization. On the other hand, operating fees are expensed increasing production costs. The Adjusted EBIT measure reduces this gap between different business models and allows for a more comparable benchmark.
| 1 | Please see “Reconciliation of Non-IFRS measures” on page 24 for reconciliation of Adjusted EBITDA and Adjusted EBIT to Profit/Loss. Adjusted EBITDA is defined as consolidated profit from operations before financing and taxation, depreciation, amortization and unrealized changes in fair value of long-term biological assets. Adjusted EBIT is defined as consolidated profit from operations before financing and taxation, and unrealized changes in fair value of long-term biological assets. Adjusted EBITDA margin and Adjusted EBIT margin are calculated as a percentage of gross sales. |
7
Crops
Crops — Highlights
| metric | 2010 | 2009 | (chg %) | 4Q10 | 4Q09 | (chg %) | ||||||||||||||||||||
| Gross Sales | $ thousand | 108,162 | 92,029 | 17.5 | % | 18,155 | 22,774 | -20.3 | % | |||||||||||||||||
| tons | 530,892 | 366,508 | 44.9 | % | 70,602 | 99,683 | -29.2 | % | ||||||||||||||||||
| Adj EBITDA | $ thousand | 33,613 | 21,120 | 59.2 | % | 8,768 | 10,155 | -13.7 | % | |||||||||||||||||
Adj EBIT | $ thousand | 31,902 | 19,054 | 67.4 | % | 8,130 | 9,157 | -11.2 | % | |||||||||||||||||
| Area under production | Hectares | 134,562 | 104,986 | 28.2 | % | — | — | — | ||||||||||||||||||
Adjusted EBIT of our Crops segment increased 67.4%, from $19.1 million in 2009 to $31.9 million in 2010, mainly due to: (i) an increase in yields, primarily in soybean, as a result of climatic conditions returning to normal following the severe drought that impacted our main productive regions from mid 2008 until mid 2009; (ii) a decrease in production costs, primarily due to the price impact the financial crisis of 2008 had on fertilizers and agrochemicals; (iii) an increase in production area mainly due to the expansion of our leased area in Argentina and Uruguay; and (iv) the continuous improvement of soil productivity as a result of the ongoing land transformation process.
Crops — Sales Breakdown
| 2010 | 2009 | (chg %) | 2010 | 2009 | (chg %) | 2010 | 2009 | (chg %) | ||||||||||||||||||||||||||||
| Crop | thousand $ | thousand tons | $ per unit | |||||||||||||||||||||||||||||||||
| Soybean | 64,890 | 35,696 | 81.8 | % | 250.3 | 120.3 | 108.0 | % | 259.3 | 296.7 | -12.6 | % | ||||||||||||||||||||||||
Corn(1) | 25,881 | 14,654 | 76.6 | % | 201.7 | 100.5 | 100.6 | % | 128.3 | 145.8 | -12.0 | % | ||||||||||||||||||||||||
Wheat(2) | 9,110 | 13,324 | -31.6 | % | 60.4 | 84.1 | -28.2 | % | 150.9 | 158.5 | -4.8 | % | ||||||||||||||||||||||||
| Sunflower | 4,880 | 5,517 | -11.6 | % | 16.7 | 27.8 | -39.9 | % | 291.8 | 198.1 | 47.3 | % | ||||||||||||||||||||||||
| Cotton | 2,395 | 11,905 | -79.9 | % | 1.8 | 14.9 | -87.7 | % | 1,314.7 | 801.5 | 64.0 | % | ||||||||||||||||||||||||
| Soybean meal & oil | — | 6,500 | -100.0 | % | — | 18.9 | -100.0 | % | — | 343.9 | -100.0 | % | ||||||||||||||||||||||||
| Others | 1,006 | 4,434 | -77.3 | % | — | — | — | — | — | — | ||||||||||||||||||||||||||
Total | 108,162 | 92,029 | 17.5 | % | 530.9 | 366.5 | 44.9 | % | — | — | — | |||||||||||||||||||||||||
| (1) | Includes sorghum | |
| (2) | Includes barley |
Soybean and Corn sales increased 81.8% and 76.6% respectively during 2010 as a result of the higher yields and larger planted area during the 2009/10 harvest year.
8
Crops — Changes in Fair Value Breakdown
| Soy 2nd | Corn 2nd | |||||||||||||||||||||||||||||||||
| as of December 31st, 2010 | metric | Soy | Crop | Corn | Crop | Wheat | Sunflower | Cotton | Total | |||||||||||||||||||||||||
2009/10 harvest year | ||||||||||||||||||||||||||||||||||
| Harvested area | Hectares | 62,443 | 25,079 | 30,577 | 4,040 | 26,332 | 14,784 | 425 | 163,680 | |||||||||||||||||||||||||
| Changes in Fair Value in 2010 from harvested area 2009/10 (i) | $ thousands | 15,081 | 4,914 | 2,049 | 281 | — | (547 | ) | 101 | 21,879 | ||||||||||||||||||||||||
2010/11 harvest year | ||||||||||||||||||||||||||||||||||
| Planting plan (a+b+c+d) | Hectares | 58,190 | 31,820 | 28,460 | 1,284 | 28,029 | 9,951 | 3,242 | 160,976 | |||||||||||||||||||||||||
| Area remaining to be planted (a) | Hectares | 6,162 | 20,212 | 6,210 | 1,109 | — | — | — | 33,694 | |||||||||||||||||||||||||
| Planted area in initial growing stages (b) | Hectares | 45,185 | 11,608 | 7,099 | 175 | — | 1,924 | 3,242 | 69,232 | |||||||||||||||||||||||||
| Planted area with significant biological growth (c) | Hectares | 6,843 | — | 15,151 | — | 2,772 | 8,028 | — | 32,793 | |||||||||||||||||||||||||
| Changes in Fair Value 2010 from planted area 2010/2011 with significant biological growth (ii) | $ thousands | 2,547 | — | 4,865 | — | 781 | 527 | — | 8,719 | |||||||||||||||||||||||||
| Harvested area (d) | Hectares | — | — | — | — | 25,258 | — | — | 25,258 | |||||||||||||||||||||||||
| Changes in Fair Value 2010 from harvested area 2010/11 (iii) | $ thousands | — | — | — | — | 8,281 | — | — | 8,281 | |||||||||||||||||||||||||
Total Changes in Fair Value in 2010 (i+ii+iii) | $ thousands | 17,629 | 4,914 | 6,914 | 281 | 9,062 | (21 | ) | 101 | 38,879 | ||||||||||||||||||||||||
The table above shows how gains or losses from crop production that were generated during the 2009/10 and 2010/11 harvest years flow into the 2010 fiscal year. Biological growth of 2009/10 summer crops (soybean, corn, sunflower, cotton, etc), mostly harvested between February and May 2010, generated a gain in “Initial recognition and changes in fair value of biological assets and agricultural produce” (“Changes in Fair Value”) of $21.9 million in 2010. Winter crops, mainly wheat and barley, harvested in December 2010, generated Changes in Fair Value of $8.3 million. Finally, summer crops and some un-harvested wheat corresponding to the 2010/11 season, which were planted and had attained significant biological growth by December 31st 2010, generated a Change in Fair Value of $8.7 million in 2010 fiscal year. As a result, total Changes in Fair Value was $38.9 million for 2010.
Crops — Gain / Loss From Open Hedged Positions
| Gain/loss booked | ||||||||||||||||||||
| Volume | in 2010 ($ | |||||||||||||||||||
| Country | Product | Type of contract | (thousand ton) | Hedge price ($/ton) | thousands) | |||||||||||||||
| ARG | Soybean | Forward | 80.6 | 241 | (1,774 | ) | ||||||||||||||
| Soybean | Future | 24.6 | 241 | (2,789 | ) | |||||||||||||||
| Corn | Forward | 54.1 | 143 | (2,179 | ) | |||||||||||||||
| Corn | Future | 1.8 | 142 | 141 | ||||||||||||||||
| Sunflower | Forward | 12.5 | 322 | 17 | ||||||||||||||||
| Wheat | Future | (4 | ) | |||||||||||||||||
| URU | Soybean | Forward | 6.5 | 351 | — | |||||||||||||||
| BRA | Soybean | Forward | 9.0 | 309 | — | |||||||||||||||
| Cotton | Forward | 1.1 | 2,176 | — | ||||||||||||||||
Total | 206.7 | (6,587 | ) | |||||||||||||||||
As of December 31, 2010, open hedge positions for the 2010/11 harvest year production stood at 206.7 thousand tons of crops. All futures contracts and only the portion of forward contracts which are linked to biological assets with significant biological growth generate gains or losses in the Statement of Income,
9
resulting from the mark-to-market of the contracts at year end. As a result of the increase in commodity prices during 4Q10, we recognized non-cash losses from our open hedge positions of $6.6 million. These losses impact the “Other Operating Income, net” line item of the 2010 Statement of Income.
Rice
Rice — Highlights
| metric | 2010 | 2009 | (chg %) | 4Q10 | 4Q09 | (chg %) | ||||||||||||||||||||
| Gross Sales | $ thousand | 61,586 | 69,350 | -11.2 | % | 16,149 | 14,855 | 8.7 | % | |||||||||||||||||
| Adj EBITDA | $ thousand | 7,122 | 13,244 | -46.2 | % | 6,542 | 1,666 | 292.7 | % | |||||||||||||||||
Adj EBIT | $ thousand | 5,041 | 11,792 | -57.2 | % | 5,967 | 1,439 | 314.7 | % | |||||||||||||||||
| Area under production | Hectares | 18,142 | 17,258 | 5.1 | % | — | — | — | ||||||||||||||||||
Rice Mills | ||||||||||||||||||||||||||
| Own production of rough rice | thousand tons (1) | 75.8 | 83.3 | -9.1 | % | 33.1 | 29.6 | 11.7 | % | |||||||||||||||||
| Third party rough rice purchases | thousand tons | 53.0 | 73.7 | -28.2 | % | 0.3 | 7.9 | -96.2 | % | |||||||||||||||||
| Sales of Processed Rice | thousand tons | 149.3 | 183.9 | -18.8 | % | 74.5 | 82.4 | -9.6 | % | |||||||||||||||||
| Ending stock | thousand tons | 19.9 | 21.7 | -8.3 | % | 19.9 | 21.7 | -8.3 | % | |||||||||||||||||
| (1) | Rough rice equivalent |
Rice yields and production during the 2009/10 harvest year in Argentina were negatively impacted by a lack of sun radiation received by rice plants during their critical growth stage due to an unusually high number of cloudy days. This was the main driver of the decrease in production. Additionally, due to the lack of rough rice in the market, our rough rice purchases decreased by 28.2%. The reduction in rice processing volume was partially offset by an increase in domestic white rice prices. As a result, Adjusted EBIT for the Rice segment decreased 57.2%, from $11.8 million in 2009 to $5.0 million in 2010.
