Segment information

According to IFRS 8, operating segments are identified based on the ‘management approach’. Operating segments are components of an entity about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to allocate resources and in assessing performance. The Group’s CODM is the Management Committee. IFRS 8 stipulates external segment reporting based on the Group’s internal organizational and management structure and on internal financial reporting to the chief operating decision maker.

The Group operates in three major lines of business, namely, Farming; Sugar, Ethanol and Energy; and Land Transformation.

•The Company’s ‘Farming’ is further comprised of five reportable segments:

•The Company’s ‘Crops’ Segment consists of planting, harvesting and sale of grains, oilseeds and fibers (including wheat, corn, soybeans, cotton and sunflowers, among others), and to a lesser extent the provision of grain warehousing/conditioning and handling and drying services to third parties. Each underlying crop in this segment does not represent a separate operating segment. Management seeks to maximize the use of the land through the cultivation of one or more type of crops. Types and surface amount of crops cultivated may vary from harvest year to harvest year depending on several factors, some of them out of the Group´s control. Management is focused on the long-term performance of the productive land, and to that extent, the performance is assessed considering the aggregated combination, if any, of crops planted in the land. A single manager is responsible for the management of operating activity of all crops rather than for each individual crop.

•The Company’s ‘Rice’ Segment consists of planting, harvesting, processing and marketing of rice.

•The Company’s ‘Dairy’ Segment consists of the production and sale of raw milk and other dairy products.

•The Company’s ‘All Other Segments’ consists of the aggregation of the remaining non-reportable operating segments, which do not meet the quantitative thresholds for disclosure, namely, Coffee and Cattle.

•The Company’s ‘Sugar, Ethanol and Energy’ Segment consists of cultivating sugarcane which is processed in owned sugar mills, transformed into ethanol, sugar and electricity and marketed;

•The Company’s ‘Land Transformation’ Segment comprises the (i) identification and acquisition of underdeveloped and undermanaged farmland businesses; and (ii) realization of value through the strategic disposition of assets (generating profits).

Total segment assets and liabilities are measured in a manner consistent with that of the consolidated financial statements. These assets and liabilities are allocated based on the operations of the segment and the physical location of the asset.

Effective July 1, 2018, the Group applied IAS 29 “Financial Reporting in Hyperinflationary Economies” (“IAS 29”) to its operations in Argentina. IAS 29 “Financial Reporting in Hyperinflationary Economies” requires that the financial statements of entities whose functional currency is that of a hyperinflationary economy be adjusted for the effects of changes in the general price index and be expressed in terms of the current unit of measurement at the closing date of the reporting period (“inflation accounting”). In order to determine whether an economy is classified as hyperinflationary, IAS 29 sets forth a series of factors to be considered, including whether the amount of cumulative inflation nears or exceeds a threshold of 100 %. Accordingly, Argentina has been classified as a hyperinflationary economy under the terms of IAS 29 from July 1, 2018. (Please see Note 33 - Basis of preparation and presentations).

According to IAS 29, all Argentine Peso-denominated non-monetary items in the statement of financial position are adjusted by applying a general price index from the date they were initially recognized to the end of the reporting period. Likewise, all Argentine Peso-denominated items in the statement of income should be expressed in terms of the measuring unit current at the end of the reporting period, consequently, income statement items are adjusted by applying a general price index on a monthly basis from the dates they were initially recognized in the financial statements to the end of the reporting period. This process is called “re-measurement”.

Once the re-measurement process is completed, all Argentine Peso denominated accounts are translated into U.S. Dollars, the Group’s reporting currency, applying the guidelines in IAS 21 “The Effects of Changes in Foreign Exchange Rates”(“IAS 21”). IAS 21 requires that amounts be translated at the closing rate at the date of the most recent statement of financial position. This process is called “translation”.

The re-measurement and translation processes are applied on a monthly basis until year-end. Due to this process, the re-measured and translated results of operations for a given month are subject to change until year-end, affecting comparison and analysis.

