Bioceres Crop Solutions Corp. — Form 6-K Summary
Reporting period: Filed May 12, 2020 for the fiscal third quarter and nine-month periods ended March 31, 2020. Results are unaudited, in U.S. dollars, and prepared under IFRS. Comparisons are year over year unless stated otherwise.
Business Context
Bioceres provides crop productivity technologies, including crop protection, seed and integrated products, crop nutrition, biological treatments, and the HB4 drought-tolerant seed platform. Agriculture-related activities were considered essential in the principal countries of operation, and the Company reported remaining operational during the COVID-19 pandemic.
Financial Performance
| Metric | Fiscal 3Q20 | Fiscal 3Q19 | Change |
|---|---|---|---|
| Reported revenue | $25.7 million | $18.7 million | 37% increase |
| Comparable revenue, excluding IAS 29 | $26.0 million | $23.9 million | 9% increase |
| Reported gross profit | $10.8 million | $7.7 million | 40% increase |
| Comparable gross profit | $12.0 million | $11.4 million | 6% increase |
| Comparable gross margin | 46.4% | 47.7% | Down 133 basis points |
| Adjusted EBITDA | $2.6 million | $3.3 million | 21% decrease |
| Adjusted EBITDA margin | 10.2% | 17.7% | Down 759 basis points |
| Net loss | $3.4 million | $22.7 million | Loss narrowed |
| Metric | Fiscal 9M20 | Fiscal 9M19 | Change |
|---|---|---|---|
| Reported revenue | $124.9 million | $110.8 million | 13% increase |
| Comparable revenue, excluding IAS 29 | $122.3 million | $113.2 million | 8% increase |
| Reported gross profit | $56.7 million | $52.1 million | 9% increase |
| Comparable gross profit | $59.6 million | $58.4 million | 2% increase |
| Comparable gross margin | 48.8% | 51.6% | Down 285 basis points |
| Adjusted EBITDA | $31.8 million | $32.6 million | 2% decrease |
| Adjusted EBITDA margin | 25.5% | 29.4% | Down 393 basis points |
| Net income | $1.3 million | Net loss of $15.1 million | Improved |
Segment revenue: Fiscal 3Q20 comparable revenue increased 4% in Crop Protection to $16.7 million and 98% in Seed and Integrated Products to $4.1 million, while Crop Nutrition declined 10% to $5.2 million. For the nine-month period, comparable revenue increased 8% in Crop Protection, 7% in Seed and Integrated Products, and 9% in Crop Nutrition.
Operating expenses and finance: Third-quarter SG&A was $8.7 million, including $1.5 million related to stock compensation; comparable SG&A increased to $7.2 million from $4.4 million. Nine-month SG&A was $27.9 million, or $25.3 million excluding identified one-time expenses. Net finance loss improved to $4.2 million in 3Q20 from $21.9 million, and to $24.1 million for 9M20 from $36.4 million, primarily due to lower interest costs and the absence of major merger-related non-cash items recorded in the prior period.
Liquidity, Debt and Capital Resources
- Cash and cash equivalents were $48.2 million at March 31, 2020, up from $3.5 million at June 30, 2019 and $6.1 million at March 31, 2019.
- Total debt was $146.1 million, comprising $66.4 million of short-term debt and $79.6 million of long-term debt.
- Net debt was $93.5 million, compared with $90.3 million at March 31, 2019. Net debt to last-twelve-month Adjusted EBITDA improved to 2.30x from 2.37x.
- The Company raised $42.5 million through secured convertible promissory notes due 2023 on March 9, 2020. Rizobacter separately issued $7.6 million of corporate bonds due 2021.
- Capital expenditures were $0.3 million in 3Q20 and $1.4 million for 9M20. The filing does not provide a complete cash flow statement in the supplied text.
Material Changes Versus Prior Comparable Period
- Comparable revenue grew despite temporary COVID-19-related hesitation in pre-season purchases.
- Seed and Integrated Products showed the strongest quarterly growth, driven by European seed treatment pack sales and recovery in Argentina.
- Gross margins declined overall because of Argentine peso foreign-exchange and inflation effects on production costs, although higher-margin seed treatment packs improved the product mix.
- Adjusted EBITDA declined despite revenue and gross profit growth because of higher SG&A, expansion expenses in Brazil, and Argentine cost pressures.
- Net losses narrowed substantially in the quarter, and the nine-month period moved to net income, primarily reflecting lower finance losses and the absence of prior-year merger-related accounting charges.
Outlook, Risks and Unusual Items
- Management planned to use the new capital to build inventory and support the commercial deployment of HB4 technology, including EcoSoy and EcoWheat products.
- Up to 12,000 hectares were reserved for HB4 wheat planting in the upcoming Southern Cone winter campaign. Demand for HB4 soybean seed multiplication registrations exceeded the potentially available acreage by nearly ten times.
- The timing of China’s HB4 approval remained under review because of COVID-19-related uncertainty.
- COVID-19 risks include disruptions to demand, customer purchasing decisions, supply chains, logistics, workforce availability, liquidity, and the timing of inventory deployment. The Company activated business continuity and crisis committees, implemented workplace protections, postponed non-essential capital expenditures, and closely monitored working capital.
- On April 14, 2020, after the reporting date, Bioceres expanded its alliance with Syngenta to distribute a Rizobacter biological seed-treatment fungicide, initially focused on Argentina.
- Reported results are affected by IAS 29 inflation accounting for Argentina. Comparable revenue and gross profit are non-IFRS measures and exclude the IAS 29 impact.
Key Facts for Investors to Verify
- Reconcile reported versus comparable revenue and gross profit, including the effect of IAS 29.
- Assess whether revenue growth can offset declining margins and increased SG&A.
- Review the terms, security, conversion features, and potential dilution of the $42.5 million convertible notes due 2023.
- Monitor debt maturities, cash use, working-capital requirements, and the sustainability of the 2.30x net-debt-to-Adjusted-EBITDA ratio.
- Verify regulatory approvals and commercialization timing for HB4 soybean and wheat products, particularly in China and the Southern Cone.
- Evaluate the effect of COVID-19, Argentine inflation and currency movements, seasonal demand, and product-mix changes on future margins and liquidity.