Adecoagro S.A.(AGRO) - 2024 Q3 - Quarterly Report

Legal Information Denomination and Company Details Provides basic legal and registration details of Adecoagro S.A., including its denomination, legal address, activity, registration date, and capital stock information - Denomination: Adecoagro S.A.[3] - Legal address: 28, Boulevard Raiffeisen, L-2411, Luxembourg[4] - Company activity: Agricultural and agro-industrial[4] Capital Stock Information | Metric | Value | | :----- | :---- | | Issued Capital Stock | 111,381,815 common shares | | Outstanding Capital Stock | 100,836,801 common shares | | Treasury Shares | 10,545,014 common shares | Condensed Consolidated Interim Statements of Income Nine-months ended September 30, 2024 vs 2023 The Group experienced a significant increase in revenue for the nine-month period ended September 30, 2024, but profit from operations and net profit decreased substantially compared to the prior year, primarily due to higher costs, increased general and administrative expenses, and a significant negative swing in financial results Key Income Statement Data (Nine-months ended September 30) | Metric | 2024 (US$ thousands) | 2023 (US$ thousands) | Change (YoY) | | :------------------------------------------------- | :------------------- | :------------------- | :------------ | | Revenue | 1,144,687 | 1,034,925 | +10.6% | | Cost of revenue | (900,810) | (769,671) | +17.0% | | Margin on manufacturing and agricultural activities before operating expenses | 345,726 | 380,863 | -9.2% | | Profit from operations | 134,752 | 203,072 | -33.7% | | Financial results, net | (98,809) | (6,786) | -1355.9% | | Profit for the period | 75,923 | 144,512 | -47.4% | | Basic earnings per share | 0.735 | 1.338 | -45.1% | Three-months ended September 30, 2024 vs 2023 For the three-month period, revenue increased, but profit from operations and net profit saw substantial declines, mirroring the nine-month trend, driven by higher operating expenses and a negative shift in financial results Key Income Statement Data (Three-months ended September 30) | Metric | 2024 (US$ thousands) | 2023 (US$ thousands) | Change (YoY) | | :------------------------------------------------- | :------------------- | :------------------- | :------------ | | Revenue | 471,495 | 385,794 | +22.2% | | Cost of revenue | (361,003) | (281,660) | +28.2% | | Margin on manufacturing and agricultural activities before operating expenses | 118,220 | 129,562 | -8.7% | | Profit from operations | 29,679 | 68,136 | -56.4% | | Financial results, net | (6,424) | 20,896 | -130.7% | | Profit for the period | 18,711 | 75,387 | -75.2% | | Basic earnings per share | 0.189 | 0.708 | -73.3% | Condensed Consolidated Interim Statements of Comprehensive Income Nine-months ended September 30, 2024 vs 2023 Total comprehensive income for the nine-month period significantly increased, primarily driven by a substantial positive exchange difference on translating foreign operations, despite a decrease in profit for the period Key Comprehensive Income Data (Nine-months ended September 30) | Metric | 2024 (US$ thousands) | 2023 (US$ thousands) | Change (YoY) | | :------------------------------------------ | :------------------- | :------------------- | :------------ | | Profit for the period | 75,923 | 144,512 | -47.4% | | Exchange differences on translating foreign operations | 428,407 | 23,378 | +1732.4% | | Revaluation surplus net of tax | (264,129) | (9,518) | +2675.0% | | Total comprehensive income for the period | 257,325 | 182,607 | +40.9% | Three-months ended September 30, 2024 vs 2023 For the three-month period, total comprehensive income decreased, mainly due to a significant drop in profit for the period and a negative revaluation surplus, partially offset by positive exchange differences Key Comprehensive Income Data (Three-months ended September 30) | Metric | 2024 (US$ thousands) | 2023 (US$ thousands) | Change (YoY) | | :------------------------------------------ | :------------------- | :------------------- | :------------ | | Profit for the period | 18,711 | 75,387 | -75.2% | | Exchange differences on translating foreign operations | 64,355 | (36,153) | N/A (swing from loss to gain) | | Revaluation surplus net of tax | (33,456) | 12,190 | -374.5% | | Total comprehensive income for the period | 49,827 | 57,130 | -12.7% | Condensed Consolidated Interim Statements of Financial Position As of September 30, 2024 vs December 31, 2023 Total assets increased slightly, driven by higher inventories and trade receivables, while cash and cash equivalents decreased. Total shareholders' equity saw a notable increase, primarily due to retained earnings and cumulative translation adjustment, despite a decrease in total liabilities Key Financial Position Data (As of September 30, 2024 vs December 31, 2023) | Metric | Sep 30, 2024 (US$ thousands) | Dec 31, 2023 (US$ thousands) | Change | | :----------------------------------- | :--------------------------- | :--------------------------- | :------- | | ASSETS | | | | | Total Non-Current Assets | 2,161,045 | 2,109,220 | +2.5% | | Total Current Assets | 1,066,665 | 1,055,674 | +1.0% | | TOTAL ASSETS | 3,227,710 | 3,164,894 | +2.0% | | SHAREHOLDERS EQUITY | | | | | TOTAL SHAREHOLDERS EQUITY | 1,436,045 | 1,265,648 | +13.5% | | LIABILITIES | | | | | TOTAL LIABILITIES | 1,791,665 | 1,899,246 | -5.7% | - Key changes in current assets include a significant increase in inventories (+56.5%) and trade and other receivables (+50.6%), while cash and cash equivalents decreased by 41.7%[8] - Key changes in shareholders' equity include a positive cumulative translation adjustment (from -$603.86 million to -$378.88 million) and an increase in retained earnings (from $418.79 million to $501.70 million)[8] Condensed Consolidated Interim Statements of Changes in Shareholders' Equity Nine-months ended September 30, 2024 For the nine-month period ended September 30, 2024, total shareholders' equity increased significantly, primarily driven by a substantial positive cumulative translation adjustment and retained