Adecoagro S.A. — FY2022 Form 20-F
Reporting period: Fiscal year ended December 31, 2022; this is an annual report, not a standalone Q4 report. The consolidated financial statements are audited and prepared under IFRS as issued by the IASB. Adecoagro operates farming, rice and dairy businesses, sugar, ethanol and energy operations, and land transformation activities in Argentina, Brazil and Uruguay.
Financial and operating highlights
| Metric | FY2022 | FY2021 | Change |
|---|---|---|---|
| Sales of goods and services | $1,347.7 million | $1,124.4 million | +19.9% |
| Profit from operations | $249.8 million | $278.0 million | -10.2% |
| Profit for the year | $108.6 million | $130.7 million | -16.9% |
| Basic earnings per share | $0.982 | $1.135 | Lower |
| Adjusted Consolidated EBITDA (non-IFRS) | $432.9 million | $437.1 million | -1.0% |
| Net cash from operating activities | $370.0 million | $348.7 million | +$21.4 million |
| Adjusted Free Cash Flow (non-IFRS) | $70.5 million | $93.7 million | Lower |
| Cash and cash equivalents | $230.7 million | $199.8 million | +$30.9 million |
| Total borrowings | $1,007.8 million | $817.7 million | +$190.1 million |
| Net debt (non-IFRS) | $678.5 million | $617.9 million | +$60.6 million |
| Net debt / Adjusted EBITDA | 1.56x | 1.41x | Higher leverage |
Operating margin was approximately 18.5% of sales, versus 24.7% in 2021; net margin was approximately 8.1%, versus 11.6%. The company reported a $465.6 million margin on manufacturing and agricultural activities before operating expenses, down 3.8%. These percentages are calculated from reported figures.
Cash flow from investing activities was an outflow of $299.3 million, including purchases of property, plant and equipment of $217.8 million and $98.0 million invested in restricted U.S. Treasury bills used as collateral. Financing activities used $23.6 million of cash; the company paid $44.8 million of interest, repurchased $36.8 million of shares, and paid $35.0 million in dividends. The filing reports $229.1 million of capital expenditures for 2022; its prior-year comparison is inconsistent in different sections ($205.2 million or $213.0 million).
Borrowings included $500 million of 6.0% senior notes due 2027. At year-end, approximately $800.7 million of debt was fixed-rate and $207.0 million variable-rate. Restricted short-term investments were $98.6 million. Management stated that working capital should be sufficient for the next 12 months; it also noted potential future funding needs and reliance by some subsidiaries on uncommitted credit lines.
Material changes and business drivers
- Sales increased primarily on higher ethanol and dairy prices and volumes, and expanded rice operations following the May 2022 acquisition of Viterra’s rice businesses in Argentina and Uruguay. The acquisition generated a reported bargain-purchase gain of about $10.1 million.
- Sugar, ethanol and energy sales rose 12.2% to $630.8 million. Ethanol sales increased 32.6%; sugar sales fell 9.4% and energy sales fell about 31%. The company reported lower cane crushing, sugar production and electricity sales, partly reflecting frost effects and a decision to use bagasse to dehydrate ethanol.
- Farming sales rose 27.5% to $717.0 million. Rice sales increased 50.9%, partly from the Viterra acquisition; dairy sales increased 28.4%. Higher costs, including cost of goods sold up 25.8%, contributed to lower operating profit and net income.
- Adjusted EBITDA was broadly flat, but adjusted free cash flow fell to $70.5 million from $93.7 million. The company attributed operating cash movement in part to higher receivables and lower payables; working-capital movements reduced 2022 cash by $86.8 million.
Outlook, risks and unusual items
- Drought and production risk: The filing describes a third consecutive La Niña year and severe drought in Argentina and Uruguay extending into early 2023. Management forecast 2022/2023 crop yield reductions of 18% to 60%, depending on crop, with a significant potential effect on results. The 2022 rice harvest was affected by drought; reported rice yield per hectare declined 12.8% year over year.
- Commodity and input exposure: Results remain sensitive to grain, sugar, ethanol and energy prices, as well as fertilizer, agrochemical, fuel and labor costs. The Russia–Ukraine conflict increased uncertainty around fertilizer availability and pricing. The company does not hedge all commodity-price exposure.
- Country, currency and inflation risks: Argentine inflation was 94.8% in 2022 and the peso depreciated 72.5% against the U.S. dollar at the official rate. Argentine foreign-exchange controls may constrain imports, debt payments, dividend remittances and access to foreign currency. Brazilian and regional economic, political, regulatory and tax changes also pose risks.
- Debt and liquidity: Debt covenants restrict additional borrowing, dividends and certain investments; some obligations are secured and include cross-default provisions. Higher leverage and variable-rate exposure could pressure cash flow. Cash is concentrated among a limited number of banks, and the filing warns that deposits may exceed government-insured limits.
- Accounting estimates: IFRS fair-value accounting for biological assets materially affects reported results. The $215.9 million gain from initial recognition and fair-value changes in biological assets was non-cash in part and declined from $227.7 million in 2021. The auditor identified valuation of Level 3 biological assets and impairment testing of Brazilian cash-generating units as critical audit matters. No impairment was recorded for the tested units.
- Other: The company reported $3.4 million of provisions for other liabilities and stated it was not involved in material litigation. It described certain unprovided claims, including a Brazilian tax claim of about $3.7 million and a farm-sale dispute with an asserted updated claim of about $48.5 million; management assessed the risk of unfavorable outcomes as remote. Internal controls were assessed effective, but acquired Viterra entities representing 2.1% of assets and 5.1% of revenue were excluded from the 2022 controls assessment and audit.
No numerical earnings or cash-flow guidance is provided in the filing. Management’s stated strategy is to expand farming through organic growth, leasing and selective acquisitions; consolidate sugar and ethanol operations; improve efficiency; and continue land transformation. The company’s dividend policy targets an annual distribution of at least 40% of prior-year Adjusted Free Cash Flow from Operations, subject to Luxembourg-law requirements; a $35 million 2023 dividend was approved after year-end.
Key facts investors should verify
- How the 2022/2023 drought affected actual yields, volumes, prices, and cash generation relative to management’s 18%–60% crop-yield reduction forecast.
- The composition and near-term maturity profile of debt, access to subsidiary credit lines, and the effect of covenants and restricted cash on available liquidity.
- The assumptions underlying Level 3 biological-asset valuations and Brazilian impairment tests, including yields, commodity prices, costs and discount rates.
- The recurring cash costs behind Adjusted EBITDA and adjusted free-cash-flow measures, and the reasons adjusted free cash flow declined despite higher operating cash flow.
- The reported capital-expenditure comparison: the filing gives two different FY2021 figures, $205.2 million and $213.0 million.
- The continuing impact of Argentine inflation, exchange controls and export/import measures, and any restrictions on moving funds to the parent company or shareholders.