Bioceres Crop Solutions Corp. — Form 6-K Summary
Reporting period: Fiscal second quarter and six-month period ended December 31, 2019. Filed February 11, 2020. Results are unaudited, presented in U.S. dollars under IFRS, and include separate “Comparable” measures that exclude the impact of IAS 29 hyperinflation accounting in Argentina.
Business Context and Reporting Period
Bioceres is an integrated provider of crop productivity solutions, including crop protection, seed and integrated products, crop nutrition, biological inputs, fertilizers, HB4 technology, and digital agricultural solutions. Argentina remained the principal operating market, while Brazil, Uruguay, Paraguay, and Bolivia provided geographic diversification.
Financial Results and Key Metrics
| Metric | Fiscal 2Q20 | Fiscal 2Q19 | Change |
|---|---|---|---|
| Reported revenue | $63.0 million | $62.5 million | 1% |
| Comparable revenue | $57.0 million | $53.9 million | 6% |
| Reported gross profit | $30.0 million | $29.3 million | 2% |
| Comparable gross profit | $29.8 million | $28.4 million | 5% |
| Comparable gross margin | 52.2% | 52.7% | Down 49 bps |
| Adjusted EBITDA | $21.1 million | $20.3 million | 4% |
| Adjusted EBITDA margin | 33.5% | 32.5% | Up 103 bps |
| Profit for the period | $12.6 million | $11.2 million | 13% |
| Net finance loss | $3.5 million | $0.8 million | Higher loss |
| Metric | Fiscal 1H20 | Fiscal 1H19 | Change |
|---|---|---|---|
| Reported revenue | $99.2 million | $92.1 million | 8% |
| Comparable revenue | $96.3 million | $89.2 million | 8% |
| Reported gross profit | $45.9 million | $44.4 million | 3% |
| Comparable gross profit | $47.6 million | $47.0 million | 1% |
| Comparable gross margin | 49.4% | 52.7% | Down 327 bps |
| Adjusted EBITDA | $29.2 million | $29.3 million | Flat |
| Adjusted EBITDA margin | 29.5% | 31.8% | Down 233 bps |
| Profit for the period | $4.7 million | $7.6 million | Down 38% |
| Net finance loss | $19.9 million | $14.6 million | Higher loss |
Segment Performance
- Fiscal 2Q20 comparable revenue: Crop Protection increased 8% to $29.8 million; Seed and Integrated Products increased 7% to $12.8 million; Crop Nutrition increased 2% to $14.4 million.
- Fiscal 1H20 comparable revenue: Crop Protection increased 10% to $49.3 million; Crop Nutrition increased 13% to $28.5 million; Seed and Integrated Products declined 2% to $18.5 million.
- Adjuvant volumes increased 10% year over year in the quarter, led by 37% growth in Brazil. Inoculant and seed-treatment doses increased 5% in the quarter but declined 3% for the six-month period.
- Micro-beaded fertilizer production reached 13,600 tons for the trailing twelve-month period, with plant capacity utilization of 27.2%.
Cash Flow, Debt, and Liquidity
- Cash and cash equivalents were $10.6 million at December 31, 2019, compared with $3.5 million at June 30, 2019.
- Total debt was approximately $111.1 million, consisting of $71.1 million of current borrowings and $40.1 million of non-current borrowings. The filing’s net debt measure was $92.1 million.
- Net debt to last-twelve-month Adjusted EBITDA was 2.23x at December 31, 2019, compared with 2.24x at fiscal year-end and 2.89x at the end of the comparable prior-year period. The ratio increased sequentially from 2.14x because of working-capital financing for the southern-hemisphere planting season.
- Capital expenditures were $0.4 million in the quarter and $1.0 million for the six-month period, primarily for maintenance.
- The filing does not provide a clear consolidated operating cash flow or free cash flow value.
Material Changes Versus Prior Comparable Period
- Quarterly comparable revenue and Adjusted EBITDA grew despite Argentine macroeconomic, drought, and weather-related headwinds. Reported quarterly gross margin improved, but comparable gross margin declined modestly.
- First-half comparable revenue increased 8%, but Adjusted EBITDA was essentially unchanged and its margin declined because of Argentine foreign-exchange and inflation effects, weaker Argentine seed-treatment-pack sales, and product-mix changes.
- Quarterly net finance loss increased substantially, driven primarily by adverse exchange-rate differences and lower inflation-related gains. First-half net finance loss increased by $5.3 million.
- First-half Seed and Integrated Products revenue declined because Argentine customers delayed or reduced seed-treatment purchases. Higher-margin seed packs improved that segment’s gross margin.
- Crop Nutrition gross margin weakened because of a greater proportion of lower-margin micro-beaded fertilizer sales and the reclassification of certain inoculant activity into Seed and Integrated Products.
- Fiscal 1H20 operating expenses increased to $21.3 million from $17.8 million, including a disclosed $1.1 million one-time stock-based compensation and transaction expense accrued in the first quarter.
Outlook, Management Commentary, Risks, and Unusual Items
- EcoWheat was harvested on 395 hectares during the quarter, with reported yield benefits ranging from 8.0% to 22.1% versus commercial controls. Inventory was available to support projected planting of 12,000 hectares in fiscal 4Q20.
- EcoSoy was planted on 2,905 hectares in Argentina. The resulting seed inventory was expected to support planting of up to approximately 90,000 hectares in the following southern-hemisphere summer crop season.
- The company beta-launched a digital platform with Okaratech Ltd. to track and support EcoFields activities.
- In January 2020, Rizobacter entered a distribution agreement with Brett Young for biological products in Western Canada and the U.S. Northern Plains. Management expects the agreement to support northern-hemisphere expansion.
- Management stated that it would continue seeking opportunities to extend debt maturities, maximize cash generation, and secure future capital requirements related to HB4 initiatives.
- Key risks include Argentine macroeconomic volatility, drought and weather conditions, peso depreciation and inflation, customer purchasing delays, foreign-exchange losses, leverage and refinancing needs, and the execution and commercialization of HB4, EcoWheat, EcoSoy, and digital initiatives.
- Reported results are affected by IAS 29 and may not be directly comparable with the company’s non-IFRS Comparable measures or with other companies’ measures. Adjusted EBITDA excludes, among other items, finance costs, taxes, depreciation, amortization, stock-based compensation, and certain transaction expenses.
Investor Verification Items
- Reconcile reported IFRS results with Comparable revenue, Comparable gross profit, and Adjusted EBITDA, including the specific IAS 29 impact.
- Verify debt maturities, interest rates, covenant requirements, and the company’s ability to refinance or extend debt.
- Assess working-capital requirements, particularly trade receivables, inventories, and seasonal borrowing needs.
- Evaluate whether EcoWheat and EcoSoy yield results and projected planted hectares translate into broad commercial revenue.
- Monitor Argentine inflation, currency movements, weather conditions, and their effects on margins and finance results.
- Confirm the commercial terms and expected financial contribution of the Brett Young distribution agreement and other strategic arrangements.
- Review the reconciliation of profit to Adjusted EBITDA and the treatment of stock-based compensation and transaction expenses.