EX-99.1 2 ex99112312020.htm EX-99.1

Document

Adecoagro S.A.

Consolidated Financial Statements as of December 31, 2020 and 2019 and for the years ended December 31, 2020, 2019 and 2018

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Adecoagro S.A.

Opinion on the Financial Statements

We have audited the accompanying consolidated statement of financial position of Adecoagro S.A. and its subsidiaries (the “Company”) as of December 31, 2020 and 2019, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2020, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

Change in Accounting Principle

As discussed in Note 34.1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in 2019.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Valuation of Level 3 Biological Assets

As described in Notes 16, 33 (b) and 34.11 to the consolidated financial statements, the total fair value of the Company’s level 3 biological assets related to sown land crops, sown land rice and sown land sugarcane was US$ 148 million at December 31, 2020. Fair value of these biological assets is determined by management using a discounted cash flows model which requires the input of highly subjective assumptions including significant unobservable inputs. The discounted cash flow model included significant judgements and assumptions relating to management’s cash flow projections including future market prices, estimated yields at the point of harvest, estimated production cycle, future costs of harvesting and others cost and estimated discount rate.

The principal considerations for our determination that performing procedures relating to the valuation of the Company’s level 3 biological assets related to sown land crops, sown land – rice and sown land sugarcane is a critical audit matter are (i) the significant judgment by management when developing the fair value measurement; (ii) a high degree of auditor judgement, subjectivity, and effort in performing procedures and evaluating management’s cash flow projections and significant assumptions related to future market prices, estimated yields at the point of harvest, estimated production cycle, future costs of harvesting and others cost and estimated discount rate; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the valuation of the Company’s level 3 biological assets related to sown land – crops, sown land – rice and sown land – sugarcane. These procedures also included, among others evaluating the significant assumptions and methods used by management in developing the fair value measurement including future market prices, estimated yields at the point of harvest, estimated production cycle, future costs of harvesting and others cost and estimated discount rate. Evaluating management’s assumptions involved evaluating whether these assumptions were reasonable considering the consistency with external information and past records and testing management’s sensitivity analysis of certain significant assumptions. Professionals with specialized skill and knowledge were used to assist in the evaluation of certain significant assumptions, including estimated yields at the point of harvest and estimated production cycle.

Property, Plant and Equipment and Goodwill Impairment Assessment- Cash Generating Units with Allocated Goodwill in Brazil

As described in Notes 12, 15, 33 (a) and 34.10 to the consolidated financial statements, the Company’s consolidated property, plant and equipment and goodwill balances at December 31, 2020 were US$ 1,358 million and US$ 14.5 million, respectively, of which US$ 519 million was allocated to the cash generating units with allocated goodwill in Brazil. The Company conducts an impairment test as of September 30 of each year, or more frequently if events or changes in circumstances indicate that the carrying value of the asset or cash generating unit may not be recoverable. An impairment loss is recognized for the amount by which the carrying amount of the asset or cash generating unit exceeds its recoverable amount. The recoverable amounts are estimated for individual assets or, where an individual asset does not generate cash flows independently, the recoverable amount is estimated for the cash generating unit to which the asset belongs. The recoverable amount of the asset or the cash generating unit is the higher of the fair value less costs to sell and value in use. The recoverable amount of cash generating units with allocated goodwill in Brazil was determined based on value in use calculations. The determination of the value in use calculation required the use of significant estimates and assumptions related to management’s cash flow projections, including yield average growth rates, future pricing increases, future cost decrease, discount rates and perpetuity growth rate.

The principal considerations for our determination that performing procedures relating to the impairment assessment of property, plant and equipment and goodwill associated with the cash generating units with allocated goodwill in Brazil is a critical audit matter are (i) the significant judgment by management when developing the value in use calculation of these cash generating units; (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s cash flow projections and significant assumptions related to yield average growth rates, future pricing increases, future cost decrease, discount rates and perpetuity growth rate; and (iii) the audit effort involved the use of professionals with specialized skill and knowledge.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s impairment assessment of property, plant and equipment and goodwill associated with the cash generating units with allocated goodwill in Brazil, including controls over the valuation of the Company’s cash generating units. These procedures also included, among others (i) testing management’s process for developing the estimate; (ii) evaluating the appropriateness of the discounted cash flow model; (iii) testing the completeness and accuracy of underlying data used in the model; and (iv) evaluating the reasonableness of the significant assumptions used by management related to yield average growth rates, future pricing increases, future cost decrease, discount rates and perpetuity growth rate. Evaluating management’s assumptions related to yield average growth rates, future pricing increases, future cost decrease, discount rates and perpetuity growth rate involved evaluating whether the assumptions used by management were reasonable considering (i) the current and past performance of the cash generating units; (ii) the consistency with external market and industry data; and (iii) whether these assumptions were consistent with evidence obtained in other areas of the audit. Professionals with specialized skill and knowledge were used to assist in the evaluation of the Company’s discounted cash flow model and the discount rate assumptions.

/s/ PRICE WATERHOUSE & CO. S.R.L.

/s/ Jorge Frederico Zabaleta (Partner)

Jorge Frederico Zabaleta

Buenos Aires, Argentina.

March 9, 2021.

We have served as the Company’s auditor since 2008.

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: 117,296,951 common shares

Treasury shares: 5,084,864 common shares

F- 2

Adecoagro S.A.

Consolidated Statements of Income

for the years ended December 31, 2020, 2019 and 2018

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

			Note			2020						2019 (*)						2018 (*)
Sales of goods and services rendered			4			817,764						887,138						793,239
Cost of goods sold and services rendered			5			(611,946)						(671,173)						(609,965)
Initial recognition and changes in fair value of biological assets and agricultural produce			16			122,729						68,589						16,195
Changes in net realizable value of agricultural produce after harvest						7,005						1,825						(909)
Margin on manufacturing and agricultural activities before operating expenses						335,552						286,379						198,560
General and administrative expenses			6			(53,428)						(57,202)						(56,080)
Selling expenses			6			(95,058)						(106,972)						(90,215)
Other operating income, net			8			1,987						(822)						104,232
Profit from operations						189,053						121,383						156,497
Finance income			9			26,054						8,979						8,394
Finance costs			9			(213,776)						(126,111)						(163,937)
Other financial results - Net gain of inflation effects on the monetary items			9			12,064						16,911						(25,211)
Financial results, net			9			(175,658)						(100,221)						(180,754)
Profit / (Loss) before income tax						13,395						21,162						(24,257)
Income tax (expense) / benefit			10			(12,325)						(20,820)						1,024
Profit / (Loss) for the year						1,070						342						(23,233)
Attributable to:
Equity holders of the parent						412						(772)						(24,622)
Non-controlling interest						658						1,114						1,389
Earnings / (Loss) per share from operations attributable to the equity holders of the parent during the year:
Basic earnings per share			11			0.003						(0.007)						(0.211)
Diluted earnings per share			11			0.003						(0.007)						(0.211)

(*) Prior periods have been recast to reflect the Company's change in accounting policy for the reclassification within financial results as explained in Note 34.1.

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

F- 3

Adecoagro S.A.

Consolidated Statements of Comprehensive Income

for the years ended December 31, 2020, 2019 and 2018

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

			2020						2019						2018
Profit / (Loss) for the year			1,070						342						(23,233)
Other comprehensive income:
-  Items that may be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations			(78,961)						(27,828)						(121,296)
Cash flow hedge, net of income tax			(14,386)						(19,420)						(32,195)
-  Items that will not be reclassified to profit or loss:
Revaluation surplus net of income tax (Note 12, 14)			29,453						(31,929)						405,906
Other comprehensive (loss) / income for the year			(63,894)						(79,177)						252,415
Total comprehensive (loss) / income for the year			(62,824)						(78,835)						229,182
Attributable to:
Equity holders of the parent			(63,353)						(75,437)						213,641
Non-controlling interest			529						(3,398)						15,541

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

F- 4

Adecoagro S.A.

Consolidated Statements of Financial Position

as of December 31, 2020 and 2019

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

			Note			2020						2019 (*)
ASSETS
Non-Current Assets
Property, plant and equipment			12			1,358,292						1,493,220
Right of use assets			13			209,694						238,053
Investment property			14			31,179						34,295
Intangible assets			15			26,930						33,679
Biological assets			16			14,725						13,303
Deferred income tax assets			10			19,821						13,664
Trade and other receivables, net			19			52,266						44,993
Derivative financial instruments			18			1,951						—
Other assets						809						1,034
Total Non-Current Assets						1,715,667						1,872,241
Current Assets
Biological assets			16			150,968						117,133
Inventories			20			133,461						112,790
Trade and other receivables, net			19			145,662						127,338
Derivative financial instruments			18			151						1,435
Other assets						45						94
Cash and cash equivalents			21			336,282						290,276
Total Current Assets						766,569						649,066
TOTAL ASSETS						2,482,236						2,521,307
SHAREHOLDERS EQUITY
Capital and reserves attributable to equity holders of the parent
Share capital			23			183,573						183,573
Share premium			23			902,815						901,739
Cumulative translation adjustment						(555,044)						(492,374)
Equity-settled compensation						14,795						15,354
Cash flow hedge			2			(90,689)						(76,303)
Other reserves						83,406						66,047
Treasury shares						(7,630)						(7,946)
Revaluation surplus						343,570						337,877
Reserve from the sale of non-controlling interests in subsidiaries						41,574						41,574
Retained earnings						8,671						18,728
Equity attributable to equity holders of the parent						925,041						988,269
Non-controlling interest						38,683						40,614
TOTAL SHAREHOLDERS EQUITY						963,724						1,028,883
LIABILITIES
Non-Current Liabilities
Trade and other payables			26			290						3,599
Borrowings			27			813,464						780,202
Lease liabilities			28			159,435						174,570
Deferred income tax liabilities			10			182,377						165,508
Payroll and social liabilities			29			1,075						1,209
Provisions for other liabilities			30			2,705						2,936
Total Non-Current Liabilities						1,159,346						1,128,024
Current Liabilities
Trade and other payables			26			126,315						106,887
Current income tax liabilities						760						754
Payroll and social liabilities			29			23,333						25,208
Borrowings			27			157,626						188,078
Lease liabilities			28			36,337						41,814
Derivative financial instruments			18			13,141						1,423
Provisions for other liabilities			30			1,654						236
Total Current Liabilities						359,166						364,400
TOTAL LIABILITIES						1,518,512						1,492,424
TOTAL SHAREHOLDERS EQUITY AND LIABILITIES						2,482,236						2,521,307

(*) Prior periods have been recast to reflect the Company's change in accounting policy for the reclassification within shareholders equity of the initial application of IAS 29 as explained in Note 34.1.

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

F- 5

Adecoagro S.A.

Consolidated Statements of Changes in Shareholders’ Equity

for the years ended December 31, 2020, 2019 and 2018

(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 23)			Share premium (Note 23)			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, 2018			183,573			908,934			(552,604)			17,852			(24,691)			—			(6,967)			—			41,574			294,150			861,821			29,376			891,197
Reclassification of "adjustment of opening balance for the application of IAS 29 (Note 29) (***)			—			—			187,941			—			—			—			—			—			—			(187,941)			—			—			—
Total equity at the beginning of financial year			183,573			908,934			(364,663)			17,852			(24,691)			—			(6,967)			—			41,574			106,209			861,821			29,376			891,197
Loss for the year			—			—			—			—			—						—						—			(24,622)			(24,622)			1,389			(23,233)
Other comprehensive income:
–Items that may be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations			—			—			(113,433)			—			—			—			—			—			—			—			(113,433)			(7,863)			(121,296)
Cash flow hedge (*)			—			—			—			—			(32,193)			—			—			—			—			—			(32,193)			(2)			(32,195)
–Items that will not be reclassified subsequently to profit or loss:
Revaluation surplus (**)			—			—			—			—			—			—			—			383,889			—			—			383,889			22,017			405,906
Other comprehensive income for the year			—			—			(113,433)			—			(32,193)			—			—			383,889			—			—			238,263			14,152			252,415
Total comprehensive income for the year			—			—			(113,433)			—			(32,193)			—			—			383,889			—			(24,622)			213,641			15,541			229,182
Reserves for the benefit of government grants (1)			—			—			—			—			—			32,380			—			—			—			(32,380)			—			—			—
Employee share options (Note 24)
- Forfeited			—			—			—			(40)			—			—			—			—			—			40			—			—			—
Restricted shares (Note 24):
- Value of employee services			—			—			—			3,899			—			—			—			—			—			—			3,899			—			3,899
- Vested			—			4,775			—			(5,520)			—			—			745			—			—			—			—			—			—
Purchase of own shares (Note 23)			—			(13,206)			—			—			—			—			(2,519)			—			—			—			(15,725)			—			(15,725)
Dividends			—			—			—			—			—			—			—			—			—			—			—			(408)			(408)
Balance at December 31, 2018			183,573			900,503			(478,096)			16,191			(56,884)			32,380			(8,741)			383,889			41,574			49,247			1,063,636			44,509			1,108,145

(*) Net of 11,322 of income tax.

(**) Net of 139,223 of Income tax.

(***) Prior periods have been recast to reflect the Company's change in accounting policy for the classification of the adjustment of opening balance for the application of IAS 29 as explained in Note 34.

(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. (please see Note 25).

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

F- 6

Adecoagro S.A.

Consolidated Statements of Changes in Shareholders’ Equity

for the years ended December 31, 2020, 2019 and 2018

(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 23)			Share premium (Note 23)			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			(478,096)			16,191			(56,884)			32,380			(8,741)			383,889			41,574			49,247			1,063,636			44,509			1,108,145
Profit for the year			—			—			—			—			—			—			—			—			—			(772)			(772)			1,114			342
Other comprehensive income:
–Items that may be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations			—			—			(14,278)			—			—			—			—			(12,183)			—			—			(26,461)			(1,367)			(27,828)
Cash flow hedge (*)			—			—			—			—			(19,419)			—			—			—			—			—			(19,419)			(1)			(19,420)
–Items that will not be reclassified subsequently to profit or loss:																																	—						—
Revaluation surplus (**)			—			—			—			—			—			—			—			(28,785)			—			—			(28,785)			(3,144)			(31,929)
Reserve of the revaluation surplus derived from the disposals of assets (***)			—			—			—			—			—			—			—			(5,044)			—			5,044			—			—			—
Other comprehensive (loss) / income for the year			—			—			(14,278)			—			(19,419)			—			—			(46,012)			—			5,044			(74,665)			(4,512)			(79,177)
Total comprehensive income for the year			—			—			(14,278)			—			(19,419)			—			—			(46,012)			—			4,272			(75,437)			(3,398)			(78,835)
Reserves for the benefit of government grants (1)			—			—			—			—			—			34,791			—			—			—			(34,791)			—			—			—
- Forfeited			—			—			—			—			—			5			(5)			—			—			—			—			—			—
Restricted shares and restricted units (Note 21):
- Value of employee services			—			—			—			3,612			—			—			—			—			—			—			3,612			—			3,612
- Vested			—			4,455			—			(4,449)			—			—			715			—			—			—			721			—			721
Purchase of own shares (Note 23)			—			(3,219)			—			—			—			—			(1,044)			—			—			—			(4,263)			—			(4,263)
- Granted (***)			—			—			—			—			—			(1,129)			1,129			—			—			—			—			—			—
Dividends			—			—			—			—			—			—			—			—			—			—			—			(497)			(497)
Balance at December 31, 2019			183,573			901,739			(492,374)			15,354			(76,303)			66,047			(7,946)			337,877			41,574			18,728			988,269			40,614			1,028,883

(*) Net of 6,752 of Income tax.

(**) Net of 10,480 of Income tax.

(***) Net of 2,978 of Income tax.

(****) Prior periods have been recast to reflect the Company's change in accounting policy for the classification of the adjustment of opening balance for the application of IAS 29 as explained in Note 34.

(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. (please see Note 25).

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

F- 7

Adecoagro S.A.

Consolidated Statements of Changes in Shareholders’ Equity

for the years ended December 31, 2020, 2019 and 2018

(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 23)			Share premium (Note 23)			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, 2020			183,573			901,739			(492,374)			15,354			(76,303)			66,047			(7,946)			337,877			41,574			18,728			988,269			40,614			1,028,883
Profit for the year			—			—			—			—			—			—			—			—			—			412			412			658			1,070
Other comprehensive income:
-    Items that may be reclassified subsequently to profit or loss:
Exchange differences on translating foreign operations			—			—			(62,670)			—			—			—			—			(15,173)			—			—			(77,843)			(1,118)			(78,961)
Cash flow hedge (*)			—			—			—			—			(14,386)			—			—			—			—			—			(14,386)			—			(14,386)
-    Items will not be reclassified to profit or loss:
Revaluation surplus (**)			—			—			—			—			—			—			—			28,464			—			—			28,464			989			29,453
Reserve of the revaluation surplus derived from the disposals of assets (***)			—			—			—			—			—			—			—			(7,598)			—			7,598			—			—			—
Other comprehensive income for the year			—			—			(62,670)			—			(14,386)			—			—			5,693			—			7,598			(63,765)			(129)			(63,894)
Total comprehensive income for the year			—			—			(62,670)			—			(14,386)			—			—			5,693			—			8,010			(63,353)			529			(62,824)
Reserves for the benefit of government grants (1)			—			—			—			—			—			18,067			—			—			—			(18,067)			—			—			—
Restricted shares (Note 24):
- Value of employee services			—			—			—			3,266			—			—			—			—			—			—			3,266			—			3,266
- Vested			—			4,182			—			(3,825)			—			383			484			—			—			—			1,224			—			1,224
- Forfeited			—			—			—			—			—			36			(36)			—			—			—			—			—			—
- Granted			—			—			—			—			—			(1,127)			1,127			—			—			—			—			—			—
Purchase of own shares (Note 23)			—			(3,106)			—			—			—			—			(1,259)			—			—			—			(4,365)			—			(4,365)
Dividends			—			—			—			—			—			—			—			—			—			—			—			(2,460)			(2,460)
Balance at December 31, 2020			183,573			902,815			(555,044)			14,795			(90,689)			83,406			(7,630)			343,570			41,574			8,671			925,041			38,683			963,724

(*) Net of 5,729 of Income tax.

(**) Net of 11,790 of Income tax.

(***) Net of 3,458 of Income tax.

(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. (please see Note 25).

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

F- 8

Adecoagro S.A.

Consolidated Statements of Cash Flows

for the years ended December 31, 2020, 2019 and 2018

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

			Note			2020						2019 (*)						2018 (*)
Cash flows from operating activities:
Profit / (Loss) for the year						1,070						342						(23,233)
Adjustments for:
Income tax expense / (benefit)			10			12,325						20,820						(1,024)
Depreciation			12			140,579						173,208						153,034
Amortization			15			1,293						1,231						1,220
Depreciation of right of use assets			13			40,820						45,168						—
Loss from the disposal of other property items			8			(2,198)						329						95
Gain from the sale of farmland and other assets			8			(2,064)						(1,354)						(36,227)
Loss from the sale of subsidiary						554						—						—
Acquisition of subsidiaries			22			—						(149)						—
Net (gain) / loss from the fair value adjustment of Investment properties			8			(1,077)						325						(13,409)
Equity settled share-based compensation granted			7			4,316						4,734						4,728
Loss / (gain) from derivative financial instruments and forwards			8, 9			10,058						(469)						(51,504)
Interest, finance cost related to lease liabilities and other financial expense, net			9			47,686						59,916						40,223
Initial recognition and changes in fair value of non harvested biological assets (unrealized)						(32,975)						(1,720)						30,299
Changes in net realizable value of agricultural produce after harvest (unrealized)						481						481						647
Provision and allowances						1,940						2,778						2,126
Net (gain) / loss of inflation effects on the monetary items			9			(12,064)						(16,911)						25,211
Foreign exchange losses, net			9			109,266						25,779						68,787
Cash flow hedge – transfer from equity			9			24,363						25,484						38,086
Subtotal						344,373						339,992						239,059
Changes in operating assets and liabilities:
Increase in trade and other receivables						(55,233)						(17,664)						(65,942)
(Increase) / Decrease in inventories						(30,165)						9,998						(41,531)
(Increase) / Decrease in biological assets						(10,290)						(27,037)						2,958
(Increase) / Decrease in other assets						(35)						(210)						(777)
Decrease in derivative financial instruments						5,234						3,997						50,021
Increase in trade and other payables						828						13,102						31,148
Increase in payroll and social security liabilities						4,120						2,565						5,876
Increase / (Decrease) in provisions for other liabilities						380						(351)						(430)
Net cash generated from operating activities before taxes paid						259,212						324,392						220,382
Income tax paid						(2,087)						(2,282)						(1,869)
Net cash generated from operating activities			(a)			257,125						322,110						218,513

(*) Prior periods have been recast to reflect the Company's change in accounting policy for the reclassification within financial results as explained in Note 34.1

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

F- 9

Adecoagro S.A.

Consolidated Statements of Cash Flows (Continued)

for the years ended December 31, 2020, 2019 and 2018

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

			Note			2020						2019 (*)						2018 (*)
Cash flows from investing activities:
Acquisition of business, net of cash and cash equivalents acquired						—						683						—
Purchases of property, plant and equipment			12			(168,529)						(252,450)						(207,069)
Purchase of cattle and non current biological assets			16			(7,339)						(4,950)						(5,706)
Purchases of intangible assets			15			(1,122)						(8,617)						(3,321)
Interest received and others			9			25,421						7,210						7,728
Proceeds from disposal of other property items						3,482						2,652						1,748
Proceeds from the sale of farmland and other assets			22			16,022						5,833						31,511
Proceeds from the sale of subsidiary			22			10,149						—						—
Net cash used in investing activities			(b)			(121,916)						(249,639)						(175,109)
Cash flows from financing activities:
Proceeds from long-term borrowings			27			116,015						108,271						45,536
Payments of long-term borrowings			27			(34,750)						(101,826)						(124,349)
Proceeds from short-term borrowings			27			207,217						193,977						318,108
Payments of short-term borrowings			27			(233,540)						(131,521)						(190,630)
Interest paid						(60,026)						(53,996)						(50,021)
(Payments) / collections of derivatives financial instruments						(1,687)						1,481						(2,578)
Lease payments						(40,336)						(49,081)						—
Purchase of own shares						(4,365)						(4,263)						(15,725)
Dividends paid to non-controlling interest						(2,447)						(905)						(1,195)
Net cash used from financing activities			(c)			(53,919)						(37,863)						(20,854)
Net increase in cash and cash equivalents						81,290						34,608						22,550
Cash and cash equivalents at beginning of year			21			290,276						273,635						269,195
Effect of exchange rate changes and inflation on cash and cash equivalents			(d)			(35,284)						(17,967)						(18,110)
Cash and cash equivalents at end of year			21			336,282						290,276						273,635

(a) Includes (14,956), 23,550 and 7,598 of the combined effect of IAS 29 and IAS 21 of the Argentine subsidiaries for 2020, 2019 and 2018, respectively.

