UNITED STATES
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 May, 2012
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)
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-F x Form 40-F ¨
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): ¨
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): ¨
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.
Yes ¨ No x
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): 82- .
UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS OF AND FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2012
This report on Form 6-K is being furnished for the purpose of providing a copy of the registrant’s unaudited condensed consolidated financial statements as of and for the three months ended March 31, 2012 (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: May 15, 2012
Adecoagro S.A.
Unaudited Condensed Consolidated Interim Financial Statements as of March 31, 2012 and for the three-month periods ended March 31, 2012 and 2011
Report of Independent Registered Public Accounting Firm
To the Shareholders of
Adecoagro S.A.
We have reviewed the accompanying condensed consolidated interim statements of financial position of Adecoagro S.A. and its subsidiaries as of March 31, 2012, and the related condensed consolidated interim statements of income and comprehensive income, of changes in shareholders’ equity and of cash flows for the three-month periods ended March 31, 2012 and 2011. 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
May 15, 2012
PRICE WATERHOUSE & CO. S.R.L.
by /s/ Marcelo de Nicola | ||
Marcelo de Nicola Partner |
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: 121,262,416 common shares (of which 3,262 are treasury shares)
Majority shareholder:Quantum Partners LP
Legal address:1300 Thames St. 5th FL, Baltimore MD 21231-3495, United States of America
Parent company activity:Investing
Capital stock: 25,384,049 common shares
F - 3
Adecoagro S.A.
Condensed Consolidated Interim Statements of Financial Position
as of March 31, 2012 and December 31, 2011
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Note | March 31, 2012 | December 31, 2011 | ||||||||
(unaudited) | ||||||||||
ASSETS | ||||||||||
Non-Current Assets | ||||||||||
Property, plant and equipment | 6 | 841,561 | 759,696 | |||||||
Investment property | 27,405 | 27,883 | ||||||||
Intangible assets | 7 | 36,511 | 36,755 | |||||||
Biological assets | 8 | 233,145 | 187,973 | |||||||
Investments in joint ventures | 4,091 | 4,299 | ||||||||
Deferred income tax assets | 38,619 | 37,081 | ||||||||
Trade and other receivables | 9 | 21,168 | 15,746 | |||||||
Other assets | 1,507 | 1,408 | ||||||||
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Total Non-Current Assets | 1,204,007 | 1,070,841 | ||||||||
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Current Assets | ||||||||||
Biological assets | 8 | 59,495 | 51,627 | |||||||
Inventories | 10 | 87,180 | 96,147 | |||||||
Trade and other receivables | 9 | 147,848 | 141,181 | |||||||
Derivative financial instruments | 4,266 | 10,353 | ||||||||
Cash and cash equivalents | 11 | 282,910 | 330,546 | |||||||
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Total Current Assets | 581,699 | 629,854 | ||||||||
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TOTAL ASSETS | 1,785,706 | 1,700,695 | ||||||||
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SHAREHOLDERS EQUITY | ||||||||||
Capital and reserves attributable to equity holders of the parent | ||||||||||
Share capital | 12 | 181,894 | 180,800 | |||||||
Share premium | 12 | 931,831 | 926,005 | |||||||
Cumulative translation adjustment | (84,586 | ) | (99,202 | ) | ||||||
Equity-settled compensation | 16,100 | 15,306 | ||||||||
Other reserves | (531 | ) | (526 | ) | ||||||
Treasury shares | (5 | ) | (4 | ) | ||||||
Retained earnings | 59,467 | 57,497 | ||||||||
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Equity attributable to equity holders of the parent | 1,104,170 | 1,079,876 | ||||||||
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Non controlling interest | 8,863 | 14,993 | ||||||||
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TOTAL SHAREHOLDERS EQUITY | 1,113,033 | 1,094,869 | ||||||||
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LIABILITIES | ||||||||||
Non-Current Liabilities | ||||||||||
Trade and other payables | 14 | 8,716 | 8,418 | |||||||
Borrowings | 15 | 223,194 | 203,409 | |||||||
Deferred income tax liabilities | 95,343 | 92,989 | ||||||||
Payroll and social security liabilities | 17 | 1,453 | 1,431 | |||||||
Provisions for other liabilities | 3,435 | 3,358 | ||||||||
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Total Non-Current Liabilities | 332,141 | 309,605 | ||||||||
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Current Liabilities | ||||||||||
Trade and other payables | 14 | 126,359 | 114,020 | |||||||
Current income tax liabilities | 936 | 872 | ||||||||
Payroll and social security liabilities | 17 | 19,606 | 17,010 | |||||||
Borrowings | 15 | 183,337 | 157,296 | |||||||
Derivative financial instruments | 7,760 | 6,054 | ||||||||
Provisions for other liabilities | 2,534 | 969 | ||||||||
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Total Current Liabilities | 340,532 | 296,221 | ||||||||
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TOTAL LIABILITIES | 672,673 | 605,826 | ||||||||
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TOTAL SHAREHOLDERS EQUITY AND LIABILITIES | 1,785,706 | 1,700,695 | ||||||||
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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 periods ended March 31, 2012 and 2011
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Note | March 31, 2012 | March 31, 2011 | ||||||||
(unaudited) | (unaudited) | |||||||||
Sales of manufactured products and services rendered | 19 | 67,278 | 26,341 | |||||||
Cost of manufactured products sold and services rendered | 20 | (53,802 | ) | (21,944 | ) | |||||
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Gross Profit from Manufacturing Activities | 13,476 | 4,397 | ||||||||
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Sales of agricultural produce and biological assets | 19 | 41,204 | 31,911 | |||||||
Cost of agricultural produce sold and direct agricultural selling expenses | 20 | (41,204 | ) | (31,911 | ) | |||||
Initial recognition and changes in fair value of biological assets and agricultural produce | 27,109 | 58,458 | ||||||||
Changes in net realizable value of agricultural produce after harvest | 2,949 | 2,620 | ||||||||
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Gross Profit from Agricultural Activities | 30,058 | 61,078 | ||||||||
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Margin on Manufacturing and Agricultural Activities Before Operating Expenses | 43,534 | 65,475 | ||||||||
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General and administrative expenses | 20 | (13,206 | ) | (17,307 | ) | |||||
Selling expenses | 20 | (13,238 | ) | (5,870 | ) | |||||
Other operating loss, net | 22 | (7,695 | ) | (5,696 | ) | |||||
Share of loss in joint ventures | (233 | ) | — | |||||||
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Gain from Operations Before Financing and Taxation | 9,162 | 36,602 | ||||||||
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Finance income | 23 | 5,580 | 3,423 | |||||||
Finance costs | 23 | (9,799 | ) | (15,308 | ) | |||||
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Financial results, net | 23 | (4,219 | ) | (11,885 | ) | |||||
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Gain Before Income Tax | 4,943 | 24,717 | ||||||||
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Income tax charge | 16 | (3,685 | ) | (9,356 | ) | |||||
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Gain for the Period | 1,258 | 15,361 | ||||||||
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Attributable to: | ||||||||||
Equity holders of the parent | 1,243 | 15,083 | ||||||||
Non controlling interest | 15 | 278 | ||||||||
Earnings per share for loss attributable to the equity holders of the parent during the period: | ||||||||||
Basic | 0.0103 | 0.1410 | ||||||||
Diluted | 0.0102 | 0.1404 |
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 periods ended March 31, 2012 and 2011
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
March 31, 2012 | March 31, 2011 | |||||||
(unaudited) | (unaudited) | |||||||
Gain for the period | 1,258 | 15,361 | ||||||
Other comprehensive income: | ||||||||
Exchange differences on translating foreign operations | 15,969 | 9,550 | ||||||
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Other comprehensive income for the period | 15,969 | 9,550 | ||||||
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Total comprehensive income for the period | 17,227 | 24,911 | ||||||
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Attributable to: | ||||||||
Equity holders of the parent | 17,087 | 24,433 | ||||||
Non controlling interest | 140 | 478 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 6
Adecoagro S.A.
Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity
for the three-month periods ended March 31, 2012 and 2011
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Attributable to equity holders of the parent | ||||||||||||||||||||||||||||||||||||||||
Share Capital (Note 12) | Share Premium | Cumulative Translation Adjustment | Equity-settled Compensation | Other reserves | Treasury shares | Retained Earnings | Subtotal | Non Controlling Interest | Total Shareholders’ Equity | |||||||||||||||||||||||||||||||
Balance at January 1, 2011 | 120,000 | 563,343 | 11,273 | 13,659 | — | — | 257 | 708,532 | 14,570 | 723,102 | ||||||||||||||||||||||||||||||
Profit for the year | — | — | — | — | — | — | 15,083 | 15,083 | 278 | 15,361 | ||||||||||||||||||||||||||||||
Other comprehensive income for the year | — | — | 9,350 | — | — | — | — | 9,350 | 200 | 9,550 | ||||||||||||||||||||||||||||||
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Total comprehensive income for the period | — | — | 9,350 | — | — | — | 15,083 | 24,433 | 478 | 24,911 | ||||||||||||||||||||||||||||||
Net proceeds from IPO and Private placement (See Note 12) | 60,104 | 362,073 | — | — | — | — | — | 422,177 | — | 422,177 | ||||||||||||||||||||||||||||||
Value of employee services | — | — | — | 342 | — | — | — | 342 | 7 | 349 | ||||||||||||||||||||||||||||||
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Balance at March 31, 2011 (unaudited) | 180,104 | 925,416 | 20,623 | 14,001 | — | — | 15,340 | 1,155,484 | 15,055 | 1,170,539 | ||||||||||||||||||||||||||||||
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Balance at January 1, 2012 | 180,800 | 926,005 | (99,202 | ) | 15,306 | (526 | ) | (4 | ) | 57,497 | 1,079,876 | 14,993 | 1,094,869 | |||||||||||||||||||||||||||
Profit for the year | — | — | — | — | — | — | 1,243 | 1,243 | 15 | 1,258 | ||||||||||||||||||||||||||||||
Other comprehensive income for the year | — | — | 15,844 | — | — | — | — | 15,844 | 125 | 15,969 | ||||||||||||||||||||||||||||||
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Total comprehensive income for the period | — | — | 15,844 | — | — | — | 1,243 | 17,087 | 140 | 17,227 | ||||||||||||||||||||||||||||||
Employee share options (Note 13): | ||||||||||||||||||||||||||||||||||||||||
- Value of employee services | — | — | — | 79 | — | — | — | 79 | 1 | 80 | ||||||||||||||||||||||||||||||
- Exercised | 49 | 263 | — | (93 | ) | — | — | — | 219 | (2 | ) | 217 | ||||||||||||||||||||||||||||
- Forfeited | — | — | — | (16 | ) | — | — | 16 | — | — | — | |||||||||||||||||||||||||||||
Restricted shares (Note 13): | ||||||||||||||||||||||||||||||||||||||||
- Value of employee services | — | — | — | 635 | — | — | — | 635 | 5 | 640 | ||||||||||||||||||||||||||||||
- Forfeited | — | — | — | — | 1 | (1 | ) | — | — | — | — | |||||||||||||||||||||||||||||
Acquisition of non controlling interest (Note 12) | 1,045 | 5,563 | (1,228 | ) | 189 | (6 | ) | — | 711 | 6,274 | (6,274 | ) | — | |||||||||||||||||||||||||||
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Balance at March 31, 2012 (unaudited) | 181,894 | 931,831 | (84,586 | ) | 16,100 | (531 | ) | (5 | ) | 59,467 | 1,104,170 | 8,863 | 1,113,033 | |||||||||||||||||||||||||||
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The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 7
Adecoagro S.A.
Condensed Consolidated Interim Statements of Cash Flows
for the three-month periods ended March 31, 2012 and 2011
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Note | March 31, 2012 | March 31, 2011 | ||||||||
(unaudited) | (unaudited) | |||||||||
Cash flows from operating activities: | ||||||||||
Gain for the period | 1,258 | 15,361 | ||||||||
Adjustments for: | ||||||||||
Income tax loss | 16 | 3,685 | 9,356 | |||||||
Depreciation | 20 | 3,805 | 4,192 | |||||||
Amortization | 7 | 94 | 92 | |||||||
Gain from disposal of other property items | 22 | (561 | ) | (218 | ) | |||||
Equity settled share-based compensation granted | 21 | 720 | 349 | |||||||
Loss from derivative financial instruments and forwards | 22, 23 | 7,113 | 4,387 | |||||||
Interest and other expense, net | 23 | 2,505 | 7,648 | |||||||
Initial recognition and changes in fair value of non harvested biological assets (unrealized) | (23,497 | ) | (49,668 | ) | ||||||
Changes in net realizable value of agricultural produce after harvest (unrealized) | (793 | ) | (210 | ) | ||||||
Provision and allowances | 1,878 | 5,232 | ||||||||
Share of loss from joint venture | 233 | — | ||||||||
Foreign exchange gains, net | 23 | 1,753 | 1,484 | |||||||
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Subtotal | (1,807 | ) | (1,995 | ) | ||||||
Changes in operating assets and liabilities: | ||||||||||
(Increase) Decrease in trade and other receivables | (13,527 | ) | 1,528 | |||||||
Decrease (Increase) in inventories | 12,397 | (39,614 | ) | |||||||
Decrease in biological assets | 731 | 21,683 | ||||||||
(Increase) Decrease in other assets | (99 | ) | 1 | |||||||
Decrease (Increase) in derivative financial | 679 | (9,287 | ) | |||||||
Increase in trade and other payables | 22,695 | 2,982 | ||||||||
Increase in payroll and social security liabilities | 2,665 | 1,104 | ||||||||
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Net cash used in operating activities before interest and taxes paid | 23,734 | (23,598 | ) | |||||||
Income tax paid | (2,804 | ) | (3,282 | ) | ||||||
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Net cash generated from (used in) operating activities | 20,930 | (26,880 | ) | |||||||
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The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 8
Adecoagro S.A.
Condensed Consolidated Interim Statements of Cash Flows
for the three-month periods ended March 31, 2012 and 2011 (Continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
Note | March 31, 2012 | March 31, 2011 | ||||||||
(unaudited) | (unaudited) | |||||||||
Cash flows from investing activities: | ||||||||||
Purchases of property, plant and equipment | (75,836 | ) | (7,121 | ) | ||||||
Purchases of intangible assets | 7 | (13 | ) | (1 | ) | |||||
Purchase of cattle and non current biological assets planting cost | (26,736 | ) | (15,081 | ) | ||||||
Interest received | 23 | 4,466 | 601 | |||||||
Payment of seller financing arising on subsidiaries acquired | (6,807 | ) | ||||||||
Proceeds from sale of property, plant and equipment | 836 | 278 | ||||||||
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Net cash used in investing activities | (104,090 | ) | (21,324 | ) | ||||||
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Cash flows from financing activities: | ||||||||||
Net proceeds from IPO and Private placement | 12 | — | 422,177 | |||||||
Proceeds from equity settled share-based compensation exercised | 218 | — | ||||||||
Proceeds from long-term borrowings | 20,418 | 7,500 | ||||||||
Payments of long-term borrowings | (1,205 | ) | (5,395 | ) | ||||||
Net increase in short-term borrowings | 18,134 | 10,928 | ||||||||
Interest paid | (6,292 | ) | (6,988 | ) | ||||||
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Net cash generated from financing activities | 31,273 | 428,222 | ||||||||
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Net (decrease)/ increase in cash and cash equivalents | (51,887 | ) | 380,018 | |||||||
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Cash and cash equivalents at beginning of period | 330,546 | 70,269 | ||||||||
Effect of exchange rate changes on cash and cash equivalents | 4,251 | 959 | ||||||||
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Cash and cash equivalents at end of period | 282,910 | 451,246 | ||||||||
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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 (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
1. | General information |
Adecoagro S.A. (the “Company” or “Adecoagro”) is a société anonyme (stock corporation) organized under the laws of the Grand Duchy of Luxembourg. Adecoagro is a holding company primarily engaged through its operating subsidiaries in agricultural and agro-industrial activities. The Company and its operating subsidiaries are collectively referred to hereinafter as the “Group”. These activities are carried out through three major lines of business, namely, Farming; Sugar, Ethanol and Energy; and Land Transformation. Farming is further comprised of five reportable segments, which are described in detail in Note 5 to these condensed consolidated interim financial statements. 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 May 15, 2012.
2. | Basis of preparation |
The information presented in the accompanying interim three-month condensed consolidated financial statements is unaudited and in the opinion of management reflect all adjustments necessary to present fairly the financial position of the Group as of March 31, 2012, results of operations and cash flows for the three months ended March 31, 2012 and 2011. 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, 2011 annual financial statements. 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 March 31, 2012 and for the three-month periods ended March 31, 2012 and 2011 have been prepared in accordance with IAS 34, ‘Interim financial reporting’. The annual financial statements for the year ended December 31, 2011 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.
A complete list of standards, amendments and interpretations to existing standards published but not yet effective for the Group is described in Note 2.1 to the annual financial statements. None of those standards became effective for the Group in the three-month period ended March 31, 2012.
During the three months ended March 31, 2012, the IASB did not publish new standards that would have a material impact on the Group when they become effective.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 10
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
2. | Basis of preparation (continued) |
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.
3. | Financial risk management |
Risk management principles and processes
The Group continues to be exposed to several risks arising from financial instruments including price risk, exchange rate risk, interest rate risk, liquidity risk and credit risk. A thorough explanation of the Group’s risks and the Group’s approach to the identification, assessment and mitigation of risks is included in Note 3 to the annual financial statements. There have been no changes to the Group’s exposure and risk management principles and processes since December 31, 2011 and refers readers to the annual financial statements for information.
