Slide 1: Adecoagro Investor Day 2018
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Slide 2: Disclaimer
Disclaimer This presentation may contain certain forward-looking statements and information relating to Adecoagro S.A. and its subsidiaries (collectively, “Adecoagro” or the “Company”) that reflect the current views and/or expectations of the Company and its management with respect to its performanc
Slide 3: Agenda
11.00-11.20 Registration (20´) 11.20-11.40 Introduction: Adecoagro in numbers: Past, Present & Future (20´) Mariano Bosch, CEO 11.40-12.40 Sugar, Ethanol & Energy Business (60´) Renato Junqueira, SE&E Director 12.40-12.50 Coffe Break (10´) 12.50-13.20 Farming Business (30´) Alejandro Lopez, Sustaina
Slide 4: Speakers
Speakers Name Past Experience Position Mariano Bosch Co-founder and Board Member CEO In the past, Mr. Bosch has been an active agribusiness entrepreneur Renato Junqueira Has been in the Company for the past 8 years SE&E Director Prior to joining Adecoagro, Mr. Junqueira served as CFO in Usina Moema
Slide 5: Adecoagro in numbers: Past, Present & Future
} 3 aero Adecc agro in’ nt mbers: 7 . Past, Present : | & Future
Slide 6: Company history and regional expansion
Regional Expansion Consolidation First Steps Second Growth Wave and entry into S&E Pre- IPO 1000 Foundation Land purchases in Uruguay and ERP implementation 2000 NYSE listing 75,000 ha of Brazil 900 Consolidation of SE&E cluster. agriculture production Entry in the SE&E business Init
Slide 7: Production, net sales, EBITDA and cash from operations 2010 vs 2016/17
Production Net Sales (In MM Tons) (In USD MM) 1,918 ~2x ~2x 870 1,033 402,0 426 2010 2016/17 Avg. 2010 2016/17 Avg. Adjusted EBITDA Net Cash From Operations (In USD MM) (In USD MM) ~3x 287 ~7x 106 95 15 2010 2016/17 Avg. 2010 2016/17 Avg.
Slide 8: S&P Agriculture Index
S&P Agriculture Index ¹ (59%) 130 120 110 90 I 100 70 50 30 10 2010 2011 2012 2013 2014 2015 2016 2017 2018 F ¹ Source: Bloomberg SPGSAGP Index 01/01/2011 – 09/25/2018; Components: Wheat, Corn, Soybean, Coffee, Sugar, Cocoa and Cotton
Slide 9: Net debt position and debt maturity profile
Net Debt(1) Position Debt Maturity Profile - Pre-Bond(1) 250 (USD MM) Net Debt Net Debt/EBITDA 200 600 02 150 526 520 500 500 475 2,2 475 I02100 480 50 2,0 02 396 0 400 < 1 year 1-2 years 2-3 years 3-4 years 4-5 years > 5 years 2,0 355 Debt Maturity Profile - Post-Bond(1) 02 (USD MM) 1,7 300 500 02
Slide 10: Expansion CAPEX schedule
Expansion CAPEX Schedule (USD MM) 120 S&E Farming 95 70 71 45 65 21 30 50 50 50 35 10 2017 2018F 2019E 2020E 2021E SE & E Farming 30% increase in nominal crushing Crops Rice Dairy Increase in leased area. growth Agricultural & industrial Double current operations Significant cost dilution enhancemen
Slide 11: Revenues, Adj. EBITDA and EBITDA minus maintenance CAPEX
Revenues Adj. EBITDA Adj. EBITDA – Maintenance CAPEX (In USD MM) (In USD MM) (In USD MM) 450 Farming Sugar 870 +26% 1,100 1,200 I 1,000 Sugar Farming & LT +39% 400 I 350 Sugar Farming & LT +66% 300 340 I 287 260 600 300 181 210 572 426 256 155 228 80 500 95 43 298 52 198 110 120 66 60 47 2010 2016/1
Slide 12: Net cash from operations and free cash flow
Net Cash from Operations1 Free Cash Flow (In USD MM) (In USD MM) 240 I 2x 210 230 ~4x 200 105 180 I 170 46 15 2010 2016/17 Avg. 2021E (61) 2010 2016/17 Avg. 2021E 1Net cash from operations=Adj. EBITDA-Maint. CAPEX- Tax Paid- Working Capital- Interest
Slide 13: Sugar, Ethanol & Energy
GS adecoagro
Slide 14: Overview and Historical Performance
Overview and Historical Performance Competitive Advantages Continuous Improvement and New Projects Cluster Expansion Environmental & Social
Slide 15: Milling evolution