(b) Includes (429), 2,922 and 3,935 of the combined effect of IAS 29 and IAS 21 of the Argentine subsidiaries for 2020, 2019 and 2018, respectively.

(c) Includes 15,694, (14,340) and (8,231) of the combined effect of IAS 29 and IAS 21 of the Argentine subsidiaries for 2020, 2019 and 2018, respectively.

(d) Includes (309), (12,132) and (3,302) of the combined effect of IAS 29 and IAS 21 of the Argentine subsidiaries for 2020, 2019 and 2018, respectively.

Non-cash investing and financing transactions disclosed in other notes are the seller financing of Subsidiaries in Note 22.

(*) Prior periods have been recast to reflect the Company's change in accounting policy for the reclassification within financial results as explained in Note 34.1

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

F- 10

Adecoagro S.A.

Notes to the Consolidated 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 consolidated 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 consolidated financial statements have been approved for issue by the Board of Directors on March 9, 2021.

2.    Financial risk management

Risk management principles and processes

The Group’s activities are exposed to a variety of financial risks. The Group’s overall risk management program focuses on the unpredictability of financial markets and seeks to minimize the Group’s capital costs by using suitable means of financing and to manage and control the Group’s financial risks effectively. The Group uses financial instruments to hedge certain risk exposures.

The Group’s approach to the identification, assessment and mitigation of risk is carried out by a Risk and Commercial Committee, which focuses on timely and appropriate management of risk.

The principal financial risks are related to raw material price, end-product price, exchange rate, interest rate, liquidity and credit. This section provides a description of the principal risks and uncertainties that could have a material adverse effect on the Group’s strategy, performance, results of operations and financial condition. These risks do not appear in any particular order of potential materiality or probability of occurrence.

    In Argentina, ongoing economical events forced the government to impose certain restrictions in the exchange markets, such as:

–Dividends payments to non residents.

– Set specific deadlines to enter and settle exports

– Prior authorization of the BCRA for the formation of external assets for companies

– Prior authorization of the BCRA for the payment of debts related to companies abroad

– Deferral of payment of certain public debt instruments.

– Fuel price control

•Exchange rate risk

The Group’s cash flows, statement of income and statement of financial position are presented in U.S. Dollars and may be affected by fluctuations in exchange rates. Currency risks as defined by IFRS 7 arise on account of monetary assets and liabilities being denominated in a currency that is not the functional currency.

A significant majority of the Group’s business activities is conducted in the respective functional currencies of the subsidiaries (primarily the Brazilian Reais and the Argentine Peso). However, the Group may transact in currencies other than the respective functional currencies, mainly the U.S. Dollars. As such, these subsidiaries may hold U.S. Dollar denominated monetary balances at each year-end as indicated in the tables below.

F- 11

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2.    Financial risk management (continued)

The Group’s net financial position exposure to the U.S. Dollar is managed on a case-by-case basis, partly by hedging certain expected cash flows with foreign exchange derivative contracts.

The following tables show the net monetary position of the respective subsidiaries within the Group categorized by functional currency. Non-U.S. Dollar amounts are presented in U.S. Dollars for purpose of these tables.

			2020
			Subsidiaries’ functional currency
Net monetary position (Liability)/ Asset			Argentine Peso			Brazilian Reais			Uruguayan Peso			U.S. Dollar			Total
Argentine Peso			(115,097)			—			—			(288)			(115,385)
Brazilian Reais			—			(298,039)			—			—			(298,039)
U.S. Dollar			(193,353)			(307,611)			20,720			47,122			(433,122)
Uruguayan Peso			—			—			(655)			—			(655)
Total			(308,450)			(605,650)			20,065			46,834			(847,201)

			2019
			Subsidiaries’ functional currency
Net monetary position (Liability)/ Asset			Argentine Peso			Brazilian Reais			Uruguayan Peso			U.S. Dollar			Total
Argentine Peso			(19,733)			—			—			(560)			(20,293)
Brazilian Reais			—			(196,081)			—			—			(196,081)
U.S. Dollar			(317,296)			(438,604)			21,586			48,091			(686,223)
Uruguayan Peso			—			—			(2,086)			—			(2,086)
Total			(337,029)			(634,685)			19,500			47,531			(904,683)

The Group’s analysis shown on the tables below is carried out based on the exposure of each functional currency subsidiary against the U.S. Dollar. The Group estimated that, other factors being constant, a hypothetical 10% appreciation/depreciation of the U.S. Dollar against the respective functional currencies for the years ended December 31, 2020 and 2019 would have decreased/increased the Group’s Profit before income tax for the year. A 10% depreciation of the U.S. Dollar against the functional currencies would have an equal and opposite effect on the income statement. A portion of this effect would have been 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 U.S. Dollars (see Hedge Accounting - Cash Flow Hedge below for details).

						Functional currency
Net monetary position						Argentine Peso			Brazilian Reais			Uruguayan Peso			Total
2020			U.S. Dollar			(19,335)			(30,761)			2,072			(48,024)
2019			U.S. Dollar			(31,730)			(43,860)			2,159			(73,431)

The tables above only consider the effect of a hypothetical appreciation / depreciation of the U.S. Dollars on the Group’s net financial position. A hypothetical appreciation / depreciation of the U.S. Dollar against the functional currencies of the Group’s subsidiaries has historically had a positive / negative effect, respectively, on the fair value of the Group’s biological assets and the end prices of the Group’s agriculture produce, both of which are generally linked to the U.S. Dollar.

F- 12

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2.    Financial risk management (continued)

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 U.S. Dollars using a portion of its borrowings denominated in U.S. Dollars, currency forwards and foreign currency floating-to-fixed interest rate swaps.

Principal amounts of long-term borrowings (non-derivative financial instruments) and notional values of foreign currency forward contracts (derivative financial instruments) were designated as hedging instruments. These instruments are exposed to Brazilian Reais/ U.S. Dollar foreign currency risks related to operations in Brazil and Argentine Peso/U.S. Dollar in Argentina, respectively. As of December 31, 2020 and 2019, approximately 15.0% and 19.5%, respectively, of projected sales qualify as highly probable forecast transactions for hedge accounting purposes and were designated as hedged items.

The Group has prepared formal documentation in order to support the designation above, including an explanation of how the designation of the hedging relationship is aligned with the Group’s Risk Management Policy, identification of the hedging instrument, the hedged transactions, the nature of the risk being hedged and an analysis which demonstrates that the hedge is expected to be highly effective. The Group reassesses the prospective and retrospective effectiveness of the hedge on an ongoing basis comparing the foreign currency component of the carrying amount of the hedging instruments and of the highly probable future sales.

Under cash flow hedge accounting, effect of changes in foreign currency exchange rates on derivative and non-derivative hedging instruments not be immediately recognized in profit or loss, but be reclassified from equity to profit or loss in the periods when the future sales occur, thus allowing for a more appropriate presentation of the results for the period reflecting the strategy in the Group’s Risk Management Policy.

The Company expects that the cash flows will occur and affect profit or loss between 2021 and 2025.

For the year ended December 31, 2020, a total amount before income tax of US$ 46,145 gain (US$ 54,312 gain in 2019) was recognized in other comprehensive income and an amount of US$ 26,031 loss (US$ 15,594 loss in 2019) was reclassified from equity to profit or loss within “Financial results, net”.

•Raw material price risk

Inflation in the costs of raw materials and goods and services from industry suppliers and manufacturers presents risks to project economics. A significant portion of the Group’s cost structure includes the cost of raw materials primarily seeds, fertilizers and agrochemicals, among others. Prices for these raw materials may vary significantly.

•End-product price risk

Prices for commodity products have historically been cyclical, reflecting overall economic conditions and changes in capacity within the industry, which affect the profitability of entities engaged in the agribusiness industry. The Group combines different actions to minimize price risk. A percentage of crops are to be sold during and post harvest period. The Group manages minimum and maximum prices for each commodity as well as gross margin per each crop as to decide when and how to sell. End-product price risks are hedged if economically viable and possible by entering into forward contracts with major trading houses or by using derivative financial instruments, consisting mainly of crops and sugar future contracts, but also includes occasionally put and call options. A movement in end-product futures prices would result in a change in the fair value of the end product hedging contracts. These fair value changes, after taxes, are recorded in the consolidated statement of income.

F- 13

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2.    Financial risk management (continued)

Contract positions are designed to ensure that the Group would receive a defined minimum price for certain quantities of its production. The counterparties to these instruments generally are major financial institutions. In entering into these contracts, the Group has assumed the risk that might arise from the possible inability of counterparties to meet the terms of their contracts. The Group does not expect any material losses as a result of counterparty defaults. The Group is also obliged to pay margin deposits and premiums for these instruments. These estimates represent only the sensitivity of the financial instruments to market risk and not the Group exposure to end product price risks as a whole, since the crops and cattle products sales are not financial instruments within the scope of IFRS 7 disclosure requirements.

Liquidity risk

The Group is exposed to liquidity risks, including risks associated with refinancing borrowings as they mature, and that borrowing facilities are not available to meet cash requirements. Failure to manage liquidity risks could have a material impact on the Group’s cash flow and statement of financial position.

Prudent liquidity risk management includes managing the profile of debt maturities and funding sources close oversight of cash flows projections, maintaining sufficient cash, and ensuring the availability of funding from an adequate amount of committed credit facilities and the ability to close out market positions. The Group's ability to fund its existing and prospective debt requirements is managed by maintaining diversified funding sources with adequate available funding lines from high quality lenders; and reaching to have long-term financial facilities.

As of December 31, 2020, cash and cash equivalents of the Group totaled US$ 336.3 million, which could be used for managing liquidity risk.

The tables below analyzes the Group’s non-derivative financial liabilities and derivative financial liabilities into relevant maturity groupings based on the remaining period at the statement of financial position to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows and as a result they do not reconcile to the amounts disclosed on the statement of financial position except for short-term payables where discounting is not applied.

At December 31, 2020			Less than 1 year			Between 1 and 2 years			Between 2 and 5 years			Over 5 Years			Total
Trade and other payables			114,523			15			22			253			114,813
Borrowings			286,588			132,266			197,941			713,321			1,330,116
Leases Liabilities			36,714			20,608			74,565			65,639			197,526
Derivative financial instruments			13,141			—			—			—			13,141
Total			450,966			152,889			272,528			779,213			1,655,596

At December 31, 2019			Less than 1 year			Between 1 and 2 years			Between 2 and 5 years			Over 5 Years			Total
Trade and other payables			94,821			3,399			30			170			98,420
Borrowings			122,403			154,682			230,058			681,819			1,188,962
Leases Liabilities			46,370			52,372			89,259			121,081			309,082
Derivative financial instruments			1,423			—			—			—			1,423
Total			265,017			210,453			319,347			803,070			1,597,887

•Interest rate risk

The Group’s interest rate risk arises from long-term borrowings at floating rates, which expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair value interest rate risk. The interest rate profile of the Group's borrowings is set out in Note 27.

F- 14

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2.    Financial risk management (continued)

The Group occasionally manages its cash flow interest rate risk exposure by using floating-to-fixed interest rate swaps. Such interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates.

The following tables show a breakdown of the Group’s fixed-rate and floating-rate borrowings per currency denomination and functional currency of the subsidiary issuing the loans. These analyses are performed after giving effect to interest rate swaps.

 The analysis for the year ended December 31, 2020 and 2019 is as follows:

			2020
			Subsidiaries’ functional currency
Rate per currency denomination			Argentine Peso			Brazilian Reais			Uruguayan Peso			U.S. Dollar			Total
Fixed rate:
Argentine Peso			81,283			—			—			—			81,283
Brazilian Reais			—			22,834			—			—			22,834
U.S. Dollar			30,671			75,592			2,002			505,259			613,524
Subtotal fixed-rate borrowings			111,954			98,426			2,002			505,259			717,641
Variable rate:
Brazilian Reais			—			184,123			—			—			184,123
U.S. Dollar			66,584			2,742			—			—			69,326
Subtotal variable-rate borrowings			66,584			186,865			—			—			253,449
Total borrowings as per statement of financial position			178,538			285,291			2,002			505,259			971,090

			2019
			Subsidiaries’ functional currency
Rate per currency denomination			Argentine Peso			Brazilian Reais			Uruguayan Peso			U.S. Dollar			Total
Fixed rate:
Argentine Peso			549			—			—			—			549
Brazilian Reais			—			142,142			—			—			142,142
U.S. Dollar			128,464			77,378			15,113			504,814			725,769
Subtotal fixed-rate borrowings			129,013			219,520			15,113			504,814			868,460
Variable rate:
Brazilian Reais			—			13,604			—			—			13,604
U.S. Dollar			79,339			6,877			—			—			86,216
Subtotal variable-rate borrowings			79,339			20,481			—			—			99,820
Total borrowings as per statement of financial position			208,352			240,001			15,113			504,814			968,280

For the years ended December 31, 2020 and 2019, if interest rates on floating-rate borrowings had been 1% higher with all other variables held constant, the Group’s Profit before income tax for the years would have decreased as shown below. A 1% decrease in interest rates would have an equal and opposite effect on the income statement.

F- 15

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2.    Financial risk management (continued)

			2020
			Subsidiaries’ functional currency
Rate per currency denomination			Argentine Peso			Brazilian Reais			Uruguayan Peso			U.S. Dollar			Total
Variable rate:
Brazilian Reais			—			(1,841)			—			—			(1,841)
U.S. Dollar			(666)			(27)						—			(693)
Total effects on profit before income tax			(666)			(1,868)			—			—			(2,534)

			2019
			Subsidiaries’ functional currency
Rate per currency denomination			Argentine Peso			Brazilian Reias			Uruguayan Peso			U.S. Dollar			Total
Variable rate:
Brazilian Reais			—			(136)			—			—			(136)
U.S. Dollar			(793)			(69)			—			—			(862)
Total effects on profit before income tax			(793)			(205)			—			—			(998)

The sensitivity analysis has been determined assuming that the change in interest rates had occurred at the date of the statement of financial position and had been applied to the exposure to interest rate risk for financial instruments in existence at that date. The 100 basis point increase or decrease represents management's assessment of a reasonable possible change in those interest rates, which have the most impact on the Group, specifically the United States and Brazilian rates over the period until the next annual statement of financial position date.

•Credit risk

The Group’s exposures to credit risk arise in certain agreements in relation to amounts owed for physical product sales, the use of derivative instruments, and the investment of surplus cash balances. The Group is also exposed to political and economic risk events, which may cause non-payment of foreign currency obligations to the Group.

The Group’s policy is to manage credit exposure to trading counterparties within defined trading limits. All of the Group’s significant counterparties are assigned internal credit limits.

The Group sells to a large base of customers. Type and class of customers may differ depending on the Group’s business segments. For the years ended December 31, 2020 and 2019, more than 80% and 96%, respectively, of the Group’s sales of crops were sold to 36 and 42 well-known customers (both multinational and local) with good credit history with the Group. In the Sugar, Ethanol and Energy segment, sales of ethanol were concentrated in 46 and 52 customers, which represented 100% of total sales of ethanol for the years ended December 31, 2020 and 2019, respectively. Approximately 78% and 86% of the Group’s sales of sugar were concentrated in 76 and 66 well-known traders for the years ended December 31, 2020 and 2019, respectively. The remaining 22% and 14%, which mainly relates to “crystal sugar”, were dispersed among several customers. In 2020 and 2019, energy sales are 96% and 94% concentrated in 52 major customers. In the dairy segment, 65% and 70% of the sales were concentrated in 21 and 36 well-known customers in 2020 and 2019, respectively.

No credit limits were exceeded during the reporting periods and management does not expect any losses from non-performance by these counterparties. If any of the Group’s customers are independently rated, these ratings are used. Otherwise, the Group assesses the credit quality of the customer taking into account its financial position, past experience and other factors (see Note 18 for details). The Group may seek cash collateral, letter of credit or parent company guarantees, as considered appropriate. Sales to customers are primarily made by credit with customary payment terms. The maximum exposure to credit risk is represented by the carrying amount of each financial asset in the statement of financial position after deducting any impairment allowance. The Group’s exposure of credit risk arising from trade receivables is set out in Note 19.

F- 16

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2.    Financial risk management (continued)

The Group is exposed to counterparty credit risk on cash and cash equivalent balances. The Group holds cash on deposit with a number of financial institutions. The Group manages its credit risk exposure by limiting individual deposits to clearly defined limits. The Group only deposits with high quality banks and financial institutions. As of December 31, 2020 and 2019, the total amount of cash and cash equivalents mainly comprise cash in banks and short-term bank deposits. The Group is authorized to transact with banks rated “BBB+” or higher. As of December 31, 2020 and 2019, 6 and 8 banks (primarily JP Morgan, Banco Safra, Itaú Nassau, Credit Agricole, Credit Suisse and Banco Itaú) accounted for more than 81% and 85%, respectively, of the total cash deposited. The remaining amount of cash and cash equivalents relates to cash in hand. Additionally, during the year ended December 31, 2020, the Group invested in fixed-term bank deposits with mainly five bank (ING, Credit Agricole, Credit Suisse, JP Morgan and Banco Galicia y Buenos Aires) and also entered into derivative contracts (currency forward). The Group’s exposure of credit risk arising from cash and cash equivalents is set out in Note 21.

The Group’s primary objective for holding derivative financial instruments is to manage currency exchange rate risk, interest rate risk and commodity price risk. The Group generally enters into derivative transactions with high-credit-quality counterparties and, by policy, limits the amount of credit exposure to any one counterparty based on an analysis of that counterparty's relative credit standing. The amounts subject to credit risk related to derivative instruments are generally limited to the amounts, if any, by which counterparty's obligations exceed the obligations with that counterparty.

The Group also entered into crop commodity futures traded in the established trading markets of Argentina and Brazil through well-rated brokers. Management does not expect any counterparty to fail to meet its obligations.

•Capital risk management

The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. In order to maintain or adjust the capital structure, it may adjust the amount of dividends paid to shareholders, return capital to shareholders, issue new shares or buy own shares or sell assets to reduce debt. Consistent with others in the industry, the Group monitors capital on the basis of the gearing ratio. This ratio is calculated as total debt (including current and non-current borrowings as shown in the consolidated statement of financial position, if applicable) divided by total capital. Total capital is calculated as equity, as shown in the consolidated statement of financial position, plus total borrowings. During the year ended December 31, 2020, the strategy was to maintain the gearing ratio within 0.40 to 0.60, as follows:

			2020						2019
Total borrowings			971,090						968,280
Total equity			963,724						1,028,883
Total capital			1,934,814						1,997,163
Gearing ratio			0.50						0.48

•Derivative financial instruments

As part of its business operations, the Group uses a variety of derivative financial instruments to manage its exposure to the financial risks discussed above. As part of this strategy, the Group may enter into derivatives of (i) interest rate to manage the composition of floating and fixed rate debt; (ii) currency to manage exchange rate risk, and (iii) crop (future contracts and put and call options) to manage its exposure to price volatility stemming from its integrated crop production activities. The Group’s policy is not to use derivatives for speculative purposes.

F- 17

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2.    Financial risk management (continued)

Derivative financial instruments involve, to a varying degree, elements of market and credit risk not recognized in the financial statements. The market risk associated with these instruments resulting from price movements is expected to offset the market risk of the underlying transactions, assets and liabilities, being hedged. The counterparties to the agreements relating to the Group’s contracts generally are large institutions with credit ratings equal to or higher than BBB+. The Group continually monitors the credit rating of such counterparties and seeks to limit its financial exposure to any one financial institution. While the contract or notional amounts of derivative financial instruments provide one measure of the volume of these transactions, they do not represent the amount of the Group’s exposure to credit risk. The amounts potentially subject to credit risk (arising from the possible inability of counterparties to meet the terms of their contracts) are generally limited to the amounts, if any, by which the counterparties’ obligations under the contracts exceed the Group’s obligations to the counterparties.

The following tables show the outstanding positions for each type of derivative contract as of the date of each statement of financial position:

▪ Futures/ options

As of December 31, 2020:

						2020
Type of derivative contract						Quantities (thousands) (**)						Notional amount						Fair Value Asset/ (Liability)						(Loss)/Gain (*)
Futures:
Sale
Corn						52						6,027						(2,846)						2,846
Soybean						32						7,242						(3,380)						3,380
Wheat						(19)						(4,272)						151						(151)
Sugar						217						63,025						(6,738)						5,538
Ethanol						1						277						(20)						3
Total						283						72,299						(12,833)						11,616

As of December 31, 2019:

						2019
Type of derivative contract						Quantities (thousands) (**)						Notional amount						Fair Value Asset/ (Liability)						(Loss)/Gain (*)
Futures:
Sale
Corn						221						923						445						(446)
Soybean						107						7,118						759						(687)
Wheat						13						515						(28)						28
Sugar						101						29,409						(1,342)						1,155
Total						442						37,965						(166)						50

(*) Included in the line item “(Loss) / Gain from commodity derivative financial instruments” of Note 8.

(**) All quantities expressed in tons and m3.

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

F- 18

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

2.    Financial risk management (continued)

▪Interest rate swap

In December 31, 2020 the Group's subsidiary in Brazil, Adecoagro Vale do Ivinhema entered into a interest rate swap operation with Itaú BBA in an aggregate amount of US$ 400 million. In these operation Adecoagro Vale do Ivinhema receives IPCA (Extended National Consumer Price Index) plus 4.24% per year, and pays CDI (an interbank floating interest rate in Reais) plus 1.85% per year. This swap expires semiannually until December, 2026. This contract resulted in a recognition of a gain of US$ 1.8 million in 2020.

▪Currency forward

During the year ended December 31, 2020 and 2019 the Group entered into several currency forward contracts with Brazilian banks in order to hedge the fluctuation of the Brazilian Reais against the U.S. Dollar for a total aggregate amount of US$ 23.8 million. These contracts resulted in a recognition of a loss of US$ 1.9 million and US$ 1.1 million in 2020 and 2019 respectively.

During the year ended on December 31, 2020, the Group entered into several currency forward contracts in order to hedge the fluctuation of the U.S. Dollar against Euro for a total notional amount of US$ 2.4 millions. The currency forward contracts maturity date was March 2021. The outstanding contracts resulted in the recognition of a loss amounting to US$ 0.03 million in 2020.

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

▪Euro-bob price swap

As Petrobras (the Brazilian oil state company) started to track the movements of the international gasoline to set its domestic prices in 2017, the Group's subsidiary in Brazil, Adecoagro Vale do Ivinhema entered into a swap operation in March 2018, which intention was to mitigate the effects of the gasoline volatility in the ethanol prices sold by the company. The swaps expired according to the due dates and as of December 31, 2018 all the swaps positions were already liquidated. The Group recorded a loss of US$ 1.6 million.

F- 19

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.    Segment information

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

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

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

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

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

•The Company’s ‘Dairy’ Segment consists of the production and sale of raw milk and industrialized products, including UHT, cheese and powder milk among others.