10
Rice — Changes in fair value breakdown
| as of December 31st, 2010 | metric | Northeast Argentina | ||||||
2009/10 harvest year | ||||||||
| Harvested area | Hectares | 18,142 | ||||||
| Yield achieved | tons/hectare | 5.1 | ||||||
Changes in Fair Value in 2010 from harvested area 2009/10 (i) | $ thousands | 3,087 | ||||||
2010/11 harvest year | ||||||||
| Planting plan (a+b+c+d) | Hectares | 27,362 | ||||||
| Area remaining to be planted (a) | Hectares | — | ||||||
| Planted area in initial growing stages (b) | Hectares | 3,428 | ||||||
| Planted area with significant biological growth (c) | Hectares | 23,934 | ||||||
Changes in Fair Value in 2010 from planted area 2010/2011 with significant biological growth (ii) | $ thousands | 6,273 | ||||||
| Harvested area (d) | Hectares | — | ||||||
| Yield achieved | tons/hectare | — | ||||||
Changes in Fair Value in 2010 from harvested area 2010/11 (iii) | $ thousands | — | ||||||
Total Changes in Fair Value in 2010 (i+ii+iii) | $ thousands | 9,360 | ||||||
Rice of the 2009/10 harvest year, mostly harvested between February and March 2010, generated Changes in Fair Value of $3.1 million in 2010. Rice planted during the 2010/11 harvest year, which had attained significant biological growth as of December 31st 2010, generated Changes in Fair Value of $6.3 million in 2010. As a result, total Changes in Fair Value was $9.4 million for 2010.
Dairy
Dairy — Highlights
| metric | 2010 | 2009 | (chg %) | 4Q10 | 4Q09 | (chg %) | ||||||||||||||||||||||
| Gross Sales | $ thousands | 14,297 | 11,894 | 20.2 | % | 4,254 | 2,722 | 56.3 | % | |||||||||||||||||||
| thousands liters | 41,597 | 47,479 | -12.4 | % | — | — | — | |||||||||||||||||||||
| Adj EBITDA | $ thousands | 2,649 | 484 | 447.4 | % | 1,106 | 849 | 30.3 | % | |||||||||||||||||||
Adj EBIT | $ thousands | 2,226 | 81 | 2648.2 | % | 957 | 756 | 26.6 | % | |||||||||||||||||||
| Milking cows | Average Heads | 4,225 | 4,594 | -8.0 | % | — | — | — | ||||||||||||||||||||
| Area under production | Hectares | 2,649 | 2,748 | -3.6 | % | — | — | — | ||||||||||||||||||||
During 2010, we completed the construction of the second and final phase of our first free stall dairy. This state-of-the-art dairy facility allows large scale milk production at increased efficiency levels. The project, which mainly consisted on building two sheds for 1,500 milking cows each and a milking mechanism consisting of an 80-cow rotary platform, was completed during May 2010 reaching full utilization of installed capacity by the end of the year. As a result of the natural adaptation of cows to the new environment, milk production decreased 12.4% during 2010. However, Adjusted EBIT for our Dairy segment increased from $0.08 million in 2009 to $2.2 million in 2010 due to a 46% increase in raw milk market prices, from $23.5 cents/liter to $34.4 cents/liter.
11
Coffee
Coffee — Highlights
| metric | 2010 | 2009 | (chg %) | 4Q10 | 4Q09 | (chg %) | ||||||||||||||||||||||
| Gross Sales | $ thousands | 7,572 | 14,265 | -46.9 | % | 2,904 | 5,674 | -48.8 | % | |||||||||||||||||||
| tons | 1,989 | 2,808 | -29.2 | % | — | — | — | |||||||||||||||||||||
| Adj EBITDA | $ thousands | (2,854 | ) | (3,550 | ) | -19.6 | % | (2,944 | ) | (516 | ) | 470.5 | % | |||||||||||||||
Adj EBIT | $ thousands | (3,303 | ) | (4,120 | ) | -19.8 | % | (3,233 | ) | (435 | ) | 643.1 | % | |||||||||||||||
| Coffee plantation area | Hectares | 1,632 | 1,632 | 0.0 | % | — | — | — | ||||||||||||||||||||
Adjusted EBIT of the Coffee segment remained negative in 2010 due to low yields and negative hedging results for the 2010/11 production (see table below). We expect operating performance to improve in the upcoming years as a result of the investments made in pruning, aiming at improving the growth pattern and productivity of our coffee trees.
Coffee — Gain/Loss from open hedged positions
| Volume | Hedge price | Gain/loss recorded | ||||||||||||||
| Country | Product | Type of contract | (thousand tons) | (cts/lb) | in 2010 ($ thousands) | |||||||||||
| Future March | 0.4 | 205 | (317 | ) | ||||||||||||
| BRA | Coffee | OTC July | 0.4 | 170 | (662 | ) | ||||||||||
| OTC July | 0.4 | 173 | (638 | ) | ||||||||||||
Total | 1.3 | 182.4 | (1,617 | ) | ||||||||||||
As of December 31 2010, our open hedging positions for coffee amounted to 1.3 thousand tons. The increase in coffee prices during 4Q10 generated a non-cash loss of $1.6 million, resulting from the mark-to-market of all futures contracts and over the counter (“OTC”) contracts at year end. These losses impacted the 2010 Statement of Income in the “Other Operating Income, net” line item.
Cattle
Cattle — Highlights
| metric | 2010 | 2009 | (chg %) | 4Q10 | 4Q09 | (chg %) | ||||||||||||||||||||||
| Gross Sales | $ thousands | 6,125 | 28,478 | -78.5 | % | 1,998 | 18,461 | -89.2 | % | |||||||||||||||||||
| Adj EBITDA | $ thousands | 4,369 | 1,525 | 186.5 | % | 1,562 | 3,624 | -56.9 | % | |||||||||||||||||||
Adj EBIT | $ thousands | 4,036 | 1,172 | 244.3 | % | 1,536 | 3,534 | -56.5 | % | |||||||||||||||||||
| Area under production | Hectares | 81,327 | 106,375 | -23.5 | % | — | — | — | ||||||||||||||||||||
Adjusted EBIT from our Cattle segment increased 244.3% in 2010, from $1.2 million to $4.0 million, mainly due to the 10-year lease agreement under which, as of December 2009, most of the Company’s productive land not suitable for crop production was leased to a third party for beef cattle grazing. The payments we receive under the lease agreement are fixed in kilograms of beef per hectare and tied to the market price of beef.
12
Land transformation business
Land transformation — Highlights
| metric | 2010 | 2009 | (chg %) | |||||||||||||
Adj EBITDA | $ thousands | 20,837 | 18,839 | 10.6 | % | |||||||||||
| Land acquired | Hectares | 14,749 | — | — | ||||||||||||
| Land sold | Hectares | 5,086 | 5,005 | 1.6 | % | |||||||||||
Adjusted EBITDA from our Land transformation business increased 10.6% in 2010, from $18.8 million to $20.8 million due to the sale of “La Macarena” farm in Uruguay in December 2010, which generated $2.0 million more compared to the sale of “La Paz” farm in Argentina completed in December 2009.
La Macarena is a 5,086 hectare farm located in Uruguay, purchased by Adecoagro in 2004 for $1,750 per hectare. The farm was originally used for cattle grazing activities but had potential for crop production. We developed a sustainable production model that was applied in La Macarena and immediately began producing soybean, corn and wheat over all potentially croppable areas. After six years of enhancing its productivity by applying no-till technology, crop rotation, and other best practices, we sold the property for a total price of $34.0 million (plus the value of planted crops), equivalent to $6,685 per hectare, obtaining a 24.6% IRR.
The Company continues to execute its strategy of developing, transforming and adding value to its land portfolio. During 2010 we began the transformation process and put into production 6,490 hectares of undermanaged and undeveloped farmland.
Our most important ongoing transformation project during the last two years has been the San Joaquin rice farm. San Joaquin is a 34,419 hectare farm purchased by Adecoagro in 2007. The farm was mostly dedicated to cattle grazing, with only 1,800 hectares used for rice production. The farm’s eastern boundary lies on the Parana River, giving it access to a great source of water for irrigation. During 2008 we performed a project feasibility study together with an environmental impact study, and concluded that the farm has the potential to produce up to 10,000 hectares of rice in a sustainable and economic manner. During 2009 after obtaining all the necessary permits and licenses from state agencies, we began the transformation and land systematization process by building irrigation channels and pumping stations for water inflow and outflow, and designing the rice fields. The project has had an important social and economic impact on the local towns by creating over 160 direct job positions in addition to countless indirect labor (logistics, suppliers, contractors, vendors, etc). During 4Q10, we successfully planted 8,600 hectares of rice which have been properly irrigated and are developing as expected, supporting our thesis of the value that this project is creating for the Company and local population.
On August 23rd, 2010, we purchased a 14,749 hectare rice farm in Argentina with high transformation potential for $20.1 million. The farm currently has 4,500 hectares suitable for rice production and approximately 6,500 hectares of cattle pastures with potential for transformation into rice fields. We believe this project will have a positive impact on the Company’s net asset value and generate valuable social and economic benefits in the region.
13
Sugar, Ethanol & Energy business
Sugar Ethanol & Energy — Highlights
| $ thousand | 2010 | 2009 | (chg %) | 4Q10 | 4Q09 | (chg %) | ||||||||||||||||||
| Gross Sales Angelica | 154,716 | 55,186 | 180.4 | % | 55,645 | 13,482 | 312.7 | % | ||||||||||||||||
| Gross Sales UMA | 73,810 | 42,401 | 74.1 | % | 48,277 | 25,504 | 89.3 | % | ||||||||||||||||
Total Gross Sales | 228,526 | 97,587 | 134.2 | % | 103,922 | 38,986 | 166.6 | % | ||||||||||||||||
| Adj EBITDA Angelica | 29,869 | (12,758 | ) | — | 17,456 | 6,102 | 186.1 | % | ||||||||||||||||
| Adj EBITDA UMA | 21,866 | (14,145 | ) | — | 7,521 | (9,205 | ) | — | ||||||||||||||||
Total Adjusted EBITDA | 51,753 | (26,903 | ) | — | 24,977 | (3,103 | ) | — | ||||||||||||||||
| Adj EBITDA Margin Angelica | 19.30 | % | -23.12 | % | — | 31.37 | % | 45.26 | % | -30.7 | % | |||||||||||||
| Adj EBITDA Margin UMA | 29.62 | % | -33.36 | % | — | 15.58 | % | -36.09 | % | — | ||||||||||||||
Adjusted EBITDA Margin Total | 22.64 | % | -27.57 | % | — | 24.03 | % | -7.96 | % | — | ||||||||||||||
| Sugarcane Crushed (thousand tons) | 4,066 | 2,215 | 83.6 | % | 1,125 | 850 | 32.4 | % | ||||||||||||||||
| Sugarcane plantation (Hectares) | 53,799 | 49,470 | 8.8 | % | — | — | — | |||||||||||||||||
Adjusted EBITDA of our Sugar, Ethanol and Energy business increased $78.6 million, from $(26.9) million in 2009 to $51.7 million in 2010, mainly as a result of the investments in our two mills during previous periods as explained on page 4.