Following the adoption of IAS 29 to the Argentine operations of the Group, management revised the information reviewed by the CODM. Accordingly, as from July 1, 2018, (commencement of hyper-inflation accounting in Argentina), the information provided to the CODM departs from the application of IAS 29 and IAS 21 re-measurement and translation processes as follows. The segment results of the Argentinean operations for each reporting period were adjusted for inflation and translated into the Group’s reporting currency using the reporting period average exchange rate. The translated amounts were not subsequently re-measured and translated in accordance with the IAS 29 and IAS 21 procedures outlined above. From January 1, 2018 through June 30, 2018, the Group’s segment results were still based on the IFRS measurement principles adopted until June 30, 2018.

In order to evaluate the economic performance of businesses on a monthly basis, results of operations in Argentina are based on monthly data that have been adjusted for inflation and converted into the average exchange rate of the U.S. Dollar each month. These already converted figures are subsequently not readjusted and reconverted as described above under IAS 29 and IAS 21. It should be noted that this translation methodology for evaluating segment information is the same that the company uses to translate results of operation from its other subsidiaries from other countries that have not been designated hyperinflationary economies because it allows for a more accurate analysis of the economic performance of its business as a whole.

The Group’s CODM believes that the exclusion of the re-measurement and translation processes from the segment reporting structure allows for a more useful presentation and facilitates period-to-period comparison and performance analysis.

The following tables show a reconciliation of each reportable segment as per the information reviewed by the CODM and the reportable segment measured in accordance with IAS 29 and IAS 21 as per the consolidated financial statements.



	Crops						Rice						Dairy
	Total segment reporting		Adjustment		Total as per statement of income		Total segment reporting		Adjustment		Total as per statement of income		Total segment reporting		Adjustment		Total as per statement of income
Sales of goods sold and services rendered	164,538		(9,120	)	155,418		100,013		(4,610	)	95,403		33,201		(3,491	)	29,710
Cost of goods and services rendered	(165,988	)	9,052		(156,936	)	(75,739	)	766		(74,973	)	(31,488	)	3,361		(28,127	)
Initial recognition and changes in fair value of biological assets and agricultural produce	36,422		(7,755	)	28,667		8,967		(4,842	)	4,125		7,295		(1,840	)	5,455
Gain from changes in net realizable value of agricultural produce after harvest	2,704		(3,613	)	(909	)	—		—		—		—		—		—
Margin on Manufacturing and Agricultural Activities Before Operating Expenses	37,676		(11,436	)	26,240		33,241		(8,686	)	24,555		9,008		(1,970	)	7,038
General and administrative expenses	(4,239	)	37		(4,202	)	(5,070	)	(869	)	(5,939	)	(2,034	)	(246	)	(2,280	)
Selling expenses	(5,921	)	474		(5,447	)	(15,465	)	1,375		(14,090	)	(983	)	41		(942	)
Other operating income, net	5,422		1,741		7,163		275		(58	)	217		(1,055	)	58		(997	)
Profit from Operations Before Financing and Taxation	32,938		(9,184	)	23,754		12,981		(8,238	)	4,743		4,936		(2,117	)	2,819

Depreciation and amortization	(1,697	)	(329	)	(2,026	)	(5,846	)	5,840		(6	)	(2,253	)	(280	)	(2,533	)
Net gain from Fair value adjustment of investment property	—		—		—		—		—		—		—		—		—



	All other segments						Corporate					Total
	Total segment reporting		Adjustment		Total as per statement of income		Total segment reporting		Adjustment	Total as per statement of income		Total segment reporting		Adjustment		Total as per statement of income
Sales of goods sold and services rendered	1,919		(149	)	1,770		—		—	—		810,609		(17,370	)	793,239
Cost of goods and services rendered	(1,412	)	99		(1,313	)	—		—	—		(623,243	)	13,278		(609,965	)
Initial recognition and changes in fair value of biological assets and agricultural produce	(806	)	(393	)	(1,199	)	—		—	—		31,025		(14,830	)	16,195
Gain from changes in net realizable value of agricultural produce after harvest	—		—		—		—		—	—		2,704		(3,613	)	(909	)
Margin on Manufacturing and Agricultural Activities Before Operating Expenses	(299	)	(443	)	(742	)	—		—	—		221,095		(22,535	)	198,560
General and administrative expenses	(155	)	(9	)	(164	)	(19,626	)	1,433	(18,193	)	(56,426	)	346		(56,080	)
Selling expenses	(165	)	16		(149	)	(178	)	33	(145	)	(92,154	)	1,939		(90,215	)
Other operating income, net	10,668		2,728		13,396		(167	)	36	(131	)	99,727		4,505		104,232
Profit from Operations Before Financing and Taxation	10,049		2,292		12,341		(19,971	)	1,502	(18,469	)	172,242		(15,745	)	156,497

Depreciation and amortization	(171	)	(6	)	(177	)	—		—	—		(153,169	)	(1,085	)	(154,254	)
Net gain from Fair value adjustment of investment property	10,680		2,729		13,409		—		—	—		10,680		2,729		13,409

Sugar, Ethanol and Energy, and Land Transformation segments have not been reconciliated due to the lack of differences.