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

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

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

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

Effective July 1, 2018, the Group applied IAS 29 “Financial Reporting in Hyperinflationary Economies” (“IAS 29”) to its operations in Argentina. IAS 29 “Financial Reporting in Hyperinflationary Economies” requires that the financial statements of entities whose functional currency is that of a hyperinflationary economy be adjusted for the effects of changes in the general price index and be expressed in terms of the current unit of measurement at the closing date of the reporting period (“inflation accounting”). In order to determine whether an economy is classified as hyperinflationary, IAS 29 sets forth a series of factors to be considered, including whether the amount of cumulative inflation nears or exceeds a threshold of 100 %. Accordingly, Argentina has been classified as a hyperinflationary economy under the terms of IAS 29 from July 1, 2018. (Please see Note 34 - Basis of preparation and presentations).

According to IAS 29, all Argentine Peso-denominated non-monetary items in the statement of financial position are adjusted by applying a general price index from the date they were initially recognized to the end of the reporting period. Likewise, all Argentine Peso-denominated items in the statement of income should be expressed in terms of the measuring unit current at the end of the reporting period, consequently, income statement items are adjusted by applying a general price index

F- 20

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.    Segment information (continued)

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

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

The following tables show a reconciliation of each reportable segment as per the information reviewed by the CODM and the reportable segment measured in accordance with IAS 29 and IAS 21 as per the consolidated financial statements for the years ended December 31, 2020, 2019 and 2018.

F- 21

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.    Segment information (continued)

Segment reconciliation for the year ended December 31, 2020:

			2020
			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			170,114						(1,653)						168,461						102,886						(1,024)						101,862						135,471						(1,997)						133,474
Cost of goods and services rendered			(150,745)						1,495						(149,250)						(74,395)						565						(73,830)						(117,754)						1,747						(116,007)
Initial recognition and changes in fair value of biological assets and agricultural produce			41,777						(934)						40,843						19,449						(772)						18,677						12,638						(294)						12,344
Gain from changes in net realizable value of agricultural produce after harvest			7,078						(71)						7,007						—						—						—						(2)						—						(2)
Margin on Manufacturing and Agricultural Activities Before Operating Expenses			68,224						(1,163)						67,061						47,940						(1,231)						46,709						30,353						(544)						29,809
General and administrative expenses			(6,816)						122						(6,694)						(7,045)						146						(6,899)						(4,896)						108						(4,788)
Selling expenses			(18,265)						267						(17,998)						(14,170)						247						(13,923)						(13,824)						284						(13,540)
Other operating income, net			(12,846)						(7)						(12,853)						731						(18)						713						(189)						3						(186)
Profit from Operations Before Financing and Taxation			30,297						(781)						29,516						27,456						(856)						26,600						11,444						(149)						11,295
Depreciation and amortization			(5,397)						111						(5,286)						(6,652)						147						(6,505)						(6,709)						141						(6,568)
Net (loss) / gain from Fair value adjustment of investment property			—						—						—						—						—						—						—						—						—

			2020
			All other segments																		Land transformation																		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						Total segment reporting						Adjustment						Total as per statement of income
Sales of goods sold and services rendered			2,545						(37)						2,508						—						—						—						—						—						—						822,475						(4,711)						817,764
Cost of goods and services rendered			(1,984)						22						(1,962)						—						—						—						—						—						—						(615,775)						3,829						(611,946)
Initial recognition and changes in fair value of biological assets and agricultural produce			1,269						(13)						1,256						—						—						—						—						—						—						124,742						(2,013)						122,729
Gain from changes in net realizable value of agricultural produce after harvest			—						—						—						—						—						—						—						—						—						7,076						(71)						7,005
Margin on Manufacturing and Agricultural Activities Before Operating Expenses			1,830						(28)						1,802						—						—						—						—						—						—						338,518						(2,966)						335,552
General and administrative expenses			(120)						2						(118)						—						(4)						(4)						(19,319)						336						(18,983)						(54,138)						710						(53,428)
Selling expenses			(217)						3						(214)						—						—						—						(202)						7						(195)						(95,866)						808						(95,058)
Other operating income, net			1,069						(2)						1,067						7,934						(14)						7,920						(161)						(8)						(169)						2,033						(46)						1,987
Profit from Operations Before Financing and Taxation			2,562						(25)						2,537						7,934						(18)						7,916						(19,682)						335						(19,347)						190,547						(1,494)						189,053
Depreciation and amortization			(138)						3						(135)						—						—						—						(876)						14						(862)						(142,288)						416						(141,872)
Net (loss) / gain from Fair value adjustment of investment property			1,080						(3)						1,077						—						—						—						—						—						—						1,080						(3)						1,077

Sugar, Ethanol and Energy segment has not been reconciled due to the lack of difference.

F- 22

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.    Segment information (continued)

Segment reconciliation for the year ended December 31, 2019:

			2019
			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			168,938						(2,492)						166,446						102,162						(1,006)						101,156						84,767						(945)						83,822
Cost of goods and services rendered			(159,197)						2,687						(156,510)						(74,480)						529						(73,951)						(77,532)						838						(76,694)
Initial recognition and changes in fair value of biological assets and agricultural produce			30,290						(549)						29,741						13,194						(979)						12,215						13,741						(231)						13,510
Gain from changes in net realizable value of agricultural produce after harvest			1,542						283						1,825						—						—						—						—						—						—
Margin on Manufacturing and Agricultural Activities Before Operating Expenses			41,573						(71)						41,502						40,876						(1,456)						39,420						20,976						(338)						20,638
General and administrative expenses			(5,446)						(87)						(5,533)						(6,752)						147						(6,605)						(4,188)						90						(4,098)
Selling expenses			(12,852)						128						(12,724)						(21,072)						498						(20,574)						(6,252)						18						(6,234)
Other operating income, net			(2,283)						(225)						(2,508)						282						(15)						267						(635)						(68)						(703)
Profit from Operations Before Financing and Taxation			20,992						(255)						20,737						13,334						(826)						12,508						9,901						(298)						9,603
Depreciation and amortization			(4,662)						(137)						(4,799)						(6,994)						171						(6,823)						(5,064)						98						(4,966)
Net (loss) / gain from Fair value adjustment of investment property			—						—						—						—						—						—						—						—						—

			2019
			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			3,904						27						3,931						—						—						—						891,554						(4,416)						887,138
Cost of goods and services rendered			(3,412)						(40)						(3,452)						—						—						—						(675,187)						4,014						(671,173)
Initial recognition and changes in fair value of biological assets and agricultural produce			(40)						53						13						—						—						—						70,295						(1,706)						68,589
Gain from changes in net realizable value of agricultural produce after harvest			—						—						—						—						—						—						1,542						283						1,825
Margin on Manufacturing and Agricultural Activities Before Operating Expenses			452						40						492						—						—						—						288,204						(1,825)						286,379
General and administrative expenses			(167)						17						(150)						(19,319)						428						(18,891)						(57,797)						595						(57,202)
Selling expenses			(171)						(11)						(182)						(165)						23						(142)						(107,628)						656						(106,972)
Other operating income, net			(956)						602						(354)						(175)						23						(152)						(1,137)						315						(822)
Profit from Operations Before Financing and Taxation			(842)						648						(194)						(19,659)						474						(19,185)						121,642						(259)						121,383
Depreciation and amortization			(181)						4						(177)						(20)						20						—						(174,578)						337						(174,241)
Net (loss) / gain from Fair value adjustment of investment property			(927)						602						(325)						—						—						—						(927)						602						(325)

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

F- 23

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.    Segment information (continued)

Segment reconciliation for the year ended December 31, 2018:

			2018
			Crops																		Rice																		Dairy
			Total segment reporting						Adjustment						Total as per statement of income						Total segment reporting						Adjustment						Total as per statement of income						Total segment reporting						Adjustment						Total as per statement of income
Sales of goods sold and services rendered			164,538						(9,120)						155,418						100,013						(4,610)						95,403						33,201						(3,491)						29,710
Cost of goods and services rendered			(165,988)						9,052						(156,936)						(75,739)						766						(74,973)						(31,488)						3,361						(28,127)
Initial recognition and changes in fair value of biological assets and agricultural produce			36,422						(7,755)						28,667						8,967						(4,842)						4,125						7,295						(1,840)						5,455
Gain from changes in net realizable value of agricultural produce after harvest			2,704						(3,613)						(909)						—						—						—						—						—						—
Margin on Manufacturing and Agricultural Activities Before Operating Expenses			37,676						(11,436)						26,240						33,241						(8,686)						24,555						9,008						(1,970)						7,038
General and administrative expenses			(4,239)						37						(4,202)						(5,070)						(869)						(5,939)						(2,034)						(246)						(2,280)
Selling expenses			(5,921)						474						(5,447)						(15,465)						1,375						(14,090)						(983)						41						(942)
Other operating income, net			4,799						1,741						6,540						275						(58)						217						(1,055)						58						(997)
Profit from Operations Before Financing and Taxation			32,315						(9,184)						23,131						12,981						(8,238)						4,743						4,936						(2,117)						2,819
Depreciation and amortization			(1,697)						(329)						(2,026)						(5,846)						(470)						(6,316)						(2,253)						(280)						(2,533)
Net (loss) / gain from Fair value adjustment of investment property			—						—						—						—						—						—						—						—						—

			2018
			All other segments																		Corporate																		Total
			Total segment reporting						Adjustment						Total as per statement of income						Total segment reporting						Adjustment						Total as per statement of income						Total segment reporting						Adjustment						Total as per statement of income
Sales of goods sold and services rendered			1,919						(149)						1,770						—						—						—						810,609						(17,370)						793,239
Cost of goods and services rendered			(1,412)						99						(1,313)						—						—						—						(623,243)						13,278						(609,965)
Initial recognition and changes in fair value of biological assets and agricultural produce			(806)						(393)						(1,199)						—						—						—						31,025						(14,830)						16,195
Gain from changes in net realizable value of agricultural produce after harvest			—						—						—						—						—						—						2,704						(3,613)						(909)
Margin on Manufacturing and Agricultural Activities Before Operating Expenses			(299)						(443)						(742)						—						—						—						221,095						(22,535)						198,560
General and administrative expenses			(155)						(9)						(164)						(19,626)						1,433						(18,193)						(56,426)						346						(56,080)
Selling expenses			(165)						16						(149)						(178)						33						(145)						(92,154)						1,939						(90,215)
Other operating income, net			10,668						2,728						13,396						(167)						36						(131)						99,727						4,505						104,232
Profit from Operations Before Financing and Taxation			10,049						2,292						12,341						(19,971)						1,502						(18,469)						172,242						(15,745)						156,497
Depreciation and amortization			(171)						(6)						(177)						—						—						—						(153,169)						(1,085)						(154,254)
Net (loss) / gain from Fair value adjustment of investment property			10,680						2,729						13,409						—						—						—						10,680						2,729						13,409

F- 24

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.    Segment information (continued)

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

Segment analysis for the year ended December 31, 2020:

			Farming																														Sugar, Ethanol and Energy						Land Transformation						Corporate						Total
			Crops						Rice						Dairy						All other segments						Farming subtotal
Sales of goods and services rendered			170,114						102,886						135,471						2,545						411,016						411,459						—						—						822,475
Cost of goods sold and services rendered			(150,745)						(74,395)						(117,754)						(1,984)						(344,878)						(270,897)						—						—						(615,775)
Initial recognition and changes in fair value of biological assets and agricultural produce			41,777						19,449						12,638						1,269						75,133						49,609						—						—						124,742
Changes in net realizable value of agricultural produce after harvest			7,078						—						(2)						—						7,076						—						—						—						7,076
Margin on manufacturing and agricultural activities before operating expenses			68,224						47,940						30,353						1,830						148,347						190,171						—						—						338,518
General and administrative expenses			(6,816)						(7,045)						(4,896)						(120)						(18,877)						(15,942)						—						(19,319)						(54,138)
Selling expenses			(18,265)						(14,170)						(13,824)						(217)						(46,476)						(49,188)						—						(202)						(95,866)
Other operating income, net			(12,846)						731						(189)						1,069						(11,235)						5,495						7,934						(161)						2,033
Profit / (loss) from operations before financing and taxation			30,297						27,456						11,444						2,562						71,759						130,536						7,934						(19,682)						190,547
Depreciation and amortization			(5,397)						(6,652)						(6,709)						(138)						(18,896)						(122,516)						—						(876)						(142,288)
Net (loss) / gain from Fair value adjustment of investment property			—						—						—						1,080						1,080						—						—						—						1,080
Reverse of revaluation surplus derived from the disposals of assets before taxes			—						—						—						—						—						—						10,198						—						10,198
Initial recognition and changes in fair value of biological assets and agricultural produce (unrealized)			12,211						3,975						(5,151)						2,258						13,293						19,682						—						—						32,975
Initial recognition and changes in fair value of biological assets and agricultural produce (realized)			29,566						15,474						17,789						(989)						61,840						29,927						—						—						91,767
Changes in net realizable value of agricultural produce after harvest (unrealized)			(481)						—						—						—						(481)						—						—						—						(481)
Changes in net realizable value of agricultural produce after harvest (realized)			7,559						—						(2)						—						7,557						—						—						—						7,557
Farmlands and farmland improvements, net			454,212						141,661						1,911						53,902						651,686						64,065						—						—						715,751
Machinery, equipment and other fixed assets, net			39,517						18,567						67,859						539						126,482						153,490						—						—						279,972
Bearer plants, net			685						—						—						—						685						304,144						—						—						304,829
Work in progress			820						23,381						18,365						1,178						43,744						13,996						—						—						57,740
Right of use assest			4,275						2,472						1,288						—						8,035						201,365						—						294						209,694
Investment property			—						—						—						31,179						31,179						—						—						—						31,179
Goodwill			5,720						792						3,769						—						10,281						4,201						—						—						14,482
Biological assets			47,489						29,062						12,933						4,703						94,187						71,506						—						—						165,693
Finished goods			30,267						5,970						6,489						—						42,726						34,315						—						—						77,041
Raw materials, stocks held by third parties and others			21,893						4,519						7,377						318						34,107						22,313						—						—						56,420
Total segment assets			604,878						226,424						119,991						91,819						1,043,112						869,395						—						294						1,912,801
Borrowings			37,111						39,686						103,742						—						180,539						632,985						—						157,566						971,090
Lease liabilities			5,920						3,063						1,311						—						10,294						185,155						—						323						195,772
Total segment liabilities			43,031						42,749						105,053						—						190,833						818,140						—						157,889						1,166,862

F- 25

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.    Segment information (continued)

Segment analysis for the year ended December 31, 2019

			Farming																														Sugar, Ethanol and Energy						Land Transformation						Corporate						Total
			Crops						Rice						Dairy						All other segments						Farming subtotal
Sales of goods and services rendered			168,938						102,162						84,767						3,904						359,771						531,783						—						—						891,554
Cost of goods sold and services rendered			(159,197)						(74,480)						(77,532)						(3,412)						(314,621)						(360,566)						—						—						(675,187)
Initial recognition and changes in fair value of biological assets and agricultural produce			30,290						13,194						13,741						(40)						57,185						13,110						—						—						70,295
Changes in net realizable value of agricultural produce after harvest			1,542						—						—						—						1,542						—						—						—						1,542
Margin on manufacturing and agricultural activities before operating expenses			41,573						40,876						20,976						452						103,877						184,327						—						—						288,204
General and administrative expenses			(5,446)						(6,752)						(4,188)						(167)						(16,553)						(21,925)						—						(19,319)						(57,797)
Selling expenses			(12,852)						(21,072)						(6,252)						(171)						(40,347)						(67,116)						—						(165)						(107,628)
Other operating income, net			(2,283)						282						(635)						(956)						(3,592)						126						2,504						(175)						(1,137)
Profit / (loss) from operations before financing and taxation			20,992						13,334						9,901						(842)						43,385						95,412						2,504						(19,659)						121,642
Depreciation and amortization			(4,662)						(6,994)						(5,064)						(181)						(16,901)						(157,657)						—						(20)						(174,578)
Net (loss) / gain from Fair value adjustment of investment property			—						—						—						(927)						(927)						—						—						—						(927)
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)			6,091						509						(3,957)						(72)						2,571						(851)						—						—						1,720
Initial recognition and changes in fair value of biological assets and agricultural produce (realized)			24,199						12,685						17,698						32						54,614						13,961						—						—						68,575
Changes in net realizable value of agricultural produce after harvest (unrealized)			(481)						—						—						—						(481)						—						—						—						(481)
Changes in net realizable value of agricultural produce after harvest (realized)			2,023						—						—						—						2,023						—						—						—						2,023
Farmlands and farmland improvements, net			474,922						142,864						611						52,874						671,271						63,594						—						—						734,865
Machinery, equipment and other fixed assets, net			29,038						25,425						74,403						507						129,373						316,304						—						—						445,677
Bearer plants, net			592						—						—						—						592						252,928						—						—						253,520
Work in progress			11,457						15,669						15,394						1,214						43,734						15,424						—						—						59,158
Right of use assets			4,378						567						371						—						5,316						231,832						—						905						238,053
Investment property			—						—						—						34,295						34,295						—						—						—						34,295
Goodwill			9,896						3,890						—						817						14,603						5,417						—						—						20,020
Biological assets			38,404						21,484						11,521						3,673						75,082						55,354						—						—						130,436
Finished goods			17,830						5,805						4,779						—						28,414						36,864						—						—						65,278
Raw materials,Stocks held by third parties and others			17,187						4,876						5,156						90						27,309						20,203						—						—						47,512
Total segment assets			603,704						220,580						112,235						93,470						1,029,989						997,920						—						905						2,028,814
Borrowings			28,045						45,602						100,262						—						173,909						612,329						—						182,042						968,280
Lease liabilities			4,857						490						378						—						5,725						209,700						—						959						216,384
Total segment liabilities			32,902						46,092						100,640						—						179,634						822,029						—						183,001						1,184,664

F- 26

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.    Segment information (continued)

Segment analysis for the year ended December 31, 2018

			Farming																														Sugar, Ethanol and Energy						Land Transformation						Corporate						Total
			Crops						Rice						Dairy						All other segments						Farming subtotal
Sales of goods and services rendered			164,538						100,013						33,201						1,919						299,671						510,938						—						—						810,609
Cost of goods sold and services rendered			(165,988)						(75,739)						(31,488)						(1,412)						(274,627)						(348,616)						—						—						(623,243)
Initial recognition and changes in fair value of biological assets and agricultural produce			36,422						8,967						7,295						(806)						51,878						(20,853)						—						—						31,025
Changes in net realizable value of agricultural produce after harvest			2,704						—						—						—						2,704						—						—						—						2,704
Margin on manufacturing and agricultural activities before operating expenses			37,676						33,241						9,008						(299)						79,626						141,469						—						—						221,095
General and administrative expenses			(4,239)						(5,070)						(2,034)						(155)						(11,498)						(25,302)						—						(19,626)						(56,426)
Selling expenses			(5,921)						(15,465)						(983)						(165)						(22,534)						(69,442)						—						(178)						(92,154)
Other operating income, net			4,799						275						(1,055)						10,668						14,687						48,357						36,850						(167)						99,727
Profit / (loss) from operations before financing and taxation			32,315						12,981						4,936						10,049						60,281						95,082						36,850						(19,971)						172,242
Depreciation and amortization			(1,697)						(5,846)						(2,253)						(171)						(9,967)						(143,202)						—						—						(153,169)
Net (loss) / gain from Fair value adjustment of investment property			—						—						—						10,680						10,680						—						—						—						10,680
Initial recognition and changes in fair value of biological assets and agricultural produce (unrealized)			8,205						(181)						(599)						102						7,527						(37,808)						—						—						(30,281)
Initial recognition and changes in fair value of biological assets and agricultural produce (realized)			28,217						9,148						7,894						(908)						44,351						16,955						—						—						61,306
Changes in net realizable value of agricultural produce after harvest (unrealized)			(647)						—						—						—						(647)						—						—						—						(647)
Changes in net realizable value of agricultural produce after harvest (realized)			3,351						—						—						—						3,351						—						—						—						3,351

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.

F- 27

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.    Segment information (continued)

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

			2020						2019
Total reportable assets as per segment information			1,912,801						2,028,814
Intangible assets (excluding goodwill)			12,448						13,659
Deferred income tax assets			19,821						13,664
Trade and other receivables			197,928						172,331
Other assets			854						1,128
Derivative financial instruments			2,102						1,435
Cash and cash equivalents			336,282						290,276
Total assets as per the statement of financial position			2,482,236						2,521,307

			2020						2019
Total reportable liabilities as per segment information			1,166,862						1,184,664
Trade and other payables			126,605						110,486
Deferred income tax liabilities			182,377						165,508
Payroll and social liabilities			24,408						26,417
Provisions for other liabilities			4,359						3,172
Current income tax liabilities			760						754
Derivative financial instruments			13,141						1,423
Total liabilities as per the statement of financial position			1,518,512						1,492,424

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

As of and for the year ended December 31, 2020:

			Argentina						Brazil						Uruguay						Total
Property, plant and equipment			811,653						535,857						10,782						1,358,292
Investment property			31,179						—						—						31,179
Goodwill			10,280						4,202						—						14,482
Non-current portion of biological assets			14,725						—						—						14,725
Sales of goods and services rendered			389,018						411,779						21,678						822,475
Initial recognition and changes in fair value of biological assets and agricultural produce			72,391						50,348						2,003						124,742
Changes in net realizable value of agricultural produce after harvest			6,770						(88)						394						7,076

F- 28

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

3.    Segment information (continued)

As of and for the year ended December 31, 2019:

			Argentina						Brazil						Uruguay						Total
Property, plant and equipment			834,248						648,471						10,501						1,493,220
Investment property			34,295						—						—						34,295
Goodwill			14,603						5,417						—						20,020
Non-current portion of biological assets			13,303						—						—						13,303
Sales of goods and services rendered			229,547						462,174						199,833						891,554
Initial recognition and changes in fair value of biological assets and agricultural produce			55,760						13,167						1,368						70,295
Changes in net realizable value of agricultural produce after harvest			2,682						(8)						(1,132)						1,542

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

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

F- 29

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

4.    Sales

			2020						2019						2018
Manufactured products and services rendered:
Ethanol			199,062						373,847						324,661
Sugar			171,102						97,710						128,377
Energy			42,756						60,913						57,797
Peanut			46,708						28,928						—
Sunflower			10,433						7,534						—
Cotton			1,969						623						—
Rice			96,397						97,515						92,560
Fluid milk (UHT)			54,380						38,441						—
Powder milk			40,500						20,722						8,646
Other diary products			17,205						8,856						—
Soybean oil and meal			—						1,062						14,059
Services			4,774						4,521						487
Rental income			584						564						643
Others			5,623						3,401						7,826
			691,493						744,637						635,056
Agricultural produce and biological assets:
Soybean			44,271						44,538						66,471
Corn			44,475						59,714						33,106
Wheat			14,457						18,733						30,091
Peanut			—						—						1,752
Sunflower			633						701						1,314
Barley			275						1,085						1,203
Seeds			1,732						734						461
Milk			12,817						9,977						19,267
Cattle			1,959						3,452						1,279
Cattle for dairy			2,729						2,169						1,612
Others			2,923						1,398						1,627
			126,271						142,501						158,183
Total sales			817,764						887,138						793,239

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$ 42.2 million as of December 31, 2020 (2019: US$ 71.7 million; 2018: US$ 63.3 million) comprised primarily of 3,419 thousand m3 of ethanol (US$ 1.7 million), 698,868 thousand mwh of energy (US$ 30.3 million), 9,045 thousand tons of soybean (U$S 2.5 million), 15,517 thousand tons of wheat (US$ 3.1 million), and 23,242 thousand tons of corn (US$ 3.4 million) which expire between January and December 2021.