earnings, despite share repurchases and dividend payments Key Changes in Shareholders' Equity (Nine-months ended September 30, 2024) | Metric | Balance at Jan 1, 2024 (US$ thousands) | Profit for the period (US$ thousands) | Other comprehensive income (US$ thousands) | Employee share options (US$ thousands) | Purchase of own shares (US$ thousands) | Dividends (US$ thousands) | Balance at Sep 30, 2024 (US$ thousands) | | :------------------------------------------ | :------------------------------------- | :------------------------------------ | :--------------------------------------- | :------------------------------------- | :------------------------------------- | :----------------------- | :------------------------------------- | | Equity attributable to equity holders of the parent | 1,229,128 | 75,974 | 178,145 | 6,607 | (58,279) | (35,000) | 1,396,575 | | Non-controlling interest | 36,520 | (51) | 3,257 | — | — | (256) | 39,470 | | Total Shareholders' Equity | 1,265,648 | 75,923 | 181,402 | 6,607 | (58,279) | (35,256) | 1,436,045 | - Cumulative Translation Adjustment shifted from -$603.86 million at Jan 1, 2024 to -$378.88 million at Sep 30, 2024, indicating a significant positive impact from foreign currency translation[16] Nine-months ended September 30, 2023 For the nine-month period ended September 30, 2023, total shareholders' equity increased, driven by profit for the period and other comprehensive income, despite share repurchases and dividend payments Key Changes in Shareholders' Equity (Nine-months ended September 30, 2023) | Metric | Balance at Jan 1, 2023 (US$ thousands) | Profit for the period (US$ thousands) | Other comprehensive income (US$ thousands) | Employee share options (US$ thousands) | Purchase of own shares (US$ thousands) | Dividends (US$ thousands) | Balance at Sep 30, 2023 (US$ thousands) | | :------------------------------------------ | :------------------------------------- | :------------------------------------ | :--------------------------------------- | :------------------------------------- | :------------------------------------- | :----------------------- | :------------------------------------- | | Equity attributable to equity holders of the parent | 1,126,091 | 143,747 | 37,784 | 7,721 | (19,012) | (35,000) | 1,261,329 | | Non-controlling interest | 37,552 | 765 | 311 | — | — | — | 38,628 | | Total Shareholders' Equity | 1,163,643 | 144,512 | 38,095 | 7,721 | (19,012) | (35,000) | 1,299,957 | Condensed Consolidated Interim Statements of Cash Flows Nine-months ended September 30, 2024 vs 2023 Net cash provided by operating activities decreased significantly in 2024 compared to 2023, primarily due to increased trade and other receivables and inventories. Investing activities shifted from a slight net cash outflow to a substantial net cash outflow, driven by higher purchases of property, plant, and equipment and business acquisitions. Financing activities also saw a much larger net cash outflow in 2024, mainly due to increased payments of borrowings and purchase of own shares Key Cash Flow Data (Nine-months ended September 30) | Metric | 2024 (US$ thousands) | 2023 (US$ thousands) | Change (YoY) | | :------------------------------------ | :------------------- | :------------------- | :------------ | | Net cash provided by operating activities | 164,867 | 257,199 | -35.9% | | Net cash used in investing activities | (147,055) | (11,174) | +1216.0% | | Net cash used in financing activities | (210,315) | (28,351) | +641.1% | | Net decrease in cash and cash equivalents | (192,503) | 217,674 | N/A (swing from increase to decrease) | | Cash and cash equivalents at end of period | 198,255 | 349,812 | -43.4% | - Operating cash flow was negatively impacted by a $150.99 million increase in trade and other receivables and a $111.08 million increase in inventories in 2024[19] - Investing cash flow was significantly impacted by $203.15 million in purchases of property, plant and equipment and $15.92 million for acquisition of a business in 2024[21] - Financing cash flow was heavily influenced by $96.73 million in payments of long-term borrowings, $121.66 million in payment of short-term borrowings, and $58.28 million in purchase of own shares in 2024[21] Notes to the Condensed Consolidated Interim Financial Statements 1. General information Adecoagro S.A. is a Luxembourg-based holding company engaged in agricultural and agro-industrial activities through its operating subsidiaries, listed on the NYSE under AGRO. The Group operates in two main business lines: Farming and Sugar, Ethanol and Energy - Adecoagro S.A. is the Group's ultimate parent company, organized under Luxembourg laws, primarily engaged in agricultural and agro-industrial activities[23] - The Group's activities are carried out through two major lines of business: Farming and Sugar, Ethanol and Energy[23] - Adecoagro is a public company listed in the New York Stock Exchange (NYSE) as a foreign registered company under the ticker symbol of AGRO[24] 2. Financial risk management The Group is exposed to price risk, exchange rate risk, interest rate risk, liquidity risk and credit risk, with no significant changes in risk management principles since December 31, 2023, and employs hedging strategies for its Argentine subsidiaries operating in a highly volatile economic context - The Group is exposed to price risk, exchange rate risk, interest rate risk, liquidity risk and credit risk, with no significant changes in risk management principles since December 31, 2023[26] - Argentina's inflation rate for the nine-month period ended September 30, 2024, was 101.6%, and the official exchange rate against the U.S. dollar was 970.5[28] - The Company is permanently monitoring the evolution of the program to determine the possible impacts that these new measures could have on the Company's business and financial position[31] Exchange rate risk The Group manages exchange rate risk, particularly for its Argentine and Brazilian operations, which have significant net monetary liabilities in local currencies. A