6-K 1 a6kfs6302019.htm FORM 6-K Document
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549  
 
FORM 6-K  
 
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of August 2019
Commission File Number: 001-35052  
 
Adecoagro S.A.
(Translation of registrant’s name into English)
 
 
Vertigo Naos Building 6,
Rue Eugene Ruppert,
L-2453, Luxembourg
Grand Duchy of Luxembourg
(Address of principal executive offices)  
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:
Form 20-F  x            Form 40-F  ¨
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1):
Yes  ¨            No   x
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7):
Yes  ¨            No   x
Indicate by check mark whether by furnishing the information contained in this Form, the Registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934:
Yes  ¨            No   x
If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): N/A
 
 
 


UNAUDITED CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS AS OF AND FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2019

This Report of Foreign Private Issuer on Form 6-K (this “Form 6-K”) is being filed by Adecoagro S.A. (“Adecoagro” or the “Company”) with the Securities and Exchange Commission (the “SEC”) and is incorporated by reference into the Company’s Registration Statement on Form F-3 filed with the SEC on December 6, 2013 (File No. 333-191325) and will be deemed to be a part thereof from the date on which this Form 6-K is filed with the SEC, to the extent not superseded by documents or reports subsequently filed or furnished. The Company is filing this report on Form 6-K for the purpose of filing a copy of the Company’s unaudited condensed consolidated interim financial statements as of and for the six month period ended June 30, 2019 (the “Consolidated Financial Statements”) as Exhibit 99.1. The Consolidated Financial Statements are presented in U.S. Dollars and prepared in accordance with International Financial Reporting Standards.

Forward-Looking Statements
 
The attachment contains forward-looking statements. The registrant desires to qualify for the “safe-harbor” provisions of the Private Securities Litigation Reform Act of 1995, and consequently is hereby filing cautionary statements identifying important factors that could cause the registrant’s actual results to differ materially from those set forth in the attachment.

The registrant’s forward-looking statements are based on the registrant’s current expectations, assumptions, estimates and projections about the registrant and its industry. These forward-looking statements can be identified by words or phrases such as “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “is/are likely to,” “may,” “plan,” “should,” “would,” or other similar expressions.

The forward-looking statements included in the attached relate to, among others: (i) the registrant’s business prospects and future results of operations; (ii) weather and other natural phenomena; (iii) developments in, or changes to, the laws, regulations and governmental policies governing the registrant’s business, including limitations on ownership of farmland by foreign entities in certain jurisdictions in which the registrant operate, environmental laws and regulations; (iv) the implementation of the registrant’s business strategy; (v) the registrant’s plans relating to acquisitions, joint ventures, strategic alliances or divestitures; (vi) the implementation of the registrant’s financing strategy and capital expenditure plan; (vii) the maintenance of the registrant’s relationships with customers; (viii) the competitive nature of the industries in which the registrant operates; (ix) the cost and availability of financing; (x) future demand for the commodities the registrant produces; (xi) international prices for commodities; (xii) the condition of the registrant’s land holdings; (xiii) the development of the logistics and infrastructure for transportation of the registrant’s products in the countries where it operates; (xiv) the performance of the South American and world economies; and (xv) the relative value of the Brazilian Real, the Argentine Peso, and the Uruguayan Peso compared to other currencies; as well as other risks included in the registrant’s other filings and submissions with the United States Securities and Exchange Commission.

These forward-looking statements involve various risks and uncertainties. Although the registrant believes that its expectations expressed in these forward-looking statements are reasonable, its expectations may turn out to be incorrect. The registrant’s actual results could be materially different from its expectations. In light of the risks and uncertainties described above, the estimates and forward-looking statements discussed in the attached might not occur, and the registrant’s future results and its performance may differ materially from those expressed in these forward-looking statements due to, inclusive, but not limited to, the factors mentioned above. Because of these uncertainties, you should not make any investment decision based on these estimates and forward-looking statements.

The forward-looking statements made in the attached relate only to events or information as of the date on which the statements are made in the attached. The registrant undertakes no obligation to update any forward-looking statements to reflect events or circumstances after the date on which the statements are made or to reflect the occurrence of unanticipated events.




SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
 
 
 
 
 
 
 
 
 
Adecoagro S.A.
 
 
 
 
Date: August 15, 2019
 
 
 
By:
 
/s/ Carlos Boero Hughes
 
 
 
 
Name:
 
Carlos Boero Hughes
 
 
 
 
Title:
 
Chief Financial Officer







Adecoagro S.A.

Condensed Consolidated Interim Financial Statements as of June 30, 2019 and for the six and three-month periods ended June 30, 2019 and 2018



Legal information


Denomination: Adecoagro S.A.
Legal address: Vertigo Naos Building, 6, Rue Eugène Ruppert, L-2453, Luxembourg


Company activity: Agricultural and agro-industrial
Date of registration: June 11, 2010
Expiration of company charter: No term defined
Number of register (RCS Luxembourg): B153.681
Issued Capital Stock:: 122,381,815 common shares
Outstanding Capital Stock: 117,778,818 common shares
Treasury Shares: 4,602,997 common shares


F - 1

Adecoagro S.A.
Condensed Consolidated Interim Statements of Income
for the six-month and three-month periods ended June 30, 2019 and 2018
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)


 
 
Six-months ended June 30,
 
Three-months ended June 30,
 
Note
2019
 
2018 (*)
 
2019
 
2018 (*)
 
 
 
 
 
 
 
 
 
 
 
(unaudited)
Sales of goods and services rendered
4
387,601

 
371,486

 
227,786

 
215,919

Cost of goods sold and services rendered
5
(293,195
)
 
(285,495
)
 
(169,257
)
 
(164,547)

Initial recognition and changes in fair value of biological assets and agricultural produce
15
51,468

 
35,508

 
28,300

 
19,427

Changes in net realizable value of agricultural produce after harvest
 
(2,602
)
 
7,348

 
(3,958
)
 
8,039

Margin on manufacturing and agricultural activities before operating expenses
 
143,272

 
128,847

 
82,871

 
78,838

General and administrative expenses
6
(29,616
)
 
(29,884)

 
(16,155
)
 
(14,712)

Selling expenses
6
(48,133
)
 
(39,644)

 
(27,761
)
 
(23,318)

Other operating (loss) / income, net
8
(8,682
)
 
85,551

 
(6,251
)
 
63,463

Profit from operations before financing and taxation  
 
56,841

 
144,870

 
32,704

 
104,271

Finance income
9
4,765

 
4,843

 
1,832

 
1,837

Finance costs
9
(64,406
)
 
(169,689)

 
(20,032
)
 
(141,472)

Other financial results - Net gain of inflation effects on the monetary items
9
42,016

 
—

 
24,230

 
—

Financial results, net
9
(17,625)

 
(164,846)

 
6,030

 
(139,635)

Profit / (loss) before income tax
 
39,216

 
(19,976)

 
38,734

 
(35,364)

Income tax (expense) / benefit
10
(18,189
)
 
9,443

 
(15,472
)
 
13,935

Profit / (loss) for the period
 
21,027

 
(10,533)

 
23,262

 
(21,429)

Attributable to:
 
 
 
 
 
 
 
 
Equity holders of the parent
 
19,838

 
(12,389)

 
22,991

 
(21,654
)
Non-controlling interest
 
1,189

 
1,856

 
271

 
225

 
 
 
 
 
 
 
 
 
Earnings / (Loss) per share attributable to the equity holders of the parent during the period:
 
 
 
 
 
 
 
 
Basic
 
0.170

 
(0.106)

 
0.197

 
(0.185
)
Diluted
 
0.168

 
(0.106)

 
0.195

 
(0.185
)

(*) Prior period have been recast to reflect the Company’s change in accounting policy for investment properties as described in Note 29.



The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 2


    Adecoagro S.A.
Condensed Consolidated Interim Statements of Comprehensive Income
for the six-month and three-month periods ended June 30, 2019 and 2018
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)



 
 
Six-months ended June 30,
 
Three-months ended June 30,
 
 
2019
 
2018 (*)
 
2019
 
2018 (*)
 
 
 
 
 
 
 
 
 
 
 
(unaudited)
 
 
 
 
 
 
 
 
 
Profit / (Loss) for the period
 
21,027

 
(10,533
)
 
23,262

 
(21,429
)
Other comprehensive income / (loss):
 
 
 
 
 
 
 
 
Items that may be reclassified subsequently to profit or loss:
 
 
 
 
 
 
 
 
Exchange differences on translating foreign operations
 
62,624

 
(83,315
)
 
85,105

 
(76,317
)
Cash flow hedge, net of tax (Note 2)
 
(462
)
 
(24,319
)
 
5,152

 
(20,699
)
Items that will not be reclassified to profit or loss:
 
 
 
 
 
 
 
 
Revaluation surplus net of tax
 
(46,985
)
 
—

 
(64,222
)
 
—

Other comprehensive income / (loss) for the period
 
15,177

 
(107,634
)
 
26,035

 
(97,016
)
Total comprehensive income / (loss) for the period
 
36,204

 
(118,167
)
 
49,297

 
(118,445
)
 
 
 
 
 
 
 
 
 
Attributable to:
 
 
 
 
 
 
 
 
Equity holders of the parent
 
34,785

 
(117,523
)
 
47,878

 
(116,642
)
Non-controlling interest
 
1,419

 
(644
)
 
1,419

 
(1,803
)

(*) Prior period have been recast to reflect the Company’s change in accounting policy for investment properties as described in Note 29.



The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 3



Adecoagro S.A.
Condensed Consolidated Interim Statements of Financial Position
as of June 30, 2019 and December 31, 2018
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

 
 
June 30,
 
December 31,
 
Note
2019
 
2018
 
 
(unaudited)
 
 
ASSETS
 
 
 
 
Non-Current Assets
 
 
 
 
Property, plant and equipment
11
1,613,844

 
1,480,439

Right of use assets
12
249,103

 
—

Investment property
13
40,725

 
40,725

Intangible assets
14
36,372

 
27,909

Biological assets
15
13,420

 
11,270

Deferred income tax assets   
10
8,890

 
16,191

Trade and other receivables, net
17
45,115

 
38,820

Other assets
 
1,098

 
1,184

Total Non-Current Assets
 
2,008,567

 
1,616,538

Current Assets
 
 
 
 
Biological assets
15
84,824

 
94,117

Inventories
18
200,853

 
128,102

Trade and other receivables, net
17
149,419

 
158,686

Derivative financial instruments
16
1,716

 
6,286

Other assets
 
158

 
8

Cash and cash equivalents
19
137,990

 
273,635

Total Current Assets
 
574,960

 
660,834

TOTAL ASSETS
 
2,583,527

 
2,277,372

SHAREHOLDERS EQUITY
 
 
 
 
Capital and reserves attributable to equity holders of the parent
 
 
 
 
Share capital
20
183,573

 
183,573

Share premium
20
904,958

 
900,503

Cumulative translation adjustment
 
(637,554
)
 
(666,037
)
Equity-settled compensation
 
13,565

 
16,191

Cash flow hedge
 
(57,346
)
 
(56,884
)
Other reserves
 
45,613

 
32,380

Treasury shares
 
(6,907
)
 
(8,741
)
Revaluation surplus
 
365,771

 
383,889

Reserve from the sale of non-controlling interests in subsidiaries
 
41,574

 
41,574

Retained earnings
 
247,718

 
237,188

Equity attributable to equity holders of the parent
 
1,100,965

 
1,063,636

Non-controlling interest
 
45,733

 
44,509

TOTAL SHAREHOLDERS EQUITY
 
1,146,698

 
1,108,145

LIABILITIES
 
 
 
 
Non-Current Liabilities
 
 
 
 
Trade and other payables
22
3,517

 
211

Borrowings
23
706,469

 
718,484

Lease liabilities
24
172,487

 
—

Deferred income tax liabilities
10
181,445

 
168,171

Payroll and social security liabilities
25
956

 
1,219

Provisions for other liabilities
26
3,294

 
3,296

Total Non-Current Liabilities
 
1,068,168

 
891,381

Current Liabilities
 
 
 
 
Trade and other payables
22
87,240

 
106,226

Current income tax liabilities
 
1,562

 
1,398

Payroll and social security liabilities
25
25,811

 
25,978

Borrowings
23
206,747

 
143,632

Lease liabilities
24
42,679

 
—

Derivative financial instruments
16
3,762

 
283

Provisions for other liabilities
26
860

 
329

Total Current Liabilities
 
368,661

 
277,846

TOTAL LIABILITIES
 
1,436,829

 
1,169,227

TOTAL SHAREHOLDERS EQUITY AND LIABILITIES
 
2,583,527

 
2,277,372



The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 4




Adecoagro S.A.
Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity
for the six-month periods ended June 30, 2019 and 2018 (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

 
 
Attributable to equity holders of the parent
 
 
 
 
 
Share Capital (Note 19)
Share Premium
Cumulative Translation Adjustment
Equity-settled Compensation
Cash flow hedge
Treasury shares
Reserve from the sale of non-controlling interests in subsidiaries
Retained Earnings
Subtotal
Non-Controlling Interest
Total Shareholders’ Equity
Balance at January 1, 2018
 
183,573
 
908,934

(552,604)

17,852

(24,691)

(6,967)

41,574

106,209

673,880

9,139
 
683,019
 
Profit for the period
 
—
 
—

—

—

—

—

—

(12,389)

(12,389)

1,856
 
(10,533)
 
Other comprehensive income:
 
 
 
 
 
 
 
 
 
 
 
 
- Items that may be reclassified subsequently to profit or loss:
 
 
 
 
 
 
 
 
 
 
 
 
Exchange differences on translating foreign operations
 
—
 
—

(80,816)

—

—

—

—

—

(80,816)

(2,499)
 
(83,315)
 
Cash flow hedge (*)
 
—
 
—

—

—

(24,318)

—

—

—

(24,318)

(1)
 
(24,319)
 
Other comprehensive income for the period
 
—
 
—

(80,816)

—

(24,318)

—

—

—

(105,134)

(2,500)
 
(107,634)
 
Total comprehensive income for the period
 
—
 
—

(80,816)

—

(24,318)

—

—

(12,389
)
(117,523)

(644)
 
(118,167)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
- Employee share options (Note 21)
 
 
 
 
 
 
 
 
 
 
 
 
Exercised/ Forfeited
 
—
 
—

—

(12
)
—

—

—

12

—

—
 
—
 
- Restricted shares (Note 21):
 
 
 
 
 
 
 
 
 
 
 
 
Value of employee services
 
—
 
—

—

2,200

—

—

—

—

2,200

—
 
2,200
 
Vested
 
—
 
4,768

—

(5,512
)
—

744

—

—

—

—
 
—
 
-Purchase of own shares (Note 20)
 
—
 
(13,206
)
—

—

—

(2,519
)
—

—

(15,725
)
—
 
(15,725)
 
Balance at June 30, 2018 (unaudited) (**)
 
183,573
 
900,496

(633,420)

14,528

(49,009)

(8,742)

41,574

93,832

542,832

8,495
 
551,327
 

(*) Net of 9,601 of Income Tax.
(**) 2018 information has been recast to reflect the Company’s change in accounting policy for investment properties as described in Note 29.


