Rosario, Argentina
November 12, 2019

Bioceres Crop Solutions Corp. (“Bioceres”) (NYSE American: BIOX), a fully integrated provider of crop productivity solutions, announced today its unaudited consolidated financial results for its first fiscal quarter 2020, the three-month period ended September 30, 2019. Financial results are expressed in U.S. dollars and are presented in accordance with International Financial Reporting Standards.

1Q20 Business and Financial Highlights

• Revenue growth of 22% year over year (YoY) to $36.3 million and 11% on a comparable basis, as the Company continues to ramp up existing capacity in Argentina, expand its footprint of biological products to other countries and increase adjuvants sales in Brazil.
• Installed capacity utilization rate for the twelve-month period ended September 30, 2019 at the micro-beaded fertilizer plant was 25%, up from 12% for the twelve-month period ending September 30, 2018.
• HB4 soybean seed inventory began to ramp-up. First 100 hectares (250 acres) harvested in the U.S., which will allow planting approximately 3.000 hectares (7,500 acres) in the upcoming summer crops season in Argentina.
• HB4 wheat seed inventory began to ramp-up. First 400 hectares (1.000 acres) planted during the Fall in the southern hemisphere are expected to be harvested during Fiscal 2Q20.
• Subsequent to quarter end, issued $15 million note securing working capital financing to support ramp-up of HB4 planting while also extending debt maturity.

Commenting on the results for the quarter, Mr. Federico Trucco, CEO of Bioceres, said “We are pleased that the strong growth in FY19 continued throughout the first quarter of 2020. We are especially pleased with the performance of our international business, which accounted for approximately one third of total revenues in the period. Despite generally tough financial conditions in Argentina, we were able to secure additional financing, which will support the ramp-up of our HB4 seed inventories both in soybean and wheat. We are getting ready to harvest the first commercial varieties from hundreds of hectares, which will allow us to plant thousands of hectares in the 2019-2020 crop cycle. As we ramp-up HB4 seed inventories, we continue to demonstrate the resiliency of HB4 crops, evidenced in this period by the significant yield performance of EcoWheat seeds relative to conventional fields in what has been a particularly dry winter season.”

Mr. Enrique Lopez Lecube, CFO of Bioceres, said “Despite delayed purchases in Argentina due to macro-economic uncertainty and unfavourable sowing conditions in some regions of the country, we continued to generate strong financial results in the first quarter. Comparable revenue continued to grow at double digits, driven by sustained ramp-up of our micro-beaded fertilizer facility, and overall solid growth in Brazil. These strong growth drivers more than offset the impact of delayed purchases in Argentina, which we view as a timing issue that should normalize over the course of the year. EBITDA declined modestly year over year, in part due to aforementioned timing of purchase decisions and in part due to temporary margin pressures in Argentina brought on by a misalignment between changes in FX and inflation. Despite these headwinds, the commercial teams did a fantastic job managing working capital and generating cash, reducing net leverage to 2.14, down from 4.07x a year ago”

REVIEW OF OPERATING PERFORMANCE

Installed capacity utilization of the micro-beaded fertilizer plant for the twelve-month period ended September 30, 2019 reached 25%. This was a 50% YoY increase bringing total production to 12.4k tons through the trailing twelve-month period. The ramp was driven both by strong sales growth in Argentina, Brazil, and Paraguay.

Adjuvants aggregated volume in Fiscal 1Q20 decreased 7% compared to the same period in 2018 due to a deliberate strategic shift from high volume, low margin products into higher margin adjuvants in Argentina. By contrast, sales volumes in Brazil increased 66% year-on-year as the Company continues to execute its growth strategy in that country.

Inoculants doses aggregated volume in Fiscal 1Q20 decreased 7% year-on-year, reflecting farmers´ delayed purchase decisions for summer crops seed treatment packs in Argentina until closer to sowing in 2Q20. We believe that this was largely driven by the macro uncertainty during the quarter, as well as limited soil moisture in some regions of Argentina which delayed planting activities. This was partially offset by higher inoculant sales in Brazil and Paraguay and increased farmers’ purchase of winter crops seed treatment packs in Argentina, which had been delayed from 4Q19.

REVIEW OF FIRST QUARTER 2019 RESULTS

Comparable Revenues and Comparable Gross Profit are key operational metrics used by the management team to assess the Company's underlying financial and operating performance. The Company has introduced the term “Comparable” to reflect the result of a given metric excluding the impact of IAS 29.

For comparison purposes, the impact of adopting IAS 29 is presented separately in each of the applicable sections of this earnings release, in a column denominated “As Reported”. For further information please review Application of IAS 29 section.

Revenues

Table 1: 4Q Revenues by Segment

Revenues increased 22% to $36.3 million in Fiscal 1Q20, compared to $29.6 million during Fiscal 1Q19.

Comparable Revenues for the quarter, excluding the impact of IAS29 as explained above, increased 11% YoY reflecting higher revenues in the crop protection and crop nutrition segments, partially offset by lower revenues in seed and integrated products: International subsidiaries and export comparable sales increased 32% YoY to $13.2 million.

• Crop Protection Comparable Revenues increased 13% YoY, or $2.2 million, to $19.5 million, driven by increased adjuvants sales in Argentina and Brazil, and higher sales of baits and seed treatment insecticides and fungicides. This was partially offset by lower sales of stored grain products and formulation services to third parties.

