Q1 2021 Adecoagro SA Earnings Call
Good morning, ladies and gentlemen, and thank you for weighted.
At this time, we would like to welcome everyone I'm sure I agree with first quarter 2021 results conference call.
With us we have Mr. Mariano Bosch CEO.
Mr. Charlie Baker Hughes, CFO and Mr. Wanting this you'll galliano Investor Relations manager.
We would like to inform you that this event is being recorded and all participants will be on listen only mode. During the company's presentation.
After the Companys remarks are completed there will be a question and answer session.
At that time further instructions will be given.
Should any participant need assistance during this call. Please press star zero to reach the operator.
Before proceeding let me mention that forward looking statements are based on the beliefs and assumptions robotics, where I go with management and on.
On information currently available to the company day.
Involve risks uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur on the future.
Investors should understand that general economic conditions industry conditions and other operating factors could also affect the future results of accelerated growth.
Mhm and could cause results to differ materially from those expressed in such forward looking statements.
Now I'll turn the conference over to Mr. Mariano Bosch CEO. Mr. Bosch you May begin your conference. Good morning on thank you for joining I think bothered on.
2021 first quarter research confidence.
As you may have seen in our release.
We continue with delivering strong operational and financial results.
Adjusted EBITDA marked a new record high for the first three months of the year.
On an increase of almost 18% compared to last year.
The results achieved through the success of the investments we believe that that are driving our EBITDA eight on gotcha and in Asia as we projected.
During the past five years, we have invested approximately.
400 media on I cut off all know what it based on Ashish.
In projects that are generating returns on invested capital.
Over 25%.
These investments have improved the efficiency and sustainability of our operations.
Enhanced our what our competitive advantages.
It allowed us to be better position to face all the different scenarios.
Just as important I think on Saudi age on our forward investment you said commitment of our team.
Our focus on efficiencies and I would've thought they feel being local producers.
It was sad to leave that in 'twenty 'twenty, we achieved solid results despite the challenging environment on it.
The social the reason why we are now able to benefit from day improved price an ideal on generate higher results.
Okay.
Moving on to the better for them on so far what obesity.
You know what is true that ethanol and energy business one of our competitive advantages is the fact that we operate under a continuous out of a small on it.
This means we can crash chouette again non stop year round.
During the first quarter, which he said that at least shown on that how do I see deal instead of how do we speed here.
Actually we crushed record high for the first three months after a year.
It allows us to dilute fixed cost on capture hood sugar and ethanol prices.
Achieving these crushing volume was possible thanks to the investment we need to expand our sugarcane plantation increase it got busted deal flow what it means on east on say efficiencies at every stage of production.
And they didn't really have on that aspect of our products, you'll see them ease of high plex humidity, we have to switch from producing sugar at least I don't on bikes have Edison.
We make the decisions of which brought us to maximize on a weekly basis moving the changing environment.
For example, we are currently maximizing ethanol production TCT trading on the premium tissue letter went two weeks ago, what am I came on to ensure that to capture the higher price.
We believe that throughout this year, we would see his he called the dish on photo yeah. They still think gain that we've put a life support to both sugar and ethanol prices.
Before moving on to the other businesses I would like to make a brief comment on the weather, but I see.
As you know the sense that our south region has been experiencing that I went on for the past months.
As we out of AC my thoughts on the food.
Which has a different weather dynamics, we expedia humid first quarter. This means that that was short of guidance, but they're prepared to go through the current dry yet on whether we.
With less implications on the Central Asia.
You know what a fun of me on that the information on businesses.
Every segment outperformed last year's figures more than doubling our adjusted EBITDA.
Once again I would like to insist that this is a result of our teamwork I.
I don't know if I'll, whatever you get more efficient on better digitally daily operations.
It could be exempted, our rice business, which almost doubled each every day.
Throughout the past years, we put a special focus on Italy.
D C. S E T body domain name I, suppose but dawn.
They're getting quality.
Efficiency throw all day value chain.
With this in mind, we've got it out there specific investments, which enabled us to do a fault on the runoff at least nest on the same time as we improve their sustainability on forward operations.
These what's on the only possible.
