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 August, 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-___________.
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2011 AND FOR THE SIX-MONTH PERIODS ENDED JUNE 30, 2011 AND 2010
This report on Form 6-K is being furnished for the purpose of providing a copy of the registrant’s condensed consolidated financial statements as of June 30, 2011 and for the six-month periods ended June 30, 2011 and 2010 (the “Consolidated Financial Statements”). The Consolidated Financial Statements are 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) weather and other natural phenomena; (iii) developments in, or changes to, the laws, regulations and governmental policies governing the registrant’s business, including limitations on ownership of farmland by foreign entities in certain jurisdictions in which the registrant operate, environmental laws and regulations; (iv) the implementation of the registrant’s business strategy, including its development of the Ivinhema mill and other current projects; (v) the registrant’s plans relating to acquisitions, joint ventures, strategic alliances or divestitures; (vi) the implementation of the registrant’s financing strategy and capital expenditure plan; (vii) the maintenance of the registrant’s relationships with customers; (viii) the competitive nature of the industries in which the registrant operates; (ix) the cost and availability of financing; (x) future demand for the commodities the registrant produces; (xi) international prices for commodities; (xii) the condition of the registrant’s land holdings; (xiii) the development of the logistics and infrastructure for transportation of the registrant’s products in the countries where it operates; (xiv) the performance of the South American and world economies; and (xv) the relative value of the Brazilian Real, the Argentine Peso, and the Uruguayan Peso compared to other currencies; as well as other risks included in the registrant’s other filings and submissions with the United States Securities and Exchange Commission.
These forward-looking statements involve various risks and uncertainties. Although the registrant believes that its expectations expressed in these forward-looking statements are reasonable, its expectations may turn out to be incorrect. The registrant’s actual results could be materially different from its expectations. In light of the risks and uncertainties described above, the estimates and forward-looking statements discussed in the attached might not occur, and the registrant’s future results and its performance may differ materially from those expressed in these forward-looking statements due to, inclusive, but not limited to, the factors mentioned above. Because of these uncertainties, you should not make any investment decision based on these estimates and forward-looking statements.
The forward-looking statements made in the attached relate only to events or information as of the date on which the statements are made in the attached. The registrant undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Adecoagro S.A. | ||||
By | /s/ Carlos A. Boero Hughes | |||
Name: | Carlos A. Boero Hughes | |||
Title: | Chief Financial Officer and Chief Accounting Officer | |||
Date: August 16, 2011
Adecoagro S.A.
Condensed Consolidated Interim Financial Statements as of June 30, 2011 and for the six-month periods ended June 30, 2011 and 2010
Report of Independent Registered Public Accounting Firm
To the Shareholders of
Adecoagro S.A.
Adecoagro S.A.
We have reviewed the accompanying condensed consolidated interim statements of financial position of Adecoagro S.A. and its subsidiaries as of June 30, 2011, and the related condensed consolidated interim statements of income and comprehensive income for each of the three-month and six-month periods ended June 30, 2011 and 2010 and the condensed consolidated interim statements of changes in shareholders´ equity and of cash flows for the six-month periods ended June 30, 2011 and 2010. This interim financial information is the responsibility of the Company’s management.
We conducted our review in accordance with the standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board (United States), the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should be made to the accompanying condensed consolidated interim financial statements for them to be in conformity with International Accounting Standard 34, ‘Interim Financial Reporting’, as issued by the International Accounting Standards Board.
Buenos Aires, Argentina
August 12, 2011
August 12, 2011
PRICE WATERHOUSE & CO. S.R.L.
by | (Partner) | |||
Mariano C. Tomatis | ||||
Legal information
Denomination:Adecoagro S.A.
Legal address:13-15 Avenue de la Liberté, L-1931, Luxembourg
Company activity:Agricultural and agro-industrial
Date of registration:June 11, 2010
Expiration of company charter:No term defined
Number of register:B153.681
Capital stock: 120,069,222 shares
Date of registration:June 11, 2010
Expiration of company charter:No term defined
Number of register:B153.681
Capital stock: 120,069,222 shares
Majority shareholder:Pampas Húmedas LLC, a Delaware limited liability company
Legal address:888 Seventh Avenue, New York, New York 10106, United States of America
Parent company activity:Investing
Capital stock:26.446.938 shares
Legal address:888 Seventh Avenue, New York, New York 10106, United States of America
Parent company activity:Investing
Capital stock:26.446.938 shares
F - 3
Adecoagro S.A.
Condensed Consolidated Interim Statements of Financial Position
as of June 30, 2011 and December 31, 2010 and 2009
Condensed Consolidated Interim Statements of Financial Position
as of June 30, 2011 and December 31, 2010 and 2009
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
June 30, | December 31, | December 31, | ||||||||||||
Note | 2011 | 2010 | 2009 | |||||||||||
(unaudited) | (restated) (*) | (restated) (*) | ||||||||||||
ASSETS | ||||||||||||||
Non-Current Assets | ||||||||||||||
Property, plant and equipment | 6 | 781,737 | 751,992 | 682,878 | ||||||||||
Investment property | 20,568 | 21,417 | 21,246 | |||||||||||
Intangible assets | 7 | 29,222 | 28,653 | 21,859 | ||||||||||
Biological assets | 8 | 162,937 | 133,593 | 190,714 | ||||||||||
Investments in joint ventures | 5,453 | 6,271 | 6,506 | |||||||||||
Deferred income tax assets | 16 | 56,792 | 67,463 | 45,113 | ||||||||||
Trade and other receivables | 9 | 25,265 | 30,752 | 22,065 | ||||||||||
Other assets | 25 | 26 | 34 | |||||||||||
Total Non-Current Assets | 1,081,999 | 1,040,167 | 990,415 | |||||||||||
Current Assets | ||||||||||||||
Biological assets | 8 | 24,757 | 53,164 | 39,740 | ||||||||||
Inventories | 10 | 135,833 | 57,170 | 57,902 | ||||||||||
Trade and other receivables | 9 | 134,237 | 119,205 | 106,212 | ||||||||||
Derivative financial instruments | 215,604 | 876 | 99 | |||||||||||
Short-term investments | 48,000 | — | — | |||||||||||
Cash and cash equivalents | 11 | 209,006 | 70,269 | 74,806 | ||||||||||
Total Current Assets | 767,437 | 300,684 | 278,759 | |||||||||||
TOTAL ASSETS | 1,849,436 | 1,340,851 | 1,269,174 | |||||||||||
SHAREHOLDERS EQUITY | ||||||||||||||
Capital and reserves attributable to equity holders of the parent | ||||||||||||||
Share capital | 12 | 180,104 | 120,000 | 120,000 | ||||||||||
Share premium | 926,269 | 563,343 | 563,343 | |||||||||||
Cumulative translation adjustment | 42,108 | 11,273 | 2,516 | |||||||||||
Equity-settled compensation | 13,713 | 13,659 | 11,914 | |||||||||||
Retained earnings | 28,904 | 257 | 44,161 | |||||||||||
Equity attributable to equity holders of the parent | 1,191,098 | 708,532 | 741,934 | |||||||||||
Non controlling interest | 15,762 | 14,570 | 15,222 | |||||||||||
TOTAL SHAREHOLDERS EQUITY | 1,206,860 | 723,102 | 757,156 | |||||||||||
LIABILITIES | ||||||||||||||
Non-Current Liabilities | ||||||||||||||
Trade and other payables | 14 | 11,224 | 11,785 | 6,822 | ||||||||||
Borrowings | 15 | 254,060 | 250,672 | 203,134 | ||||||||||
Derivative financial instruments | — | — | 280 | |||||||||||
Deferred income tax liabilities | 16 | 93,714 | 111,495 | 107,045 | ||||||||||
Payroll and social security liabilities | 17 | 1,230 | 1,178 | 1,106 | ||||||||||
Provisions for other liabilities | 4,265 | 4,606 | 3,326 | |||||||||||
Total Non-Current Liabilities | 364,493 | 379,736 | 321,713 | |||||||||||
Current Liabilities | ||||||||||||||
Trade and other payables | 14 | 74,129 | 69,236 | 62,098 | ||||||||||
Current income tax liabilities | 4,063 | 978 | 222 | |||||||||||
Payroll and social security liabilities | 17 | 18,296 | 15,478 | 10,079 | ||||||||||
Borrowings | 15 | 179,016 | 138,800 | 103,647 | ||||||||||
Derivative financial instruments | 1,309 | 8,920 | 12,607 | |||||||||||
Provisions for other liabilities | 1,270 | 4,601 | 1,652 | |||||||||||
Total Current Liabilities | 278,083 | 238,013 | 190,305 | |||||||||||
TOTAL LIABILITIES | 642,576 | 617,749 | 512,018 | |||||||||||
TOTAL SHAREHOLDERS EQUITY AND LIABILITIES | 1,849,436 | 1,340,851 | 1,269,174 | |||||||||||
(*) | See Note 2.3. |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 4
Adecoagro S.A.
Condensed Consolidated Interim Statements of Income
for the three-month and six-month periods ended June 30, 2011 and 2010
Condensed Consolidated Interim Statements of Income
for the three-month and six-month periods ended June 30, 2011 and 2010
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Six-months ended June 30 | Three-months ended June 30 | |||||||||||||||||
Note | 2011 | 2010 | 2011 | 2010 | ||||||||||||||
(unaudited) | ||||||||||||||||||
Sales of manufactured products and services rendered | 19 | 146,178 | 86,660 | 119,837 | 53,479 | |||||||||||||
Cost of manufactured products sold and services rendered | 20 | (96,086 | ) | (75,560 | ) | (74,142 | ) | (40,313 | ) | |||||||||
Gross Profit/(Loss) from Manufacturing Activities | 50,092 | 11,100 | 45,695 | 13,166 | ||||||||||||||
Sales of agricultural produce and biological assets | 19 | 88,693 | 68,641 | 56,782 | 49,472 | |||||||||||||
Cost of agricultural produce sold and direct agricultural selling expenses | 20 | (88,693 | ) | (68,641 | ) | (56,782 | ) | (49,472 | ) | |||||||||
Initial recognition and changes in fair value of biological assets and agricultural produce | 55,969 | (53,556 | ) | (2,489 | ) | (51,589 | ) | |||||||||||
Changes in net realizable value of agricultural produce after harvest. | 4,069 | 118 | 1,449 | (1,516 | ) | |||||||||||||
Gross Profit/(Loss) from Agricultural Activities | 60,038 | (53,438 | ) | (1,040 | ) | (53,105 | ) | |||||||||||
Margin on Manufacturing and Agricultural Activities Before Operating Expenses | 110,130 | (42,338 | ) | 44,655 | (39,939 | ) | ||||||||||||
General and administrative expenses | 20 | (33,508 | ) | (28,655 | ) | (16,201 | ) | (14,672 | ) | |||||||||
Selling expenses | 20 | (24,074 | ) | (17,455 | ) | (18,204 | ) | (11,451 | ) | |||||||||
Other operating (loss)/ income, net | 22 | (304 | ) | 9,588 | 5,392 | (1,942 | ) | |||||||||||
Share of loss of joint ventures | (350 | ) | (220 | ) | (350 | ) | (220 | ) | ||||||||||
Gain/(Loss) from Operations Before Financing and Taxation | 51,894 | (79,080 | ) | 15,292 | (68,224 | ) | ||||||||||||
Finance income | 23 | 13,611 | 2,408 | 10,188 | 1,554 | |||||||||||||
Finance costs | 23 | (24,654 | ) | (18,558 | ) | (9,346 | ) | (9,396 | ) | |||||||||
Financial results, net | 23 | (11,043 | ) | (16,150 | ) | 842 | (7,842 | ) | ||||||||||
Gain/(Loss) Before Income Tax | 40,851 | (95,230 | ) | 16,134 | (76,066 | ) | ||||||||||||
Income tax (charge) / benefit | 16 | (12,754 | ) | 24,650 | (3,398 | ) | 22,302 | |||||||||||
Gain/(Loss) for the Period | 28,097 | (70,580 | ) | 12,736 | (53,764 | ) | ||||||||||||
Attributable to: | ||||||||||||||||||
Equity holders of the parent | 27,569 | (69,170 | ) | 12,486 | (52,786 | ) | ||||||||||||
Non controlling interest | 528 | (1,410 | ) | 250 | (978 | ) | ||||||||||||
Gains/(Losses) per share for loss attributable to the equity holders of the parent during the period: | ||||||||||||||||||
Basic | 24 | 0.2320 | (0.5764 | ) | 0.1040 | (0.4399 | ) | |||||||||||
Diluted | 24 | 0.2304 | (0.5764 | ) | 0.1033 | (0.4399 | ) |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 5
Adecoagro S.A.