However, the Group considers that the following tables below provide useful information to understand the Group’s interim results for the three months ended March 31, 2012. These disclosures do not appear in any particular order of potential materiality or probability of occurrence.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 11
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3. | Financial risk management (continued) |
• | Interest rate risk |
The following table shows a breakdown of the Group’s fixed-rate and floating-rate borrowings per currency denomination and functional currency of the subsidiary issuing the loans (excluding finance leases) at March 31, 2012 (all amounts are shown in US dollars):
March 31, 2012 | ||||||||||||||||
Functional currency | ||||||||||||||||
Rate per currency denomination | Argentine Peso | Brazilian Reais | Uruguayan Peso | Total | ||||||||||||
(unaudited) | ||||||||||||||||
Fixed rate: | ||||||||||||||||
Argentine Peso | (3,362 | ) | — | — | (3,362 | ) | ||||||||||
Brazilian Reais | — | (65,883 | ) | — | (65,883 | ) | ||||||||||
Uruguayan Peso | — | — | (7 | ) | (7 | ) | ||||||||||
US Dollar | (75,572 | ) | — | (1,454 | ) | (77,026 | ) | |||||||||
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Subtotal Fixed-rate borrowings | (78,934 | ) | (65,883 | ) | (1,461 | ) | (146,278 | ) | ||||||||
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Variable rate: | ||||||||||||||||
Brazilian Reais | — | (114,114 | ) | — | (114,114 | ) | ||||||||||
US Dollar | (59,974 | ) | (85,141 | ) | — | (145,115 | ) | |||||||||
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Subtotal Variable-rate borrowings | (59,974 | ) | (199,255 | ) | — | (259,229 | ) | |||||||||
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Total borrowings as per analysis | (138,908 | ) | (265,138 | ) | (1,461 | ) | (405,507 | ) | ||||||||
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Finance leases | (906 | ) | (118 | ) | — | (1,024 | ) | |||||||||
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Total borrowings at March 31, 2012 | (139,814 | ) | (265,256 | ) | (1,461 | ) | (406,531 | ) | ||||||||
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At March 31, 2012, if interest rates on floating-rate borrowings had been 1 % higher (or lower) with all other variables held constant,Gain Before Income Tax for the period would decrease as follows:
March 31, 2012 | ||||||||||||||||
Functional currency | ||||||||||||||||
Rate per currency denomination | Argentine Peso | Brazilian Reais | Uruguayan Peso | Total | ||||||||||||
(unaudited) | ||||||||||||||||
Variable rate: | ||||||||||||||||
Brazilian Reais | — | (1,141 | ) | — | (1,141 | ) | ||||||||||
US Dollar | (600 | ) | (851 | ) | — | (1,451 | ) | |||||||||
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Total effects on Gain Before Income Tax | (600 | ) | (1,992 | ) | — | (2,592 | ) | |||||||||
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• | Credit risk |
As of March 31, 2012, 5 banks accounted for more than 86% of the total cash deposited (HSBC, Rabobank, Banco Do Brasil, Itau and ABC Brasil).
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 12
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
3. | Financial risk management (continued) |
• | Derivative financial instruments |
The following table shows the outstanding positions for each type of derivative contract as of March 31, 2012:
• | Futures / Options |
As of March 31, 2012
March 31, 2012 | ||||||||||||||||
Type of derivative contract | Tons | Notional amount | Market Value Asset/ (Liability) | (Loss)/ Gain (*) | ||||||||||||
(unaudited) | (unaudited) | |||||||||||||||
Futures: | ||||||||||||||||
Sale | ||||||||||||||||
Corn | 13 | 2 | 52 | 52 | ||||||||||||
Soybean | 54 | 21 | (1,989 | ) | (2,086 | ) | ||||||||||
Wheat | 1 | 0.2 | 5 | (2 | ) | |||||||||||
Cotton | 3 | 4,945 | 193 | 190 | ||||||||||||
Sugar | 161 | 75,947 | 1,145 | (6,564 | ) | |||||||||||
Ethanol | 21 | 13,207 | (330 | ) | (386 | ) | ||||||||||
Coffee | 2 | 2,346 | 1,805 | 2,100 | ||||||||||||
Options: | ||||||||||||||||
Buy put | ||||||||||||||||
Corn | 88 | 788 | 9 | (345 | ) | |||||||||||
Soybean | 0.2 | 1 | 0.1 | (1 | ) | |||||||||||
Sugar | 27 | 570 | (388 | ) | 326 | |||||||||||
Wheat | 51 | 1,784 | 549 | (481 | ) | |||||||||||
Sell call | ||||||||||||||||
Corn | 2 | (17 | ) | (18 | ) | 1 | ||||||||||
Soybean | 1 | 9 | (2 | ) | (5 | ) | ||||||||||
Sugar | 51 | 1,784 | (1,456 | ) | 182 | |||||||||||
Wheat | 27 | 600 | 508 | 101 | ||||||||||||
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| |||||||||
Total | 502 | 101,987 | 83 | (6,918 | ) | |||||||||||
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(*) | Included in line “Gain from commodity derivative financial instruments” of Note 22. |
Commodity future contract fair values are computed with reference to quoted market prices on future exchanges.
Additionally the Group has a floating-to-fixed interest rate swap and several currency forward contracts. There have been no significant changes to these contracts since December 31, 2011.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 13
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
4. | Critical accounting estimates and judgments |
The Group’s critical accounting policies are also consistent with those of the audited annual financial statements for the year ended December 31, 2011 described in Note 4.
5. | Segment information |
The Group operates in three major lines of business, namely, Farming; Sugar, Ethanol and Energy; and Land Transformation.
1. | 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’.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 14
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
5. | Segment information (continued) |
Segment analysis for the three-month period ended March 31, 2012 (unaudited)
Farming | Sugar, | |||||||||||||||||||||||||||||||||||||||
Crops | Rice | Dairy | Coffee | Cattle | Farming subtotal | ethanol and energy | Land transformation | Corporate | Total | |||||||||||||||||||||||||||||||
Sales of manufactured products and services rendered | 240 | 20,252 | — | — | 1,171 | 21,663 | 45,615 | — | — | 67,278 | ||||||||||||||||||||||||||||||
Cost of manufactured products sold and services rendered | — | (18,983 | ) | — | — | (42 | ) | (19,025 | ) | (34,777 | ) | — | — | (53,802 | ) | |||||||||||||||||||||||||
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Gross Profit from Manufacturing Activities | 240 | 1,269 | — | — | 1,129 | 2,638 | 10,838 | — | — | 13,476 | ||||||||||||||||||||||||||||||
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Sales of agricultural produce and biological assets | 35,754 | 5 | 4,715 | 461 | 80 | 41,015 | 189 | — | — | 41,204 | ||||||||||||||||||||||||||||||
Cost of agricultural produce sold and direct agricultural selling expenses | (35,754 | ) | (5 | ) | (4,715 | ) | (461 | ) | (80 | ) | (41,015 | ) | (189 | ) | — | — | (41,204 | ) | ||||||||||||||||||||||
Initial recognition and changes in fair value of biological assets and agricultural produce | 14,769 | 3,589 | 353 | (4,234 | ) | (74 | ) | 14,403 | 12,706 | — | — | 27,109 | ||||||||||||||||||||||||||||
Changes in net realizable value of agricultural produce after harvest | 2,976 | — | — | (27 | ) | — | 2,949 | — | — | — | 2,948 | |||||||||||||||||||||||||||||
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Gross Profit/ (Loss) from Agricultural Activities | 17,745 | 3,589 | 353 | (4,261 | ) | (74 | ) | 17,352 | 12,706 | — | — | 30,058 | ||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Margin on Manufacturing and Agricultural Activities Before Operating Expenses | 17,985 | 4,858 | 353 | (4,261 | ) | 1,055 | 19,990 | 23,544 | — | — | 43,534 | |||||||||||||||||||||||||||||
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| |||||||||||||||||||||
General and administrative expenses | (1,083 | ) | (1,032 | ) | (215 | ) | (231 | ) | (17 | ) | (2,578 | ) | (4,660 | ) | — | (5,968 | ) | (13,206 | ) | |||||||||||||||||||||
Selling expenses | (1,241 | ) | (4,248 | ) | (64 | ) | (77 | ) | (9 | ) | (5,639 | ) | (7,589 | ) | — | (10 | ) | (13,238 | ) | |||||||||||||||||||||
Other operating loss, net | (4,138 | ) | 282 | — | 1,918 | (12 | ) | (1,950 | ) | (5,610 | ) | — | (135 | ) | (7,695 | ) | ||||||||||||||||||||||||
Share of loss of joint ventures | — | — | (233 | ) | — | — | (233 | ) | — | — | — | (233 | ) | |||||||||||||||||||||||||||
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Profit/ (Loss) from Operations Before Financing and Taxation | 11,523 | (140 | ) | (159 | ) | (2,651 | ) | 1,017 | 9,590 | 5,685 | — | (6,113 | ) | 9,162 | ||||||||||||||||||||||||||
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Depreciation and amortization | 434 | 975 | 212 | 156 | 59 | 1,836 | 2,063 | — | — | 3,899 | ||||||||||||||||||||||||||||||
Initial recognition and changes in fair value of biological assets (unrealized) | 11,125 | 541 | 159 | (1,088 | ) | — | 10,737 | 12,494 | — | — | 23,231 | |||||||||||||||||||||||||||||
