th
Lysaker, Norway, November 12 , 2014
Third Quarter 2014 Interim Report
Highlights

Q3 marked by consolidation and corporate development activities

Q3 sales revenue at USD 0.6m and cash collection at USD 1.0m reflect current
business seasonality

Issuing convertible bond guaranteed by key shareholders to finance growth strategy

Corporate functions moving to the U.S. results in changes to the organization

Nick Adamchak, Managing Director of fertilizer supply chain manager Ameropa North
America, to be nominated as member of Agrinos Board of Directors

Commercial growth in the U.S. and core geographies, and continued development of
research and development operations key priorities moving into 2015
“Agrinos holds a very attractive position in the biologicals segment for enhanced agricultural productivity.
While we continue to make progress to become profitable as a group, I’m excited about the company’s
commercial, technological and organizational achievements in 2014. Bringing strong R&D professionals
and corporate functions together in the U.S., and strengthening our Board of Directors with sector profile
Nick Adamchak, will bolster our competitive advantage in this rapidly emerging market. The
developments we are experiencing, and the clear opportunities that lay ahead of us, are recognized by
the strong support our largest owners show via their active leadership in strengthening Agrinos’ balance
sheet to enable our investments in R&D and production. I look forward to continuing the implementation
of Agrinos’ sharpened commercial and technology development strategies as we enter 2015” said Chief
Executive Officer, D. Ry Wagner.
Business Review
Agrinos develops, produces and markets biological crop inputs, also described as agricultural biologicals.
The company has commercial market activities in the US, Brazil, China, India, Mexico, Spain and
Malaysia/Indonesia.
As part of the Agrinos growth strategy and refocus on the U.S and certain core geographies, the company
is currently moving from an Oslo, Norway headquartered operating model to a hub based model with
corporate support functions, R&D and Americas sales and marketing leadership placed in the U.S.,
production in Mexico and EMEA and Asia sales and marketing led from Norway.
During the third quarter of 2014, the U.S. and Brazil sales revenue of USD 0.2 million and cash collection
of USD 0.3 million mainly reflect current business seasonality. The partnerships with third party
distributors have developed positively so far in 2014 and Agrinos’ technology is gaining traction at the
end-user level. Year-to-date, the U.S. and Brazil sales revenues amounted to USD 2.2 million, compared
with USD 2.0 million in the full year 2013 and USD 0.8 million in the full year 2012.
In the Europe, Middle East, Africa (EMEA) and Asia region, Agrinos recorded third quarter sales
revenues of USD 0.4 million and collection of USD 0.6 million driven by distributors in India and the
company’s long term palm oil efforts in Malaysia/Indonesia. Year-to-date, the region’s sales revenues
amounted to USD 2.6 million. In India, Agrinos first sales to a new distributor with nationwide reach have
Third Quarter 2014 Interim Report
taken place. By that, the company then has nationwide customer reach through two large national
distributors in India, the first on-boarded in 2012, while the latter in 2014. In China, the company’s
partnership with Kingenta Ecological Engineering Group Co Ltd. progressed in the third quarter with
product launch of Agrinos’ technology through Kingenta’s distribution network.
Agrinos operations in Mexico have been through consolidation and restructuring in 2014. In the third
quarter, the company’s distributors in Mexico reported deployment of approximately 215,000 units to endusers. While the distributors are continuing to roll-out substantial product volumes, they are still working to
become profitable. Agrinos continues to explore strategic options for its commercial operations in the
country.
Financial review
Profit and loss
The third quarter operating income of negative USD 3.6 million is significantly impacted by the volatility of
the reporting currencies. The strengthening of the USD vs NOK and MXN during 2014 has a positive
impact on the costs of approx. USD 1 million in the quarter. Adjusted for the currency impact the costs are
significantly lower than in previous quarters.
Sales revenue amounted to USD 0.6 million in the third quarter, mainly explained by sales in the U.S. and
India. No sales revenue was recognized in Mexico since Agrinos’ distributors are carrying sufficient
inventories and their cash collection was modest in the quarter.
Cost of goods sold (COGS) was USD 0.2 million in the quarter, reflecting the low volume sold in the
quarter. COGS comprise raw materials, production costs and overhead, as well as shipping, handling and
transportation.
Salaries and personnel costs amounted to USD 1.8 million in the quarter. Redundancy costs of net USD
0.4 million related to reduction in manning including moving corporate functions from Norway to US is
included in the figure. Agrinos had 152 employees (FTE) at the end of the quarter, down from 158
employees at the end of the second quarter.