F- 30

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(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 December 31, 2020:

			2020
			Crops						Rice						Dairy						All other segments						Sugar, Ethanol and Energy						Total
Finish goods at the beginning of 2020 (Note 20)			17,830						5,805						4,779						—						36,864						65,278
Cost of production of manufactured products (Note 6)			44,074						79,507						102,933						—						285,627						512,141
Purchases			3,648						—						—						—						6,088						9,736
Agricultural produce			137,204						—						15,546						1,962						—						154,712
Transfer to raw material			(46,192)						(4,256)						—						—						—						(50,448)
Direct agricultural selling expenses			16,467						—						—						—						—						16,467
Tax recoveries (i)			—						—						—						—						(21,765)						(21,765)
Changes in net realizable value of agricultural produce after harvest			7,007						—						(2)						—						—						7,005
Finished goods at the end of December 31, 2020 (Note 20)			(30,267)						(5,970)						(6,489)						—						(34,315)						(77,041)
Exchange differences			(521)						(1,256)						(760)						—						(1,602)						(4,139)
Cost of goods sold and services rendered, and direct agricultural selling expenses			149,250						73,830						116,007						1,962						270,897						611,946

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

As of December 31, 2019:

			2019
			Crops						Rice						Dairy						All other segments						Sugar, Ethanol and Energy						Total
Finished goods at the beginning of 2019			29,144						9,507						1,170						—						39,937						79,758
Cost of production of manufactured products (Note 6)			33,952						66,386						68,851						—						354,964						524,153
Purchases			21,715						3,095						—						—						44,577						69,387
Agricultural produce			108,732						—						12,146						3,452						—						124,330
Transfer to raw material			(35,757)						—						—						—						—						(35,757)
Direct agricultural selling expenses			15,752						—						—						—						—						15,752
Tax recoveries (i)			—						—						—						—						(32,995)						(32,995)
Changes in net realizable value of agricultural produce after harvest			1,825						—						—						—						—						1,825
Finished goods at the end of December 31, 2019 (Note 20)			(17,830)						(5,805)						(4,779)						—						(36,864)						(65,278)
Exchange differences			(1,023)						768						(694)						—						(9,053)						(10,002)
Cost of goods sold and services rendered, and direct agricultural selling expenses			156,510						73,951						76,694						3,452						360,566						671,173

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

F- 31

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

5.    Cost of goods sold and services rendered (continued)

As of December 31, 2018:

			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
Adjustment of opening net book amount for the application of IAS 29			42						1,354						—						—						—						1,396
Cost of production of manufactured products (Note 6)			17,930						61,600						7,546						36						349,495						436,607
Purchases			63,533						15,540						872						—						43,531						123,476
Agricultural produce			104,941						—						20,879						1,277						—						127,097
Transfer to raw material			(24,375)						—						—						—						—						(24,375)
Direct agricultural selling expenses			12,629						—						—						—						—						12,629
Tax recoveries (i)			—						—						—						—						(32,380)						(32,380)
Changes in net realizable value of agricultural produce after harvest			(909)						—						—						—						—						(909)
Finished goods at the end of December 31, 2018			(29,144)						(9,507)						(1,170)						—						(39,937)						(79,758)
Exchange differences			(8,857)						(2,490)						—						—						(4,359)						(15,706)
Cost of goods sold and services rendered, and direct agricultural selling expenses			156,936						74,973						28,127						1,313						348,616						609,965

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

F- 32

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

6.    Expenses by nature

The Group presents the statement of income under the function of expense method. Under this method, expenses are classified according to their function as part of the line items “cost of goods sold and direct agricultural selling expenses”, “general and administrative expenses” and “selling expenses”.

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 year ended December 31, 2020:

			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			2,348						4,466						7,452						—						26,341						40,607						25,519						5,206						71,332
Raw materials and consumables			448						3,072						14,486						—						8,743						26,749						—						—						26,749
Depreciation and amortization			2,929						2,016						2,812						—						93,211						100,968						12,490						985						114,443
Depreciation of right of use assets			—						19						461						—						6,208						6,688						3,557						24						10,269
Fuel, lubricants and others			131						68						2,030						—						16,543						18,772						428						187						19,387
Maintenance and repairs			639						1,492						1,141						—						12,581						15,853						954						476						17,283
Freights			172						4,617						1,708						—						649						7,146						—						33,111						40,257
Export taxes / selling taxes			—						—						—						—						—						—						—						35,966						35,966
Export expenses			—						—						—						—						—						—						—						8,801						8,801
Contractors and services			1,358						116						54						—						5,086						6,614						—						—						6,614
Energy transmission			—						—						—						—						—						—						—						2,231						2,231
Energy power			803						1,015						1,879						—						764						4,461						137						114						4,712
Professional fees			32						35						103						—						447						617						6,261						1,060						7,938
Other taxes			20						76						97						—						2,312						2,505						376						21						2,902
Contingencies			—						—						—						—						—						—						703						—						703
Lease expense and similar arrangements			111						182						137						—						—						430						283						226						939
Third parties raw materials			3,257						6,578						42,051						—						13,547						65,433						—						—						65,433
Tax recoveries			—						—						—						—						(1,087)						(1,087)						—						—						(1,087)
Others			524						1,219						1,975						—						1,613						5,331						2,720						6,650						14,701
Subtotal			12,772						24,971						76,386						—						186,958						301,087						53,428						95,058						449,573
Own agricultural produce consumed			31,302						54,536						26,547						—						98,669						211,054						—						—						211,054
Total			44,074						79,507						102,933						—						285,627						512,141						53,428						95,058						660,627

F- 33

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(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 year ended December 31, 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			1,880						4,738						4,412						—						39,768						50,798						27,492						6,211						84,501
Raw materials and consumables			314						6,527						10,151						—						15,683						32,675						—						—						32,675
Depreciation and amortization			2,581						1,897						2,140						—						122,025						128,643						11,212						868						140,723
Depreciation of right of use assets			—						116						344						—						6,794						7,254						2,007						5						9,266
Fuel, lubricants and others			228						83						1,381						—						25,430						27,122						593						225						27,940
Maintenance and repairs			290						1,120						985						—						19,694						22,089						1,755						534						24,378
Freights			146						2,405						1,959						—						784						5,294						—						23,130						28,424
Export taxes / selling taxes			—						—						—						—						—						—						—						52,312						52,312
Export expenses			—						—						—						—						—						—						—						5,552						5,552
Contractors and services			1,051						138						40						—						9,381						10,610						—						—						10,610
Energy transmission			—						—						—						—						—						—						88						3,057						3,145
Energy power			725						1,298						1,659						—						1,181						4,863						145						145						5,153
Professional fees			20						65						127						—						175						387						8,065						1,047						9,499
Other taxes			1						74						81						—						1,241						1,397						1,089						28						2,514
Contingencies			—						—						—						—						—						—						459						—						459
Lease expense and similar arrangements			83						171						78						—						—						332						831						125						1,288
Third parties raw materials			7,136						5,629						18,131						—						11,243						42,139						—						—						42,139
Tax recoveries			—						—						—						—						(396)						(396)						—						—						(396)
Others			431						695						681						—						2,324						4,131						3,466						13,733						21,330
Subtotal			14,886						24,956						42,169						—						255,327						337,338						57,202						106,972						501,512
Own agricultural produce consumed			19,066						41,430						26,682						—						99,637						186,815						—						—						186,815
Total			33,952						66,386						68,851						—						354,964						524,153						57,202						106,972						688,327

F- 34

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(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 year ended December 31, 2018:

			Cost of production of manufactured products (Note 5)
			Crops						Rice						Dairy						All other segments						Sugar, Ethanol and Energy						Total						General and Administrative Expenses						Selling Expenses						Total
Salaries, social security expenses and employee benefits			—						5,055						115						36						46,106						51,312						29,245						5,908						86,465
Raw materials and consumables			733						4,391						282						—						10,122						15,528						—						—						15,528
Depreciation and amortization			—						1,764						118						—						115,253						117,135						9,667						767						127,569
Fuel, lubricants and others			—						117						—						—						26,267						26,384						614						192						27,190
Maintenance and repairs			—						1,452						30						—						19,715						21,197						1,573						365						23,135
Freights			47						2,519						436						—						685						3,687						—						24,700						28,387
Export taxes / selling taxes			—						—						—						—						—						—						—						42,074						42,074
Export expenses			—						—						—						—						—						—						—						2,774						2,774
Contractors and services			2,885						254						1,279						—						7,901						12,319						—						—						12,319
Energy transmission			—						—						—						—						—						—						—						2,689						2,689
Energy power			—						1,239						138						—						1,340						2,717						145						57						2,919
Professional fees			—						52						—						—						484						536						7,781						556						8,873
Other taxes			—						71						—						—						1,841						1,912						1,309						10						3,231
Contingencies			—						—						—						—						—						—						1,345						—						1,345
Lease expense and similar arrangements			—						276						3						—						—						279						1,077						53						1,409
Third parties raw materials			—						2,913						—						—						13,154						16,067						—						—						16,067
Others			3						1,697						223						—						5,067						6,990						3,324						10,070						20,384
Subtotal			3,668						21,800						2,624						36						247,935						276,063						56,080						90,215						422,358
Own agricultural produce consumed			14,262						39,800						4,922						—						101,560						160,544						—						—						160,544
Total			17,930						61,600						7,546						36						349,495						436,607						56,080						90,215						582,902

7.    Salaries and social security expenses

			2020						2019						2018
Wages and salaries (i)			89,662						104,400						105,931
Social security costs			27,430						30,888						29,865
Equity-settled share-based compensation			4,316						4,734						4,728
			121,408						140,022						140,524

(i)Includes US$ 27,544, US$ 32,714 and US$ 32,636, capitalized in Property, Plant and Equipment for the years 2020, 2019 and 2018, respectively.

F- 35

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

8.    Other operating income, net

			2020						2019						2018
Gain from disposal of farmland and other assets (Note 22)			2,064						1,354						36,227
Loss from the sale of subsidiaries (Note 22)			(554)						—						—
(Loss) / gain from commodity derivative financial instrument			(8,320)						(618)						54,694
Gain / (loss) from disposal of other property items			2,198						(329)						(95)
Net gain / (loss) from fair value adjustment of investment property			1,077						(325)						13,409
Others			5,522						(904)						(3)
			1,987						(822)						104,232

9.    Financial results, net

			2020						2019 (*)						2018 (*)
Finance income:
- Interest income			4,084						6,390						7,728
- Gain from interest rate/foreign exchange rate derivative financial instruments			92						1,189						—
- Other income			21,878						1,400						666
Finance income			26,054						8,979						8,394
Finance costs:
- Interest expense			(58,282)						(56,468)						(47,266)
- Finance cost related to lease liabilities			(12,532)						(9,524)						—
- Cash flow hedge – transfer from equity (Note 2)			(24,363)						(25,484)						(38,086)
- Foreign exchange losses, net			(109,266)						(25,779)						(68,787)
- Taxes			(4,559)						(4,364)						(3,136)
- Loss from interest rate/foreign exchange rate derivative financial instruments			—						—						(3,024)
- Other expenses			(4,774)						(4,492)						(3,638)
Finance costs			(213,776)						(126,111)						(163,937)
Other financial results - Net gain of inflation effects on the monetary items			12,064						16,911						(25,211)
Total financial results, net			(175,658)						(100,221)						(180,754)

(*) Prior periods have been recast to reflect the Company's change in accounting policy for the reclassification within financial results as explained in Note 34.1.

10.    Taxation

Adecoagro is subject to the applicable general tax regulations in Luxembourg.

The Group’s income tax has been calculated on the estimated assessable taxable results for the year at the rates prevailing in the respective foreign tax jurisdictions. The subsidiaries of the Group are required to calculate their income taxes on a separate basis according to the rules and regulations of the jurisdictions where they operate. Therefore, the Group is not legally permitted to compensate subsidiaries’ losses against subsidiaries’ income. The details of the provision for the Group’s consolidated income tax are as follows:

			2020						2019						2018
Current income tax			(2,840)						666						(2,846)
Deferred income tax			(9,485)						(21,486)						3,870
Income tax (expense) / benefit			(12,325)						(20,820)						1,024

F- 36

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

10.    Taxation (continued)

The statutory tax rate in the countries where the Group operates for all of the years presented are:

Tax Jurisdiction						Income Tax Rate
Argentina (i)						30		%
Brazil						34		%
Uruguay						25		%
Spain						25		%
Luxembourg						24.94		%

(i) During 2017 and 2019, the Argentine Government introduced changes in the income tax. The income tax rate will be reduced to 30% for the years 2018 to 2020, and to 25% from 2021 onwards. A new tax on dividends is created with a rate of 7% for the years 2018 to 2020, and 13% from 2021 onwards. Considering 2018, 2019 and 2020 resulted in losses for Argentine subsidiaries, no deferred income tax liability was recognized for future withholding tax on dividends.

Deferred tax assets and liabilities of the Group as of December 31, 2020 and 2019, without taking into consideration the offsetting of balances within the same tax jurisdiction, will be recovered or settled as follows:

			2020						2019
Deferred income tax asset to be recovered after more than 12 months			105,424						108,294
Deferred income tax asset to be recovered within 12 months			23,744						35,973
Deferred income tax assets			129,168						144,267
Deferred income tax liability to be settled after more than 12 months			(278,035)						(292,871)
Deferred income tax liability to be settled within 12 months			(13,689)						(3,240)
Deferred income tax liability			(291,724)						(296,111)
Deferred income tax (liability) / assets, net			(162,556)						(151,844)

The gross movement on the deferred income tax account is as follows:

			2020						2019
Beginning of year			(151,844)						(151,980)
Exchange differences			1,536						4,877
Changes of fair value valuation for farmlands			(11,790)						10,480
Acquisition of subsidiary			—						(3,515)
Disposal of subsidiary			3,458						3,730
Others			(159)						(705)
Tax credit relating to cash flow hedge (i)			5,728						6,755
Income tax benefit expense			(9,485)						(21,486)
End of year			(162,556)						(151,844)

(i) Relates to the gain or loss before income tax of cash flow hedge recognized in other comprehensive income amounting to US$ 46,145 for the year ended December 31, 2020 (2019: US$ 75,822); net of the reclassification from Equity to the Income Statement of US$ (26,031) for the year ended December 31, 2020 (2019: US$ (32,305))

F- 37

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

10.    Taxation (continued)

The movement in the deferred income tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same tax jurisdiction, is as follows:

Deferred income tax liabilities						Property, plant and equipment						Investment property						Biological assets						Others						Total
At January 1, 2019						270,583						11,954						3,466						2,408						288,411
Charged / (credited) to the statement of income						31,745						331						912						(1,939)						31,049
Acquisition of subsidiary						3,603						—						—						—						3,603
Farmlands revaluation						(10,480)						—						—						—						(10,480)
Disposals of subsidiaries						(3,730)						—						—						—						(3,730)
Exchange differences						(10,862)						(378)						(199)						(1,303)						(12,742)
At December 31, 2019						280,859						11,907						4,179						(834)						296,111
Charged / (credited) to the statement of income						11,581						(1,928)						6,463						—						16,116
Farmlands revaluation						11,521						269						—						—						11,790
Disposals of subsidiaries						(3,513)						—						—						—						(3,513)
Exchange differences						(28,920)						(370)						510						—						(28,780)
At December 31, 2020						271,528						9,878						11,152						(834)						291,724

Deferred income tax assets						Provisions						Tax loss carry forwards						Equity-settled share-based compensation						Borrowings						Biological assets						Others						Total
At January 1, 2019						3,960						80,220						5,302												4,594						42,355						136,431
Charged / (credited) to the statement of income						(604)						8,017						(1,214)						2,709						(117)						772						9,563
Acquisition of subsidiaries						7						134						—						—						—						(53)						88
Others						—						—						(705)						—						—						—						(705)
Tax charge relating to cash flow hedge						—						6,755						—						—						—						—						6,755
Exchange differences						(126)						(3,707)						—						(1,161)						31						(2,902)						(7,865)
At December 31, 2019						3,237						91,419						3,383						1,548						4,508						40,172						144,267
(Credited) / charged to the statement of income						4,941						(5,843)						(835)						34,017						(4,508)						(21,141)						6,631
Disposal of subsidiary						—						—						—						—						—						(55)						(55)
Others						—						—						(60)						—						—						(99)						(159)
Tax charge relating to cash flow hedge						—						5,728						—						—						—						—						5,728
Exchange differences						(1,152)						(20,363)						—						(9,460)						—						3,731						(27,244)
At December 31, 2020						7,026						70,941						2,488						26,105						—						22,608						129,168

Tax loss carry forwards in Argentina and Uruguay generally expire within 5 years. Tax loss carry forwards in Brazil and Luxembourg do not expire. However, in Brazil, the taxable profit for each year can only be reduced by tax loss carry forward up to a maximum of 30%.

In order to fully realize the deferred tax asset, the Group will need to generate future taxable income in the countries where the tax loss carry forward were incurred. Based upon the level of historical taxable income and projections for future

F- 38

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

10.    Taxation (continued)

taxable income over the periods in which the deferred tax assets are deductible, management believes that as at December 31, 2020, it is probable that the Group will realize some portion of the deferred tax assets in Brazil and Argentina.

As of December 31, 2020, the Group’s tax loss carry forwards and their corresponding jurisdictions are as follows:

Jurisdiction

Tax loss carry forward

Expiration period

Argentina (1)

92,845

5 years

Brazil

123,509

No expiration date.

Uruguay

4,895

5 years

Luxembourg

34,832

No expiration date.

(1) As of December 31, 2020, the aging of the determination tax loss carry forward in Argentina is as follows:

Year of generation						Amount
2016						701
2017						6,966
2018						19,181
2019						52,126
2020						13,871

Deferred income tax assets are recognized for tax loss carry-forwards to the extent that the realization of the related tax benefit through future taxable profits is probable. The Group did not recognize deferred income tax assets of US$ 5.3 million as of December 31, 2020, in respect of losses amounting to US$ 20.2 million that can be carried forward against future taxable income.

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

			2020						2019						2018
Tax calculated at the tax rates applicable to profits in the respective countries			(4,184)						(7,250)						2,956
Non-deductible items			(7,642)						(1,511)						(2,249)
Effect of the changes in the statutory income tax rate in Argentina			6,324						3,115						(1,013)
Unused tax losses			(710)						(3,742)						(4,181)
Tax losses where no deferred tax asset was recognized			—						—						(2,368)
Non-taxable income			11,060						11,545						13,069
Previously unrecognized tax losses now recouped to reduce tax expenses			1,529						1,910						—
Effect of IAS 29 and tax adjustment per inflation in Argentina			(19,239)						(23,805)						(5,825)
Others			537						(1,082)						635
Income tax (expense) / benefit			(12,325)						(20,820)						1,024

F- 39

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

11.    Earnings per share

(a) Basic

Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Group by the weighted average number of shares in issue during the period excluding ordinary shares held as treasury shares (Note 24).

			2020						2019						2018
Profit / (loss) from operations attributable to equity holders of the Group			412						(772)						(24,622)
Weighted average number of shares in issue (thousands)			117,453						117,252						116,637
Basic earnings / (loss) per share from operations			0.003						(0.007)						(0.211)

(b) Diluted

Diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding to assume conversion of all dilutive potential shares. The Group has two categories of dilutive potential shares: equity-settled share options and restricted units. For these instruments, a calculation is done to determine the number of shares that could have been acquired at fair value, based on the monetary value of the subscription rights attached to outstanding share options. The number of shares calculated as above is compared with the number of shares that would have been issued assuming the exercise of the equity-settled share options. As of December 31, 2020, there were 261 thousands (2019: 645 thousands; 2018: 851 thousands) share options/restricted units outstanding that could potentially have a dilutive impact in the future but were antidilutive for the periods presented.

			2020						2019						2018
Profit / (loss) from operations attributable to equity holders of the Group			412						(772)						(24,622)
Weighted average number of shares in issue (thousands)			117,453						117,252						116,637
Adjustments for:
- Employee share options and restricted units (thousands)			261						645						1,198
Weighted average number of shares for diluted earnings per share (thousands)			117,714						117,897						117,835
Diluted earnings / (loss) per share from operations			0.003						(0.007)						(0.211)

F- 40

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

12.    Property, plant and equipment

Changes in the Group’s property, plant and equipment in 2020 and 2019 were as follows:

			Farmlands						Farmland improvements						Buildings and   facilities						Machinery,   equipment,   furniture and fittings						Bearer plants						Others						Work in   progress						Total
At January 1, 2019
Cost			780,184						32,718						344,915						718,978						480,049						21,611						50,904						2,429,359
Accumulated depreciation			—						(16,394)						(156,293)						(513,830)						(247,093)						(15,310)						—						(948,920)
Net book amount			780,184						16,324						188,622						205,148						232,956						6,301						50,904						1,480,439
At December 31, 2019
Opening net book amount			780,184						16,324						188,622						205,148						232,956						6,301						50,904						1,480,439
Exchange differences			(25,205)						(536)						(6,846)						(8,770)						(9,802)						(207)						(3,170)						(54,536)
Additions			1,738						62						38,570						62,320						102,813						2,160						54,488						262,151
Revaluation surplus			(42,384)						—						—						—						—						—						—						(42,384)
Acquisition of subsidiaries			815						—						24,126						5,280						—						437						—						30,658
Reclassification from investment property			4,816						—						—						—						—						—						—						4,816
Transfers			—						12,643						13,614						16,772						—						35						(43,064)						—
Disposals			—						—						(81)						(3,308)						—						(129)						—						(3,518)
Disposals of subsidiaries			(10,379)						—						(571)						(22)						—						—						—						(10,972)
Reclassification to non-income tax credits (*)			—						—						—						(226)						—						—						—						(226)
Depreciation			—						(3,213)						(24,714)						(70,921)						(72,447)						(1,913)						—						(173,208)
Closing net book amount			709,585						25,280						232,720						206,273						253,520						6,684						59,158						1,493,220

			Farmlands						Farmland improvements						Buildings and facilities						Machinery, equipment, furniture and fittings						Bearer plants						Others						Work in progress						Total
At December 31, 2019
Fair value for farmlands / Cost			709,585						44,887						413,727						791,024						573,060						23,907						59,158						2,615,348
Accumulated depreciation			—						(19,607)						(181,007)						(584,751)						(319,540)						(17,223)						—						(1,122,128)
Net book amount			709,585						25,280						232,720						206,273						253,520						6,684						59,158						1,493,220
Year ended December 31, 2020
Opening net book amount			709,585						25,280						232,720						206,273						253,520						6,684						59,158						1,493,220
Exchange differences			(36,422)						(432)						(55,368)						(112,657)						30,864						(617)						(6,445)						(181,077)
Additions			—						—						11,279						52,350						72,592						1,877						31,192						169,290
Revaluation surplus			41,490						—						—						—						—						—						—						41,490
Reclassification from investment property			3,127						—						—						—						—						—						—						3,127
Transfers			—						(177)						10,101						16,182						—						59						(26,165)						—
Disposals			(10,118)						—						(73)						(3,092)						—						(37)						—						(13,320)
Disposals of subsidiaries			(13,496)						—						—						—						—						—						—						(13,496)
Reclassification to non-income tax credits (*)			—						—						—						(363)						—						—						—						(363)
Depreciation			—						(3,086)						(21,055)						(62,788)						(52,147)						(1,503)						—						(140,579)
Closing net book amount			694,166						21,585						177,604						95,905						304,829						6,463						57,740						1,358,292
At December 31, 2020
Fair value for farmlands / Cost			694,166						44,278						379,666						743,444						676,516						25,189						57,740						2,620,999
Accumulated depreciation			—						(22,693)						(202,062)						(647,539)						(371,687)						(18,726)						—						(1,262,707)
Net book amount			694,166						21,585						177,604						95,905						304,829						6,463						57,740						1,358,292

F- 41

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

12.    Property, plant and equipment (continued)

(*) Brazilian federal tax law allows entities to take a percentage of the total cost of the assets purchased as a tax credit. As of December 31, 2020 and 2019, ICMS (Imposto sobre Circulação de Mercadorias e Prestação de Serviços) tax credits were reclassified to trade and other receivables.

