Business context and reporting period
Bioceres Crop Solutions Corp. is an Argentina-centered agricultural technology and inputs company, operating in crop protection, crop nutrition, and seed and integrated products. Its portfolio includes adjuvants, biologicals, fertilizers, seeds and licensed biotechnology, including drought-tolerance technology HB4. This is the audited annual report for the fiscal year ended June 30, 2020—not a standalone 2019 fourth-quarter filing. Financial statements are presented in U.S. dollars under IFRS as issued by the IASB.
Financial performance and position
| Metric | FY2020 | FY2019 |
|---|---|---|
| Total revenue | $173.1 million | $160.6 million |
| Gross profit / gross margin | $79.5 million / 46.0% | $73.6 million / 45.9% |
| Operating income | $39.1 million | $32.1 million |
| Profit (loss) for year | $4.2 million | $(16.4) million |
| Adjusted EBITDA / margin | $46.5 million / 26.9% | $41.3 million / 25.7% |
| Operating cash flow | $11.4 million | $29.7 million |
| Cash and cash equivalents at year-end | $27.2 million | $3.5 million |
| Total assets / total liabilities | $297.6 million / $236.8 million | $242.5 million / $180.4 million |
FY2020 revenue grew 7.8% as reported. Management states that, excluding the effect of IAS 29 hyperinflation accounting, revenue rose to $174.2 million from $148.6 million. Segment revenue was $94.2 million in crop protection, $49.4 million in crop nutrition and $29.5 million in seed and integrated products. Segment gross margins were 43%, 42% and 61%, respectively.
Cash from operations declined despite the return to profitability, with management attributing the FY2020 cash flow to $35.7 million of working-capital outflows. Investing cash outflow was $22.2 million, including $17.8 million invested in financial assets; financing provided $33.5 million. Current assets were $164.7 million and current liabilities $130.6 million; management reported a current-liabilities-to-current-assets ratio of 0.8x.
Balance-sheet borrowings were $104.9 million, including $63.7 million current and $41.2 million non-current. Separately, the company recorded $43.0 million of convertible notes at year-end, issued with $42.5 million principal and maturing in March 2023. The filing’s contractual-obligations table reports $114.5 million of borrowings including prospective interest, and total obligations of $216.6 million. The filing also cites total indebtedness of $92.0 million in its risk discussion; the different debt figures should be reconciled. Reported total equity was $60.7 million.
Material changes versus the prior comparable period
- Revenue increased $12.5 million, with growth across all three segments. Excluding IAS 29 effects, management attributes growth to higher crop protection, crop nutrition and seed/integrated-product sales.
- Operating income increased $7.1 million. Lower finance costs and lower other financial-result charges helped move the company from a FY2019 loss before tax to FY2020 pretax profit.
- Net income improved by $20.6 million, from a $16.4 million loss to $4.2 million profit. However, other comprehensive loss was $9.7 million, mainly reflecting translation losses; total comprehensive loss was $5.4 million.
- Adjusted EBITDA rose $5.2 million and its margin increased 1.2 percentage points. This is a non-IFRS measure and excludes, among other items, financing, tax, depreciation, amortization and share-based compensation.
- Operating cash flow fell $18.3 million, while year-end cash increased following financing proceeds, including the convertible-note issuance. Current borrowings declined, but non-current liabilities and total liabilities increased.
- Crop protection margin was pressured by a higher proportion of adjuvant sales in Brazil; crop nutrition margin declined with the increased share of lower-margin microbeaded fertilizers. Seed and integrated-product margin also contracted modestly.
Outlook, commentary, risks and unusual items
- Outlook: Management expects existing cash, operating inflows and borrowing or refinancing sources to cover anticipated needs for the next 12 months. Growth priorities include scaling Rizobacter products, international expansion and commercializing HB4-based EcoSoy and EcoWheat. The filing does not provide quantified revenue or earnings guidance.
- HB4 approvals and commercialization: Argentina approved HB4 wheat after year-end, conditional on import approval in Brazil. Approvals in other markets remain a key uncertainty. The company reported planting about 7,000 hectares for HB4 wheat seed inventory and reserving more than 20,000 hectares for upcoming soybean planting; commercial results depend on approvals, seed multiplication and market adoption.
- Debt and covenants: Rizobacter failed specified liabilities-to-assets covenants under its syndicated loan and private corporate bonds at June 30, 2020; lenders granted waivers for the year. The company identified $63.7 million of current borrowings, with substantial maturities in the following fiscal year. Argentine exchange controls may constrain repayment of foreign debt.
- Argentina and currency exposure: Approximately 76% of consolidated sales were attributable to Argentine operations. Inflation, peso depreciation, exchange controls, export duties, recession and restrictions on currency transfers may affect costs, earnings and access to cash. Argentina was treated as hyperinflationary under IAS 29 from July 1, 2018. The FY2020 tax-indexation adjustment increased tax expense and tax payable by $1.8 million, with most payment allocated to later years.
- COVID-19 and weather: Agricultural operations were exempt from Argentina’s restrictions, and the financial statements say the company had not been materially impacted through the reporting date. The ultimate effects remained uncertain. Management also cited severe Argentine drought and fires as risks to crops, planting decisions and results.
- Contingency: A judicial injunction affects certain Rizobacter shares and dividends. If the contingencies are lifted, the parent may owe a $17.3 million contingent purchase payment; an adverse ruling could require return of shares and reduce the group’s Rizobacter ownership.
- Capital and governance: The parent controlled approximately 63.7% of voting power. The company did not anticipate dividends, citing financial commitments and contractual restrictions. After year-end, it exchanged or redeemed all outstanding warrants; the transaction issued 2.6 million shares and paid cash for some warrants.
- Unusual accounting and audit matters: IFRS 16 was adopted in FY2020, recognizing right-of-use assets and lease liabilities. FY2020 SG&A included $3.4 million of non-cash share-based incentives, partly offset by a $0.8 million recovery of prior transaction expenses. The auditor issued an unqualified IFRS opinion; there was no auditor attestation on internal controls because the company was an emerging growth company.
Important facts for investors to verify
- Reconcile the filing’s $92.0 million indebtedness risk disclosure with $104.9 million of balance-sheet borrowings, the $43.0 million carrying value of convertible notes, and the contractual-obligations table.
- Review the debt maturity schedule, covenant-waiver terms and access to foreign currency for repayments, particularly the near-term maturities and Rizobacter’s 2021 notes.
- Track Brazilian import approval for HB4 wheat, other jurisdictional approvals, seed inventory ramp-up and evidence of commercial sales or royalty income.
- Assess the quality and repeatability of operating cash flow given the $35.7 million working-capital outflow, higher receivables and increased investment in financial assets.
- Separate reported growth from IAS 29 effects and assess the sensitivity of margins and earnings to Argentine inflation, exchange rates, export taxes and weather.
- Monitor the Rizobacter share injunction and potential $17.3 million contingent payment, as well as the effects of warrant-related share issuance and dilution from convertible notes or equity awards.