Thanks to the team's speed it don't even know what do you approach of our people.
They worked with passion and dedication to go to the next day and automobile she sticks surrounding their production of rough Rice and day Liberty do on what it means all day may have quality product in time to be sold throughout the different ankle a bunch that you're on it.
Moving to on what a corrupt businesses.
We are currently undergoing how do I think activities, we see in line with our forecast.
In this segment diversifying into higher value added growth was a key to drive a D H N at Asia.
This investment you know what a peanut flour facilities allows us to better if you've got any day rate that went up but Asia on maximize how what are your thoughts.
You know what do they do operations.
We continue delivering strong operational results on improving our productivity indicators, even as we populate our Florida from Tristan.
This higher volume off means evidences among other things the importance so far what a 40 day, they did process, which enables us to offer high quality books to customers in their domestic on the export market.
As mentioned on our capacity lease.
Last year, we became free cash flow positive for the first time, she's two cell phone on 17.
Now that the resets on even front of us and that our five year plan issuing its final stages. We are confident that the cash flow generation, we continued to increase in the upcoming years.
Moreover.
We have reached that level, we think the salak weight on.
On what structure.
Just like 'twenty 'twenty modest debt turning point for us in terms of cogeneration.
2021 will mark the year, when we start distributing cash to our channel called that.
This is it but are you at a D and as you can see we have already started doing it it's about what do I bet brought on.
As of today, we have already reported chase 1.5 media on shares.
To conclude I would like to take a moment to reflect on why rush journey. During these past years.
You know Investor day, you'll fucked over 2018, we've communicated to the market.
We had embarked in a five year investment plan.
This represented a huge challenge for like on body.
But we had the conviction that we will be able to complete it with Texas.
Now we had a very proud of our achievements, which translate into that he says we are presenting today.
Yeah.
I would like to reiterate my gratitude to all the operation on Admonishment team.
Thanks to lay out a day leader for that how to work that we are one of the lowest cost producers in the entire world on.
And we are generating attractive on sustained out modest range for all of our channel called us.
Now I will let Charlie walk you through then on myself that quarter.
Yeah.
Thank you Mariano.
Morning, everyone.
Now, let's move to page four with a brief analysis on the range seen my thought on solar.
<unk>.
As seen on the top charts range from our cluster in Mato Grosso school during the three month period of 'twenty 'twenty. One we are 68% higher than during the same period of last year on.
22% higher than the 10 year average precipitation square register it throughout the quarter by where especially concentrated in January but the registered range doubling the 10 year average level.
As can be seen in the volume discharge the frequency on distribution of rainfall caused interruptions word crushing activities, leading to a 10, 1% decrease in milling per day.
However, this was fully offset by an early start of meaning activities on our cluster, which resulted in on 87% increase in total meaning days and 76, 1% increase in effecting meeting.
Oh days, we weren't able to achieve these higher results because our teams were raising the available to restart crushing activities on because as opposed to the first quarter of 2021.
What kind of availability, thanks to our strategic decision to reduce our meeting face during last year.
As a result of these <unk>.
Russian volume reached $2 1 million tons of sugarcane during the first quarter of 2021.
S T eight 3% or 800000 tons higher compared to the same period of last year.
Please jump now to page five where I would like to walk you through our agricultural productivity.
During the quarter working use reached 75 tons per hectare Hawaii Trs content reached 100, plus kilograms per tonne marching up 15, 4% and 14, 3% increase respectively compared to the same period of last year.
The combination of these two effects resulted in net eurosport dogs from per hectare of $8 four tons 31, 9% higher year over year.
The year over year GAAP is explained by the strategy adopted during the first quarter of 2020 with the aim of capturing the high ethylene prices observed during that quarter by being mindful of securing cannot be liability for the rest of the year, we maximize the harvest a whole heck this with low productivity put then.
Sure, thus, allowing the sugarcane with the highest potential to continue growing and recover from.
From the impact of the 29 genes.
Worse weather conditions.
Let's move ahead to slide six where I would like to discuss our production mix.
You can see on the top left chart during the first quarter of 2020, one who are traded at a premium of 10, 2% on a 5.1% hydrous and anhydrous ethanol.