The following table presents information with respect to the Group’s reportable segments. Certain other activities of a holding function nature not allocable to the segments are disclosed in the column ‘Corporate’.

Segment analysis for the year ended December 31, 2018



	Farming										Sugar, Ethanol and Energy		Land Transformation	Corporate		Total
	Crops		Rice		Dairy		All other segments		Farming subtotal		Sugar, Ethanol and Energy		Land Transformation	Corporate		Total
Sales of goods and services rendered	164,538		100,013		33,201		1,919		299,671		510,938		—	—		810,609
Cost of goods sold and services rendered	(165,988	)	(75,739	)	(31,488	)	(1,412	)	(274,627	)	(348,616	)	—	—		(623,243	)
Initial recognition and changes in fair value of biological assets and agricultural produce	36,422		8,967		7,295		(806	)	51,878		(20,853	)	—	—		31,025
Changes in net realizable value of agricultural produce after harvest	2,704		—		—		—		2,704		—		—	—		2,704
Margin on manufacturing and agricultural activities before operating expenses	37,676		33,241		9,008		(299	)	79,626		141,469		—	—		221,095
General and administrative expenses	(4,239	)	(5,070	)	(2,034	)	(155	)	(11,498	)	(25,302	)	—	(19,626	)	(56,426	)
Selling expenses	(5,921	)	(15,465	)	(983	)	(165	)	(22,534	)	(69,442	)	—	(178	)	(92,154	)
Other operating income, net	5,422		275		(1,055	)	10,668		15,310		48,357		36,227	(167	)	99,727
Profit / (loss) from operations before financing and taxation	32,938		12,981		4,936		10,049		60,904		95,082		36,227	(19,971	)	172,242

Depreciation and amortization	(1,697	)	(5,846	)	(2,253	)	(171	)	(9,967	)	(143,202	)	—	—		(153,169	)
Net gain from Fair value adjustment of investment property	—		—		—		10,680		10,680		—		—	—		10,680
Initial recognition and changes in fair value of biological assets and agricultural produce (unrealized)	8,205		(181	)	(599	)	102		7,527		(37,808	)	—	—		(30,281	)
Initial recognition and changes in fair value of biological assets and agricultural produce (realized)	28,217		9,148		7,894		(908	)	44,351		16,955		—	—		61,306
Changes in net realizable value of agricultural produce after harvest (unrealized)	(647	)	—		—		—		(647	)	—		—	—		(647	)
Changes in net realizable value of agricultural produce after harvest (realized)	3,351		—		—		—		3,351		—		—	—		3,351

Farmlands and farmland improvements, net	547,842		173,481		727		22,891		744,941		51,567		—	—		796,508
Machinery, equipment and other fixed assets, net	5,049		23,135		32,821		459		61,464		338,607		—	—		400,071
Bearer plants, net	427		—		—		—		427		232,529		—	—		232,956
Work in progress	8,690		5,214		14,317		18		28,239		22,665		—	—		50,904
Investment property	—		—		—		40,725		40,725		—		—	—		40,725
Goodwill	9,463		4,142		—		2,110		15,715		5,635		—	—		21,350
Biological assets	27,347		17,173		10,298		3,094		57,912		47,475		—	—		105,387
Finished goods	29,144		9,507		1,170		—		39,821		39,937		—	—		79,758
Raw materials, stocks held by third parties and others	15,834		7,394		2,217		121		25,566		22,778		—	—		48,344
Total segment assets	643,796		240,046		61,550		69,418		1,014,810		761,193		—	—		1,776,003
Borrowings	111,692		58,999		543		4,860		176,094		600,810		—	85,212		862,116
Total segment liabilities	111,692		58,999		543		4,860		176,094		600,810		—	85,212		862,116