Depreciation is calculated using the straight-line method to allocated their cost over the estimated usefull lives. Farmlands are not depreciated.

Farmland improvements			5-25 years
Buildings and facilities			20 years
Furniture and fittings			10 years
Computer equipment			3-5 years
Machinery and equipment			4-10 years
Vehicles			4-5 years
Bearer plants			6 years - based on productivity

The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial position date.

 Farmlands are measured at fair value. For all farmlands with a total valuation of US$ 694 million as of December 31, 2020, 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 December 31, 2020 would have reduced the value of the farmlands on US$ 69 million (2019: US$71 million), which would impact, net of its tax effect on the "Revaluation surplus" item in the statement of Changes in Shareholders' Equity. If farmlands were stated on the historical cost basis, the amount as of December 31, 2020 would be US$ 194 million.

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 years ended December 31, 2020 and 2019.

During the year ended December 31, 2020, borrowing costs of US$ 3,861 (2019:US$ 13,904) were capitalized as components of the cost of acquisition or construction for 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$ 451,904 as of December 31, 2020 (2019: US$ 324,129).

F- 42

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

13.    Right of use assets

    Changes in the Group’s right of use assets in 2020 were as follows:

			Agricultural partnerships (*)						Others						Total
At January 1, 2019
Adoption of IFRS 16			194,763						10,174						204,937
Exchange differences			1,582						(14,364)						(12,782)
Additions and re-measurements			60,770						30,296						91,066
Depreciation			(37,278)						(7,890)						(45,168)
Closing net book amount			219,837						18,216						238,053
At December 31, 2020
Opening net book amount			219,837						18,216						238,053
Exchange differences			(47,186)						(3,969)						(51,155)
Additions and re-measurements			53,149						10,467						63,616
Depreciation			(33,530)						(7,290)						(40,820)
Closing net book amount			192,270						17,424						209,694

(*) Agricultural partnership has an average of 6 years duration.

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 year ended December 31, 2020.

14.    Investment property

Changes in the Group’s investment property in 2020 and 2019 were as follows:

			2020						2019
Beginning of the year			34,295						40,725
Net gain / (loss) from fair value adjustment (Note 8)			1,077						(325)
Reclassification to property, plant and equipment (i)			(3,127)						(4,816)
Exchange difference			(1,066)						(1,289)
End of the year			31,179						34,295
Fair value			31,179						34,295
Net book amount			31,179						34,295

(i)       Relates with the expiration of contracts with third parties.

The accounting policy for all Investment properties are measured at Fair Value. For all Investment properties with a total valuation of US$ 31.2 million and US$ 34.2 million as of December 31, 2020 and 2019 respectively, 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". The Group estimated that, other factors being constant, a 10% reduction on the Sales price for the period ended December 31,

F- 43

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

14.    Investment property (continued)

2020 and 2019 would have reduced the value of the Investment properties on US$ 3.1 million and US$ 3.4 million respectively, which would impact the line item "Net gain from fair value adjustment ".

15.    Intangible assets

Changes in the Group’s intangible assets in 2020 and 2019 were as follows:

			Goodwill						Software						Trademarks						Others						Total
At January 1, 2019
Cost			21,350						10,165						2,442						338						34,295
Accumulated amortization			—						(4,568)						(1,556)						(262)						(6,386)
Net book amount			21,350						5,597						886						76						27,909
Year ended December 31, 2019
Opening net book amount			21,350						5,597						886						76						27,909
Exchange differences			(695)						(329)						(1)						(16)						(1,041)
Additions			—						2,080						6,431						106						8,617
Acquisition of subsidiaries			—						66						—						—						66
Disposal			(635)						(6)						—						—						(641)
Amortization charge (i)			—						(1,147)						—						(84)						(1,231)
Closing net book amount			20,020						6,261						7,316						82						33,679
At December 31, 2019
Cost			20,020						11,976						8,872						428						41,296
Accumulated amortization			—						(5,715)						(1,556)						(346)						(7,617)
Net book amount			20,020						6,261						7,316						82						33,679
Year ended December 31, 2020
Opening net book amount			20,020						6,261						7,316						82						33,679
Exchange differences			(1,687)						(954)						(80)						(35)						(2,756)
Additions			—						823						326						94						1,243
Disposal			—						(46)						—						(46)						(92)
Disposal of subsidiary			(3,851)						—						—						—						(3,851)
Amortization charge (i)			—						(820)						(412)						(61)						(1,293)
Closing net book amount			14,482						5,264						7,150						34						26,930
At December 31, 2020
Cost			14,482						11,799						9,118						441						35,840
Accumulated amortization			—						(6,535)						(1,968)						(407)						(8,910)
Net book amount			14,482						5,264						7,150						34						26,930

(i)Amortization charges are included in “General and administrative expenses” and “Selling expenses” for the years ended December 31, 2020 and 2019, respectively. There were no impairment charges for any of the years presented (see Note 33 (a)).

F- 44

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

16.    Biological assets

Changes in the Group’s biological assets in 2020 and 2019 were as follows:

			2020
			Crops (ii)						Rice (ii)						Dairy						All other segments						Sugarcane (ii)						Total
Beginning of the year			38,404						21,484						11,521						3,673						55,354						130,436
Increase due to purchases			—						—						—						580						—						580
Initial recognition and changes in fair value of biological assets (i)			40,843						18,677						12,344						1,256						49,609						122,729
Decrease due to harvest / disposals			(137,204)						(51,673)						(42,641)						(2,760)						(101,967)						(336,245)
Costs incurred during the year			106,889						41,243						32,043						2,003						81,193						263,371
Exchange differences			(1,443)						(669)						(334)						(49)						(12,683)						(15,178)
End of the year			47,489						29,062						12,933						4,703						71,506						165,693

			2019
			Crops (ii)						Rice (ii)						Dairy						All other segments						Sugarcane (ii)						Total
Beginning of the year			27,347						17,173						10,298						3,094						47,475						105,387
Increase due to purchases			—						—						—						1,080						—						1,080
Initial recognition and changes in fair value of biological assets (i)			29,741						12,215						13,510						13						13,110						68,589
Decrease due to harvest / disposals			(108,732)						(39,331)						(38,828)						(3,452)						(103,551)						(293,894)
Costs incurred during the year			93,715						32,802						26,735						3,035						100,775						257,062
Exchange differences			(3,667)						(1,375)						(194)						(97)						(2,455)						(7,788)
End of the year			38,404						21,484						11,521						3,673						55,354						130,436

(i)    Biological asset with a production cycle of more than one year (that is dairy and cattle) generated “Initial recognition and changes in fair value of biological assets” amounting to US$ 13,600 for the year ended December 31, 2020 (2019: US$ 4,257). In 2020, an amount of US$ 966 (2019: US$ 2,414) was attributable to price changes, and an amount of US$ 12,634 (2019: US$ 1,843) was attributable to physical changes.

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

F- 45

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

16.    Biological assets (continued)

Cost of production as of December 31, 2020:

			Crops						Rice						Dairy						All other segments						Sugar, Ethanol and Energy						Total
Salaries, social security expenses and employee benefits			2,739						5,822						4,215						672						9,084						22,532
Depreciation and amortization			40						—						—						—						3,852						3,892
Depreciation of right of use assets			—						—						—						—						27,862						27,862
Fertilizers, agrochemicals and seeds			46,406						9,655						10						—						29,416						85,487
Fuel, lubricants and others			716						534						754						51						2,053						4,108
Maintenance and repairs			1,040						4,451						1,820						229						1,921						9,461
Freights			1,832						453						118						49						—						2,452
Contractors and services			30,819						15,681						—						19						4,951						51,470
Feeding expenses			—						—						13,092						285						—						13,377
Veterinary expenses			—						—						2,395						189						—						2,584
Energy power			51						2,138						863						6						—						3,058
Professional fees			565						1,838						162						4						343						2,912
Other taxes			1,185						100						8						83						51						1,427
Lease expense and similar arrangements			19,694						109						3						2						1,004						20,812
Others			1,802						462						460						9						656						3,389
Subtotal			106,889						41,243						23,900						1,598						81,193						254,823
Own agricultural produce consumed			—						—						8,143						405						—						8,548
Total			106,889						41,243						32,043						2,003						81,193						263,371

F- 46

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

16.    Biological assets (continued)

Cost of production as of December 31, 2019:

			Crops						Rice						Dairy						All other segments						Sugar, Ethanol and Energy						Total
Salaries, social security expenses and employee benefits			2,600						5,192						3,776						582						10,657						22,807
Depreciation and amortization			3						—						—						—						5,465						5,468
Depreciation of right of use assets			—						—						—						—						31,190						31,190
Fertilizers, agrochemicals and seeds			40,767						9,924						—						33						40,355						91,079
Fuel, lubricants and others			886						678						889						77						3,031						5,561
Maintenance and repairs			996						2,648						1,582						253						2,254						7,733
Freights			1,446						318						89						151						—						2,004
Contractors and services			27,782						10,745						3						96						5,161						43,787
Feeding expenses			3						—						10,538						810						—						11,351
Veterinary expenses			—						—						2,020						209						—						2,229
Energy power			69						2,310						979						10						—						3,368
Professional fees			196						74						138						4						214						626
Other taxes			1,182						105						8						96						43						1,434
Lease expense and similar arrangements			14,767						53						3						8						1,417						16,248
Others			3,018						755						307						28						988						5,096
Subtotal			93,715						32,802						20,332						2,357						100,775						249,981
Own agricultural produce consumed			—						—						6,403						678						—						7,081
Total			93,715						32,802						26,735						3,035						100,775						257,062

Biological assets in December 31, 2020 and 2019 were as follows:

			2020						2019
Non-current
Cattle for dairy production (i)			12,600						11,397
Breeding cattle (ii)			2,003						1,783
Other cattle (ii)			122						123
			14,725						13,303
Current
Breeding cattle (iii)			2,578						1,677
Other cattle (iii)			333						214
Sown land – crops (ii)			47,489						38,404
Sown land – rice (ii)			29,062						21,484
Sown land – sugarcane (ii)			71,506						55,354
			150,968						117,133
Total biological assets			165,693						130,436

(i)Classified as bearer and mature biological assets.

(ii)Classified as consumable and immature biological assets.

(iii)Classified as consumable and mature biological assets.

F- 47

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

16.    Biological assets (continued)

The fair value less estimated point of sale costs of agricultural produce at the point of harvest amounted to US$ 290,844 for the year ended December 31, 2020 (2019: US$ 251,614).

The following table presents the Group´s biological assets that are measured at fair value at December 31, 2020 and 2019 (see Note 18 to see the description of each fair value level):

			2020																								2019
			Level 1						Level 2						Level 3						Total						Level 1						Level 2						Level 3						Total
Cattle for dairy production			—						12,600						—						12,600						—						11,397						—						11,397
Breeding cattle			4,581						—						—						4,581						3,460						—						—						3,460
Other cattle			—						455						—						455						—						337						—						337
Sown land – sugarcane			—						—						71,506						71,506						—						—						55,354						55,354
Sown land – crops			—						—						47,489						47,489						—						—						38,404						38,404
Sown land – rice			—						—						29,062						29,062						—						—						21,484						21,484

There were no transfers between any levels during the year.

The following significant unobservable inputs were used to measure the Group´s biological assets using the discounted cash flow valuation technique:

Description

Unobservable inputs

Range of unobservable inputs

Relationship of unobservable inputs to fair value

2020

2019

Sown land – sugarcane

Sugarcane yield – tonnes per hectare; Sugarcane TRS (kg of sugar per ton of cane) Production Costs – US$ per hectare. (Include maintenance, harvest and leasing costs)

-Sugarcane yield: 60-100 tn/ha -Sugarcane TRS: 120-140 kg of sugar/ton of cane -Maintenance costs: 400-600 US$/ha -Harvest costs: 6.0-12.0 US$/ton of cane -Leasing costs: 12.0-14.4 tn/ha

-Sugarcane yield: 60-100tn/ha - Sugarcane TRS: 120-140kg of sugar/ton of cane - Maintenance costs: 500-700 US$/ha - Harvest costs: 9.0-15.0 US$/ton of cane - Leasing costs: 12.0-14.4 tn/ha

The higher the sugarcane yield, the higher the fair value. The higher the maintenance, harvest and leasing costs per hectare, the lower the fair value. The higher the TRS of sugarcane, the higher the fair value.

Sown land – crops

Crops yield – tonnes per hectare; Commercial Costs – US$ per hectare; Production Costs – US$ per hectare.

- Crops yield: 0.95 – 5.5 tn/ha for Wheat, 2.5 – 11 tn/ha for Corn, 0.8 - 3.8 tn/ha for Soybean, 0.6-3 for Sunflower and 2.5-3.5 tn/ha for Peanut - Commercial Costs: 6-43 US$/tn for Wheat, 2-51 US$/ton for Corn, 7-59 US$/ton for Soybean, 1-71 US$/ton for Sunflower and 22-31 US$/ha for Peanut - Production Costs: 115-612 US$/ha for Wheat, 198-990 US$/ha for Corn, 159-750 US$/ha for Soybean, 233-641 US$/ha for Sunflower and 695-1400 US$/ha for Peanut

- Crops yield: 0.95 – 4.69 tn/ha for Wheat, 2.5 – 10  tn/ha for Corn, 1.19 - 3.8 tn/ha for Soybean and 1.6-3 for Sunflower - Commercial Costs: 6-43 US$/ha for Wheat, 2-51 US$/ha for Corn, 7-59 US$/ha for Soybean and 2-71 US$/ha for Sunflower - Production Costs: 115-574 US$/ha for Wheat, 198-859 US$/ha for Corn, 159-679 US$/ha for Soybean and 233-641 US$/ha for Sunflower

The higher the crops yield, the higher the fair value. The higher the commercial and direct costs per hectare, the lower the fair value.

Sown land – rice

Rice yield – tonnes per hectare; Commercial Costs – US$ per hectare; Production Costs – US$ per hectare.

-Rice yield: 6.5 -7.5 tn/ha -Commercial Costs: 8-16 US$/ha -Production Costs: 750-950 US$/ha

-Rice yield: 6.5 -7.5 tn/ha -Commercial Costs: 8-12 US$/ha -Production Costs: 750-950 US$/ha

The higher the rice yield, the higher the fair value. The higher the commercial and direct costs per hectare, the lower the fair value.

F- 48

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

16.    Biological assets (continued)

As of December 31, 2020, the impact of a reasonable 10% increase (decrease) in estimated costs, with all other variables held constant, would result in a decrease (increase) in the fair value of the Group’s plantations less cost to sell of US$ 14.7 million for sugarcane, US$ 3.7 million for crops and US$ 3.7 million for rice.

As of December 31, 2019, the impact of a reasonable 10% increase (decrease) in estimated costs, with all other variables held constant, would result in a decrease (increase) in the fair value of the Group’s plantations less cost to sell of US$ 7.9 million for sugarcane, US$ 2.8 million for crops and US$ 2.0 million for rice.

17.    Investments in joint ventures

The table below lists the Group’s investment in joint ventures for the year ended December 31 2018:

						% of ownership interest held
Name of the entity			Country of incorporation and operation			2018
CHS AGRO S.A.			Argentina			50		%

On February 26, 2013, the Group formed CHS AGRO, a joint venture with CHS Inc. CHS Inc. is a leading farmer-owned energy, grains and foods company based in the United States. The Group holds a 50% interest in CHS AGRO. On October 2014, CHS AGRO finished its sunflower processing plant in the city of Pehuajo, Province of Buenos Aires, Argentina.

    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, the Company own 100% of CHS Agro S.A. which has since been renamed as Girasoles del Plata S.A. (See Note 22). Thus, the Company is not part of any Joint Venture as of December 31, 2020 and 2019.

The following amounts represent the income and expenses of the joint ventures:

			2018
Income			9,305
Expenses			(31,989)
Loss before income tax			(22,684)

When the share of losses of an investee equals or exceeds the carrying amount of an investment the Group discontinue applying the equity method, the investment is reduced to zero and does not record additional losses. This was the case in 2018.

F- 49

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

18.    Financial instruments by category

The Group classified its financial assets in the following categories:

(a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading. A financial asset is classified in this category if acquired principally for the purpose of selling in the short-term. Derivatives are also categorized as held for trading unless they are designated as hedges. For all years presented, the Group’s financial assets at fair value through profit or loss comprise mainly derivative financial instruments.

(b) Financial assets at amortized cost.

Financial assets at amortized cost, namely loans and receivables, are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables comprise “trade and other receivables” and “cash and cash equivalents” in the statement of financial position.

The following tables show the carrying amounts of financial assets and financial liabilities by category of financial instrument and reconciliation to the corresponding line item in the statements of financial position, as appropriate. Since the line items “Trade and other receivables, net” and “Trade and other payables” contain both financial instruments and non-financial assets or liabilities (such as other tax receivables or advance payments for services to be received in the future), the reconciliation is shown in the columns headed “Non-financial assets” and “Non-financial liabilities”.

			Financial assets at amortized cost						Assets at fair value through profit or loss						Subtotal financial assets						Non- financial assets						Total
December 31, 2020
Assets as per statement of financial position
Trade and other receivables			109,231						—						109,231						88,697						197,928
Derivative financial instruments			—						2,102						2,102						—						2,102
Cash and cash equivalents			336,282						—						336,282						—						336,282
Total			445,513						2,102						447,615						88,697						536,312

			Liabilities at fair value through profit or loss						Financial liabilities at amortized cost						Subtotal financial liabilities						Non- financial liabilities						Total
Liabilities as per statement of financial position
Trade and other payables			—						114,813						114,813						11,792						126,605
Borrowings (i)			—						971,090						971,090						—						971,090
Leases Liabilities			—						195,772						195,772						—						195,772
Derivative financial instruments (i)			13,141						—						13,141						—						13,141
Total			13,141						1,281,675						1,294,816						11,792						1,306,608

(i)    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 U.S. Dollars using a portion of its borrowings denominated in U.S. Dollars, currency forwards and foreign currency floating-to-fixed interest rate swaps (see Note 2).

F- 50

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

18.    Financial instruments by category (continued)

			Financial assets at amortized cost						Assets at fair value through profit or loss						Subtotal financial assets						Non- financial assets						Total
December 31, 2019
Assets as per statement of financial position
Trade and other receivables			88,113						—						88,113						84,218						172,331
Derivative financial instruments			—						1,435						1,435						—						1,435
Cash and cash equivalents			290,276						—						290,276						—						290,276
Total			378,389						1,435						379,824						84,218						464,042

			Liabilities at fair value through profit or loss						Financial liabilities at amortized cost						Subtotal financial liabilities						Non- financial liabilities						Total
Liabilities as per statement of financial position
Trade and other payables			—						98,420						98,420						12,066						110,486
Borrowings (i)			—						968,280						968,280						—						968,280
Leases Liabilities			—						216,384						216,384						—						216,384
Derivative financial instruments (i)			1,423						—						1,423						—						1,423
Total			1,423						1,283,084						1,284,507						12,066						1,296,573

(i)    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 U.S. Dollars using a portion of its borrowings denominated in U.S. Dollars, currency forwards and foreign currency floating-to-fixed interest rate swaps (see Note 2).

Because of the short maturities of most trade accounts receivable and payable, other receivables and liabilities, and cash and cash equivalents, their carrying amounts at the closing date do not differ significantly from their respective fair values. The fair value of long-term borrowings is disclosed in Note 27.

Income, expense, gains and losses on financial instruments can be assigned to the following categories:

			Financial asset / liabilities at amortized cost						Assets/ liabilities at fair value through profit or loss						Other financial liabilities at amortized cost						Total
December 31, 2020
Interest income (i)			4,084						—						—						4,084
Interest expense (i)			(58,282)						—						—						(58,282)
Foreign exchange (losses) / gain (i)			(109,266)						—						—						(109,266)
Loss from derivative financial instruments (ii)			—						(8,228)						—						(8,228)
Finance cost related to lease liabilities			(12,532)						—						—						(12,532)

F- 51

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

18.    Financial instruments by category (continued)

			Financial assets / liabilities at amortized cost						Assets/ liabilities at fair value through profit or loss						Other financial liabilities at amortized cost						Total
December 31, 2019
Interest income (i)			6,390						—						—						6,390
Interest expense (i)			(56,441)						(27)												(56,468)
Foreign exchange gains losses (i)			(19,807)						(5,972)						—						(25,779)
(Loss) / gain from derivative financial instruments (ii)			(870)						1,441						—						571
Finance cost related to lease liabilities			(9,524)						—						—						(9,524)

(i)Included in “Financial Results, net” in the consolidated statement of income.

(ii)Included in “Other operating income, net” and “Financial Results, net” in the consolidated statement of income.