Other operating expenses amounted to USD 1.7 million in the third quarter, positively impacted by USD
0.9 million due to settlement of a liability with one of the distributors in Mexico.
Research and development expenses are included in Salaries and personnel costs and Other operating
expenses with a total of USD 1.5 million, an increase of USD 0.6 million compared to the second quarter.
Depreciation and amortization was USD 0.7 million in the quarter.
Total operating expenses in the third quarter thus amounted to USD 4.4 million before depreciation,
amortization and earn-out.
The earnings before interest, taxes, depreciation and amortization (EBITDA) pre earn-out, were negative
at USD 2.9 million in the quarter vs negative USD 3.4 million in the second quarter of 2014.
On October 15, 2013, the company entered into an agreement to amend an earn-out agreement with
KarlCo in relation to sales in Mexico and Colombia in the period 2011–2014 (see note 6). Based on the
result of the operations in Mexico, no earn-out was provisioned for in the third quarter of 2014.
Agrinos AS, Vollsveien 13 H, N-1366, Norway, Tel: +47 210 45 600, www.agrinos.com
Page 2 of 14
Third Quarter 2014 Interim Report
Due to exchange rate fluctuations the financial income ended at a positive USD 0.9 million in the quarter.
Interest of USD 0.5 million invoiced to the Mexican distributors was not recognized as interest income in
the quarter due to the uncertainty related to their ability to service the debt to Agrinos.
Cash flow and balance sheet
Net cash flow from operating activities was negative USD 6.7 million in the third quarter of 2014, mainly
driven by operational expenditures.
Gross cash burn, defined as operational and capital expenditures, was USD 7.9 million in the quarter. Of
the gross cash burn in the quarter, USD 1.8 million was related to research and development, up from
USD 1.1 million in the second quarter, and USD 0.8 million was payment to the Bioderpac earn out
holders. There was no funding of the distributors in Mexico in the quarter.
The cash collection in the third quarter amounted to USD 1.0 million. Cash and cash equivalents totaled
USD 8.9 million at end of the quarter.
The strengthening of the US dollar versus the Norwegian krone during the quarter has, all other things
equal, reduced the balance sheet values at the end of the quarter. Hence, some of the developments in
the balance sheet from the second to the third quarter are driven by the changes in currency rates. The
aggregated translation effect reduces the equity at the end of the quarter with approx. USD 6.5 million
Total non-current assets amounted to USD 18.0 million at the end of the quarter, down from USD 19.4
million at the beginning of the quarter. Goodwill and other intangibles related to intellectual property
amounted to USD 8.9 million.
Inventories are down by USD 0.6 million to USD 10.7 million during the third quarter, reflecting sales in
the quarter. The production has been insignificant in the quarter.
Accounts receivable decreased by USD 2.3 million to USD 23.2 million during the quarter. Included in this
balance sheet item is this quarter’s net invoicing of interest and services of USD 1.3 million to the
distributors in Mexico. The accounts receivable towards the distributors in Mexico amounts to USD 21.6
million at the end of Q3.
Other receivables increased by USD 0.2 million to USD 11.8 million during the quarter. Included in this
balance sheet item is USD 9.3 million in VAT, of which the largest part is related to the operations in
Mexico.
Accounts payable amounted to USD 4.5 million at the end of the quarter. The reduction of USD 1.1
million during the quarter is mainly due to a settlement with one of the distributors.
Other current liabilities decreased by USD 0.5 million in the quarter to USD 23.7 million. The main
components in this balance sheet item at the end of the quarter are: Deferred sales revenue and interest
and service income accrual of USD 12.3 million; taxes and VAT of USD 6.3 million; redundancy and
closing costs of USD 2.0 million; earn–out of USD 1.0 million; and contingent liabilities of USD 0.2 million.
Total current liabilities decreased by USD 1.6 million to USD 28.7 million during the quarter.
Due to substantial translation effects as a result of the strengthening of USD during the quarter, the book
equity was reduced from USD 52.7 million to USD 43.5 million at the end of the quarter. The equity ratio
ended at 60%, down from 63% at the start of the quarter.
Agrinos AS, Vollsveien 13 H, N-1366, Norway, Tel: +47 210 45 600, www.agrinos.com
Page 3 of 14
Third Quarter 2014 Interim Report
Analytically restated sales revenue and operating income
Due to the large inventories built up by the Mexican distributors through 2012 not yet decreased to a
normal level and the modest cash collection in Mexico, the company has for the last eight quarters
reported zero in sales revenue from Mexico. To better reflect the company’s activity in Mexico, an
analytical restatement based on the numbers of Agrinos’ HYT® units deployed by the distributors is
presented each quarter.