Condensed Consolidated Interim Statements of Comprehensive Income
for the three-month and six-month periods ended June 30, 2011 and 2010
Condensed Consolidated Interim Statements of Comprehensive Income
for the three-month and six-month periods ended June 30, 2011 and 2010
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Six-months ended June 30 | Three-months ended June 30 | |||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
(unaudited) | ||||||||||||||||
Gain/(Loss) for the period | 28,097 | (70,580 | ) | 12,736 | (53,764 | ) | ||||||||||
Other comprehensive income: | ||||||||||||||||
Exchange differences on translating foreign operations | 31,477 | (18,500 | ) | 21,927 | (8,261 | ) | ||||||||||
Other comprehensive income/ (loss) for the period | 31,477 | (18,500 | ) | 21,927 | (8,261 | ) | ||||||||||
Total comprehensive income/(loss) for the period | 59,574 | (89,080 | ) | 34,663 | (62,025 | ) | ||||||||||
Attributable to: | ||||||||||||||||
Equity holders of the parent | 58,404 | (87,293 | ) | 33,971 | (60,887 | ) | ||||||||||
Non controlling interest | 1,170 | (1,787 | ) | 692 | (1,138 | ) |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 6
Adecoagro S.A.
Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity
for the six-month periods ended June 30, 2011 and 2010
Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity
for the six-month periods ended June 30, 2011 and 2010
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Attributable to equity holders of the parent | ||||||||||||||||||||||||||||||||
Cumulative | Non | Total | ||||||||||||||||||||||||||||||
Share | Share | Translation | Equity-settled | Retained | Controlling | Shareholders’ | ||||||||||||||||||||||||||
Capital | Premium | Adjustment | Compensation | Earnings | Subtotal | Interest | Equity | |||||||||||||||||||||||||
Balance at January 1, 2010 | 120,000 | 563,343 | 2,516 | 11,914 | 44,161 | 741,934 | 15,222 | 757,156 | ||||||||||||||||||||||||
Total comprehensive loss for the period | — | — | (18,123 | ) | — | (69,170 | ) | (87,293 | ) | (1,787 | ) | (89,080 | ) | |||||||||||||||||||
Employee share options granted | — | — | — | 970 | — | 970 | 20 | 990 | ||||||||||||||||||||||||
Balance at June 30, 2010 (unaudited) | 120,000 | 563,343 | (15,607 | ) | 12,884 | (25,009 | ) | 655,611 | 13,455 | 669,066 | ||||||||||||||||||||||
Balance at January 1, 2011 | 120,000 | 563,343 | 11,273 | 13,659 | 257 | 708,532 | 14,570 | 723,102 | ||||||||||||||||||||||||
Total comprehensive income for the period | — | — | 30,835 | — | 27,569 | 58,404 | 1,170 | 59,574 | ||||||||||||||||||||||||
Net proceeds from IPO and Private placement (Note 12) | 60,104 | 362,926 | — | — | — | 423,030 | — | 423,030 | ||||||||||||||||||||||||
Employee share options granted (Note 13) | — | — | — | 458 | — | 458 | 9 | 467 | ||||||||||||||||||||||||
Restricted shares granted (Note 13) | — | — | — | 674 | — | 674 | 13 | 687 | ||||||||||||||||||||||||
Employee share options forfeited | — | — | — | (1,078 | ) | 1,078 | — | — | — | |||||||||||||||||||||||
Balance at June 30, 2011 (unaudited) | 180,104 | 926,269 | 42,108 | 13,713 | 28,904 | 1,191,098 | 15,762 | 1,206,860 | ||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 7
Adecoagro S.A.
Condensed Consolidated Interim Statements of Cash Flows
for the six-month periods ended June 30, 2011 and 2010
Condensed Consolidated Interim Statements of Cash Flows
for the six-month periods ended June 30, 2011 and 2010
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
June 30, | June 30, | |||||||||
Note | 2011 | 2010 | ||||||||
(unaudited) | (unaudited) | |||||||||
Cash flows from operating activities: | ||||||||||
Gain /(Loss) for the period | 28,097 | (70,580 | ) | |||||||
Adjustments for: | ||||||||||
Income tax charge/(benefit) | 16 | 12,754 | (24,650 | ) | ||||||
Depreciation | 20 | 13,799 | 13,754 | |||||||
Amortization | 7 | 189 | 196 | |||||||
Gain from disposal of other property items | 22 | (335 | ) | (654 | ) | |||||
Employee share options granted | 21 | 1,154 | 990 | |||||||
Loss from derivative financial instruments and forwards | 22, 23 | (7,829 | ) | (9,586 | ) | |||||
Interest and other expense, net | 23 | 14,667 | 11,475 | |||||||
Initial recognition and changes in fair value of non harvested biological assets (unrealized) | (16,665 | ) | 68,717 | |||||||
Changes in net realizable value of agricultural produce after harvest (unrealized) | (28 | ) | 136 | |||||||
Provision and allowances | (2,406 | ) | (902 | ) | ||||||
Share of loss from joint venture | 350 | 220 | ||||||||
Foreign exchange (gains)/ losses, net | 23 | (713 | ) | 4,221 | ||||||
Changes in operating assets and liabilities: | ||||||||||
(Increase)/ decrease in trade and other receivables | (10,002 | ) | 21,902 | |||||||
Increase in inventories | (73,828 | ) | (34,899 | ) | ||||||
Decrease in biological assets | 50,835 | 39,313 | ||||||||
Decrease in other assets | 1 | 9 | ||||||||
Decrease in derivative financial instruments | (9,510 | ) | (2,390 | ) | ||||||
Increase/ (decrease) in trade and other payables | 3,811 | (13,027 | ) | |||||||
Increase in payroll and social security liabilities | 2,870 | 3,320 | ||||||||
Decrease in provisions for other liabilities | (3 | ) | (765 | ) | ||||||
Net cash generated from/ (used in) operating activities before interest and taxes paid | 7,208 | 6,800 | ||||||||
Interest paid | (16,682 | ) | (14,699 | ) | ||||||
Income tax paid | (15,527 | ) | (2,925 | ) | ||||||
Net cash used in operating activities | (25,001 | ) | (10,824 | ) | ||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 8
Adecoagro S.A.
Condensed Consolidated Interim Statements of Cash Flows
for the six-month periods ended June 30, 2011 and 2010 (Continued)
Condensed Consolidated Interim Statements of Cash Flows
for the six-month periods ended June 30, 2011 and 2010 (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
June 30, | June 30, | |||||||||||
Note | 2011 | 2010 | ||||||||||
(unaudited) | (unaudited)) | |||||||||||
Cash flows from investing activities: | ||||||||||||
Purchases of property, plant and equipment | (23,577 | ) | (50,170 | ) | ||||||||
Purchases of intangible assets | 7 | (37 | ) | (36 | ) | |||||||
Purchase of cattle and non current biological assets planting cost | (24,801 | ) | (25,367 | ) | ||||||||
Interest received | 23 | 2,468 | 647 | |||||||||
Proceeds from sale of property, plant and equipment | 890 | 1,203 | ||||||||||
Short-term investments | (48,000 | ) | — | |||||||||
Acquisition of currency forward | (205,000 | ) | — | |||||||||
Net cash used in investing activities | (298,057 | ) | (73,723 | ) | ||||||||
Cash flows from financing activities: | ||||||||||||
Net proceeds from IPO and Private placement | 12 | 421,778 | — | |||||||||
Proceeds from long-term borrowings | 17,167 | 12,725 | ||||||||||
Payments of long-term borrowings | (13,709 | ) | (18,626 | ) | ||||||||
Net increase in short-term borrowings | 39,931 | 60,589 | ||||||||||
Net cash generated from financing activities | 465,167 | 54,688 | ||||||||||
Net increase/(decrease) in cash and cash equivalents | 142,109 | (29,859 | ) | |||||||||
Cash and cash equivalents at beginning of period | 70,269 | 74,806 | ||||||||||
Effect of exchange rate changes on cash and cash equivalents | (3,372 | ) | 6,284 | |||||||||
Cash and cash equivalents at end of period | 209,006 | 51,231 | ||||||||||
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 9
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
1. General information and Reorganization
Adecoagro S.A. (the “Company” or “Adecoagro”) is a holding company primarily engaged through its operating subsidiaries in agricultural and agro-industrial activities. The Company and its operating subsidiaries are collectively referred to hereinafter as the “Group”. These activities are carried out through three major lines of business, namely, Farming; Sugar, Ethanol and Energy; and Land Transformation. Farming is further comprised of five reportable segments, which are described in detail in Note 5 to these condensed consolidated interim financial statements.
The Group was established in 2002 and has subsequently grown significantly both organically and through acquisitions. The Group currently has operations in Argentina, Brazil and Uruguay.
The Company is the Group’s ultimate parent company and is a Societe Anonyme corporation incorporated and domiciled in the Grand Duchy of Luxembourg. The address of its registered office is 13-15 Avenue de la Liberté, L-1931, Luxembourg.
These condensed consolidated interim financial statements have been approved for issue by the Board of Directors on August 12, 2011.
Reorganization
On October 30, 2010 the members of International Farmland Holdings LLC (“IFH”) completed the contribution of 98% of their respective interests in IFH on a pro rata basis to a newly formed entity, Adecoagro, as contribution in kind in exchange for 100% of the common shares of Adecoagro outstanding as of that date (the “Reorganization”). This Reorganization was done, among other things, to facilitate the initial public offering of the Group, which occurred on January 28, 2011. Adecoagro had no prior assets, holdings or operations.
The consolidated financial statements of Adecoagro at December 31, 2010 and for the six- month period ended June 30, 2010, are presented using the historical values from the consolidated financial statements of IFH. However, the issued share capital reflects that of Adecoagro as of that date. The Reorganization is retroactively reflected in the consolidated financial statements of Adecoagro as of that date, in the period in which the Reorganization occurred. The Reorganization did not qualify as a business combination under common control; rather, it was a simple Reorganization of the capital of IFH, the existing organization. As such, the Reorganization is a non-adjusting event under IAS 10 and therefore it is recognized retroactively in the consolidated financial statements of the period in which the Reorganization occurs.
On January 28, 2011 the Company successfully completed an initial public offering and a private placement (see Note 12).
F - 10
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2. Basis of preparation
The information presented in the accompanying interim six-month financial statements is unaudited. In the opinion of management, the accompanying condensed consolidated interim financial statements reflect all adjustments necessary to present fairly the financial position of the Group at June 30, 2011, results of operations and cash flows for the six months ended June 30, 2011 and 2010. All such adjustments are of a normal recurring nature. In preparing the accompanying condensed consolidated interim financial statements, management has made certain estimates and assumptions that affect reported amounts in the financial statements and disclosures of contingencies. Actual results may differ from those estimates. The results for interim periods are not necessarily indicative of annual results. These condensed consolidated interim financial statements follow the same accounting policies and methods of their application as the Group’s audited December 31, 2010 annual financial statements, except as stated in 2.2 and 2.3 below. Accordingly, these condensed consolidated interim financial statements should be read in conjunction with the audited financial statements of the Group as of that date.