Determining fair values

IFRS 13 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. All financial instruments recognized at fair value are allocated to one of the valuation hierarchy levels of IFRS 13. This valuation hierarchy provides for three levels. The allocation reflects which of the fair values derive from transactions in the market and where valuation is based on models because market transactions are lacking. The level in the fair value hierarchy is categorized in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety.

As of December 31, 2020 and 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. The financial instruments the Group has allocated to this level mainly comprise crop futures and options traded on the stock market.

Derivatives not traded on the stock market allocated to Level 2 are valued using models based on observable market data. 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 Group does not have financial instruments allocated to this level for any of the years presented.

The following tables present the Group’s financial assets and financial liabilities that are measured at fair value as of December 31, 2020 and 2019 and their allocation to the fair value hierarchy:

									Level 1						Level 2						Total
Assets
Derivative financial instruments			2020						151						1,951						2,102
Derivative financial instruments			2019						1,257						178						1,435
Liabilities
Derivative financial instruments			2020						(12,984)						(157)						(13,141)
Derivative financial instruments			2019						(1,423)						—						(1,423)

F- 52

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

18.    Financial instruments by category (continued)

There were no transfers within level 1 and 2 during the years ended December 31, 2020 and 2019.

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

(12,833)

NDF

Quoted price

Swap curve

Present value method

2

(30)

Interest-rate swaps

Theoretical price

Money market interest-rate curve

Present value method

2

1,824

(11,039)

F- 53

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

19.    Trade and other receivables, net

			2020						2019
Non-current
Advances to suppliers			1,704						723
Income tax credits			5,283						5,240
Non-income tax credits (i)			18,195						16,895
Judicial deposits			2,188						2,596
Receivable from disposal of subsidiary (Note 22)			23,093						17,047
Other receivables			1,803						2,492
Non-current portion			52,266						44,993
Current
Trade receivables			58,530						55,271
Less: Allowance for trade receivables			(3,965)						(3,773)
Trade receivables – net			54,565						51,498
Prepaid expenses			10,427						12,521
Advances to suppliers			17,751						14,417
Income tax credits			1,709						1,059
Non-income tax credits (i)			33,628						33,363
Receivable from disposal of subsidiary (Note 22)			15,506						5,716
Cash collateral			36						23
Other receivables			12,040						8,741
Subtotal			91,097						75,840
Current portion			145,662						127,338
Total trade and other receivables, net			197,928						172,331

(i) Includes US$ 363 (2019: US$ 226) reclassified from property, plant and equipment.

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 U.S. Dollars):

			2020						2019
Currency
U.S. Dollar			56,531						37,131
Argentine Peso			55,433						45,520
Uruguayan Peso			811						999
Brazilian Reais			85,153						88,681
			197,928						172,331

As of December 31, 2020 trade receivables of US$ 11,623 (2019: US$ 5,052) were past due but not impaired. The aging analysis of these receivables indicates that US$ 977 and US$ 318 are over 6 months in December 31, 2020 and 2019, respectively.

Since January 1, 2018, for trade receivables, the Company applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognized from initial recognition of the receivables.

F- 54

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

19.    Trade and other receivables, net (continued)

Delinquency in payments was an indicator that a receivable may be impaired. However, management considers all available evidence in determining when a receivable is impaired. Generally, trade receivables, which are more than 180 days past due are fully provided for. However, certain receivables 180+ days overdue are not provided for based on a case-by-case analysis of credit quality analysis. Furthermore, receivables, which are not 180+ days overdue, may be provided for if specific analysis indicates a potential impairment.

Movements on the Group’s allowance for trade receivables are as follows:

			2020						2019						2018
At January 1			3,773						2,503						1,002
Charge of the year			2,192						3,656						2,468
Acquisition of subsidiary			—						46						—
Unused amounts reversed			(769)						(1,314)						(237)
Used during the year			(446)						(48)						(281)
Exchange differences			(785)						(1,070)						(449)
At December 31			3,965						3,773						2,503

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

As of December 31, 2020, approximately 50% (2019: 25%) of the outstanding unimpaired trade receivables (neither past due not impaired) relate to sales to 24 well-known multinational companies with good credit quality standing, including but not limited to Itersnack Procurement B.V., Camara de Comercializacao de Energia Electrica CCEE, The Real Peunats Company, Interfood Americas S.A., Mastellone Hnos. S.A., Companhia de Distribuição Araguaia, among others. Most of these entities or their parent companies are externally credit-rated. The Group reviews these external ratings from credit agencies.

The remaining percentage as of December 31, 2020 and 2019 of the outstanding unimpaired trade receivables (neither past due nor impaired) relate to sales to a dispersed large quantity of customers for which external credit ratings may not be available. However, the total base of customers without an external credit rating is relatively stable.

New customers with less than six months of history with the Group are closely monitored. The Group has not experienced credit problems with these new customers to date. The majority of the customers for which an external credit rating is not available are existing customers with more than six months of history with the Group and with no defaults in the past. A minor percentage of customers may have experienced some non-significant defaults in the past but fully recovered.

20.    Inventories

			2020						2019
Raw materials			56,420						47,501
Finished goods (Note 5) (1)			77,041						65,278
Others			—						11
			133,461						112,790

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

F- 55

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

21.    Cash and cash equivalents

			2020						2019
Cash at bank and on hand			178,079						124,701
Short-term bank deposits			158,203						165,575
			336,282						290,276

22.    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. At the day of the acquisition, we had our participation valued at 0. 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 and second payments 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 these facilities, we also acquired the brands Las Tres Niñas and Angelita. The total consideration for these operations was US$ 47 million. This transaction qualifies as a purchase of assets.

Disposals

In December 2020, the Company completed the sale of Global Seward S.L.U. and Peak City S.L.U. wholly owned subsidiaries, which main underlying asset is Huelen Farm at the selling price of US$ 30.1 millions, USD 10.1 million were collected at the closing date, and the balance will be collected in two annual installments. This transaction resulted in a loss

F- 56

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

22.    Disposals and acquisitions (continued)

before tax of US$ 0.6 million included in the line item “Other operating income”, and also in the reclassification of Revaluation surplus to retained earnings of US$ 2.2 million.

In June 2020, the Company collected US$ 12.1 million in consideration of the sale of 811.70 hectares farm in the Province of Santa Fe, Argentina. This transaction resulted in a gain before tax of US$ 2.1 million included in the line item “Other operating income” and also in the reclassification of Revaluation surplus to retained earnings before income tax of US$ 8.0 million reflected in the Statements of changes in shareholders equity.

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 US$ 8.0 million.

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”.

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”.

F- 57

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

23.    Shareholders' contributions

The share capital of the Group is represented by common shares with a nominal value of US$ 1.5 per share and one vote each.

			Number of shares						Share capital and share premium
At January 1, 2018			122,382						1,092,507
Employee share options exercised (Note 24) (1)			—						—
Restricted shares and units vested (Note 24)			—						4,775
Purchase of own shares			—						(13,206)
At December 31,2018			122,382						1,084,076
Restricted shares and units vested (Note 24)			—						4,455
Purchase of own shares			—						(3,219)
At December 31,2019			122,382						1,085,312
Restricted shares units vested (Note 24)			—						4,182
Purchase of own shares			—						(3,106)
At December 31,2020			122,382						1,086,388

(1)Treasury shares were used to settle these options and units.

Share Repurchase Program

On September 24, 2013, the Board of Directors of the Company has authorized a share repurchase program for up to 5% of its outstanding shares. The repurchase program has commenced on September 24, 2013 and is reviewed by the Board of Directors after each 12-month period. On August 11, 2020, the Board of Directors approved the extension of the program for an additional twelve-month period, ending September 23, 2021.

Repurchases of shares under the program are made from time to time 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. 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.

As of December 31, 2020, the Company repurchased 9,957,078 shares under this program, of which 4,406,246 have been applied to some exercise of the Company’s stock option plan and restricted stock units plan. In 2020, 2019 and 2018 the Company repurchased shares for an amount of US$ 4,365, US$ 4,263 and US$ 15,725, respectively. The outstanding treasury shares as of December 31, 2020 totaled 5,084,864.

F- 58

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

24.    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 granted equity-settled options to senior managers and selected employees of the Group's subsidiaries with a term of ten years. 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 stock units and restricted shares to senior and medium management and key employees of the Group’s subsidiaries.

(a)Option Schemes

The fair value of the options under the Option Schemes was measured at the date of grant using the Black-Scholes valuation technique.

As of the date of these financial statements all options has already been vested and expensed.

The Adecoagro/ IFH 2004 Stock Incentive Option Plan was effectively established in 2004 and is administered by the Compensation Committee of the Company. Options are exercisable over a ten-year period. In May 2014 this period was extended for another ten year-period.

Movements in the number of equity-settled options outstanding and their related weighted average exercise prices under the Adecoagro/ IFH 2004 Stock Incentive Option Plan are as follows:

			2020												2019												2018
			Average exercise price per share						Options (thousands)						Average exercise price per  Share						Options (thousands)						Average exercise price per  Share						Options (thousands)
At January 1			6.66						1,634						6.66						1,634						6.66						1,634
Exercised			—						—						—						—						—						—
At December 31			6.66						1,634						6.66						1,634						6.66						1,634

Options outstanding at year end under this Plan have the following expiry date and exercise prices:

			Exercise price per share						Shares (in thousands)
Expiry date (i):									2020						2019						2018
May 1, 2024			5.83						496						496						496
May 1, 2025			5.83						452						452						452
January 1, 2026			5.83						142						142						142
February 16, 2026			7.11						103						103						103
October 1, 2026			8.62						441						441						441

(i) On May 2014, the Board of directors decided to extend the expired date of the Plan.

The Adecoagro/ IFH 2007/ 2008 Equity Incentive Plan was effectively established in late 2007 and expired during 2020, with no options excercised.

F- 59

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

24.    Equity-settled unit-based payments (continued)

(b)Restricted Share / Restricted Stock Unit Plan

The Restricted Share and Restricted Stock Unit Plan was effectively established in 2010 and amended in November 2011. It is administered by the Compensation Committee of the Company. Restricted shares or units under these Plan vest over a 3-year period from the date of grant at 33% on each anniversary of the grant date. Participants are entitled to receive one common share of the Company for each restricted share or restricted unit granted. There are no performance requirements for the delivery of common shares, except that a participant’s employment with the Group must not have been terminated prior to the relevant vesting date. If the participant ceases to be an employee for any reason, any unvested restricted share or unit shall not be converted into common shares. The maximum number of ordinary shares with respect to which awards may be made under the Plan is 5,379,164, of which 3,809,322 have already been vested and 1,396,221 will be vested on future periods. The maximum numbers of ordinary shares are revised annually.

At December 31, 2020, the Group recognized compensation expense US$ 4.5 million related to the restricted stock units granted under the Restricted Share Plan (2019: US$ 4.8 million and 2017: US$ 4.9 million).

The restricted shares under the Restricted Share Plan were measured at fair value at the date of grant.

Key grant-date fair value and other assumptions under the Restricted Share Plan are detailed below:

Grant Date			Apr 1, 2018						May 15, 2018						Apr 1, 2019						May 15, 2019						Apr 1, 2020						May 12, 2020
Fair value			8.43						9.10						7.00						7.20						5.65						7.45
Possibility of ceasing employment before vesting			—		%				—		%				—		%				—		%				—		%				—		%

Movements in the number of restricted shares outstanding under the Restricted Share Plan are as follows: 

			Restricted shares (thousand)												Restricted stock units (thousands)
			2020						2019						2020						2019						2018
At January 1			750						—						508						976						969
Granted (1)			751						753						—						20						530
Forfeited			(24)						(3)						(10)						(12)						(25)
Vested			(255)						—						(324)						(476)						(498)
At December 31			1,222						750						174						508						976

(1) Approved by the Board of Directors of March 10, 2020 and the Shareholders Meeting of April 15, 2020.

25.    Legal and other reserves

According to the laws of certain of the countries in which the Group operates, a portion of the profit of the year (5%) is separated to constitute legal reserves until they reach legal capped amounts. These legal reserves are not available for dividend distribution and can only be released to absorb losses. The legal limit of these reserves has not been met.

Legal and other reserves amount to US$ 9.662 as of December 31, 2020 (2019: US$ 8,375) and are included within the balance of retained earnings in the statement of changes in shareholders’ equity.

The Company may make distributions in the form of dividends or otherwise to the extent that it has distributable retained earnings or available distributable reserves (including share premium) that result from the Stand Alone Financial Statements prepared in accordance with Luxembourg GAAP. No distributable retained earning result from the Stand Alone Financial Statements of the Company as of December 31, 2020, but the Company has distributable reserves in excess of US$ 935,297.

F- 60

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

25.    Legal and other reserves (continued)

In the other reserves line, it is included the benefit that the Company  has regarding ICMS conceded by the government of the Estate of Mato Grosso do Sul. In accordance with the Complementary Law 160/17, grants related to ICMS, conceded by any Estate of Brazil, were considered as Investments Grants. This investment grants will not be computed to calculate income tax, since they were accounted as an Equity Reserve. This reserve cannot be distribute, unless income tax is paid on the reserve.

26.    Trade and other payables

			2020						2019
Non-current
Payable from acquisition of property, plant and equipment			—						3,394
Other payables			290						205
			290						3,599
Current
Trade payables			110,662						90,594
Advances from customers			4,755						2,980
Taxes payable			7,037						9,086
Payables from acquisition of property, plant and equipment			3,569						3,596
Other payables			292						631
			126,315						106,887
Total trade and other payables			126,605						110,486

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 amounts, as the impact of discounting is not significant.

27.    Borrowings

			2020						2019
Non-current
Senior Notes			497,009						496,564
Bank borrowings			316,455						283,638
			813,464						780,202
Current
Senior Notes			8,250						8,250
Bank overdrafts			50,447						27
Bank borrowings			98,929						179,801
			157,626						188,078
Total borrowings			971,090						968,280

As of December 31, 2020, total bank borrowings include collateralized liabilities of US$ 201,153 (2019: US$ 210,525). These loans are mainly collateralized by property, plant and equipment, sugarcane plantations, sugar export contracts and shares of certain subsidiaries of the Group.

F- 61

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

27.    Borrowings (continued)

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$ 495.7 million.

The Notes are fully and unconditionally guaranteed on a senior unsecured basis by certain of our current and future subsidiaries. As of the Issue Date, 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. During 2020 and 2019 the Group was in compliance with these financial covenants.

The maturity of the Group's borrowings and the Group's exposure to fixed and variable interest rates is as follows:

			2020						2019
Fixed rate:
Less than 1 year			116,113						120,154
Between 1 and 2 years			52,175						46,247
Between 2 and 3 years			39,844						55,453
Between 3 and 4 years			12,500						40,725
Between 4 and 5 years			—						10,331
More than 5 years			497,009						595,550
			717,641						868,460
Variable rate:
Less than 1 year			41,513						67,924
Between 1 and 2 years			32,870						20,007
Between 2 and 3 years			6,035						7,197
Between 3 and 4 years			5,154						4,692
Between 4 and 5 years			28,334						—
More than 5 years			139,543						—
			253,449						99,820
			971,090						968,280

Borrowings incurred by the Group’s subsidiaries in Brazil are repayable at various dates between January 2021 and November 2027 and bear either fixed interest rates ranging from 2.50% to 7.95% per annum or variable rates based on LIBOR or other specific base-rates plus spreads ranging from 4.26% to 8.15% per annum. At December 31, 2020 there are no borrowings subject to LIBOR (six months). At December 2019, LIBOR (six months) was 2.88%.

Borrowings incurred by the Group´s subsidiaries in Argentina are repayable at various dates between January 2021 and June 2028 and bear either fixed interest rates ranging from 2.75% and 7.0% per annum or variable rates based on LIBOR or other specific base-rates plus spreads of 4.0% for those borrowings denominated in U.S. Dollar, and a fixed interest rates ranging from 30% to 39% per annum for those borrowings denominated in Argentine pesos.

F- 62

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

27.    Borrowings (continued)

Brazilian Subsidiaries

The main loans of the Group’s Brazilian Subsidiaries are:

Bank			Grant date			Nominal amount						Capital outstanding as of December 31												Maturity date			Annual interest rate
												2020									2019
						(In millions)						Millions of Reais						Millions of equivalent Dollars			Millions of equivalent Dollars
Banco Do Brasil (1)			October 2012			R$			130.0			R$			36.8			7.08			13.4			November 2022			2.94% minus 15% of performance bonus
Itau BBA FINAME Loan (2)			December 2012			R$			45.9			R$			7.3			1.40			1.6			December 2022			2.50%
Banco do Brasil / Itaú BBA Finem Loan (3)			September 2013			R$			273.0			R$			49.4			9.51			16.5			January 2023			6.83%
BNDES Finem Loan (4)			November 2013			R$			215.0			R$			55.4			10.66			20.8			January 2023			3.75%
ING Bank N.V. (5)			October 2018			US$			75.0						—			75.00			75.0			October 2023			6.33%
Certificados Recebíveis do Agronegócio (CRA)			December 2019			R$			405.0			R$			405.0			77.92			99.2			November 2027			7.69%
Banco do Brasil NCE Loan			March 2020			US$			150.0						—			14.43			—			March 2021			4.14%
Debênture Loan (6)			December 2020			US$			403.2						—			77.59			—			December 2026			8.15%

(1)Collateralized by (i) a first degree mortgage of the Carmen (Santa Agua) farm; (ii) a first degree mortgage of the Sapálio farm; and (iii) liens over the Ivinhema mill and equipment.

(2)Collateralized by (i) a first degree mortgage of the Carmen (Santa Agua) farm; (ii) a first degree mortgage of the Sapálio farm; and (iii) liens over the Ivinhema mill and equipment.

(3)Collateralized by (i) a first degree mortgage of the Carmen (Santa Agua) farm; (ii) a first degree mortgage of the Sapálio farm; (iii) liens over the Ivinhema mill and equipment; and (iv) long term power purchase agreements (PPA).

(4)Collateralized by (i) liens over the Ivinhema mill and equipment; and (ii) power sales contracts.

(5)Collateralized by sales contracts.

(6)Collateralized by fiduciary assignment of energy contracts.

In December 2019, Adecoagro Vale do Ivinhema placed R$ 400.0 million in Certificados de Recebíveis do Agronegócio (CRA) adjustable by the IPCA (Brazilian official inflation rate), maturing in November 2027 and bearing an interest 3.80% per annum. This debt was issued with no guarantee.

The above mentioned loans, except the CRA, contain certain customary financial covenants and restrictions which require us to meet pre-defined financial ratios, among other restrictions, as well as restrictions on the payment of dividends. These financial ratios are measured considering the statutory financial statements of the Brazilian Subsidiaries.

During 2020 and 2019 the Group was in compliance with all financial covenants.

F- 63

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

27.    Borrowings (continued)

Argentinian Subsidiaries

The main loans of the Group’s Argentinian Subsidiaries are:

Bank

Grant date

Nominal amount

Capital outstanding as of December 31

Maturity date

Annual interest rate

2020

2019

(In millions)

(In millions)

(In millions)

IFC Tranche A (1)

2016

US$25.0

—

18.18

September, 2023

per annum

IFC Tranhce B (1)

2016

US$25.0

—

14.29

September, 2021

plus LIBOR

Rabobank (2)

2018

US$50.0

50.00

50.00

June, 2024

6.17%

IFC Tranche A (3)

2020

US$12.6

12.60

—

June, 2028

plus LIBOR

IFC Tranche B (3)

2020

US$9.4

9.41

—

June, 2028

plus LIBOR

(1) Collateralized by a US$ 113 million mortgage over Carmen farm, which is property of Adeco Agropecuaria S.A.

(2) Collateralized by the pledged of the shares of Dinaluca S.A., Compañía Agroforestal S.M.S.A. and Girasoles del Plata S.A.

(3) Collateralized by a US$ 241.8 million mortgage over Carmen, Abolengo, San Carlos, Las Horquertas, and La Rosa farm, which is property of Adeco Agropecuaria S.A. A US$ 35.7 million mortgage over El Meridiano farm, which is property of Pilaga S.A. And a US$ 44.3 million mortgage over Santa Lucia farm, which is property of Bañados del Salado S.A.

Loan with International Finance Corporation (IFC)

In June 2020, our Argentine subsidiaries, Adeco Agropecuaria S.A., Pilagá S.A. and L3N S.A. entered into a US$100 million loan agreement with International Finance Corporation (IFC), member of the World Bank Group. The loan's tenor is eight years, including a two-year grace period, with a rate of LIBOR + 4%. In October, US$ 22 million has been received.

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

The above mentioned loans contain certain customary financial covenants and restrictions which require us to meet pre-defined financial ratios, among other restrictions, as well as restrictions on the payment of dividends. These financial ratios are measured considering the statutory financial statements of the Argentinian Subsidiaries.

During 2020 and 2019 the Group was in compliance with all financial covenants.

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 as of December 31 2019 and 2020 equals US$ 497 million and US$ 528 million, 99.49% and 105.65% of the nominal amount, respectively.

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

F- 64

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

27.    Borrowings (continued)

Evolution of the Group's borrowings as December 31, 2020 and 2019 is as follow:

			2020						2019
Amount at the beginning of the year			968,280						862,116
Proceeds from long term borrowings			116,015						108,271
Payments of long term borrowings			(34,750)						(101,826)
Proceeds from short term borrowings			207,217						193,977
Payments of short term borrowings			(233,540)						(131,521)
Payments of interest (1)			(57,914)						(51,529)
Accrued interest			52,800						53,277
Acquisition of subsidiaries			—						12,823
Exchange differences, inflation and translation, net			(55,612)						7,284
Others			8,594						15,408
Amount at the end of the year			971,090						968,280

(1) Excludes payment of interest related to trade and other payables.

28.     Lease liabilities

			2020						2019
Lease liabilities
Non-current			159,435						174,570
Current			36,337						41,814
			195,772						216,384

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

			2020						2019
Less than 1 year			36,337						41,814
Between 1 and 2 years			20,276						46,657
Between 2 and 3 years			30,228						28,197
Between 3 and 4 years			23,920						21,160
Between 4 and 5 years			19,951						18,427
More than 5 years			65,060						60,129
			195,772						216,384

F- 65

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

29.    Payroll and social security liabilities

			2020						2019
Non-current
Social security payable			1,075						1,209
			1,075						1,209
Current
Salaries payable			2,774						3,290
Social security payable			2,827						3,025
Provision for vacations			6,866						8,808
Provision for bonuses			10,866						10,085
			23,333						25,208
Total payroll and social security liabilities			24,408						26,417

30.    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.