Usina Monte Alegre (UMA) mill has a long history in the business. During 2008 and 2009, we invested in a high pressure steam boiler that allowed us to expand the crushing capacity and to achieve full cogeneration. This resulted in an Adjusted EBITDA of $21.9 million in 2010 representing a 29.6% Adjusted EBITDA margin.
Sugar Ethanol & Energy — Sales Breakdown
| $ thousand | thousands of units | ($/ unit) | ||||||||||||||||||||||||||||||||||
| 2010 | 2009 | (chg %) | 2010 | 2009 | % Change | 2010 | 2009 | (chg %) | ||||||||||||||||||||||||||||
| Sugar (tons) | 98,385 | 26,143 | 276.3 | % | 233.6 | 75.1 | 211.2 | % | 421.1 | 348.2 | 20.9 | % | ||||||||||||||||||||||||
| Ethanol (cubic meters) | 114,793 | 62,811 | 82.8 | % | 189.0 | 145.9 | 29.5 | % | 607.5 | 430.5 | 41.1 | % | ||||||||||||||||||||||||
| Energy (Mwh) | 15,040 | 8,216 | 83.1 | % | 178.9 | 128.3 | 39.4 | % | 84.1 | 66.6 | 26.3 | % | ||||||||||||||||||||||||
| Other | 308 | 417 | -26.1 | % | — | — | — | — | — | — | ||||||||||||||||||||||||||
TOTAL | 228,526 | 97,587 | 134.2 | % | — | — | — | — | — | — | ||||||||||||||||||||||||||
Sales increased 134.2% from $97.6 million in 2009 to $228.5 million in 2010 as a result of the increase in sugar, ethanol and energy production following the expansion in the company’s sugarcane milling capacity and an increase in average prices for all three products. Sugar sales increased significantly more than ethanol sales as a result of the start of operations of Angelica’s sugar factory during June 2010.
14
Sugar, Ethanol & Energy — Industrial indicators
| metric | 2010 | 2009 | (chg %) | 4Q10 | 4Q09 | (chg %) | ||||||||||||||||||||||
| Sugarcane milling Angelica | thousand tons | 2,928 | 1,468 | 99.5 | % | 913 | 527 | 73.3 | % | |||||||||||||||||||
| Sugarcane milling UMA | thousand tons | 1,138 | 747 | 52.2 | % | 212 | 323 | -34.3 | % | |||||||||||||||||||
| Sugarcane milling Total | thousand tons | 4,066 | 2,215 | 83.6 | % | 1,125 | 850 | 32.4 | % | |||||||||||||||||||
| Own sugarcane | % | 95.2 | % | 93.7 | % | 1.6 | % | 94.1 | % | 97.3 | % | -3.2 | % | |||||||||||||||
| Sugar Production mix | % | 45.5 | % | 19.8 | % | 129.8 | % | 51.7 | % | 19.3 | % | 167.4 | % | |||||||||||||||
| Ethanol Production mix | % | 54.5 | % | 80.2 | % | -32.1 | % | 48.3 | % | 80.7 | % | -40.1 | % | |||||||||||||||
| Energy per milled ton | Kwh / ton | 41 | 58 | -28.4 | % | 61 | 95 | -35.8 | % | |||||||||||||||||||
Owned sugarcane accounted for 95.2% of total cane milled during the year 2010, thus decreasing reliance on third party supply. The completion of Angelica’s sugar factory drove Adecoagro’s share of sugar in production mix up from 19.8% in 2009 to 45.5% in 2010.
Sugar, Ethanol & Energy — Changes in Fair Value Breakdown
Biological Asset
| 2010 | 2009 | |||||||||||||||||||||||
| $ | Hectares | $/hectare | $ | Hectares | $/hectare | |||||||||||||||||||
| (+) Sugarcane plantations at end of period | 104,847 | 53,799 | 1,949 | 164,701 | 49,470 | 3,329 | ||||||||||||||||||
| (-) Sugarcane plantations at begining of period | (164,701 | ) | 49,470 | 3,329 | (48,167 | ) | 32,616 | 1,477 | ||||||||||||||||
| (-) Planting investment | (34,700 | ) | 7,998 | 4,339 | (40,196 | ) | 17,670 | 2,275 | ||||||||||||||||
| (-) Exchange difference | (2,241 | ) | — | — | (19,003 | ) | — | — | ||||||||||||||||
| Changes in Fair Value of Biological Assets (unrealized) | (96,795 | ) | — | — | 57,335 | — | — | |||||||||||||||||
Agricultural produce
| $ | Tons | $/ton | $ | Tons | $/ton | |||||||||||||||||||
| (+) Harvested own sugarcane transferred to mill | 117,182 | 3,869 | 30.3 | 46,928 | 2,076 | 22.6 | ||||||||||||||||||
| (-) Expenses | (106,390 | ) | — | — | (43,200 | ) | — | — | ||||||||||||||||
| Changes in Fair Value of Agricultural Produce | 10,934 | — | — | 3,728 | — | — | ||||||||||||||||||
Total Changes in Fair Value | (86,003 | ) | — | — | 61,064 | — | — | |||||||||||||||||
Changes in Fair Value of the Sugar, Ethanol and Energy business decreased $147.1 million, from $61.1 million in 2009 to $(86.0) million in 2010. The main driver for this decrease was a fall in the fair value of our sugarcane plantations (“Biological Asset”), from an average of $3,329 per hectare to $1,949 per hectare, as a result of lower sugar future market price estimates used in the sugarcane valuation model. This impact was partially offset by an increase in the profit generated in the current production of sugarcane (“Agricultural Produce”), from $3.7 million to $10.8 million.
The fair value of sugarcane plantations is determined using a discounted cash flow (DCF) model. As a result, the value measurement of the sugarcane plantations is affected by the inputs and assumptions used in the DCF model, such as sugarcane price, yields, costs, productivity and discount rate. Given the lack of
15
available price data for sugarcane, the price of future harvested sugarcane is calculated through a model based on estimates of sugar price derived from the Sugar #11 ICE- NY future contract.
During 2010, a change was introduced to the sugarcane valuation model. Projected revenues are now calculated based on the average of daily prices for sugar future contracts during the six-month period ended at year end rather than the single price for sugar future contracts at year end, method used during 2009. The company and its auditors determined that the use of 6-month average of daily prices of future contracts was a more appropriate estimate for price inputs in the valuation model, as it would mitigate any additional variability that a single-day price may have on the sugarcane valuation model. As a result of future prices variation during 2010, using the six month moving average of sugar futures prices rather than the single price at year end, reduced the value of the biological asset in $90.9 million as of December 31st, 2010 (unaudited), also impacting the 2010 Changes in Fair Value by the same amount.
Gains or losses resulting from unrealized changes in fair value of long term biological assets (i.e. sugarcane, coffee and cattle) does not represent a cash inflow or outflow for the Company. The Adjusted EBITDA performance measure neutralizes the effect of these unrealized gains and losses.
Agricultural Produce — Productive Indicators
| metric | 2010 | 2009 | (chg %) | |||||||||||||
| Harvested own sugarcane | thousand tons | 3,869 | 2,076 | 86.4 | % | |||||||||||
| Harvested area | Hectares | 40,263 | 22,222 | 81.2 | % | |||||||||||
| Yield | tons/hectare | 96.1 | 93.4 | 2.9 | % | |||||||||||
| TRS content | kg/ton | 135.9 | 125.08 | 8.7 | % | |||||||||||
| Mechanized harvest | % | 79.9 | 65.8 | 21.5 | % | |||||||||||
The table above shows productive indicators related to our owned sugarcane production (“Agricultural Produce”) which is planted, harvested and then transferred to our mills for processing. Sugarcane yields and sugar content in cane (TRS) increased 2.9% and 8.7% respectively in 2010. Above average rains that fell during the second half of 2009 were detrimental to the development of sugar content (TRS) in 2009, but enhanced sugarcane growth for the 2010 harvest. The increase in sugar content (TRS) during 2010 is a result of lower than average rains during the 2010 harvest.
Sugar, Ethanol and Energy — Results From Open Hedged Positions
| Volume | Hedge price | Gain/loss booked | ||||||||||||||||||
| Country | Product | Type of contract | (thousand tons) | ($ cts/lb) | in 2010 ($ thousand) | |||||||||||||||
| Forward May | 16.0 | 20.4 | — | |||||||||||||||||
| Forward July | 30.1 | 21.5 | — | |||||||||||||||||
| Forward October | 9.0 | 23.1 | — | |||||||||||||||||
| BRA | Sugar | OTC July | 20.3 | 18.2 | (2,769 | ) | ||||||||||||||
| OTC October | 23.4 | 22.9 | (554 | ) | ||||||||||||||||
| Future May | 1.0 | 28.9 | (10 | ) | ||||||||||||||||
| Future July | 1.5 | 25.7 | (18 | ) | ||||||||||||||||
Total | 101.3 | 21.3 | (3,350 | ) | ||||||||||||||||
As of December 31st, 2010, open hedge positions for sugar stood at 101.3 thousand tons at an average price $21.3 cents/lb. During 4Q10 we recorded a non-cash loss of $3.4 million resulting from the mark-to-
16
market of all futures and OTC contracts at year end. The recognition of the loss caused by the increase in sugar prices is reflected in our Statement of Income under the “Other operating income, net” line item.