These condensed consolidated interim financial information as of June 30, 2011 and for the six-month periods ended June 30, 2011 and 2010 have been prepared in accordance with IAS 34, ‘Interim financial reporting’. The annual financial statements for the year ended December 31, 2010 have been prepared in accordance with International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB) and the Interpretations of the International Financial Reporting Interpretations Committee (IFRIC). The condensed consolidated interim financial statements are presented in United States Dollars.
2.1 New accounting standards
The impact of new accounting standards, amendments and interpretations on the Group’s financial statements for the six-month period ended June 30, 2011 is set out below:
An amendment to IAS 32 (Financial Instruments: Presentation) was issued in October 2009. The amendment clarifies that rights issues, options and warrants denominated in a currency other than the issuer’s functional currency and offered on a pro-rata basis to all owners of the same class of equity must be classified as equity. Such rights issues have so far been accounted for as liabilities. The change relates only to issues of a fixed number of shares at a fixed foreign-currency exercise price. The amendment is to be applied for annual periods beginning on or after February 1, 2010. Earlier application is permitted. The amendment was effective for the Group’s six-month period ended June 30, 2011, and did not have a material impact on the presentation of the Group’s financial position, results of operations or earnings per share.
IFRIC 19 “Extinguishing Financial Liabilities with Equity Instruments” was issued in November 2009. The interpretation addresses the accounting treatment in cases where a company settles all or part of a financial liability by issuing equity instruments to the creditor. It is to be applied for annual periods beginning on or after July 1, 2010. Earlier application is permitted. The amendment was effective for the Group’s six-month period ended June 30, 2011, and did not have a material impact on the presentation of the Group’s financial position, results of operations or earnings per share.
The IASB issued IAS 24 (revised) in November 2009. The revisions provide a partial exemption from the disclosure requirements for government-related entities and simplify the definition of a related party. The revisions are applicable for accounting periods beginning on or after 1 January 2011. Earlier application is permitted. The revised standard was effective for the Group’s six-month period ended June 30, 2011, and did not have a material impact on the presentation of the Group’s financial position, results of operations or earnings per share.
In November 2009 amendments were issued to IFRIC 14 “IAS 19 — The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction”, an interpretation of IAS 19 (Employee Benefits). The amendments apply when a company is subject to minimum pension plan funding requirements. They enable prepayments of the respective contributions to be recognized as an asset. The amendments are to be applied for annual periods beginning on or after January 1, 2011. Earlier application is permitted. The amendment was effective for the Group’s six-month period ended June 30, 2011, and did not have a material impact on the presentation of the Group’s financial position, results of operations or earnings per share.
F - 11
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2.1 New accounting standards (continued)
On 6 May 2010, the IASB issued Improvements to IFRSs — a collection of amendments to seven IFRSs — as part of its program of annual improvements to its standards. The amendments are effective for annual periods beginning on or after July 1, 2010 and January 1, 2011 (thus effective for the Group’s six-month period ended June 30, 2011), although entities are permitted to adopt them earlier. These amendments relate to IFRS 1 “First Time Adoption of IFRS”, IFRS 3 “Business Combination”, IFRS 7 “Financial Instruments: Disclosures”, IAS 1 “Presentation of Financial Statements”, IAS 27 “Consolidated and separate financial statements”, IAS 34 “Interim Financial Reporting” and IFRIC 13 “Customer Loyalty Programmes”. The amendments did not have a material impact on the presentation of the Group’s financial position, results of operations or earnings per share.
2.2 New significant accounting policies
The following significant accounting policies were applied for the first time in the preparation of these condensed consolidated interim financial statements.
Short-term investments
Short-term investments includes fixed-term deposits not repayable on demand and with original maturities of more than three months.
2.3 Revision of previously issued financial statements
During the six-month period ended June 30, 2011, the Group changed its accounting policy for the classification of certain bearer biological assets, mainly sugar cane and coffee plantations, on the statement of financial position. As from June 30, 2011, the Group classified these biological assets as non-current assets in the statement of financial position. This is consistent with the trend of industry financial statements published in Brazil, which are based on IFRS recently adopted in that country. Comparative financial statements were revised as a result of such change, reducing current biological assets and increasing non-current biological assets in US$ 29,377 and US$ 20,367 as of December 31, 2010 and 2009, respectively.
2.4 Seasonality of operations
The Group’s business activities are inherently seasonal. The Group generally harvest and sell its grains (corn, soybean, rice and sunflower) between February and June, with the exception of wheat, which is harvested from December to January. Coffee and cotton are different in that while both are typically harvested from June to August, they require a conditioning process which takes about two to three months. Sales in other business segments, such as in Cattle and Dairy business segments, tend to be more stable. However, the raising of cattle and sale of milk is generally higher during the fourth quarter, when the weather is warmer and pasture conditions are more favorable. The sugarcane harvesting period typically begins April/May and ends in November/December. This creates fluctuations in sugarcane inventory, usually peaking in December to cover sales between crop harvests (i.e., January through April). As a result of the above factors, there may be significant variations in the results of operations from one quarter to another, as planting activities may be more concentrated in one quarter whereas harvesting activities may be more concentrated in another quarter. In addition, quarterly results may vary as a result of the effects of fluctuations in commodities prices, production yields and costs on the determination of initial recognition and changes in fair value of biological assets and agricultural produce.
F - 12
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3. Financial risk management
Risk management principles and processes
There have been no significant changes on the risks the Group’s activities are exposed to.
The Group’s approach to the identification, assessment and mitigation of risk is carried out by a Risk and Commercial Committee, which focuses on timely and appropriate management of risk. This Risk and Commercial Committee has overall accountability for the identification and management of risk across the Group.
The principal financial risks arising from financial instruments are raw material price risk, end-product price risk, exchange rate risk, interest rate risk, liquidity risk and credit risk.
The principal risks and uncertainties facing the business, which you could find in the annual financial statements of the Company, are the following:
• | End-product price risk |
The Group uses a variety of commodity-based derivative instruments to manage its exposure to price volatility stemming from its integrated crop production activities. These instruments consist mainly of crop sales forwards contracts, but also includes occasionally put and call options.
Contract positions are designed to ensure that the Group would receive a defined minimum price for certain quantities of its production. The counterparties to these instruments generally are major financial institutions. In entering into these contracts, the Group has assumed the risk that might arise from the possible inability of counterparties to meet the terms of their contracts. The Group does not expect any losses as a result of counterparty defaults. The Group is also obliged to pay margin deposits and premiums for these instruments. These estimates represent only the sensitivity of the financial instruments to market risk and not the Group exposure to end product price risks as a whole, since the crops and cattle products sales, including sales forward contracts, are not financial instruments within the scope of IFRS 7 disclosure requirements.
The Group estimates that for the period ended June 30, 2011, other factors being constant, and a 5% increase (or decrease) in prices of the Group’s end products would increase (or decrease)Gain Before Income Taxby approximately US$ 4,646.
• | Liquidity risk |
There have been no significant changes regarding exposure to liquidity risk since December 31, 2010.
• | Interest rate risk |
There have been no significant changes regarding interest rate risk exposure since December 31, 2010.
The following table shows a breakdown of the Group’s fixed-rate and floating-rate borrowings per currency denomination and functional currency of the subsidiary issuing the loans (excluding finance leases) at June 30, 2011 (all amounts are shown in US dollars):
F - 13
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3. | Financial risk management (continued) |
June 30, 2011 | ||||||||||||||||
Functional currency | ||||||||||||||||
Argentine | Brazilian | |||||||||||||||
Rate per currency denomination | Peso | Reais | Uruguayan Peso | Total | ||||||||||||
(unaudited) | ||||||||||||||||
Fixed rate: | ||||||||||||||||
Argentine Peso | 91 | — | — | 91 | ||||||||||||
Brazilian Reais | — | 83,569 | — | 83,569 | ||||||||||||
US Dollar | 49,106 | — | 1,195 | 50,301 | ||||||||||||
Subtotal Fixed-rate borrowings | 49,197 | 83,569 | 1,195 | 133,961 | ||||||||||||
Variable rate: | ||||||||||||||||
Brazilian Reais | — | 109,741 | — | 109,741 | ||||||||||||
US Dollar | 54,755 | 134,348 | — | 189,103 | ||||||||||||
Subtotal Variable-rate borrowings | 54,755 | 244,089 | — | 298,844 | ||||||||||||
Total borrowings as per analysis | 103,952 | 327,658 | 1,195 | 432,805 | ||||||||||||
Finance leases | 126 | 145 | — | 271 | ||||||||||||
Total borrowings at June 30, 2011 | 104,078 | 327,803 | 1,195 | 433,076 | ||||||||||||
At June 30, 2011, if interest rates on floating-rate borrowings had been 1% higher (or lower) with all other variables held constant,Gain Before Income Taxfor the period would decrease (or increase) as follows:
June 30, 2011 | ||||||||||||||||
Functional currency | ||||||||||||||||
Argentine | Brazilian | |||||||||||||||
Rate per currency denomination | Peso | Reais | Uruguayan Peso | Total | ||||||||||||
(unaudited) | ||||||||||||||||
Variable rate: | ||||||||||||||||
Brazilian Reais | — | 1,097 | — | 1,097 | ||||||||||||
US Dollar | 548 | 1,343 | — | 1,891 | ||||||||||||
Total effects on Gain Before Income Tax | 548 | 2,440 | — | 2,989 | ||||||||||||
• | Credit risk |
There have been no significant changes regarding exposure to credit risk arising from outstanding receivables since December 31, 2010. As of June 30, 2011, one bank accounted for more than 75% of the total cash deposited (HSBC). Additionally, during the six-month period ended June 30, 2011, the Group entered into a derivative contract (currency forward) with the Deutsche Bank for a notional amount of US$ 205 million.
• | Derivative financial instruments |
As part of its business operations, the Group uses a variety of derivative financial instruments to manage its exposure to the financial risks discussed above. As part of this strategy, the Group may enter into (i) interest rate derivatives to manage the composition of floating and fixed rate debt; (ii) currency derivatives to hedge certain foreign currency cash flows and to adjust the currency composition of its assets and liabilities; and (iii) crop future contracts and put and call options to manage its exposure to price volatility stemming from its integrated crop production activities. The Group’s policy is not to use derivatives for speculative purposes.
F - 14
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3. | Financial risk management (continued) |
The Group’s primary objective for holding derivative financial instruments is to manage currency exchange rate risk, interest rate risk and commodity price risk. The Group generally enters into derivative transactions with large institutions with high-credit-quality (usually equal or higher than the Group’s). The market risk associated with these instruments resulting from price movements is expected to offset the market risk of the underlying transactions, assets and liabilities, being hedged.
Non-hedging derivatives are classified as current when realization within 12 months is expected. Otherwise they are classified as non-current, although any portion that is expected to be realized within 12 months of the date of the statement of financial position is presented as current. The Group did not apply hedge accounting to these instruments.
The following table shows the outstanding positions for each type of derivative contract as of June 30, 2011:
• | Futures / Options |
As of June 30, 2011
June 30, 2011 | ||||||||||||||||
Market | ||||||||||||||||
Type of | Notional | Value Asset/ | (Loss)/ Gain | |||||||||||||
derivative contract | Tons | amount | (Liability) | (*) | ||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Futures: | ||||||||||||||||
Sale | ||||||||||||||||
Corn | 9 | 2,478 | 210 | 210 | ||||||||||||
Soybean | 33 | 13,828 | 627 | 627 | ||||||||||||
Wheat | 1 | 170 | 9 | (13 | ) | |||||||||||
Sugar | 15,545 | 8,459 | (528 | ) | (1,587 | ) | ||||||||||
Coffee | 1,344 | 7,981 | 112 | (304 | ) | |||||||||||
Cotton | 91 | 292 | 46 | 46 | ||||||||||||
Options: | ||||||||||||||||
Corn | 10 | 106 | (13 | ) | (13 | ) | ||||||||||
Total | 17,033 | 33,314 | 463 | (1,034 | ) | |||||||||||
(*) | Included in line “Gain from commodity derivative financial instruments” within “Other operating income, net”. See Note 22. |
Commodity future contract fair values are computed with reference to quoted market prices on future exchanges.