The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 5




Adecoagro S.A.
Condensed Consolidated Interim Statements of Changes in Shareholders’ Equity
for the six-month periods ended June 30, 2019 and 2018 (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

 
 
Attributable to equity holders of the parent
 
 
 
 
Share Capital (Note 19)
Share Premium
Cumulative Translation Adjustment
Equity-settled Compensation
Cash flow hedge
Other reserves (***)
Treasury shares
Revaluation surplus (**)
Reserve from the sale of non-controlling interests in subsidiaries
Retained Earnings
Subtotal
Non-Controlling Interest
Total Shareholders’ Equity
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at January 1, 2019
 
183,573
 
900,503

(666,037
)
16,191

(56,884
)
32,380

(8,741
)
383,889

41,574

237,188

1,063,636

44,509

1,108,145

Loss for the period
 
—
 
—

—

—

—

 
—

—

—

19,838

19,838

1,189

21,027

Other comprehensive loss:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
- Items that may be reclassified subsequently to profit or loss:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Exchange differences on translating foreign operations
 
—
 
—

28,483

—

—

—

—

30,316

—

—

58,799

3,825

62,624

Cash flow hedge (*)
 
—
 
—

—

—

(462
)
—

—

—

—

—

(462
)
—

(462
)
- Items that will not be reclassified to profit or loss:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revaluation surplus
 
—
 
—

—

—

—

—

—

(43,390
)
—

—

(43,390
)
(3,595
)
(46,985
)
Reserve of the revaluation surplus derived from the disposals of assets
 
—
 
—

—

—

—

—

—

(5,044
)
—

5,044

—

—

—

Other comprehensive income for the period
 
—
 
—

28,483

—

(462
)
—

—

(18,118
)
—

5,044

14,947

230

15,177

Total comprehensive income for the period
 
—
 
—

28,483

—

(462
)
—

—

(18,118
)
—

24,882

34,785

1,419

36,204

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
- Reserves for the benefit of government grants (1)
 
—
 
—

—

—

—

14,352

—

—

—

(14,352
)
—

—

—

- Restricted shares (Note 21):
 
 
 
 
 
 
 
 
 
 
 
 
 

Value of employee services
 
—
 
—

—

1,823

—

—

—

—

—

—

1,823

—

1,823

Vested
 
—
 
4,455

—

(4,449
)
—

—

715

—

—

—

721

—

721

Granted
 
—
 
—

—

—

—

(1,119
)
1,119

—

—

—

—

—

—

- Dividends
 
—
 
—

—

—

—

 
—

 
—

—

—

(195
)
(195
)
Balance at June 30, 2019 (unaudited)
 
183,573
 
904,958

(637,554
)
13,565

(57,346
)
45,613

(6,907
)
365,771

41,574

247,718

1,100,965

45,733

1,146,698


(*) Net of 656 of Income tax.
(**) Net of 15,903 of Income tax.
(***) It corresponds to Restricted Shares Granted.
(1) Correspond to the presumed credit of ICMS (Imposto sobre Circulação de Mercadorias e Prestação de Serviços) over the sale values in our Sugar, ethanol and energy business).


The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 6



Adecoagro S.A.
Condensed Consolidated Interim Statements of Cash Flows
for the six-month periods ended June 30, 2019 and 2018
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

    
 
Note
June 30,
2019
 
June 30,
2018 (*)
 
 
(unaudited)
Cash flows from operating activities:
 
 
 
 
Profit / (loss) for the period
 
21,027

 
(10,533
)
Adjustments for:
 
 
 
 
Income tax expense / (benefit)
10
18,189

 
(9,443
)
Depreciation
11
78,510

 
69,474

Amortization
14
698

 
523

Depreciation of right of use assets
12
21,982

 
—

Gain from the sale of farmland and other assets
27
(1,472
)
 
(36,227
)
Gain from disposal of other property items
 
(278
)
 
57

Acquisition of subsidiaries
 
(149
)
 
—

Net loss / (gain) from the Fair value adjustment of Investment properties
13
3,482

 
(15,922
)
Equity settled share-based compensation granted
7, 21
1,623

 
2,544

Loss / (gain) from derivative financial instruments
8, 9
2,379

 
(25,137
)
Interest and other expense, net
9
30,893

 
23,144

Initial recognition and changes in fair value of non harvested biological assets (unrealized)
 
(28,854
)
 
(7,496
)
Changes in net realizable value of agricultural produce after harvest (unrealized)
 
4,580

 
(7,863
)
Provision and allowances
 
2,252

 
276

Net gain of inflation effects on the monetary items
9
(42,016
)
 
—

Foreign exchange losses, net
9
12,897

 
125,272

Cash flow hedge – transfer from equity
9
11,981

 
7,327

Subtotal
 
137,724

 
115,996

Changes in operating assets and liabilities:
 
 
 
 
(Increase) in trade and other receivables
 
(16,585
)
 
(54,218
)
(Increase) in inventories
 
(69,427
)
 
(82,485
)
Decrease in biological assets
 
45,880

 
32,561

(Increase) in other assets
 
(156
)
 
(67
)
Decrease in derivative financial instruments
 
5,389

 
27,657

(Decrease) in trade and other payables
 
(22,744
)
 
(9,150
)
Increase in payroll and social security liabilities
 
9

 
2,653

(Decrease) in provisions for other liabilities
 
(111
)
 
(316
)
Net cash generated from operating activities before taxes paid
 
79,979

 
32,631

Income tax paid
 
(1,251
)
 
(897
)
Net cash generated from operating activities
(a)
78,728

 
31,734



The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 7



Adecoagro S.A.
Condensed Consolidated Interim Statements of Cash Flows
for the six-month periods ended June 30, 2019 and 2018 (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

 
Note
June 30,
2019
 
June 30,
2018 (*)
 
 
(unaudited)
Cash flows from investing activities:
 


 
 
Acquisition of a business, net of cash and cash equivalents acquired
 
750

 
—

 Purchases of property, plant and equipment
11
(175,616
)
 
(112,947
)
 Purchases of cattle and non current biological assets
 
(3,941
)
 
(3,115
)
 Purchases of intangible assets
14
(8,060
)
 
(2,149
)
 Interest received
9
3,581

 
4,242

 Proceeds from sale of property, plant and equipment
 
1,435

 
746

 Proceeds from sale of farmlands and other assets
27
5,833

 
5,207

Net cash used in investing activities
(b)
(176,018
)
 
(108,016
)
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Proceeds from long-term borrowings
 
10,141

 
50,729

Payments of long-term borrowings
 
(57,449
)
 
(62,867
)
Proceeds from short-term borrowings
 
148,511

 
142,212

Payment of short-term borrowings
 
(67,939
)
 
(122,546
)
Proceeds of derivatives financial instruments
 
710

 
358

Lease payments
 
(32,051
)
 
—

Interest paid
 
(31,927
)
 
(26,360
)
Purchase of own shares
 
—

 
(15,725
)
Dividends paid to non-controlling interest
 
(603
)
 
(1,195
)
Net cash used in financing activities
(c)
(30,607
)
 
(35,394
)
Net decrease in cash and cash equivalents
 
(127,897
)
 
(111,676
)
Cash and cash equivalents at beginning of period
19
273,635

 
269,195

Effect of exchange rate changes and inflation on cash and cash equivalents
(d)
(7,748
)
 
(12,811
)
Cash and cash equivalents at end of period
19
137,990

 
144,708



(*) Prior period have been recast to reflect the Company’s change in accounting policy for investment properties as described in Note 29.

(a) Includes 11,067 of the combine effect of IAS 29 and IAS 21 of the Argentine subsidiaries.
(b) Includes (5,730) of the combine effect of IAS 29 and IAS 21 of the Argentine subsidiaries.
(c) Includes 2,627 of the combine effect of IAS 29 and IAS 21 of the Argentine subsidiaries.
(d) Includes (7,964) of the combine effect of IAS 29 and IAS 21 of the Argentine subsidiaries.


Other Non-cash investing and financing for the transactions disclosed in other notes are the seller financing of Subsidiaries in Note 27.


The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 8



Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
    






1.    General information

Adecoagro S.A. (the "Company" or "Adecoagro") is the Group’s ultimate parent company and is a société anonyme (stock corporation) organized under the laws of the Grand Duchy of Luxembourg. Adecoagro is a holding company primarily engaged through its operating subsidiaries in agricultural and agro-industrial activities. The Company and its operating subsidiaries are collectively referred to hereinafter as the "Group". These activities are carried out through three major lines of business, namely, Farming; Sugar, Ethanol and Energy and Land Transformation. Farming is further comprised of three reportable segments, which are described in detail in Note 3 to these condensed consolidated interim financial statements.

Adecoagro is a public company listed in the New York Stock Exchange as a foreign registered company under the symbol of AGRO.

These condensed consolidated interim financial statements have been approved for issue by the Board of Directors on August 13, 2019.

2.    Financial risk management

Risk management principles and processes

The Group is exposed to several risks arising from financial instruments including price risk, exchange rate risk, interest rate risk, liquidity risk and credit risk. A thorough explanation of the Group´s risks and the Group´s approach to the identification, assessment and mitigation of risks is included in Note 2 to the annual financial statements. There have been no changes to the Group's exposure and risk management principles and processes since December 31, 2018 and refers readers to the annual financial statements for information.

However, the Group considers that the following tables below provide useful information to understand the Group´s interim results for the six month period ended June 30, 2019. These disclosures do not appear in any particular order of potential materiality or probability of occurrence.

•
Exchange rate risk

The following tables show the Group’s net monetary position broken down by various currencies for each functional currency in which the Group operates at June 30, 2019. All amounts are shown in US dollars.

 
June 30, 2019
 
(unaudited)
 
Functional currency
Net monetary position (Liability)/ Asset
Argentine
Peso
Brazilian
Reais
Uruguayan
Peso
US Dollar
Total
Argentine Peso
(11,757
)
—

—

544

(11,213
)
Brazilian Reais
—

(12,841
)
—

—

(12,841
)
US Dollar
(325,484
)
(482,940
)
19,551

53,569

(735,304
)
Uruguayan Peso
—

—

(1,093
)
—

(1,093
)
Total
(337,241)

(495,781)

18,458

54,113

(760,451)

    
The Group’s analysis shown on the tables below is carried out based on the exposure of each functional currency subsidiary against the US dollar. The Group estimated that, other factors being constant, a 10% appreciation of the US dollar against the respective functional currencies for the period ended June 30, 2019 would have increased the Group’s Loss before income tax for the period. A 10% depreciation of the US dollar against the functional currencies would have an equal and opposite effect on the income statement.

The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 9


Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2.
Financial risk management (continued)


A portion of this effect would be recognized as other comprehensive income since a portion of the Company’s borrowings was used as cash flow hedge of the foreign exchange rate risk of a portion of its highly probable future sales in US dollars (see Hedge Accounting - Cash Flow Hedge below for details).


 
June 30, 2019
 
(unaudited)
 
Functional currency
Net monetary position
Argentine
Peso
Brazilian
Reais
Uruguayan
Peso
US Dollar
Total
US Dollar
(32,548
)
(48,294
)
1,955

—

(78,887)
(Decrease) or increase in Profit before income tax
(32,548)

(48,294)

1,955

—

(78,887)


Hedge Accounting - Cash flow hedge

Effective July 1, 2013, the Group formally documented and designated cash flow hedging relationships to hedge the foreign exchange rate risk of a portion of its highly probable future sales in US dollars using a portion of its borrowings denominated in US dollars, currency forwards and foreign currency floating-to-fixed interest rate swaps.