The analytically restated sales revenue for the group amounted to USD 2.2 million in the third quarter,
reflecting the deployment of approximately 215,000 units by the distributors in Mexico in the quarter. The
analytical restatement of operating income for the group amounted to negative USD 2.5 million. The
number of deployed units drives the cost of goods sold in the analytically restated operating income. See
note 5 for further details.
Research and Development
To support both existing and future commercial activities, Agrinos has scaled-up its research and
development operations through 2014 by hiring additional biotech professionals, investing in
infrastructure to deliver R&D and commercial success and to improve and advance the company’s
technology. Short-term, focus will be on line extensions based on improvement of current products and
new patent filings.
The company has had several seasoned employees join its research and development team in the first
three quarters of 2014. Senior Ph. D professionals have been hired within R&D strategy, operations and
strategic alliances, product development, biochemical analytics and regulatory affairs.
The build-up of a global research and development office and facility in Davis, California, is another
important element of Agrinos’ expansion of its research and development activities. The facility opened
October 2014 and is located in one of the global centers for the development of biologicals solutions in
agriculture, Davis, California. This hub provides linkages to major agricultural and biotech expertise and
collaboration opportunities with the University of California, Davis.
Organization
On the back of the positive development in the U.S and to align overhead costs with the company’s
growth strategy, Agrinos currently steps up its presence in the Americas and brings key functions closer
to the main market and the research and development operations.
As part of this strategy, the company is currently moving from an Oslo, Norway headquartered operating
model to a hub based model with corporate support functions, R&D and Americas sales and marketing
leadership placed in the U.S., production placed in Mexico and EMEA and Asia sales and marketing
leadership placed in Oslo, Norway.
As a consequence of moving corporate functions to the U.S. and implementation of a corporate hub
model, John Janczak has been appointed as Agrinos new Chief Financial Officer, effective December 1,
2014. He will be based in Dallas, Texas, and will take responsibility for Finance, Investor Relations and
Corporate Communication in his new role. Janczak joins Agrinos following a career in finance and
management as a Senior Finance Manager & Controller for Cardinal Health, Inc., Business Manager of
Sears Holdings, CFO of MMD Holdings, Inc., and most recently, Executive Vice President of Finance, and
then CFO and President of Falcon Steel Company.
The transition of corporate functions from Norway to the U.S. will take place during the remainder of the
year. Agrinos AS will continue as the parent company in the group, and its common stock will continue to
be traded on the Norwegian OTC market.
Agrinos AS, Vollsveien 13 H, N-1366, Norway, Tel: +47 210 45 600, www.agrinos.com
Page 4 of 14
Third Quarter 2014 Interim Report
Corporate Governance
Board Composition
The Board of Agrinos has stated that it is seeking to strengthen its capacity and competence mix. Agrinos
will hold an Extraordinary General Meeting in early December, inter alia enabling the election of Nick
Adamchak, Managing Director of Ameropa North America, as member of Agrinos Board of Directors.
Ameropa is a privately owned international grain and fertilizer supply chain company based in
Switzerland. The group sells fertilizers, grains and petrochemicals with regional offices on all five
continents and to support its core international trade business, the group invests in production,
distribution and logistics assets. In February of this year, it was announced that Agrinos and Ameropa
North America and its partner Windcrofte Holdings, LLC, had entered into a multi-year Distribution,
License and Research Agreement for the sales and marketing of Agrinos High Yield Technology®
(HYT®) products in North America, and for the development of next generation yield enhancement
technologies based on the Agrinos and Windcrofte Holdings product development platforms.
Nick Adamchak brings to the board his recent distribution experience with Agrinos’ technologies and
products in addition to his over 30 years of experience in the fertilizer business. For the last 11 years he
has been the Managing Director North American Operations for Ameropa and he is on the Board of
Directors of The Fertilizer Institute (TFI) and Fertilizer Industry Roundtable.
Subject to the election at the Extraordinary General Meeting, the Board of Agrinos will consist of the
following:
Kristian Johansen, acting Chairman of the board
Morten Sigval Bergesen
Gerardo Enrique Esquer Aguirre
Jean Baptiste Oldenhove
Nick Adamchak
Outlook
Agrinos is a biological-based agricultural company pursuing growth through commercial activities as well
as research and development. The company’s novel technology, strong field trial results and established
routes to large agricultural inputs markets is believed to provide attractive opportunities where the
company can create value for its customers and capture a margin.