Segment analysis for the year ended December 31, 2017



	Farming										Sugar, Ethanol and Energy		Land Transformation	Corporate		Total
	Crops		Rice		Dairy		All other segments		Farming subtotal		Sugar, Ethanol and Energy		Land Transformation	Corporate		Total
Sales of goods and services rendered	197,222		86,478		37,523		1,336		322,559		610,619		—	—		933,178
Cost of goods sold and services rendered	(196,302	)	(71,087	)	(36,979	)	(853	)	(305,221	)	(461,506	)	—	—		(766,727	)
Initial recognition and changes in fair value of biological assets and agricultural produce	17,158		10,236		11,769		267		39,430		23,790		—	—		63,220
Changes in net realizable value of agricultural produce after harvest	8,852		—		—		—		8,852		—		—	—		8,852
Margin on manufacturing and agricultural activities before operating expenses	26,930		25,627		12,313		750		65,620		172,903		—	—		238,523
General and administrative expenses	(2,981	)	(4,699	)	(1,058	)	(174	)	(8,912	)	(26,806	)	—	(21,581	)	(57,299	)
Selling expenses	(7,501	)	(13,324	)	(711	)	(156	)	(21,692	)	(73,664	)	—	(43	)	(95,399	)
Other operating income, net	7,719		724		662		4,279		13,384		30,419		—	(40	)	43,763
Profit / (loss) from operations before financing and taxation	24,167		8,328		11,206		4,699		48,400		102,852		—	(21,664	)	129,588

Depreciation and amortization	(1,511	)	(3,851	)	(1,037	)	(159	)	(6,558	)	(144,449	)	—	—		(151,007	)
Net gain from Fair value adjustment of investment property	—		—		—		4,302		4,302		—		—	—		4,302
Initial recognition and changes in fair value of biological assets and agricultural produce (unrealized)	4,366		5,346		1,849		159		11,720		2,925		—	—		14,645
Initial recognition and changes in fair value of biological assets and agricultural produce (realized)	12,792		4,890		9,920		108		27,710		20,865		—	—		48,575
Changes in net realizable value of agricultural produce after harvest (unrealized)	2,371		—		—		—		2,371		—		—	—		2,371
Changes in net realizable value of agricultural produce after harvest (realized)	6,481		—		—		—		6,481		—		—	—		6,481

Farmlands and farmland improvements, net	70,126		13,688		248		9,346		93,408		26,342		—	—		119,750
Machinery, equipment and other fixed assets, net	21,365		18,851		12,175		341		52,732		390,350		—	—		443,082
Bearer plants, net	252		—		—		1,832		2,084		236,826		—	—		238,910
Work in progress	714		1,940		5,659		—		8,313		21,322		—	—		29,635
Investment property	—		—		—		42,342		42,342		—		—	—		42,342
Goodwill	3,221		1,480		—		1,110		5,811		6,601		—	—		12,412
Biological assets	31,745		29,717		9,338		4,016		74,816		93,178		—	—		167,994
Finished goods	21,146		8,476		—		—		29,622		32,266		—	—		61,888
Raw materials,Stocks held by third parties and others	17,958		9,927		1,726		364		29,975		17,056		—	—		47,031
Total segment assets	166,527		84,079		29,146		59,351		339,103		823,941		—	—		1,163,044
Borrowings	69,789		62,790		2,384		3,829		138,792		633,638		—	45,528		817,958
Total segment liabilities	69,789		62,790		2,384		3,829		138,792		633,638		—	45,528		817,958