The Group expects that the cash flows will occur and affect profit or loss between 2019 and 2024.

For the period ended June 30, 2019, a loss before income tax of US$ 11,931 was recognized in other comprehensive income and a loss of US$ 11,981 was reclassified from equity to profit or loss within “Financial results, net”.

•
Interest rate risk

The following table shows a breakdown of the Group’s fixed-rate and floating-rate borrowings per currency denomination and functional currency of the subsidiary issuing the loans at June 30, 2019 (all amounts are shown in US dollars):

 
June 30, 2019
 
(unaudited)
 
Functional currency
Rate per currency denomination
Argentine
Peso
 
Brazilian
Reais
 
Uruguayan
Peso
 
US Dollar
 
Total
Fixed rate:
 
 
 
 
 
 
 
 
 
Argentine Peso
14,562

 
—

 
—

 
—

 
14,562
Brazilian Reais
—

 
55,535

 
—

 
—

 
55,535
US Dollar
92,042

 
79,287

 
10,993

 
504,590

 
686,912
Subtotal Fixed-rate borrowings
106,604

 
134,822

 
10,993

 
504,590

 
757,009
Variable rate:
 
 
 
 
 
 
 
 
 
Brazilian Reais
—

 
25,365

 
—

 
—

 
25,365
US Dollar
125,296

 
5,546

 
—

 
—

 
130,842
Subtotal Variable-rate borrowings
125,296

 
30,911

 
—

 
—

 
156,207
Total borrowings as per analysis
231,900

 
165,733

 
10,993

 
504,590

 
913,216



The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 10


Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2.
Financial risk management (continued)


At June 30, 2019, 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 as follows:

 
June 30, 2019
 
(unaudited)
 
Functional currency
Rate per currency denomination
Argentine
Peso
Brazilian
Reais
Total
Variable rate:
 
 
 
Brazilian Reais
—

(254
)
(254)

US Dollar
(1,253
)
(55
)
(1308)

Decrease in profit before income tax
(1,253
)
(309
)
(1,562
)
    
•
Credit risk

As of June 30, 2019, six banks accounted for more than 79% of the total cash deposited (J.P. Morgan, HSBC, Banco do Brasil, Banco Safra, Banco Santander, Banco Bradesco).

•
Derivative financial instruments

The following table shows the outstanding positions for each type of derivative contract as of June 30, 2019:

§
Futures / Options

 
 
June 30, 2019
Type of
 
Quantities (thousands)
(**)
 
Notional
 
Market
 
Profit / (Loss)
(*)
derivative contract
 
 
amount
 
Value Asset/ (Liability)
 
 
 
 
 
 
 
(unaudited)
 
(unaudited)
Futures:
 
 
 
 
 
 
 
 
Sale
 
 
 
 
 
 
 
 
Corn
 
62

 
7,592

 
(2,490
)
 
(2,490
)
Soybean
 
119

 
33,292

 
(822
)
 
(872
)
Wheat
 
15

 
2,825

 
245

 
245

Sugar
 
87,528

 
19,205

 
666

 
(1,379
)
Ethanol
 
900

 
1,494

 
(9
)
 
(9
)
Options:
 
 
 
 
 
 
 
 
Buy put
 
 
 
 
 
 
 
 
Corn
 
3

 
69

 
52

 
(17
)
Sugar
 
15,545

 
672

 
753

 
51

Sell call
 
 
 
 
 
 
 
 
Sugar
 
8,534

 
(421
)
 
(235
)
 
6

Sell put
 
 
 
 
 
 
 
 
Sugar
 
5,182

 
(150
)
 
(149
)
 
194

Buy call
 
 
 
 
 
 
 
 
Corn
 
3

 
(58
)
 
(30
)
 
27

Total
 
117,891

 
64,520

 
(2,019
)
 
(4,244
)

(*) Included in line "Gain / (Loss) from commodity derivative financial instruments" Note 8.
(**) All quantities expressed in tons except otherwise indicated.

Commodity future contract fair values are computed with reference to quoted market prices on future exchanges.

The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 11


Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2.
Financial risk management (continued)



§    Other derivative financial instruments

As of June 30, 2019, the Group has floating-to-fixed interest rate swap, foreign currency fixed-to-floating interest rate swap and foreign currency floating-to fixed interest rate swap agreements, which were also outstanding as of December 31, 2018.

During the period ended June 30, 2019 and 2018, the Group entered into several currency forward contracts with Brazilian banks in order to hedge the fluctuation of the Brazilian Reais against US Dollar for a total notional amount of US$ 1.7 million and US$ 23.6 million, respectively. Those contracts entered in 2019 had maturity dates July 2019. The outstanding contracts resulted in the recognition of a loss of US$ 0.09 million in the period ended June 30, 2019.

During the period ended on June 30, 2019 and 2018, the Group entered into several currency forward contracts in order to hedge the fluctuation of the US Dollar against Euro for a total notional amount of US$ 1.3 million and US$ 7.7 million, respectively. The currency forward contracts maturity date is July 2019, and between August and September 2018, respectively. The outstanding contracts resulted in the recognition of a loss of US$ 0.01 million and US$ 0.04 million, respectively.

Gain and losses on currency forward contracts are included within “Financial results, net” in the statement of income.



3.    Segment information    
    
IFRS 8 “Operating Segments” requires an entity to report financial and descriptive information about its reportable segments, which are operating segments or aggregations of operating segments that meet specified criteria. 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 CODM evaluates the business based on the differences in the nature of its operations, products and services. The amount reported for each segment item is the measure reported to the CODM for these purposes.

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

•
The Group’s ‘Farming’ line of business is further comprised of three reportable segments:

§
The Group’s ‘Crops’ Segment consists of planting, harvesting, sale and processing grains, oilseeds and fibers (including wheat, corn, soybeans, cotton and sunflowers, among others), and to a lesser extent the provision of grain warehousing/conditioning, handling and drying services to third parties, and the purchase and sale of crops produced by third parties crops. Each underlying crop in the Crops 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. (For disposals and acquisitions see Note 27),

§
The Group’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 industrialized products, including UHT, cheese and powder milk among others;

§
The Group’s ‘All Other Segments’ column consists of the aggregation of the remaining non-reportable operating segments, which do not meet the quantitative thresholds for disclosure and for which the Group's management does not consider them to be significance Coffee and Cattle.

The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 12


Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.    Segment information (continued)



•
The Group’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 Group’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). (For disposals and acquisitions see Note 27).

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.

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 accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 13


Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.    Segment information (continued)



The following tables show a reconciliation of each reportable segment for the six-month period ended June 30, 2019, 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
72,946

 
2,710

 
75,656

 
59,136

 
1,182

 
60,318

 
29,756

 
1,583

 
31,339

Cost of goods and services rendered
(73,543
)
 
(2,783
)
 
(76,326
)
 
(44,674
)
 
(416
)
 
(45,090
)
 
(26,426
)
 
(1,362
)
 
(27,788
)
Initial recognition and changes in fair value of biological assets and agricultural produce
22,312

 
1,680

 
23,992

 
14,742

 
743

 
15,485

 
5,535

 
371

 
5,906

Gain from changes in net realizable value of agricultural produce after harvest
(2,708
)
 
106

 
(2,602
)
 
—

 
—

 
—

 
—

 
—

 
—

Margin on Manufacturing and Agricultural Activities Before Operating Expenses
19,007

 
1,713


20,720

 
29,204

 
1,509

 
30,713

 
8,865

 
592

 
9,457

General and administrative expenses
(2,451
)
 
(161
)
 
(2,612
)
 
(3,415
)
 
(205
)
 
(3,620
)
 
(1,883
)
 
(110
)
 
(1,993
)
Selling expenses
(3,851
)
 
(185
)
 
(4,036
)
 
(12,557
)
 
(709
)
 
(13,266
)
 
(1,988
)
 
(137
)
 
(2,125
)
Other operating income, net
(6,413
)
 
23

 
(6,390
)
 
266

 
19

 
285

 
282

 
15

 
297

Profit from Operations Before Financing and Taxation
6,292

 
1,390

 
7,682

 
13,498

 
614

 
14,112

 
5,276

 
360

 
5,636

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
(2,143
)
 
(139
)
 
(2,282
)
 
(3,614
)
 
(208
)
 
(3,822
)
 
(2,167
)
 
(138
)
 
(2,305
)
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
782

 
54

 
836

 
—

 
—

 
—

 
382,072

 
5,529

 
387,601

Cost of goods and services rendered
(526
)
 
(40
)
 
(566
)
 
—

 
—

 
—

 
(288,594
)
 
(4,601
)
 
(293,195
)
Initial recognition and changes in fair value of biological assets and agricultural produce
(142
)
 
(15
)
 
(157
)
 
—

 
—

 
—

 
48,689

 
2,779

 
51,468

Gain from changes in net realizable value of agricultural produce after harvest
—

 
—

 
—

 
—

 
—

 
—

 
(2,708
)
 
106

 
(2,602
)
Margin on Manufacturing and Agricultural Activities Before Operating Expenses
114

 
(1
)
 
113

 
—

 
—

 
—

 
139,459

 
3,813

 
143,272

General and administrative expenses
(85
)
 
(8
)
 
(93
)
 
(9,304
)
 
(542
)
 
(9,846
)
 
(28,590
)
 
(1,026
)
 
(29,616
)
Selling expenses
(72
)
 
(12
)
 
(84
)
 
(242
)
 
(15
)
 
(257
)
 
(47,075
)
 
(1,058
)
 
(48,133
)
Other operating income, net
(3,444
)
 
(47
)
 
(3,491
)
 
(373
)
 
(11
)
 
(384
)
 
(8,681
)
 
(1
)
 
(8,682
)
Profit from Operations Before Financing and Taxation
(3,487
)
 
(68
)
 
(3,555
)
 
(9,919
)
 
(568
)
 
(10,487
)
 
55,113

 
1,728

 
56,841

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
(94
)
 
(6
)
 
(100
)
 
—

 
—

 
—

 
(78,717
)
 
(491
)
 
(79,208
)
Net gain from Fair value adjustment of Investment property
(3,437
)
 
(45
)
 
(3,482
)
 
—

 
—

 
—

 
(3,437
)
 
(45
)
 
(3,482
)

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


The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 14


Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.    Segment information (continued)



Segment analysis for the six-month period ended June 30, 2019 (unaudited)

 
Farming
 
Sugar, Ethanol and Energy
 
Land Transformation
 
Corporate
 
Total
 
Crops
 
Rice
 
Dairy
 
All Other Segments
 
Farming subtotal
 
 
 
 
Sales of goods and services rendered
72,946

 
59,136

 
29,756

 
782

 
162,620

 
219,452

 
—

 
—

 
382,072
Cost of goods sold and services rendered
(73,543
)
 
(44,674
)
 
(26,426
)
 
(526
)
 
(145,169)

 
(143,425
)
 
—

 
—

 
(288,594)
Initial recognition and changes in fair value of biological assets and agricultural produce
22,312

 
14,742

 
5,535

 
(142
)
 
42,447

 
6,242

 
—

 
—

 
48,689
Changes in net realizable value of agricultural produce after harvest
(2,708
)
 
—

 
—

 
—

 
(2,708)

 
—

 
—

 
—

 
(2,708)
Margin on manufacturing and agricultural activities before operating expenses
19,007

 
29,204

 
8,865

 
114

 
57,190

 
82,269

 
—

 
—

 
139,459
General and administrative expenses
(2,451
)
 
(3,415
)
 
(1,883
)
 
(85
)
 
(7,834)

 
(11,452
)
 
—

 
(9,304
)
 
(28,590)
Selling expenses
(3,851
)
 
(12,557
)
 
(1,988
)
 
(72
)
 
(18,468)

 
(28,365
)
 
—

 
(242
)
 
(47,075)
Other operating income, net
(6,413
)
 
266

 
282

 
(3,444
)
 
(9,309)

 
(353
)
 
1,354

 
(373
)
 
(8,681)
Profit / (loss) from operations before financing and taxation
6,292

 
13,498

 
5,276

 
(3,487
)
 
21,579

 
42,099

 
1,354

 
(9,919
)
 
55,113
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
(2,143
)
 
(3,614
)
 
(2,167
)
 
(94
)
 
(8,018)

 
(70,699
)
 
—

 
—

 
(78,717)
Net gain from Fair value adjustment of Investment property
—

 
—

 
—

 
(3,437
)
 
(3,437)

 
—

 
—

 
—

 
(3,437)
Reverse of revaluation surplus derived from the disposals of assets before taxes
—

 
—

 
—

 
—

 
—

 
—

 
8,022

 
—

 
8,022
Initial recognition and changes in fair value of biological assets and agricultural produce (unrealized)
17,269

 
9,434

 
(1,763
)
 
968

 
25,908

 
2,946

 
—

 
—

 
28,854
Initial recognition and changes in fair value of biological assets and agricultural produce (realized)
5,043

 
5,308

 
7,298

 
(1,110
)
 
16,539

 
3,296

 
—

 
—

 
19,835
Changes in net realizable value of agricultural produce after harvest (unrealized)
(4,580
)
 
—

 
—

 
—

 
(4,580)

 
—

 
—

 
—

 
(4,580)
Changes in net realizable value of agricultural produce after harvest (realized)
1,872