Commercially, the company is experiencing positive development within the U.S. and select other
markets, driven by in-the-field results, maturing distributor relationships and end-user technology
adoption. The company expects this progress to continue throughout the year and will continue to pursue
growth in the U.S. and other core geographies moving into 2015.
To protect and strengthen competitiveness, Agrinos will invest in further development of existing and new
products and other research and development activities targeted at supporting commercial progress.
Agrinos’ ongoing corporate transition project, where corporate functions are moved to Dallas, Texas and
Davis, California, are other measures to strengthen the company’s effectiveness and competitiveness.
The company continues to carefully monitor its financial position in Mexico. While the Mexican distributors
continue to deploy substantial amounts of Agrinos products, limited cash has been returned to Agrinos
year-to-date. Hence, the company continues to explore strategic options for its commercial operations in
Mexico.
Agrinos strategy targets commercial growth in the U.S. and select geographies based on continued
development of the company’s research and development operations. This strategy requires a strong
Agrinos AS, Vollsveien 13 H, N-1366, Norway, Tel: +47 210 45 600, www.agrinos.com
Page 5 of 14
Third Quarter 2014 Interim Report
balance sheet. The company’s goal in 2015 is to become cash flow positive before global research and
development expenditures, corporate transition charges and capital expenditures. To facilitate new
investments and step up of research and development activities the company needs additional financing.
To ensure that Agrinos has the financial platform necessary to implement its strategy through 2015 and to
achieve both short term and long term goals as a leading company in the biologicals segment for
enhanced agricultural productivity, the board has decided to issue a convertible bond of up to NOK 165
million (approx. USD 25 million). NOK 113 million (approx. USD 17 million) has been guaranteed by two
of the company’s largest shareholders, both with a long term view towards the future of the Company and
this sector. Of this guarantee, Manor will invest NOK 100 million (approx. USD 15 million) and Havfonn
will invest NOK 13 million (approx. USD 2 million), represented at the board respectively by Jean Baptiste
Oldenhove and Morten Bergesen. Separate published company release and information on the
company’s website provide further details.
As part of its long term growth strategy, Agrinos will continue to consider a stock exchange listing and
IPO. However, Agrinos will not prioritize IPO preparations in the short to medium term, but rather focus
resources on commercial progress in key geographies, the development of global research and product
development activities and new production facilities.
th
November 12 , 2014
The Board of Directors
Agrinos AS
Lysaker, Norway
Agrinos AS, Vollsveien 13 H, N-1366, Norway, Tel: +47 210 45 600, www.agrinos.com
Page 6 of 14
Third Quarter 2014 Interim Report
Consolidated Financial Statements – unaudited
Group Condensed Consolidated Profit & Loss Statement (Unaudited)
USD
YTD 30.09.2014
H1 2014
Q3 2014
Q2 2014
Q1 2014
YE 2013
4 801 520
567 367
5 368 887
4 189 525
390 915
4 580 440
611 995
176 452
788 447
3 859 964
115 415
3 975 379
329 561
275 500
605 061
4 392 522
4 942 853
9 335 375
Cost of goods sold
Salaries and personnel costs
Depreciation and amortisation
Other operating expenses
Earn-out
Total operating expenses
-1 398 505
-8 275 986
-2 015 980
-8 526 882
0
-20 217 353
-1 213 780
-6 461 988
-1 323 391
-6 857 854
0
-15 857 013
-184 725
-1 813 998
-692 589
-1 669 028
0
-4 360 340
-1 131 537
-3 515 163
-673 861
-2 753 128
0
-8 073 689
-82 243
-2 946 825
-649 530
-4 104 726
0
-7 783 324
-906 676
-14 128 392
-3 691 328
-75 514 401
6 710 264
-87 530 533
Operating income
-14 848 466
-11 276 573
-3 571 893
-4 098 310
-7 178 263
-78 195 158
Net financial income / expense (-)
1 385 225
509 471
875 754
1 255 139
-745 668
8 341 919
Net income / loss (-) before taxes
-13 463 241
-10 767 102
-2 696 139
-2 843 171
-7 923 931
-69 853 239
-107 479
-105 281
-2 198
-105 281
0
916 631
-12 168
-6 574
-5 594
48 211
-54 785
-445 500
-13 558 552
-10 865 809
-2 692 743
-2 996 663
-7 869 146
-68 491 108
Sales revenue
Other operating revenue
Operating revenue
Tax expense
Minority Interest
Net income / loss (-)
Average currency exchange rate applied for Q3 of 2014 converting the Mexican peso (MXN) to the US dollar (USD) was 13.11.
Average currency exchange rate applied for Q2 of 2014 converting the Mexican peso (MXN) to the US dollar (USD) was 13.13.
