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Bioceres Crop Solutions Corp. reports fiscal first quarter 2020 financial results
Nov. 15, 2019
Bioceres Crop Solutions
ArgentinaFollow
ArgentinaBioceres Crop Solutions Corp. (“Bioceres”), a fully integrated provider of crop productivity solutions, announced its unaudited consolidated financial results for its first fiscal quarter 2020, the three-month period ended September 30, 2019. Financial results are expressed in U.S. dollars and are presented in accordance with International Financial Reporting Standards.
1Q20 Business and Financial Highlights
• Revenue growth of 22% year over year (YoY) to $36.3 million and 11% on a comparable basis, as the Company continues to ramp up existing capacity in Argentina, expand its footprint of biological products to other countries and increase adjuvants sales in Brazil.
• Installed capacity utilization rate for the twelve-month period ended September 30, 2019 at the micro-beaded fertilizer plant was 25%, up from 12% for the twelve-month period ending September 30, 2018.
• HB4 soybean seed inventory began to ramp-up. First 100 hectares (250 acres) harvested in the U.S., which will allow planting approximately 3.000 hectares (7,500 acres) in the upcoming summer crops season in Argentina.
• HB4 wheat seed inventory began to ramp-up. First 400 hectares (1.000 acres) planted during the Fall in the southern hemisphere are expected to be harvested during Fiscal 2Q20.
• Subsequent to quarter end, issued $15 million note securing working capital financing to support ramp-up of HB4 planting while also extending debt maturity.
Commenting on the results for the quarter, Mr. Federico Trucco, CEO of Bioceres, said “We are pleased that the strong growth in FY19 continued throughout the first quarter of 2020. We are especially pleased with the performance of our international business, which accounted for approximately one third of total revenues in the period. Despite generally tough financial conditions in Argentina, we were able to secure additional financing, which will support the ramp-up of our HB4 seed inventories both in soybean and wheat. We are getting ready to harvest the first commercial varieties from hundreds of hectares, which will allow us to plant thousands of hectares in the 2019-2020 crop cycle. As we ramp-up HB4 seed inventories, we continue to demonstrate the resiliency of HB4 crops, evidenced in this period by the significant yield performance of EcoWheat seeds relative to conventional fields in what has been a particularly dry winter season.”
Mr. Enrique Lopez Lecube, CFO of Bioceres, said “Despite delayed purchases in Argentina due to macro-economic uncertainty and unfavourable sowing conditions in some regions of the country, we continued to generate strong financial results in the first quarter. Comparable revenue continued to grow at double digits, driven by sustained ramp-up of our micro-beaded fertilizer facility, and overall solid growth in Brazil. These strong growth drivers more than offset the impact of delayed purchases in Argentina, which we view as a timing issue that should normalize over the course of the year. EBITDA declined modestly year over year, in part due to aforementioned timing of purchase decisions and in part due to temporary margin pressures in Argentina brought on by a misalignment between changes in FX and inflation. Despite these headwinds, the commercial teams did a fantastic job managing working capital and generating cash, reducing net leverage to 2.14, down from 4.07x a year ago”
REVIEW OF OPERATING PERFORMANCE
Installed capacity utilization of the micro-beaded fertilizer plant for the twelve-month period ended September 30, 2019 reached 25%. This was a 50% YoY increase bringing total production to 12.4k tons through the trailing twelve-month period. The ramp was driven both by strong sales growth in Argentina, Brazil, and Paraguay.
Adjuvants aggregated volume in Fiscal 1Q20 decreased 7% compared to the same period in 2018 due to a deliberate strategic shift from high volume, low margin products into higher margin adjuvants in Argentina. By contrast, sales volumes in Brazil increased 66% year-on-year as the Company continues to execute its growth strategy in that country.