 
—

 
—

 
—

 
1,872

 
—

 
—

 
—

 
1,872
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Farmlands and farmland improvements, net
538,987

 
173,427

 
2,423

 
22,850

 
737,687

 
49,392

 
—

 
—

 
787,079
Machinery, equipment, building and facilities, and other fixed assets, net
36,474

 
28,123

 
73,197

 
623

 
138,417

 
362,638

 
—

 
—

 
501,055
Bearer plants, net
566

 
—

 
—

 
—

 
566

 
252,363

 
—

 
—

 
252,929
Work in progress
11,599

 
7,039

 
25,872

 
19

 
44,529

 
28,252

 
—

 
—

 
72,781
Right of use asset
465

 
755

 
629

 
—

 
1,849

 
245,991

 
—

 
1,263

 
249,103
Investment property
—

 
—

 
—

 
40,725

 
40,725

 
—

 
—

 
—

 
40,725
Goodwill
10,273

 
1,601

 
4,496

 
—

 
16,370

 
5,697

 
—

 
—

 
22,067
Biological assets
18,620

 
3,973

 
11,861

 
5,462

 
39,916

 
58,328

 
—

 
—

 
98,244
Finished goods
46,869

 
5,906

 
3,994

 
—

 
56,769

 
53,694

 
—

 
—

 
110,463
Raw materials, Stocks held by third parties and others
30,694

 
28,653

 
8,422

 
130

 
67,899

 
22,491

 
—

 
—

 
90,390
Total segment assets
694,547

 
249,477

 
130,894

 
69,809

 
1,144,727

 
1,078,846

 
—

 
1,263

 
2,224,836
Borrowings
135,706

 
92,511

 
10,120

 
4,557

 
242,894

 
580,709

 
—

 
89,613

 
913,216
Lease liabilities
394

 
621

 
600

 
—

 
1,615

 
212,390

 
—

 
1,161

 
215,166
Total segment liabilities
136,100

 
93,132

 
10,720

 
4,557

 
244,509

 
793,099

 
—

 
90,774

 
1,128,382

The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 15


Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.    Segment information (continued)


Segment analysis for the six-month period ended June 30, 2018 (*) (unaudited)
 
Farming
 
Sugar, Ethanol and Energy
 
Land Transformation
 
Corporate
 
Total
 
Crops
 
Rice
 
Dairy
 
All Other Segments
 
Farming subtotal
 
 
 
 
Sales of goods and services rendered
80,512

 
56,211

 
15,607

 
804

 
153,134

 
218,352
 
 
—
 
 
—
 
 
371,486
 
Cost of goods sold and services rendered
(80,589
)
 
(46,273
)
 
(14,979
)
 
(540
)
 
(142,381
)
 
(143,114
)
 
—
 
 
—
 
 
(285,495
)
Initial recognition and changes in fair value of biological assets and agricultural produce
23,773

 
12,703

 
5,500

 
4

 
41,980

 
(6,472
)
 
—
 
 
—
 
 
35,508
 
Changes in net realizable value of agricultural produce after harvest
7,348

 
—

 
—

 
—

 
7,348

 
—
 
 
—
 
 
—
 
 
7,348
 
Margin on manufacturing and agricultural activities before operating expenses
31,044

 
22,641

 
6,128

 
268

 
60,081

 
68,766
 
 
—
 
 
—
 
 
128,847
 
General and administrative expenses
(2,040
)
 
(2,458
)
 
(1,493
)
 
(50
)
 
(6,041
)
 
(14,035
)
 
—
 
 
(9,808
)
 
(29,884
)
Selling expenses
(2,995
)
 
(7,968
)
 
(201
)
 
(90
)
 
(11,254
)
 
(28,330
)
 
—
 
 
(60
)
 
(39,644
)
Other operating (loss)/income, net
(2,602
)
 
282

 
(38
)
 
15,920

 
13,562

 
35,854
 
 
36,227
 
 
(92
)
 
85,551
 
Profit / (loss) from operations before financing and taxation
23,407

 
12,497

 
4,396

 
16,048

 
56,348

 
62,255
 
 
36,227
 
 
(9,960
)
 
144,870
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
(797
)
 
(1,959
)
 
(561
)
 
(61
)
 
(3,378
)
 
(66,619
)
 
—
 
 
—
 
 
(69,997
)
Net gain from Fair value adjustment of Investment property
—

 
—

 
—

 
15,922

 
15,922

 
—
 
 
—
 
 
—
 
 
15,922
 
Initial recognition and changes in fair value of biological assets and agricultural produce (unrealized)
9,804

 
9,381

 
1,823

 
462

 
21,470

 
(13,974
)
 
—
 
 
—
 
 
7,496
 
Initial recognition and changes in fair value of biological assets and agricultural produce (realized)
13,969

 
3,322

 
3,677

 
(458
)
 
20,510

 
7,502
 
 
—
 
 
—
 
 
28,012
 
Changes in net realizable value of agricultural produce after harvest (unrealized)
7,863

 
—

 
—

 
—

 
7,863

 
—
 
 
—
 
 
—
 
 
7,863
 
Changes in net realizable value of agricultural produce after harvest (realized)
(515
)
 
—

 
—

 
—

 
(515
)
 
—
 
 
—
 
 
—
 
 
(515
)
 
 
 
 
 
 
 
 
 


 
 
 
 
 
 
 
 
As of December 31, 2018:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Farmlands and farmland improvements, net
547,842

 
173,481

 
727

 
22,891

 
744,941

 
51,567
 
 
—
 
 
—
 
 
796,508
 
Machinery, equipment, building and facilities, 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
 

(*) Prior period have been recast to reflect the Company’s change in accounting policy for investment properties as described in Note 29.

The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 16



Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
    





4.    Sales
 
 
June 30,
2019
 
June 30,
2018
 
 
(unaudited)
Sales of manufactured products and services rendered:
 
 
 
 
Ethanol
 
155,261

 
143,697

Sugar (*)
 
37,423

 
52,278

Soybean oil and meal
 
1,191

 
4,388

Rice (*)
 
58,500

 
54,744

Energy (*)
 
27,287

 
22,279

Process milk (UHT)
 
15,331

 
—

Powder milk
 
3,416

 
1,163

Process milk (Cheese)
 
3,821

 
—

Process milk (Cream)
 
2,063

 
—

Peanut
 
4,625

 
—

Industrialized sunflower
 
2,911

 
—

Services
 
1,386

 
428

Operating leases
 
294

 
327

Others
 
1,627

 
3,871

 
 
315,136

 
283,175

Sales of agricultural produce and biological assets:
 
 
 
 
Soybean
 
18,170

 
44,523

Cattle for dairy production
 
1,437

 
1,517

Corn (*)
 
36,481

 
21,379

Milk
 
5,059

 
13,421

Wheat (*)
 
8,391

 
4,904

Sunflower
 
1,100

 
983

Barley
 
1,042

 
1,300

Seeds
 
117

 
62

Others
 
668

 
222

 
 
72,465

 
88,311

Total sales
 
387,601

 
371,486


(*) Includes sales of corn, rice, sugar, mhw of energy, ethanol and wheat produced by third parties for an amount of US$ 18.9 million, US$ 3.2 million, US$ 11.6 million, US$ 2.5, US$ 2.7 and US$ 0.14 million respectively.

Commitments to sell commodities at a future date

The Group entered into contracts to sell non-financial instruments, mainly, sugar, soybean and corn through sales forward contracts. Those contracts are held for purposes of delivery the non-financial instrument in accordance with the Group’s expected sales. Accordingly, as the own use exception criteria are met, those contracts are not recorded as derivatives.

The notional amount of these contracts is US$89 million as of June 30, 2019 (June 30, 2018: US$ 93 million) comprised primarily of 87,166 tons of sugar (US$ 23.9 million), 36,546 m³ of ethanol (US$ 6.6 million), 510,602 mhw of energy (U$S 33.5 million), 32,157 tons of soybean (US$ 7.5 million), 115,811 tons of corn (US$ 17.0 million), 2,233 tons of wheat (US$ 0.5 million) and other products (US$ 0.0 million) which expire between July 2019 and December 2019.


The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 17



Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
    





5.    Cost of goods sold and services rendered
As of June 30, 2019 :
 
June 30, 2019
 
Crops
 
Rice
 
Dairy
 
All other segments
 
Sugar, Ethanol and Energy
 
Total
Finished goods at the beginning of 2019 (Note 18)
29,144

 
9,507

 
1,170

 
—

 
39,937

 
79,758

Cost of production of manufactured products (Note 6)
13,013

 
40,084

 
24,531

 
—

 
153,291

 
230,919

Purchases
21,216

 
406

 
40

 
—

 
16,905

 
38,567

Agricultural produce
79,496

 
—

 
5,940

 
566

 
—

 
86,002

Transfer to raw material
(26,105
)
 
—

 
—

 
—

 
—

 
(26,105
)
Direct agricultural selling expenses
7,380

 
—

 
—

 
—

 
—

 
7,380

Tax recoveries (i)
—

 
—

 
—

 
—

 
(13,329
)
 
(13,329
)
Changes in net realizable value of agricultural produce after harvest
(2,602
)
 
—

 
—

 
—

 
—

 
(2,602
)
Finished goods as of June 30, 2019 (Note 18)
(46,869
)
 
(5,906
)
 
(3,994
)
 
—

 
(53,694
)
 
(110,463
)
Exchange differences
1,653

 
999

 
101

 
—

 
315

 
3,068

Cost of goods sold and services rendered, and direct agricultural selling expenses period
76,326

 
45,090

 
27,788

 
566

 
143,425

 
293,195

(i): Correspond to the presumed credit of ICMS (Imposto sobre Circulação de Mercadorias e Prestação de Serviços) over the sale values.

As of June 30, 2018:
 
June 30, 2018
 
Crops
 
Rice
 
Dairy
 
All other segments
 
Sugar, Ethanol and Energy
 
Total
Finished goods at the beginning of 2018
21,146

 
8,476

 
—

 
—

 
32,266

 
61,888

Cost of production of manufactured products (Note 6)
2,990

 
38,590

 
485

 
29

 
160,006

 
202,100

Purchases
36,623

 
7,921

 
316

 
—

 
21,165

 
66,025

Agricultural produce
87,496

 
—

 
15,182

 
511

 
—

 
103,189

Transfer to raw material
(7,802
)
 
—

 
—

 
—

 
—

 
(7,802
)
Direct agricultural selling expenses
9,239

 
—

 
—

 
—

 
—

 
9,239

Tax recoveries (i)
—

 
—

 
—

 
—

 
(13,815
)
 
(13,815
)
Changes in net realizable value of agricultural produce after harvest
7,348

 
—

 
—

 
—

 
—

 
7,348

Finished goods as of June 30, 2018
(60,629
)
 
(4,745
)
 
(918
)
 
—

 
(52,448
)
 
(118,740
)
Exchange differences
(15,822
)
 
(3,969
)
 
(86
)
 
—

 
(4,060
)
 
(23,937
)
Cost of goods sold and services rendered, and direct agricultural selling expenses period
80,589

 
46,273

 
14,979

 
540

 
143,114

 
285,495

(i): Correspond to the presumed credit of ICMS (Imposto sobre Circulação de Mercadorias e Prestação de Serviços) over the sale values.



The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 18



Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
    





6.Expenses by nature

The following table provides the additional disclosure required on the nature of expenses and their relationship to the function within the Group:

Expenses by nature for the period ended June 30, 2019:
 
 
Cost of production of manufactured products (Note 5)
 
General and Administrative Expenses
 
Selling Expenses
 
Total
 
 
Crops
 
Rice
 
Dairy
 
All other segments
 
Sugar, Ethanol and Energy
 
Total
 
 
 
Salaries, social security expenses and employee benefits
 
823

 
2,817

 
1,433

 
—

 
17,592

 
22,665

 
14,028

 
3,168

 
39,861

Raw materials and consumables
 
309

 
3,931

 
3,180

 
—

 
4,180

 
11,600

 
—

 
—

 
11,600

Depreciation and amortization
 
967

 
1,095

 
658

 
—

 
52,066

 
54,786

 
6,278

 
76

 
61,140

Depreciation of right-of-use assets
 
—

 
4

 
125

 
—

 
2,639

 
2,768

 
582

 
3

 
3,353

Fuel, lubricants and others
 
133

 
55

 
374

 
—

 
12,490

 
13,052

 
366

 
122

 
13,540

Maintenance and repairs
 
(43
)
 
597

 
428

 
—

 
9,125

 
10,107

 
1,007

 
314

 
11,428

Freights
 
58

 
1,872

 
692

 
—

 
444

 
3,066

 
—

 
10,541

 
13,607

Export taxes / selling taxes
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
23,367

 
23,367

Export expenses
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
2,587

 
2,587

Contractors and services
 
609

 
99

 
156

 
—

 
4,840

 
5,704

 
—

 
—

 
5,704

Energy transmission
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
1,635

 
1,635

Energy power
 
337

 
896

 
402

 
—

 
634

 
2,269

 
161

 
60

 
2,490

Professional fees
 
6

 
22

 
36

 
—

 
(239
)
 
(175
)
 