hypothetical 10% appreciation of the U.S. Dollar against the Brazilian real or Uruguayan peso, or 25% against the Argentine peso, would decrease profit before income tax by $52.4 million. The Group uses cash flow hedging relationships, including US dollar-denominated borrowings, to mitigate foreign exchange rate risk on future US dollar sales Net Monetary Position by Functional Currency (September 30, 2024) | Functional currency | Argentine Peso | Brazilian Reais | Uruguayan Peso | US Dollar | Total | | :------------------ | :------------- | :-------------- | :------------- | :-------- | :---- | | Argentine Peso | (11,271) | — | — | — | (11,271) | | Brazilian Reais | — | (605,103) | — | — | (605,103) | | US Dollar | (132,769) | (230,130) | 37,864 | (7,090) | (332,125) | | Uruguayan Peso | — | — | (941) | — | (941) | | Total | (144,040) | (835,233) | 36,923 | (7,090) | (949,440) | - A hypothetical 10% appreciation of the U.S. Dollar against the Brazilian real or Uruguayan peso, or a 25% appreciation against the Argentine peso, would decrease Profit before income tax by US$ 52.42 million[35][36] - The Group may document and designate cash flow hedging relationships to hedge the foreign exchange rate risk of all or part of its highly probable future sales in U.S. Dollars using either all or a portion of its US dollar-denominated borrowings and/or derivative instruments[37] Interest rate risk The Group's borrowings are a mix of fixed and variable rates across different currencies. A 1% increase in interest rates on floating-rate borrowings would decrease profit before income tax by US$ 2.41 million Borrowings by Rate Type and Currency (September 30, 2024) | Rate per currency denomination | Argentine Peso | Brazilian Reais | US Dollar | Total | | :--------------------------- | :------------- | :-------------- | :-------- | :---- | | Fixed rate | 91,717 | 380,553 | 146,121 | 618,391 | | Variable rate | 13,435 | 227,598 | — | 241,033 | | Total borrowings | 105,152 | 608,151 | 146,121 | 859,424 | - At September 30, 2024, if interest rates on floating-rate borrowings had been 1% higher (or lower) with all other variables held constant, Profit before income tax for the period would decrease by US$ 2.41 million[39] Credit risk As of September 30, 2024, approximately 70% of the Group's total cash deposited was held across six banks, indicating a concentration of credit risk with these institutions - As of September 30, 2024, six banks accounted for approximately 70% of the total cash deposited (J.P. Morgan, Banco Bladex, Banco do Brasil, Credit Agricole, Galicia and Itaú)[40] Derivative financial instruments The Group uses various derivative instruments, including commodity futures/options, interest rate swaps, and currency forwards, to manage market risks. For the nine-month period ended September 30, 2024, commodity futures resulted in a net loss of $651 thousands, interest rate swaps in a loss of $3.5 million, and currency forwards in a gain of $1.88 million Futures/Options Outstanding Positions (September 30, 2024) | Type of derivative contract | Notional amount (US$ thousands) | Market Value Asset/(Liability) (US$ thousands) | Profit / (Loss) (US$ thousands) | | :------------------------ | :------------------------------ | :------------------------------------------- | :------------------------------ | | Corn (Sale) | (1,556) | 52 | 52 | | Soybean (Sale) | (1,887) | 24 | 24 | | Wheat (Sale) | 950 | 9 | 9 | | Sugar (Sale) | 30,307 | (1,335) | (736) | | Total | 27,814 | (1,250) | (651) | - The swap agreements resulted in a recognition of a loss of US$ 3.5 million for the nine-month period ended September 30, 2024[47] - Currency forward contracts resulted in a gain of US$ 0.02 million for hedging Brazilian Reais and a gain of US$ 1.86 million for hedging Argentine Peso against the U.S. Dollar for the nine-month period ended September 30, 2024[48][50] 3. Segment information The Group operates in two major lines of business: Farming (Crops, Rice, Dairy) and Sugar, Ethanol and Energy, with internal reporting refined in Q4 2023 to align with land transformation and productive land management, while Argentine segment results are adjusted for inflation and translated using average exchange rates, differing from IAS 29 and IAS 21 for external reporting - The Group's business activities include agricultural (harvesting crops, producing milk), manufacturing (processed peanuts, sugar, ethanol, energy, dairy products), and land transformation[52][53][54] - Effective for our year ended December 31, 2023, our CODM changed its internal reporting mainly to refine the way it views our farming business and its interaction with our overarching land transformation activities embedded within such farming business[56] - The Group operates in two major lines of business: 'Farming' (comprised of Crops, Rice, and Dairy segments) and 'Sugar, Ethanol and Energy'[59][66] - For segment reporting purposes, the segment results of Argentine operations for each reporting period were adjusted for inflation and translated into the reporting currency using the reporting period average exchange rate, departing from IAS 29 and IAS 21[64] Segment analysis for the nine-month period ended September 30, 2024 For the nine-month period ended September 30, 2024, the Sugar, Ethanol and Energy segment was the primary driver of profit from operations, while the Farming (Crops, Rice, Dairy) segment showed mixed results, with Crops reporting a loss from operations. Total segment assets were dominated by Farming and Sugar, Ethanol and Energy Segment Revenue and Profit from Operations (Nine-months ended September 30, 2024) | Segment | Revenue (US$ thousands) | Profit / (loss) from Operations (US$ thousands) | | :-------------------- | :---------------------- | :-------------------------------------------- | | Crops | 175,065 | (7,547) | | Rice | 199,035 | 23,260 | | Dairy | 209,248 | 17,046 | | Farming subtotal | 583,348 | 32,759 | | Sugar, Ethanol and Energy | 524,651 | 116,890 | | Corporate | — | (18,168) | | Total | 1,107,999 | 