Initial recognition and changes in fair value of agricultural produce (unrealized) | 795 | 2,405 | — | (3,146 | ) | — | 54 | 212 | — | — | 266 | |||||||||||||||||||||||||||||
Initial recognition and changes in fair value of biological assets and agricultural produce (realized) | 2,849 | 643 | 194 | — | (74 | ) | 3,612 | — | — | — | 3,612 | |||||||||||||||||||||||||||||
Changes in net realizable value of agricultural produce after harvest (unrealized) | 793 | — | — | — | — | 793 | — | — | — | 793 | ||||||||||||||||||||||||||||||
Changes in net realizable value of agricultural produce after harvest (realized) | 2,183 | — | — | (27 | ) | — | 2,156 | — | — | — | 2,156 | |||||||||||||||||||||||||||||
Property, plant and equipment, net | 234,636 | 48,354 | 11,618 | 23,281 | 20,612 | 338,501 | 503,060 | — | — | 841,561 | ||||||||||||||||||||||||||||||
Investment property | 9,225 | — | — | — | 18,180 | 27,405 | — | — | — | 27,405 | ||||||||||||||||||||||||||||||
Goodwill | 14,214 | 6,304 | — | 1,019 | 1,180 | 22,717 | 11,984 | — | — | 34,701 | ||||||||||||||||||||||||||||||
Biological assets | 54,979 | 4,263 | 9,493 | 17,892 | 1,493 | 88,120 | 204,520 | — | — | 292,640 | ||||||||||||||||||||||||||||||
Investment in joint ventures | — | — | 4,091 | — | — | 4,091 | — | — | — | 4,091 | ||||||||||||||||||||||||||||||
Inventories | 25,042 | 40,104 | 2,418 | 741 | 42 | 68,347 | 18,833 | — | — | 87,180 | ||||||||||||||||||||||||||||||
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Total segment assets | 338,096 | 99,025 | 27,620 | 42,933 | 41,507 | 549,181 | 738,397 | — | — | 1,287,578 | ||||||||||||||||||||||||||||||
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Borrowings | 83,315 | 55,925 | 13,981 | 14,981 | — | 168,202 | 238,329 | — | — | 406,531 | ||||||||||||||||||||||||||||||
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Total segment liabilities | 83,315 | 55,925 | 13,981 | 14,981 | — | 168,202 | 238,329 | — | — | 406,531 | ||||||||||||||||||||||||||||||
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The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 15
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
5. | Segment information (continued) |
Segment analysis for the three-month period ended March 31, 2011 (unaudited)
Farming | Sugar, | |||||||||||||||||||||||||||||||||||||||
Crops | Rice | Dairy | Coffee | Cattle | Farming subtotal | ethanol and energy | Land transformation | Corporate | Total | |||||||||||||||||||||||||||||||
Sales of manufactured products and services rendered | 31 | 15,555 | — | 713 | 1,089 | 17,388 | 8,953 | — | — | 26,341 | ||||||||||||||||||||||||||||||
Cost of manufactured products sold and services rendered | — | (14,594 | ) | — | (629 | ) | — | (15,223 | ) | (6,721 | ) | — | — | (21,944 | ) | |||||||||||||||||||||||||
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Gross Profit from Manufacturing Activities | 31 | 961 | — | 84 | 1,089 | 2,165 | 2,232 | — | — | 4,397 | ||||||||||||||||||||||||||||||
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Sales of agricultural produce and biological assets | 25,740 | 25 | 4,443 | 1,456 | 247 | 31,911 | — | — | — | 31,911 | ||||||||||||||||||||||||||||||
Cost of agricultural produce sold and direct agricultural selling expenses | (25,740 | ) | (25 | ) | (4,443 | ) | (1,456 | ) | (247 | ) | (31,911 | ) | — | — | — | (31,911 | ) | |||||||||||||||||||||||
Initial recognition and changes in fair value of biological assets and agricultural produce | 23,759 | 9,177 | 2,847 | (2,560 | ) | 44 | 33,267 | 25,191 | — | — | 58,458 | |||||||||||||||||||||||||||||
Changes in net realizable value of agricultural produce after harvest | 2,933 | — | — | (313 | ) | — | 2,620 | — | — | — | 2,620 | |||||||||||||||||||||||||||||
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Gross Profit/ (Loss) from Agricultural Activities | 26,692 | 9,177 | 2,847 | (2,873 | ) | 44 | 35,887 | 25,191 | — | — | 61,078 | |||||||||||||||||||||||||||||
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Margin on Manufacturing and Agricultural Activities Before Operating Expenses | 26,723 | 10,138 | 2,847 | (2,789 | ) | 1,133 | 38,052 | 27,423 | — | — | 65,475 | |||||||||||||||||||||||||||||
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| |||||||||||||||||||||
General and administrative expenses | (2,516 | ) | (3,496 | ) | (680 | ) | (313 | ) | (28 | ) | (7,033 | ) | (5,179 | ) | — | (5,095 | ) | (17,307 | ) | |||||||||||||||||||||
Selling expenses | (259 | ) | (2,599 | ) | (76 | ) | (114 | ) | (12 | ) | (3,060 | ) | (2,810 | ) | — | — | (5,870 | ) | ||||||||||||||||||||||
Other operating loss, net | (6,629 | ) | 81 | — | (549 | ) | — | (7,097 | ) | 1,282 | — | 119 | (5,696 | ) | ||||||||||||||||||||||||||
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Profit/ (Loss) from Operations Before Financing and Taxation | 17,319 | 4,124 | 2,091 | (3,765 | ) | 1,093 | 20,862 | 20,716 | — | (4,976 | ) | 36,602 | ||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Depreciation and amortization | 357 | 385 | 117 | 118 | 38 | 1,015 | 3,269 | — | — | 4,284 | ||||||||||||||||||||||||||||||
Initial recognition and changes in fair value of biological assets (unrealized) | 19,229 | 580 | 1,441 | (319 | ) | — | 20,931 | 29,426 | — | — | 50,357 | |||||||||||||||||||||||||||||
Initial recognition and changes in fair value of agricultural produce (unrealized) | 762 | 5,025 | — | (2,241 | ) | — | 3,546 | (4,235 | ) | — | — | (689 | ) | |||||||||||||||||||||||||||
Initial recognition and changes in fair value of biological assets and agricultural produce (realized) | 3,768 | 3,572 | 1,406 | — | 44 | 8,790 | — | — | — | 8,790 | ||||||||||||||||||||||||||||||
Changes in net realizable value of agricultural produce after harvest (unrealized) | 285 | — | — | (75 | ) | — | 210 | — | — | — | 210 | |||||||||||||||||||||||||||||
Changes in net realizable value of agricultural produce after harvest (realized) | 2,648 | — | — | (238 | ) | — | 2,410 | — | — | — | 2,410 | |||||||||||||||||||||||||||||
As of December 31, 2011: | ||||||||||||||||||||||||||||||||||||||||
Property, plant and equipment, net | 209,859 | 43,781 | 4,202 | 25,806 | 19,568 | 303,216 | 451,873 | — | — | 755,089 | ||||||||||||||||||||||||||||||
Investment property | — | — | — | — | 20,852 | 20,852 | — | — | — | 20,852 | ||||||||||||||||||||||||||||||
Goodwill | 4,892 | 6,943 | — | 1,140 | 316 | 13,291 | 13,406 | — | — | 26,697 | ||||||||||||||||||||||||||||||
Biological assets | 46,878 | 3,292 | 8,102 | 22,062 | 302 | 80,636 | 152,284 | — | — | 232,920 | ||||||||||||||||||||||||||||||
Investment in joint ventures | — | — | 6,182 | — | — | 6,182 | — | — | — | 6,182 | ||||||||||||||||||||||||||||||
Inventories | 28,333 | 32,449 | 2,231 | 2,751 | 13 | 65,777 | 31,217 | — | — | 96,994 | ||||||||||||||||||||||||||||||
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Total segment assets | 289,962 | 86,465 | 20,717 | 51,759 | 41,051 | 489,954 | 648,780 | — | — | 1,138,734 | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Borrowings | 67,170 | 42,965 | 10,740 | 16,072 | — | 136,947 | 266,939 | — | — | 403,886 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
Total segment liabilities | 67,170 | 42,965 | 10,740 | 16,072 | — | 136,947 | 266,939 | — | — | 403,886 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 16
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (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.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 17
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (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 three-month periods ended March 31, 2012 and 2011 were as follows:
Farmlands | Farmland improvements | Buildings and facilities | Machinery, equipment, furniture and fittings | Computer equipment | Vehicles | Work in progress | Total | |||||||||||||||||||||||||
Three-month period ended March 31, 2011 | ||||||||||||||||||||||||||||||||
Opening net book amount | 305,412 | 245 | 165,248 | 239,910 | 1,602 | 1,103 | 38,472 | 751,992 | ||||||||||||||||||||||||
Exchange differences | (1,587 | ) | (9 | ) | 3,391 | 5,161 | 32 | (20 | ) | 202 | 7,170 | |||||||||||||||||||||
Additions | — | — | 236 | 3,150 | 112 | 61 | 3,682 | 7,241 | ||||||||||||||||||||||||
Transfers | — | — | 1,360 | 2,165 | 133 | — | (3,658 | ) | — | |||||||||||||||||||||||
Disposals | — | — | — | (60 | ) | — | — | — | (60 | ) | ||||||||||||||||||||||
Reclassification to non-income tax credits (*) | — | — | — | (966 | ) | — | — | — | (966 | ) | ||||||||||||||||||||||
Depreciation charge (Note 20) | — | (28 | ) | (2,268 | ) | (7,765 | ) | (142 | ) | (85 | ) | — | (10,288 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Closing net book amount | 303,825 | 208 | 167,967 | 241,595 | 1,737 | 1,059 | 38,698 | 755,089 | ||||||||||||||||||||||||
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|
|
|
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|
|
|
|
| |||||||||||||||||
At March 31, 2011(unaudited) | ||||||||||||||||||||||||||||||||
Cost | 303,825 | 3,032 | 196,077 | 332,392 | 3,007 | 2,820 | 38,698 | 879,851 | ||||||||||||||||||||||||