The table below shows the movements in the Group's provisions for other liabilities categorized by type of provision:

			Labor, legal and other claims						Others						Total
At January 1, 2019			3,620						5						3,625
Additions			527						41						568
Used during year			(774)						—						(774)
Exchange differences			(247)						—						(247)
At December 31, 2019			3,126						46						3,172
Additions			890						1,449						2,339
Used during year			(407)						—						(407)
Exchange differences			(745)						—						(745)
At December 31, 2020			2,864						1,495						4,359

Analysis of total provisions:

			2020						2019
Non current			2,705						2,936
Current			1,654						236
			4,359						3,172

The Group is engaged in several legal proceedings, including tax, labor, civil, administrative and other proceedings in Brazil, which qualified as contingent liabilities for an aggregate claimed nominal amount of US$ 73.7 million and US$ 22.4 million as of December 31, 2020 and 2019, respectively. The main addition in the year 2020 refers to a claim of the tax authorities in Brazil of the exclusion of the calculation base of Income Tax of the accelerated depreciation of rural activity as provided for in article 6 of Provisional Measure 2,159-70 / 01 and in Article 325 of the Income Tax Regulation / 18.

F- 66

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

31.    Group companies

The following table details the subsidiaries that comprised the Group as of December 31, 2020 and 2019:

															2020						2019
			Activities						Country of incorporation and operation						Ownership percentage held if not 100 %						Ownership percentage held if not 100 %
Details of principal subsidiary undertakings:
Operating companies (unless otherwise stated):
Adeco Agropecuaria S.A.			(a)						Argentina						—						—
Pilagá S.A.			(a)						Argentina						99.94		%				99.94		%
Cavok S.A.			(a)						Argentina						51		%				51		%
Establecimientos El Orden S.A.			(a)						Argentina						51		%				51		%
Bañado del Salado S.A.			(a)						Argentina						—						—
Agro Invest S.A.			(a)						Argentina						51		%				51		%
Forsalta S.A.			(a)						Argentina						51		%				51		%
Dinaluca S.A.			(a)						Argentina						—						—
Simoneta S.A.			(a)						Argentina						(*)						—
Compañía Agroforestal S.M.S.A.			(a)						Argentina						—						—
Energía Agro S.A.U.			(a)						Argentina						—						—
L3N S.A.			(d)						Argentina						—						—
Maní del Plata S.A.			(a)						Argentina						—						—
Girasoles del Plata S.A.			(a)						Argentina						—						—
Adeco Agropecuaria Brasil S.A.			(b)						Brazil						—						—
Adecoagro Vale do Ivinhema S.A. ("AVI")			(b)						Brazil						—						—
Usina Monte Alegre Ltda. ("UMA")			(b)						Brazil						—						—
Monte Alegre Energia Ltda.			(b)						Brazil						—						—
Adecoagro Energia Ltda.			(b)						Brazil						—						—
Adecoagro Administração e Participação Ltda.			(b)						Brazil						—						—
Kelizer S.A.			(a)						Uruguay						—						—
Adecoagro Uruguay S.A.			(a)						Uruguay						—						—
Holdings companies:
Adeco Brasil Participações S.A.			—						Brazil						—						—
Adecoagro LP S.C.S.			—						Luxembourg						—						—
Adecoagro GP S.a.r.l.			—						Luxembourg						—						—
Ladelux S.C.A.			—						Uruguay						—						—
Spain Holding Companies			(c)						Spain						—						—

(a) Mainly crops, rice, cattle and others.

(b) Mainly sugarcane, ethanol and energy.

(c) Comprised by (1) wholly owned subsidiaries: Kadesh Hispania S.L.U.; Leterton España S.L.U.; Global Asterion S.L.U.; Global Acasto S.L.U.; Global Laertes S.L.U.; Global Seward S.L.U. (*); Global Pindaro S.L.U.; Global Pileo S.L.U.; Peak Texas S.L.U.; Peak City S.L.U. (*); Global Neimoidia S.L.U. and 51% controlled subsidiaries; Global Acamante S.L.U.; Global Carelio S.L.U.; Global Calidon S.L.U.; Global Mirabilis S.L.U. Global Anceo S.L.U.Global Hisingen S.L.U.

(d) Mainly dairy

(*) Simoneta S.A., Global Seward S.L.U. and Peak City S.L.U. were sold during December 2020. See Note 22.

F- 67

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

31.    Group companies (continued)

The percentage voting right for each principal subsidiary is the same as the percentage of capital stock held. Issued share capital represents only ordinary shares/ quotas, units or their equivalent. There are no preference shares or units issued in any subsidiary undertaking.

According to the laws of certain of the countries in which the Group operates, 5% of the profit of the year is separated to constitute legal reserves until they reach legal capped amounts (20% of total capital). These legal reserves are not available for dividend distribution and can only be released to absorb losses. The Group’s joint ventures have not reached the legal capped amounts.

32.    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)/(equity)
																		2020						2019						2018						2020						2019
Directors and senior management						Employment						Compensation selected employees						(5,232)						(5,232)						(7,122)						(15,499)						(15,499)
Girasoles del Plata S.A (i)						Joint venture						Sales of goods						—						—						456						—						—
												Services						—						—						210						—						—
												Interest income						—						—						242						—						—

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

F- 68

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

33.    Critical accounting estimates and judgments

Critical accounting policies are those that are most important to the portrayal of the Group’s financial condition, results of operations and cash flows, and require management to make difficult, subjective or complex judgments and estimates about matters that are inherently uncertain. Management bases its estimates on historical experience and other assumptions that it believes are reasonable. The Group’s critical accounting policies are discussed below.

Actual results could differ from estimates used in employing the critical accounting policies and these could have a material impact on the Group’s results of operations. The Group also has other policies that are considered key accounting policies, such as the policy for revenue recognition. However, these other policies, which are discussed in the notes to the Group’s financial statements, do not meet the definition of critical accounting estimates, because they do not generally require estimates to be made or judgments that are difficult or subjective.

(a)Impairment of non-financial assets

    At the date of each statement of financial position, the Group reviews the carrying amounts of its property, plant and equipment and finite lived intangible assets to determine whether there is any indication that those assets could have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. Where the asset does not generate cash flows that are independently, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. The Group’s property, plant and equipment items generally do not generate independent cash flows.

    In the case of Goodwill, any goodwill acquired is allocated to the cash-generating unit (‘CGU’) expected to benefit from the business combination. CGU to which goodwill is allocated is tested for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying amount of the CGU may be impaired. The carrying amount of the CGU is compared to its recoverable amount, which is the higher of fair value less costs to sell and the value in use. An impairment loss is recognized for the amount by which the carrying amount exceeds its recoverable amount. The impairment review requires management to undertake certain significant judgments, including estimating the recoverable value of the CGU to which goodwill is allocated, based on either fair value less costs-to-sell or the value-in-use, as appropriate, in order to reach a conclusion on whether it deems the goodwill is impaired or not.

    For purposes of the impairment testing, each CGU represents the smallest identifiable group of assets that generate cash inflows that are largely independent of the cash inflows from other assets or group of assets.

    Farmlands may be used for different activities that may generate independent cash flows. Those farmlands that are used for more than one segment activity (i.e. crops and cattle or rental income), the farmland is further subdivided into two or more CGUs, as appropriate, for purposes of impairment testing. For its properties in Brazil, management identified a farmland together with its related mill as separate CGUs. Most of the farmlands in Argentina and Uruguay are treated as single CGUs.

    Based on these criteria, management identified a total amount of 40 CGUs as of September 30, 2020 and 40 CGUs as of September 30, 2019.

As of September 30, 2020 and 2019, due to the fact that there were no impairment indicators, the Group only tested those CGUs with allocated goodwill in Argentina and Brazil.

    CGUs tested based on a fair-value-less-costs-to-sell model at September 30, 2020 and 2019:     

    As of September 30, 2020, the Group identified 11 CGUs in Argentina (2019: 11 CGUs) to be tested based on this model (all CGUs with allocated goodwill). Estimating the fair value less costs-to-sell is based on the best information available, and refers to the amount at which the CGU could be bought or sold in a current transaction between willing parties. Management may be assisted by the work of external advisors. When using this model, the Group applies the “sales comparison approach” as its method of valuing most properties, which relies on results of sales of similar agricultural properties to estimate the value of the CGU. This approach is based on the theory that the fair value of a property is directly related to the selling prices of similar properties.

F- 69

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

33.    Critical accounting estimates and judgments (continued)

    Fair values are determined by extensive analysis which includes current and potential soil productivity of the land (the ability to produce crops and maintain livestock) projected margins derived from soil use, rental value obtained for soil use, if applicable, and other factors such as climate and location. Farmland ratings are established by considering such factors as soil texture and quality, yields, topography, drainage and rain levels. Farmland may contain farm outbuildings. A farm outbuilding is any improvement or structure that is used for farming operations. Outbuildings are valued based on their size, age and design.

    Based on the factors described above, each farm property is assigned different soil classifications for the purposes of establishing a value, Soil classifications quantify the factors that contribute to the agricultural capability of the soil. Soil classifications range from the most productive to the least productive.

    The first step to establishing an assessment for a farm property is a sales investigation that identifies the valid farm sales in the area where the farm is located. A price per hectare is assigned for each soil class within each farm property. This price per hectare is determined based on the quantitative and qualitative analysis mainly described above.

    The results are then tested against actual sales, if any, and current market conditions to ensure the values produced are accurate, consistent and fair.

    The following table shows only the 11 CGUs (2019: 11 CGUs) where goodwill was allocated at each period end and the corresponding amount of goodwill allocated to each one:

CGU / Operating segment / Country						September 30, 2020						September 30, 2019
La Carolina / Crops / Argentina						168						162
La Carolina / Cattle / Argentina						27						26
El Orden / Crops / Argentina						180						175
El Orden / Cattle / Argentina						7						6
La Guarida / Crops / Argentina						1,196						1,158
La Guarida / Cattle / Argentina						616						597
Los Guayacanes / Crops / Argentina						2,215						2,145
Doña Marina / Rice / Argentina						3,856						3,734
Huelen / Crops / Argentina (1)						3,838						3,716
El Colorado / Crops / Argentina						1,918						1,857
El Colorado / Cattle / Argentina						19						18
Closing net book value of goodwill allocated to CGUs tested (Note 15)						14,040						13,594
Closing net book value of PPE items allocated to CGUs tested						161,010						162,844
Total assets allocated to CGUs tested						175,050						176,438

(1) Dispose on December 2020, see Note 22.

Based on the testing above, the Group determined that none of the CGUs, with allocated goodwill, were impaired at September 30, 2020 and 2019.

CGUs tested based on a value-in-use model at September 30, 2020 and 2019:

As of September 30, 2020, the Group identified 2 CGUs (2019: 2 CGUs) in Brazil to be tested based on this model (all CGUs with allocated goodwill). The determination of the value-in-use calculation required the use of significant estimates and assumptions related to management’s cash flow projections. In performing the value-in-use calculation, the Group applied pre-tax rates to discount the future pre-tax cash flows. In each case, these key assumptions have been made by management

F- 70

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

33.    Critical accounting estimates and judgments (continued)

reflecting past experience and are consistent with relevant external sources of information, such as appropriate market data. In calculating value-in-use, management may be assisted by the work of external advisors.

The key assumptions used by management in the value-in-use calculations which are considered to be most sensitive to the calculation are:

Key Assumptions

September 30, 2020

September 30, 2019

Financial projections

Covers 4 years for UMA (*)

Covers 4 years for UMA (*)

Covers 7 years for AVI (**)

Covers 7 years for AVI (**)

Yield average growth rates

0-1%

0-1%

Future pricing increases

1.76% per annum

0.11% per annum

Future cost decrease

0.33% per annum

0.78% per annum

Discount rates

7%

7%

Perpetuity growth rate

1%

1%

(*) UMA stands for Usina Monte Alegre LTDA.

(**) AVI stands for Adecoagro Vale Do Ivinhema S.A.

    Discount rates are based on the risk-free rate for U. S. government bonds, adjusted for a risk premium to reflect the increased risk of investing in South America and Brazil in particular. The risk premium adjustment is assessed for factors specific to the respective CGUs and reflects the countries that the CGUs operate in.

The following table shows only the 2 CGUs where goodwill was allocated at each period end and the corresponding amount of goodwill allocated to each one:

CGU/ Operating segment						September 30, 2020						September 30, 2019
AVI / Sugar, Ethanol and Energy						2,815						3,813
UMA / Sugar, Ethanol and Energy						1,056						1,430
Closing net book value of goodwill allocated to CGUs tested (Note 15)						3,871						5,243
Closing net book value of PPE items allocated to CGUs tested						494,077						614,702
Total assets allocated to 2 CGUs tested						497,948						619,945

Based on the testing above, the Group determined that none of the CGUs, with allocated goodwill, were impaired at September 30, 2020 and 2019.

Management views these assumptions are conservative and does not believe that any reasonable change in the assumptions would cause the carrying value of these CGU’s to exceed the recoverable amount.

The Company's goodwill and property, plant and equipment balances allocated to the cash generating units with allocated goodwill in Argentina and Brazil were U$S 147 million and U$S 519 million, respectively at December 31, 2020.

As of December 31, 2020, the Group determined that there is no indicators of impairment.

(b) Biological assets

The nature of the Group’s biological assets and the basis of determination of their fair value are explained under Note 34.11. The discounted cash flow model requires the input of highly subjective assumptions including observable and unobservable data. Generally the estimation of the fair value of biological assets is based on models or inputs that are not observable in the market and the use of such unobservable inputs is significant to the overall valuation of the assets. These

F- 71

Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

33.    Critical accounting estimates and judgments (continued)

inputs are determined based on the best information available, for example by reference to historical information of past practices and results, statistical and agronomic information, and other analytical techniques. The discounted cash flow model includes significant assumptions relating to the cash flow projections including future market prices, estimated yields at the point of harvest, estimated production cycle, future costs of harvesting and other costs, and estimated discount rate.

Market prices are generally determined by reference to observable data in the principal market for the agricultural produce. Harvesting costs and other costs are estimated based on historical and statistical data. Yields are estimated based on several factors including the location of the farmland and soil type, environmental conditions, infrastructure and other restrictions and growth at the time of measurement. Yields are subject to a high degree of uncertainty and may be affected by several factors out of the Group’s control including but not limited to extreme or unusual weather conditions, plagues and other crop diseases, among other factors.

The significant assumptions discussed above are highly sensitive. Reasonable shifts in assumptions including but not limited to increases or decreases in prices, costs and discount factors used would result in a significant increase or decrease to the fair value of biological assets. In addition, cash flows are projected over a number of years and based on estimated production. Estimates of production in themselves are dependent on various assumptions, in addition to those described above, including but not limited to several factors such as location, environmental conditions and other restrictions. Changes in these estimates could materially impact on estimated production, and could therefore affect estimates of future cash flows used in the assessment of fair value (see Note 16).

(c) Income taxes

The Group is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the worldwide provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain. The Group recognizes liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the current and deferred income tax assets and liabilities in the period in which such determination is made.

Deferred tax assets are reviewed each reporting date and reduced to the extent that it is no longer probable that sufficient taxable income will be available to allow all or part of the asset to be settled. Deferred tax assets and liabilities are not discounted. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income and tax planning strategies in making this assessment (see Note 10).

(d) Fair value for farmlands and investment property

Property, plant and equipment

Farmlands are recognized at fair value based on periodic, but at least annual, valuations prepared by an external independent expert. A revaluation reserve is credited in shareholders’ equity. The valuation is determined using sales Comparison Approach. 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) (see Note 12).

Investment property

Investment property consists of farmland for rental or for capital appreciation and not used in production or for sale in the ordinary course of business, and it is measured at fair value. The changes of the Fair value, which is based on an independent external expert, impacts the profit and loss of the period, in the line item Other operating income, net (see Note 14).

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Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

34.    Summary of significant accounting policies

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated.

Financial reporting in a hyperinflation economy

IAS 29 “Financial Reporting in Hyperinflationary Economies” requires that the financial statements of entities whose functional currency is that of a hyperinflationary economy to be adjusted for the effects of changes in a suitable general price index and to be expressed in terms of the current unit of measurement at the closing date of the reporting period. Accordingly, the inflation produced from the date of acquisition or from the revaluation date, as applicable, must be computed in the non-monetary items.

In order to conclude on whether an economy is categorized as hyperinflationary under the terms of IAS 29, the Standard details a series of factors to be considered, including the existence of a cumulative inflation rate in three years that approximates or exceeds 100 %.

Since 2018, when cumulative inflation rate in three years exceeded the 100% threshold, Argentina´s operations are considered to be under hyperinflationary economy for accounting purposesunder the terms of IAS 29 and since then, it has been applied IAS 29 in the financial reporting of its subsidiaries and associates with Argentine peso as functional currency.

Financial statements of a foreign entity with a functional currency of a country that has a highly inflationary economy, are restated to reflect changes in the general price level or index in that country before translation into U.S. Dollars. In adjusting for hyperinflation, a general price index is applied to all non-monetary items in the financial statements (including equity) and the resulting gain or loss, which is the gain or loss on the entity's net monetary position, is recognized in the income statement. Monetary items in the closing statement of financial position are not adjusted. The Group treated all Argentine subsidiaries as a hyperinflationary economy as all of them have argentine peso as functional currency. The results and financial position of all foreign entities with a functional currency of a country that has a highly inflationary economy are translated at closing rates after the restatement for changes in the general purchasing power argentine peso.

The inflation adjustment on the years 2020, 2019 and 2018 was calculated by means of conversion factor derived from the Argentine price indexes published by the National Institute of Statistics and the year-over-year change in the index was 1.361; 1.538 and 1.476, respectively.

The main procedures for the above-mentioned adjustment are as follows:

•Monetary assets and liabilities which are carried at amounts current at the balance sheet date are not restated because they are already expressed in terms of the monetary unit current at the balance sheet date.

•Non-monetary assets and liabilities which are not carried at amounts current at the balance sheet date, and components of shareholders' equity are adjusted by applying the relevant conversion factors.

•All items in the income statement are restated by applying the relevant conversion factors.

•The effect of inflation on the Company’s net monetary position is included in the income statement, in "Other financial results" (Note 9).

•The ongoing application of the re-translation of comparative amounts to closing exchanges rates under IAS 21 and the hyperinflation adjustments required by IAS 29 will lead to a difference in addition to the difference arising on the application of hyperinflation accounting.

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Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

34.    Summary of significant accounting policies (continued)

The comparative figures in these consolidated financial statements presented in a stable currency are not adjusted for subsequent changes in the price level or exchange rates. This resulted in a difference between the closing equity of the previous year and the opening equity of the current year. The Company recognized this initial difference directly in equity.

34.1    Basis of preparation and presentation

The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (IFRS) of the International Accounting Standards Board (IASB) and the Interpretations of the International Financial Reporting Interpretations Committee (IFRIC). All IFRS issued by the IASB, effective at the time of preparing these consolidated financial statements have been applied.

The consolidated financial statements have been prepared under the historical cost convention as modified by financial assets and financial liabilities (including derivative instruments) at fair value through profit or loss, biological assets and agricultural produce at the point of harvest and farmlands measured at fair value.

The preparation of consolidated financial statements in conformity with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Group’s accounting policies. The areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements are disclosed in Note 34.

Description of accounting policies changed during the year.

Reclassification

During the period ended September 30, 2020, the Company has changed its accounting policy related to the application of IAS 29, Inflation Accounting, that was implemented in 2018. The cumulative initial effect of inflation accounting until December 31, 2017 divided by the exchange rate at that date was recognized directly in equity, in the line “Adjustment of opening balance for the application of IAS 29”, as part of retained earnings. The ongoing effect of hyperinflation adjustment and retranslation of comparative amounts to closing exchange rates after initial recognition was recognized in Other Comprehensive Income, as part of the cumulative translation adjustment (“CTA”).

The Company has change its accounting policy for the presentation of the effect of the initial application of IAS 29, and reclassified it to Other Comprehensive Income, as part of the cumulative translation adjustment (“CTA”); instead of presenting it within retained earnings. This change in the presentation policy was in order to provide uniformity of disclosure for the same concept and only required a reclassification of the constituent elements of the equity and does not affect total shareholders equity.

			January 01, 2018												December 31, 2018												December 31, 2019
			(Previously stated)			Increase / (Decrease)			(Revised)						(Previously stated)			Increase / (Decrease)			(Revised)						(Previously stated)			Increase / (Decrease)			(Revised)
Retained Earnings			294,150			(187,941)			106,209						237,188			(187,941)			49,247						206,669			(187,941)			18,728
Cumulative Translation Adjustment			(552,604)			187,941			(364,663)						(666,037)			187,941			(478,096)						(680,315)			187,941			(492,374)
Subtotal attributable to equity holders of the parent			861,821			—			861,821						1,063,636			—			1,063,636						988,269			—			988,269

In addition, and related to hyperinflation accounting, the Company has changed its accounting policy for the presentation of finance income /expenses. Until June 2020, the Company had elected not to segregate the impact of inflation on financial results. The company has decided to change its presentation policy and segregate the impact of inflation over financial results, considering the segregation of such effects provides reliable and more relevant information. Financial results will be presented reflecting interest and exchange difference, net of its inflation effects. This change represents only a reclassification within Financial results and does not have any impact on total financial results, net or net income.

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Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

34.1    Basis of preparation and presentation (continued)

			December 31, 2019												December 31, 2018
			(Previously stated)			Increase / (Decrease)			(Revised)						(Previously stated)			Increase / (Decrease)			(Revised)
- Interest income			7,319			(929)			6,390						7,915			(187)			7,728
Finance income			9,908			(929)			8,979						8,581			(187)			8,394
- Interest expense			(60,134)			3,666			(56,468)						(51,577)			4,311			(47,266)
- Cash flow hedge - transfer from equity			(15,594)			(9,890)			(25,484)						(26,693)			(11,393)			(38,086)
- Foreign exchange losses, net			(108,458)			82,679			(25,779)						(183,195)			114,408			(68,787)
Finance costs			(202,566)			76,455			(126,111)						(271,263)			107,326			(163,937)
Other financial result - Net gain of inflation effects on the monetary items			92,437			(75,526)			16,911						81,928			(107,139)			(25,211)
Total financial results, net			(100,221)			—			(100,221)						(180,754)			—			(180,754)

Both changes have been reflected in the comparative periods, thus, comparative figures have been restated.

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.

    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.

Description of accounting policies changed during last year

Leases

For fiscal years beginning on January 1st, 2019 and onward the adoption of IFRS 16 - Leases it is mandatory.

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.

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 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.

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Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

34.1    Basis of preparation and presentation (continued)

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)

Accounting policies for right of use and lease liabilities are disclosed in Note 34.7 Leases

New standards and interpretations not yet adopted

Certain new accounting standards and interpretations have been published that are not mandatory for 31 December 2020 reporting periods and have not been early adopted by the group. These standards are not expected to have a material impact on the entity in the current or future reporting periods and on foreseeable future transactions.

34.2    Scope of consolidation

The consolidated financial statements include the results of the Company and all of its subsidiaries from the date that control commences to the date that control ceases. They also include the Group’s share of the net income of its jointly-controlled entities on an equity-accounted basis from the point at which joint control commences, to the date that it ceases.

(a) Subsidiaries

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date that control commences and deconsolidated from the date that control ceases.

The Group uses the acquisition method of accounting to account for business combinations. The consideration transferred for the acquisition of a subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.

