Key Highlights

  • Adecoagro shares are trading down 8.34% at $8.30 versus a prior close of $9.05.
  • Nine-month adjusted EBITDA hit a record $471.8 million, almost $100 million above the prior record.
  • Fertilizer EBITDA reached $109 million in the third quarter, led by urea.
  • Sugar, ethanol and energy EBITDA fell on lower sugar prices and volumes.
  • Pro forma Leverage stands at 3.2 times.

Adecoagro (NYSE:AGRO) is trading down 8.34% at $8.30, reversing Wednesday's 1.34% gain to $9.05 after third quarter results posted after the close. Record fertilizer Earnings pushed nine-month adjusted EBITDA to $471.8 million, but weaker sugar and ethanol results and higher interest costs kept the quarter flat. Peer Cresud (NASDAQ:CRESY) is trading down 1.50%.

Fertilizers Carry the Year

Third quarter gross sales were $591 million, or $1.5 billion year to date, and quarterly EBITDA was in line with last year. Fertilizers drove the growth, with urea realized prices at $561 per tonne, up $81. Fertilizer EBITDA was $109 million in the third quarter and $283 million year to date, up 65%.

Urea nine-month cost was $237 per tonne versus $262 a year earlier. Variable costs make up 70% to 75% of the total, and 80% to 85% of gas is at fixed prices.

Sugar, Ethanol and Energy Falls

Sugar, ethanol and energy EBITDA was $101 million in the third quarter and $120 million year to date, down on lower sugar prices and volumes and lower mark-to-market of biological assets. That segment's EBITDA fell 10.7% in the third quarter. Adjusted Net Income also fell on higher acquisition-related interest and taxes.

Caarapé Mill Adds Capacity

The Caarapé mill was acquired for about $136 million, under $30 per tonne of its 5 million tonne capacity. It will start crushing March 1 and is expected to process 4 million to 5 million tonnes in 2027, with room to ramp to 6 million to 7 million tonnes. Management expects crushing growth of about 15% including Caarapé.

Fourth Quarter Outlook

Fourth quarter ethanol sales should be about 200,000 cubic meters higher, with prices about 25% above the third quarter including a Subsidy that is confirmed only through December 9. Full-year unit cost is expected to be about 5% higher in dollar terms.

Analysts Are Split

Four analysts cover the stock, with one bullish, two neutral and one bearish. Their average target is $12.93, with a range of $10.50 to $15.

Leverage and Ethanol Subsidy Decide the Rebound

Pro forma leverage of 3.2 times puts deleveraging at the center of the story. Investors will watch whether fourth quarter ethanol prices hold up once the subsidy window closes after December 9, how fast urea prices stay above last year's levels and whether the Caarapé start on March 1 stays on schedule.

Analysts on the call also pressed management on plans to expand the urea plant at Profertil and on cost pressure there.