It has traded on average at 14, six cents per pound and $15.05 per pound respectively.
In this context on.
Our efforts were focused on maximizing sugar production.
Except for a few specific days when ethanol traded at a premium.
As can be seen on the top right chart. During the first quarter of 2021 we diverted as much as 40% of our Trs to sugar compared to 5% you on the same period of last year.
Hunting in the sugar production 15 times higher.
I would like to insist that this high degree in flexibility constitutes one of our most important competitive advantages since it allow us to make a more efficient use of our fixed assets and sell the product with the highest margin and contribution.
Worth pointing out.
On the sugar makes it achieved margin a record high for the first quarter of the year as the content and quality of care rates observed during the first months of the year, usually favors the production of ethanol.
Despite producing less alcoholic mix compared to the first quarter of 2020.
Suddenly produce increased year over year as a consequence of the greater crushing volume on Trs content, allowing us to capture good ethylene prices.
During the first quarter of the irrational accounted for 70% of total EBITDA generation in the sugar ethanol and energy business, considering other operating income while sugar accounted for 28%.
Let's please turn to slide seven where I would like to discuss quarterly sales.
So you can see on the Douglas chart ethanol sales volumes decreased by 14, 1% year over year.
This is mainly explained by our commercial decision to increase our recovery to benefit from higher expected prices.
S. On this average selling price mentioned in the reality is increased compared to the first quarter of 2020, but was slower as measured in U S dollars standing at $15.07 per pound issue equity willing.
And representing a three 7% year over year reduction.
All in on an ethanol sales during the quarter reached $43 4 million, 17% lower compared to the same period of last year.
Allow me to briefly point out that the ethanol volume sold enabled us to continue issuing carbon credits on the <unk> program under us GAAP turning on additional revenue stream registered in the other operating income line.
In fact during the quarter. We sold are handled in 2000 T. B O S.
Average price of 31, nine <unk> per CPU.
You went into $6 force he value.
On a case of energy.
Lending volumes reached 100 on 20000 megawatt hour, marking a 12, 3% year over year increase.
Average selling prices were lower both Mexican in reality as well as in dollars standing at $30 three per megawatt hour, implying on 23, 2% decrease compared to the same period of last year.
Overall.
Net sales totaled $3 6 million $13, 7% lower compared to the first quarter of 2020.
<unk> sales during the quarter reached $25 2 million almost nine times higher than during the first quarter of 2020. This increase was driven by on 26, 4% increase in average sugar prices, which reached $18.03 per pound.
And an increase of over seven times in selling volumes.
Our strategy to maximize sugar production, coupled with the increasing crushing volumes, resulting in a greater volume of available for sale took up to the higher sugar prices observed during the quarter.
In addition, we exported over 2007 hundred tons of scientific guidance organic sugar produced in our room on mill.
Capturing on average price premium of 53% over V H P sugar.
In this way, we not only have highly efficient cluster model in place, but also continued to add value to them.
Finally to conclude with a short ethanol and energy business. Please turn to slide eight where I would like to discuss financial performance.
Adjusted EBITDA during the first quarter of 2021 was $58 2 million 42, 1% higher compared to the same period of last year.
In addition to the higher net sales the increase was explained by.
On cost reduction measured in cents per pound as a consequence from the higher crushing volume the depreciation of the Brazilian resin on attained efficiencies on the farm on this industry let alone.
And on $26 5 million gain derived from the mark to market or to a gain of which $15 million has already been harvested and hence is realized margin, while the balance will become cash in the upcoming quarters.
This was partially offset by a loss derived from the mark to market on borrowed commodity hedge positions led by the increasing prices.
I would now like to move on to the farming business. Please direct your attention to slide 10.
Or have completed planting activities for the 'twenty 2020, one harvest year, reaching over 262000 hectares, nine 9% higher than the previous harvest season.
This increase is mainly driven by an increase in peanuts, and sunflower plenty day area.
Two crops, we turned on a good fit into our crop rotation system offer higher margins and strengthen our diversification strategy.