Indebtness
Debt Breakdown
| $ thousands | 4Q10 | 3Q10 | % Change | |||||||||
Short Term Debt | 137,795 | 137,858 | 0.0 | % | ||||||||
| Farming | 67,951 | 59,497 | 14.2 | % | ||||||||
| Sugar, Ethanol & Energy | 69,843 | 78,361 | -10.9 | % | ||||||||
Long Term Debt | 251,677 | 265,361 | -5.2 | % | ||||||||
| Farming | 54,871 | 63,717 | -13.9 | % | ||||||||
| Sugar, Ethanol & Energy | 196,806 | 201,644 | -2.4 | % | ||||||||
Total Debt | 389,472 | 403,219 | -3.4 | % | ||||||||
| Cash & Equivalents (1) | 70,269 | 60,621 | 15.9 | % | ||||||||
Net Debt | 319,203 | 342,598 | -6.8 | % | ||||||||
| (1) | Does not include IPO proceeds of $423.0 millions |
Adecoagro’s gross indebtness at the end of 4Q10 was $389.5 million, showing a 3.4% reduction versus the previous quarter. The 14.2% increase in farming short term debt is mainly due to the additional working capital required during the planting of summer crops. The 10.9% decrease in the Sugar, Ethanol & Energy short term debt reflects the increase cash collection from sugar, ethanol and energy sales following the peak of the harvest season. The 15.9% growth in Cash and Cash Equivalents versus the previous quarter reflects the collection of $10 million related to the first installment of the sale of La Macarena farm, Net debt position for 4Q10 stands at $319.2 million, 6.8% below 3Q10.
 |  |
17
Capital expenditures
Capital Expenditures Breakdown
| $ thousands | 2010 | 2009 | % Change | |||||||||
Farming & Land Transformation | 19,239 | 15,596 | 23.4 | % | ||||||||
| Land Acquisitions | 8,846 | 2,602 | 240.0 | % | ||||||||
| Land transformation | 4,762 | 881 | 440.6 | % | ||||||||
| Rice Mill Construction | 4,086 | 3,434 | 19.0 | % | ||||||||
| Dairy Free Stall Unit | 1,544 | 8,678 | -82.2 | % | ||||||||
Sugar, Ethanol & Energy | 154,781 | 117,125 | 32.2 | % | ||||||||
| Sugar and Ethanol mills | 120,081 | 78,229 | 53.5 | % | ||||||||
| Sugarcane Planting | 34,700 | 38,896 | -10.8 | % | ||||||||
Total | 174,020 | 132,720 | 31.1 | % | ||||||||
Adecoagro’s capital expenditures during 2010 totaled $174.0 million, 31.1% higher than 2009. Over 88.9% of these expenditures were related to the expansion of our Sugar, Ethanol & Energy business, mainly the completion of the assembly and construction of the Angelica mill and the planting of 7,998 hectares of sugarcane plantations to supply our mills. Main investments made in our Farming & Land Transformation business were: (i) the purchase of a rice farm; (ii) the transformation of 6.5K hectares of farmland; (iii) the ongoing construction of our fourth rice mill that will process rice produced in the San Joaquin farm and rice purchased from third parties; and (iv) the completion of the second and final phase of our free stall dairy.
Inventories
End of Period Stock
| Product | Metric | 2010 | 2009 | % Change | ||||||||||||
| Soybean | tons | 6,882 | 6,074 | 13 | % | |||||||||||
Corn (1) | tons | 18,599 | 9,927 | 87 | % | |||||||||||
Wheat(2) | tons | 65,754 | 45,592 | 44 | % | |||||||||||
| Sunflower | tons | 508 | 3,754 | -86 | % | |||||||||||
| Cotton | tons | 0 | 630 | -100 | % | |||||||||||
| Rice | tons | 19,863 | 21,671 | -8 | % | |||||||||||
| Coffee | tons | 890 | 141 | 531 | % | |||||||||||
| Sugar | tons | 11,211 | 2,635 | 326 | % | |||||||||||
| Ethanol | m3 | 4,943 | 15,060 | -67 | % | |||||||||||
| (1) | Includes sorghum | |
| (2) | Includes barley |
Inventories at year end for most of our farming products increased in 2010 compared to 2009 as a result of the growth in production of most summer crops in the 2009/10 harvest year and the excellent 2010/11 harvest of winter crops. Sugar inventories increased significantly year over year as a result of the start of operations of the sugar factory in the Angelica mill during June 2010.
18
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) the implementation of our business strategy, including our development of the Ivinhema project; (iii) our plans relating to acquisitions, joint ventures, strategic alliances or divestitures; (iv) the implementation of our financing strategy and capital expenditure plan; (v) the maintenance of our relationships with customers; (vi) the competitive nature of the industries in which we operate; (vii) the cost and availability of financing; (viii) future demand for the commodities we produce; (ix) international prices for commodities; (x) the condition of our land holdings; (xi) the development of the logistics and infrastructure for transportation of our productions in the countries where we operate; (xii) the performance of the South American and world economies; (xiii) weather and other natural phenomena; (xiv) the relative value of the Brazilian Real, the Argentine Peso, and the Uruguayan Peso compared to other currencies; and (xv) developments in, or changes to, the laws, regulations and governmental policies governing our business, including environmental laws and regulations.
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.
19
Appendix
Property Portfolio
Land Portfolio
| Area in hectares | ||||||||||||||||||||||
| Total | ||||||||||||||||||||||
| Farm | Region | Total | Croppable | Cattle | Productive | Current use | ||||||||||||||||
| Las Horquetas | Humid Pampas, Argentina | 2,089 | 1,747 | — | 1,747 | Grains | ||||||||||||||||
| El Meridiano | Humid Pampas, Argentina | 6,302 | 4,933 | — | 4,933 | Grains | ||||||||||||||||
| San Carlos | Humid Pampas, Argentina | 4,239 | 2,976 | — | 2,976 | Grains | ||||||||||||||||
| La Alegría | Humid Pampas, Argentina | 2,439 | 1,936 | — | 1,936 | Grains | ||||||||||||||||
| Santa Regina | Humid Pampas, Argentina | 3,618 | 3,202 | — | 3,202 | Grains | ||||||||||||||||
| Abolengo | Humid Pampas, Argentina | 7,476 | 6,863 | — | 6,863 | Grains & Dairy | ||||||||||||||||
| Carmen | Humid Pampas, Argentina | 10,020 | 7,541 | — | 7,541 | Grains Dairy | ||||||||||||||||
| San Joaquín | Northeast Argentina | 37,082 | 8,179 | 21,833 | 30,012 | Rice, Grains & Cattle | ||||||||||||||||
| La Rosa | Northwest Argentina | 4,087 | 2,483 | 1,329 | 3,812 | Grains & Cattle | ||||||||||||||||
| San Agustín | Northeast Argentina | 5,067 | 2,517 | 1,838 | 4,355 | Rice, Grains & Cattle | ||||||||||||||||
| San José | Northwest Argentina | 7,630 | 435 | 7,071 | 7,506 | Grains | ||||||||||||||||
| Itá Caabó | Northeast Argentina | 26,650 | 11,159 | 10,864 | 22,023 | Rice, Grains & Cattle | ||||||||||||||||
| Oscuro | Northeast Argentina | 33,429 | 8,363 | 18,262 | 26,625 | Rice, Grains & Cattle | ||||||||||||||||
| Santa Lucía | Northwest Argentina | 17,495 | 10,453 | — | 10,453 | Grains & Cattle | ||||||||||||||||
| El Orden | Northwest Argentina | 6,860 | 4,263 | 2,520 | 6,783 | Grains & Cattle | ||||||||||||||||
| La Carolina | Northwest Argentina | 8,297 | 1,634 | 6,663 | 8,297 | Grains & Cattle | ||||||||||||||||
| La Guarida | Northwest Argentina | 15,451 | 6,765 | 2,105 | 8,870 | Grains & Cattle | ||||||||||||||||
| Dinaluca | Northeast Argentina | 14,749 | 4,500 | — | 4,500 | Rice | ||||||||||||||||
| Ombú | Northeast Argentina | 18,320 | 5,402 | 8,842 | 14,244 | Grains & Cattle | ||||||||||||||||
| La Garrucha | Northwest Argentina | 3,607 | 3,060 | — | 3,060 | Grains | ||||||||||||||||
| Los Guayacanes | Northwest Argentina | 7,241 | 6,226 | — | 6,226 | Grains | ||||||||||||||||
| La Pecuaria | Uruguay | 3,177 | 2,260 | — | 2,260 | Grains | ||||||||||||||||
| Sapálio | Mato Grosso do Sul, Brazil | 6,062 | 4,702 | — | 4,702 | Sugarcane | ||||||||||||||||
| Agua Branca | Mato Grosso do Sul, Brazil | 1,614 | 1,176 | — | 1,176 | Sugarcane | ||||||||||||||||
| Nossa Senhora Aparecida | Mato Grosso do Sul, Brazil | 540 | 402 | — | 402 | Sugarcane | ||||||||||||||||
| Carmen (Agua Santa) | Mato Grosso do Sul, Brazil | 146 | 120 | — | 120 | Sugarcane | ||||||||||||||||
| Ouro Verde | Mato Grosso do Sul, Brazil | 683 | 506 | — | 506 | Sugarcane | ||||||||||||||||
| Bela Manhá | Mato Grosso do Sul, Brazil | 381 | 284 | — | 284 | Sugarcane | ||||||||||||||||
| Don Fabrício | Mato Grosso do Sul, Brazil | 3,304 | 2,459 | — | 2,459 | Sugarcane | ||||||||||||||||
| Takuarê | Mato Grosso do Sul, Brazil | 490 | 259 | — | 259 | Sugarcane | ||||||||||||||||
| Rio de Janeiro | Western Bahia, Brazil | 10,012 | 5,805 | — | 5,805 | Grains & Coffee | ||||||||||||||||
| Mimoso | Western Bahia, Brazil | 902 | 277 | — | 277 | Coffee | ||||||||||||||||
| Palmeira | Western Bahia, Brazil | 1,000 | — | — | — | Coffee | ||||||||||||||||
| Lagoa de Oeste | Western Bahia, Brazil | 1,132 | 627 | — | 627 | Coffee | ||||||||||||||||
| Heloisa | Western Bahia, Brazil | 800 | — | — | — | Coffee | ||||||||||||||||
| Alto Alegre | Western Bahia, Brazil | 6,082 | 2,723 | — | 2,723 | Grains & Cotton | ||||||||||||||||
| Conquista | Western Bahia, Brazil | 4,325 | 1,971 | — | 1,971 | Grains & Cotton | ||||||||||||||||
Total | 282,798 | 128,208 | 81,327 | 209,535 | ||||||||||||||||||
20
Industrial Portfolio
| Facility | Description | Province/Country | Productive Information | |||
| Angelica Agronenergía | Sugar and Ethanol Mill | Mato Grosso do Sul, Brazil | 4.0 MM tons of Sugarcane crushing capacity | |||
| Usina Monte Alegre | Sugar and Ethanol Mill | Minas Gerais, Brazil | 1.2 MM tons of Sugarcane crushing capacity | |||
| La Lacteo | Milk Processing Facility | Cordoba, Argentina | 250,000 liters per day processed | |||
| Semillero Itá Caabó | Rice Seed Breader | Corrientes, Argentina | Rice genetic improvement program | |||
| Molino Ala Mercedes | Rice Mill | Corrientes, Argentina | Milling capacity of 5,000 tons of white rice per month | |||
| Molino San Agustin | Rice Mill | Corrientes Argentina | Milling capacity of 3,500 tons of white rice per month | |||
| Molino Ala Salvador | Rice Mill | Entre Rios, Argentina | Milling capacity of 5,000 tons of white rice per month | |||
| Franck | Rice Mill | Santa Fe, Argentina | Under Construction | |||
| Christophersen | Grain Storage and Conditioning | Santa Fe, Argentina | Storage capacity of 18,600 tons and drying capacity of 2,000 tons | |||
| San Carlos | Grain Storage and Conditioning | Buenos Aires, Argentina | Storage capacity for 3,600 tons | |||
| El Meridiano | Grain Storage and Conditioning | Buenos Aires, Argentina | Storage capacity for 1,500 tons | |||
| Abolengo | Grain Storage and Conditioning | Santa Fe, Argentina | Storage capacity for 3,000 tons | |||
| La Rosa | Grain Storage and Conditioning | Santa Fe, Argentina | Storage capacity for 2,000 tons | |||
Market Outlook
Source: Thomson Reuthers
Soybean:Average price for the Dec-10 future contract on CBOT (Chicago Board of Trade) was U$S 12.44/bushel in 4Q10. This represents 20% increase compared to 3Q10 and 24% appreciation against 4Q09.