Inoculants doses aggregated volume in Fiscal 1Q20 decreased 7% year-on-year, reflecting farmers´ delayed purchase decisions for summer crops seed treatment packs in Argentina until closer to sowing in 2Q20. We believe that this was largely driven by the macro uncertainty during the quarter, as well as limited soil moisture in some regions of Argentina which delayed planting activities. This was partially offset by higher inoculant sales in Brazil and Paraguay and increased farmers’ purchase of winter crops seed treatment packs in Argentina, which had been delayed from 4Q19.
REVIEW OF FIRST QUARTER 2019 RESULTS
Comparable Revenues and Comparable Gross Profit are key operational metrics used by the management team to assess the Company's underlying financial and operating performance. The Company has introduced the term “Comparable” to reflect the result of a given metric excluding the impact of IAS 29.
For comparison purposes, the impact of adopting IAS 29 is presented separately in each of the applicable sections of this earnings release, in a column denominated “As Reported”.
Revenues increased 22% to $36.3 million in Fiscal 1Q20, compared to $29.6 million during Fiscal 1Q19.
Comparable Revenues for the quarter, excluding the impact of IAS29 as explained above, increased 11% YoY reflecting higher revenues in the crop protection and crop nutrition segments, partially offset by lower revenues in seed and integrated products: International subsidiaries and export comparable sales increased 32% YoY to $13.2 million.
• Crop Protection Comparable Revenues increased 13% YoY, or $2.2 million, to $19.5 million, driven by increased adjuvants sales in Argentina and Brazil, and higher sales of baits and seed treatment insecticides and fungicides. This was partially offset by lower sales of stored grain products and formulation services to third parties.
• Seed and Integrated Products Comparable Revenues declined 18% YoY, or $1.3 million, to $5.7 million reflecting delayed farmers’ purchases of summer crop seed treatment packs, partially offset by winter crop pack sales delayed from the prior quarter and higher seeds sales.
• Crop Nutrition Comparable Revenues increased 27% YoY, or $3.0 million, to $14.0 million driven by sustained growth in micro-beaded fertilizers sales in Argentina, Brazil and Paraguay. Higher inoculant sales in Brazil and Paraguay also contributed to segment sales growth.
Gross profit increased to $15.9 million in 1Q20, from to $15.1 million in 1Q19.
Comparable Gross Profit was $17.8 million in 1Q20, compared with $18.6 million in the year-ago quarter. Strong revenue growth was offset by the impact of the slowdown in the peso depreciation in Argentina relative to the inflation rate. Since most of our revenues are pegged to the US dollar, while a significant portion of our production costs are denominated in Argentine pesos, this timing mismatch negatively impacted gross profit in the quarter. Comparable gross margin for 1Q20 was 45.3% compared to 52.6% in the prior year quarter, driven by the following performance by business segment:
• Crop Protection Comparable Gross profit was $8.0 million, compared to $8.4 million in Fiscal 1Q19. Gross margin was 40.9% in Fiscal 1Q20 compared to 48.7% in the year ago quarter. The overall decline in gross margin for the crop protection segment is explained by increased manufacturing costs in US dollars in Argentina, due to the aforementioned FX and inflation dynamics, as well as growth in revenues driven by lower margin products than the previous YoY quarter product mix.
• Seed and Integrated Products Comparable Gross profit was $3.7 million, compared to $5.1 million in the year ago quarter. Gross margin was 63.7%, compared to 72.1% in Fiscal 1Q19. Increased sales of high margin royalty payments was more than offset by increased manufacturing costs in Argentina due to the aforementioned FX and inflation dynamics.
• Crop Nutrition Comparable Gross profit was $6.1 million, compared to $5.1 million in the prior year quarter, driven by the ramp-up of the micro-beaded fertilizer plant utilization rate, as well as higher inoculants sales in Brazil, Paraguay and other international subsidiaries. Gross margin declined to 43.7% compared to 46.1% in Fiscal 1Q19 due to the aforementioned FX and inflation dynamics.
Source: Bioceres
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