• | Currency forward |
The Company intends to use approximately US$ 230 million of the net proceeds from the Initial Public Offering to finance part of the construction costs of Ivinhema, the new sugar and ethanol mill in Brazil. Considering this, in April 2011, and in order to hedge the fluctuation of the Brazilian Reais against the US dollar, the Group bought a ninety-day Zero Coupon Note from Deutsche Bank AG London Branch for a notional amount of US$ 205 million (equivalent to Reais 328 million), where the amount of Brazilian Reais to receive at maturity is fixed. The Zero Coupon Note matured on August 2, 2011 and the Group received US$ 211 million, which resulted in the recognition of a gain of US$ 6 million included within “Finance income”.
F - 15
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
4. | Critical accounting estimates and judgments |
Critical accounting policies are those that are most important to the portrayal of the Group’s financial condition, results of operations and cash flows, and require management to make difficult, subjective or complex judgments and estimates about matters that are inherently uncertain. Management bases its estimates on historical experience and other assumptions that it believes are reasonable. The Group’s critical accounting policies are consistent with those of the annual financial statements for the year ended December 31, 2010. Further discussion on critical accounting policies for the period ended June 30, 2011 is included below.
Actual results could differ from estimates used in employing the critical accounting policies and these could have a material impact on the Group’s results of operations. The Group also has other policies that are considered key accounting policies, such as the policy for revenue recognition. However, these other policies, which are discussed in the notes to the Group’s financial statements, do not meet the definition of critical accounting estimates, because they do not generally require estimates to be made or judgments that are difficult or subjective.
(a) Impairment testing
For the six-month period ended June 30, 2011 there were no new events or circumstances that indicate that an impairment had occurred.
(b) Biological assets
The discounted cash flow model requires the input of highly subjective assumptions including observable and unobservable data. Generally the estimation of the fair value of biological assets and certain agricultural produce is based on models or inputs that are not observable in the market and the use of unobservable inputs is significant to the overall valuation of the assets. Unobservable inputs are determined based on the best information available, for example by reference to historical information of past practices and results, statistical and agronomical information, and other analytical techniques. Key assumptions include future market prices, estimated yields at the point of harvest, estimated production cycle, future cash flows, future costs of harvesting and other costs, and estimated discount rate.
(c) Fair value of derivatives and other financial instruments
Fair values of derivative financial instruments are computed with reference to quoted market prices on trade exchanges, when available. The fair values of commodity options are calculated using period-end market rates together with common option pricing models. The fair value of interest rate swaps has been calculated using a discounted cash flow analysis.
5. | Segment information |
The Group operates in three major lines of business, namely, Farming; Sugar, Ethanol and Energy; and Land Transformation.
The Group’s‘Farming’is further comprised of five reportable segments: Crops, Rice, Dairy, Coffee and Cattle.
The measurement principles for the Group’s segment reporting structure are based on the IFRS principles adopted in the condensed consolidated interim financial statements. Revenue generated and goods and services exchanged between segments are calculated on the basis of market prices.
The following table presents information with respect to the Group’s reportable segments. Certain other activities of a holding function nature not allocable to the segments are disclosed in the column ‘Corporate’.
F - 16
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
5. Segment information (continued)
Segment analysis for the six-month period ended June 30, 2011(unaudited):
Farming | Sugar, | |||||||||||||||||||||||||||||||||||||||
Farming | ethanol and | Land | ||||||||||||||||||||||||||||||||||||||
Crops | Rice | Dairy | Coffee | Cattle | subtotal | energy | transformation | Corporate | Total | |||||||||||||||||||||||||||||||
Sales of manufactured products and services rendered | 176 | 33,884 | — | 713 | 2,345 | 37,118 | 109,060 | — | — | 146,178 | ||||||||||||||||||||||||||||||
Cost of manufactured products sold and services rendered | — | (29,720 | ) | — | (629 | ) | (191 | ) | (30,540 | ) | (65,546 | ) | — | — | (96,086 | ) | ||||||||||||||||||||||||
Gross Profit from Manufacturing Activities | 176 | 4,164 | — | 84 | 2,154 | 6,578 | 43,514 | — | — | 50,092 | ||||||||||||||||||||||||||||||
Sales of agricultural produce and biological assets | 75,973 | 35 | 8,963 | 3,204 | 518 | 88,693 | — | — | — | 88,693 | ||||||||||||||||||||||||||||||
Cost of agricultural produce sold and direct agricultural selling expenses | (75,973 | ) | (35 | ) | (8,963 | ) | (3,204 | ) | (518 | ) | (88,693 | ) | — | — | — | (88,693 | ) | |||||||||||||||||||||||
Initial recognition and changes in fair value of biological assets and agricultural produce | 37,030 | 8,275 | 3,424 | 2,338 | 351 | 51,418 | 4,551 | — | — | 55,969 | ||||||||||||||||||||||||||||||
Gain from changes in net realizable value of agricultural produce after harvest | 5,832 | — | — | (1,763 | ) | — | 4,069 | — | — | — | 4,069 | |||||||||||||||||||||||||||||
Gross Profit from Agricultural Activities | 42,862 | 8,275 | 3,424 | 575 | 351 | 55,487 | 4,551 | — | — | 60,038 | ||||||||||||||||||||||||||||||
Margin on Manufacturing and Agricultural Activities Before Operating Expenses | 43,038 | 12,439 | 3,424 | 659 | 2,505 | 62,065 | 48,065 | — | — | 110,130 | ||||||||||||||||||||||||||||||
General and administrative expenses | (4,806 | ) | (4,016 | ) | (798 | ) | (635 | ) | (164 | ) | (10,419 | ) | (11,265 | ) | — | (11,824 | ) | (33,508 | ) | |||||||||||||||||||||
Selling expenses | (813 | ) | (5,605 | ) | (188 | ) | (235 | ) | (27 | ) | (6,868 | ) | (17,206 | ) | — | — | (24,074 | ) | ||||||||||||||||||||||
Other operating (loss)/ income, net | (3,047 | ) | 113 | — | 241 | — | (2,693 | ) | 2,411 | — | (22 | ) | (304 | ) | ||||||||||||||||||||||||||
Share of loss of joint ventures | — | — | (350 | ) | — | — | (350 | ) | — | — | — | (350 | ) | |||||||||||||||||||||||||||
Gain/ (Loss) from Operations Before Financing and Taxation | 34,372 | 2,931 | 2,088 | 30 | 2,314 | 41,735 | 22,005 | — | (11,846 | ) | 51,894 | |||||||||||||||||||||||||||||
Depreciation and amortization | (658 | ) | (1,351 | ) | (232 | ) | (281 | ) | (120 | ) | (2,642 | ) | (11,346 | ) | — | — | (13,988 | ) | ||||||||||||||||||||||
Initial recognition and changes in fair value of biological assets (unrealized) | 5,074 | — | 1,485 | (817 | ) | — | 5,742 | (10,650 | ) | — | — | (4,908 | ) | |||||||||||||||||||||||||||
Initial recognition and changes in fair value of agricultural produce (unrealized) | 10,026 | 4,123 | — | 3,155 | — | 17,304 | 4,269 | — | — | 21,573 | ||||||||||||||||||||||||||||||
Initial recognition and changes in fair value of biological assets and agricultural produce (realized) | 21,930 | 4,152 | 1,939 | — | 351 | 28,372 | 10,932 | — | — | 39,304 | ||||||||||||||||||||||||||||||
Gain from changes in net realizable value of agricultural produce after harvest (unrealized) | — | — | — | 28 | — | 28 | — | — | — | 28 | ||||||||||||||||||||||||||||||
Gain from changes in net realizable value of agricultural produce after harvest (realized) | 5,832 | — | — | (1,791 | ) | — | 4,041 | — | — | — | 4,041 | |||||||||||||||||||||||||||||
Property, plant and equipment, net | 209,372 | 48,017 | 4,275 | 27,083 | 19,226 | 307,973 | 473,764 | — | — | 781,737 | ||||||||||||||||||||||||||||||
Investment property | — | — | — | — | 20,568 | 20,568 | — | — | — | 20,568 | ||||||||||||||||||||||||||||||
Goodwill | 4,770 | 6,717 | — | 1,190 | 308 | 12,985 | 14,190 | — | — | 27,175 | ||||||||||||||||||||||||||||||
Biological assets | 22,142 | 2,435 | 7,946 | 22,742 | 219 | 55,484 | 132,210 | — | — | 187,694 | ||||||||||||||||||||||||||||||
Investment in joint ventures | — | — | 5,453 | — | — | 5,453 | — | — | — | 5,453 | ||||||||||||||||||||||||||||||
Inventories | 43,581 | 33,854 | 1,638 | 8,390 | 16 | 87,479 | 48,354 | — | — | 135,833 | ||||||||||||||||||||||||||||||
Total segment assets | 279,865 | 91,023 | 19,312 | 59,405 | 40,337 | 489,942 | 668,518 | — | — | 1,158,460 | ||||||||||||||||||||||||||||||
Borrowings | 66,029 | 41,631 | 10,408 | 15,638 | — | 133,706 | 299,370 | — | — | 433,076 | ||||||||||||||||||||||||||||||
Total segment liabilities | 66,029 | 41,631 | 10,408 | 15,638 | — | 133,706 | 299,370 | — | — | 433,076 | ||||||||||||||||||||||||||||||
F - 17
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
5. Segment information (continued)
Segment analysis for the six-month period ended June 30, 2010 (unaudited):
Farming | Sugar, | |||||||||||||||||||||||||||||||||||||||
Farming | ethanol and | Land | ||||||||||||||||||||||||||||||||||||||
Crops | Rice | Dairy | Coffee | Cattle | subtotal | energy | transformation | Corporate | Total | |||||||||||||||||||||||||||||||
Sales of manufactured products and services rendered | 184 | 30,768 | — | 2,709 | 1,708 | 35,369 | 51,291 | — | — | 86,660 | ||||||||||||||||||||||||||||||
Cost of manufactured products sold and services rendered | — | (26,692 | ) | — | (2,546 | ) | — | (29,238 | ) | (46,322 | ) | — | — | (75,560 | ) | |||||||||||||||||||||||||
Gross Profit from Manufacturing Activities | 184 | 4,076 | — | 163 | 1,708 | 6,131 | 4,969 | — | — | 11,100 | ||||||||||||||||||||||||||||||
Sales of agricultural produce and biological assets | 59,836 | 153 | 5,951 | 1,310 | 1,342 | 68,592 | 49 | — | — | 68,641 | ||||||||||||||||||||||||||||||
Cost of agricultural produce sold and direct agricultural selling expenses | (59,836 | ) | (153 | ) | (5,951 | ) | (1,310 | ) | (1,342 | ) | (68,592 | ) | (49 | ) | — | — | (68,641 | ) | ||||||||||||||||||||||
Initial recognition and changes in fair value of biological assets and agricultural produce | 20,357 | 2,342 | 5,207 | 161 | 524 | 28,591 | (82,147 | ) | — | — | (53,556 | ) | ||||||||||||||||||||||||||||
Gain from changes in net realizable value of agricultural produce after harvest | (863 | ) | — | — | 981 | — | 118 | — | — | — | 118 | |||||||||||||||||||||||||||||
Gross Profit/ (Loss) from Agricultural Activities | 19,494 | 2,342 | 5,207 | 1,142 | 524 | 28,709 | (82,147 | ) | — | — | (53,438 | ) | ||||||||||||||||||||||||||||
Margin on Manufacturing and Agricultural Activities Before Operating Expenses | 19,678 | 6,418 | 5,207 | 1,305 | 2,232 | 34,840 | (77,178 | ) | — | — | (42,338 | ) | ||||||||||||||||||||||||||||