4,093

 
283

 
4,201

Other taxes
 
—

 
76

 
20

 
—

 
923

 
1,019

 
282

 
1,905

 
3,206

Contingencies
 
—

 
—

 
—

 
—

 
—

 
—

 
364

 
—

 
364

Lease expense and similar arrangements
 
23

 
155

 
54

 
—

 
—

 
232

 
636

 
49

 
917

Third parties raw materials
 
1,359

 
4,764

 
3,422

 
—

 
3,336

 
12,881

 
—

 
—

 
12,881

Tax recoveries
 
—

 
—

 
—

 
—

 
(1,275
)
 
(1,275
)
 
—

 
—

 
(1,275
)
Others
 
157

 
569

 
102

 
—

 
510

 
1,338

 
1,819

 
4,023

 
7,180

Subtotal    
 
4,738

 
16,952

 
11,082

 
—

 
107,265

 
140,037

 
29,616

 
48,133

 
217,786

Own agricultural produce consumed
 
8,275

 
23,132

 
13,449

 
—

 
46,026

 
90,882

 
—

 
—

 
90,882

Total    
 
13,013

 
40,084

 
24,531

 
—

 
153,291

 
230,919

 
29,616

 
48,133

 
308,668



The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 19


Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

6.
Expenses by nature (continued)



Expenses by nature for the period ended June 30, 2018:
 
 
Cost of production of manufactured products (Note 5)
 
General and Administrative Expenses
 
Selling Expenses
 
Total
 
Crops
 
Rice
 
Dairy
 
All other segments
 
Sugar, Ethanol and Energy
 
Total
 
 
 
Salaries, social security expenses and employee benefits
—

 
3,740

 
90

 
29

 
21,740

 
25,599

 
17,046

 
3,042

 
45,687
Raw materials and consumables
307

 
3,480

 
32

 
—

 
3,090

 
6,909

 
—

 
—

 
6,909
Depreciation and amortization
—

 
318

 
125

 
—

 
52,523

 
52,966

 
3,171

 
415

 
56,552
Fuel, lubricants and others
—

 
91

 
—

 
—

 
13,143

 
13,234

 
290

 
114

 
13,638
Maintenance and repairs
—

 
818

 
—

 
—

 
9,034

 
9,852

 
659

 
201

 
10,712
Freights
—

 
2,262

 
61

 
—

 
322

 
2,645

 
—

 
10,522

 
13,167
Export taxes / selling taxes
—

 
—

 
—

 
—

 
—

 
—

 
—

 
17,846

 
17,846
Export expenses
—

 
—

 
—

 
—

 
—

 
—

 
—

 
1,681

 
1,681
Contractors and services
316

 
321

 
136

 
—

 
3,458

 
4,231

 
—

 
—

 
4,231
Energy transmission
—

 
—

 
—

 
—

 
—

 
—

 
—

 
1,507

 
1,507
Energy power
—

 
873

 
32

 
—

 
621

 
1,526

 
114

 
29

 
1,669
Professional fees
—

 
31

 
—

 
—

 
270

 
301

 
4,713

 
280

 
5,294
Other taxes
—

 
29

 
—

 
—

 
923

 
952

 
828

 
7

 
1,787
Contingencies
—

 
—

 
—

 
—

 
—

 
—

 
598

 
—

 
598
Lease expense and similar arrangements
—

 
113

 
9

 
—

 
—

 
122

 
556

 
22

 
700
Third parties raw materials
—

 
1,924

 
—

 
—

 
4,719

 
6,643

 
—

 
—

 
6,643
Others
2

 
764

 
—

 
—

 
2,795

 
3,561

 
1,909

 
3,978

 
9,448
Subtotal    
625

 
14,764

 
485

 
29

 
112,638

 
128,541

 
29,884

 
39,644

 
198,069
Own agricultural produce consumed
2,365

 
23,826

 
—

 
—

 
47,368

 
73,559

 
—

 
—

 
73,559
Total    
2,990

 
38,590

 
485

 
29

 
160,006

 
202,100

 
29,884

 
39,644

 
271,628


The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 20



Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
    





7.    Salaries and social security expenses


 
June 30,
2019
 
June 30,
2018
 
(unaudited)
Wages and salaries
54,044

 
60,577

Social security costs
17,556

 
15,671

Equity-settled share-based compensation
1,623

 
2,544

 
73,223

 
78,792


8.    Other operating (loss) / income, net

 
June 30,
2019
 
June 30,
2018 (*)
 
(unaudited)
Gain from disposals of farmland and other assets (Note 27)
1,472

 
36,227

(Loss) / gain from commodity derivative financial instruments
(2,657
)
 
32,142

Gain / (loss) from disposal of other property items
183

 
(57
)
Net (loss) / gain from fair value adjustment of Investment property
(3,482
)
 
15,922

Others
(4,198
)
 
1,317

 
(8,682
)
 
85,551


(*) Prior period have been recast to reflect the Company’s change in accounting policy for investment properties as described in Note 29.


The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 21



Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
    





9.    Financial results, net
 
June 30,
2019
 
June 30,
2018
 
(unaudited)
Finance income:
 
 
 
- Interest income
3,646

 
4,242

- Gain from interest rate/foreign exchange rate derivative financial instruments
278

 
—

- Other income
841

 
601

Finance income
4,765

 
4,843

 
 
 
 
Finance costs:
 
 
 
- Interest expense
(30,970
)
 
(27,404
)
- Finance cost related to lease liabilities
(3,587
)
 
—

- Cash flow hedge – transfer from equity
(11,981
)
 
(7,327
)
- Foreign exchange losses, net
(12,897
)
 
(125,272
)
- Taxes
(1,820
)
 
(2,068
)
- Loss from interest rate/foreign exchange rate derivative financial instruments
—

 
(6,759
)
- Other expenses
(3,151
)
 
(859
)
Finance costs
(64,406
)
 
(169,689
)
Other financial results - Net gain of inflation effects on the monetary items
42,016

 
—

Total financial results, net
(17,625
)
 
(164,846
)


The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 22



Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
    





10.    Taxation

Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total annual earnings.
 
June 30, 2019
 
June 30, 2018 (*)
 
(unaudited)
Current income tax
952

 
(2,536
)
Deferred income tax
(19,141
)
 
11,979

Income tax (expense) / benefit
(18,189
)
 
9,443


During 2017, the Argentine Government introduced changes in the income tax. The income tax enforce is 30% for the years 2018 and 2019, and will be 25% from 2020 onwards. There has been no other changes in the statutory tax rates in the countries where the Group operates since December 31, 2018.
    
The gross movement on the deferred income tax account is as follows:

 
June 30, 2019
 
June 30, 2018 (*)
 
(unaudited)
Beginning of period (liability) / asset
(151,980
)
 
20,351

Exchange differences
(14,322
)
 
(2,726
)
Effect of fair value valuation for farmlands
15,903

 
—

Acquisition of subsidiary (Note 27)
(4,958
)
 
—

Disposal of farmland (Note 27)
2,743

 
—

Tax charge relating to cash flow hedge (i)
(812
)
 
9,257

Others
12

 
—

Income tax (expense) / benefit
(19,141
)
 
11,979

End of period (liability) / asset
(172,555
)
 
38,861


(i)
It relates to the amount reclassified of US$ 11,931 loss and US$ 41,247 loss from equity to profit and loss for the six-month period ended June 30, 2019 and 2018, respectively.

(*) Prior period have been recast to reflect the Company’s change in accounting policy for investment properties as described in Note 29.

The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to profits of the consolidated entities as follows:


The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 23

Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

10.    Taxation (continued)

 
June 30, 2019
 
June 30, 2018 (*)
 
(unaudited)
Tax calculated at the tax rates applicable to profits in the respective countries
(12,999
)
 
5,311

Non-deductible items
(1,322
)
 
(307
)
Effect of the changes in the statutory income tax rate in Argentina
3,085

 
(347
)
Non-taxable income
5,066

 
6,374

Tax losses where no deferred tax asset was recognized
(4
)
 
(1,896
)
Effect of IAS 29 on Argentina´s Shareholder´s equity and deferred income tax.
(11,439
)
 
—

Unused tax losses
(203
)
 
—

Others
(373
)
 
308

Income tax (expense) / benefit
(18,189)

 
9,443


(*) Prior period have been recast to reflect the Company’s change in accounting policy for investment properties as described in Note 29.

The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 24



Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
    





11.    Property, plant and equipment
Changes in the Group’s property, plant and equipment for the six-month periods ended June 30, 2019 and 2018 were as follows:
 
Farmlands
 
Farmland improvements
 
Buildings and facilities
 
Machinery, equipment, furniture and
Fittings
 
Bearer plants
 
Others
 
Work in progress
 
Total
Six-month period ended June 30, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Opening net book amount.
110,743

 
9,007

 
192,844

 
246,080

 
238,910

 
4,158

 
29,635

 
831,377

Exchange differences
(24,860
)
 
(2,977
)
 
(30,444
)
 
(45,096
)
 
(35,669
)
 
(1,255
)
 
(7,298
)
 
(147,599
)
Additions
—

 
—

 
7,727

 
36,800

 
43,982

 
1,612

 
29,531

 
119,652

Transfer from investment property
37

 
—

 
—

 
—

 
—

 
—

 
—

 
37

Transfers
—

 
66

 
2,189

 
4,891

 
—

 
—

 
(7,146
)
 
—

Disposals
—

 
—

 
(132
)
 
(902
)
 
—

 
(24
)
 
(82
)
 
(1,140
)
Disposal of subsidiaries
(11,471
)
 
—

 
(596
)
 
(18
)
 
(1,667
)
 
—

 
—

 
(13,752
)
Reclassification to non-income tax credits (*)
—

 
—

 
(69
)
 
(181
)
 
—

 
—

 
(39
)
 
(289
)
Depreciation (Note 6)
—

 
(1,046
)
 
(8,202
)
 
(29,422
)
 
(29,990
)
 
(814
)
 
—

 
(69,474
)
Closing net book amount
74,449

 
5,050

 
163,317

 
212,152

 
215,566

 
3,677

 
44,601

 
718,812

At June 30, 2018 (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
.

Cost
74,449

 
17,871

 
289,421

 
630,009

 
379,227

 
15,981

 
44,601

 
1,451,559

Accumulated depreciation
—

 
(12,821
)
 
(126,104
)
 
(417,857
)
 
(163,661
)
 
(12,304
)
 
—

 
(732,747
)
Net book amount
74,449

 
5,050

 
163,317

 
212,152

 
215,566

 
3,677

 
44,601

 
718,812

Six-month period ended June 30, 2019
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Opening net book amount
780,184

 
16,324

 
188,622

 
205,148

 
232,956

 
6,301

 
50,904

 
1,480,439

Exchange differences
60,941

 
1,398

 
5,530

 
3,092

 
2,338

 
422

 
2,849

 
76,570

Additions
1,864

 
—

 
34,494

 
51,724

 
50,745

 
1,826

 
35,727

 
176,380

Revaluation surplus
(62,958
)
 
—

 
—

 
—

 
—

 
—

 
—

 
(62,958
)
Acquisition of subsidiaries
913

 
—

 
27,045

 
5,918

 
—

 
489

 
—

 
34,365

Transfers
—

 
937

 
3,526

 
12,225

 
—

 
11

 
(16,699
)
 
—

Disposals
—

 
—

 
—

 
(935
)
 
—

 
(25
)
 
—

 
(960
)
Disposal of subsidiaries
(10,770
)
 
—

 
(571
)
 
(22
)
 
—

 
—

 
—

 
(11,363
)
Reclassification to non-income tax credits (*)
—

 
—

 
—

 
(119
)
 
—

 
—

 
—

 
(119
)
Depreciation (Note 6)
—

 
(1,754
)
 
(11,461
)
 
(31,151
)
 
(33,110
)
 
(1,034
)
 
—

 
(78,510
)
Closing net book amount
770,174

 
16,905

 
247,185

 
245,880

 
252,929

 
7,990

 
72,781

 
1,613,844

At June 30, 2019 (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cost
770,174

 
35,053

 
414,939

 
790,861

 
533,132

 
24,334

 
72,781

 
2,641,274

Accumulated depreciation
—

 
(18,148
)
 
(167,754
)
 
(544,981
)
 
(280,203
)
 
(16,344
)
 
—

 
(1,027,430
)
Net book amount
770,174

 
16,905

 
247,185

 
245,880

 
252,929

 
7,990

 
72,781

 
1,613,844

(*) Brazilian federal tax law allows entities to take a percentage of the total cost of the assets purchased as a tax credit. As of June 30, 2019, ICMS tax credits were reclassified to trade and other receivables.

The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 25


Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

11.    Property, plant and equipment (continued)


Since September 2018 the Company changes the accounting policy for its Farmlands (See Note 28 - Basis of presentation - Changes in accounting policies), adopting the valuation at Fair Value. For all Farmlands with a total valuation of US$ 770 million as of June 30, 2019 , the valuation was determined using sales Comparison Approach prepared by an independent expert. Sale prices of comparable properties are adjusted considering the specific aspects of each property, the most relevant premise being the price per hectare. (Level 3). The Group estimated that, other factors being constant, a 10% reduction on the Sales price for the period ended June 30, 2019 would have reduced the value of the Farmlands on US$ 77 million, which would impact, net of its tax effect on the "Revaluation surplus" item in the statement of Changes in Shareholders' Equity.

Depreciation charges are included in “Cost of production of Biological Assets”, “Cost of production of manufactures products”, “General and administrative expenses”, “Selling expenses” and capitalized in “Property, plant and equipment” for the nine-months period ended June 30, 2019 and 2018.

