Adecoagro S.A. — FY2021 Form 20-F
Period: Fiscal year ended December 31, 2021; filed April 28, 2022. Although the request metadata says “2021 Q4,” this is an annual filing, and the supplied text does not provide stand-alone fourth-quarter results. Financial statements are prepared under IFRS and presented in U.S. dollars.
Business context
Adecoagro is a South American agribusiness operating in Argentina, Brazil and Uruguay. Its activities include crop and rice farming, dairy, sugar, ethanol and energy, and land transformation. It reported 2021 sales of $1.124 billion across its Farming and Sugar, Ethanol and Energy businesses; land-sale gains are presented separately.
Key financial metrics
| Metric | FY2021 | FY2020 | Change / context |
|---|---|---|---|
| Sales of goods and services | $1,124.4 million | $817.8 million | Up 37.5% |
| Profit from operations | $278.0 million | $189.1 million | Up 47.1%; operating margin approximately 24.7%, versus 23.1% |
| Profit for the year | $130.7 million | $1.1 million | Net margin approximately 11.6%; FY2020 profit was near break-even |
| Adjusted Consolidated EBITDA | $437.1 million | $342.0 million | Up approximately 27.8%; non-IFRS measure |
| Net cash from operating activities | $348.7 million | $257.1 million | Working capital absorbed cash, notably inventories and receivables |
| Adjusted Free Cash Flow | $93.7 million | $49.4 million | Non-IFRS measure; adjusted Free Cash Flow from Operations was $151.8 million |
| Capital expenditures | $205.2 million | $166.8 million | Primarily sugarcane renewal/expansion, equipment and facility investment |
| Cash and cash equivalents | $199.8 million | $336.3 million | Cash declined during the year |
| Total borrowings / net debt | $817.7 million / $617.9 million | $971.1 million / $634.8 million | Net debt / Adjusted EBITDA was 1.41x, versus 1.86x |
Current assets were $761.8 million and current liabilities were $357.4 million at year-end. The filing reports $626.8 million of fixed-rate and $190.8 million of variable-rate borrowings. The $500 million senior notes mature in 2027 and carry a 6% annual coupon.
Material changes versus FY2020
- Sales growth reflected higher commodity prices and stronger revenue in sugar, ethanol and energy, crops, dairy and rice. Management cited higher sugar, ethanol and energy prices, alongside increased crop and dairy prices and volumes.
- Profitability improved substantially, helped by higher operating profit and a marked reduction in net financial loss, from $175.7 million to $103.5 million. The change included a shift from $109.3 million of net foreign-exchange losses in 2020 to an $18.9 million gain in 2021.
- Biological-asset and agricultural-produce fair-value gains rose to $227.7 million from $122.7 million. These estimates are sensitive to prices, yields, costs and discount assumptions; they are not equivalent to cash proceeds.
- Cash from operations increased, but the company ended the year with less cash, partly reflecting higher inventories, investment and $66.5 million of share repurchases. Sugarcane output was affected by drought and frost; cane yields fell about 13% year over year, and the company recorded approximately $15 million of idle-production loss.
- Sales increased in all major operating areas: Farming sales rose 38.4% to $562.3 million, while Sugar, Ethanol and Energy sales rose 36.6% to $562.0 million. No farmland was sold in 2021, compared with two farm sales in 2020.
Outlook, commentary, risks and unusual items
- Management said existing cash, operating cash flow and financing access were expected to meet anticipated needs for the foreseeable future, and working capital was expected to cover liquidity requirements for the next 12 months. This is subject to market and operating conditions.
- The company adopted a distribution policy beginning in 2022: annual distributions of at least 40% of prior-year Adjusted Free Cash Flow from Operations, including a minimum $30 million cash dividend, subject to Luxembourg law and available distributable reserves. A $35 million dividend was approved in April 2022; it is subsequent to FY2021.
- A proposed acquisition of rice operations in Argentina and Uruguay from Viterra had not closed as of the filing date and remained subject to customary conditions and government approvals. The contemplated terms included approximately $18 million payable in installments and assumption of debt estimated at approximately $20 million at the reporting date.
- Russia’s invasion of Ukraine occurred after the reporting year. Management warned of uncertainty around fertilizer supply and prices, fuel and logistics costs for the 2022/2023 harvest. It said it had purchased fertilizers to help secure supply for the current harvest.
- Key ongoing exposures include adverse weather and climate, commodity and input-price volatility, customer concentration, currency and inflation effects, Argentina’s exchange controls and hyperinflation accounting, export taxes and other government intervention, and debt covenants and refinancing access. Sugarcane leases and agriculture partnerships cover a substantial portion of plantations.
- Legal proceedings include tax, labor, civil and other matters. The company reported $3 million of provisions at year-end and stated it knew of no material pending or threatened litigation expected to materially harm the business. It separately disclosed a Brazilian tax claim with an approximately $3.7 million demand and a farm purchase-agreement claim of approximately $39.5 million; management considered adverse outcomes remote, but the cases were not fully concluded.
- The auditor issued an unqualified opinion on the IFRS financial statements and internal control over financial reporting. Critical audit matters included valuation of Level 3 biological assets and impairment testing of Brazilian cash-generating units with goodwill.
Most important facts for investors to verify
- Reconcile reported earnings and Adjusted EBITDA to cash generation, with particular attention to fair-value gains, working-capital movements and the non-IFRS adjustments.
- Track cash, borrowings, debt maturities, variable-rate exposure, covenant compliance and the capacity of subsidiaries to upstream cash under local restrictions.
- Assess the effects of drought and frost on sugarcane yields, 2022/2023 fertilizer availability and cost, and the company’s ability to pass higher input costs through to prices.
- Confirm the status, financing and final purchase terms of the proposed Viterra rice-operations acquisition.
- Review the assumptions behind biological-asset valuations, farmland appraisals and Brazilian impairment tests, as well as the outcomes of the disclosed legal claims.