131,481 | Total Segment Assets and Liabilities (As of September 30, 2024) | Segment | Total segment assets (US$ thousands) | Total segment liabilities (US$ thousands) | | :-------------------- | :--------------------------------- | :------------------------------------ | | Crops | 697,430 | 48,898 | | Rice | 451,759 | 62,151 | | Dairy | 225,178 | 69,382 | | Farming subtotal | 1,374,367 | 180,431 | | Sugar, Ethanol and Energy | 1,290,188 | 949,055 | | Corporate | 283 | 84,230 | | Total | 2,664,838 | 1,213,716 | Segment analysis for the nine-month period ended September 30, 2023 In the nine-month period ended September 30, 2023, the Sugar, Ethanol and Energy segment was the largest contributor to both revenue and profit from operations. The Farming segment also showed positive profit from operations, with Rice being the strongest performer Segment Revenue and Profit from Operations (Nine-months ended September 30, 2023) | Segment | Revenue (US$ thousands) | Profit / (loss) from Operations (US$ thousands) | | :-------------------- | :---------------------- | :-------------------------------------------- | | Crops | 170,841 | (191) | | Rice | 196,116 | 29,124 | | Dairy | 192,084 | 14,541 | | Farming subtotal | 559,041 | 43,474 | | Sugar, Ethanol and Energy | 483,261 | 178,085 | | Corporate | — | (17,822) | | Total | 1,042,302 | 203,737 | Total Segment Assets and Liabilities (As of December 31, 2023) | Segment | Total segment assets (US$ thousands) | Total segment liabilities (US$ thousands) | | :-------------------- | :--------------------------------- | :------------------------------------ | | Crops | 637,411 | 42,667 | | Rice | 331,844 | 45,815 | | Dairy | 138,093 | 57,433 | | Farming subtotal | 1,107,348 | 145,915 | | Sugar, Ethanol and Energy | 1,380,111 | 957,065 | | Corporate | 580 | 180,479 | | Total | 2,488,039 | 1,283,459 | 4. Revenue Total revenue increased by 10.6% to $1,144.7 million for the nine-month period ended September 30, 2024, driven by growth in manufactured products and agricultural produce, with commodity sales forward contracts totaling $87.2 million Revenue Sources (Nine-months ended September 30) | Revenue Source | 2024 (US$ thousands) | 2023 (US$ thousands) | Change (YoY) | | :-------------------------------------- | :------------------- | :------------------- | :------------ | | Subtotal manufactured products and services rendered | 991,532 | 898,836 | +10.3% | | Subtotal agricultural produce and biological assets | 153,155 | 136,089 | +12.5% | | Total revenue | 1,144,687 | 1,034,925 | +10.6% | - Key manufactured product revenue increases include Ethanol (+21.3%), Sugar (+4.5%), Rice (+6.5%), Fluid milk (UHT) (+23.5%), Powder milk (+12.9%), and Other dairy products (+54.3%)[72] - Key agricultural produce revenue increases include Soybean (+29.8%), Corn (+49.6%), and Wheat (+53.6%)[72] - The Group entered into contracts to sell non-financial instruments, mainly, sugar, soybean and corn through sales forward contracts. The notional amount of these contracts is US$ 87.20 million as of September 30, 2024[73][76] 5. Cost of revenue Total cost of revenue increased by 17.0% to $900.8 million for the nine-month period ended September 30, 2024. This increase was primarily driven by higher cost of production of manufactured products and agricultural produce, partially offset by tax recoveries Cost of Revenue Components (Nine-months ended September 30) | Component | 2024 (US$ thousands) | 2023 (US$ thousands) | Change (YoY) | | :------------------------------------------ | :------------------- | :------------------- | :------------ | | Finished goods at the beginning of period | 179,611 | 152,716 | +17.6% | | Cost of production of manufactured products | 832,042 | 721,872 | +15.3% | | Agricultural produce | 216,455 | 171,312 | +26.4% | | Tax recoveries | (34,016) | (15,187) | +124.0% | | Finished goods at end of period | (231,742) | (234,298) | -1.1% | | Total Cost of revenues and direct agricultural selling expenses | 900,810 | 769,671 | +17.0% | - The increase in cost of revenue was mainly driven by higher cost of production of manufactured products and agricultural produce[77][78] 6. Expenses by nature Total expenses by nature, including cost of production, general and administrative, and selling expenses, increased to $1,026.5 million in 2024 from $892.7 million in 2023. Key increases were seen in salaries, depreciation, freights, and third-party raw materials Total Expenses by Nature (Nine-months ended September 30) | Expense Category | 2024 (US$ thousands) | 2023 (US$ thousands) | Change (YoY) | | :------------------------------------------ | :------------------- | :------------------- | :------------ | | Salaries, social security expenses and employee benefits | 96,055 | 90,323 | +6.3% | | Depreciation and amortization | 142,125 | 124,522 | +14.1% | | Depreciation of right-of-use assets | 20,788 | 17,930 | +16.0% | | Freights | 67,056 | 56,669 | +18.3% | | Third parties raw materials | 130,158 | 109,560 | +18.8% | | Own agricultural produce consumed | 366,264 | 309,360 | +18.4% | | Total | 1,026,511 | 892,736 | +15.0% | 7. Salaries and social security expenses Total salaries and social security expenses increased by 9.1% to $159.1 million for the nine-month period ended September 30, 2024, primarily due to higher wages and social security costs, partially offset by a decrease in equity-settled share-based compensation Salaries and Social Security Expenses (Nine-months ended September 30) | Expense Category | 2024 (US$ thousands) | 2023 (US$ thousands) | Change (YoY) | | :-------------------------------- | :------------------- | :------------------- | :------------ | | Wages and salaries | 118,508 | 106,440 | +11.3% | | Social security costs | 35,502 | 32,719 | +8.5% | | Equity-settled share-based compensation | 5,081 | 6,684 | -24.0% | | Total | 159,091 | 145,843 | +9.1% | 8. Other operating income / (expense), net The Group reported a net operating expense of $16.5 million for the nine-month period ended September 30, 2024, a significant increase from $6.9 