Business Context and Reporting Period
Bioceres Crop Solutions Corp. filed a Form 6-K on September 10, 2020, reporting unaudited consolidated results for the three-month fourth quarter and fiscal year ended June 30, 2020. Results are stated in U.S. dollars under IFRS. The Company provides crop protection, seed and integrated products, crop nutrition, and HB4 drought-tolerant technology. Argentina is accounted for as a hyperinflationary economy under IAS 29; management therefore presents “Comparable” results excluding the impact of IAS 29.
Financial and Operating Metrics
| Metric | 4Q20 | FY20 |
|---|---|---|
| Reported revenue | $48.2 million, down 3% | $173.1 million, up 8% |
| Comparable revenue | $51.9 million, up 46% | $174.2 million, up 17% |
| Reported gross profit | $22.8 million; 47.4% margin | $79.5 million; 45.9% margin |
| Comparable gross profit | $25.3 million; 48.7% margin | $84.9 million; 48.7% margin |
| Adjusted EBITDA | $14.7 million, up 67%; 30.5% margin | $46.5 million, up 13%; 26.9% margin |
| Net profit | $2.9 million, versus a $1.2 million loss | $4.0 million, versus a $16.4 million loss |
| Operating profit | $12.8 million, versus $7.3 million | $39.1 million, versus $32.1 million |
| Net finance result | $6.6 million loss | $29.1 million loss |
- FY20 revenue growth was driven by international adjuvant sales, higher seed-treatment-pack sales, and increased micro-beaded fertilizer sales. Comparable revenue rose across all three segments: crop protection 13% to $94.1 million, seed and integrated products 32% to $30.8 million, and crop nutrition 18% to $49.3 million.
- FY20 gross margin declined on a comparable basis to 48.7% from 50.5%, primarily because of product mix, including greater sales of lower-margin micro-beaded fertilizer and more Brazil B2B adjuvant sales.
- FY20 SG&A was $38.3 million, down 2.3%. FY20 research and development expense was $4.2 million, with an additional $3.8 million invested in R&D activities related to intangible assets and joint ventures.
- Cash and cash equivalents were $34.9 million at June 30, 2020, compared with $3.5 million at June 30, 2019. Including other financial assets and restricted deposits, management reported approximately $56 million of cash, deposits, and short-term investments.
- Total debt was approximately $104.8 million, comprising $63.6 million of short-term borrowings and $41.2 million of long-term borrowings, excluding discounted checks. Net debt was $91.9 million, and net debt to LTM Adjusted EBITDA improved to 1.98x from 2.24x.
- Capital expenditures were $1.6 million in FY20 versus $2.0 million in FY19. The filing does not provide a clear consolidated operating cash flow or free cash flow value.
Material Changes Versus Prior Comparable Period
- Comparable FY20 revenue increased 17%, while Adjusted EBITDA increased 13% and the margin expanded by 113 basis points to 26.9%.
- Net profit improved to $4.0 million from a $16.4 million loss, aided by higher operating profit and a $11.2 million improvement in the net finance result.
- Net interest expense and financial commissions declined to $17.3 million from $23.2 million, reflecting more efficient working-capital financing.
- Cash and cash equivalents increased by $31.5 million, while total net debt declined modestly by $0.9 million. Long-term debt represented 57% of total debt at year-end versus 37% in the prior year.
- FY20 SG&A included $3.4 million of non-cash share-based incentives and a $0.8 million recovery of prior merger-related transaction expenses. FY19 included $4.5 million of merger-related transaction expenses and a $20.9 million non-cash share-based payment cost related to the listing.
Guidance, Outlook, Risks, and Unusual Items
- Management stated that inventory preparation for the HB4 commercial launch remained on track. More than 20,000 hectares were reserved for HB4 soybean planting in the Southern Cone, versus 3,000 hectares a year earlier. Approximately 7,000 hectares were planted to build HB4 wheat seed inventories, versus 400 hectares in the fourth quarter of 2019.
- The Company raised approximately $65 million during FY20 to accelerate the HB4 commercial launch and expand internationally. This included $42.5 million from convertible promissory notes, $15 million of Rizobacter Series III bonds due December 2021 at a 4.73% annual nominal rate, and $7.6 million of Series II bonds due 2021.
- Subsequent to year-end, Rizobacter issued $17 million of Series IV bonds due August 2023 at a stated 0.0% annual interest rate.
- On August 24, 2020, the Company completed a tender offer covering all 24.2 million outstanding NYSE-listed warrants. Approximately 90% of holders tendered, with 99% of those electing shares; outstanding shares increased 7% to 38.7 million, and the transaction removed potential future warrant dilution.
- The Company reported continued operations without supply-chain disruptions through the filing date despite COVID-19. Risks include the duration and effects of COVID-19, customer and government responses, employee and community safety, inventory ramp-up execution, macroeconomic and foreign-exchange conditions, inflation in Argentina, agricultural demand, and regulatory or commercial approval of HB4 products.
- Management’s growth commentary is forward-looking and is not a formal quantitative revenue or earnings guidance forecast. Actual results may differ materially from expectations.
Investor Verification Checklist
- Reconcile reported IFRS revenue and profit with the non-IFRS Comparable revenue, Comparable gross profit, Adjusted EBITDA, and net debt measures, including the effects of IAS 29.
- Review the full audited annual financial statements for cash flow details, working-capital movements, debt maturities, covenants, and liquidity requirements.
- Verify the terms, accounting treatment, and dilution effects of the convertible notes, Series II, III, and IV bonds, and the warrant exchange.
- Assess the regulatory status, commercialization timing, inventory requirements, and customer adoption assumptions for HB4 wheat and soybean products.
- Monitor COVID-19 effects, Argentine inflation and currency movements, agricultural input demand, product mix, and the Company’s ability to maintain its improved leverage ratio.