Accumulated depreciation | — | (2,824 | ) | (28,110 | ) | (90,797 | ) | (1,270 | ) | (1,761 | ) | — | (124,762 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Net book amount | 303,825 | 208 | 167,967 | 241,595 | 1,737 | 1,059 | 38,698 | 755,089 | ||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Three-month period ended March 31, 2012 | ||||||||||||||||||||||||||||||||
Opening net book amount | 313,685 | 930 | 153,617 | 204,441 | 1,474 | 993 | 84,556 | 759,696 | ||||||||||||||||||||||||
Exchange differences | (1,411 | ) | (19 | ) | 3,372 | 5,705 | 37 | (19 | ) | 1,624 | 9,289 | |||||||||||||||||||||
Additions | — | — | 77 | 13,462 | 165 | 1,822 | 61,813 | 77,339 | ||||||||||||||||||||||||
Transfers | — | — | 1,234 | 615 | — | — | (1,849 | ) | — | |||||||||||||||||||||||
Disposals | — | — | — | (272 | ) | (1 | ) | (1 | ) | — | (274 | ) | ||||||||||||||||||||
Reclassification to non-income tax credits (*) | — | — | — | (136 | ) | — | — | (548 | ) | (684 | ) | |||||||||||||||||||||
Depreciation charge (Note 20) | — | (100 | ) | (1,502 | ) | (2,004 | ) | (80 | ) | (119 | ) | — | (3,805 | ) | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Closing net book amount | 312,274 | 811 | 156,798 | 221,811 | 1,595 | 2,676 | 145,596 | 841,561 | ||||||||||||||||||||||||
|
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|
|
|
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|
|
|
|
| |||||||||||||||||
At March 31, 2012(unaudited) | ||||||||||||||||||||||||||||||||
Cost | 312,274 | 4,049 | 195,387 | 339,035 | 3,556 | 4,924 | 145,596 | 1,004,821 | ||||||||||||||||||||||||
Accumulated depreciation | — | (3,238 | ) | (38,589 | ) | (117,224 | ) | (1,961 | ) | (2,248 | ) | — | (163,260 | ) | ||||||||||||||||||
|
|
|
|
|
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|
|
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|
|
|
|
| |||||||||||||||||
Net book amount | 312,274 | 811 | 156,798 | 221,811 | 1,595 | 2,676 | 145,596 | 841,561 | ||||||||||||||||||||||||
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|
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 18
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (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$ 2,275 and US$ 2,901 of depreciation charges are included in “Cost of manufactured products sold and services rendered” for the three-month periods ended March 31, 2012 and 2011, respectively. An amount of US$ 1,362 and US$ 1,291 of depreciation charges are included in “General and administrative expenses” for the three-month periods ended March 31, 2012 and 2011, respectively. An amount of US$ 168 and US$ nil of depreciation charges are included in “Selling expenses” for the three-month periods ended March 31, 2012 and 2011, respectively. An amount of US$ nil and 6,096 of depreciation charge were not charged in the result of the period and were capitalized in “Inventories”.
As of March 31, 2012, borrowing costs of US$ 1,502 (March 31, 2011: US$ 120) 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$ 325,862 as of March 31, 2012.
As of March 31, 2012 included within property, plant and equipment balances are US$ 1.207 related to the net book value of assets under finance leases.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 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)
7. | Intangible assets |
Changes in the Group’s intangible assets in the three-month periods ended March 31, 2012 and 2011 were as follows:
Goodwill | Trademarks | Software | Total | |||||||||||||
Three-month period ended March 31, 2011 | ||||||||||||||||
Opening net book amount | 26,494 | 1,884 | 275 | 28,653 | ||||||||||||
Exchange differences | 203 | 14 | 7 | 224 | ||||||||||||
Additions | — | — | 1 | 1 | ||||||||||||
Amortization charge (i) (20) | — | (53 | ) | (39 | ) | (92 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Closing net book amount | 26,697 | 1,845 | 244 | 28,786 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
At March 31, 2011(unaudited) | ||||||||||||||||
Cost | 26,697 | 2,787 | 675 | 30,159 | ||||||||||||
Accumulated amortization | — | (942 | ) | (431 | ) | (1,373 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net book amount | 26,697 | 1,845 | 244 | 28,786 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Three-month period ended March 31, 2012 | ||||||||||||||||
Opening net book amount | 34,886 | 1,592 | 277 | 36,755 | ||||||||||||
Exchange differences | (185 | ) | 13 | 9 | (163 | ) | ||||||||||
Additions | — | — | 13 | 13 | ||||||||||||
Amortization charge (ii) (Note 20) | — | (47 | ) | (47 | ) | (94 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Closing net book amount | 34,701 | 1,558 | 252 | 36,511 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
At March 31, 2012(unaudited) | ||||||||||||||||
Cost | 34,701 | 2,680 | 840 | 38,221 | ||||||||||||
Accumulated amortization | — | (1,122 | ) | (588 | ) | (1,710 | ) | |||||||||
|
|
|
|
|
|
|
| |||||||||
Net book amount | 34,701 | 1,558 | 252 | 36,511 | ||||||||||||
|
|
|
|
|
|
|
|
(i) | For the three-month period ended March 31, 2012 an amount of US$ 47 and US$ 47 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 three-month period ended March 31, 2011 an amount of US$ 39 and US$ 53 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 September 30, 2011.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 20
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (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 three-month periods ended March 31, 2012 and 2011 were as follows:
March 31, 2012 | March 31, 2011 | |||||||
(unaudited) | (unaudited) | |||||||
Beginning of the period | 239,600 | 186,757 | ||||||
Increase due to purchases | 294 | — | ||||||
Initial recognition and changes in fair value of biological assets (i) | 27,109 | 58,458 | ||||||
Decrease due to harvest | (58,210 | ) | (60,327 | ) | ||||
Decrease due to sales | (445 | ) | (417 | ) | ||||
Costs incurred during the period | 80,753 | 45,352 | ||||||
Exchange differences | 3,539 | 3,097 | ||||||
|
|
|
| |||||
End of the period | 292,640 | 232,920 | ||||||
|
|
|
|
(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$ 8,751 (gain) for the three-month period ended March 31, 2012 (2011: US$ 25,522 - gain). In 2012, an amount of US$ (12,853) (2011: US$ 34,748) was attributable to price changes, and an amount of US$ 21,604 (2011: US$ (9,226)) was mainly attributable to physical changes. |
Biological assets as of March 31, 2012 and December 31, 2011 were as follows:
March 31, 2012 | December 31, 2011 | |||||||
(unaudited) | (unaudited) | |||||||
Non-current | ||||||||
Cattle for dairy production | 9,493 | 9,338 | ||||||
Other cattle | 1,240 | 1,341 | ||||||
Sown land – coffee | 17,892 | 18,369 | ||||||
Sown land – sugarcane | 204,520 | 158,925 | ||||||
|
|
|
| |||||
233,145 | 187,973 | |||||||
|
|
|
| |||||
Current | ||||||||
Other cattle | 253 | 160 | ||||||
Sown land – crops | 54,979 | 28,300 | ||||||
Sown land – rice | 4,263 | 23,167 | ||||||
|
|
|
| |||||
59,495 | 51,627 | |||||||
|
|
|
| |||||
Total biological assets | 292,640 | 239,600 | ||||||
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 21
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
9. | Trade and other receivables, net |
March 31, 2012 | December 31, 2011 | |||||||
(unaudited) | ||||||||
Non current | ||||||||
Receivables from related parties (Note 24) | 63 | 63 | ||||||
|
|
|
| |||||
Trade receivables – net | 63 | 63 | ||||||
|
|
|
| |||||
Advances to suppliers | 4,846 | 2,719 | ||||||
Income tax credits | 3,643 | 3,682 | ||||||
Non-income tax credits (i) | 10,245 | 6,988 | ||||||
Cash collateral | 1,540 | 1,469 | ||||||
Other receivables | 831 | 824 | ||||||
|
|
|
| |||||
Non current portion | 21,168 | 15,746 | ||||||
|
|
|
| |||||
Current | ||||||||
Trade receivables | 32,366 | 38,178 | ||||||
Receivables from related parties (Note 24) | 5,276 | 4,846 | ||||||
Less: Allowance for trade receivables | (1,765 | ) | (1,622 | ) | ||||
|
|
|
| |||||
Trade receivables – net | 35,877 | 41,402 | ||||||
|
|
|
| |||||
Prepaid expenses | 20,499 | 12,102 | ||||||
Advances to suppliers | 15,952 | 11,872 | ||||||
Income tax credits | 3,606 | 2,522 | ||||||
Non-income tax credits (i) | 47,473 | 45,659 | ||||||
Cash collateral | 1,294 | 1,792 | ||||||
Receivable from disposal of farmland | 18,311 | 18,090 | ||||||
Other receivables | 4,836 | 7,743 | ||||||
|
|
|
| |||||
Subtotal | 111,971 | 99,779 | ||||||
|
|
|
| |||||
Current portion | 147,848 | 141,181 | ||||||
|
|
|
| |||||
Total trade and other receivables, net | 169,016 | 156,927 | ||||||
|
|
|
|
(i) | Includes US$ 684 and US$ 3,021 reclassified from property, plant and equipment as of March 31, 2012 and December 31, 2011 respectively. |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 22
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
9. | Trade and other receivables, net (continued) |
The fair values of current trade and other receivables approximate their respective carrying amounts due to their short-term nature. The fair values of non-current trade and other receivables approximate their carrying amount, as the impact of discounting is not significant.