Average currency exchange rate applied for Q1 of 2014 converting the Mexican peso (MXN) to the US dollar (USD) was 13.24.
Average currency exchange rate applied YE 2013 (Q4) converting the Mexican peso (MXN) to the US dollar (USD) was 12.76.
Agrinos AS, Vollsveien 13 H, N-1366, Norway, Tel: +47 210 45 600, www.agrinos.com
Page 7 of 14
Third Quarter 2014 Interim Report
Group Condensed Consolidated Balance Sheet Statement (Unaudited)
Assets
USD
09.30.2014
06.30.2014
03.31.2014
12.31.2013
7 275 514
1 669 214
987 669
9 932 397
7 940 390
1 782 122
1 027 230
10 749 742
8 442 550
1 835 122
1 016 779
11 294 451
8 658 890
1 894 907
1 020 617
11 574 414
74 109
3 092 628
596 668
810 200
6 669 466
-3 163 949
8 079 122
77 073
3 189 683
408 927
935 822
7 046 043
-3 017 096
8 640 452
76 206
3 133 936
256 015
1 066 818
6 938 436
-2 780 847
8 690 564
76 480
3 145 202
256 935
1 239 757
6 981 277
-2 574 223
9 125 428
0
0
0
0
0
0
0
0
Total non-current assets
18 011 519
19 390 194
19 985 015
20 699 842
Inventories
Total goods
10 732 164
10 732 164
11 318 801
11 318 801
12 032 244
12 032 244
12 339 969
12 339 969
Accounts receivable
Other receivables
Total receivables
23 196 110
11 762 239
34 958 349
25 483 052
11 586 665
37 069 717
24 154 804
12 535 900
36 690 704
22 058 279
12 822 622
34 880 901
8 909 086
15 721 047
18 824 955
25 066 669
Total current assets
54 599 599
64 109 565
67 547 903
72 287 539
Total assets
72 611 118
83 499 759
87 532 918
92 987 381
Assets
Goodwill
Other intangible assets
Deferred Tax Asset
Total intangible assets
Land
Buildings
Improvements to leased premises
Vehicles
Machines, fixtures and fittings etc.
Accumulated depreciation
Total tangible fixed assets
Investments in other shares and interests
Total financial non-current assets
Bank deposits, cash etc.
Currency exchange rate applied at 30 September 2014 converting Mexican peso (MXN) to US dollar (USD) was 13.49.
Currency exchange rate applied at 30 June 2014 converting Mexican peso (MXN) to US dollar (USD) was 12.97
Currency exchange rate applied at 31 March 2014 converting Mexican peso (MXN) to US dollar (USD) was 13.12
Currency exchange rate applied at 31 December 2013 converting Mexican peso (MXN) to US dollar (USD) was 13.08
Agrinos AS, Vollsveien 13 H, N-1366, Norway, Tel: +47 210 45 600, www.agrinos.com
Page 8 of 14
Third Quarter 2014 Interim Report
Group Condensed Consolidated Balance Sheet Statement (Unaudited)
Equity and Liabilities
USD
09.30.2014
06.30.2014
03.31.2014
12.31.2013
100 607
148 922 928
149 023 535
105 514
156 187 461
156 292 975
107 972
159 825 772
159 933 744
106 729
157 989 676
158 096 405
-625 076
-104 878 266
-612 908
-102 997 876
-606 334
-102 495 881
-513 503
-95 631 555
43 520 193
52 682 191
56 831 529
61 951 347
0
0
0
0
0
0
0
0
378 448
378 448
525 610
525 610
533 711
533 711
630 233
630 233
Accounts payable
Current tax payable
Other current liabilities
Total current liabilities
4 455 752
607 005
23 649 720
28 712 477
5 527 845
622 254
24 141 859
30 291 958
5 928 957
700 921
23 537 800
30 167 678
6 450 462
874 421
23 080 918
30 405 801
Total liabilities
29 090 925
30 817 568
30 701 389
31 036 034
Total equity and liabilities
72 611 118
83 499 759
87 532 918
92 987 381
Equity
Share capital
Premium reserve
Total paid in capital
Minority interests
Accumulated P&L
Total equity
Liabilities
Deferred tax
Total provisions for liabilities
Other non-current liabilities
Total non-current liabilities
Currency exchange rate applied at 30 September 2014 converting Mexican peso (MXN) to US dollar (USD) was 13.49.