157 MW 168k ha 95% own 72/28% 3 Mills export Total Area sugarcane ethanol mix capacity Milling (MM tons) 14.2 Angélica Mill MG Sugar Ethanol Energy MS 5,6 MM tons (th. tons) (th. m3) (th. MWh) Ivinhema Mill Monte Alegre Mill 956 781 950 7,4 MM tons 1,2 MM tons Milling evolution (MM tons) CAGR: 25% 1
Slide 16: Milled cane, sugar, ethanol and energy production
Milled Cane (th. tons) Sugar Production (th tons) CAGR: +14% CAGR: +8% Own Third parties VHP White Sugar Ethanol Production (th. m³) Energy Exported (th. MWh) CAGR: +21% CAGR: +18% 2010 2011 2012 2013 2014 2015 2016 2017 2018 F Hydrous Ethanol Anhydrous Ethanol 16
Slide 17: Harvested area, TRS content and sugarcane yield
Harvested Area (th. ha) Sugarcane Yield (tons/ha) TRS Content (kg/ton) TRS (tons/ha) 17
Slide 18: Milling hours, energy exported and employees
Average Hourly Milling (ton/hour) Effective Average Milling Hours (hours) Energy Exported (kWh/ton) Employees per million tons milled 18
Slide 19: Competitive Advantages
Overview and Historical Performance Competitive Advantages Continuous Improvement and New Projects Cluster Expansion Environmental & Social
Slide 20: Competitive advantages: low competition, high TRS/ha, continuous harvest
1 Low competition 2 High TRS/ha potential 3 Continuous Harvest 4 High cogeneration efficiency 5 Production Flexibility 6 ICMS tax incentive 20
Slide 21: Cluster competition map
1 Low competition with other mills and crops Main competition is cattle raising Possibility to keep expanding crushing capacity Cluster Competition Map Ribeirão Preto Competition Map Ribeirão Angelica Mill Preto Ivinhema Mill 100km Radius 12 mills 100km Radius 40 mills 21
Slide 22: Annual lease return: cattle vs sugarcane
1 Annual return of the lease (USD/ha) + 107% 214 104 Cattle Sugarcane The opportunity cost is cattle raising Sugarcane is more profitable to the landowner Many farmers see their farm as a way of life instead of an economic activity 22
Slide 23: Land lease cost advantage
1 % of the total TRS produced paid to the land owner The ratio between the TRS produced and paid to the landowner is one of the best in the country This is a consequence of both low leasing rates and high TRS/ha production 2013 2014 2015 2016 2017 2018 Traditional Areas¹ Available TRS Leasing Co
Slide 24: Average TRS/ha
2 Average TRS/ha Traditional Areas¹ ¹Source: PECEGE/ESALQ (17/18) The TRS/ha has significantly improved in the last four seasons, as a result of: Second cycle of sugarcane with better yields Cleaning the sugarcane areas Protect the biological assets Have a high amount of own cane allows a gr
Slide 25: Continuous harvest: TRS and rainfall
3 Project Implemented and Tested Gradually Strategy is a perfect fit to our region Continuous Harvest Off-season (days) Average Rain TRS (kg/ton) More rain in the traditional season Less rain in the offseason Lower variance of the TRS during the year Average Rains (mm) TRS (kg/ton) Center So
Slide 26: Continuous harvest vs traditional use of time
3 Use of Time (Continuous Harvest vs. Traditional) Main Benefits: Fixed cost dilution To produce and sell ethanol during off-season Main Challenges: CS Season = 220 effective days Have cane ready for harvest all year round Cluster Continuous Harvest = 240 effective days Industrial maintenanc
Slide 27: Harvesters and tractors machine yield
2015 2016 2017 2018 AVG machine yield (th. tons/machine/year) Work Fronts Harvesters (th. tons/machine/year) Tractors Center South Adecoagro (2018F) Source: CTC 27
Slide 28: Energy exported per ton milled
4 Energy Exported per ton milled (kWh/ton) High energy export per ton crushed Cost Efficient equipment Low energy consumption Advantage²: High margin business and predictable cash flow +USD 1.0¢/lb Annual contracts (instead of 8-month contracts), ¹Source: CTC ² Energy Price: R$220/MWh due