Harvesting activities are well on the on the way, but it is worth pointing out that the intensive range registered into March in Argentina led to a slower harvesting progress achieved during this quarter compared to the same period of last year. However, harvesting activities have since been resume with no aimed.
Picked on us.
Let's move to page 11, where I would like to walk you through the financial performance of our farming and land transformation businesses.
Adjusted EBITDA in the farming and land transformation businesses reached $56 2 million in the first quarter of 2021.
So if you're $1 5 million or over two times higher year over year.
The increase was mostly attributable to the farming business, which registered a year over year increase in adjusted EBITDA of $28 7 million showing the benefits of having bigger more efficient on vertically integrated operations.
The crops business generating an adjusted EBITDA of $17 9 million more than four times higher than during the first quarter of 2020.
The increase was explained by a $5 8 million gain in the mark to market of our biological assets driven by an increase in commodity prices, especially soybean and corn, despite lower yields and lower harvest each area.
And on 9 million cost reduction due to an enhanced efficiencies on the depreciation of the Argentine peso, which led to a dilution of costs into U S dollars. This.
This was partially offset by a decrease in gross sales.
He explained by a 43, 8% reduction in sending volumes, mainly due to the slower harvesting progress achieved during the quarter.
The rice business generating on adjusted EBITDA of 20 813 million.
86 was 7% higher compared to the same period of last year lease.
This increase was explained by.
11, 9% in recent years and on increasing prices, which led to a $13 7 million increase in the mark to market of our biological asking on agricultural produce.
And $3 million increase in gross sales driven by higher average prices, which fully offset the lower selling volume.
We were able to achieve these results because for the past years, we have focused on three main goals.
D V. D is the key variable to Max minimize cost per ton.
Grain quality to improve industrial efficiencies, coupled with traceability to be used as a commercial tool.
And efficiency throughout the value chain by focusing on synergies on every level and this line by carrying out investments to improve logistics and enhanced efficiencies on the farm level, we were able to achieve higher units and reduced cost per ton on.
And by diversifying our product portfolio working on our own genetics and achieving a customer centric view, we successfully increased our average selling price.
Neither a business generating on adjusted EBITDA of $4 7 million in the first quarter of 2021, 48.8% higher year over year, mainly driven by a 14, 5% increase in gross sales on account of the higher selling volume mainly derived from the export market.
Market and our continuous focus on achieving efficiencies in our vertical integrated operations and increasing our productivity levels in every stage of the value chain.
This was partially offset by the lower price of men on by the higher cost of staple.
Enter formation businesses registered on adjusted EBITDA of $5 1 million explained by the gain in the Mark to market of an accounts receivable corresponding to the latest seems from farms in Brazil, which was positively impacted by the increase in soybean prices.
Let's now turn to page 13, which shows the evolution of how they go out of those consolidated operation on the financial performance.
During the first quarter of 2020, one where achieved solid results both from an operational and financial point of view on <unk>.
Adjusted EBITDA totaled 109 million $78, 7% higher compared to the same period of last year, marking a new record high for the first three months of the year.
We weren't able to achieve these high results on capitalized on the rally in commodity prices. Thanks to the investments we carried out since 2017.
Across all our businesses.
As we projected these investments are driving our EBITDA and cash generation I haven't been offering attractive returns.
To conclude please turn to slide 14 to take a look on our net debt position as you may see in the volume left chart. Our net debt as of March 31st from 2021 reached 732 million 97 million higher compared to December 31st of doing it.
Yeah.
Three 1% reduction in gross debt was fully offset by a 38% decrease in our cash position. This is explained by the fact that cash generation is concentrated in the second semester of the year.
From a seasonality point of view the first quarter has the highest working capital requirements. Since during these periods all of our crops are planted and most cost incurred by the only a small amount of the crops are harvested and sold.
As we continue harvesting throughout the second and third quarter, we expect to reduce working capital invested in debt.
On a year over year basis net debt during the quarter was two 9% higher than during the first quarter of 2020 also explained by the decrease in cash position.
This was mostly driven by a 64, 4% English inventories led by our commercial strategy to carry stops in order to benefit from higher expected prices, especially sugar and ethanol.