Currency exchange rate applied at 30 June 2014 converting Mexican peso (MXN) to US dollar (USD) was 12.97
Currency exchange rate applied at 31 March 2014 converting Mexican peso (MXN) to US dollar (USD) was 13.12
Currency exchange rate applied at 31 December 2013 converting Mexican peso (MXN) to US dollar (USD) was 13.08
Agrinos AS, Vollsveien 13 H, N-1366, Norway, Tel: +47 210 45 600, www.agrinos.com
Page 9 of 14
Third Quarter 2014 Interim Report
Group Condensed Consolidated Cash Flow Statement (Unaudited)
USD
Cash flow from operating activities
Profit/Loss (-) before tax
Depreciation and amortisation
Changes in inventories, receivables and payables
Changes in other accruals/currency effects
Net cash flow from operating activities
Cash flow from investment activities
Investments/disposals of tangible fixed assets
Changes in other investments
Net cash flow from investment activities
Cash flow from financing activities
Proceeds from borrowings (current and non-current)
Net proceeds from issuance of shares
Net cash flow from financing activities
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
YTD 30.09.2014
H1 2014
Q3 2014
Q2 2014
Q1 2014
YE 2013
-13 463 241
2 015 980
-724 736
-3 819 324
-15 991 321
-10 767 102
1 323 391
-213 693
374 302
-9 283 102
-2 696 139
692 589
-511 043
-4 193 626
-6 708 219
-2 843 171
673 861
1 053 602
-1 793 962
-2 909 670
-7 923 931
649 530
-1 267 295
2 168 264
-6 373 432
-69 853 239
3 691 328
63 193 270
-31 537 077
-34 505 718
85 523
0
85 523
42 103
0
42 103
43 420
0
43 420
-186 137
0
-186 137
228 240
0
228 240
-1 636 393
0
-1 636 393
-251 785
0
-251 785
-104 623
0
-104 623
-147 162
0
-147 162
-8 101
0
-8 101
-96 522
0
-96 522
363 241
26 646 951
27 010 192
-16 157 583
25 066 669
8 909 086
-9 345 622
25 066 669
15 721 047
-6 811 961
15 721 047
8 909 086
-3 103 908
18 824 955
15 721 047
-6 241 714
25 066 669
18 824 955
-9 131 919
34 198 588
25 066 669
Average currency exchange rate applied for Q3 of 2014 converting the Mexican peso (MXN) to the US dollar (USD) was 13.11.
Average currency exchange rate applied for Q2 of 2014 converting the Mexican peso (MXN) to the US dollar (USD) was 13.13.
Average currency exchange rate applied for Q1 of 2014 converting the Mexican peso (MXN) to the US dollar (USD) was 13.24.
Average currency exchange rate applied YE 2013 (Q4) converting the Mexican peso (MXN) to the US dollar (USD) was 12.76
Agrinos AS, Vollsveien 13 H, N-1366, Norway, Tel: +47 210 45 600, www.agrinos.com
Page 10 of 14
Third Quarter 2014 Interim Report
Notes
Note 1 – Unaudited Financial Statements
Key figures, financial highlights and financial statements are presented as official accounts translated into
USD from NOK based on average rates for profit and loss accounts and current rate for the balance
sheet accounts.
Note 2 – Minority Interests
Agrinos acquired 55% of the shares in PT Agrinos Indonesia through a share issue in January 2012. The
shareholding in Agrinos Malaysia Sdn Bhd was reduced to 84.7% through a share issue to the company’s
local partners in December 2011. Agrinos increased its shareholding in Agrinos Beijing BioTech from 50
per cent to 60 per cent during the first quarter of 2013.
Note 3 – Accounting Principles
As from the fourth quarter 2012, Agrinos has introduced more strict criteria as deployment of products
and payment by end users that have to be met to have sales revenue recognized. Revenue recognition
will occur only when the company receives firm and reliable documentation in the form of contracts and
purchase orders from end customers, or when such documentation with a high degree of certainty will be
obtained, that products will be deployed by the end user within 6 months and fully paid within 12 months.
The documentation is to be reviewed on a quarterly basis and quarterly sales revenue to be recognized
accordingly.
As from the third quarter 2012 the liabilities and employer taxes related to the company’s stock warrant
program are recognised in the accounts. The stock warrants liability at the end of the quarter is charged
to equity and is a non-cash transaction. The employer tax (14.1%) related to the stock warrants is
charged to Salaries and personnel costs. The liabilities and employer tax to be recognised per quarter will
be determined by the share price and the number of warrants outstanding.
Estimated earn-out obligations were capitalised in the 2010 accounts. As from 2011 the accounting
principles have been changed and earn-out is posted as accrued operating expenses.