Slide 29: Ethanol evolution and higher ethanol mix
5 Ethanol Evolution (th, m³) Our higher ethanol mix generates an increased revenue of USD 12.6MM equivalent to a cost reduction of USD 0.4¢/lb when compared to the S&E Sector average mix (60%) mix Hydrous Ethanol Anhydrous Ethanol Direct effect • Carbon credit expected to generate an additional reve
Slide 30: Strategy to increase ethanol mix
5 Strategy to increase the Ethanol Mix in Cluster in 2018: Phase 1 We have been sending sugarcane “xarope” to the fermentation tanks to increase the alcoholic level of the tanks; Adjust the sugarcane supply according to the distillery capacity of both mills; Halt sugar production during boiler
Slide 31: Cluster logistics and ethanol tax benefit
6 Sugar Freight Cost: Cluster: USD 37/ton (BRL 148/ton) MG UMA: USD 23/ton (BRL 91/ton) MS Cluster UMA mill mills 422 km Ethanol Basis: 320 km Paulínia 538 km Santos USD 17.5/m³ (R$ 70/m³) discount over Maringá rail transloading Port Paranaguá Ribeirão Preto-SP price Port Cluster Logistics Com
Slide 32: Cash cost breakdown: low cost producer
Cash Cost Breakdown Main Competitive Advantages (USD ¢/lb¹) (USD ¢/lb) Agriculture Industry SG&A Cogeneration Depreciation² Cash Cost¹ Low Cost Producer USD 9.0¢/lb ¹ Fx: 3.73 BRL/USD ² Only plant, property and equipment depreciation 32
Slide 33: Continuous Improvement and New Projects
Overview and Historical Performance Competitive Advantages Continuous Improvement and New Projects Cluster Expansion Environmental & Social
Slide 34: Continuous improvements: innovation as competitive advantage
S adecoagro Continuous improvements: Innovation as a competitive advantage a adecoagro ®rergia em crescir 0 acucar orgar WoO
Slide 35: Biogas from vinasse project
Concentrated Biogas Energy Vinasse 5 m³/h 520 m³/h 6,000 MWh/year Phase 1 USD 372 thousand Concentrated Vinasse Biogas 160 m³/h 12,844 m³/h Biodigester Potential Energy Biofuel 336 k OR 74 MWh / year MM L / year USD 21 MM USD 0.6¢/lb 35
Slide 36: MPB seedling multiplication
Main Benefits Speed up the multiplication of sugarcane varieties Healthier seeds, improving sugarcane yield Reduce our planting costs Next Steps MPB (th. Seedlings) Planting Cost (BRL/ha) 1 seed line to 6 of planting 36
Slide 37: Organic sugar
Main aspects Organic High premium product over sugar#11 Sugar USD 9 MM (est.) of additional revenues by 2022 From a logistics perspective UMA is at good location close to the Santos Port (Export) Production Projection Organic Sugar (th. tons) Parity (USD ¢/lb) Domestic market International mar
Slide 38: Cluster Expansion
Overview and Historical Performance Competitive Advantages Continuous Improvement and New Projects Cluster Expansion Environmental & Social
Slide 39: Cluster expansion: milling capacity and capex
Cluster Expansion: Cluster Milling Capacity (MM tons) Low industrial investments in Angelica and Ivinhema Mills Milling capacity expansion of 3MM tons (to be reached in 2021) + % Industrial and agricultural fixed cost dilution Expansion using cheap land leases availability Expansion of are
Slide 40: Expansion map of leases
Expansion Map of Leases Cluster expansion of 41 thousand hectares Bridge Angélica Mill Average distance radius reduction. Enabling even further cost reductions New leasing costs consistent with historical average Ivinhema Mill Average Distance (km) 31,20 31,30 31,70 30,90 27,90 30,77 30,65 Cur
Slide 41: Environmental & Social
Overview and Historical Performance Competitive Advantages Continuous Improvement and New Projects Cluster Expansion Environmental & Social
Slide 42: Regional challenges and workforce training