According to the latest USDA World Agricultural Supply and Demand Estimates report released on March 10th, world’s production will be 258.4 million metric tons (MMT) in 2010/11, with a marginal 0.6% decrease compared against the prior year. At the end of 4Q10, estimated global production was 257.8 MMT, according to the USDA. The outlook for global soybean supply remains uncertain, as production in
21
Argentina and Brazil is still not defined due to adverse climatic factors in both countries. There has been a positive change in global production between December 2010 and latest USDA March’s report due to an increase in the harvest in Brazil, which will reach a record 70 MMT in 2010/2011; China’s production was also revised upward (from 14.4 MMT to 15.2 MMT). On the other hand, there were reductions in Argentina (from 52 MMT to 49.5 MMT) and in the US (from 91.9 MMT to 90.6 MMT). From the demand side, latest USDA estimates suggest that China’s soybean imports will be approximately 57 MMT, Soybeans stock-to-use in the US was reported to be at historically low levels of 4.2%.
In 2011, Argentina will export around 11 MMT of soybeans compared to 12 MMT in 2010. Around 33% of Argentina’s soybean production could be used as biodiesel if government biodiesel requirements rise to 10% (50% local market and 50% to export). For Argentina, Bolsa de Cereales estimated a soybean harvest of 48.8 MMT on March 10th.
Corn:Dec-10 corn future contract on CBOT (Chicago Board of Trade) traded at an average price of U$S 562/bushel in 4Q10, which represents 33% increase compared to 3Q10 and 45% appreciation compared to 4Q09.
March 2011 USDA supply and demand report showed that global production is estimated to reach approximately 813,8 MMT, while December 2010 estimate was 820.7 MMT. This reduction is due to a reduction of production in Argentina (from 25 MMT to 22 MMT, mainly due to bad weather conditions during December) and in the US (from 318.5 to 316.2 MMT). Brazilian production was revised higher between December 2010 and March 2011, from 51 MMT to 53 MMT, US corn supply and demand forecasts are very tight as USDA lowered production and increased consumption due to a higher use of ethanol. In order to prevent a further balance tightening (stocks-to-use is at 5% in March 2011 while it was 6.2% in December 2010), corn acreage in the US should increase by 3 MM acres, Mexico’s agricultural region of Sinaloa was hit this year by the coldest weather in at least two decades, affecting more than 4 MMT of corn. As a result of the colder weather conditions, Mexico is expected to produce 23.3 MMT of corn in 2011, down from the previous forecast of 25 MMT.
Argentina is the second largest corn exporter and itsBolsa de Cerealesestimates that the production will reach 19.5 MMT in 2010/11 harvest while export surplus is estimated at 10-11 MMT.
Wheat:Dec-10 future contract on CBOT had an average price of U$S 707/bushel in 4Q10. This means an 8% increase compared to 3Q10 and 35% appreciation compared to 4Q09.
Latest USDA report shows that global ending stocks will be 181.9 MMT. This represents a 5.2 MMT variation against December 2010 USDA’s estimation namely as a result of higher than previously estimated production in Argentina (from 13.5 MMT to 15 MMT) and Australia and a lower consumption in the Euro zone. The Russian government is expected to debate the extension of the ban on grain exports but it will not be eliminated until the end of the year. For this reason, global exports have recently been revised lower, with a negative change of 3 MMT in the former Soviet Union countries between December 2010 and March 2011.
For Argentina, Bolsa de Cereales reported that production is estimated to be 15 MMT, up 0.5 MMT as compared to the previous estimates and 90% higher than the 7.9 MMT of 2009/2010 (hardly affected by the drought), Argentina opens a new export quota of 1 MMT of low quality wheat. Total export surplus is estimated at 6-7 MMT for this year.
22
Cotton:Average price for the nearby future contract traded on ICE (ICE Futures U.S) was US¢ 130/lb in 4Q10. This represents 48% increase compared to 3Q10 and 87% compared to 4Q09.
USDA’s March 2011 report shows a decrease of 1.1 million 480-pound bales compared to USDA’s December 2010 report. This is due to a downward revision of estimates of production in China (from 30 M bales to 29.5 M) and India (from 26 M bales to 25 M). Ending stocks in the US were kept unchanged at a record low of 1.90 MM bales. Cotton supply is likely to remain tight because adverse weather conditions throughout India, Australia, and Pakistan have damaged cotton crops, and prices are expected to remain high due to strong demand from China and India, Argentina, Brazil and Australia increased cotton area by 61% for the 2011 crops. High prices and margins are an incentive for Northern Hemisphere plantings too and it is expected that US will expand the cotton planted area in April/May. During 2010, cotton prices increased considerably following economic recovery and supported by the export restriction in India, one of the world’s largest exporters of cotton.
Rice:South American market for high quality milled rice stood at U$S 560/ton FOB in Q410, while Q310 average was at U$S 540/ton average, USDA’s March report revised rice figures: global ending stocks were higher in 4.5 MMT YOY. Rice prices lagged the rise in the grains complex, this is generating (particularly in US) a potential switch of 20-30% of planting area from rice to the other grains & cotton, that means a possible increase in rice prices in the US for the 2011/2012 crop.
International prices are in a weak period, with possible upward effects in demand. According toConmasur(Confedración de Molinos Arroceros del Mercosur), production in Brazil is expected to be approximately 13 MMT in 2010/2011 harvest, while Argentina expects its production to be approximately 1.6 MMT, and Uruguay at 1.5 MMT. As a result, Mercosur’s export surplus to third markets out of the region will be 3-3.5 MMT according toConmasurestimates, compared to 1.5 MMT in 2010.
Coffee:Dec-10 future contract traded on ICE at an average price of US¢ 205/lb in 4Q10. This means an 18% increase compared to 3Q10 and 47% compared to 4Q09.
Coffee on ICE market reached last month the highest price level since 1997 on tight inventories and low stocks driven by three consecutive below-par crops in Colombia (although it is expected to be better next season). According to CONAB, the crop in Brazil will be 47.2 M bags in 2010/2011, slightly lower than 2009/2010 record high of 48.1 M 60 kg bags. Export activity in Brazil remains firm but internal market continues with big discounts relative to international markets. Weather conditions around the world have affected coffee’s quality. That has been one of the main reasons of the rally in prices during the last months.
Sugar & Ethanol:According to the latest data published by UNICA, cane crushing in the Centre-South region of Brazil during the 2010/2011 crop totaled 556.2 MM tons, with an average of 141.2 kgs TRS/ton of cane, resulting in 33.5 MM tons of sugar and 25.3 MM m3 of ethanol (7.4 MM m3 of anhydrous and 17.9 MM m3 of hydrous). These final numbers are much lower than the production forecasted by UNICA in the beginning of 2010 due to the impact of La Niña’s drought on cane productivity/growth. Cane crushing was 7% lower than expected, while sugar production was down 2% and ethanol down 8%.
The 44.7% TRS diversion to the production of sugar ensued because of its higher remuneration compared with ethanol throughout the whole crop. The average price for the Dec-10 sugar contract on ICE rose to 29.01 cts US$/lb in 4Q10 caused by the reduction in expected production, while the average gross ex-mill price, published by ESALQ, was 1,238,43 BRL/m3 and 1,215,58 for anhydrous and hydrous ethanol
23
respectively. Compared to 3Q2010, sugar prices increased 44%, anhydrous and hydrous +23%, in response to strong sugar exports and ethanol domestic demand as well as world climate issues.
India, the world’s second largest sugar producer, started its harvest during 4Q10. Many consultancies such as Kingsman, Czarnikow and ISMA agree today that India’s final sugar production figures for 10/11 will reach a maximum of 25 MM tons which would allow India to export up to 2 mm tons sugar (500 K tons of OGL licenses were approved recently after much internal debate about impacts on food inflation and crop size).
Reconciliation of Non-IFRS measures (Adjusted EBITDA & Adjusted EBIT) to Profit/(loss) of the period for 2010 and 2009
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 and unrealized changes in fair value of long-term biological assets.
We define Adjusted EBIT 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 unrealized changes in fair value of long-term biological assets.
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), unrealized changes in fair value of long term biological assets (a significant non-cash gain or loss to our consolidated statements of income following IAS 41 accounting), foreign exchange gains or losses and other financial expenses. 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 a measures 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.