General and administrative expenses | (3,685 | ) | (2,167 | ) | (1,307 | ) | (416 | ) | (180 | ) | (7,755 | ) | (9,394 | ) | — | (11,506 | ) | (28,655 | ) | |||||||||||||||||||||
Selling expenses | (660 | ) | (4,204 | ) | (166 | ) | (469 | ) | (140 | ) | (5,639 | ) | (11,816 | ) | — | — | (17,455 | ) | ||||||||||||||||||||||
Other operating income, net | 1,406 | 84 | — | 41 | (12 | ) | 1,519 | 8,639 | — | (570 | ) | 9,588 | ||||||||||||||||||||||||||||
Share of loss of joint ventures | — | — | (220 | ) | — | — | (220 | ) | — | — | — | (220 | ) | |||||||||||||||||||||||||||
Gain/ (Loss) from Operations Before Financing and Taxation | 16,739 | 131 | 3,514 | 461 | 1,900 | 22,745 | (89,749 | ) | — | (12,076 | ) | (79,080 | ) | |||||||||||||||||||||||||||
Depreciation and amortization | (937 | ) | (950 | ) | (186 | ) | (53 | ) | (209 | ) | (2,335 | ) | (11,615 | ) | — | — | (13,950 | ) | ||||||||||||||||||||||
Initial recognition and changes in fair value of biological assets (unrealized) | 1,270 | — | 3,056 | (789 | ) | — | 3,537 | (82,296 | ) | — | — | (78,759 | ) | |||||||||||||||||||||||||||
Initial recognition and changes in fair value of agricultural produce (unrealized) | 7,204 | 1,811 | — | 901 | — | 9,916 | 126 | — | — | 10,042 | ||||||||||||||||||||||||||||||
Initial recognition and changes in fair value of biological assets and agricultural produce (realized) | 11,883 | 531 | 2,151 | 49 | 524 | 15,138 | 23 | — | — | 15,161 | ||||||||||||||||||||||||||||||
Gain from changes in net realizable value of agricultural produce after harvest (unrealized) | — | — | — | (136 | ) | — | (136 | ) | — | — | — | (136 | ) | |||||||||||||||||||||||||||
Gain from changes in net realizable value of agricultural produce after harvest (realized) | (863 | ) | — | — | 1,117 | — | 254 | — | — | 254 | ||||||||||||||||||||||||||||||
As of December 31, 2010: | ||||||||||||||||||||||||||||||||||||||||
Property, plant and equipment, net | 204,454 | 50,898 | 4,202 | 25,265 | 18,831 | 303,650 | 448,342 | — | — | 751,992 | ||||||||||||||||||||||||||||||
Investment property | — | 1,168 | — | — | 20,249 | 21,417 | — | — | — | 21,417 | ||||||||||||||||||||||||||||||
Goodwill | 4,672 | 7,023 | 577 | 1,115 | — | 13,387 | 13,107 | — | — | 26,494 | ||||||||||||||||||||||||||||||
Biological assets | 31,247 | 21,555 | 7,130 | 21,577 | 401 | 81,910 | 104,847 | — | — | 186,757 | ||||||||||||||||||||||||||||||
Investment in joint ventures | — | — | 6,271 | — | — | 6,271 | — | — | — | 6,271 | ||||||||||||||||||||||||||||||
Inventories | 22,926 | 8,422 | 883 | 7,023 | 61 | 39,315 | 17,855 | — | — | 57,170 | ||||||||||||||||||||||||||||||
Total segment assets | 263,299 | 89,066 | 19,063 | 54,980 | 39,542 | 465,950 | 584,151 | — | — | 1,050,101 | ||||||||||||||||||||||||||||||
Borrowings | 59,339 | 41,050 | 10,262 | 13,651 | — | 124,302 | 265,170 | — | — | 389,472 | ||||||||||||||||||||||||||||||
Total segment liabilities | 59,339 | 41,050 | 10,262 | 13,651 | — | 124,302 | 265,170 | — | — | 389,472 | ||||||||||||||||||||||||||||||
F - 18
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
5. Segment information (continued)
Total segment assets are measured in a manner consistent with that of the condensed consolidated interim financial statements. These assets are allocated based on the operations of the segment and the physical location of the asset. The Group’s investment in the joint venture Grupo La Lácteo is allocated to the ‘Dairy’ segment. Therefore, the Group’s share of profit or loss after income taxes and its carrying amount are reported in this segment.
Total segment liabilities are measured in a manner consistent with that of the condensed consolidated interim financial statements. These liabilities are allocated based on the operations of the segment.
F - 19
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
6. Property, plant and equipment
Changes in the Group’s property, plant and equipment in the six-month periods ended June 30, 2011 and 2010 were as follows:
Machinery, | ||||||||||||||||||||||||||||||||
equipment, | ||||||||||||||||||||||||||||||||
Farmland | Buildings and | furniture and | ||||||||||||||||||||||||||||||
Farmlands | improvements | facilities | fittings | Computer equipment | Vehicles | Work in progress | Total | |||||||||||||||||||||||||
Six-month period ended June 30, 2010 | ||||||||||||||||||||||||||||||||
Opening net book amount | 299,872 | 434 | 102,654 | 170,648 | 1,382 | 1,062 | 106,826 | 682,878 | ||||||||||||||||||||||||
Exchange differences | (10,779 | ) | (21 | ) | (4,059 | ) | (5,756 | ) | (51 | ) | (41 | ) | (3,455 | ) | (24,162 | ) | ||||||||||||||||
Additions | 300 | — | 343 | 11,111 | 205 | 212 | 45,575 | 57,746 | ||||||||||||||||||||||||
Transfers | — | 154 | 30,327 | 27,378 | 24 | — | (57,883 | ) | — | |||||||||||||||||||||||
Disposals | — | — | (198 | ) | (264 | ) | (32 | ) | (55 | ) | — | (549 | ) | |||||||||||||||||||
Reclassification to non-income tax credits (*) | — | — | — | — | — | — | (5,800 | ) | (5,800 | ) | ||||||||||||||||||||||
Depreciation charge | — | (95 | ) | (3,384 | ) | (12,346 | ) | (197 | ) | (120 | ) | — | (16,142 | ) | ||||||||||||||||||
Closing net book amount | 289,393 | 472 | 125,683 | 190,771 | 1,331 | 1,058 | 85,263 | 693,971 | ||||||||||||||||||||||||
At June 30, 2010(unaudited) | ||||||||||||||||||||||||||||||||
Cost | 289,393 | 3,219 | 149,057 | 265,639 | 2,351 | 2,676 | 85,263 | 797,598 | ||||||||||||||||||||||||
Accumulated depreciation | — | (2,747 | ) | (23,374 | ) | (74,868 | ) | (1,020 | ) | (1,618 | ) | — | (103,627 | ) | ||||||||||||||||||
Net book amount | 289,393 | 472 | 125,683 | 190,771 | 1,331 | 1,058 | 85,263 | 693,971 | ||||||||||||||||||||||||
Six-month period ended June 30, 2011 | ||||||||||||||||||||||||||||||||
Opening net book amount | 305,412 | 245 | 165,248 | 239,910 | 1,602 | 1,103 | 38,472 | 751,992 | ||||||||||||||||||||||||
Exchange differences | (158 | ) | (14 | ) | 9,877 | 15,172 | 90 | (20 | ) | 919 | 25,866 | |||||||||||||||||||||
Additions | — | — | 246 | 6,899 | 220 | 149 | 17,059 | 24,573 | ||||||||||||||||||||||||
Transfers | — | 542 | 7,927 | 4,317 | 137 | — | (12,923 | ) | — | |||||||||||||||||||||||
Disposals | — | — | (36 | ) | (489 | ) | — | (30 | ) | — | (555 | ) | ||||||||||||||||||||
Reclassification to non-income tax credits (*) | — | — | — | (1,533 | ) | — | — | — | (1,533 | ) | ||||||||||||||||||||||
Depreciation charge | — | (127 | ) | (4,503 | ) | (13,488 | ) | (300 | ) | (188 | ) | — | (18,606 | ) | ||||||||||||||||||
Closing net book amount | 305,254 | 646 | 178,759 | 250,788 | 1,749 | 1,014 | 43,527 | 781,737 | ||||||||||||||||||||||||
At June 30, 2011(unaudited) | ||||||||||||||||||||||||||||||||
Cost | 305,254 | 3,597 | 211,372 | 355,013 | 3,321 | 2,961 | 43,527 | 925,045 | ||||||||||||||||||||||||
Accumulated depreciation | — | (2,951 | ) | (32,613 | ) | (104,225 | ) | (1,572 | ) | (1,947 | ) | — | (143,308 | ) | ||||||||||||||||||
Net book amount | 305,254 | 646 | 178,759 | 250,788 | 1,749 | 1,014 | 43,527 | 781,737 | ||||||||||||||||||||||||
F - 20
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
6. Property, plant and equipment (continued)
(*) Brazilian federal tax law allows entities to take a percentage of the total cost of the assets purchased as a tax credit. The procedure adopted initially was to recognize such credits proportionally to the depreciation of these fixed assets on a monthly basis. During 2009, the Group elected to change the procedure to recognize these federal tax credits separately when the assets is purchased and, as permitted, the tax credits already “embedded” within the cost of the assets were reclassified to tax credit (See Note 9).
An amount of US$11,229 and US$11,263 of depreciation charges are included in “Cost of manufactured products sold and services rendered” for the six-month periods ended June 30, 2011 and 2010, respectively. An amount of US$2,570 and US$2,491 of depreciation charges are included in “General and administrative expenses” for the six-month periods ended June 30, 2011 and 2010, respectively. An amount of US$4,807 and US$2,388 of depreciation charges were not charged to the statement of income and were capitalized in “Inventories” for the six-month periods ended June 30, 2011 and 2010, respectively.
As of June 30, 2011, borrowing costs of US$475 (June 30, 2010: US$3,423) were capitalized as components of the cost of acquisition or construction of qualifying assets.
Certain of the Group’s assets have been pledged as collateral to secure the Group’s borrowings and other payables. The net book value of the pledged assets amounts to US$362,981 as of June 30, 2011.
As of June 30, 2011, included within property, plant and equipment balances are US$0.2 million related to the net book value of assets under finance leases.
F - 21
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
7. Intangible assets
Changes in the Group’s intangible assets in the six-month periods ended June 30, 2011 and 2010 were as follows:
Goodwill | Trademarks | Software | Total | |||||||||||||
Six-month period ended June 30, 2010 | ||||||||||||||||
Opening net book amount | 19,953 | 1,556 | 350 | 21,859 | ||||||||||||
Exchange differences | (505 | ) | (158 | ) | (169 | ) | (832 | ) | ||||||||
Additions | — | — | 36 | 36 | ||||||||||||
Disposals | — | (195 | ) | — | (195 | ) | ||||||||||
Amortization charge (i) (20) | — | (108 | ) | (88 | ) | (196 | ) | |||||||||
Closing net book amount | 19,448 | 1,095 | 129 | 20,672 | ||||||||||||
At June 30, 2010(unaudited) | ||||||||||||||||
Cost | 19,448 | 1,879 | 476 | 21,803 | ||||||||||||
Accumulated amortization | — | (784 | ) | (347 | ) | (1,131 | ) | |||||||||
Net book amount | 19,448 | 1,095 | 129 | 20,672 | ||||||||||||
Six-month period ended June 30, 2011 | ||||||||||||||||
Opening net book amount | 26,494 | 1,884 | 275 | 28,653 | ||||||||||||
Exchange differences | 681 | 19 | 21 | 721 | ||||||||||||
Additions | — | — | 37 | 37 | ||||||||||||
Amortization charge (ii) (Note 20) | — | (107 | ) | (82 | ) | (189 | ) | |||||||||
Closing net book amount | 27,175 | 1,796 | 251 | 29,222 | ||||||||||||
At June 30, 2011(unaudited) | ||||||||||||||||
Cost | 27,175 | 2,792 | 725 | 30,692 | ||||||||||||
Accumulated amortization | (996 | ) | (474 | ) | (1,470 | ) | ||||||||||
Net book amount | 27,175 | 1,796 | 251 | 29,222 | ||||||||||||
(i) | For the six-month period ended June 30, 2011 an amount of US$82 and US$107 of amortization charges are included in “General and administrative expenses” and “Selling expenses”, respectively. There were no impairment charges for any of the periods presented. | |
(ii) | For the six-month period ended June 30, 2010 an amount of US$88 and US$108 of amortization charges are included in “General and administrative expenses” and “Selling expenses”, respectively. There were no impairment charges for any of the periods presented. |
The Group tests annually whether goodwill has suffered any impairment. The last impairment test of goodwill was performed as of December 31, 2010.