As of June 30, 2019, borrowing costs of US$ 5,037 (June 30, 2018: US$ 6,134) were capitalized as components of the cost of acquisition or construction of qualifying assets.

Certain of the Group’s assets have been pledged as collateral to secure the Group’s borrowings and other payables. The net book value of the pledged assets amounts to US$ 350,279 as of June 30, 2019.



12.    Right of use assets

Changes in the Group’s right of use assets for the six-month periods ended June 30, 2019 were as follows:
 
Agricultural partnership
 
Others
 
Total
 
(unaudited)
Six-months period ended June 30, 2019
 
 
 
 
 
Adoption of IFRS 16
194,763

 
10,174

 
204,937

Exchange differences
39

 
(85
)
 
(46
)
Additions and Re-measurement
57,432

 
8,762

 
66,194

Depreciation
(18,860
)
 
(3,122
)
 
(21,982
)
Closing net book amount
233,374

 
15,729

 
249,103


Since January 1,2019, the Company mandatory adopted IFRS 16. (Note 29). Agricultural partnership has an average of 6 years duration.

As of June 30, 2019 included within Right of use assets balances are US$ 715 related to the net book value of assets under finance leases.


The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 26



Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
    





13.    Investment property

Changes in the Group’s investment property for the six-month periods ended June 30, 2019 and 2018 were as follows:

 
 
June 30,
2019
 
June 30,
2018 (*)
 
 
(unaudited)
Beginning of the period
 
40,725

 
42,342

(Loss) / gain from fair value adjustment (Note 8)
 
(3,482
)
 
15,922

Reclassification to property, plant and equipment
 
—

 
(37
)
Exchange differences
 
3,482

 
(15,922
)
End of the period
 
40,725

 
42,305

Cost
 
40,725

 
42,305

Net book amount
 
40,725

 
42,305



Since September 2018 the Company changes the accounting policy for all Investment properties. (See Note 29 - Basis of presentation - Changes in accounting policies), adopting the valuation at Fair Value. For all Investment properties with a total valuation of US$ 40.7 million as of June 30, 2019 , the valuation was determined using Sales Comparison Approach prepared by an independent expert. Sale prices of comparable properties are adjusted considering the specific aspects of each property, the most relevant premise being the price per hectare. (Level 3). The increase /decrease in the Fair value is recognized in the Statement of income under the line item "Other operating income, net". There were no changes of the valuation techniques during June 30, 2019 and 2018. The Group estimated that, other factors being constant, a 10% reduction on the Sales price for the period ended June 30, 2019 would have reduced the value of the Investment properties on US$ 4.0 million, which would impact the line item "Net gain from fair value adjustment ".

The following amounts have been recognized in the statement of income in the line “Sales of manufactured products and services rendered”, and "Other operating income, net", respectively.
 
 
June 30, 2019
 
June 30, 2018
 
 
(unaudited)
Rental income
 
271

 
310

Net (loss) / gain from fair value adjustment (Note 8)
 
(3,482
)
 
15,922


(*) Prior period have been recast to reflect the Company’s change in accounting policy for investment properties as described in Note 29.



The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 27



Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
    





14.    Intangible assets

Changes in the Group’s intangible assets in the six-month periods ended June 30, 2019 and 2018 were as follows:

 
 
Goodwill
 
Software
 
Trademarks
 
Others
 
Total
Six-month period ended June 30, 2018
 
 
 
 
 
 
 
 
 
 
Opening net book amount
 
12,412

 
3,847

 
922

 
11

 
17,192

Exchange differences
 
(2,819
)
 
(1,119
)
 
(8
)
 
(3
)
 
(3,949
)
Additions
 
—

 
2,138

 
—

 
11

 
2,149

Amortization charge (i) (Note 6)
 
—

 
(506
)
 
—

 
(17
)
 
(523
)
Closing net book amount
 
9,593

 
4,360

 
914

 
2

 
14,869

At June 30, 2018 (unaudited)
 
 
 
 
 
 
 
 
 
 
Cost
 
9,593

 
8,270

 
2,609

 
84

 
20,556

Accumulated amortization
 
—

 
(3,910
)
 
(1,695
)
 
(82
)
 
(5,687
)
Net book amount
 
9,593

 
4,360

 
914

 
2

 
14,869

 
 
 
 
 
 
 
 
 
 
 
Six-month period ended June 30, 2019
 
 
 
 
 
 
 
 
 
 
Opening net book amount
 
21,350

 
5,596

 
886

 
77

 
27,909

Exchange differences
 
1,352

 
315

 
—

 
3

 
1,670

Additions
 
—

 
799

 
7,208

 
53

 
8,060

Acquisition of subsidiary
 
—

 
66

 
—

 
—

 
66

Disposal
 
(635
)
 
—

 
—

 
—

 
(635
)
Amortization charge (i) (Note 6)
 
—

 
(645
)
 
—

 
(53
)
 
(698
)
Closing net book amount
 
22,067

 
6,131

 
8,094

 
80

 
36,372

At June 30, 2019 (unaudited)
 
 
 
 
 
 
 
 
 
 
Cost
 
22,067

 
11,343

 
9,789

 
1,950

 
45,149

Accumulated amortization
 
—

 
(5,212
)
 
(1,695
)
 
(1,870
)
 
(8,777
)
Net book amount
 
22,067

 
6,131

 
8,094

 
80

 
36,372


(i)Amortization charges are included in “General and administrative expenses” and “Selling expenses” for the period ended June 30, 2019 and 2018, respectively.

The Group tests annually whether goodwill has suffered any impairment. The last impairment test of goodwill was performed as of September 30, 2018.



The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 28



Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
    





15.    Biological assets

Changes in the Group’s biological assets in the six-month periods ended June 30, 2019 and 2018 were as follows:

 
June 30, 2019
 
Crops (i)
 
Rice (i)
 
Dairy
 
All other segments
 
Sugarcane (i)
 
Total
Beginning of the year
27,347

 
17,173

 
10,298

 
3,094

 
47,475

 
105,387

Increase due to purchases
—

 
—

 
—

 
1,064

 
—

 
1,064

Initial recognition and changes in fair value of biological assets
23,992

 
15,485

 
5,906

 
(157
)
 
6,242

 
51,468

Decrease due to harvest / disposals
(79,496
)
 
(44,107
)
 
(14,329
)
 
(565
)
 
(48,588
)
 
(187,085
)
Decrease due to sales of agricultural produce
—

 
—

 
(5,059
)
 
—

 
—

 
(5,059
)
Costs incurred during the period
46,350

 
13,104

 
14,652

 
1,207

 
52,690

 
128,003

Exchange differences
427

 
2,318

 
393

 
819

 
509

 
4,466

End of the period (unaudited)
18,620

 
3,973

 
11,861

 
5,462

 
58,328

 
98,244


 
June 30, 2018
 
Crops (i)
 
Rice (i)
 
Dairy
 
All other segments
 
Sugarcane (i)
 
Total
Beginning of the year
31,745

 
29,717

 
9,338

 
4,016

 
93,178

 
167,994

Increase due to purchases
—

 
—

 
—

 
934

 
—

 
934

Initial recognition and changes in fair value of biological assets
23,773

 
12,703

 
5,500

 
4

 
(6,472
)
 
35,508

Decrease due to harvest / disposals
(87,496
)
 
(53,433
)
 
(1,732
)
 
(492
)
 
(49,359
)
 
(192,512
)
Decrease due to sales of agricultural produce
—

 
—

 
(13,420
)
 
—

 
—

 
(13,420
)
Costs incurred during the period
51,480

 
16,686

 
13,703

 
816

 
45,680

 
128,365

Exchange differences
(10,759
)
 
(3,084
)
 
(3,893
)
 
(1,687
)
 
(12,242
)
 
(31,665
)
End of the period (unaudited)
8,743

 
2,589

 
9,496

 
3,591

 
70,785

 
95,204


(i)
Biological assets that are measured at fair value within level 3 of the hierarchy.

The discounted cash flow valuation technique and the significant unobservable inputs used to calculate the fair value of these biological assets are consistent with those of the audited annual financial statements for the year ended December 31, 2018 described in Note 16. Please see Level 3 definition in Note 16 of these condensed consolidated interim financial statements..

The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 29


Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

15.    Biological assets (continued)



Cost of production as of June 30, 2019:
                                                               
 
June 30, 2019
 
(unaudited)
 
Crops
 
Rice
 
Dairy
 
All other segments
 
Sugar, Ethanol and Energy
 
Total
Salaries, social security expenses and employee benefits
1,523

 
3,411

 
2,250

 
291

 
4,711

 
12,186

Depreciation and amortization
—

 
—

 
—

 
—

 
2,102

 
2,102

Depreciation of right-of-use assets
—

 
—

 
—

 
—

 
18,629

 
18,629

Fertilizers, agrochemicals and seeds
13,656

 
1,054

 
—

 
1

 
20,993

 
35,704

Fuel, lubricants and others
549

 
392

 
517

 
56

 
1,466

 
2,980

Maintenance and repairs
596

 
1,268

 
824

 
141

 
955

 
3,784

Freights
1,154

 
171

 
47

 
84

 
—

 
1,456

Contractors and services
15,316

 
5,242

 
—

 
14

 
3,313

 
23,885

Feeding expenses
—

 
—

 
5,812

 
53

 
—

 
5,865

Veterinary expenses
—

 
—

 
1,106

 
115

 
—

 
1,221

Energy power
36

 
982

 
610

 
6

 
—

 
1,634

Professional fees
97

 
40

 
56

 
3

 
92

 
288

Other taxes
631

 
69

 
4

 
42

 
27

 
773

Lease expense and similar arrangements
11,432

 
14

 
1

 
5

 
—

 
11,452

Others
1,360

 
461

 
188

 
15

 
402

 
2,426

Subtotal    
46,350

 
13,104

 
11,415

 
826

 
52,690

 
124,385

Own agricultural produce consumed
—

 
—

 
3,237

 
381

 
—

 
3,618

Total    
46,350

 
13,104

 
14,652

 
1,207

 
52,690

 
128,003



Cost of production as of June 30, 2018:
 
June 30, 2018
 
(unaudited)
 
Crops
 
Rice
 
Dairy
 
All other segments
 
Sugar, Ethanol and Energy
 
Total
Salaries, social security expenses and employee benefits
1,729

 
3,766

 
1,976

 
256

 
4,329

 
12,056

Depreciation and amortization
144

 
—

 
—

 
—

 
1,395

 
1,539

Fertilizers, agrochemicals and seeds
19,183

 
1,878

 
—

 
—

 
17,507

 
38,568

Fuel, lubricants and others
583

 
343

 
363

 
23

 
1,378

 
2,690

Maintenance and repairs
559

 
1,157

 
889

 
81

 
741

 
3,427

Freights
74

 
342

 
49

 
56

 
—

 
521

Contractors and services
14,836

 
6,879

 
—

 
33

 
3,401

 
25,149

Feeding expenses
—

 
—

 
5,224

 
75

 
—

 
5,299

Veterinary expenses
—

 
—

 
961

 
73

 
—

 
1,034

Energy power
78

 
1,513

 
534

 
—

 
—

 
2,125

Professional fees
106

 
1

 
53

 
1

 
120

 
281

Other taxes
780

 
78

 
6

 
58

 
25

 
947

Lease expense and similar arrangements
12,576

 
177

 
—

 
—

 
16,285

 
29,038

Others
832

 
552

 
230

 
16

 
499

 
2,129

Subtotal    
51,480

 
16,686

 
10,285

 
672

 
45,680

 
124,803

Own agricultural produce consumed
—

 
—

 
3,418

 
144

 
—

 
3,562

Total    
51,480

 
16,686

 
13,703

 
816

 
45,680

 
128,365


The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 30


Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

15.    Biological assets (continued)



Biological assets as of June 30, 2019 and December 31, 2018 were as follows:

 
June 30,
2019
 
December 31, 2018
 
(unaudited)
 
 
Non-current
 
 
 
Cattle for dairy production
11,675

 
9,859

Breeding cattle
1,603

 
1,310

Other cattle
142

 
101

 
13,420

 
11,270

Current
 
 
 
Breeding cattle
3,717

 
1,683

Other cattle
186

 
439

Sown land – crops
18,620

 
27,347

Sown land – rice
3,973

 
17,173

Sown land – sugarcane
58,328

 
47,475

 
84,824

 
94,117

Total biological assets
98,244

 
105,387



16.    Financial instruments

As of June 30, 2019, the financial instruments recognized at fair value on the statement of financial position comprise derivative financial instruments.

In the case of Level 1, valuation is based on unadjusted quoted prices in active markets for identical financial assets that the Group can refer to at the date of the statement of financial position. A market is deemed active if transactions take place with sufficient frequency and in sufficient quantity for price information to be available on an ongoing basis. Since a quoted price in an active market is the most reliable indicator of fair value, this should always be used if available. The financial instruments the Group has allocated to this level mainly comprise crop futures and options traded on the stock market. In the case of securities, the Group allocates them to this level when either a stock market price is available or prices are provided by a price quotation on the basis of actual market transactions.

Derivatives not traded on the stock market allocated to Level 2 are valued using models based on observable market data. For this, the Group uses inputs directly or indirectly observable in the market, other than quoted prices. If the financial instrument concerned has a fixed contract period, the inputs used for valuation must be observable for the whole of this period. The financial instruments the Group has allocated to this level mainly comprise interest-rate swaps and foreign-currency interest-rate swaps.