Segment analysis for the year ended December 31, 2016



	Farming										Sugar, Ethanol and Energy		Land Transformation	Corporate		Total
	Crops		Rice		Dairy		All other segments		Farming subtotal		Sugar, Ethanol and Energy		Land Transformation	Corporate		Total
Sales of goods and services rendered	142,124		96,562		32,897		960		272,543		596,692		—	—		869,235
Cost of goods sold and services rendered	(141,731	)	(83,574	)	(32,571	)	(212	)	(258,088	)	(420,493	)	—	—		(678,581	)
Initial recognition and changes in fair value of biological assets and agricultural produce	48,790		10,498		5,476		(13	)	64,751		60,705		—	—		125,456
Changes in net realizable value of agricultural produce after harvest	(5,841	)	—		—		—		(5,841	)	—		—	—		(5,841	)
Margin on manufacturing and agricultural activities before operating expenses	43,342		23,486		5,802		735		73,365		236,904		—	—		310,269
General and administrative expenses	(2,770	)	(3,373	)	(983	)	(290	)	(7,416	)	(22,648	)	—	(20,686	)	(50,750	)
Selling expenses	(5,692	)	(11,583	)	(752	)	(49	)	(18,076	)	(62,518	)	—	(79	)	(80,673	)
Other operating income, net	(8,787	)	402		686		22,546		14,847		(8,903	)	—	(192	)	5,752
Profit / (loss) from operations before financing and taxation	26,093		8,932		4,753		22,942		62,720		142,835		—	(20,957	)	184,598

Depreciation and amortization	(1,369	)	(2,766	)	(964	)	(192	)	(5,291	)	(122,209	)	—	—		(127,500	)
Net gain from Fair value adjustment of investment property	—		—		—		14,049		14,049		—		—	—		14,049
Initial recognition and changes in fair value of biological assets and agricultural produce (unrealized)	5,790		2,316		1,319		107		9,532		279		—	—		9,811
Initial recognition and changes in fair value of biological assets and agricultural produce (realized)	43,000		8,182		4,157		(120	)	55,219		60,426		—	—		115,645
Changes in net realizable value of agricultural produce after harvest (unrealized)	(90	)	—		—		—		(90	)	—		—	—		(90	)
Changes in net realizable value of agricultural produce after harvest (realized)	(5,751	)	—		—		—		(5,751	)	—		—	—		(5,751	)

Total reportable segments’ assets and liabilities are reconciled to total assets as per the statement of financial position as follows:



	2018	2017
Total reportable assets as per segment information	1,776,003	1,163,044
Intangible assets (excluding goodwill)	6,559	4,780
Deferred income tax assets	16,191	30,808
Trade and other receivables	197,506	172,214
Other assets	1,192	565
Derivative financial instruments	6,286	4,483
Cash and cash equivalents	273,635	269,195
Total assets as per the statement of financial position	2,277,372	1,645,089



	2018	2017
Total reportable liabilities as per segment information	862,116	817,958
Trade and other payables	106,437	99,250
Deferred income tax liabilities	168,171	10,457
Payroll and social liabilities	27,197	28,507
Provisions for other liabilities	3,625	4,843
Current income tax liabilities	1,398	503
Derivative financial instruments	283	552
Total liabilities as per the statement of financial position	1,169,227	962,070

Non-current assets and revenues and fair value gains and losses are shown by geographic region. These are the regions in which the Group is active: Argentina, Brazil and Uruguay.

As of and for the year ended December 31, 2018:



	Argentina	Brazil		Uruguay		Total
Property, plant and equipment	811,890	656,586		11,963		1,480,439
Investment property	40,725	—		—		40,725
Goodwill	15,081	6,269		—		21,350
Non-current portion of biological assets	11,270	—		—		11,270

Sales of goods and services rendered	207,480	496,966		106,163		810,609
Initial recognition and changes in fair value of biological assets and agricultural produce	45,985	(13,541	)	(1,419	)	31,025
Changes in net realizable value of agricultural produce after harvest	1,148	1,436		120		2,704

As of and for the year ended December 31, 2017:



	Argentina	Brazil	Uruguay	Total
Property, plant and equipment	113,758	710,523	7,096	831,377
Investment property	42,342	—	—	42,342
Goodwill	5,095	7,317	—	12,412
Non-current portion of biological assets	11,276	—	—	11,276

Sales of goods and services rendered	214,888	545,859	172,431	933,178
Initial recognition and changes in fair value of biological assets and agricultural produce	36,341	26,326	553	63,220
Changes in net realizable value of agricultural produce after harvest	5,705	1,346	1,801	8,852

As of and for the year ended December 31, 2016:



	Argentina		Brazil		Uruguay		Total
Sales of goods and services rendered	164,264		432,468		272,503		869,235
Initial recognition and changes in fair value of biological assets and agricultural produce	62,970		62,556		(70	)	125,456
Loss from changes in net realizable value of agricultural produce after harvest	(4,491	)	(958	)	(392	)	(5,841	)