The decrease in accounts receivables due to the greater the sugar maximization.
And the increase in planted area in the crops rice and sugar and ethanol.
And energy businesses as well as the increase in medical cost.
Business.
Net debt ratio reached 188 times in line with the fourth quarter of 2020, and 18, 8% lower than the first quarter of last year on.
The same time, our liquidity ratio, which is calculated as cash and equivalents plus marketable inventories divided by short term debt reached 184 times and.
Any value above one point shows the full capacity of the company to replace short term debt with cash balance without raising external capital.
We consider our balance sheet to be in a healthy position based not only on the adequate overall debt levels, but also on the terms of our indebtedness most of which is long run through that.
Thank you very much for your time, we are now open to questions.
Thank you Bill.
Floor is now open for questions. If you have a question. Please press star one on your Touchtone phone open for any time.
If at any point your question is the answer.
Move yourself from the queue by pressing star two.
Questions will be taken on the order they are received.
Raj when you pose your question that you pick up your handset to provide optimum sound quality.
Today's first question troublesome Thiago Duarte BTG Pactual. Please go ahead.
Hello, Good morning.
Yeah Mariano good morning, Charlie.
Thanks for them from the call.
I have three questions I'll try to breed to be brief on this.
Start with the sugar and ethanol and energy segment.
As you as you mentioned in your opening remarks idea I know theres been growing concerns on the on the poor on rainfall levels that affected there shouldnt be affecting cash yields across the Brazilian center yourself, you already mentioned that on that core clusters weren't as affected which is great.
So I wanted to hear your views on how you think that any effect on sugar production in the center self from Brazil, sugar and ethanol production in the center software on Brazil in general.
As in this ongoing crop the reason why I'm asking business because I suspect that the industry will continue to maximize sugar output so bad.
And output to be the one sacrifice by lower feedstock availability. So I wanted to have your views on how we should expect the cooperative to react to this scenario in terms of our production mix.
The second question.
Related to capital allocation, so so based on the.
Current environment, it looks like you're headed to.
Very good free cash flow generation this year are.
Coming from better commodity prices on the phasing out of your your five year investment plan. So can you. Please remind us what's the ideal or the target on land.
Average ratio that you that you are aiming and whether you should be able to come out with a stronger dividend cash distribution policy beyond the share buyback that you have been executing.
Or if you see room for another round of capacity expansion and attractive investment opportunities across your business units. So just how we should.
C capital allocation between.
Dividends and cash distributions and investments.
And finally my third question is on the rides business you have been showing a very good progress in this quarter in particular, a very good contribution from the rice business.
In terms of yields in terms of prices as well. So can you comment a little bit on the outlook on the sustainability of those margins in particular in terms on how you see the the pricing outlook moving forward. Thank you so much.
Thank you very much for your questions.
And one on take first your first question on the sugar and ethanol.
Outlook for this year in general on our strategy there on how we see the climate day affecting on I will ask Renato to leave more color Andy So Renato can you answer.
By geography, but thank you for a question.
It's becoming clear that the dull weather centre solve the breast tumors, which will have less.
Yes, when everyone was imagine most of them on your starts day have dropped and about 10% of the Trs produced so it's I think it's becoming clear that Brazil has not an austere on S. True supplied to 36 million bonds that reward needs from Brazil, and also true true to supply the.
The recovering at the low markets that did some grisly that should be increasing approximately six percentage either 6% dependent on the market.
As of two 7 million tons of sugar equivalents.
So different from the last two years, we think that the true Bob it's sugar and ethanol you'll be trading closer to parents.
So last year, we saw sugar paying much more than the ethanol. So there are a lot of switch from ethanol to sugar free income almost 11 million bonds and the year before it was it was exactly the opposite this year, we think that will be seen.
A healthy competition.
The same pis from sugar and ethanol. So that's why we think that both growth will be moving.
We will have a good price.
Strategy in this scenario is to be as flexible as possible true true burn or to change the mix.
We could be interest as Mariano mentioned before taking advantage of the product.
It is more profitable in that particular moment.
Just as a reference to be heightened motherboards.