F - 22
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
8. Biological assets
Changes in the Group’s biological assets in the six-month periods ended June 30, 2011 and 2010 were as follows:
June 30, | June 30, | |||||||
2011 | 2010 | |||||||
(unaudited) | (unaudited) | |||||||
Beginning of the period | 186,757 | 230,454 | ||||||
Initial recognition and changes in fair value of biological assets (i) | 55,969 | (53,556 | ) | |||||
Decrease due to harvest | (196,322 | ) | (130,081 | ) | ||||
Decrease due to sales | (1,212 | ) | (1,540 | ) | ||||
Costs incurred during the period | 132,196 | 102,514 | ||||||
Exchange differences | 10,306 | (7,046 | ) | |||||
End of the period year | 187,694 | 140,745 | ||||||
(i) | Biological asset with a production cycle of more than one year (that is, sugarcane, coffee, dairy and cattle) generated “Initial recognition and changes in fair value of biological assets” amounting to US$10,664 (gain) for the six-month period ended June 30, 2011 (June 30, 2010: US$ (76,255) (loss)). In 2011, an amount of US$26,814 (2010: US$ (61,511)) was attributable to price changes, and an amount of US$ (16,150) (2010: US$ (14,744)) was attributable to physical changes. |
Biological assets as of June 30, 2011 and December 31, 2010 and 2009 were as follows:
June 30, | December 31, | December 31, | ||||||||||
2011 | 2010 | 2009 | ||||||||||
(unaudited) | ||||||||||||
Non-current | ||||||||||||
Cattle for dairy production | 7,946 | 7,130 | 4,313 | |||||||||
Other cattle | 39 | 39 | 66 | |||||||||
Sown land — coffee | 22,742 | 21,577 | 21,634 | |||||||||
Sown land — sugarcane | 132,210 | 104,847 | 164,701 | |||||||||
162,937 | 133,593 | 190,714 | ||||||||||
Current | ||||||||||||
Other cattle | 180 | 362 | 749 | |||||||||
Sown land — crops | 22,142 | 31,247 | 27,467 | |||||||||
Sown land — rice | 2,435 | 21,555 | 11,524 | |||||||||
24,757 | 53,164 | 39,740 | ||||||||||
Total biological assets | 187,694 | 186,757 | 230,454 | |||||||||
F - 23
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
9. Trade and other receivables, net
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
Non current | ||||||||
Income tax credits | 453 | 3,628 | ||||||
Non-income tax credits (i) | 6,626 | 8,681 | ||||||
Receivable from disposal of farmlands (ii) | 13,931 | 13,656 | ||||||
Cash collateral | 3,332 | 3,079 | ||||||
Other receivables | 923 | 1,708 | ||||||
Non current portion | 25,265 | 30,752 | ||||||
Current | ||||||||
Trade receivables | 45,469 | 32,702 | ||||||
Receivables from related parties (Note 25) | 2,704 | 1,662 | ||||||
Less: Allowance for trade receivables | (1,389 | ) | (1,323 | ) | ||||
Trade receivables — net | 46,784 | 33,041 | ||||||
Prepaid expenses | 8,409 | 8,299 | ||||||
Advances to suppliers | 13,292 | 14,274 | ||||||
Income tax credits | 4,441 | 6,954 | ||||||
Non-income tax credits (i) | 44,705 | 38,006 | ||||||
Cash collateral | 2,381 | 2,342 | ||||||
Receivable from disposal of farmlands (ii) | 10,678 | 10,432 | ||||||
Receivable with related parties (Note 25) | — | 291 | ||||||
Other receivables | 3,547 | 5,566 | ||||||
Subtotal | 87,453 | 86,164 | ||||||
Current portion | 134,237 | 119,205 | ||||||
Total trade and other receivables, net | 159,502 | 149,957 | ||||||
(i) | Includes US$1,533 and US$6,721 reclassified from property, plant and equipment as of June 30, 2011 and December 31, 2010, respectively. | |
(ii) | Relates to the sale of a farmland for which total net proceeds of US$24.6 million have not been fully collected as of June 30, 2011. |
The fair values of current trade and other receivables approximate their respective carrying amounts due to their short-term nature. The fair values of non-current trade and other receivables approximate their carrying amount, as the impact of discounting is not significant.
F - 24
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
9. Trade and other receivables, net (continued)
The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies (expressed in US dollars):
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
Currency | ||||||||
US Dollar | 55,116 | 53,561 | ||||||
Argentine Peso | 32,123 | 38,977 | ||||||
Uruguayan Peso | 889 | 697 | ||||||
Brazilian Reais | 71,374 | 56,722 | ||||||
159,502 | 149,957 | |||||||
As of June 30, 2011 trade receivables of US$27,761 (December 31, 2010: US$9,379) were past due but not impaired. The ageing analysis of these receivables is as follows:
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
Up to 3 months | 24,944 | 7,929 | ||||||
3 to 6 months | 369 | 542 | ||||||
Over 6 months | 1,049 | 908 | ||||||
26,362 | 9,379 | |||||||
The creation and release of allowance for trade receivables have been included in “Selling expenses” in the statement of income. Amounts charged to the allowance account are generally written off, when there is no expectation of recovering additional cash.
The other classes within other receivables do not contain impaired assets.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The Group does not hold any collateral as security.
As of June 30, 2011 and December 31, 2010, the total amount of cash and cash equivalents mainly comprise cash in banks and short-term bank deposits. The Group is authorized to work with banks rated “BBB+” or higher. At June 30, 2011, one bank (HSBC) accounted for more than 75% of the total cash deposited. The remaining amount of cash and cash equivalents relates to cash in hand.
Additionally, during the six-month period ended June 30, 2011, the Group invested in fixed-term bank deposits with one bank (HSBC) and entered into a derivative contract (currency forward). The Group does not have investment in securities or other financial instruments for which risk may have increased due to the financial credit crisis.
The Group arranged the interest rate swaps with Citibank N.A. (United States), HSBC S.A. (Brazil) and Banco Pine S.A. (Brazil). The Group also arranged an Crop commodity futures are traded in the established trading markets of Argentina and Brazil through well rated brokers. Counterparty risk derived from these transactions is not material.
F - 25
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
10. Inventories
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
Raw materials | 39,481 | 25,292 | ||||||
Finished goods | 92,915 | 25,601 | ||||||
Stocks held by third parties | 3,382 | 6,267 | ||||||
Others | 55 | 10 | ||||||
135,833 | 57,170 | |||||||
The cost of inventories recognized as expense and included in “Cost of manufactured products sold and services rendered” amounted to US$89,992 for the six-month period ended June 30, 2011. The cost of inventories recognized as expense and included in “Cost of agricultural produce sold and direct agricultural selling expenses” amounted to US$70,409 for the six-month period ended June 30, 2011.
11. Cash and cash equivalents
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
Cash at bank and on hand | 40,661 | 31,768 | ||||||
Short-term bank deposits | 168,345 | 38,501 | ||||||
209,006 | 70,269 | |||||||
12. Shareholders’ contributions
Number of shares | Share capital and | |||||||
(thousands) | share premium | |||||||
At January 1, 2010 | 120,000 | 683,343 | ||||||
At June 30, 2010 | 120,000 | 683,343 | ||||||
At January 1, 2011 | 120,000 | 683,343 | ||||||
At January 24, 2011, after reverse split (1) | 80,000 | 683,343 | ||||||
Issue of shares on January 28, 2011 (2) | 40,069 | 423,030 | ||||||
At June 30, 2011 | 120,069 | 1,106,373 | ||||||
(1) | The Extraordinary General Meeting of Adecoagro’s shareholders held on January 24, 2011 approved the reverse split of Adecoagro’s common shares, changing the nominal value of Adecoagro’s common shares from US$1 to US$1.5. Therefore, Adecoagro reduced total shares outstanding as of that date from 119,999,997 shares to 79,999,985 shares. | |
(2) | Initial Public Offering and private placement. |
On January 28, 2011 the Company successfully completed an initial public offering of its shares in the New York Stock Exchange. The Company issued 28,405,925 shares, at a price of US$11 per share. In addition, on February 11, 2010, the Company issued 4,285,714 shares as a consequence of the over-alloment option exercised by the underwriters of the initial public offering, raising an overall amount of approximately US$359 million.
On January 28, 2011, Adecoagro’s also issued and sold to Al Gharrafa Investment Company 7,377,598 common shares at a purchase price per share of US$10,65, which is equal to the price per common share paid by the underwriters acting in the initial public offering of the Company. This transaction was conditioned upon, and closed immediately after, the closing of the initial public offering of the Company. Consequently the Company raised US$79 million.
F - 26
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
12. Shareholders’ contributions (continued)
The Company intends to use these funds to finance part of the construction costs of Ivinhema (sugar and ethanol mill in Brazil) and for potential investments in the acquisition of farmland and capital expenditures required in the expansion of the farming business.
Related transaction costs totaling US$15 million net of tax have been netted off with the deemed proceeds, on the Share premium issued.
13. Equity-settled share-based payments
The Group has set a “2004 Incentive Option Plan” and a “2007/2008 Equity Incentive Plan” (collectively referred to as “Option Schemes”) under which the Group grants equity-settled options to senior managers and selected employees of the Group ´s subsidiaries. Additionally, in 2010 the Group has set a “Adecoagro 2010 Restricted Share Plan” (referred to as “Restricted Share Plan”) under which the Group grants restricted shares to senior and medium management and key employees of the Group’s subsidiaries.
(a) Option Schemes
For the six-month periods ended June 30, 2011 and 2010 the Group incurred US$0.5 million and US$1.0 million respectively, related to the options granted under the Option Schemes.
The fair value of the Option Schemes was measured at the date of grant using the Black-Scholes valuation technique. This valuation model takes into account factors such as non transferability, expected volatility, exercise restrictions and behavioral considerations.