Population and sugarcane production Regional Challenges map High Low quality Low share of of life in demographic low terms of density educated healthcare employees and education MS 6,9 hab/km2 63 hab/mil ton 166,2 hab/km 2 Lack of 127 hab/mil ton experienced Different workforce work culture Recruitm
Slide 43: Headcount, absenteeism, turnover and injury leave
Headcount / Milling Absenteeism / Turnover (%) 8% 35 7% 30 25 6% 20 5% 15 4% 10 3% 5 2% 0 Headcount Milling (k ton) *Last Update Jul/2018 Absenteeism (%) Turnover Injury Leave Overtime (th. hours) (total number / year) 43
Slide 44: Integrated sugarcane system
Integrated Sugarcane Rainfall Solar Energy CO2 O2 Fertilizers Agrochemicals Diesel system is the most efficient agro-model as it reuses all ELECTRICITY BIO-FERTILIZER PLANTATION residues COMPOST (ASHES) DIGESTER BAGASSE BOILER & COMPOST MILL POWER PLANT ELECTRICITY VINASSE JUICE CONCENTRATOR VINAS
Slide 45: Farming
Slide 46: Farming: integrated business model
Capacity to accommodate 7,500 cows Integrated business model Potential to double the size over the next Over 40,000 fully irrigated hectares couple years Production of 240,000 tons of rough rice Productivity of 36.7 Liter/Cow/Day, 67% above Argentina’s average 3 state-of-the-art rice mills Low cost
Slide 47: Farming asset locations and production mix
Northwest Argentina 33k owned productive hectares 20 farms(1) 194 ha of productive area(2) USD 795 MM appraisal by Cushman & Wakefield(3) Uruguay Northeast Argentina 49k owned productive hectares 2k owned productive hectares Argentina Milk 11% Soybean Humid Pampas 17% Other crops 38k owned productiv
Slide 48: Rice
Slide 49: Rice: seed, farm, mill and commercialization
Seed + Farm + Mill + Commercialization Seeds Seed Breeding Irrigated Farms Export Rough Rice Mills Rice Domestic Market
Slide 50: Irrigated hectares and lowest cost rough rice producer
40k irrigated hectares in the North East of Argentina Lowest cost producer of rough rice(USD/ton)1 4 large farms Natural Advantages Selling Cost Production Cost 20% of Argentina production Solar Radiation Main rice Seed producer 202 16 187 13 Fertile Soils 157 NE of 17 Argentina 186 173 140 Pl
Slide 51: Rice sales by country and world rice trading
Adecoagro´s tons sold by country (%) Adecoagro´s tons sold by segregated rice (%) 2013 2018 +7% Avg. Price Premium over Non-Segregated Costa Rica Europe 20% Costa 1% 10% Rica ~3x Middle Brazil 2% East 2x 13% Mexico Domestic 23% amount of 6% Market 37% customers Domesti c Market 6% 29% Middle East Br
Slide 52: Seed breeding, fleet tracking, drones and robotics
Seed Breeding Fleet Tracking Drone Surveillance & Artificial Intelligence Robotics & Automation
Slide 53: Rice best practices and our people
Precision Ground Leveling Best Practices Less water usage (and thus less energy) Balanced fertilization (includes soil analysis) Higher operational efficiencies (less diesel per hectare) Integrated Pest Management (includes water analysis) Our People Certifications and Standards Strong tra
Slide 54: Rice planted area, yields and production cost
Scalable en productive system Adecoagro Rough Rice Production Cost (USD/ton) 42,0 8,00 196 Planted Area (th. Has) 40,3 7,50 40,0 39,7 Yields (tons/ha) 6,90 7,00 169 38,0 37,6 158 6,50 5,87 5,91 140 36,0 6,00 35,3 5,50 34,0 5,10 5,00 32,0 4,50 30,0 4,00 2014/15 2015/16 2016/17 2017/18 2014/15 2015/16
Slide 55: Rice investments: leveling, machinery, logistics, packaging
Precision Ground Leveling Machinery & Operational Improvement To achieve 80% of total area To acquire planters and harvesters By that we expect to enhance rice productivity By that we expect to decrease operational costs EBITDA Growth (MM USD) 28 ~2x 27 I 12 26 2017 2021E Rough Rice Logistic