The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies (expressed in US dollars):
March 31, 2012 | December 31, 2011 | |||||||
(unaudited) | ||||||||
Currency | ||||||||
US Dollar | 47,518 | 51,338 | ||||||
Argentine Peso | 53,595 | 42,163 | ||||||
Uruguayan Peso | 994 | 803 | ||||||
Brazilian Reais | 66,909 | 62,622 | ||||||
|
|
|
| |||||
169,016 | 156,927 | |||||||
|
|
|
|
As of March 31, 2012 trade receivables of US$ 7,072 (December 31, 2011: US$ 18,938) were past due but not impaired. The ageing analysis of these receivables is as follows:
March 31, 2012 | December 31, 2011 | |||||||
(unaudited) | ||||||||
Up to 3 months | 5,498 | 17,996 | ||||||
3 to 6 months | 1,513 | 914 | ||||||
Over 6 months | 61 | 28 | ||||||
|
|
|
| |||||
7,072 | 18,938 | |||||||
|
|
|
|
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 holds mortgages as collateral for the sale of La Macarena and La Alegría farmlands.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 23
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
10. | Inventories |
March 31, 2012 | December 31, 2011 | |||||||
(unaudited) | ||||||||
Raw materials | 25,865 | 31,539 | ||||||
Finished goods | 60,929 | 60,067 | ||||||
Stocks held by third parties | 373 | 4,528 | ||||||
Others | 13 | 13 | ||||||
|
|
|
| |||||
87,180 | 96,147 | |||||||
|
|
|
|
The cost of inventories recognized as expense are included in ‘Cost of manufactured products sold and services rendered’ amounted to US$ 35,179 for the three-month periods ended March 31, 2012. The cost of inventories recognized as expense and included in ‘Cost of agricultural produce sold and direct agricultural selling expenses’ amounted to US$ 32,245 for the three-month periods ended March 31, 2012.
11. | Cash and cash equivalents |
March 31, 2012 | December 31, 2011 | |||||||
(unaudited) | ||||||||
Cash at bank and on hand | 185,963 | 238,902 | ||||||
Short-term bank deposits | 96,947 | 91,644 | ||||||
|
|
|
| |||||
282,910 | 330,546 | |||||||
|
|
|
|
12. | Shareholders’ contributions |
Number of shares (thousands) | Share capital and share premium | |||||||
At January 1, 2011 (1) | 80,000 | 683,343 | ||||||
Issue of shares on January 28, 2011 (2) | 40,069 | 422,177 | ||||||
At March 31, 2011 | 120,069 | 1,105,520 | ||||||
At January 1, 2012 | 120,533 | 1,106,805 | ||||||
Employee share options exercised (Note 13) | 32 | 312 | ||||||
Exchange of shares | 697 | 6,608 | ||||||
At March 31, 2012 | 121,262 | 1,113,725 |
(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.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 24
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
12. | Shareholders’ contributions (continued) |
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.
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.
The related transaction costs totaling US$ 15 million have been netted off with the deemed proceeds, on the Share premium issued.
During March, 2012, the Company issued 696,618 shares to certain limited partners of International Farmland Holdings LP (“IFH”) in exchange for their residual interest, totaling 0.57230% interest in IFH thereby increasing its interest in IFH to 99.2%.
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 Restricted Share and Restricted Stock Unit 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 three-month periods ended March 31, 2012 and 2011 the Group incurred US$ 0.8 million and US$ 0.3 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:
Grant Date | Jan 2009 | Nov 2009 | Jan 2010 | Jan 2010 | Jun 2010 | Sep 2010 | Sep 2010 | |||||||||||||||||||||
Expected volatility | 21 | % | 22 | % | 22 | % | 22 | % | 22 | % | 22 | % | 22 | % | ||||||||||||||
Expected life | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | 6.5 | |||||||||||||||||||||
Risk free rate | 1.85 | % | 2.31 | % | 2.34 | % | 2.34 | % | 1.79 | % | 1.41 | % | 1.41 | % | ||||||||||||||
Expected dividend yield | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | 0 | % | ||||||||||||||
Fair value per option | $ | 3.52 | $ | 3.78 | $ | 3.62 | $ | 3.38 | $ | 3.17 | $ | 3.05 | $ | 3.28 | ||||||||||||||
Possibility of ceasing employment before vesting | 0.16 | % | 0.46 | % | 0.46 | % | 0.46 | % | 0.67 | % | 0.76 | % | 0.76 | % | ||||||||||||||
Exercise price | $ | 13.40 | $ | 13.40 | $ | 12.82 | $ | 13.40 | $ | 13.40 | $ | 13.40 | $ | 12.82 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 25
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (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 are not 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
March 31, 2012 | March 31, 2011 | |||||||||||||||
Average exercise price per share | Options (thousands) | Average exercise price per share | Options (thousands) | |||||||||||||
At January 1 | 6.68 | 2,134 | 6.67 | 2,176 | ||||||||||||
Granted | — | — | — | — | ||||||||||||
Forfeited | — | — | — | — | ||||||||||||
Exercised | 6.71 | (32 | ) | — | — | |||||||||||
Expired | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
At March 31 | 6.68 | 2,101 | 6.67 | 2,176 | ||||||||||||
|
|
|
|
|
|
|
|
2007/2008 Equity Incentive Plan
March 31, 2012 | March 31, 2011 | |||||||||||||||
Average exercise price per share | Options (thousands) | Average exercise price per share | Options (thousands) | |||||||||||||
At January 1 | 13.06 | 2,038 | 13.05 | 2,113 | ||||||||||||
Granted | — | — | — | — | ||||||||||||
Forfeited | 13.17 | (9 | ) | 12.82 | (46 | ) | ||||||||||
Exercised | — | — | — | — | ||||||||||||
Expired | — | — | — | — | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
At March 31 | 13.06 | 2,029 | 13.05 | 2,067 | ||||||||||||
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 26
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
13. | Equity-settled share-based payments (continued) |
Options outstanding under the plans have the following expiry date and exercise prices:
2004 Incentive Option Plan
Exercise price per share | ||||||||||||
Shares (in thousands) | ||||||||||||
Expiry date: | March 31, 2012 | March 31, 2011 | ||||||||||
May 1, 2014 | 5.83 | 674 | 674 | |||||||||
May 1, 2015 | 5.83 | 553 | 556 | |||||||||
May 1, 2016 | 5.83 | 173 | 229 | |||||||||
February 16, 2016 | 7.11 | 110 | 110 | |||||||||
October 1, 2016 | 8.62 | 592 | 607 |
2007/2008 Equity Incentive Plan
Exercise price per share | ||||||||||||
Shares (in thousands) | ||||||||||||
Expiry date: | March 31, 2012 | March 31, 2011 | ||||||||||
Dec 1, 2017 | 12.82 | 1,149 | 1,151 | |||||||||
Jan 30, 2019 | 13.40 | 687 | 700 | |||||||||
Nov 1, 2019 | 13.40 | 13 | 18 | |||||||||
Jan 30, 2020 | 12.82 | 28 | 35 | |||||||||
Jan 30, 2020 | 13.40 | 71 | 81 | |||||||||
Jun 30, 2020 | 13.40 | 22 | 22 | |||||||||
Sep 1, 2020 | 13.40 | 44 | 44 | |||||||||
Sep 1, 2020 | 12.82 | 15 | 15 |
The following table shows the exercisable shares at year end under both the Adecoagro/ IFH 2004 Incentive Option Plan and the Adecoagro/ IFH 2007/ 2008 Equity Incentive Plan:
Exercisable shares in thousands | ||||
March 31, 2012 | 3,841 | |||
March 31, 2011 | 3,423 |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 27
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
13. | Equity-settled share-based payments (continued) |
(b) | Restricted Share and Restricted Stock Unit Plan |
The Restricted Share and Restricted Stock Unit Plan was effectively established in 2010 and amended in November 2011 and is administered by the Compensation Committee of the Company. Awards under this plan vest over a 3-year period from the date of grant at 33% on each anniversary of the grant date. Participants are entitled to receive one common share of the Company for each restricted share or restricted unit issued. For the Restricted Share Plan there are no performance requirements for the delivery of common shares, except that a participant’s employment with the Group must not have been terminated prior to the relevant vesting date. If the participant ceases to be an employee for any reason, any unvested restricted share shall not be converted into common shares and the participant shall cease for all purposes to be a shareholder with respect to such shares.