Key grant-date fair value and other assumptions under the Option Schemes are detailed below:
May | May | May | Feb | Oct | Dec | Jan | Nov | |||||||||||||||||||||||||
Grant Date | 2004 | 2005 | 2006 | 2006 | 2006 | 2007 | 2009 | 2009 | ||||||||||||||||||||||||
Expected volatility | 39 | % | 37 | % | 36 | % | 36 | % | 36 | % | 36 | % | 21 | % | 22 | % | ||||||||||||||||
Expected life | 5.77 | 5.37 | 4.97 | 5.05 | 4.8 | 6.5 | 6.5 | 6.5 | ||||||||||||||||||||||||
Risk free rate | 3.46 | % | 3.56 | % | 4.46 | % | 4.13 | % | 4.14 | % | 3.22 | % | 1.85 | % | 2.31 | % | ||||||||||||||||
Expected dividend yield | 1 | % | 1 | % | 1 | % | 1 | % | 1 | % | 1 | % | 0 | % | 0 | % | ||||||||||||||||
Fair value per option | $ | 2.21 | $ | 2.10 | $ | 3.03 | $ | 2.51 | $ | 2.97 | $ | 4.78 | $ | 3.52 | $ | 3.78 | ||||||||||||||||
Possibility of ceasing employment before vesting | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 0.09 | % | 0.40 | % | 0.72 | % | ||||||||||||||||
Exercise price | $ | 5.83 | $ | 5.83 | $ | 5.83 | $ | 7.11 | $ | 8.62 | $ | 12.82 | $ | 13.40 | $ | 13.40 |
Jan | Jan | Jun | Sep | Sep | ||||||||||||||||
Grant Date | 2010 | 2010 | 2010 | 2010 | 2010 | |||||||||||||||
Expected volatility | 22 | % | 22 | % | 22 | % | 22 | % | 22 | % | ||||||||||
Expected life | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | |||||||||||||||
Risk free rate | 2.34 | % | 2.34 | % | 1.79 | % | 1.41 | % | 1.41 | % | ||||||||||
Expected dividend yield | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||||
Fair value per option | $ | 3.62 | $ | 3.38 | $ | 3.17 | $ | 3.05 | $ | 3.28 | ||||||||||
Possibility of ceasing employment before vesting | 0.85 | % | 0.85 | % | 0.97 | % | 1.17 | % | 1.17 | % | ||||||||||
Exercise price | $ | 12.82 | $ | 13.40 | $ | 13.40 | $ | 13.40 | $ | 12.82 |
F - 27
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
13. Equity-settled share-based payments (continued)
Since the Group’s shares were not historically publicly traded expected volatility was determined by calculating the historical volatility of share prices of comparable entities in representative stock markets. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of non-transferability, exercise restrictions and behavioral considerations.
Movements in the number of equity-settled options outstanding and their related weighted average exercise prices under plans are as follows:
2004 Incentive Option Plan
June 30, 2011 | June 30, 2010 | |||||||||||||||
Average | Average | |||||||||||||||
exercise | exercise | |||||||||||||||
price per | Options | price per | Options | |||||||||||||
share | (thousands) | share | (thousands) | |||||||||||||
At January 1 | 6.67 | 2,176 | 4.48 | 3,602 | ||||||||||||
Granted | — | — | — | — | ||||||||||||
Forfeited | — | — | — | — | ||||||||||||
Exercised | — | — | — | — | ||||||||||||
Expired | — | — | — | — | ||||||||||||
At June 30 | 6.67 | 2,176 | 4.48 | 3,602 | ||||||||||||
2007/2008 Equity Incentive Plan
June 30, 2011 | June 30, 2010 | |||||||||||||||
Average | Average | |||||||||||||||
exercise | exercise | |||||||||||||||
price per | Options | price per | Options | |||||||||||||
share | (thousands) | share | (thousands) | |||||||||||||
At January 1 | 13.05 | 2,113 | 8.69 | 3,046 | ||||||||||||
Granted | — | — | 8.81 | 174 | ||||||||||||
Forfeited | 12.82 | (46 | ) | — | — | |||||||||||
Exercised | — | — | — | — | ||||||||||||
Expired | — | — | — | — | ||||||||||||
At June 30 | 13.05 | 2,067 | 8.69 | 3,220 | ||||||||||||
Options outstanding under the plans have the following expiry date and exercise prices:
2004 Incentive Option Plan
Exercise | ||||||||||||
price per | Shares (in thousands) | |||||||||||
Expiry date: | share | June 30, 2011 | June 30, 2010 | |||||||||
May 1, 2014 | 5.83 | 674 | 1,011 | |||||||||
May 1, 2015 | 5.83 | 556 | 858 | |||||||||
May 1, 2016 | 5.83 | 229 | 481 | |||||||||
February 16, 2016 | 7.11 | 110 | 165 | |||||||||
October 1, 2016 | 8.62 | 607 | 1,087 |
F - 28
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
13. Equity-settled share-based payments (continued)
2007/2008 Equity Incentive Plan
Exercise price per | Shares (in thousands) | |||||||||||
Expiry date: | share | June 30, 2011 | June 30, 2010 | |||||||||
Dec 1, 2017 | 12.82 | 1,151 | 1,969 | |||||||||
Jan 30, 2019 | 13.40 | 700 | 1,050 | |||||||||
Nov 1, 2019 | 13.40 | 18 | 27 | |||||||||
Jan 30, 2020 | 12.82 | 35 | 53 | |||||||||
Jan 30, 2020 | 13.40 | 81 | 121 | |||||||||
Jun 30, 2020 | 13.40 | 22 | — | |||||||||
Sep 1, 2020 | 13.40 | 44 | — | |||||||||
Sep 1, 2020 | 12.82 | 15 | — |
The following table shows the exercisable shares at period end under both the Adecoagro/ IFH 2004 Incentive Option Plan and the Adecoagro/ IFH 2007/ 2008 Equity Incentive Plan:
Exercisable shares in thousands | ||||
June 30, 2011 | 4,243 | |||
June 30, 2010 | 3,220 |
(b) Restricted Share Plan
The Adecoagro 2010 Restricted Share Plan was effectively established in 2010 and is administered by the Compensation Committee of the Company. Restricted shares under the Restricted Share Plan vest over a 3-year period from the date of grant at 33% on each anniversary of the grant date. Participants are entitled to receive one ordinary share of the Company for each restricted share issued. For Restricted Share Plan, there are no performance requirements for the delivery of ordinary shares, except that a participant’s employment with the Group must not have been terminated prior to the relevant vesting date. If the participant ceases to be an employee for any reason, any unvested restricted share shall not be converted into ordinary shares and the participant shall cease for all purposes to be a shareholder with respect to such shares.
For the six-month period ended June 30, 2011 the Group incurred US$0.7 million related to the restricted shares granted under the Restricted Share Plan.
The restricted shares under the Restricted Share Plan were measured at fair value at the date of grant.
Key grant-date fair value and other assumptions under the Adecoagro 2010 Restricted Share Plan are detailed below:
Grant Date | Apr 1, 2011 | Apr 1, 2011 | May 13, 2011 | |||||||||
Fair value | 12.69 | 12.69 | 12.36 | |||||||||
Possibility of ceasing employment before vesting | 5 | % | 10 | % | 0 | % |
F - 29
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
13. Equity-settled share-based payments (continued)
Movements in the number of restricted shares outstanding under the Adecoagro 2010 Restricted Share Plan are as follows:
Restricted shares | ||||
(thousands) | ||||
June 30, 2011 | ||||
At January 1, 2011 | — | |||
Granted | 427 | |||
Forfeited | — | |||
At June 30, 2011 | 427 | |||
14. Trade and other payables
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
Non-current | ||||||||
Trade payables | 3,125 | 4,239 | ||||||
Payable from acquisition of subsidiary | 6,131 | 5,802 | ||||||
Taxes payable | 1,518 | 1,331 | ||||||
Other payables | 450 | 413 | ||||||
11,224 | 11,785 | |||||||
Current | ||||||||
Trade payables | 55,289 | 49,597 | ||||||
Payable from acquisition of subsidiary | 6,162 | 5,802 | ||||||
Advances from customers | 5,678 | 2,560 | ||||||
Amounts due to related parties (Note 25) | — | 4,892 | ||||||
Taxes payable | 4,429 | 4,967 | ||||||
Other payables | 2,571 | 1,418 | ||||||
74,129 | 69,236 | |||||||
Total trade and other payables | 85,353 | 81,021 | ||||||
F - 30
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
15. Borrowings
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
Non-current | ||||||||
Syndicated loan (*) | 20,000 | 20,000 | ||||||
BNDES loan (*) | 68,337 | 70,149 | ||||||
IDB facility (*) | 33,940 | 42,837 | ||||||
Brazil Loan (*) | 44,840 | 42,792 | ||||||
Deustche Bank loan (*) | 32,000 | 35,000 | ||||||
Other bank borrowings | 54,932 | 39,813 | ||||||
Obligations under finance leases | 11 | 81 | ||||||
254,060 | 250,672 | |||||||
Current | ||||||||
Bank overdrafts | 79 | 209 | ||||||
Syndicated loan (*) | 10,680 | 10,165 | ||||||
BNDES loan (*) | 12,341 | 11,901 | ||||||
IDB facility (*) | 16,926 | 16,384 | ||||||
Brazil Loan (*) | 1,073 | 4,317 | ||||||
Deustche Bank loan (*) | 18,365 | 15,379 | ||||||
Other bank borrowings | 119,292 | 80,078 | ||||||
Obligations under finance leases | 260 | 367 | ||||||
179,016 | 138,800 | |||||||
Total borrowings | 433,076 | 389,472 | ||||||
(*) | The Group was in compliance with the related covenants under the respective loan agreements. |
As of June 30, 2011, total bank borrowings include collateralized liabilities of US$327,384 (December 31, 2010: US$350,654). These loans are mainly collateralized by property, plant and equipment and shares of certain subsidiaries of the Group.
The maturity of the Group’s borrowings (excluding obligations under finance leases) and the Group’s exposure to fixed and variable interest rates is as follows:
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
Fixed rate: | ||||||||
Less than 1 year | 54,655 | 52,326 | ||||||
Between 1 and 2 years | 34,378 | 22,425 | ||||||
Between 2 and 3 years | 8,327 | 7,661 | ||||||
Between 3 and 4 years | 7,826 | 7,394 | ||||||
Between 4 and 5 years | 6,124 | 5,920 | ||||||
More than 5 years | 22,651 | 22,555 | ||||||
133,961 | 118,281 | |||||||
Variable rate: | ||||||||
Less than 1 year | 124,101 | 86,107 | ||||||
Between 1 and 2 years | 86,415 | 70,905 | ||||||
Between 2 and 3 years | 34,978 | 54,436 | ||||||
Between 3 and 4 years | 17,517 | 17,506 | ||||||
Between 4 and 5 years | 13,847 | 15,619 | ||||||
More than 5 years | 21,986 | 26,170 | ||||||
298,844 | 270,743 | |||||||
432,805 | 389,024 | |||||||
F - 31
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
15. Borrowings (continued)
The carrying amounts of the Group’s borrowings are denominated in the following currencies (expressed in US dollars):
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
Currency | ||||||||
Argentine Peso | 217 | 13 | ||||||
US Dollar | 239,404 | 199,182 | ||||||
Uruguayan Peso | — | 62 | ||||||
Brazilian Reais | 193,455 | 190,215 | ||||||
433,076 | 389,472 | |||||||
Obligations under finance leases
Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.
Gross finance lease liabilities — minimum lease payments:
June 30, | December 31, | |||||||
2011 | 2010 | |||||||
(unaudited) | ||||||||
Not later than one year | 275 | 396 | ||||||
Later than one year and not later than five years | 11 | 81 | ||||||
286 | 477 | |||||||
Future finance charges on finance leases | (15 | ) | (29 | ) | ||||
Present value of finance lease liabilities | 271 | 448 | ||||||
16. Taxation
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
June 30, | June 30, | |||||||
2011 | 2010 | |||||||
(unaudited) | (unaudited) | |||||||
Current income tax | (13,436 | ) | 1,039 | |||||
Deferred income tax | 682 | 23,611 | ||||||
Income tax (charge) / benefit | (12,754 | ) | 24,650 | |||||
There has been no change in the statutory tax rates in the countries where the Group operates since December 31, 2010.