Slide 56: Crops
Slide 57: Crops production chain
Crop Rotation Land Harvest Storage & Conditioning Transport Export No Till Domestic Market
Slide 58: Crops: low cost producer
Fertilizer (Kg/ha) Spraying per hectare (#) Natural Advantages Highly Fertile Soils 500 400 9 Temperate Climate ~2x Modern Technology Proximity to Ports 4 Low Cost Producer - Humid Brazilian Humid Brazilian Pampas Cerrado Pampas Cerrado
Slide 59: Soybean and corn cost comparison
Soybean Cost (USD per ton) Corn Cost (USD per ton) Production Selling costs Fobbing costs Export tax Production Selling costs Fobbing costs Export tax 253 151 238 10 140 217 125 10 55 38 119 94 177 10 38 13 4 94 10 54 4 13 13 52 13 40 24 24 189 105 163 76 86 92 50 48 Adecoagro Humid Pampas Illinois
Slide 60: GPS, logistics and scouting platforms
GPS and Steering Pilot Logistic Platform Scouting Platform Controlled Spraying
Slide 61: Crops best practices and our people
No Till Best Practices Protect soils from erosion risks Crop Rotations and Balanced Fertilization Increase organic matter content Integrated Pest Management Wheat/Soybeans Soybeans Corn Our People Certifications and Standards Strong training programs Commercial Standards: RTRS, 2BS, EPA
Slide 62: Storage facilities and productive area increase
Storage and Conditioning Facilities Increase Productive in Area To invest in storage and conditioning To take advantage of our own facilities in order to: organization and skills to increase area to operate Increase our operational flexibility Enhance optimization of processing EBITDA Growth
Slide 63: Land transformation process and appreciation
Land Appreciation Land Transformation Process Full Rotation & High Yields Best * Reaching its highest production capabilities Practices Medium Low-Yield Crops * Adecoagro applies a ↑ Yields careful process to ↑ Land Value Natural Grasses develop the land and ↓ Costs *Identify underman- achieve its h
Slide 64: Dairy
Slide 65: Dairy production chain
Biofertilizer Grid Biodigester Corn & Forage Electricity Free Stall Harvest Fluid Milk Processing Storage Facilities Domestic Market Feed Breeding Export
Slide 66: Feed and free stall model
Own high quality feed Cows stay in sand beds with controlled temperature Silage to store and feed the cows in a timely manner Quantity and quality of the feed is given to the cows
Slide 67: Dairy productivity and cost reduction
Cow comfort translates in high protein conversion rate Optimal Platform to Process milk 1 Kg 1.5 Lts Traceability Quantity Quality High Consistency Animal Feed Free Stall Fluid Milk Increase in scale along with an increase in productivity High productivity resulted in cost reduction (USD/100kg) Prod
Slide 68: Free stall, genomics, biofertilizers and IoT
Free Stall Model Biofertilizers Sexed Semen & Genomics IoT & Big Data
Slide 69: Animal welfare, biodigester and people
Biodigester Animal Welfare Production of renewable electricity Cow comfort: controlled atmosphere, sand beds Reduction of GHG (methane => CO2) Health and Reproduction Protocols Our People Certifications and Standards Local and abroad Operational Standards training programs Focus on Qua
Slide 70: Dairy capacity increase and processing facilities
Increase in Capacity (Cows) Investing in Processing facilities We are investing in doubling production capacity One facility to produce Powder Milk and Cheese (Export and Domestic) By that we expect to enhance efficiencies through economies of EBITDA Growth (USD MM) Second facility to produc
Slide 71: Industrial facilities footprint