On July 18, 2011, the Group issued and registered 427,293 restricted shares with a nominal value of US$ 1.5 which were granted under the Restricted Share Plan. While the restricted shares are not vested, they are recognized in “Other reserves”. Once they are vested, the reserve is reversed and a share premium is recognized.
The restricted shares under the Restricted Share and Restricted Stock Unit Plan were measured at fair value at the date of grant.
As March 31, 2012, the Group recognized compensation expense US$ 0.6 million related to the restricted shares granted under the Restricted Share and Restricted Stock Unit Plan.
Key grant-date fair value and other assumptions under the Restricted Share and Restricted Stock Unit 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 | % |
Movements in the number of restricted shares outstanding under the Restricted Share and Restricted Stock Unit Plan are as follows:
Restricted shares (thousands) | ||||
2012 | ||||
At January 1, 2012 | 356 | |||
Granted | — | |||
Forfeited | (1 | ) | ||
Exercised | — | |||
|
| |||
At March 31, 2012 | 355 | |||
|
|
On March 27, 2012, the Board of Directors of the Company approved the award of 471 thousand restricted stock units under the Adecoagro’s Restricted Share and Restricted Stock Unit Plan as compensation to senior and medium management and key employees. During April 2012, 316 thousand restricted stock units were granted out of this award.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 28
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
14. | Trade and other payables |
March 31, 2012 | December 31, 2011 | |||||||
(unaudited) | ||||||||
Non-current | ||||||||
Payable from acquisition of property, plant and equipment (i) | 3,646 | 3,646 | ||||||
Taxes payable | 1,824 | 1,547 | ||||||
Other payables | 870 | 885 | ||||||
Escrows arising on business combinations | 2,376 | 2,340 | ||||||
|
|
|
| |||||
8,716 | 8,418 | |||||||
|
|
|
| |||||
Current | ||||||||
Trade payables | 87,651 | 68,672 | ||||||
Payable from acquisition of subsidiary | 26,156 | 35,730 | ||||||
Advances from customers | 4,134 | 1,721 | ||||||
Amounts due to related parties (Note 24) | 239 | 318 | ||||||
Taxes payable | 4,536 | 4,989 | ||||||
Other payables | 3,643 | 2,590 | ||||||
|
|
|
| |||||
126,359 | 114,020 | |||||||
|
|
|
| |||||
Total trade and other payables | 135,075 | 122,438 | ||||||
|
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|
|
(i) | These trades payable are mainly collateralized by property, plant and equipment of the Group. |
15. | Borrowings |
March 31, 2012 | December 31, 2011 | |||||||
(unaudited) | ||||||||
Non-current | ||||||||
Syndicated loan (*) | 10,000 | 10,000 | ||||||
BNDES loan (*) | 51,422 | 52,627 | ||||||
IDB facility (*) | 71,447 | 69,401 | ||||||
Brazil Loan (*) | 35,216 | 23,070 | ||||||
Other bank borrowings | 54,455 | 48,232 | ||||||
Obligations under finance leases | 654 | 79 | ||||||
|
|
|
| |||||
223,194 | 203,409 | |||||||
|
|
|
| |||||
Current | ||||||||
Bank overdrafts | 3,856 | 6,735 | ||||||
Syndicated loan (*) | 10,280 | 10,112 | ||||||
BNDES loan (*) | 10,664 | 10,396 | ||||||
IDB facility (*) | 7,895 | 8,349 | ||||||
Brazil Loan (*) | 4,110 | 2,836 | ||||||
Other bank borrowings | 146,162 | 118,749 | ||||||
Obligations under finance leases | 370 | 119 | ||||||
|
|
|
| |||||
183,337 | 157,296 | |||||||
|
|
|
| |||||
Total borrowings | 406,531 | 360,705 | ||||||
|
|
|
|
(*) | The Group was in compliance with the related covenants under the respective loan agreements. |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 29
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
15. | Borrowings (continued) |
As of March 31, 2012, total bank borrowings include collateralized liabilities of US$ 343,509 (December 31, 2011: US$ 297,472). 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:
March 31, 2012 | December 31, 2011 | |||||||
(unaudited) | ||||||||
Fixed rate: | ||||||||
Less than 1 year | 69,533 | 70,007 | ||||||
Between 1 and 2 years | 23,860 | 25,554 | ||||||
Between 2 and 3 years | 13,028 | 12,426 | ||||||
Between 3 and 4 years | 9,659 | 8,902 | ||||||
Between 4 and 5 years | 8,037 | 7,551 | ||||||
More than 5 years | 22,161 | 22,866 | ||||||
|
|
|
| |||||
146,278 | 147,306 | |||||||
|
|
|
| |||||
Variable rate: | ||||||||
Less than 1 year | 113,434 | 87,170 | ||||||
Between 1 and 2 years | 41,781 | 40,353 | ||||||
Between 2 and 3 years | 36,327 | 24,756 | ||||||
Between 3 and 4 years | 30,170 | 23,507 | ||||||
Between 4 and 5 years | 26,351 | 23,369 | ||||||
More than 5 years | 11,166 | 14,046 | ||||||
|
|
|
| |||||
259,229 | 213,201 | |||||||
|
|
|
| |||||
405,507 | 360,507 | |||||||
|
|
|
|
The carrying amounts of the Group’s borrowings are denominated in the following currencies (expressed in US dollars):
March 31, 2012 | December 31, 2011 | |||||||
(unaudited) | ||||||||
Currency | ||||||||
Argentine Peso | 4,268 | 6,739 | ||||||
US Dollar | 222,141 | 199,657 | ||||||
Uruguayan Peso | 7 | — | ||||||
Brazilian Reais | 180,115 | 154,309 | ||||||
|
|
|
| |||||
406,531 | 360,705 | |||||||
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 30
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
16. | Taxation |
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
March 31, 2012 | March 31, 2011 | |||||||
(unaudited) | (unaudited) | |||||||
Current income tax | (416 | ) | (2,723 | ) | ||||
Deferred income tax | (3,269 | ) | (6,633 | ) | ||||
|
|
|
| |||||
Income tax (charge) / benefit | (3,685 | ) | (9,356 | ) | ||||
|
|
|
|
There has been no change in the statutory tax rates in the countries where the Group operates since December 31, 2011.