F - 32
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
16. Taxation (continued)
The gross movement on the deferred income tax account is as follows:
June 30, | June 30, | |||||||
2011 | 2010 | |||||||
(unaudited) | (unaudited) | |||||||
Beginning of period | 44,032 | 61,932 | ||||||
Exchange differences | (5,176 | ) | (5,851 | ) | ||||
IPO deductible expenses directly charged to equity (*) | (1,252 | ) | — | |||||
Income tax benefit | (682 | ) | (23,611 | ) | ||||
End of period | 36,922 | 32,470 | ||||||
(*) | See Note 12. |
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:
June 30, | June 30, | |||||||
2011 | 2010 | |||||||
(unaudited) | (unaudited) | |||||||
Tax calculated at the tax rates applicable to profits in the respective countries | (14,577 | ) | 31,538 | |||||
Non-deductible items | (1,030 | ) | (3,868 | ) | ||||
Unused tax losses, net | 2,569 | (3,396 | ) | |||||
Others | 284 | 376 | ||||||
Income tax (charge) / benefit | (12,754 | ) | 24,650 | |||||
17. Payroll and social security liabilities
June 30, | December 31, | ||||||||
2011 | 2010 | ||||||||
(unaudited) | |||||||||
Non-current | |||||||||
Social security payable | 1,230 | 1,178 | |||||||
1,230 | 1,178 | ||||||||
Current | |||||||||
Salaries payable | 6,836 | 3,471 | |||||||
Social security payable | 2,820 | 2,223 | |||||||
Provision for vacations | 6,457 | 6,155 | |||||||
Provision for bonuses | 2,183 | 3,629 | |||||||
18,296 | 15,478 | ||||||||
Total payroll and social security liabilities | 19,526 | 16,656 | |||||||
F - 33
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
18. Provisions for other liabilities
The Group is subject to several laws, regulations and business practices of the countries where it operates. In the ordinary course of business, the Group is subject to certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings, including those involving tax, labor and social security, administrative and civil and other matters. The Group accrues liabilities when it is probable that future costs will be incurred and it can reasonably estimate them. The Group bases its accruals on up-to-date developments, estimates of the outcomes of the matters and legal counsel experience in contesting, litigating and settling matters. As the scope of the liabilities becomes better defined or more information is available, the Group may be required to change its estimates of future costs, which could have a material effect on its results of operations and financial condition or liquidity. There have been no material changes to claimed amounts and current proceedings since December 31, 2010.
19. Sales
June 30, | June 30, | |||||||
2011 | 2010 | |||||||
(unaudited) | (unaudited) | |||||||
Sales of manufactured products and services rendered: | ||||||||
Ethanol | 52,988 | 35,660 | ||||||
Sugar | 42,900 | 12,526 | ||||||
Rice | 33,444 | 30,365 | ||||||
Energy | 13,011 | 3,058 | ||||||
Operating leases | 2,364 | 1,679 | ||||||
Coffee | 713 | 2,709 | ||||||
Services | 597 | 613 | ||||||
Others | 161 | 50 | ||||||
146,178 | 86,660 | |||||||
Sales of agricultural produce and biological assets: | ||||||||
Soybean | 39,237 | 39,510 | ||||||
Cattle for dairy production | 701 | 336 | ||||||
Other cattle | 511 | 1,204 | ||||||
Corn | 18,729 | 12,845 | ||||||
Cotton | 787 | 886 | ||||||
Milk | 8,262 | 5,615 | ||||||
Wheat | 9,497 | 3,069 | ||||||
Coffee | 3,204 | 1,310 | ||||||
Sunflower | 6,055 | 1,717 | ||||||
Barley | 570 | 406 | ||||||
Seeds | 35 | 349 | ||||||
Sorghum | 946 | 1,050 | ||||||
Others | 159 | 344 | ||||||
88,693 | 68,641 | |||||||
Total sales | 234,871 | 155,301 | ||||||
F - 34
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
19. | Sales (continued) |
Commitments to sell commodities at a future date
The Group entered into contracts to sell non financial instruments, mainly, sugar, soybean, corn and coffee through sales forward contracts. Those contracts are held for purposes of delivery the non financial instrument in accordance with the Group’s expected sales. Accordingly, as the own use exception criteria are met, those contracts are not recorded as derivatives.
The notional amount of these contracts is US$75.1 million as of June 30, 2011 (2010: US$49.4 million) comprised primarily of 117,628 tons of sugar (US$60.5 million), 30,244 tons of soybean (U$S 9.5 million), 9,869 tons of corn (US$1.6 million) and 775 tons of coffee (U$S 3.5 million) which expire between July 2011 and November 2011.
20. Expenses by nature
The following table provides the additional disclosure required on the nature of expenses and their relationship to the function within the Group:
June 30, | June 30, | |||||||
2011 | 2010 | |||||||
(unaudited) | (unaudited) | |||||||
Cost of agricultural produce and biological assets sold | 79,890 | 61,616 | ||||||
Raw materials and consumables used in manufacturing activities | 62,330 | 49,949 | ||||||
Services | 8,453 | 5,794 | ||||||
Salaries and social security expenses (Note 21) | 29,245 | 22,110 | ||||||
Depreciation and amortization | 13,988 | 13,950 | ||||||
Taxes (*) | 883 | 1,778 | ||||||
Maintenance and repairs | 4,911 | 3,867 | ||||||
Lease expense and similar arrangements (**) | 1,192 | 916 | ||||||
Freights | 14,227 | 7,780 | ||||||
Export taxes / selling taxes | 11,806 | 11,429 | ||||||
Fuel and lubricants | 3,891 | 2,834 | ||||||
Others | 11,545 | 8,288 | ||||||
Total expenses by nature | 242,361 | 190,311 | ||||||
(*) | Excludes export taxes and selling taxes. | |
(**) | Relates to various cancellable operating lease agreements for office and machinery equipment. |
For the six-month period ended June 30, 2011, an amount of US$96,086 is included as “Cost of manufactured products sold and services rendered” (June 30, 2010: US$75,560); an amount of US$88,693 is included as “Cost of agricultural produce sold and direct agricultural selling expenses” (June 30, 2010: US$68,641); an amount of US$33,508 is included in “General and administrative expenses” (June 30, 2010: US$28,655); and an amount of US$24,074 is included in “Selling expenses” as described above (June 30, 2010: US$17,455).
F - 35
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
21. Salaries and social security expenses
June 30, | June 30, | |||||||
2011 | 2010 | |||||||
(unaudited) | (unaudited) | |||||||
Wages and salaries | 21,967 | 17,112 | ||||||
Social security costs | 6,124 | 4,008 | ||||||
Equity-settled share-based compensation | 1,154 | 990 | ||||||
29,245 | 22,110 | |||||||
Number of employees | 5,852 | 5,749 | ||||||
22. Other operating (loss)/ income, net
June 30, | June 30, | |||||||
2011 | 2010 | |||||||
(unaudited) | (unaudited) | |||||||
Gain from commodity derivative financial instruments | 3,649 | 8,931 | ||||||
Loss from onerous contracts — forwards | (5,632 | ) | — | |||||
Gain from disposal of other property items | 335 | 654 | ||||||
Others | 1,344 | 3 | ||||||
(304 | ) | 9,588 | ||||||
23. Financial results, net
June 30, | June 30, | |||||||
2011 | 2010 | |||||||
(unaudited) | (unaudited) | |||||||
Finance income: | ||||||||
- Interest income | 2,468 | 647 | ||||||
- Foreign exchange gains, net | 713 | — | ||||||
- Gain from interest rate/foreign exchange rate derivative financial instruments | 9,812 | 655 | ||||||
- Other income | 618 | 1,106 | ||||||
Finance income | 13,611 | 2,408 | ||||||
Finance costs: | ||||||||
- Interest expense | (17,135 | ) | (12,122 | ) | ||||
- Foreign exchange losses, net | — | (4,221 | ) | |||||
- Taxes | (2,292 | ) | (1,076 | ) | ||||
- Other expenses | (5,227 | ) | (1,139 | ) | ||||
Finance costs | (24,654 | ) | (18,558 | ) | ||||
Total financial results, net | (11,043 | ) | (16,150 | ) | ||||
F - 36
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
24. Earnings per share
(a) Basic
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Group by the weighted average number of shares in issue during the period (Note 12).
June 30, | June 30, | |||||||
2011 | 2010 | |||||||
(unaudited) | (unaudited) | |||||||
Gain/(loss) attributable to equity holders of the Group | 27,569 | (69,170 | ) | |||||
Weighted average number of shares in issue (thousands) | 118,843 | 120,000 | ||||||
Basic gains/(losses) per share | 0.2320 | (0.5764 | ) | |||||
(b) Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding to assume conversion of all dilutive potential shares. The Group has two categories of dilutive potential shares: equity-settled share options and restricted shares. For these equity-settled share options, a calculation is done to determine the number of shares that could have been acquired at fair value, based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the equity-settled share options.
June 30, | June 30, | |||||||
2011 | 2010 | |||||||
(unaudited) | (unaudited) | |||||||
Gain / (loss) attributable to equity holders of the Group | 27,569 | (69,170 | ) | |||||
Weighted average number of shares in issue (thousands) | 118,843 | 120,000 | ||||||
Adjustments for: | ||||||||
- Employee share options (thousands) | 809 | (* | ) | |||||
- Restricted shares (thousands) | 27 | (* | ) | |||||
Weighted average number of shares for diluted earnings per share (thousands) | 119,679 | 120,000 | ||||||
Diluted earnings per share | 0.2304 | (0.5764 | ) | |||||
(*) | The effects of anti-dilutive potential shares are ignored in the earnings per share calculation at June 30, 2010. All shares are anti-dilutive in a loss period because they would decrease a loss per share. |
As explained in Note 12, on January 24, 2011 the Extraordinary General Meeting of Adecoagro’s shareholders held on January 24, 2011 approved the reverse split of Adecoagro’s common shares, changing the nominal value of Adecoagro’s common shares from US$1 to US$1.5. Accordingly, the calculation of basic and diluted earnings per share for all periods presented had been adjusted retrospectively.
F - 37
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
25. Related-party transactions
The following is a summary of the balances and transactions with related parties:
Income (loss) included in the statement of income | Balance receivable (payable) | |||||||||||||||||||
Description of | June 30, | June 30, | June 30, | December | ||||||||||||||||
Related party | Relationship | transaction | 2011 | 2010 | 2011 | 31, 2010 | ||||||||||||||
(unaudited) | (unaudited) | (unaudited) | ||||||||||||||||||
Grupo La Lácteo | Joint venture | Sales of goods | 8,262 | 5,615 | — | — | ||||||||||||||
Receivables from | ||||||||||||||||||||
related parties | ||||||||||||||||||||
(Note 9) | — | — | 2,704 | 1,662 | ||||||||||||||||
Mario Jorge de Lemos | (i) | Cost of manufactured | ||||||||||||||||||
Vieira/ Cia Agropecuaria | products sold and | |||||||||||||||||||
Monte Alegre/ Alfenas | services rendered (ii) | — | (1,236 | ) | — | — | ||||||||||||||
Agricola Ltda/Marcelo | Receivables from | |||||||||||||||||||
Weyland Barbosa Vieira/ | related parties | |||||||||||||||||||
Paulo Albert Weyland | (Note 9) | — | — | — | 291 | |||||||||||||||
Vieira | Payables (Note 14) | — | — | — | (4,892 | ) | ||||||||||||||
UMA members | (i) | Tax credit | — | (3,991 | ) | — | — | |||||||||||||
Ospraie | (i) | Consent fee (iii) | (3,000 | ) | — | — | — | |||||||||||||
Management and | Employment | Compensation | ||||||||||||||||||
selected employees | selected employees | |||||||||||||||||||
(iv) | (3,146 | ) | (2,937 | ) | (13,713 | ) | (13,659 | ) |
(i) | Shareholder or affiliate of shareholder of the Company. | |
(ii) | Relates to agriculture partnership agreements (“parceria”). | |
(iii) | One-time cost related to the agreement entered into with Ospraie to waive certain rights following the completion of initial public offering. | |
(iv) | Includes compensation expense under equity-settled share-based payments (Note 13). |
26. Events after the date of the statement of financial position
As regard the Senior Secured Loan facility with Deutsche Bank AG, dated July 28, 2010, which bears interest at a variable rate of LIBOR plus 8.5% per annum, on August 3, 2011 the Group fully prepaid the outstanding capital. This optional prepayment amounts to US$47.7 million including interest accrued until the prepayment date. Additionally, the Company paid the premium fee of 2.5% of the principal outstanding amount to be able to make the prepayment, equivalent to US$1.1 million.
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