million in 2023. This was primarily due to a substantial net loss from fair value adjustment of investment property and an impairment loss from a fire at a peanut facility, partially offset by gains from disposals of assets and commodity derivative financial instruments Other Operating Income / (Expense), Net (Nine-months ended September 30) | Item | 2024 (US$ thousands) | 2023 (US$ thousands) | Change (YoY) | | :------------------------------------------ | :------------------- | :------------------- | :------------ | | Gain from disposals of farmland and other assets | 6,050 | 9,526 | -36.5% | | Gain /(loss) from commodity derivative financial instruments | 5,757 | (12,464) | N/A (swing from loss to gain) | | Net loss from fair value adjustment of investment property | (22,484) | (913) | +2362.6% | | Impairment of assets destroyed by fire | (14,036) | — | N/A | | Total | (16,505) | (6,927) | +138.3% | - In September 2024, a fire in our Peanut facility located in the Province of Cordoba damaged a warehouse cell and inventory stored therein. As a result, the Company recognized an impairment loss of approximately US$ 12.00 million and US$ 2.00 million for inventories and property, plant and equipment, respectively[83] 9. Financial results, net The Group reported a significant net financial loss of $98.8 million for the nine-month period ended September 30, 2024, a substantial negative swing from a $6.8 million loss in 2023. This was primarily driven by a sharp decrease in finance income (especially foreign exchange gains and other income) and increased finance costs, including cash flow hedge transfers and foreign exchange losses Financial Results, Net (Nine-months ended September 30) | Item | 2024 (US$ thousands) | 2023 (US$ thousands) | Change (YoY) | | :------------------------------------------ | :------------------- | :------------------- | :------------ | | Finance income | 9,164 | 105,783 | -91.3% | | Finance costs | (106,062) | (117,641) | -9.8% | | Other financial results - Net (loss)/gain of inflation effects on the monetary items | (1,911) | 5,072 | N/A (swing from gain to loss) | | Total financial results, net | (98,809) | (6,786) | +1355.9% | - Finance income decreased significantly due to the absence of large foreign exchange gains and other income seen in 2023[85] - Finance costs included $28.2 million from cash flow hedge transfers from equity and $5.1 million in foreign exchange losses in 2024[85] 10. Taxation The Group recognized an income tax benefit of $39.98 million for the nine-month period ended September 30, 2024, a significant positive swing from an expense of $51.77 million in 2023. This was primarily driven by a large deferred income tax benefit and the effect of IAS 29 on Argentina's shareholder's equity and deferred income tax. The Group is within the scope of OECD Pillar Two rules, effective January 1, 2024, but reported no significant impact as of September 30, 2024 Income Tax Benefit / (Expense) (Nine-months ended September 30) | Item | 2024 (US$ thousands) | 2023 (US$ thousands) | Change (YoY) | | :-------------------------- | :------------------- | :------------------- | :------------ | | Current income tax | (8,013) | (6,485) | +23.6% | | Deferred income tax | 47,993 | (45,289) | N/A (swing from expense to benefit) | | Income tax benefit / (expense) | 39,980 | (51,774) | N/A | - The deferred income tax benefit in 2024 was significantly influenced by exchange differences and the effect of fair value valuation for farmlands[87] - The income tax benefit was also positively impacted by the effect of IAS 29 on Argentina's shareholder's equity and deferred income tax ($32.1 million in 2024)[90] - The Group is within the scope of the OECD Pillar Two model rules, effective as from January 1, 2024, but did not have any significant impact as of September 30, 2024[91][92] 11. Property, plant and equipment, net Net property, plant and equipment (PPE) remained relatively stable at $1,597.7 million as of September 30, 2024, with movements from exchange differences and additions largely offset by revaluation adjustments and depreciation, and farmlands valued using a Sales Comparison Approach by an independent expert Property, Plant and Equipment, Net (Nine-months ended September 30, 2024) | Item | Opening net book amount (US$ thousands) | Exchange differences (US$ thousands) | Additions (US$ thousands) | Revaluation surplus (US$ thousands) | Depreciation (US$ thousands) | Closing net book amount (US$ thousands) | | :------------------------------------ | :-------------------------------------- | :----------------------------------- | :------------------------ | :---------------------------------- | :------------------------- | :-------------------------------------- | | Farmlands | 694,202 | 403,590 | — | (407,056) | — | 677,004 | | Machinery, equipment, furniture and fittings | 196,995 | 8,010 | 46,525 | — | (60,022) | 194,711 | | Bearer plants | 375,842 | (42,780) | 108,930 | — | (79,236) | 362,756 | | Total | 1,549,565 | 448,209 | 195,446 | (407,056) | (168,845) | 1,597,718 | - The Group determined the valuation of farmlands (US$ 681.00 million as of September 30, 2024) using a "Sales Comparison Approach" prepared by an independent expert. A 10% reduction on the sales price would have reduced the value of the farmlands by US$ 68.10 million[97] - As of September 30, 2024, borrowing costs of US$ 3.78 million were capitalized as components of the cost of acquisition or construction of qualifying assets[98] - The net book value of pledged assets amounts to US$ 218.02 million as of September 30, 2024[99] 12. Right of use assets Right of use assets decreased slightly to $387.4 million as of September 30, 2024, primarily due to negative exchange differences and depreciation, partially offset by additions and re-measurements, with agricultural partnerships being the largest component Right of Use Assets (Nine-months ended September 30, 2024) | Item | Opening net book amount (US$ thousands) | Exchange differences (US$ thousands) | Additions and re-measurement (US$ thousands) | Depreciation (US$ thousands) | Closing net book amount (US$ thousands) | | :----------------------- | :-------------------------------------- | :----------------------------------- | :------------------------------------------- | :------------------------- | :-------------------------------------- | | Agricultural partnership | 384,848 | (29,488) | 63,038 | (56,597) | 361,801 | | Others | 21,865 | 1,357 | 9,882 | (7,530) | 25,574 | | Total | 406,713 | (28,131) | 72,920 | (64,127) | 387,375 | - Agricultural partnerships have an average term of 6 years[100] 13. Investment property Investment property remained stable at $33.5 million as of September 30, 2024, with a significant loss from fair value adjustment largely offset by positive exchange differences, and valuation based on a Sales Comparison Approach by an independent expert Investment Property (Nine-months ended September 30) | Item | 2024 (US$ thousands) | 2023 (US$ thousands) | | :-------------------------------- | :------------------- | :------------------- | | Beginning of period | 33,364 | 33,330 | | Loss from fair value adjustment | (22,484) | (913) | | Exchange differences | 22,662 | 947 | | End of period | 33,542 | 33,364 | - The Group determined the valuation of investment properties using a "Sales Comparison Approach" prepared by an independent expert. A 10% reduction on the Sales price as of September 30, 2024 would have reduced the value of the Investment properties on US$ 3.40 million[102] 14. Intangible assets, net Net intangible assets increased to $38.2 million as of September 30, 2024, primarily due to significant positive exchange differences and additions, partially offset by amortization charges, with goodwill being the largest component Intangible Assets, Net (Nine-months ended September 30, 2024) | Item | Opening net book amount (US$ thousands) | Exchange differences (US$ thousands) | Additions (US$ thousands) | Amortization charge (US$ thousands) | Closing net book amount (US$ thousands) | | :--------- | :-------------------------------------- | :----------------------------------- | :------------------------ | :---------------------------------- | :-------------------------------------- | | Goodwill | 14,309 | 6,154 | — | — | 20,463 | | Software | 6,042 | 2,135 | 1,019 | (1,387) | 7,809 | | Trademarks | 6,431 | 3,246 | — | (377) | 9,300 | | Others | 737 | (80) | — | (5) | 652 | | Total | 27,519 | 11,455 | 1,019 | (1,769) | 38,224 | - The Group conducts an impairment test annually or more frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable[104] 15. Biological assets Total biological assets decreased slightly to $225.1 million as of September 30, 2024, due to decreases from harvest/disposals partially offset by recognition, fair value changes, costs, and exchange differences, with the La Niña weather event severely impacting 2023 crop yields Biological Assets (Nine-months ended September 30, 2024) | Item | Beginning of year (US$ thousands) | Initial recognition and changes in fair value (US$ thousands) | Decrease due to harvest / disposals (US$ thousands) | Costs incurred during the period (US$ thousands) | Exchange differences (US$ thousands) | End of period (US$ thousands) | | :-------------------- | :-------------------------------- | :-------------------------------------------------- | :------------------------------------------ | :--------------------------------------- | :----------------------------------- | :-------------------------------- | | Crops | 55,545 | 33,184 | (194,622) | 118,324 | 36,060 | 49,293 | | Rice | 32,843 | 39,114 | (148,827) | 104,617 | 20,087 | 48,477 | | Dairy | 23,191 | 7,473 | (77,560) | 73,334 | 15,755 | 42,193 | | Sugarcane | 116,458 | 41,531 | (163,719) | 104,695 | (13,818) | 85,147 | | Total | 228,037 | 121,302 | (584,728) | 400,970 | 58,084 | 225,110 | - Biological assets that are measured at fair value within Level 3 of the hierarchy use valuation techniques based on unobservable inputs (discounted cash flow), while Level 2 assets are measured at fair value within Level 2 of the hierarchy[107] - The "La Niña" weather event in 2023 resulted in a severe drought in Argentina and Uruguay, causing a reduction in crop yields ranging from 18% to 60%, significantly affecting results of operations for the year ended December 31, 2023[111] 16. Financial instruments The Group's financial instruments measured at fair value, primarily derivative financial instruments and short-term investments, are categorized into Level 1 and Level 2 of the fair value hierarchy, with no Level 3 instruments or transfers between levels during the periods presented Financial Instruments Measured at Fair Value (September 30, 2024) | Item | Level 1 (US$ thousands) | Level 2 (US$ thousands) | Total (US$ thousands) | | :-------------------------- | :---------------------- | :---------------------- | :-------------------- | | Assets | | | | | Derivative financial instruments | 85 | 15,183 | 15,268 | | Short-term investment | 15,351 | — | 15,351 | | Total assets | 15,436 | 15,183 | 30,619 | | Liabilities | | | | | Derivative financial instruments | (1,355) | — | (1,355) | | Total liabilities | (1,355) | — | (1,355) | - Level 1 financial instruments mainly consist of crop futures and options traded on the stock market, NDFs, and public securities[113][118] - Level 2 financial instruments mainly consist of interest-rate swaps and foreign-currency interest-rate swaps, valued using models based on observable market data[114][118] - The Group does not have any Level 3 financial instruments for any of the periods presented, and there were no transfers between any levels[115] 17. Trade and other receivables, net Total trade and other receivables, net, increased significantly to $307.5 million as of September 30, 2024, driven by higher current trade receivables and advances to suppliers, with the majority denominated in US Dollar and Brazilian Reais Trade and Other Receivables, Net (As of September 30, 2024 vs December 31, 2023) | Item | Sep 30, 2024 (US$ thousands) | Dec 31, 2023 (US$ thousands) | Change | | :-------------------------------- | :--------------------------- | :--------------------------- | :------- | | Non-current portion | 37,872 | 39,060 | -3.1% | | Current portion | 269,648 | 179,055 | +50.6% | | Total trade and other receivables, net | 307,520 | 218,115 | +41.0% | - Current trade receivables increased from $87.6 million to $160.1 million, and advances to suppliers increased from $42.8 million to $51.4 million[119] Trade and Other Receivables by Currency (As of September 30, 2024 vs December 31, 2023) | Currency | Sep 30, 2024 (US$ thousands) | Dec 31, 2023 (US$ thousands) | | :--------------- | :--------------------------- | :--------------------------- | | US Dollar | 132,854 | 88,811 | | Argentine Peso | 63,936 | 24,304 | | Uruguayan Peso | 2,740 | 6,570 | | Brazilian Reais | 107,990 | 98,430 | | Total | 307,520 | 218,115 | 18. Inventories Total inventories increased significantly by 56.5% to $400.6 million as of September 30, 2024, driven by increases in both raw materials and finished goods Inventories (As of September 30, 2024 vs December 31, 2023) | Item | Sep 30, 2024 (US$ thousands) | Dec 31, 2023 (US$ thousands) | Change | | :------------ | :--------------------------- | :--------------------------- | :------- | | Raw materials | 168,888 | 76,440 | +121.0% | | Finished goods | 231,742 | 179,611 | +29.0% | | Total | 400,630 | 256,051 | +56.5% | 19. Cash and cash equivalents Cash and cash equivalents decreased by 41.7% to $198.3 million as of September 30, 2024, with declines observed in both cash at bank and on hand, and short-term bank deposits Cash and Cash Equivalents (As of September 30, 2024 vs December 31, 2023) | Item | Sep 30, 2024 (US$ thousands) | Dec 31, 2023 (US$ thousands) | Change | | :-------------------- | :--------------------------- | :--------------------------- | :------- | | Cash at bank and on hand | 52,620 | 179,068 | -70.6% | | Short-term bank deposits | 145,635 | 160,713 | -9.3% | | Total | 198,255 | 339,781 | -41.7% | 20. Disposals In April 2024, the Company sold La Pecuaria farm for $20.7 million, generating a $6.1 million pre-tax gain, following the September 2023 sale of El Meridiano farm for $48 million with a $9.5 million pre-tax gain - In April 2024, the Company sold "La Pecuaria" farm, a 3,177 hectares farm located in Uruguay for an aggregate amount of US$ 20.70 million, resulting in a pre-tax gain of US$ 6.10 million[129] - In September 2023, the Company sold "El Meridiano", a 6,302 hectares farm located in the Province of Buenos Aires, Argentina for an aggregate amount of US$ 48.00 million, resulting in a gain before tax of US$ 9.50 million[128] 21. Shareholder's contribution The Company's share capital and share premium decreased to $833.9 million as of September 30, 2024, primarily due to share repurchases and dividend payments, partially offset by employee share option exercises and restricted share vesting, with the share repurchase program renewed in July 2024 and $35 million in annual dividends approved Share Capital and Share Premium (As of September 30, 2024 vs January 1, 2024) | Item | At January 1, 2024 (US$ thousands) | Employee share options exercised (US$ thousands) | Restricted share vested (US$ thousands) | Purchase of own shares (US$ thousands) | Dividends to shareholders (US$ thousands) | At September 30, 2024 (US$ thousands) | | :------------------------ | :--------------------------------- | :--------------------------------------- | :------------------------------------ | :------------------------------------- | :---------------------------------------- | :------------------------------------ | | Share capital and share premium | 910,883 | 115 | 7,540 | (49,626) | (35,000) | 833,912 | - On July 11, 2024, the Group's share repurchase program was renewed to purchase up to five per cent (5%) of the Company's total outstanding share capital until December 31, 2024[131] - During the nine-month period ended September 30, 2024, the Company repurchased shares for an amount of 5,768,614[132] - On April 17, 2024, the Company's general shareholders' meeting approved the payment of an annual dividend of $35 million payable in two installments in May and November of 2024[133] 22. Equity-settled share-based payments The Group operates the 2004 Incentive Option Plan and the Adecoagro Restricted Share and Restricted Stock Unit Plan, recognizing $4.6 million in compensation expense for restricted shares in the nine-month period ended September 30, 2024, with 603,799 shares granted and 970,511 vested - The Group established the "2004 Incentive Option Plan" and the "Adecoagro Restricted Share and Restricted Stock Unit Plan" for equity-settled share-based payments[136][137] - As of September 30, 2024, the Group recognized compensation expense of US$ 4.60 million related to the restricted shares granted under the Restricted Share Plan (September 30, 2023: US$ 4.90 million)[139] - For the nine-month period ended September 30, 2024, 603,799 Restricted Shares were granted and 970,511 were vested[139] 23. Trade and other payables Total trade and other payables decreased by 8.6% to $175.2 million as of September 30, 2024, mainly due to decreases in current trade payables, advances from customers, and payables from acquisition of subsidiaries, partially offset by an increase in dividends payables Trade and Other Payables (As of September 30, 2024 vs December 31, 2023) | Item | Sep 30, 2024 (US$ thousands) | Dec 31, 2023 (US$ thousands) | Change | | :-------------------------- | :--------------------------- | :--------------------------- | :------- | | Non-current | 494 | 1,008 | -51.0% | | Current | 174,699 | 190,730 | -8.4% | | Total trade and other payables | 175,193 | 191,738 | -8.6% | - Current trade payables decreased from $140.9 million to $138.2 million, and advances from customers decreased from $16.4 million to $6.4 million. Dividends payables increased from $1.0 million to $18.5 million[140] 24. Borrowings Total borrowings decreased by 5.0% to $859.4 million as of September 30, 2024, primarily due to a