Adecoagro revealed that executives had been "travelling all
around" southern Brazil investigating potential sugar acquisitions, and was
mulling growth in the likes of rice, dairy and beef, after slashing its debts
in a "milestone" year.
Mariano Bosch, chief executive of the South American farm
operator - of which George Soros's Soros Fund Management is a major shareholder
- said that it had been looking at "many, many mills that are for sale in
Brazil" with a view to expanding a sugar and ethanol division which had become
Adecagro's "most important".
"We've been traveling all around the southern areas," Mr Bosch
told investors, in answer to a question of whether Adecagro was interested in Brazilian
cane processors said to be on the market.
However, he added that "we are only interested in the ones
where we really believe we can be the low cost producers or within the low cost
producers", stressing too the need for potential acquisitions to have easy
access to cane to crush.
"For us, one of the key things on understanding this
business is the sugarcane availability. "We've seen many mills for sale where
that was a problem."
Adecoagro - which has also unveiled plans for expanding its
existing Brazilian cane crushing capacity by 3.0m tonnes to 13.0m tonnes, to
ease "bottlenecks" - is considering investing in Argentina too, most likely for
developing operations in sectors in which it already operates.
"All the changes" in Argentine agriculture brought in by the
government of Mauricio Macri, elected in late in 2015, are "generating some opportunities",
Mr Bosch said.
"The main things we are looking at in Argentina… is on the
rice business where we see opportunities to continue growing with the same
business where we are," and which currently grows the grain on some 40,000
In dairy too, "we see opportunities to continue growing
there" after a 2016 in which Adecoagro achieved "very interesting returns" in
what was a "very difficult year" for the sector in Argentina.
Move into meat?
Expansion into meat too was also being considered, although Mr
Bosch said that such a move would require confidence "that from Argentina we
can be a low-cost producer for the whole world, not only for the domestic
market in Argentina
"In terms of poultry or beef or those types of businesses are
things that are within the scope, but we need to find our competitive
While a move into "transforming vegetable proteins into
animal proteins" was "something that makes sense for us, "there are a lot of
things that have to be clear for us in order to invest or to deploy capital in
something new and different", he told investors, flagging a higher hurdle for
returns on investment.
"We need to have clarity that we are going to obtain above
The comments followed the release of the group of results
showing that the group had achieved $84.9m in free cash flow in 2016, which it
termed a "milestone year for Adecoagro", in showing benefits of "eight years of
"We are getting to the place where we really feel
comfortable" on the strength of the group's balance sheet, Mr Bosch said.
The group's net debt, as a multiple of earnings before
interest, taxation, depreciation and amortisation (ebitda) fell to 1.6 times as
of the end of last year, from 2.4 times a year before, on Itau BBA