Adecoagro´s Net Income in 4Q17 was $5.0 million, driving 2017 full year Net Income to a record $11.7 million

LUXEMBOURG, March 15, 2018

Main highlights for the period:

• Full year Net Income stood at $11.7 million, 214.2% above previous year.

• Delivered positive cash in 2017. Adjusted Free Cash Flow from Operations in 2017 was $78.0 million, while Adjusted Free Cash Flow was $7.2 million

• Full year 2017 Adjusted EBITDA⁽¹⁾ was $276.3 million, 7.3% below previous year.

Financial & Operational Highlights

• In our Sugar, Ethanol and Energy business, Adjusted EBITDA in 4Q17 reached $81.3 million, 27.4% lower than in 4Q16. Operating and financial performance in the quarter was negatively affected by: (i) substantial rainfalls, an increase of over 30% compared to the 10 year average, which caused harvest delays and disruptions, resulting in a 29.4% decrease in sugarcane crushing volumes compared to 4Q16; (ii) lower realized sugar and ethanol prices in US dollars; and (iii) higher production costs driven mainly by the decrease in yields and lower crushing volumes.
  
  On a full year basis, Adjusted EBITDA was $247.3 million with an Adjusted EBITDA margin net of 3rd party commercialization of 52%. The year-over-year decrease in financial performance is primarily explained by (i) a 7.9% reduction in crushing volumes resulting in lower sugar, ethanol and energy production volumes, (ii) the increase in cost of production for the reasons explained above; and (iii) lower sugar prices in US dollars. These negative effects were mainly offset by: (i) higher industrial efficiencies (milling per hour increased 6.0% year-over-year, reaching 2,072 tons per hour), (ii) higher ethanol selling volumes, (iii) higher realized ethanol and energy prices in US dollars; and (iv) a $43.0 million increase derived from the mark-to-market of our hedging derivatives position. 
  
  As a result of excess rains, the unharvested sugarcane as of December 31, 2017 continues to grow on our fields and is expected to be harvested during 2018 with higher yields. This agricultural effect is already factored in the $11.6 million gain derived from the mark-to-market valuation of our unharvested biological asset. At the same time, as we are deferring harvest operations, we expect to crush more sugarcane during 2018. This, in turn, will enhance efficiencies in our industrial operations increasing EBITDA generation.

• On a full year basis, Adjusted EBITDA for the Farming business reached $50.7 million, a $3.3 million or 6.1% decrease compared to the same period of last year. This decrease is primarily explained by: (i) lower margins in our Crops business manly driven by the appreciation of the Argentine peso, in real terms; and an $8.5 million decrease in All Other Segments explained by an extraordinary gain recorded in 2016 related to the settlement of an arbitration dispute with Marfrig Argentina SA. These negative effects were partially offset by the outstanding operational and financial performance of our Dairy business. Cow productivity remains at very high levels and we were able to profit from higher raw milk prices as a result of of supply shortages due to excess rainfalls during the first half of the year. At the same time, the $12.1 million hedging gain derived from the mark-to-market of our derivatives position also contributed to offset the negative effects.
  
  Net Income in 2017 totaled $11.7 million, $8.0 million higher compared to the previous year. The 7.3% lower Adjusted EBITDA was more than offset by the lower foreign currency losses and lower income tax payments.

Strategy Execution

• Adjusted Free Cash Flow: During 2017, our operations have delivered $78.0 million of Adjusted Free Cash Flow from Operations (AFCF before expansion capex), 41.5% lower compared to 2016. This decrease is fully explained by the $43.8 million higher maintenance capex invested during 2017, as our planting and operations stabilize and reach sustainable levels. At the same time we anticipated additional maintenance expenses during the fourth quarter as a result of abundant rainfalls.
  
  As for Adjusted Free Cash Flow, we delivered $7.2 million in 2017. As previously announced, we are currently undertaking several organic expansion projects across all our existing businesses. This has driven expansion capex to $70.8 million in 2017. We believe Adjusted EBITDA and Free Cash Flow generation will increase substantially as we ramp-up and consolidate these projects.

• Organic Businesses Growth Update (5 Year Plan):
  
  Cluster Expansion: The expansion of the cluster in Mato Grosso do Sul is moving forward according to plan. As previously announced, investments in Angelica are already complete and crushing capacity has increased by 17%, from 900 tons/hour to 1,050 tons/hour. As for investments in Ivinhema mill, we are advancing according to schedule and budget and we expect to conclude them by the first half of 2018.
  The expansion of our sugarcane to supply the additional nominal crushing capacity is also advancing well. We expect sugarcane planting to grow at a pace that will allow total milling to increase by approximately 0.5 million tons per year.
  
  Dairy Business: The construction of free stall #3 is moving forward according to plan. By July 2018, we expect to start populating the facility, targeting operations at 40% of total capacity by the end of year. We are advancing well in growing and securing corn silage to feed the additional cows. As for the bio-digester, we already stabilized energy production generating attractive results.
  
  Rice Business: We expect to conclude investments by the first half of the year, allowing us to improve  our rice processing and distribution, and increase the value of main by-products.
  
  Crops Business: We expect to complete the construction of one of the two storage and grain conditioning facilities by end of 2018. This investment will allow us to reduce our conditioning and logistics costs and enhance our commercial flexibility.

• Share Repurchase Update: As part of our commitment to generate long term value for our shareholders, we have been actively engaged in the execution of our share repurchase program. Since our last Earnings Release and as of today, we purchased an additional 4.1 million shares at an average price of $9.6 per share. We expect to continue our share repurchases under the program during 2018 subject to necessary investment in our expansion projects.
  We believe that both the organic expansion projects, and the repurchasing of shares represents the best allocation of our capital.

(1) Adjusted EBITDA is defined as consolidated profit from operations before financing and taxation, depreciation, amortization plus the gains or losses from disposals of non-controlling interests in subsidiaries.  Adjusted EBIT is defined as consolidated profit from operations before financing and taxation, plus the gains or losses from disposals of non-controlling interests in subsidiaries. Adjusted EBITDA margin and Adjusted EBIT margin are calculated as a percentage of net sales.

Non-Gaap Financial Measures: For a full reconciliation of non-gaap financial measures please refer to page 29 of our 4Q17 Earnings Release found on Adecoagro's website (ir.adecoagro.com)