Industrial facilities location Ideal Footprint to process our milk Vertical integration is aligned with our strategy of being the low cost producer of milk We will transform our raw milk, with high quality and consistency, into dairy products for both export and domestic markets. Major Dairy T
Slide 72: Chivilcoy and Morteros plants
CHIVILCOY MORTEROS Production capacity of 700 K Liters of milk per Day Production capacity of 970 th. Liters of milk per Day o Max production capacity UHT milk 450 th. Liters per Day o Powder Milk 650 th. Liters per day o Max production capacity UP milk 300 th. Liters per Day o Cheese 320 th. Li
Slide 73: Commercial Outlook
Slide 74: China soy imports and soybean basis
China Soy Imports (MM tons)1 Basis Soybean 300,00 250,00 Basis 2018/19 97 95 +10% Basis (5-Yr 200,00 Avg) 18% 150,00 62 73 (47%) 100,00 30 16 50,00 2017/18 2018/19 2 0,00 USA ARG + BR Rest 1Source: USDA 2Company´s estimates -50,00
Slide 75: Hydrous ethanol demand
Hydrous Demand (th. m3) Th. m3 2.000 75% 72% 72% 72% 1.800 70% 69% 1.600 Average 42% 64% 65% increase YoY 64% 1.400 60% 60% 58% 1.200 55% 1.000 Demand (K(th. m3)m3) (th.m3) Average demand 2017 (K m3) Parity Ratio (%) 800 50% Jan/18 Feb/18 Mar/18 Apr/18 May/18 Jun/18 Jul/18 Aug/18
Slide 76: Ethanol vs sugar prices in cts/lb
Cts/lb Prices in cts/lb equivalent 24,00 Ethanol MS vs. Sugar: +3% Ethanol MS vs. Sugar: +28% Ethanol MIX AGRO: 53% RP 54% Ethanol MIX AGRO: 72% RP 63% 20,00 16,00 12,00 8,00 jan-17 feb-17 apr-17 jun-17 jul-17 sep-17 oct-17 dec-17 feb-18 mar-18 may-18 jun-18 aug-18 oct-18 Anhydrous MS Sugar Hydrous
Slide 77: Ethanol price projection MS
Cts/lb Ethanol Price Projection - MS (cts/lb) 17,00 76% 70% 70% 70% 70% 16,00 71% 68% 68% 68% 15,00 65% 65% 66% 65% Average 62% 62% 25% 14,00 60% 60% 60% premium 61% over sugar 13,00 56% 12,00 51% 11,00 46% oct-18 nov-18 dec-18 jan-19 feb-19 mar-19 apr-19 may-19 jun-19 jul-19 aug-19 sep-19 oct-19 no
Slide 78: Global sugar supply and demand balance
Global Supply and Demand Balance (Oct/Sep Basis) India Sugar Production & Stock to Use Ratio (MM tons / %) (MM tons / %) 11,0 2,5% 52,0% 9,0 36,0 51% 51% 51,0% 34,0 51% 51% 7,0 2,0% 50,0% 32,0 49% 5,0 10,56 10,15 30,0 49,0% mln mt 1,5% 28,0 48,0% mln mt 3,0 48% 4,84 47,0% 26,0 33 1,0 2,66 2,37 32 46
Slide 79: Corporate Governance
Slide 80: Highest standards of corporate governance
One Class of Common Shares CLASS OF SHARES Equal Voting Rights per Share. No Controlling Shareholder ELECTION OF BOARD OF DIRECTORS By Majority of votes in AGM. Staggered Basis. BOARD Highly Qualified and experienced. COMPOSITION Expertise in Business/Finance/Agro industrial BOARD INDEPENDENCE Major
Slide 81: Management and board members
Management Board Members Name Years Past Experience Years with Company Name Past Experience Position Position Plinio Musetti Partner in the private equity group of Pragma Patrimonio Mariano Bosch 48 Agribusiness Since Inception Chairman Over 20 years of CEO and Private Equity experience entrepreneur
Slide 82: Value creation: investment, divest, optimize, dividends
Investment Projects Asset VALUE Optimize Divesting CREATION Leverage Dividends/ Buyback
Slide 83: Management and board committees
Management Committees Board Committees Sugar, Ethanol & Energy Compensation Farming Risk & Commercial Commercial Strategy Internal Audit Audit
Slide 84: Our values
adecoagro Our Values EFFICIENCY We create trust We look for the top based relationships efficiency achieving by creating honest links the lowest cost in our community. of production. TRANSPARENCY We work with transparency by being honest and sincere with our relationships. INNOVATION We promote inno
Slide 85: Contact
Charlie Boero Hughes - CFO Juan Ignacio Galleano - IRO Email: Email: chboero@adecoagro.com jgalleano@adecoagro.com TEL: TEL: +5411 4836 8804 +5411 4836 8624