24
Adjusted EBITDA 2010
| $ in thousands | Crops | Rice | Dairy | Coffee | Cattle | Farming | Sugar | Land Tranformation | Corporate | Total | ||||||||||||||||||||||||||||||
| Manufacturing activities | ||||||||||||||||||||||||||||||||||||||||
| Sales | 344 | 59,280 | — | 2,709 | 3,718 | 66,051 | 228,478 | — | — | 294,529 | ||||||||||||||||||||||||||||||
| Cost | — | (52,017 | ) | — | (2,546 | ) | — | (54,563 | ) | (164,638 | ) | — | — | (219,201 | ) | |||||||||||||||||||||||||
Gross Profit manufacturing activities | 344 | 7,263 | — | 163 | 3,718 | 11,488 | 63,840 | — | — | 75,328 | ||||||||||||||||||||||||||||||
| Agricultural activities | — | |||||||||||||||||||||||||||||||||||||||
| Sales | 107,818 | 2,305 | 14,297 | 4,863 | 2,407 | 131,690 | 48 | — | — | 131,738 | ||||||||||||||||||||||||||||||
| Cost | (107,818 | ) | (2,305 | ) | (14,297 | ) | (4,863 | ) | (2,407 | ) | (131,690 | ) | (48 | ) | — | — | (131,738 | ) | ||||||||||||||||||||||
| Changes in fair value | 38,879 | 9,360 | 9,129 | (2,630 | ) | 737 | 55,475 | (86,003 | ) | — | — | (30,528 | ) | |||||||||||||||||||||||||||
| Changes in NRV after harvest | 7,482 | — | — | 517 | — | 7,999 | — | — | — | 7,999 | ||||||||||||||||||||||||||||||
| Gross Profit agricultural activities | 46,361 | 9,360 | 9,129 | (2,113 | ) | 737 | 63,474 | (86,003 | ) | — | — | (22,529 | ) | |||||||||||||||||||||||||||
Margin Before Operating Expenses | 46,705 | 16,623 | 9,129 | (1,950 | ) | 4,455 | 74,962 | (22,163 | ) | — | — | 52,799 | ||||||||||||||||||||||||||||
| G&A expenses | (7,087 | ) | (3,773 | ) | (2,910 | ) | (983 | ) | (350 | ) | (15,103 | ) | (19,080 | ) | — | (22,379 | ) | (56,562 | ) | |||||||||||||||||||||
| Selling expenses | (1,522 | ) | (8,154 | ) | (333 | ) | (655 | ) | (175 | ) | (10,839 | ) | (41,689 | ) | — | — | (52,528 | ) | ||||||||||||||||||||||
| Other operating income, net | (6,194 | ) | 345 | — | (2,165 | ) | 70 | (7,944 | ) | 5,305 | 20,837 | 26 | 18,224 | |||||||||||||||||||||||||||
| Joint ventures | — | — | (50 | ) | — | — | (50 | ) | — | — | (50 | ) | ||||||||||||||||||||||||||||
Profit from Operations Before Financing and Taxation | 31,902 | 5,041 | 5,836 | (5,753 | ) | 4,000 | 41,026 | (77,627 | ) | 20,837 | (22,353 | ) | (38,117 | ) | ||||||||||||||||||||||||||
| Changes in fair value of long term biological assets (urealized) (-1) | — | — | (3,610 | ) | 2,450 | 36 | (1,124 | ) | 96,795 | — | — | 95,671 | ||||||||||||||||||||||||||||
Adjusted EBIT | 31,902 | 5,041 | 2,226 | (3,303 | ) | 4,036 | 39,902 | 19,168 | 20,837 | (22,353 | ) | 57,554 | ||||||||||||||||||||||||||||
| Depreciation and amortization (-1) | 1,711 | 2,080 | 423 | 449 | 333 | 4,996 | 32,567 | — | — | 37,563 | ||||||||||||||||||||||||||||||
Adjusted EBITDA | 33,613 | 7,121 | 2,649 | (2,854 | ) | 4,369 | 44,898 | 51,735 | 20,837 | (22,353 | ) | 95,116 | ||||||||||||||||||||||||||||
| Changes in fair value of long term biological assets (urealized) | — | — | — | — | — | — | — | — | — | (95,671 | ) | |||||||||||||||||||||||||||||
| Depreciation and amortization | — | — | — | — | — | — | — | — | — | (37,563 | ) | |||||||||||||||||||||||||||||
| Other financial expenses, net | — | — | — | — | — | — | — | — | — | 2,767 | ||||||||||||||||||||||||||||||
| Foreign Exchange, net | — | — | — | — | — | — | — | — | — | 7,324 | ||||||||||||||||||||||||||||||
| Interest Expense, net | — | — | — | — | — | — | — | — | — | (33,028 | ) | |||||||||||||||||||||||||||||
| Income tax (expense)/Benefit | — | — | — | — | — | — | — | — | — | 16,263 | ||||||||||||||||||||||||||||||
Profit /(Loss) for the period | — | — | — | — | — | — | — | — | — | (44,791 | ) | |||||||||||||||||||||||||||||
Adjusted EBITDA 2009
| $ in thousands | Crops | Rice | Dairy | Coffee | Cattle | Farming | Sugar | Land Tranformation | Corporate | Total | ||||||||||||||||||||||||||||||
| Manufacturing activities | ||||||||||||||||||||||||||||||||||||||||
| Sales | 9,667 | 67,317 | 752 | 7,984 | 172 | 85,892 | 97,494 | — | — | 183,386 | ||||||||||||||||||||||||||||||
| Cost | (5,447 | ) | (56,576 | ) | (613 | ) | (7,120 | ) | — | (69,756 | ) | (110,327 | ) | — | — | (180,083 | ) | |||||||||||||||||||||||
| Gross Profit manufacturing activities | 4,220 | 10,741 | 139 | 864 | 172 | 16,136 | (12,833 | ) | — | — | 3,303 | |||||||||||||||||||||||||||||
| Agricultural activities | ||||||||||||||||||||||||||||||||||||||||
| Sales | 82,362 | 2,033 | 11,142 | 6,281 | 28,306 | 130,124 | 93 | — | — | 130,217 | ||||||||||||||||||||||||||||||
| Cost | (82,362 | ) | (2,033 | ) | (11,142 | ) | (6,281 | ) | (28,306 | ) | (130,124 | ) | (93 | ) | — | — | (130,217 | ) | ||||||||||||||||||||||
| Changes in fair value | 6,563 | 12,170 | 3,374 | (16,207 | ) | 4,704 | 10,604 | 61,064 | — | — | 71,668 | |||||||||||||||||||||||||||||
| Changes in NRV after harvest | 11,362 | 191 | — | 1,234 | — | 12,787 | — | — | — | 12,787 | ||||||||||||||||||||||||||||||
| Gross Profit agricultural activities | 17,925 | 12,361 | 3,374 | (14,973 | ) | 4,704 | 23,391 | 61,064 | — | — | 84,455 | |||||||||||||||||||||||||||||
Margin Before Operating Expenses | 22,145 | 23,102 | 3,513 | (14,109 | ) | 4,876 | 39,527 | 48,231 | — | — | 87,758 | |||||||||||||||||||||||||||||
| G&A expenses | (6,280 | ) | (2,883 | ) | (2,221 | ) | (2,126 | ) | (2,909 | ) | (16,419 | ) | (13,922 | ) | — | (22,052 | ) | (52,393 | ) | |||||||||||||||||||||
| Selling expenses | (1,587 | ) | (7,485 | ) | (777 | ) | (1,353 | ) | (1,045 | ) | (12,247 | ) | (18,922 | ) | — | — | (31,169 | ) | ||||||||||||||||||||||
| Other operating income, net | 4,776 | (942 | ) | (108 | ) | 806 | 377 | 4,909 | (10,467 | ) | 18,839 | (210 | ) | 13,071 | ||||||||||||||||||||||||||
| Joint ventures | — | — | (294 | ) | — | — | (294 | ) | — | — | (294 | ) | ||||||||||||||||||||||||||||
Profit from Operations Before Financing and Taxation | 19,054 | 11,792 | 113 | (16,782 | ) | 1,299 | 15,476 | 4,920 | 18,839 | (22,262 | ) | 16,973 | ||||||||||||||||||||||||||||
| Changes in fair value of long term biological assets (urealized) (-1) | — | — | (32 | ) | 12,662 | (127 | ) | 12,503 | (57,335 | ) | — | — | (44,832 | ) | ||||||||||||||||||||||||||
Adjusted EBIT | 19,054 | 11,792 | 81 | (4,120 | ) | 1,172 | 27,979 | (52,415 | ) | 18,839 | (22,262 | ) | (27,859 | ) | ||||||||||||||||||||||||||
| Depreciation and amortization (-1) | 2,066 | 1,452 | 403 | 570 | 353 | 4,844 | 25,512 | — | — | 30,356 | ||||||||||||||||||||||||||||||
Adjusted EBITDA | 21,120 | 13,244 | 484 | (3,550 | ) | 1,525 | 32,823 | (26,903 | ) | 18,839 | (22,262 | ) | 2,497 | |||||||||||||||||||||||||||
| Changes in fair value of long term biological assets (urealized) | — | — | — | — | — | — | — | — | — | 44,832 | ||||||||||||||||||||||||||||||
| Depreciation and amortization | (30,356 | ) | ||||||||||||||||||||||||||||||||||||||
| Other financial expenses, net | — | — | — | — | — | — | — | — | — | (5,816 | ) | |||||||||||||||||||||||||||||
| Foreign Exchange, net | — | — | — | — | — | — | — | — | — | 10,903 | ||||||||||||||||||||||||||||||
| Interest Expense, net | — | — | — | — | — | — | — | — | — | (27,750 | ) | |||||||||||||||||||||||||||||
| Income tax (expense)/Benefit | — | — | — | — | — | — | — | — | — | 5,415 | ||||||||||||||||||||||||||||||
Profit /(Loss) for the period | — | — | — | — | — | — | — | — | — | (275 | ) | |||||||||||||||||||||||||||||
25
Reconciliation of Non-IFRS measures (Adjusted EBITDA & Adjusted EBIT) to Profit/(loss) of the period for 4Q10 and 4Q09
Adjusted EBITDA 4Q10
| USD in thousands | Crops | Rice | Dairy | Coffee | Cattle | Farming | Sugar | Land Tranformation | Corporate | Total | ||||||||||||||||||||||||||||||
| Manufacturing activities | ||||||||||||||||||||||||||||||||||||||||
| Sales | 133 | 15,586 | — | — | 970 | 16,689 | 103,923 | — | — | 120,612 | ||||||||||||||||||||||||||||||
| Cost | — | (13,234 | ) | — | — | — | (13,234 | ) | (68,798 | ) | — | — | (82,032 | ) | ||||||||||||||||||||||||||
Gross Profit manufacturing activities | 133 | 2,352 | — | — | 970 | 3,455 | 35,125 | — | — | 38,580 | ||||||||||||||||||||||||||||||
| Agricultural activities | ||||||||||||||||||||||||||||||||||||||||
| Sales | 18,021 | 563 | 4,254 | 2,904 | 1,028 | 26,770 | (1 | ) | — | — | 26,769 | |||||||||||||||||||||||||||||