In the case of Level 3, the Group uses valuation techniques not based on inputs observable in the market. This is only permissible insofar as no observable market data are available. The inputs used reflect the Group’s assumptions regarding the factors, which market players would consider in their pricing. The Group uses the best available information for this, including internal company data. The Group does not have financial instruments allocated to this level for any of the periods presented.

There were no transfer between any levels during the period.


The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 31


Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

16.    Financial instruments (continued)


The following tables present the Group’s financial assets and financial liabilities that are measured at fair value as of June 30, 2019 and their allocation to the fair value hierarchy:

 
2019
 
Level 1
 
Level 2
 
Total
 
 
 
 
 
 
Assets
 
 
 
 
 
Derivative financial instruments
1,716

 
—

 
1,716

Total assets
1,716

 
—

 
1,716

Liabilities
 
 
 
 
 
Derivative financial instruments
(3,735
)
 
(27
)
 
(3,762
)
Total liabilities
(3,735
)
 
(27
)
 
(3,762
)

When no quoted prices in an active market are available, fair values (particularly with derivatives) are based on recognized valuation methods. The Group uses a range of valuation models for this purpose, details of which may be obtained from the following table:
Class
 
Pricing Method
 
Parameters
 
Pricing Model
 
Level
 
Total
 
 
 
 
 
 
 
 
 
 
 
Futures
 
Quoted price
 
-
 
-
 
1
 
(2,410
)
 
 
 
 
 
 
 
 
 
 
 
Options
 
Quoted price
 
-
 
-
 
1
 
391

 
 
 
 
 
 
 
 
 
 
 
NDF
 
Quoted price
 
Foreign-exchange curve
 
Present value method
 
2
 
(27
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(2,046
)


The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 32



Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
    





17.    Trade and other receivables, net
 
June 30, 2019
 
December 31, 2018
 
(unaudited)
 
 
Non current
 
 
 
Advances to suppliers
27

 
2,343

Income tax credits
5,065

 
4,429

Non-income tax credits (i)
18,057

 
15,998

Judicial deposits
3,313

 
2,908

Receivable from disposal of subsidiary
16,480

 
10,944

Cash collateral
33

 
—

Other receivables
2,140

 
2,198

Non current portion
45,115

 
38,820

Current
 
 
 
Trade receivables
68,588

 
60,167

Receivables from related parties (Note 28)
—

 
8,337

Less: Allowance for trade receivables
(4,419
)
 
(2,503
)
Trade receivables – net
64,169

 
66,001

Prepaid expenses
8,843

 
9,396

Advance to suppliers
21,464

 
43,365

Income tax credits
3,261

 
2,560

Non-income tax credits (i)
37,376

 
28,232

Receivable from disposal of subsidiary
5,552

 
3,709

Cash collateral
25

 
1,505

Receivables from related parties (Note 28)
—

 
324

Other receivables
8,729

 
3,594

Subtotal
85,250

 
92,685

Current portion
149,419

 
158,686

Total trade and other receivables, net
194,534

 
197,506



(i) Includes US$ 119 for the six-month period ended June 30, 2019 reclassified from property, plant and equipment (for the year ended December 31, 2018: US$ 1,086).
 
The fair values of current trade and other receivables approximate their respective carrying amounts due to their short-term nature. The fair values of non-current trade and other receivables approximate their carrying amount, as the impact of discounting is not significant.

The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies (expressed in US dollars):


The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 33


Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements (continued)
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

17.    Trade and other receivables, net (continued)


 
June 30,
2019
 
December 31, 2018
 
(unaudited)
 
 
Currency
 
 
 
US Dollar
41,515

 
52,342

Argentine Peso
65,758

 
42,896

Uruguayan Peso
726

 
534

Brazilian Reais
86,535

 
101,734

 
194,534

 
197,506


As of June 30, 2019 trade receivables of US$ 9,480 (December 31, 2018: US$ 5,052) were past due but not impaired. The ageing analysis of these receivables indicates that US$ 301 and US$ 318 are over 6 months in June 30, 2019 and December 31, 2018, respectively.

The creation and release of allowance for trade receivables have been included in ‘Selling expenses’ in the statement of income. Amounts charged to the allowance account are generally written off, when there is no expectation of recovering additional cash.

The other classes within other receivables do not contain impaired assets.

The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above.

18.    Inventories

 
June 30,
2019
 
December 31, 2018
 
(unaudited)
 
 
Raw materials
90,387

 
48,140

Finished goods (Note 5) (i)
110,463

 
79,758

Others
3

 
204

 
200,853

 
128,102


(i): Finished goods of Crops reportable segment are valued at fair value.

19.    Cash and cash equivalents

 
June 30,
2019
 
December 31, 2018
 
(unaudited)
 
 
Cash at bank and on hand
101,458

 
197,544

Short-term bank deposits
36,532

 
76,091

 
137,990

 
273,635



The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 34


Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)


20. Shareholder´s contribution






 
Number of shares (thousands)
 
Share capital and share premium
At January 1, 2018
 
122,382

 
1,092,507

Restricted shares vested
 
—

 
4,768

Purchase of own shares   
 
—

 
(13,206
)
At June 30, 2018
 
122,382

 
1,084,069

 
 
 
 
 
At January 1, 2019
 
122,382

 
1,084,076

Restricted share vested   
 
—

 
4,455

At June 30, 2019
 
122,382

 
1,088,531

      
Share Repurchase Program

On September 12, 2013, the Board of Directors of the Company authorized a share repurchase program for up to 5% of its outstanding shares. The repurchase program has been renewed by the Board of Directors after each 12-month period. On August 14, 2018, the Board of Directors approved the renewal of the Program and extension of the term for an additional twelve-month period ending on September 23, 2019.

Repurchases of shares under the program may be made from time to time (i) in open market transactions in compliance with the trading conditions of Rule 10b-18 under the U.S. Securities Exchange Act of 1934, as amended, and applicable rules and regulations; and (ii) through privately negotiated transactions. The share repurchase program does not require Adecoagro to acquire any specific number or amount of shares and may be modified, suspended, reinstated or terminated at any time in the Company’s discretion and without prior notice. The size and the timing of repurchases will depend upon market conditions, applicable legal requirements and other factors.

As of June 30, 2019, the Company repurchased an aggregate of 8,421,549 shares under the program, of which 3,075,270 have been utilized to cover the exercise of the Company’s employee stock option plan and restricted stock units plan. During the period ended June 30, 2019 and 2018 the Company repurchased shares for an amount of nill and US$ 15,725, respectively. The outstanding treasury shares as of June 30, 2019 totaled 4,602,997.


21.        Equity-settled share-based payments

The Group has set a “2004 Incentive Option Plan” and a “2007/2008 Equity Incentive Plan” (collectively referred to as “Option Schemes”) under which the Group grants equity-settled options to senior managers and selected employees of the Group´s subsidiaries. Additionally, in 2010 the Group has set a “Adecoagro Restricted Share and Restricted Stock Unit Plan” (referred to as “Restricted Share Plan”) under which the Group grants restricted shares, or restricted stock units to senior and medium management and key employees of the Group’s subsidiaries.
 
(a)
Option Schemes

No expense was accrued for both periods under the Options Schemes.

As of June 30, 2019, nil options (June 30, 2018: nil) were exercised, and nil options (June 30, 2018: 2,575) were forfeited, and 594,879 options were expired (June 30, 2018: nil).

The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 35


Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

21.        Equity-settled share-based payments (Continued)



(b)
Restricted Share and Restricted Stock Unit Plan

As of June 30, 2019, the Group recognized compensation expense US$ 2.5 million related to the restricted shares granted under the Restricted Share Plan (June 30, 2018: US$ 2.2 million). For the six-month period ended June 30, 2019, 766,515 Restricted Shares were granted (June 30, 2018: 550,640 Restricted Stock units), 476,847 were vested (June 30, 2018: 496,646), and 5,055 Restricted Stock Units were forfeited (June 30, 2018: 6,298).

22.        Trade and other payables

 
June 30,
2019
 
December 31,
2018
 
(unaudited)
 
 
Non-current
 
 
 
Payable from acquisition of property, plant and equipment (Note 27)
3,251

 
—

Other payables
266

 
211

 
3,517

 
211

Current
 
 
 
Trade payables
76,200

 
94,483

Advances from customers
2,283

 
3,813

Amounts due to related parties (Note 28)
—

 
354

Taxes payable
4,883

 
6,457

Payables from acquisition of property, plant and equipment (Note 27)
3,540

 
—

Other payables
334

 
1,119

 
87,240

 
106,226

Total trade and other payables
90,757

 
106,437



The fair values of current trade and other payables approximate their respective carrying amounts due to their short-term nature. The fair values of non-current trade and other payables approximate their carrying amount, as the impact of discounting is not significant.


The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 36



Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
    





23.        Borrowings

 
June 30,
2019
 
December 31, 2018
 
(unaudited)
 
 
Non-current
 
 
 
Senior Notes (*)
496,341

 
496,118

Bank borrowings (*)
210,128

 
221,971

Obligations under finance leases
—

 
395

 
706,469

 
718,484

Current
 
 
 
Senior Notes (*)
8,250

 
8,250

Bank overdrafts
13,972

 
2,320

Bank borrowings (*)
184,525

 
132,862

Obligations under finance leases
—

 
200

 
206,747

 
143,632

Total borrowings
913,216

 
862,116


(*) The Group was in compliance with the related covenants under the respective loan agreements.

As of June 30, 2019, total bank borrowings include collateralized liabilities of US$ 77,662 (December 31, 2018:
US$ 87,738). These loans are mainly collateralized by property, plant and equipment sugarcane plantations, sugar export contracts and shares of certain subsidiaries of the Group.

Notes 2027

On September 21, 2017, the Company issued senior notes (the “Notes”) for US$ 500 million, at an annual nominal rate of 6%. The Notes will mature on September 21, 2027. Interest on the Notes are payable semi-annually in arrears on March 21 and September 21 of each year. The total proceeds nets of expenses was US$ 496.5 million.

The Notes are fully and unconditionally guaranteed on a senior unsecured basis by certain of our current and future subsidiaries, currently: Adeco Agropecuaria S.A., Adecoagro Brasil Participações S.A., Adecoagro Vale do Ivinhema S.A., Pilagá S.A. and Usina Monte Alegre Ltda. are the only Subsidiary Guarantors.

The Notes contain customary financial covenants and restrictions which require us to meet pre-defined financial ratios, among other restrictions.

The maturity of the Group's borrowings (excluding obligations under finance leases) and the Group's exposure to fixed and variable interest rates is as follows:


The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 37


Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

23.
Borrowings (continued)


 
June 30,
2019
 
December 31, 2018
 
(unaudited)
 
 
Fixed rate:
 
 
 
Less than 1 year
146,628

 
105,708

Between 1 and 2 years
16,772

 
16,287

Between 2 and 3 years
25,924

 
25,704

Between 3 and 4 years
35,892

 
43,507

Between 4 and 5 years
26,089

 
26,415

More than 5 years
505,704

 
505,456

 
757,009

 
723,077

Variable rate:
 
 
 
Less than 1 year
60,119

 
37,724

Between 1 and 2 years
33,653

 
17,278

Between 2 and 3 years
26,472

 
29,861

Between 3 and 4 years
21,189

 
22,886

Between 4 and 5 years
14,774

 
18,251

More than 5 years
—

 
12,444

 
156,207

 
138,444

 
913,216

 
861,521


The breakdown of the Group´s borrowing by currency is included in Note 2 - Interest rate risk.

The carrying amount of short-term borrowings is approximate its fair value due to the short-term maturity. Long term borrowings subject to variable rate approximate their fair value. The fair value of long-term subject to fix rate do not significant differ from their fair value. The fair value (level 2) of the notes equals US$ 478 million, 95.6% of the nominal amount.



The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 38



Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
    





24.        Lease liabilities

 
June 30,
2019
 
December 31, 2018
 
(unaudited)
 
 
Lease liabilities
 
 
 
Non-current
172,487

 
—

Current (*)
42,679

 
—

 
215,166

 
—


(*) Includes US$ 7,576 of Related parties.

The maturity of the Group's lease liabilities is as follows:

 
June 30,
2019
Less than 1 year
42,679

Between 1 and 2 years
53,031

Between 2 and 3 years
27,663

Between 3 and 4 years
20,682

Between 4 and 5 years
16,862

More than 5 years
54,249

 
215,166


25.        Payroll and social security liabilities

 
June 30,
2019

December 31, 2018
 
(unaudited)
 
 
Non-current
 
 
 
Social security payable
956

 
1,219

 
956

 
1,219

Current
 
 
 
Salaries payable
10,651

 
8,841

Social security payable
3,078

 
3,112

Provision for vacations
9,309

 
9,770

Provision for bonuses
2,773

 
4,255

 
25,811

 
25,978

Total payroll and social security liabilities
26,767

 
27,197



The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 39



Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
    





26.        Provisions for other liabilities

The Group is subject to several laws, regulations and business practices of the countries where it operates. In the ordinary course of business, the Group is subject to certain contingent liabilities with respect to existing or potential claims, lawsuits and other proceedings, including those involving tax, labor and social security, administrative and civil and other matters. The Group accrues liabilities when it is probable that future costs will be incurred and it can reasonably estimate them. The Group bases its accruals on up-to-date developments, estimates of the outcomes of the matters and legal counsel experience in contesting, litigating and settling matters. As the scope of the liabilities becomes better defined or more information is available, the Group may be required to change its estimates of future costs, which could have a material effect on its results of operations and financial condition or liquidity. There have been no material changes to claimed amounts and current proceedings since December 31, 2018.