reduction in Senior Notes, short-term bank borrowings, and the settlement of a loan with International Finance Corporation (IFC), with the Company remaining in compliance with financial covenants Borrowings (As of September 30, 2024 vs December 31, 2023) | Item | Sep 30, 2024 (US$ thousands) | Dec 31, 2023 (US$ thousands) | Change | | :---------------- | :--------------------------- | :--------------------------- | :------- | | Non-current | 688,628 | 697,843 | -1.3% | | Current | 170,796 | 207,106 | -17.5% | | Total borrowings | 859,424 | 904,949 | -5.0% | - During 2024, the Group settled the outstanding amount of US$16.4 million under the loan agreement entered into with the International Finance Corporation (IFC)[147] - A cash tender offer for up to US$100.0 million of the Notes due 2027 resulted in US$84.36 million in aggregate principal amount of Notes being validly tendered and fully cancelled[146] - As of September 30, 2024, the Group was in compliance with the related financial covenants under the respective loan agreements[142] 25. Lease liabilities Total lease liabilities decreased by 6.4% to $354.3 million as of September 30, 2024, with the majority being long-term and a significant portion maturing in more than 5 years Lease Liabilities (As of September 30, 2024 vs December 31, 2023) | Item | Sep 30, 2024 (US$ thousands) | Dec 31, 2023 (US$ thousands) | Change | | :---------- | :--------------------------- | :--------------------------- | :------- | | Non-current | 301,465 | 325,569 | -7.4% | | Current | 52,827 | 52,941 | -0.2% | | Total | 354,292 | 378,510 | -6.4% | - Lease liabilities maturing in more than 5 years amount to US$ 130.97 million as of September 30, 2024[152] 26. Payroll and social security liabilities Total payroll and social security liabilities remained stable at $39.2 million as of September 30, 2024, with an increase in salaries payable largely offset by a decrease in provision for bonuses Payroll and Social Security Liabilities (As of September 30, 2024 vs December 31, 2023) | Item | Sep 30, 2024 (US$ thousands) | Dec 31, 2023 (US$ thousands) | Change | | :-------------------------- | :--------------------------- | :--------------------------- | :------- | | Non-current | 1,278 | 1,570 | -18.6% | | Current | 37,963 | 37,357 | +1.6% | | Total | 39,241 | 38,927 | +0.8% | - Salaries payable increased from $4.5 million to $10.7 million, while provision for bonuses decreased from $16.0 million to $9.6 million[153] 27. Provisions for other liabilities The Group accrues liabilities for contingent claims, lawsuits, and other proceedings when probable and estimable. There have been no material changes to claimed amounts and current proceedings since December 31, 2023 - The Group accrues liabilities when it is probable that future costs will be incurred and it can reasonably estimate them[154] - There have been no material changes to claimed amounts and current proceedings since December 31, 2023[154] 28. Related-party transactions Compensation to directors and senior management for employment services amounted to $5.7 million for the nine-month period ended September 30, 2024, a decrease from $6.2 million in 2023. The balance payable to related parties was $16.3 million as of September 30, 2024 Related-Party Transactions (Nine-months ended September 30) | Item | 2024 (US$ thousands) | 2023 (US$ thousands) | | :------------------------------------ | :------------------- | :------------------- | | Compensation to Directors and senior management | (5,698) | (6,200) | | Balance payable (Sep 30) | (16,273) | (18,781) | 29. Basis of preparation and presentation The unaudited condensed consolidated interim financial statements, prepared in accordance with IAS 34, reflect management's estimates and assumptions, and should be read with annual statements, noting the Group's inherently seasonal business activities lead to fluctuating financial results, particularly for grains, peanuts, cotton, and sugar/ethanol/electricity, while dairy is more stable - The condensed consolidated interim financial statements are unaudited and have been prepared in accordance with International Accounting Standard 34 (IAS 34), 'Interim financial reporting'[156][157] - The Group's business activities are inherently seasonal, with harvesting and selling of grains (corn, soybean, rice and sunflower) between February and August, wheat from December to January, peanut from April to May, and cotton from June to August[159] - The Sugar, Ethanol and Electricity cluster, despite continuous operation, still experiences fluctuations due to traditional off-season periods in the sector, usually peaking in December to take advantage of higher prices during the traditional off-season period (i.e., January through April)[161] 30. Critical accounting estimates and judgments The Group's critical accounting policies are consistent with its annual financial statements, with impairment tests conducted annually or more frequently for non-financial assets and Cash Generating Units (CGUs) with allocated goodwill, using fair-value-less-costs-to-sell for Argentine farmlands and value-in-use for Brazilian CGUs, with no impairment identified as of September 30, 2024 and 2023 - At the date of each statement of financial position, the Group reviews the carrying amounts of its property, plant and equipment and finite lived intangible assets to determine whether there is any indication that those assets could have suffered an impairment loss[163] - Goodwill acquired is allocated to Cash Generating Units (CGUs) and tested for impairment annually, or more frequently if events or changes in circumstances indicate impairment[164] - As of September 30, 2024, the Group identified 6 CGUs in Argentina (Farming segments) tested based on a "fair-value-less-costs-to-sell" model and 2 CGUs in Brazil (Sugar, Ethanol and Energy segment) tested based on a "value-in-use" model[166][167][174] - Based on the testing, the Group determined that none of the CGUs, with allocated goodwill, were impaired at September 30, 2024 and 2023[173][177]