Note 4 – Revenues
Due to delay in roll-out of the technology and the Mexican distributors having sufficient inventories at the
end of the quarter, the above-mentioned accounting principle under note 3 implies that no sales revenues
are recognized for Mexico in the third quarter of 2014.
In the quarter Agrinos has invoiced the distributors in Mexico USD 0.9 million for services. However, due
to the distributors’ financial situation these invoices are not recognized as other revenue in the quarter.
Agrinos has booked a deferred revenue related to Mexico of approx. USD 13.0 million that can be
recognized when the distributors’ financial situation have improved.
Note 5 – Analytically Restated Sales Revenue and Operating Income
Due to the large inventories built up by the Mexican distributors through 2012, the company has for the
last eight quarters reported zero in sales revenue from Mexico. To better reflect the company’s underlying
progress in Mexico, an analytical restatement in which the numbers of HYT® units deployed by the
distributors determine the Mexican sales revenue and operating income, is presented per quarter. The
operating income is presented without including provisions related to the distributors in Mexico.
Agrinos AS, Vollsveien 13 H, N-1366, Norway, Tel: +47 210 45 600, www.agrinos.com
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Third Quarter 2014 Interim Report
Analytically restated sales revenue amounted to USD 2.2 million in the third quarter, reflecting the
deployment of approximately 215,000 units by the distributors in Mexico in the quarter. The sale price
applied to Mexico for the period 2011 to the third quarter of 2013 in the restatement reflects the average
invoicing price by Agrinos to the distributors in 2011 and 2012, the period in which the distributors
purchased the products that were deployed. For the quarters thereafter the net price agreed with the
distributors in connection with the settlement in the fourth quarter of 2013 is used as the Mexican sale
price.
The analytical restatement of operating income ended at negative USD 2.5 million.The number of
deployed units drive the cost of goods sold in the analytically restated operating income.
The company will present an analytical restatement of the quarterly sales revenue and operating income
until the distributors have depleted their inventories sufficiently enough to ensure that Agrinos’ recognized
sales revenue reflects the end-user demand in Mexico.
Note 6 – Earn-Out
Agrinos has earn-out liabilities related to the acquisition of the shares in Bioderpac and the distribution
rights in Mexico and Colombia.
The earn-out related to the shares in Bioderpac is calculated as USD 1 per liter HYT B and per kilo HYT
C sold outside Mexico and Colombia in the period 2011-2013. In 2011 and 2012 there was made an
annual earn-out provision of USD 0.1 million related to the acquisition of the shares in Bioderpac. The
cumulative value of the earn-out shall not be less than USD 2.0 million for the three years. In 2013, the
remaining earn-out liability of USD 1.8 million was provisioned for. The earn-out holders received USD 0.8
million in cash in the third quarter. The remaining amount will be settled in cash and shares in Agrinos by
the end of July 2015.
The obligations under the original earn-out agreement related to the distribution rights in Mexico and
Colombia were calculated as 40% of modified earnings before interest, taxes, depreciation and
amortization (EBITDA) for these countries for the period 2011-2014. On October 15 2013, the company
entered into an agreement to amend KarlCo’s earn-out in relation to sales in Mexico and Colombia in the
period 2011–2014. The parties have agreed to recalculate the earn-out based on the company’s current
revenue recognition principles and the analytically restated numbers for Mexico. The minimum value of
the earn-out shall not be less than USD 5.0 million. That amount was settled in receivables on Mexican
distributors in the third quarter of 2012. The amended agreement will better reflect the underlying
profitability in the earn-out period. As a result of the above-mentioned amendment, the earn-out provision
of approx. USD 9.0 million in 2012 was reversed in the third quarter of 2013. No earn-out related to sales
in Mexico and Colombia was booked in 2013 or the first three quarters of this year.
Note 7 – Redundancy Costs
It was decided in 2013 to close three business units. At the end of the second quarter of 2014 the
redundancy provisions amounted to USD 1.3 million. In the third quarter a net provision of USD 0.4
million catering for reduction in manning and the consequences of moving corporate functions to US, has
been recorded. At the end of the quarter, total redundancy provisions amount to USD 1.7 million.
Note 8 – Write Downs and Provisions
A significant write down and provision of USD 38.1 million was made at the end of 2013 to cater for risk
related to the Mexican distributors' ability to repay their debt to Agrinos. This amount included a deferred
revenue accrual of USD 9.8 million. Furthermore, market rights in Mexico were written down by USD 6
million.