| Cost | (18,021 | ) | (563 | ) | (4,254 | ) | (2,904 | ) | (1,028 | ) | (26,770 | ) | 1 | — | ��� | (26,769 | ) | |||||||||||||||||||||||
| Changes in fair value | 15,489 | 6,789 | 2,334 | (2,117 | ) | 185 | 22,680 | 23,759 | — | — | 46,439 | |||||||||||||||||||||||||||||
| Changes in NRV | 1,195 | — | — | (507 | ) | — | 688 | — | — | — | 688 | |||||||||||||||||||||||||||||
| Gross Profit agricultural activities | 16,684 | 6,789 | 2,334 | (2,624 | ) | 185 | 23,368 | 23,759 | — | — | 47,127 | |||||||||||||||||||||||||||||
Margin Before Operating Expenses | 16,817 | 9,141 | 2,334 | (2,624 | ) | 1,155 | 26,823 | 58,884 | — | — | 85,707 | |||||||||||||||||||||||||||||
| G&A expenses | (2,543 | ) | (1,202 | ) | (823 | ) | (484 | ) | 20 | (5,032 | ) | (4,049 | ) | — | (5,908 | ) | (14,989 | ) | ||||||||||||||||||||||
| Selling expenses | (276 | ) | (2,165 | ) | (88 | ) | (96 | ) | (12 | ) | (2,637 | ) | (17,055 | ) | — | — | (19,692 | ) | ||||||||||||||||||||||
| Other operating income, net | (5,868 | ) | 193 | — | (1,595 | ) | (6 | ) | (7,276 | ) | (2,663 | ) | 20,837 | (796 | ) | 10,102 | ||||||||||||||||||||||||
| Joint ventures | — | — | 170 | — | — | 170 | — | — | — | 170 | ||||||||||||||||||||||||||||||
Profit from Operations Before Financing and Taxation | 8,130 | 5,967 | 1,593 | (4,799 | ) | 1,157 | 12,048 | 35,118 | 20,837 | (6,704 | ) | 61,299 | ||||||||||||||||||||||||||||
| Changes in fair value of long term biological assets (urealized) (-1) | — | — | (636 | ) | 1,566 | 379 | 1,309 | (20,325 | ) | — | — | (19,016 | ) | |||||||||||||||||||||||||||
Adjusted EBIT | 8,130 | 5,967 | 957 | (3,233 | ) | 1,536 | 13,357 | 14,793 | 20,837 | (6,704 | ) | 42,283 | ||||||||||||||||||||||||||||
| Depreciation and amortization(-1) | 638 | 575 | 149 | 289 | 26 | 1,677 | 10,185 | — | — | 11,862 | ||||||||||||||||||||||||||||||
Adjusted EBITDA | 8,768 | 6,542 | 1,106 | (2,944 | ) | 1,562 | 15,034 | 24,978 | 20,837 | (6,704 | ) | 54,144 | ||||||||||||||||||||||||||||
| Changes in fair value of long term biological assets (urealized) | — | — | — | — | — | — | — | — | — | 19,016 | ||||||||||||||||||||||||||||||
| Depreciation and amortization | — | — | — | — | — | — | — | — | — | (11,862 | ) | |||||||||||||||||||||||||||||
| Other financial expenses, net | — | — | — | — | — | — | — | — | — | 3,835 | ||||||||||||||||||||||||||||||
| Foreign Exchange, net | — | — | — | — | — | — | — | — | — | 4,553 | ||||||||||||||||||||||||||||||
| Interest Expense, net | — | — | — | — | — | — | — | — | — | (11,846 | ) | |||||||||||||||||||||||||||||
| Income tax (expense)/Benefit | — | — | — | — | — | — | — | — | — | (13,084 | ) | |||||||||||||||||||||||||||||
Profit /(Loss) for the period | — | — | — | — | — | — | — | — | — | 44,756 | ||||||||||||||||||||||||||||||
Adjusted EBITDA 4Q09
| $ in thousands | Crops | Rice | Dairy | Coffee | Cattle | Farming | Sugar | Land Tranformation | Corporate | Total | ||||||||||||||||||||||||||||||
| Manufacturing activities | ||||||||||||||||||||||||||||||||||||||||
| Sales | 1,774 | 13,942 | — | 3,209 | 172 | 19,097 | 38,985 | — | — | 58,082 | ||||||||||||||||||||||||||||||
| Cost | (478 | ) | (17,523 | ) | (1 | ) | (2,983 | ) | — | (20,985 | ) | (52,691 | ) | — | — | (73,676 | ) | |||||||||||||||||||||||
| Gross Profit manufacturing activities | 1,296 | (3,581 | ) | (1 | ) | 226 | 172 | (1,888 | ) | (13,706 | ) | — | — | (15,594 | ) | |||||||||||||||||||||||||
| Agricultural activities | ||||||||||||||||||||||||||||||||||||||||
| Sales | 21,000 | 913 | 2,722 | 2,465 | 18,289 | 45,389 | 1 | — | — | 45,390 | ||||||||||||||||||||||||||||||
| Cost | (21,000 | ) | (913 | ) | (2,722 | ) | (2,465 | ) | (18,289 | ) | (45,389 | ) | (1 | ) | — | — | (45,390 | ) | ||||||||||||||||||||||
| Changes in fair value | 5,880 | 6,772 | 1,586 | (3,738 | ) | 4,426 | 14,926 | 31,018 | — | — | 45,944 | |||||||||||||||||||||||||||||
| Changes in NRV after harvest | 3,691 | 210 | — | 503 | — | 4,404 | — | — | — | 4,404 | ||||||||||||||||||||||||||||||
| Gross Profit agricultural activities | 9,571 | 6,982 | 1,586 | (3,235 | ) | 4,426 | 19,330 | 31,018 | — | — | 50,348 | |||||||||||||||||||||||||||||
Margin Before Operating Expenses | 10,867 | 3,401 | 1,585 | (3,009 | ) | 4,598 | 17,442 | 17,312 | — | — | 34,754 | |||||||||||||||||||||||||||||
| G&A expenses | (1,574 | ) | (722 | ) | (401 | ) | (276 | ) | (640 | ) | (3,613 | ) | (1,944 | ) | — | (5,056 | ) | (10,613 | ) | |||||||||||||||||||||
| Selling expenses | (220 | ) | (353 | ) | (176 | ) | (285 | ) | (484 | ) | (1,518 | ) | (9,048 | ) | — | — | (10,566 | ) | ||||||||||||||||||||||
| Other operating income, net | 84 | (887 | ) | (123 | ) | (327 | ) | (10 | ) | (1,263 | ) | 143 | 18,839 | (86 | ) | 17,633 | ||||||||||||||||||||||||
| Joint ventures | — | — | 12 | — | — | 12 | — | — | — | 12 | ||||||||||||||||||||||||||||||
Profit from Operations Before Financing and Taxation | 9,157 | 1,439 | 897 | (3,897 | ) | 3,464 | 11,060 | 6,463 | 18,839 | (5,142 | ) | 31,220 | ||||||||||||||||||||||||||||
| Changes in fair value of long term biological assets (urealized) (-1) | — | — | (141 | ) | 3,462 | 70 | 3,391 | (21,149 | ) | — | — | (17,758 | ) | |||||||||||||||||||||||||||
Adjusted EBIT | 9,157 | 1,439 | 756 | (435 | ) | 3,534 | 14,451 | (14,686 | ) | 18,839 | (5,142 | ) | 13,462 | |||||||||||||||||||||||||||
| Depreciation and amortization (-1) | 998 | 227 | 93 | (81 | ) | 90 | 1,327 | 11,583 | 12,910 | |||||||||||||||||||||||||||||||
Adjusted EBITDA | 10,155 | 1,666 | 849 | (516 | ) | 3,624 | 15,778 | (3,103 | ) | 18,839 | (5,142 | ) | 26,372 | |||||||||||||||||||||||||||
| Changes in fair value of long term biological assets (urealized) | — | — | — | — | — | — | — | — | — | 17,758 | ||||||||||||||||||||||||||||||
| Depreciation and amortization | — | — | — | — | — | — | — | — | — | (12,910 | ) | |||||||||||||||||||||||||||||
| Other financial expenses, net | — | — | — | — | — | — | — | — | — | (1,906 | ) | |||||||||||||||||||||||||||||
| Foreign Exchange, net | — | — | — | — | — | — | — | — | — | 5,238 | ||||||||||||||||||||||||||||||
| Interest Expense, net | — | — | — | — | — | — | — | — | — | (11,183 | ) | |||||||||||||||||||||||||||||
| Income tax (expense)/Benefit | — | — | — | — | — | — | — | — | — | (5,816 | ) | |||||||||||||||||||||||||||||
Profit /(Loss) for the period | — | — | — | — | — | — | — | — | — | 17,553 | ||||||||||||||||||||||||||||||
26
Financial Information
Statement of Income
| $ thousands | 2010 | 2009 | % Change | Q4 2010 | Q4 2009 | % Change | ||||||||||||||||||
| Sales of manufactured products and services rendered | 294,529 | 183,386 | 60.6 | % | 120,612 | 58,082 | 107.7 | % | ||||||||||||||||
| Cost of manufactured products sold and services rendered | (219,201 | ) | (180,083 | ) | 21.7 | % | (82,032 | ) | (73,676 | ) | 11.3 | % | ||||||||||||
Gross Profit from Manufacturing Activities | 75,328 | 3,303 | 2180.6 | % | 38,580 | (15,594 | ) | — | ||||||||||||||||
| Sales of agricultural produce and biological assets | 131,738 | 130,217 | 1.2 | % | 26,769 | 45,390 | -41.0 | % | ||||||||||||||||
| Cost of agricultural produce sold and direct agricultural selling expenses | (131,738 | ) | (130,217 | ) | 1.2 | % | (26,769 | ) | (45,390 | ) | -41.0 | % | ||||||||||||
| Initial recognition and changes in fair value of biological assets and agricultural produce | (30,528 | ) | 71,668 | — | 46,439 | 45,944 | 1.1 | % | ||||||||||||||||
| Changes in net realizable value of agricultural produce after harvest | 7,999 | 12,787 | -37.4 | % | 688 | 4,404 | -84.4 | % | ||||||||||||||||
Gross (Loss) / Profit from Agricultural Activities | (22,529 | ) | 84,455 | — | 47,127 | 50,348 | -6.4 | % | ||||||||||||||||
Margin on Manufacturing and Agricultural Activities Before Operating Expenses | 52,799 | 87,758 | -39.8 | % | 85,707 | 34,754 | 146.6 | % | ||||||||||||||||
| General and administrative expenses | (56,562 | ) | (52,393 | ) | 8.0 | % | (14,989 | ) | (10,613 | ) | 41.2 | % | ||||||||||||
| Selling expenses | (52,528 | ) | (31,169 | ) | 68.5 | % | (19,692 | ) | (10,566 | ) | 86.4 | % | ||||||||||||
| Other operating income, net | 18,224 | 13,071 | 39.4 | % | 10,102 | 17,633 | -42.7 | % | ||||||||||||||||