• Seed and Integrated Products Comparable Revenues declined 18% YoY, or $1.3 million, to $5.7 million reflecting delayed farmers’ purchases of summer crop seed treatment packs, partially offset by winter crop pack sales delayed from the prior quarter and higher seeds sales.

• Crop Nutrition Comparable Revenues increased 27% YoY, or $3.0 million, to $14.0 million driven by sustained growth in micro-beaded fertilizers sales in Argentina, Brazil and Paraguay. Higher inoculant sales in Brazil and Paraguay also contributed to segment sales growth.

Gross Profit

Table 3: 1Q Gross Profit by Segment

Gross profit increased to $15.9 million in 1Q20, from to $15.1 million in 1Q19.

Comparable Gross Profit was $17.8 million in 1Q20, compared with $18.6 million in the year-ago quarter. Strong revenue growth was offset by the impact of the slowdown in the peso depreciation in Argentina relative to the inflation rate. Since most of our revenues are pegged to the US dollar, while a significant portion of our production costs are denominated in Argentine pesos, this timing mismatch negatively impacted gross profit in the quarter. Comparable gross margin for 1Q20 was 45.3% compared to 52.6% in the prior year quarter, driven by the following performance by business segment:

• Crop Protection Comparable Gross profit was $8.0 million, compared to $8.4 million in Fiscal 1Q19. Gross margin was 40.9% in Fiscal 1Q20 compared to 48.7% in the year ago quarter. The overall decline in gross margin for the crop protection segment is explained by increased manufacturing costs in US dollars in Argentina, due to the aforementioned FX and inflation dynamics, as well as growth in revenues driven by lower margin products than the previous YoY quarter product mix.

• Seed and Integrated Products Comparable Gross profit was $3.7 million, compared to $5.1 million in the year ago quarter. Gross margin was 63.7%, compared to 72.1% in Fiscal 1Q19. Increased sales of high margin royalty payments was more than offset by increased manufacturing costs in Argentina due to the aforementioned FX and inflation dynamics.

• Crop Nutrition Comparable Gross profit was $6.1 million, compared to $5.1 million in the prior year quarter, driven by the ramp-up of the micro-beaded fertilizer plant utilization rate, as well as higher inoculants sales in Brazil, Paraguay and other international subsidiaries. Gross margin declined to 43.7% compared to 46.1% in Fiscal 1Q19 due to the aforementioned FX and inflation dynamics.

Selling, General and Administrative Expenses

SG&A in Fiscal 1Q20 was $8.7 million compared to $6.1 million in the corresponding period in 2018. Excluding a one-time expense of $0.8 million for stock-based compensation in Fiscal 1Q20, SG&A in the quarter would have been $7.9 million. The year over year increase is mainly explained by higher inflation affecting Argentine peso denominated costs, which was not completely offset by a depreciation of the currency. Negative effects from FX and inflation dynamics on SG&A were partially offset by lower personnel and administrative costs.

Research & Development

R&D expenses include ongoing efforts to maintain and continuously update the Company’s existing product portfolio. R&D expenses in the quarter increased YoY by $0.2 million to $1.2 million.

Adjusted EBITDA & Adjusted EBITDA Margin

During Fiscal 1Q20, the Company reported Adjusted EBITDA of $8.1 million, compared with $9.0 million in Fiscal 1Q19. Adjusted EBITDA margin was 22.4% compared to 30.4% in the prior year quarter. Strong sales growth, higher JV contributions and solid cost control were offset by a mismatch between Argentine peso depreciation and the inflation rate in Argentina.

Table 5: Adjusted EBITDA Reconciliation and Adjusted EBITDA Margin

Financial Income and Loss

Table 6: Net finance result

Interest expense from financial debt obligations represents the main financial metric that management uses to assess cost of financing. Exchange difference income and expenses as well as net gains or losses of inflation effect on monetary items, are believed to have a limited impact on the underlying business as a significant portion of both cash flows and financial debt obligations are in US dollars.

During Fiscal 1Q20 the Company reported a net financial loss of $16.4 million compared to a net financial loss of $13.7 million in Fiscal 1Q19, principally due to an increase of $1.0 million in interest and financial expenses and a $2.2 million decrease from the net gain from the inflation effect on monetary items. This was partially offset by a decrease in exchange differences of $1.5 million caused by FX variations in Argentina during those periods. Increased interest expenses are mainly explained by the impact of higher interest rates on working capital financing sourced in Argentina, and mostly used for operations in that country.

Balance Sheet & Cash Flow

Table 7: Capitalization and Debt Ratio

1- Excludes discounted checks and includes outstanding installments of financed payment from the acquisition of Rizobacter.

Cash and cash equivalents on September 30, 2019 was $5.5 million. During the quarter, cash and cash equivalents increased by $2.0 million, while the total debt balance decreased by $6.0 million to $86.8 million.

Net Debt to LTM Adjusted EBITDA improved to 2.14x in 1Q20 from 2.24x reported at the end of Fiscal 4Q19, and 4.07x at the close of Fiscal 1Q19.

SUBSEQUENT EVENTS

HB4 Soybean Seed Inventory Ramp-Up

HB4 soybean seed inventory ramp-up was finalized in Newport, Arkansas (US) and available inventory is being shipped to Argentina for planting of approximately 3.000 hectares in November and December of 2019.

Secures Additional Financing

On October 15, 2019, Bioceres entered into a two-year bullet loan agreement for up to US$20 million. This facility extended the company’s maturity profile and provided additional flexibility for the HB4 inventory ramp-up.

Website: http://www.bioceres.com.ar

Published: November 13, 2019