Agrinos AS, Vollsveien 13 H, N-1366, Norway, Tel: +47 210 45 600, www.agrinos.com
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Third Quarter 2014 Interim Report
At the end of 2013 total gross claims on the Mexican distributors recorded in the balance sheet amounted
to approx. USD 20 million. Adjusted for the above-mentioned deferred revenue accrual, the net claims
amounted to approx. USD 10 million at the end of the year.
In the first three quarters of 2014 no more write-downs related to the distributors in Mexico have been
recorded. Deferred revenue accruals of USD 2.9 million have been made for invoices issued to the
distributors in Mexico related to interest costs, services and products in the first three quarters of 2014. At
the end of the quarter total receivables towards the distributors amounted to USD 21.6 million, while the
deferred revenue accrual in the balance sheet related to the distributors amounted to USD 12.3 million.
In addition to the provisions related to the distributors in Mexico, the balance sheet at the end of the
quarter includes USD 0.3 million to cover closing and restructuring costs, down from USD 0.4 million at
the end of the second quarter.
Contingent liabilities related to legal disputes amount to USD 0.2 million at the end of the quarter, down
from USD 0.7 million from the previous quarter. A reversal of USD 0.2 million is a result of settlement of a
case in Agrinos’ favour in the quarter.
Note 9 – Equity
Agrinos strengthened its balance sheet with USD 25.8 million in new equity in the fourth quarter 2013
after having pursued adequate funding for its business since August. The new financing consisted of
three separate transactions, all carried out at a price of NOK 8 per share: A strategic investment of USD
15 million by Manor Investment S.A.(Manor), a USD 6.8 million bridge loan contribution into equity and a
USD 4.2 million private placement directed towards existing shareholders.
In addition to shares, Manor and the bridge loan holders received independent subscription rights for
15.1% of Agrinos’ share capital immediately following completion of the latest three transactions. The
subscription price for new shares issued under the subscription rights shall be equal to 15% below the
volume weighted average price per share over the last 60 trading days prior to Agrinos’ receipt of the
notification of such exercise. The subscription rights may not be exercised prior to 1 April 2014. The
subscription rights may be used to subscribe for new shares, in full or in part, on one or several
occasions, on or before 5 weeks following the annual general meeting in Agrinos approving the annual
accounts of 2014, but not later than 15 July 2015. As of 12 November 2014 no subscription rights have
been exercised.
Note 10 - Shareholders
List of largest shareholders is regularly updated on www.agrinos.com
Agrinos AS, Vollsveien 13 H, N-1366, Norway, Tel: +47 210 45 600, www.agrinos.com
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Third Quarter 2014 Interim Report
Contact Information
Jørgen K. Andersen
CFO
Mobile: +47 951 43 854
E-mail: [email protected]
Harald Bjørland
EVP Corporate Communications and IR
Mobile: +47 908 58 221
E-mail: [email protected]
About Agrinos
Agrinos is a biological crop input provider committed to improving the productivity and sustainability of
®
®
modern agriculture. Agrinos’ range of High Yield Technology (“HYT ”) products helps farmers to practice
profitable agriculture by providing increased crop productivity, improved efficiency of conventional
fertilizer and a reduced environmental footprint.
®
Certified as organic and based on Agrinos’ proprietary technology, the HYT products provide benefits by
strengthening the soil-based microbial ecosystem, stimulating crop development at key points in the
growth cycle and boosting natural plant resistance to pathogens and threats. With solutions for a variety
®
of crop categories, the technology comprising the HYT products has demonstrated its value in third-party
trials in key agricultural regions worldwide.
Cautionary statement on forward-looking statements
This document contains certain forward-looking statements relating to the business, financial performance and results of the
company and/or the industry in which it operates. Forward-looking statements concern future circumstances and results and other
statements that are not historical facts, sometimes identified by the words “believes”, expects”, “predicts”, “intends”, “projects”,
“plans”, “estimates”, “aims”, “foresees”, “anticipates”, “targets”, and similar expressions. The forward-looking statements contained in
this announcement, including assumptions, opinions and views of the company or cited from third party sources are solely opinions
and forecasts which are subject to risks, uncertainties and other factors that may cause actual events to differ materially from any
anticipated development. Neither the company, nor any of its parent or subsidiary undertakings or any such person’s officers or
employees provides any assurance that the assumptions underlying such forward-looking statements are free from errors nor does
any of them accept any responsibility for the future accuracy of the opinions expressed in this announcement or the actual
occurrence of the forecasted developments. No obligation, except as required by law, is assumed to update any forward-looking
statements or to conform these forward-looking statements to our actual results.
Agrinos AS, Vollsveien 13 H, N-1366, Norway, Tel: +47 210 45 600, www.agrinos.com
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