| Excess of fair value of net assets acquired over cost | — | — | — | — | — | — | ||||||||||||||||||
| Share of loss of joint ventures | (50 | ) | (294 | ) | -83.0 | % | 170 | 12 | 1316.7 | % | ||||||||||||||
(Loss) / Profit from Operations Before Financing and Taxation | (38,117 | ) | 16,973 | — | 61,298 | 31,220 | 96.3 | % | ||||||||||||||||
| Finance income | 16,559 | 11,553 | 43.3 | % | 7,195 | 4,551 | 58.1 | % | ||||||||||||||||
| Finance costs | (39,496 | ) | (34,216 | ) | 15.4 | % | (10,653 | ) | (12,402 | ) | -14.1 | % | ||||||||||||
| Financial results, net | (22,937 | ) | (22,663 | ) | 1.2 | % | (3,458 | ) | (7,851 | ) | -56.0 | % | ||||||||||||
Loss Before Income Tax | (61,054 | ) | (5,690 | ) | 973.0 | % | 57,840 | 23,369 | 147.5 | % | ||||||||||||||
| Income tax benefit | 16,263 | 5,415 | 200.3 | % | (13,084 | ) | (5,816 | ) | 125.0 | % | ||||||||||||||
Loss for the Year | (44,791 | ) | (275 | ) | 16187.6 | % | 44,756 | 17,553 | 155.0 | % | ||||||||||||||
Statement of Cash Flow
| $ thousands | 2010 | 2009 | % Change | |||||||||
(Loss)/ Profit for the year | (44,791 | ) | (275 | ) | 16187.6 | % | ||||||
Adjustments for: | ||||||||||||
| Income tax benefit | (16,263 | ) | (5,415 | ) | 200.3 | % | ||||||
| Depreciation | 37,217 | 30,059 | 23.8 | % | ||||||||
| Amortization | 346 | 297 | 16.5 | % | ||||||||
| Gain from the disposal of other property items | (21,684 | ) | (337 | ) | 6334.4 | % | ||||||
| Employee share/unit options granted | 1,780 | 2,880 | -38.2 | % | ||||||||
| Loss/ (gain) from derivative financial instruments and forwards | (1,189 | ) | 7,486 | — | ||||||||
| Interest expense, net | 33,028 | 27,750 | 19.0 | % | ||||||||
| Initial recognition and changes in fair value of non harvested biological assets (unrealized) | 72,374 | (55,841 | ) | — | ||||||||
| Changes in net realizable value of agricultural produce after harvest (unrealized) | (1,527 | ) | (127 | ) | 1102.4 | % | ||||||
| Provision and allowances | 4,980 | 4,013 | 24.1 | % | ||||||||
| Share of loss from joint venture | 50 | 294 | -83.0 | % | ||||||||
| Foreign exchange (gains)/ losses, net | (7,324 | ) | (10,903 | ) | -32.8 | % | ||||||
| Gain from the sale of farmland businesses | — | (18,839 | ) | — | ||||||||
| Excess of fair value of net assets acquired over cost | — | — | — | |||||||||
27
| $ thousands | 2010 | 2009 | % Change | |||||||||
Changes in operating assets and liabilities: | ||||||||||||
| Increase in trade and other receivables | 3,584 | (30,388 | ) | — | ||||||||
| Decrease/ (increase) in inventories | 2,259 | 3,442 | -34.4 | % | ||||||||
| Increase in biological assets | 7,171 | 20,389 | — | |||||||||
| (Increase)/ decrease in other assets | 8 | (5 | ) | — | ||||||||
| Decrease/ (increase) in derivative financial instruments | (3,554 | ) | 3,162 | — | ||||||||
| Decrease in other financial assets at fair value through profit or loss | — | — | — | |||||||||
| Increase/ (decrease) in trade and other payables | (4,221 | ) | 11,508 | — | ||||||||
| Increase in payroll and social security liabilities | 5,470 | 4,327 | 26.4 | % | ||||||||
| Decrease in provisions for other liabilities | 319 | (165 | ) | — | ||||||||
Net cash from operating activities before interest and taxes paid | 68,033 | (6,688 | ) | — | ||||||||
| Interest paid | (33,283 | ) | (25,797 | ) | 29.0 | % | ||||||
| Income tax paid | (7,813 | ) | (13,322 | ) | -41.4 | % | ||||||
Net cash used in operating activities | 26,937 | 45,807 | -41.2 | % | ||||||||
| 2010 | 2009 | |||||||||||
Cash flows from investing activities: | ||||||||||||
| Acquisition of subsidiaries, net of cash acquired | (7,872 | ) | — | — | ||||||||
| Purchases of property, plant and equipment | (87,679 | ) | (97,817 | ) | -10.4 | % | ||||||
| Purchases of intangible assets | (33 | ) | (315 | ) | -89.5 | % | ||||||
| Increase of Non Current Biological Assets | (35,060 | ) | (40,492 | ) | -13.4 | % | ||||||
| Interest received | 1,341 | 472 | 184.1 | % | ||||||||
| Proceeds from sale of property, plant and equipment | 12,103 | 7,341 | 64.9 | % | ||||||||
| Proceeds from disposal of subsidiaries | 5,475 | 16,425 | -66.7 | % | ||||||||
| Acquisition of non controlling interest in subsidiaries | — | — | — | |||||||||
Net cash used in investing activities | (111,725 | ) | (114,386 | ) | -2.3 | % | ||||||
Cash flows from financing activities: | ||||||||||||
| Capital contributions from members | — | 69,101 | — | |||||||||
| Proceeds from long-term borrowings | 67,379 | 80,000 | -15.8 | % | ||||||||
| Net increase in short-term borrowings | 12,449 | 6,946 | 79.2 | % | ||||||||
Net cash generated from financing activities | 79,828 | 156,047 | -48.8 | % | ||||||||
Net (decrease)/ increase in cash and cash equivalents | (4,960 | ) | (4,146 | ) | 19.6 | % | ||||||
| Cash and cash equivalents at beginning of year | 74,806 | 93,360 | -19.9 | % | ||||||||
| Effect of exchange rate changes on cash | 423 | (14,408 | ) | — | ||||||||
Cash and cash equivalents at end of year | 70,269 | 74,806 | -6.1 | % | ||||||||
Statement of Financial Position
| $ thousands | 2010 | 2009 | % Change | |||||||||
ASSETS | ||||||||||||
Non-Current Assets | ||||||||||||
| Property, plant and equipment, net | 751,992 | 682,878 | 10.1 | % | ||||||||
| Investment property | 21,417 | 21,246 | 0.8 | % | ||||||||
| Intangible assets, net | 28,653 | 21,859 | 31.1 | % | ||||||||
| Biological assets | 104,216 | 170,347 | -38.8 | % | ||||||||
28
| $ thousands | 2010 | 2009 | % Change | |||||||||
| Investments in joint ventures | 6,271 | 6,506 | -3.6 | % | ||||||||
| Deferred income tax assets | 67,463 | 45,113 | 49.5 | % | ||||||||
| Trade and other receivables, net | 30,752 | 22,065 | 39.4 | % | ||||||||
| Other assets | 26 | 34 | -23.5 | % | ||||||||
Total Non-Current Assets | 1,010,790 | 970,048 | 4.2 | % | ||||||||
Current Assets | ||||||||||||
| Biological assets | 82,541 | 60,107 | 37.3 | % | ||||||||
| Inventories | 57,170 | 57,902 | -1.3 | % | ||||||||
| Trade and other receivables, net | 119,205 | 106,212 | 12.2 | % | ||||||||
| Derivative financial instruments | 876 | 99 | 784.8 | % | ||||||||
| Cash and cash equivalents | 70,269 | 74,806 | -6.1 | % | ||||||||
Total Current Assets | 330,061 | 299,126 | 10.3 | % | ||||||||
| Spin-off assets | — | — | ||||||||||
TOTAL ASSETS | 1,340,851 | 1,269,174 | 5.6 | % | ||||||||
MEMBERS EQUITY | ||||||||||||
Capital and reserves attributable to equity holders of the parent | ||||||||||||
| Members’ units | ||||||||||||
| Share capital | 120,000 | 120,000 | — | |||||||||
| Share premium | 563,343 | 563,343 | — | |||||||||
| Cumulative translation adjustment | 11,273 | 2,516 | 348.1 | % | ||||||||
| Equity-settled compensation | 13,659 | 11,914 | 14.6 | % | ||||||||
| Retained earnings | 257 | 44,161 | -99.4 | % | ||||||||
Equity attributable to equity holders of the parent | 708,532 | 741,934 | -4.5 | % | ||||||||
| Non controlling interest | 14,570 | 15,222 | -4.3 | % | ||||||||
TOTAL MEMBERS EQUITY | 723,102 | 757,156 | -4.5 | % | ||||||||
LIABILITIES | ||||||||||||
Non-Current Liabilities | ||||||||||||
| Trade and other payables | 11,785 | 6,822 | 72.7 | % | ||||||||
| Borrowings | 250,672 | 203,134 | 23.4 | % | ||||||||
| Derivative financial instruments | — | 280 | 100.0 | % | ||||||||
| Deferred income tax liabilities | 111,495 | 107,045 | 4.2 | % | ||||||||
| Payroll and social liabilities | 1,178 | 1,106 | 6.5 | % | ||||||||
| Provisions for other liabilities | 4,606 | 3,326 | 38.5 | % | ||||||||
Total Non-Current Liabilities | 379,736 | 321,713 | 18.0 | % | ||||||||
Current Liabilities | ||||||||||||
| Trade and other payables | 69,236 | 62,098 | 10.6 | % | ||||||||
| Current income tax liabilities | 978 | 222 | 340.5 | % | ||||||||
| Payroll and social liabilities | 15,478 | 10,079 | 53.6 | % | ||||||||
| Borrowings | 138,800 | 103,647 | 33.9 | % | ||||||||
| Derivative financial instruments | 8,920 | 12,607 | -29.2 | % | ||||||||
| Provisions for other liabilities | 4,601 | 1,652 | 211.8 | % | ||||||||
Total Current Liabilities | 238,013 | 190,305 | 25.1 | % | ||||||||
TOTAL LIABILITIES | 617,749 | 512,018 | 20.6 | % | ||||||||
TOTAL MEMBERS EQUITY AND LIABILITIES | 1,340,851 | 1,269,174 | 5.6 | % | ||||||||
29