The gross movement on the deferred income tax account is as follows:
March 31, 2012 | March 31, 2011 | |||||||
(unaudited) | (unaudited) | |||||||
Beginning of period | 55,908 | 44,032 | ||||||
Exchange differences | (2,453 | ) | (3,036 | ) | ||||
Income tax charge / (benefit) | 3,269 | 6,633 | ||||||
|
|
|
| |||||
End of period | 56,724 | 47,629 | ||||||
|
|
|
|
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:
March 31, 2012 | March 31, 2011 | |||||||
(unaudited) | (unaudited) | |||||||
Tax calculated at the tax rates applicable to profits in the respective countries | 2,267 | 9,800 | ||||||
Non-deductible items | 336 | 228 | ||||||
Unused tax losses, net | 408 | 901 | ||||||
Others | 674 | (1,573 | ) | |||||
|
|
|
| |||||
Income tax charge | 3,685 | 9,356 | ||||||
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 31
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
17. | Payroll and social security liabilities |
March 31, 2012 | December 31, 2011 | |||||||
(unaudited) | ||||||||
Non-current | ||||||||
Social security payable | 1,453 | 1,431 | ||||||
|
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| |||||
1,453 | 1,431 | |||||||
|
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| |||||
Current | ||||||||
Salaries payable | 5,651 | 3,174 | ||||||
Social security payable | 2,546 | 2,758 | ||||||
Provision for vacations | 6,416 | 7,100 | ||||||
Provision for bonuses | 4,993 | 3,978 | ||||||
|
|
|
| |||||
19,606 | 17,010 | |||||||
|
|
|
| |||||
Total payroll and social security liabilities | 21,059 | 18,441 | ||||||
|
|
|
|
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, 2011, except for the increase in provision for onerous contracts as of March 31, 2012 for a total amount of US$ 1,750.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 32
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
19. | Sales |
March 31, 2012 | March 31, 2011 | |||||||
(unaudited) | (unaudited) | |||||||
Sales of manufactured products and services rendered: | ||||||||
Ethanol | 31,684 | 3,510 | ||||||
Sugar | 12,560 | 5,232 | ||||||
Rice | 19,909 | 15,431 | ||||||
Energy | 1,370 | 161 | ||||||
Operating leases | 1,389 | 1,089 | ||||||
Coffee | — | 713 | ||||||
Services | 353 | 155 | ||||||
Others | 13 | 50 | ||||||
|
|
|
| |||||
67,278 | 26,341 | |||||||
|
|
|
| |||||
Sales of agricultural produce and biological assets: | ||||||||
Soybean | 4,129 | 3,925 | ||||||
Cattle for dairy production | 372 | 373 | ||||||
Other cattle | 73 | 247 | ||||||
Corn | 11,847 | 12,917 | ||||||
Cotton | 2,314 | — | ||||||
Milk | 4,343 | 4,070 | ||||||
Wheat | 11,185 | 3,962 | ||||||
Coffee | 461 | 1,456 | ||||||
Sunflower | 3,426 | 3,800 | ||||||
Barley | 2,837 | 449 | ||||||
Seeds | 5 | 19 | ||||||
Sorghum | — | 571 | ||||||
Others | 212 | 122 | ||||||
|
|
|
| |||||
41,204 | 31,911 | |||||||
|
|
|
| |||||
Total sales | 108,482 | 58,252 | ||||||
|
|
|
|
Commitments to sell commodities at a future date
The Group entered into contracts to sell non financial instruments, mainly, sugar, soybean and corn through sales forward contracts. Those contracts are held for purposes of delivery the non financial instrument in accordance with the Group’s expected sales. Accordingly, as the own use exception criteria are met, those contracts are not recorded as derivatives.
The notional amount of these contracts is US$ 16.0 million as of March 31, 2012 (2011: US$ 122.6 million) comprised primarily of 20,626 tons of sugar (US$ 11.19 million), 5,628 tons of soybean (U$S 2,4 million) and 2,135 tons of cotton (U$S 2.4 million) which expire between June 2012 and December 2012.
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 33
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
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:
March 31, 2012 | March 31, 2011 | |||||||
(unaudited) | (unaudited) | |||||||
Cost of agricultural produce and biological assets sold | 37,040 | 28,191 | ||||||
Raw materials and consumables used in manufacturing activities | 29,345 | 14,340 | ||||||
Services | 5,872 | 2,189 | ||||||
Salaries and social security expenses (Note 21) | 19,033 | 11,157 | ||||||
Depreciation and amortization | 3,899 | 4,284 | ||||||
Taxes (*) | 671 | 2,197 | ||||||
Maintenance and repairs | 7,369 | 2,905 | ||||||
Lease expense and similar arrangements (**) | 1,152 | 535 | ||||||
Freights | 2,632 | 3,282 | ||||||
Export taxes / selling taxes | 5,848 | 2,197 | ||||||
Fuel and lubricants | 1,901 | 874 | ||||||
Others | 6,688 | 4,881 | ||||||
|
|
|
| |||||
Total expenses by nature | 121,450 | 77,032 | ||||||
|
|
|
|
(*) | Excludes export taxes and selling taxes. |
(**) | Relates to various cancellable operating lease agreements for office and machinery equipment. |
For the three-month period ended March 31, 2012, an amount of US$ 53,802 is included as “cost of manufactured products sold and services rendered” (March 31, 2011: US$ 21,944); an amount of US$ 41,204 is included as “cost of agricultural produce sold and direct agricultural selling expenses” (March 31, 2011: US$ 31,911); an amount of US$ 13,206 is included in “general and administrative expenses” (March 31, 2011: US$ 17,307); and an amount of US$ 13,238 is included in “selling expenses” as described above (March 31, 2011: US$ 5,870).
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 34
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
21. | Salaries and social security expenses |
March 31, 2012 | March 31, 2011 | |||||||
(unaudited) | (unaudited) | |||||||
Wages and salaries | 13,853 | 8,968 | ||||||
Social security costs | 4,460 | 1,840 | ||||||
Equity-settled share-based compensation | 720 | 349 | ||||||
|
|
|
| |||||
19,033 | 11,157 | |||||||
|
|
|
| |||||
Number of employees | 6,044 | 5,529 | ||||||
|
|
|
|
22. | Other operating loss, net |
March 31, 2012 | March 31, 2011 | |||||||
(unaudited) | (unaudited) | |||||||
(Loss) /gain from commodity derivative financial instruments | (6,195 | ) | 1,486 | |||||
Loss from onerous contracts – forwards | (1,571 | ) | (7,344 | ) | ||||
Gain from disposal of other property items | 561 | 218 | ||||||
Others | (490 | ) | (56 | ) | ||||
|
|
|
| |||||
(7,695 | ) | (5,696 | ) | |||||
|
|
|
|
23. | Financial results, net |
March 31, 2012 | March 31, 2011 | |||||||
(unaudited) | (unaudited) | |||||||
Finance income: | ||||||||
- Interest income | 4,466 | 601 | ||||||
- Gain from interest rate/foreign exchange rate derivative financial instruments | 653 | 1,471 | ||||||
- Other income | 461 | 1,351 | ||||||
|
|
|
| |||||
Finance income | 5,580 | 3,423 | ||||||
|
|
|
| |||||
Finance costs: | ||||||||
- Interest expense | (5,974 | ) | (9,417 | ) | ||||
- Foreign exchange losses, net | (1,753 | ) | (1,484 | ) | ||||
- Taxes | (614 | ) | (441 | ) | ||||
- Other expenses | (1,458 | ) | (3,966 | ) | ||||
|
|
|
| |||||
Finance costs | (9,799 | ) | (15,308 | ) | ||||
|
|
|
| |||||
|
|
|
| |||||
Total financial results, net | (4,219 | ) | (11,885 | ) | ||||
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 35
Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
24. | Related-party transactions |
The following is a summary of the balances and transactions with related parties:
Related party | Relationship | Description of transaction | Income (loss) included in the statement of income | Balance receivable (payable) | ||||||||||||||||||
March 31, 2012 | March 31, 2011 | March 31, 2012 | December 31, 2011 | |||||||||||||||||||
�� | (unaudited) | (unaudited) | (unaudited) | |||||||||||||||||||
Grupo La Lácteo | Joint venture | Sales of goods | 2,473 | 4,070 | — | — | ||||||||||||||||
Purchases of goods | (52 | ) | — | — | — | |||||||||||||||||
Interest income | 62 | — | — | — | ||||||||||||||||||
Receivables from related parties (Note 9) | — | — | 5,339 | 4,909 | ||||||||||||||||||
Mario Jorge de Lemos Vieira/ Cia Agropecuaria Monte Alegre/ Alfenas | (i) | Cost of manufactured products sold and services rendered (ii) | 1,195 | — | — | — | ||||||||||||||||
Agricola Ltda/ Marcelo Weyland Barbosa Vieira/ | ||||||||||||||||||||||
Paulo Albert Weyland | Payables (Note 14) | |||||||||||||||||||||
Vieira | — | — | (239 | ) | (318 | ) | ||||||||||||||||
Ospraie | (i) | Consent fee (iii) | — | (3,000 | ) | — | — | |||||||||||||||
Directors and senior management | Employment | Compensation selected employees | (1,637 | ) | (1,520 | ) | (16,100 | ) | (15,306 | ) |
(i) | 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. |
The accompanying notes are an integral part of these condensed consolidated interim financial statements.
F - 36