Bioceres Crop Solutions Corp. — Form 6-K Summary
Business context and reporting period
Bioceres reported unaudited consolidated results for the three months ended September 30, 2020, representing fiscal first quarter 2021. Results are presented in U.S. dollars under IFRS. Comparable results exclude the impact of IAS 29 inflation accounting for Argentine operations.
The company provides crop productivity technologies, including crop protection, seed and integrated products, crop nutrition, and HB4 biotechnology.
Financial and operating highlights
| Metric | 1Q20 | 1Q21 | Change |
|---|---|---|---|
| Reported revenue | $36.3 million | $42.4 million | 17% |
| Comparable revenue | $39.1 million | $42.2 million | 8% |
| Reported gross profit | $15.9 million | $19.2 million | 21% |
| Reported gross margin | 43.9% | 45.4% | Up 156 bps |
| Comparable gross profit | $17.8 million | $20.0 million | 13% |
| Comparable gross margin | 45.5% | 47.5% | Up 203 bps |
| Adjusted EBITDA | $8.1 million | $10.5 million | 30% |
| Adjusted EBITDA margin | 22.4% | 24.9% | Up 246 bps |
| Loss for the period | $(8.0) million | $(6.4) million | 20% improvement |
| Net finance loss | $(16.1) million | $(11.3) million | 30% improvement |
Segment revenue was $21.6 million in Crop Protection, $8.7 million in Seed and Integrated Products, and $12.0 million in Crop Nutrition. Comparable growth was strongest in Seed and Integrated Products, up 57%, and Crop Protection, up 11%; Crop Nutrition declined 15% on a comparable basis.
Reported operating profit was $8.4 million versus $6.2 million in the prior-year quarter. The filing does not provide a cash-flow statement or a clear operating cash-flow value.
Debt, liquidity and balance sheet
- Cash and cash equivalents at September 30, 2020 were $30.0 million; other short-term financial investments were $29.6 million, for total cash and short-term investments of approximately $59.6 million.
- Total debt was approximately $162.1 million, comprising $62.0 million of short-term borrowings, $56.7 million of long-term borrowings, and $44.4 million of convertible notes.
- Reported net debt was $103.5 million, and net debt to last-twelve-month Adjusted EBITDA was 2.12x, compared with 2.15x at the end of fiscal 1Q20 and 1.98x at fiscal year-end 2020.
- Cash and short-term investments increased by approximately $49.3 million year over year, including $17 million raised through a zero-interest Rizobacter bond offering in August 2020.
Material changes versus the prior comparable period
- Adjuvant volumes increased 38% to 1.8 million liters, while seed-treatment pack volumes increased 69% to 2.2 million doses.
- Inoculant volumes declined 28% to 4.2 million doses, and micro-beaded fertilizer volumes declined 10% to 3.5 million tons.
- Seed and Integrated Products gross profit increased 58% on a comparable basis, with segment gross margin broadly stable at approximately 62% on a reported basis.
- Crop Protection comparable gross margin declined to 38.6% from 40.5%, primarily due to product mix and Argentine foreign-exchange and inflation effects.
- SG&A increased 16.2% to $10.1 million, reflecting inflation and foreign-exchange effects, higher professional services and tender-offer costs. R&D expense declined 14.9% to $1.0 million, while an additional $0.8 million was invested in R&D related to intangible assets and joint ventures.
- The company continued to report a net loss, although the loss narrowed from $8.0 million to $6.4 million. The improvement reflected lower finance losses, partly offset by a $2.0 million income-tax expense compared with a $2.2 million tax benefit in the prior-year quarter.
Strategic developments, outlook and risks
- After quarter-end, Bioceres acquired Arcadia Biosciences’ remaining interest in Verdeca, obtaining full ownership of the HB4 Soy platform and related soybean gene-edited materials and technology rights.
- The transaction included Latin American rights to Arcadia’s wheat traits and Good Wheat brand. Consideration was $20 million at closing, consisting of $5 million in cash and $15 million in Bioceres shares. Total consideration is expected to be $32 million, excluding certain fees, transaction costs and non-Verdeca royalties.
- Additional consideration includes $2 million contingent on Chinese HB4 Soy import clearance or specified commercial penetration, plus royalties equal to 6% of Verdeca’s net HB4 technology royalties until an aggregate $10 million is reached. Some wheat rights remain subject to third-party clearances.
- Argentina commercially approved drought-tolerant HB4 Wheat on October 8, 2020, subject to import approval in Brazil, Argentina’s principal wheat trading partner.
- Management expects full ownership of Verdeca to improve commercialization flexibility and allow Bioceres to capture more economic value per hectare. No quantified revenue, EBITDA or cash-flow guidance was provided.
- Limited rainfall delayed plantings and reduced Crop Nutrition sales, while also affecting wheat production. Management stated that the dry conditions could highlight HB4 Wheat’s drought-tolerance potential.
- Key risks include COVID-19 effects on operations and liquidity, the ability to ramp inventories, regulatory and import approvals, third-party clearances for licensed wheat rights, Argentine inflation and foreign-exchange volatility, weather conditions, and execution of the HB4 commercialization strategy.
Important facts for investors to verify
- Reconcile the company’s headline $59.6 million liquidity figure with the consolidated balance sheet, which reports $30.0 million of cash and $29.6 million of other short-term financial assets.
- Review the full terms, funding and accounting treatment of the Verdeca and wheat intellectual-property acquisition, including contingent payments, share issuance, pledges and third-party clearances.
- Monitor Brazilian import approval and other regulatory approvals required for commercial deployment of HB4 Wheat and HB4 Soy.
- Assess cash-flow generation and working-capital requirements, as the filing text does not provide a clear operating cash-flow figure.
- Consider the limitations of Adjusted EBITDA and comparable metrics, which are non-IFRS measures and exclude specified items, including IAS 29 effects and certain expenses.