Bioceres Crop Solutions Corp. — Form 6-K Summary
Filing date: November 11, 2019. The filing reports unaudited consolidated results for the first fiscal quarter of 2020, the three months ended September 30, 2019. Results are presented in U.S. dollars under IFRS. Argentina was treated as hyperinflationary under IAS 29 beginning July 1, 2018.
Business Context and Reporting Period
Bioceres is an integrated provider of crop productivity technologies, including crop protection, seed and integrated products, crop nutrition, biological products, and the HB4 soybean and wheat programs. Management reported continued expansion in Argentina and international markets, particularly Brazil and Paraguay.
Key Financial Metrics
| Metric | 1Q20 | 1Q19 | Change |
|---|---|---|---|
| Revenue, as reported | $36.3 million | $29.6 million | 22% |
| Comparable revenue, excluding IAS 29 | $39.3 million | $35.4 million | 11% |
| Gross profit, as reported | $15.9 million | $15.1 million | 5% |
| Comparable gross profit | $17.8 million | $18.6 million | (4%) |
| Reported gross margin | 43.9% | 51.0% | (716 bps) |
| Comparable gross margin | 45.3% | 52.6% | (730 bps) |
| Operating profit | $6.2 million | $8.2 million | Declined |
| Net loss | $8.0 million | $3.6 million | Loss increased |
| Adjusted EBITDA | $8.1 million | $9.0 million | (9.5%) |
| Adjusted EBITDA margin | 22.4% | 30.4% | (793 bps) |
Comparable revenue growth was led by crop protection, which increased 13% to $19.5 million, and crop nutrition, which increased 27% to $14.0 million. Seed and integrated products declined 18% to $5.7 million due primarily to delayed summer-crop purchases in Argentina.
Net finance loss increased to $16.4 million from $13.7 million, mainly because of higher interest expense and a lower gain from the inflation effect on monetary items. The reported loss attributable to Bioceres’ equity holders was $7.1 million, compared with a $2.6 million loss in the prior-year quarter.
Liquidity, Debt, and Balance Sheet
- Cash and cash equivalents were $5.5 million at September 30, 2019, up from $3.5 million at June 30, 2019.
- Total debt was $96.6 million, comprising $64.1 million of short-term debt and $32.6 million of long-term debt.
- Net debt was $86.8 million, compared with $92.8 million at June 30, 2019 and $99.6 million at September 30, 2018.
- Net debt to trailing-twelve-month Adjusted EBITDA improved to 2.14x from 2.24x at June 30, 2019 and 4.07x a year earlier.
- Total assets were $233.1 million and total liabilities were $191.6 million at September 30, 2019.
- The filing states that cash increased by approximately $2.0 million during the quarter and debt decreased by approximately $6.0 million. A detailed cash flow statement is not provided in the filing text.
Material Changes Versus the Prior Comparable Period
- Reported revenue increased 22%, while comparable revenue increased 11% after excluding IAS 29 effects.
- Crop nutrition revenue increased 52% as reported, supported by the ramp-up of the micro-beaded fertilizer facility. Trailing twelve-month plant utilization reached 25%, versus 12% a year earlier, with production of 12.4 thousand tons.
- Brazil adjuvant sales volumes increased 66%, although consolidated adjuvant volumes declined 7% because of a shift away from lower-margin products in Argentina.
- Inoculant volumes declined 7%, reflecting delayed Argentine farmer purchases.
- Gross margins and Adjusted EBITDA margins contracted because Argentine peso depreciation did not keep pace with inflation, increasing U.S.-dollar-denominated production costs.
- SG&A increased to $8.7 million from $6.1 million, including a one-time $0.8 million stock-based compensation expense. Excluding that expense, SG&A was $7.9 million.
- Other comprehensive loss was $13.4 million in 1Q20, compared with $16.4 million in 1Q19, resulting in total comprehensive loss of $21.4 million.
Guidance, Outlook, Risks, and Unusual Items
Management characterized delayed Argentine purchases as a timing issue expected to normalize during the fiscal year. Growth expectations depend on continued international expansion, increased fertilizer capacity utilization, and the ramp-up of HB4 soybean and wheat seed inventories.
- The first 100 hectares of HB4 soybean were harvested in the United States, supporting planned planting of approximately 3,000 hectares in Argentina during November and December 2019.
- The first 400 hectares of HB4 wheat were planted in the Southern Hemisphere and were expected to be harvested in fiscal 2Q20.
- On October 15, 2019, the company entered into a two-year bullet loan facility for up to $20 million. The earnings release also describes this financing as a $15 million note, so the precise amount drawn or committed should be verified.
- Key risks include Argentine macroeconomic uncertainty, inflation and foreign-exchange volatility, delayed planting and purchasing decisions, higher local interest rates, margin pressure, and execution risk associated with commercializing HB4 products.
- Forward-looking statements are subject to material risks and uncertainties, and the company disclaims an obligation to update them.
Investor Verification Checklist
- Verify the exact amount and terms of the October 2019 financing, including whether the facility was for up to $20 million and whether $15 million was issued or drawn.
- Reconcile reported versus comparable revenue and gross profit, including the effects of IAS 29 and Argentine inflation accounting.
- Review the detailed debt maturity schedule, interest rates, covenants, and the portion of debt used for working capital.
- Assess whether delayed Argentine purchases normalized and whether expected HB4 soybean and wheat planting and harvest milestones were achieved.
- Monitor whether fertilizer capacity utilization and international sales growth offset continued Argentine FX and inflation-related margin pressure.
- Confirm the source and classification of the significant finance losses and other comprehensive loss in the full financial statements.