The Group recognizes any non-controlling interest in the acquiree on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets.

The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill.

Inter-company transactions, balances and unrealized gains on transactions between group companies are eliminated. Unrealized losses are also eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

(b) Disposal of subsidiaries

When the Group ceases to have control any retained interest in the entity is re-measured to its fair value at the date when control is lost, with the change in carrying amount recognized in profit or loss. The fair value is the initial carrying

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Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

34.2    Scope of consolidation (continued)

amount for the purposes of subsequently accounting for the retained interest as an associate, joint venture or financial asset. In addition, any amount previously recognized in other comprehensive income in respect of that entity is accounted for as if the Group had directly disposed of the related assets or liabilities. This may mean that amounts previously recognized in other comprehensive income are reclassified to profit or loss, except for the related revaluation surplus which is reclassified to retained earnings..

34.3    Segment reporting

According to IFRS 8, operating segments are identified based on the ‘management approach’. This approach stipulates external segment reporting based on the Group’s internal organizational and management structure and on internal financial reporting to the chief operating decision maker (the Management Committee in the case of the Company)

34.4    Foreign currency translation

(a) Functional and presentation currency

Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in US dollars, which is the Group’s presentation currency.

(b) Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions or valuation where items are remeasured. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognized in the statement of income, in the line Item “Finance income” or “Finance cost”, as appropriate.

(c) Group companies

The results and financial position of Group entities (except those that has the currency of a hyper-inflationary economy - Argentine subsidiaries) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

•assets and liabilities for each statement of financial position presented are translated at the closing rate at the date of that statement of financial position;

•income and expenses for each statement of income are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the rate on the dates of the transactions); and

•all resulting exchange differences are recognized as a separate component of equity.

When a foreign operation is sold, exchange differences that were recorded in equity are recognized in the statement of income as part of the gain or loss on sale.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

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Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

34.5    Property, plant and equipment

Farmlands are initially recorded at fair value and subsequently under the revaluation model based on periodic, but at least annual, valuations prepared by an external independent expert. A revaluation reserve is credited in shareholders’ equity. All other property, plant and equipment is recorded at cost, less accumulated depreciation and impairment losses, if any. Historical cost comprises the purchase price and any costs directly attributable to the acquisition. Under the definition of Property plant and equipment is included the bearer plants, such as sugarcane and coffee trees.

Where individual components of an item of property, plant and equipment have different useful lives, they are accounted for as separate items, which are depreciated separately.

Subsequent costs are included in the asset’s carrying amount or recognized as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured reliably. The carrying amount of the replaced part is derecognized. All other repairs and maintenance are charged to the statement of income when they are incurred.

The depreciation methods and periods used by the group are disclosed in Note 12.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized within “Other operating income, net” in the consolidated statement of income.

34.6    Investment property

Investment property consists of farmland for rental or for capital appreciation and not used in production or for sale in the ordinary course of business, and it is measured at fair value net of any impairment losses if any. The changes of the Fair value, which is based on an independent external expert, impacts the profit and loss of the period, in the line item Other operating income, net.

34.7    Leases

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.

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

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Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

34.7    Leases (continued)

•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;

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 rate used in the discounted cash flow involved a high degree of management´s estimations.

34.8    Goodwill

Goodwill represents future economic benefits arising from assets that are not capable of being individually identified and separately recognized by the Group on an acquisition. Goodwill on acquisition is initially measured at cost. being the excess of the consideration over the fair value of the Group’s share of net assets of the acquired subsidiary undertaking at the acquisition date. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. It is allocated to those cash generating units expected to benefit from the acquisition for the purpose of impairment testing. Goodwill ais included within “Intangible assets” on the statement of financial position. Goodwill arising on the acquisition of foreign entities is treated as an asset of the foreign entity denominated in the local currency and translated at the closing rate.

Goodwill is not amortized but tested for impairment on an annual basis, or more frequently if there is an indication of impairment (see Note 34 (a)). Gains and losses on the disposal of a Group entity include any goodwill relating to the entity sold (see Note 35.10). 

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Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

34.9    Other intangible assets

Other intangible assets that are acquired by the Group, which have finite useful lives, are measured at cost less accumulated amortization and impairment losses, if any. These intangible assets comprise mainly trademarks and computer software and are amortized in the statement of income on a straight-line basis over their estimated useful lives estimated to be 10 to 20 years and 3 to 5 years, respectively.

34.10 Impairment of assets

Goodwill

The Company conducts an impairment test annually or more frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the carrying amount exceeds its recoverable amount. For the purpose of impairment testing, assets are grouped at the lowest levels for which there are separately identifiable cash flows, known as cash-generating units. If the recoverable amount of the cash-generating unit is less than its carrying amount, the impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the cash generating unit and then to the other assets of the unit pro-rata on the basis of the carrying amount of each asset may in the unit. Impairment losses recognized for goodwill cannot be reversed in a subsequent period. Recoverable amount is the higher of the fair value less costs to sell and value in use. In determining the value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted (see Note 34 (a) for details).

Property, plant and equipment and finite lived intangible assets

At each statement of financial position date, the Group reviews the carrying amounts of its property, plant and equipment and other intangible assets which have finite lives to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent, if any, of the impairment loss. Where the asset does not generate cash flows that are independent from other assets, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs.

If the recoverable amount of an asset or cash-generating unit is estimated to be less than its carrying amount, that carrying amount is reduced to its recoverable amount. An impairment loss is recognized immediately in the statement of income.

Where an impairment loss subsequently reverses, the carrying amount of the asset or cash-generating unit is increased to the revised estimate of its recoverable amount, not to exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset or cash-generating unit in prior years. A reversal of an impairment loss is recognized immediately in the statement of income.

34.11    Biological assets

Biological assets comprise growing crops (mainly corn, wheat, soybeans, sunflower peanuts and rice), sugarcane, coffee and livestock (growing herd and cattle for dairy production).

The Group distinguishes between consumable and bearer biological assets, and between mature and immature biological assets. “Consumable” biological assets are those assets that may be harvested as agriculture produce or sold as biological assets, for example livestock intended for dairy production. “Bearer” biological assets are those assets capable of producing more than one harvest, for example sugarcane or livestock from which raw milk is produced. “Mature” biological assets are those that have attained harvestable specifications (for consumable biological assets) or are able to sustain regular harvests (for bearer biological assets). “Immature” biological assets are those assets other than mature biological assets.

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Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

34.11    Biological assets (continued)

Costs are capitalized as biological assets if, and only if, (a) it is probable that future economic benefits will flow to the entity, and (b) the cost can be measured reliably. The Group capitalizes costs such as: planting, harvesting, weeding, seedlings, irrigation, agrochemicals, fertilizers and a systematic allocation of fixed and variable production overheads that are directly attributable to the management of biological assets, among others. Costs that are expensed as incurred include administration and other general overhead and unallocated production overhead, among others.

Biological assets, both at initial recognition and at each subsequent reporting date, are measured at fair value less costs to sell, except where fair value cannot be reliably measured. Cost approximates fair value when little biological transformation has taken place since the costs were originally incurred or the impact of biological transformation on price is not expected to be material.

 Gains and losses that arise on measuring biological assets at fair value less costs to sell and measuring agricultural produce at the point of harvest at fair value less costs to sell are recognized in the statement of income in the period in which they arise in the line item “Initial recognition and changes in fair value of biological assets and agricultural produce”.

Where there is an active market for a biological asset or agricultural produce, quoted market prices in the most relevant market are used as a basis to determine the fair value. Otherwise, when there is no active market or market-determined prices are not available, fair value of biological assets is determined through the use of valuation techniques.

Therefore, the fair value of biological assets is generally derived from the expected discounted cash flows of the related agricultural produce. The fair value of the agricultural produce at the point of harvest is generally derived from market determined prices.

A general description of the determination of fair values based on the Company’s business segments follow:

•Growing crops including rice:

Growing crops, for which biological growth is not significant, are measured at cost, which approximates fair value. Expenditure on growing crops includes land preparation expenses and other direct expenses incurred during the sowing period including labor, seedlings, agrochemicals and fertilizers among others.

Otherwise, biological assets are measured at fair value less estimated point-of-sale costs at initial recognition and at any subsequent period. Point-of-sale costs include all costs that would be necessary to sell the assets

The fair value of growing crops including rice is measured based on a formula, which takes into consideration the estimate of crop yields, estimated market prices and costs, and discount rates. Estimated yields are determined based on several factors including location of farmland, environmental conditions and other restrictions and growth at the time of measurement. Yields are multiplied by sown hectares to determine the estimated tons of crops including rice to be obtained. The tons are then multiplied by a net cash flow determined at the future crop prices less the direct costs to be incurred. This amount is discounted at a discount rate, which reflects current market assessments of the assets involved and the time value of money.

•Growing herd and cattle:

Livestock are measured at fair value less estimated point-of-sale costs, with any changes therein recognized in the statement of income, on initial recognition as well as subsequently at each reporting period. The fair value of livestock is determined based on the actual selling prices less estimated point-of-sale costs in the markets where the Group operates.

•Sugarcane:

Sugarcane planting costs form part of Property plant and equipment. The agricultural produce growing on sugarcane is classified as biological assets and are measured at fair value less cost to sell. The fair value of agricultural produce growing on sugarcane depends on the variety, location and maturity of the plantation.

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Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

34.11    Biological assets (continued)

Agricultural produce growing in the Sugarcane, for which biological growth is not significant, is valued at cost, which approximates fair value. Expenditure on the agricultural produce growing in the sugarcane consists mainly of labor, agrochemicals and fertilizers among others. When it has attained significant biological growth, it is measured at fair value through a discounted cash flow model. Estimated revenues are based on estimated yearly production volume (which will be destined to sugar, ethanol, energy and raw cane production) and the price is calculated as the average of daily prices for sugar future contracts (Sugar #11 ICE-NY contracts) for a six months period. Projected costs include maintenance and land leasing among others. These estimates are discounted at an appropriate discount rate.

34.12    Inventories

Inventories comprise of raw materials, finished goods (including harvested agricultural produce and manufactured goods) and others.

Harvested agricultural produce (except for rice and milk) are measured at net realizable value until the point of sale because there is an active market in the produce, there is a negligible risk that the produce will not be sold and there is a well-established practice in the industry carrying the inventories at net realizable value. Changes in net realizable value are recognized in the statement of income in the period in which they arise under the line item “Changes in net realizable value of agricultural produce after harvest”.

All other inventories (including rice and milk) are measured at the lower of cost and net realizable value. Cost is determined using the weighted average method.

34.13    Financial assets

Financial assets are classified in the following categories: at fair value through profit or loss and at amortized cost, namely loans and receivables. The classification depends on the purpose for which the financial assets were acquired. Management determines the classification of its financial assets at initial recognition (see Note 18).

(a) Recognition and measurement

Regular purchases and sales of financial assets are recognized on the trade-date – the date on which the Group commits to purchase or sell the asset. Financial assets not carried at fair value through profit or loss are initially recognized at fair value plus transaction costs. Financial assets carried at fair value through profit or loss are initially recognized at fair value and transaction costs are expensed in the statement of income. Financial assets are derecognized when the rights to receive cash flows from the investments have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Financial assets at fair value through profit or loss are subsequently carried at fair value. Loans and receivables are subsequently carried at amortized cost using the effective interest method.

Gains or losses arising from changes in the fair value of the “financial assets at fair value through profit or loss” category are presented in the statement of income within “Other operating income, net” in the period in which they arise.

If the market for a financial asset is not active (and for unlisted securities), the Group establishes fair value by using valuation techniques. These include the use of recent arm’s length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, and option pricing models, making maximum use of market inputs and relying as little as possible on entity-specific inputs.

The Group assesses at each statement of financial position date whether there is objective evidence that a financial asset or a group of financial assets is impaired. Impairment testing of trade receivables is described in Note 35.15.

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Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

34.13    Financial assets (continued)

(b) Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis, or realize the asset and settle the liability simultaneously. This right must not be contingent on future events and must be enforceable in any case.

34.14    Derivative financial instruments and hedging activities

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value. Commodity future contract fair values are computed with reference to quoted market prices on future exchanges markets. The fair values of commodity options are calculated using year-end market rates together with common option pricing models. The fair value of interest rate swaps has been calculated using a discounted cash flow analysis.

The Group manages exposures to financial and commodity risks using hedging instruments that provide the appropriate economic outcome. The principal hedging instruments used may include commodity future contracts, put and call options, foreign exchange forward contracts and interest rate swaps. The Group does not use derivative financial instruments for speculative purposes.

The Group’s policy is to apply hedge accounting to hedging relationships where it is both permissible under IFRS 9, practical to do so and its application reduces volatility, but transactions that may be effective hedges in economic terms may not always qualify for hedge accounting under IFRS 9. Any derivatives that the Group holds to hedge these exposures are classified as “held for trading” and are shown in a separate line on the face of the statement of financial position. The method of recognizing gains or losses on derivatives depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. Gains and losses on commodity derivatives are classified within “Other operating income, net”. Gains and losses on interest rate and foreign exchange rate derivatives are classified within ‘Financial results, net’. The Group designates certain derivatives as hedges of the foreign currency risk associated with highly probable forecast transactions (cash flow hedge).

The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Group also documents its assessment, both at hedge inception and on an ongoing basis, of whether the instruments that are used in hedging transactions are highly effective in offsetting changes in fair value or cash flows of hedged items.

Cash flow hedge

The effective portion of the gain or loss on the instruments that are designated and qualify as cash flow hedges is recognized in other comprehensive income. The gain or loss relating to the ineffective portion is recognized immediately in the statement of income within "Finance income” or “Finance cost”, as appropriate.

Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss. The gain or loss relating to the effective portion is recognized in the statement of income within "Finance income” or “Finance cost”, as appropriate.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognized when the forecast transaction is ultimately recognized in the statement of income. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the statement of income.

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Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

34.15    Trade and other receivables and trade and other payables

Trade receivables are recognized initially at fair value and subsequently measured at amortized cost using the effective interest method. In the case of receivables, less allowance for trade receivables.

The group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables. To measure the expected credit losses, trade receivables have been grouped based on shared credit risk characteristics and the days past due.

34.16    Cash and cash equivalents

Cash and cash equivalents includes cash in hand, deposits held at call with banks and other short-term highly liquid investments with original maturities of three months or less. In the statements of cash flows, interest paid is presented within financing cash flows and interest received is presented within investing activities.

34.17    Borrowings

Borrowings are initially recognized at fair value, net of transaction costs incurred. Borrowings are subsequently measured at amortized cost using the effective interest method. Borrowing costs are capitalized during the period of time that is required to complete and prepare the asset for its intended use.

34.18    Provisions

Provisions are recognized when (i) the Group has a present legal or constructive obligation as a result of past events; (ii) it is probable that an outflow of resources will be required to settle the obligation; and (iii) a reliable estimate of the amount of the obligation can be made. Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the obligation.

34.19    Onerous contracts

The Group enters into contracts, which require the Group to sell commodities in accordance with the Group's expected sales. These contracts do not qualify as derivatives. These contracts are not recognized until at least one of the parties has performed under the agreement. However, when the contracts are onerous, the Group recognizes the present obligation under the contracts as a provision included within “Provision and other liabilities” in the statement of financial position. Losses under these onerous contracts are recognized within “Other operating income, net” in the statement of income.

34.20    Current and deferred income tax

The Group’s tax benefit or expense for each year comprises the charge for current tax payable and deferred taxation attributable to the Group’s operating subsidiaries. Tax is recognized in the statement of income, except to the extent that it relates to items recognized directly in equity. In this case, the tax is also recognized in equity.

The current income tax charge is calculated on the basis of the tax laws enacted at the date of the statement of financial position in the countries where the Group’s subsidiaries operate and generate taxable income. Management periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authorities.

Deferred income tax is recognized, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and laws) effective in the countries where the Group’s subsidiaries operate and generate taxable income.

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Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

34.20    Current and deferred income tax (continued)

Deferred income tax assets are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized.

Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.

The Group is able to control the timing of dividends from its subsidiaries and hence does not expect to remit overseas earnings in the foreseeable future in a way that would result in a charge to taxable profit. Hence deferred tax is recognized in respect of the retained earnings of overseas subsidiaries only to the extent that, at the date of the statement of financial position, dividends have been accrued as receivable or a binding agreement to distribute past earnings in future has been entered into by the subsidiary.

34.21    Revenue Recognition

The Group’s primary activities comprise agricultural and agro-industrial activities.

The Group’s agricultural activities comprise growing and selling agricultural produce. In accordance with IAS 41 “Agriculture”, cattle are measured at fair value with changes therein recognized in the statement of income as they arise. Agricultural produce is measured at net realizable value with changes therein recognized in the statement of income as they arise. Therefore, sales of agricultural produce and cattle generally do not generate any separate gains or losses in the statement of income.

The Group’s agro-industrial activities comprise the selling of manufactured products (i.e. industrialized rice, milk-related products, ethanol, sugar, energy, among others). These sales are measured at the fair value of the consideration received or receivable, net of returns and allowances, trade and other discounts, and sales taxes, as applicable.

Revenue is recognized when the full control have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, and there is no continuing management involvement with the goods. Transfers of control vary depending on the individual terms of the contract of sale. Revenues are recognised when control of the products has transferred, being when the products are delivered to the customer, having this full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the customer’s acceptance of the products.

The Group also provides certain agricultural-related services such as grain warehousing/conditioning and other services, e.g. handling and drying services. Revenue from services is recognized as services are provided.

The Group leases owned farmland property to third parties under operating lease agreements. Rental income is recognized on a straight-line basis over the period of the lease.

The Group is a party to a 15-year power agreement for the sale of electricity which expires in 2042. The delivery period starts in April and ends in November of each year. The Group is also a party to two 15-year power agreements which delivery period starts in March and ends in December of each year, these two agreements will expire in 2024 and 2025, respectively. Prices under all the agreements are adjusted annually for inflation. Revenue related to the sale of electricity under these two agreements is recorded based upon output delivered.

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Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

34.22    Farmlands sales

The Group’s strategy is to profit from land appreciation value generated through the transformation of its productive capabilities. Therefore, the Group may seek to realize value from the sale of farmland assets and businesses.

Farmland sales are not recognized until (i) the sale is completed, (ii) the Group has determined that it is probable the buyer will pay, (iii) the amount of revenue can be measured reliably, and (iv) the Group has transferred to the buyer the risk of ownership, and does not have a continuing involvement. Gains from “farmland sales” are included in the statement of income under the line item “Other operating income, net”.

34.23    Assets held for sale and discontinued operations

When the Group intends to dispose of, or classify as held for sale, a business component that represents a separate major line of business or geographical area of operations, or a subsidiary acquired exclusively with a view to resale, it classifies such operations as discontinued. The post tax profit or loss of the discontinued operations is shown as a single amount on the face of the statement of income, separate from the other results of the Group. Assets and liabilities classified as held for sale are measured at the lower of carrying value and fair value less costs to sell.

Non-current assets and disposal groups are classified as held for sale if their carrying amount will be recovered through a disposal rather than through continuing use. This condition is regarded as met only when management is committed to the sale (disposal), the sale (disposal) is highly probable and expected to be completed within one year from classification and the asset is available for immediate sale (disposal) in its present condition. The statements of income for the comparative periods are represented to show the discontinued operations separate from the continuing operations.

34.24    Earnings per share

Basic earnings per share is calculated by dividing the net income for the year attributable to equity holders of the parent by the weighted average number of ordinary shares outstanding during the year. Diluted net earnings per share is computed by dividing the net income for the period by the weighted average number of ordinary shares outstanding, and when dilutive, adjusted for the effect of all potentially dilutive shares, including share options, on an as-if converted basis.

34.25    Equity-settled share-based payments

The Group issues equity settled share-based payments to certain directors, senior management and employees. Options under the awards were measured at fair value at the date of grant. An expense is recognized to spread the fair value of each award over the vesting period on a straight-line basis, after allowing for an estimate of the awards that will eventually vest. The estimate of the level of vesting is reviewed at least annually, with any impact on the cumulative charge being recognized immediately.

34.26    Research and development

Research phase expenditure is expensed as incurred. Development expenditure is capitalized as an internally generated intangible asset only if it meets strict criteria, relating in particular to technical feasibility and generation of future economic benefits. Research expenses have been immaterial to date. The Group has not capitalized any development expenses to date.

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Adecoagro S.A.

Notes to the Consolidated Financial Statements (Continued)

(All amounts in US$ thousands, except shares and per share data and as otherwise indicated)

35.     Information related to COVID-19 pandemic

In December 2019, a novel strain of coronavirus (“COVID-19”) was reported to have surfaced in China and started spreading to the rest of the world in early 2020. The COVID-19 virus is impacting economic activity worldwide and poses the risk that Adecoagro or its employees, contractors, suppliers, customers and other business partners may be prevented from conducting certain business activities for an indefinite period of time, including due to shutdowns mandated by governmental authorities or otherwise adopted by companies as a preventive measure. Given the uncertainty around the extent and timing of the future spread of COVID-19 and the imposition or relaxation of protective measures, it is not possible to predict the COVID-19’s effects on the industry, generally, and to reasonably estimate the financial effect on the Company.

In Brazil, the government created a crisis committee to monitor the impact of COVID-19 in March 2020. Since then, it has announced several measures (tax and others) to address the effects of COVID-19. In this regard, the Brazilian health authorities, as well as several state and municipal authorities have adopted or recommended social distancing measures.

In Argentina, on March 20, 2020 the Argentine government implemented a social, preventive and mandatory isolation regime, prohibiting the circulation of people on routes, roads and public spaces (the “Mandatory Isolation Regime”) which has already been partially reverted as of the day of this report.

As of the date of this report, the activities pursued by our Argentine subsidiaries, related to agricultural production, distribution and commercialization, were exempted from the Mandatory Isolation Regime for being considered “essential” activities. Also our activities in Brazil have no restrictions

In order to guarantee the hygiene and safety conditions established by the Ministry of Health and to preserve the health of the employees in our subsidiaries, Adecoagro has enacted Prevention and Action Protocols tailored for each facility, in addition to constituting Crisis Committees. Measures taken include but are not limited to: (i) daily temperature check upon arrival to the facility, (ii) mandatory distancing in the workplace, (iii) maximum limit of people in the lunch room and vehicles (iv) sanitary barriers, (iv) special protective attire. Additionally, remote work has been guaranteed for the duration of the Mandatory Isolation Regime for employees based in central offices, and a rotation scheme has been implemented for administrative employees based in the farms or industrial facilities.

Most of our businesses are operating without any major disruption both at the farm and industry level as well as on the road and at the ports. However, the demand of our products, mainly ethanol in Brazil, has been reduced as a consequence of the lockdown decided by the authorities in connection with the pandemic. Nevertheless, we are optimizing our production mix, in order to mitigate such reduction in demand.

The Company is closely monitoring the situation and taking all necessary measures at its disposal to preserve human life and its operation.

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