Bioceres Crop Solutions Corp. reports fiscal third quarter 2020 financial results

Bioceres Crop Solutions Corp. (“Bioceres” or the “Company”) (NYSE American: BIOX), a fully-integrated provider of crop productivity solutions designed to enable the transition of agriculture towards carbon neutrality, Tuesday announced its unaudited consolidated financial results for fiscal third quarter 2020 and the fiscal nine-month period ended March 31, 2020. Financial results are expressed in U.S. dollars and are presented in accordance with International Financial Reporting Standards. All comparisons in this announcement are year-over-year (“YoY”), unless noted otherwise.

Fiscal 3Q20 financial and business highlights

- Comparable Revenues up 9%, with growth across key product lines in strategic markets and despite growers’ hesitation to make pre-season purchases due to a temporary period of uncertainty related to the early stages of the COVID-19 pandemic. Revenue growth was mainly driven by further penetration of crop protection markets in Brazil, Paraguay and Uruguay, strong sales of seed treatment packs in Europe, as well as a continued recovery in Argentina.

- Bioceres raised over $50 million of capital during the quarter through a private placement of a convertible promissory note due 2023 for $42.5 million and a public bond issuance by Rizobacter, the Company’s main operating subsidiary, for $7.6 million. The proceeds are equivalent to a significant portion of the short-term financial debt of the Company, implying a material strengthening of Bioceres’ balance sheet and cash positions, which reflect improved YoY financial results in the third quarter. The capital raised also provides the financial robustness required to support working capital needs in the coming quarters for the deployment of HB4^® technology during the wheat and soybean crops seasons in the Southern Cone.

- In preparation for the commercial launch of HB4^® drought-tolerant soybean varieties, the product was showcased at Expoagro 2020, attended by more than 100,000 South American growers. At the pavilion of Verdeca, the Company’s JV dedicated to this technology, the number of early adopters that registered for the next cycle of seed multiplication exceeded by nearly ten-fold the maximum acreage potentially available. Based on current demand levels and the harvesting of HB4 inventories underway, Bioceres is well positioned to increase the inventories into hundreds of thousands of acres during the next summer crop season in Argentina.

- The Company plans for HB4^® technology in wheat remain unchanged, with up to 12,000 hectares reserved for planting during the upcoming winter campaign in the Southern Cone.

- In response to COVID-19 pandemic, Bioceres’ Business Continuity and Crisis committees were activated. These committees coordinated the steps necessary to comply with emerging regulations, to safeguard employees, customers and the communities in which we operate, as well as minimize any disruptions to the Company’s business operations.

Commenting on the Company’s results, Mr. Federico Trucco, Chief Executive Officer of Bioceres, said, “We operate in a privileged industry and this has never been as clear as during the COVID-19 epidemic. Despite some short-lived uncertainty in the farming community late in the quarter due to the pandemic, it is gratifying to report a nine percent year-on-year increase in revenue during the period. Deeper penetration of international markets, including Europe, drove much of this growth as we continued effectively executing our commercial strategy abroad. Looking ahead, we have secured capital via the March private placement to substantially ramp up inventories of HB4^® seed varieties, which will be integrated with our proprietary biological seed treatments and launched under Bioceres’ EcoSoy™ and EcoWheat™ brands. In light of COVID-19’s global impact, the Company will keep China´s HB4 approval timeline under review, as we plan and coordinate efforts to ramp up inventories. And owing to the health and safety measures that we rapidly implemented throughout our organization, we remain fully operational as the summer crop harvest is underway in the Southern Cone.”

Mr. Enrique Lopez Lecube, Chief Financial Officer of Bioceres said, “We are pleased to have brought in capital to support the exciting growth opportunities that we see in front of us. The $50 million raised during the quarter significantly enhances our financial flexibility, allows us to optimize working capital financing, lowering financing costs. While our fiscal third quarter is seasonally slow, I was encouraged by continued growth in revenue and gross profit, confirming the resilience of our business. We intend to balance the deployment of the capital we raised in support of high return growth opportunities while remaining committed to preserving financial flexibility going forward.”