The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 40



Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
    





27. Disposals and acquisitions

▪Acquisitions

In January 2019, the Company acquired, the remaining 50% of CHS Agro S.A. a joint venture between the Company and CHS Argentina S.A. After this acquisition, we own 100% of CHS Agro S.A. which has since been renamed as Girasoles del Plata S.A. The consideration for this operation was nominal. As a result of this transaction, the Company recognized a gain in the line item Other Operating Income of USD 0.2 million.

Net assets acquired are as follows:

Property, plant and equipment
21,800

Intangible assets, net
41

Inventories
1,866

Trade and other receivables, net
4,492

Deferred income tax liabilities
(4,546
)
Trade and other payables
(1,031
)
Current income tax liabilities
(5
)
Payroll and Social liabilities
(153
)
Borrowings
(23,062
)
Cash and cash equivalents added as a result of the business combination
747

Total net assets added as a result of business combination
149

Fair value of previously held equity interest
74

Gain for bargain purchase
75


In January 2019, the Company acquired 100% of Olam Alimentos S.A. whose principal asset is a peanuts processing facility located in the Province of Córdoba, (currently Mani del Plata S.A.) from Olam International Ltd. The consideration for this acquisition was USD 10 million to be disbursed in three installments, with the first payment made at closing. This transaction qualifies as a purchase of assets.

In February 2019, the Company acquired two dairy facilities from SanCor Cooperativas Unidas Limitada ("SanCor"). The first facility is located in Chivilcoy, Province of Buenos Aires and processes fluid milk while the second facility is located in Morteros, Province of Cordoba and produces powder milk and cheese. Together with this facilities, we also acquired the brands Las Tres Niñas and Angelita. The total consideration for this operations was US$ 47 million. This transaction qualifies as a purchase of assets.

▪Disposals

In May 2018, the Group completed the sale of Q45 Negócios Imobiliários Ltda., a wholly owned subsidiary, which main underlying asset is the  Rio De Janeiro Farm, for a selling price of US$ 34 million (Reais 120 million), which was fully collected as of the date of these financial statements. This transaction resulted in a gain of US$ 22 million included in “Other operating income” under the line item “Gain from the sale of farmland and other assets”.

In June 2018, the Group completed the sale of Q43 Negócios Imobiliários Ltda., a wholly owned subsidiary , which main underlying asset is the Conquista Farm, for a selling price of US$ 18.4 million (Reais 68 million), of which US$ 5.6 million (Reais 21.4 million) has already been collected and the balance will be collected in four annual installments starting in June 2019. This transaction resulted in a gain of US$ 14 million, included in “Other operating income” under the line item “Gain from the sale of farmland and other assets”


The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 41


Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

27.    Disposals and acquisitions (continued)

In January 2019, we completed the sale of Q065 Negócios Imobiliários Ltda., a wholly owned subsidiary , which main underlying asset is the Alto Alegre Farm, for a selling price of US$ 16.6 million (Reais 62.5 million), of which US$ 2.2 million (Reais 8.4 million) has already been collected and the balance will be collected in seven annual installments starting in June 2019.

This transaction resulted in a gain before tax of US$ 1.5 million, and also in the reclassification of Revaluation surplus to retained earnings of U$S 8.0 million.

28.        Related-party transactions

The following is a summary of the balances and transactions with related parties:
Related party
 
Relationship
 
Description of transaction
 
Income / (loss) included in the statement of income
 
Balance receivable / (payable)
 
 
 
June 30, 2019
 
June 30, 2018
 
June 30, 2019
 
December 31, 2018
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(unaudited)

 
(unaudited)

 
(unaudited)

 
 
Mario Jorge de Lemos Vieira/ Cia Agropecuaria Monte Alegre/ Alfenas Agricola Ltda/ Marcelo Weyland Barbosa Vieira/ Paulo Albert Weyland Vieira
 
(i)
 
Receivables (Note 17)


—

 
—

 
—

 
324

Cost of manufactured products sold and services rendered
 
752

 
767

 
—

 
—

Payables (Note 22)
 
 
 
 
 
—

 
(160
)
Leases liabilities (Note 24)
 
—

 
—

 
(7,576
)
 
—

Girasoles del Plata S.A. (ii)
 
Joint venture
 
Services
 
—

 
36

 
—

 
—

Sales of goods
 
—

 
44

 
—

 
—

Payables (Note 22)
 
—

 
—

 
—

 
(194
)
Interest income
 
—

 
139

 
—

 
—

Receivables (Note 17)
 
—

 
—

 
—

 
8,337

Directors and senior management
 
Employment
 
Compensation selected employees
 
(3,857
)
 
(3,657
)
 
(13,690
)
 
(16,353
)

(i) Shareholder of the Company.
(ii) Since February 2019, Girasoles del Plata S.A. (formerly CHS Agro S.A.) is fully part of the Group.


The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 42



Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)
    





29.    Basis of preparation and presentation

The information presented in the accompanying condensed consolidated interim financial statements (“interim financial statements”) as of June 30, 2019 and for the six-month periods ended June 30, 2019 and 2018 is unaudited and in the opinion of management reflect all adjustments necessary to present fairly the financial position of the Group as of June 30, 2019, results of operations and cash flows for the six-month periods ended June 30, 2019 and 2018. All such adjustments are of a normal recurring nature. In preparing these accompanying interim financial statements, management has made certain estimates and assumptions that affect reported amounts in the financial statements and disclosures of contingencies. Actual results may differ from those estimates. The results for interim periods are not necessarily indicative of annual results.

These interim financial statements have been prepared in accordance with IAS 34, ‘Interim financial reporting’ and they should be read in conjunction with the annual financial statements for the year ended December 31, 2018, which have been prepared in accordance with IFRSs.

A complete list of standards, amendments and interpretations to existing standards published but not yet effective for the Group is described in Note 2.1 to the annual financial statements.

The accounting policies adopted in the preparation of the interim financial statements are consistent with those followed in the preparation of the Group’s annual consolidated financial statements for the year ended December 31, 2018 except for the changes in connection with the implementation of IFRS 16 – Leases, explained in Note 24 of these Consolidated Condensed Interim Financial Statements.

Description of accounting policies in placd as of June 30, 2019, but not in place as of June 30, 2018.

Revaluation model for investment property

During the period ended September 30, 2018, the Company adopted the revaluation model for its investment property. The higher valuation resulted in the condensed consolidated statement of income for the six-month period ended June 30, 2018, as follows:

 
June 30, 2018
 
Increase/ (Decrease)
 
June 30, 2018 (recast)
Other operating income
69,629

 
15,922

 
85,551

Loss before income tax
(35,898
)
 
15,922

 
(19,976
)
Income tax benefit
13,424

 
(3,981
)
 
9,443

Loss for the period
(22,474
)
 
11,941

 
(10,533
)
Basic earnings per share
(0.208
)
 
0.102

 
(0.106
)

Description of accounting policies changed during the period.
Leases

For fiscal years beginning on January 1st 2019 and onward it is mandatory the adoption of IFRS 16 - Leases.We disclose herein the new accounting policies that have been applied from January 1, 2019, where they are different to those applied in prior periods.

IFRS 16 was adopted following the simplified approach, without restating comparative. The reclassifications and the adjustments arising from the new lease accounting rules are directly recognized in the opening balance sheet on January 1, 2019.

The Company has adopted IFRS 16 Leases from January 1, 2019, but has not restated comparatives for previous reporting period as permitted under the specific transition provisions in the Standard.

The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 43


Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

29.    Basis of preparation and presentation (continued)



On adoption of IFRS 16, the Company recognized lease liabilities in relation to leases which had previously been classified as ‘operating leases’ under the principles of IAS 17 Leases. In the previous year, the Company only recognize lease liabilities in relation to leases that were classified as "Finance leases" under IAS 17 Leases. For the initial recognition, these liabilities were measured at the present value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate as of January 1, 2019.

The adoption of IFRS 16 Leases from January 1, 2019, resulted in changes in accounting policies and adjustments to the amounts recognized in the financial statements.

Short term leases are recognized on a straight line basis as an expense in the income statement.

Right-of-use assets

The total of the right-of-use assets are included under such type in the Statement of Financial Position:
 
Right of use
 
Lease liabilities
 
 
 
 
Closing balance as of December 31, 2018
—

 
—

Initial recognition
204,937

 
(204,937
)
Reclassifications from Trade and other receivables, net
—

 
26,794

Opening balance as of January 1, 2019
204,937

 
(178,143
)

The impact of the adoption of IFRS 16 did not have effect in retained earnings at January 1, 2019.

According with the adoption of IFRS 16, the new accounting policy for leases is as follows;

Leases are recognized as a right-of-use asset and corresponding liability at the date of which the leased asset is available for use by the group. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset's useful life and the lease term on a straight-line basis.

In determining the lease term, the Company considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated).

Short term leases are recognized on a straight line basis as an expense in the income statement.


Accounting as lessee

The Company recognizes a right-of-use asset and a lease liability at the commencement date of each lease contract that grants the right to control the use of an identified asset during a period of time. The commencement date is the date in which the lessor makes an underlying asset available for use by the lessee.

The Company applied exemptions for leases with a duration lower than 12 months, with a value lower than thirty thousand dollars and/or with clauses related to variable payments. These leases have been considered as short-term leases and, accordingly, no right-of-use asset or lease liability have been recognized.

The weighted average lessee’s incremental borrowing rate applied  to lease liabilities recognised in the statement of financial osition at the date of initial application was 7.04%.


The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 44


Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

29.    Basis of preparation and presentation (continued)


At initial recognition, the right-of-use asset is measured considering:

•
The value of the initial measurement of the lease liability;
•
Any lease payments made at or before the commencement date, less any lease incentives; and
•
Any initial direct costs incurred by the lessee; and

After initial recognition, the right-of-use assets are measured at cost, less any accumulated depreciation and/or impairment losses, and adjusted for any re-measurement of the lease liability.

Depreciation of the right-of-use asset is calculated using the straight-line method over the estimated duration of the lease contract.

The lease liability is initially measured at the present value of the lease payments that are not paid at such date, including the following concepts:

•
Variable lease payments that depend on an index or rate, initially measured using the index or rate as of the commencement date;
•
Amounts expected to be payable by the lessee under residual value guarantees;
•
The exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
•
Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease;
•
Fixed payments, less any lease incentives receivable;
•
Variable lease payments that depend on an index or rate, initially measured using the index or rate as of the commencement date;
•
Amounts expected to be payable by the lessee under residual value guarantees;
•
The exercise price of a purchase option if the lessee is reasonably certain to exercise that option; and
•
Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising an option to terminate the lease.

After the commencement date, the Company measures the lease liability by:

•
Increasing the carrying amount to reflect interest on the lease liability;
•
Reducing the carrying amount to reflect lease payments made; and
•
Re-measuring the carrying amount to reflect any reassessment or lease modifications.

The above mentioned inputs for the valuation of the right of use assets and lease liabilities including the determination of the contracts within the scope of the standard, the contract term ant interest rat used in the discounted cash flow involved a high degree of management´s estimations.

Early adoption of IFRS 3 Amendment
The IASB has issued narrow-scope amendments to IFRS 3,'Business combinations', to improve the definition of a business.

The amended definition emphasizes that the output of a business is to provide goods and services to customers, whereas the previous definition focused on returns in the form of dividends, lower costs or other economic benefits to investors and others.


The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 45


Adecoagro S.A.
Notes to the Condensed Consolidated Interim Financial Statements
(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

29.    Basis of preparation and presentation (continued)


Entities are required to apply the amendments to transactions for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after 1 January 2020. The Company applied this amendment form the period beginning on 1 January 2019.
    
Seasonality of operations

The Group’s business activities are inherently seasonal. The Group generally harvest and sell its grains (corn, soybean, rice and sunflower) between February and August, with the exception of wheat, which is harvested from December to January. Peanut is harvested from April to May, and sales are executed with higher intensity during the third quarter of the year. Cotton is a unique in that while it is typically harvested from June to August, it requires processing which takes about two to three months to complete. Sales in our Dairy business segment tend to be more stable. However, milk production is generally higher during the fourth quarter, when the weather is more suitable for production. Although our Sugar, Ethanol and Electricity cluster is currently operating under a "non-stop" or "continuous" harvest and without stopping during traditional off-season, the rest of the sector in Brazil is still primarily operating with large off-season periods from December/January to March/April. The result of large off-season periods is fluctuations in our sugar and ethanol sales and in our inventories, usually peaking in December to take advantage of higher prices during the traditional off-season period (i.e., January through April). As a result of the above factors, there may be significant variations in our financial results from one quarter to another. In addition, our quarterly results may vary as a result of the effects of fluctuations in commodities prices, production yields and costs on the determination of initial recognition and changes in fair value of biological assets and agricultural produce.

30.    Critical accounting estimates and judgments

The Group's critical accounting policies are also consistent with those of the audited annual financial statements for the year ended December 31, 2018 described in Note 33.



The accompanying notes are an integral part of these condensed consolidated interim financial statements

F- 46