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Adecoagro cashes in on sugar rally

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Revenues at the South American agribusiness Adecoagro surged, as the company increased sugar output to cash in on rising prices.

But the company flagged the risk posed by the large speculative net-long position in sugar futures markets, which could weigh on prices.

"The main threat on sugar prices remain the large speculative position currently in place," Adecoagro said.

And the compnany took a hit from exchange rate fluctuations, which weighed on earnings.

Rising sugar returns

Adecoagro reported gross sales in the three months to September 30 up 44.5% year on year, at $246.4m.

Adjusted earnings before interest, taxation, depreciation and amortisation (ebitda) rose 32% year on year, to $89.8m.

But the company's net income was down 58% year on year, at $6.81m, due primarily to negative currency effects.

Until this year, the company's largest shareholder was George Soros, but the billionaire has since sold down his stake, although he still owns some 10% of the company.

Cashing in on sugar

Adecoagro's sugar and ethanol business "delivered outstanding operational and financial performance," over the period, the company said.

Ebitda rose 23% year on year, as the company was able ramp up cane crushing, and increase the volume of cane diverted to sugar rather than ethanol, thanks to rising prices.

The company reported "higher agricultural productivity and efficiency gains in our industrial and cane logistics operations, which coupled with favorable weather resulted in a 20.2% increase in sugarcane crushing [year on year].

Hedging loss

But the benefits from of the higher sugar price was partially offset by losses due to sugar hedging.

Ethanol prices in Brazil have benefited from the higher proportion of cane diverted toward sugar production, Adecoagro said

Despite a cut to gasoline prices, "ethanol prices have remained strong and are expected to maintain throughout the year".

The company's land business reported ebitda up 76% year on year.

Earnings were helped by to higher margins for its rice and dairy businesses, efficiency gains due to the weaker Argentine peso, and the end of a legal dispute for its cattle business.

By William Clarke

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