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Sugar sweetens profits at Soros-backed farm group

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Adecoagro, the South American farm operator in which investment legend George Soros is the top shareholder, unveiled a quadrupling in earnings, helped by a boost from an early start to its cane crushing season.

The New York-listed group, of which Soros Fund Management owns 21.4% according to filings, unveiled a jump in earnings to $13.76m in the January-to-March quarter, up from $2.60m a year before.

The earnings rise, on revenues up 15.6% at $109.2m, was led by a 370% jump to $17.93m in earnings before interest, taxation, depreciation and amortisation (ebitda) at the group's Brazilian sugar and ethanol division.

The improvement at the business reflected largely a $12.3m gain on marking sugar hedges to market prices.

However, the group also flagged support from an early start to cane crushing, as part of a strategy to extend the harvest season and "dilute" fixed costs - which represent some 85% of total divisional expenses - by spreading them across a longer period.

Early start

"We are strategically seeking to extend the harvest year, by anticipating the commencement of the season as well as finishing as late as possible," the company said.

Adecoagro brought forward the start of the crushing season its Angelica mill by 15 days, compared with last year, and at its Ivinhema mill by 40 days.

This shifts spurred a 10-fold jump to 461,124 tonnes in cane processing volumes in the January-to-March period, and backed a 37% increase to 79,424 cubic metres in ethanol sales.

The group also highlighted improving cane crop metrics, which it said reflected disciplined replanting and improved agronomics, with the yield up 41% at 90.7 tonnes per hectare.

Sugar levels in cane rose by 14.5% to 117.9 kilogrammes per tonne.

Industry trend

The data tally with a strong start to the Brazilian Centre South cane harvest identified by industry group Unica, which showed cumulative crush volumes so far in 2015-16 at 45.0m tonnes as of the start of the month, a gain of 12% year on year.

The sugar concentration in cane, at 109.31 kilogrammes per tonne, was running 1.6% higher year on year, Unica said.

However, there may be limits to the extent to which Brazilian cane crushers fell it desirable to extend their processing season, given typically wetter conditions from around December to March.

Besides hampering cane harvesting, the moisture stimulates cane growth, tending to lower sugar concentrations in crop.

'Above-average weather'

Adecoagro's rise in profits in cane contrasted with a 36% slide to $23.09m in underlying ebitda in the farming and land transformation division, reflecting lower crop prices.

However, the group, which farms on 224,300 hectares largely in Argentina and Uruguay on top of the 127,000 hectares of Brazilian cane land, underlined good prospects for its ongoing harvest

"Harvesting operations for our 2014-15 crops are well underway favoured by above-average weather conditions," the group said.

"As we complete the harvest we expect to see improvement in yields in most of our crops."


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