COVID-19 update and risk mitigation

Bioceres continues to strongly execute its growth strategy and deliver improved results, proving that it operates a highly resilient business in the context of Covid-19.

- Business continuity. Activities surrounding agriculture, including ag-inputs supply and manufacturing, have been deemed essential in the key countries where Bioceres operates, allowing the Company to proceed with its commercial, manufacturing and administrative activities.

- Safeguarding employees. Bioceres took early measures in implementing policies and procedures that protect workers at the Company and its customers’ sites. Traveling has been restricted and resources enabled for selling, administrative and other support functions to work from home. For those working at manufacturing, distribution and farm sites, safety and social distancing protocols were implemented and are regularly monitored by the Company’s Business Continuity and Crisis committees.

- Strengthened supply chain. Solid and long-standing relationships with Bioceres’ main suppliers have enabled the Company to rely on scheduled fulfillment of supply agreements, ensuring input availability for the timely manufacturing of key products. Alternative suppliers of raw materials, equipment and services have been identified to build in additional flexibility and agility into Bioceres’ supply chain.

- End-users of Bioceres products. Understanding that growers rely on product availability to complete field tasks, Bioceres maintains robust IT infrastructure and distribution planning to ensure that logistics and customer support can be performed remotely and securely with the same levels of efficiency and quality.

- Financial performance. Bioceres continues to deliver solid growth from its baseline business and to execute well on its HB4^® initiative, with an enhanced focus on preserving cash liquidity. Cost reduction measures have been implemented without affecting company personnel, non-essential capital expenditures have been postponed, and working capital is being closely monitored.

Review of fiscal third quarter 2020 operating performance

Installed capacity utilization of Bioceres’ micro-beaded fertilizer plant, for the fiscal twelve-month period ended March 31, 2019, increased 22.5% YoY to 27.2%, while unchanged on a sequential basis, bringing total production to 13,600 tons during this period. With a focus on profitability, the Company is proceeding with discipline while calibrating the commercial strategy to widen market acceptance of this technical product.

Aggregate adjuvant volumes decreased 10.7% YoY in the fiscal third quarter, due to lower sales in Argentina, where insecticide and fungicide application rates declined under highly-favorable crop growing conditions, which resulted in less need for pesticides and thus led to lower demand for adjuvants. At the Bioceres’ main Latin American subsidiaries outside Argentina, adjuvant volumes increased 32%, as the Company continued effectively executing its international growth strategy. For the fiscal nine-month period ended March 31, 2019, total adjuvant volume remained flat YoY as volume growth in Brazil offset a shift in product mix in Argentina, as the Company emphasized higher-margin adjuvants over high-volume, lower-margin products in the latter market.

Total inoculant and seed treatment packs doses for the quarter decreased 46% YoY, driven by the discontinuation of low-end, high-volume inoculants sales in Brazil, during what is a seasonally slow quarter for these products in the Southern Cone. The volume decline was partially offset by high volume growth in Europe and South Africa, as well as a partial recovery in volumes of seed treatment packs in Argentina, which had been negatively impacted during the first two quarters of the Fiscal Year. For the nine-month period, inoculant and seed treatment pack volumes decreased 14% YoY, a decline due to unfavorable weather and economic conditions when summer crops were being planted in Argentina during the first two quarters of the Company’s fiscal year.

Bioceres Expands Scope of Alliance with Syngenta

On April 14, 2020 Bioceres expanded the scope of its alliance with Syngenta, granting distribution rights to a biological seed treatment fungicide developed by the Company’s subsidiary Rizobacter, with an initial focus on Argentina, although there is high-growth potential in international markets such as Europe. The product is a therapeutic formulation based on the Trichoderma Harzianum (Rizoderma) fungus, which has proven effective in controlling all seed and soil diseases which affect germination and early development of wheat crops. Because the formulation is a biological fungicide, it promotes new response mechanisms that enhance disease resistance and offer extended control. Additionally, use of this product is more sustainable and environmentally friendly than competing products.

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