But the growth subscription agreement into 19 Sainsbury vault is on high growth 20, Sainsbury, Paul So while we are maximizing ethanol.
Yeah, and I thought they are anything else on the sugar and ethanol is that okay.
Oh, that's okay. That's okay, Oh, Okay, you might fall on that it would be would be the you know how how he thinks the.
The mix in their center cellphone, Brazil will behave once he believes the two products are going to be trading at parity.
No because the consensus was there's growth there was going to be a vaccination of true maximization of sugar output.
And whether he thinks there's going to be more trs diverted to ethanol not sure what the acquired group, which is clear the strategy but from.
From the whole industry or the industry in general.
I understand that your question Charles.
As we mentioned before we think the department to you'll be similar even in that same day or solve.
Montreal multiples on ship cosmetic lasers from the parts of that.
Your friend, but closer than the last two years, but it seems that the most interesting thats all.
Various plastic in their hedging I think they are maximizing sugar at the news when the price are very close as we are today.
So we think that there.
Most projections and we believe that they are correct.
That's all from a dry to produce the 36 million bonds that everyone is expecting from volume.
Okay. Thank you.
Michael.
Just to complement the IR day stay away on what strategy to continue to be open on the sugar price that day in January alone.
Compare to do that right.
And then on.
We'll go to that secondly on third.
Question that you asked on the third question that he said the rice.
Operation.
Thank you for that question on on as an opportunity to point out again.
Amazing job that the full team on the rice operations have done.
This is something we've been pursuing for favorite adhere. This has been very specific investments that have been done in plant. For example, we changed the whole strategy of how to plan that means 45000 hectares were planted they're very efficient right.
And this is something that we can continue to sustain.
Then on the whole litigation system that is a very dedicated and he had a lot of technology being applied here, we have and it technology at light on every place where the internet of things had a connecting all day refinanced a flow of water to move this makes us not only more.
And in terms of economic Furthermore, and most sustainable also so all of this operation is improving every year and we expect to continue to flow through because he saw a continuous improvement that is going on there people learning more the team is more slowly they didn't know smart on how to execute it.
So in all.
All these investments that we leave a.
Very relevant but the moderator on thing is how the team is working to make all these things come up too with it.
Then on the and.
On the commercial part of those day logistic part of this is a huge logistic challenge that could easily fund on me.
Five to eight different they fly on our places where we are ahead of anything so all that is moving the quality of rights that we were able to.
<unk> achieved these here he's the best in the last eight years, it's even better than what we went protecting on top of these we had of being able to save the day rate, they're different but yet not out yet.
And when he said that Asia is different but we are able to reach different clients all over the world. So these clients have knowing the specifics about how you see that they need for their specific different bands. So all these relationships that we have the aging with our clients all on what they want.
That includes the full Havili deal day off the end of the C zone up there at.
Although all of their product is something.
Very rarely would that be flowing on so that's why we see the sad results very sustainable way.
He always their commitment that technology that is being applied.
We had a very optimistic regarding what's going on in the overall N.
V Smith on how we've been improving in the last two or three years. The results of these a dry season and when we look at day three internet at price yourself right, but yeah. Okay.
What they've been five years ago, but they are not even near the historical high price. He so overall prices continue to increase and we are in the position. We are at the lowest cost producer because of what they have what they want they are mentioning so thank you for the opportunity of asking about right.
And he said a becoming a relevant business for us, but we never spend a lot of time, explaining all the repurchase that goes on in that specific area.
And.
And then finally your second question that each day. The these question on on the capital allocation.
And what would be the leverage ratio that day.
We are willing to have it's clear we've been always talking about below two times EBITDA. That's what we've been saying in the last day of three years and we wanted to be there in order to think about distributing our research with our sales causes.
We are clearly there we are also very well structured in terms of the of that debt himself day there.
And so you've seen that is evidenced based on that Saturday explained in deep that test explaining this so.
It's clear that in terms of net we are very comfortable today and so how are we thinking to distribute this capital on what could be potential capex or they'll say project.
I mentioned on in the transaction. Our first priority is to distribute part of discussed that is being generated with the with a shareholder.
2020 wells today, yet or whether we became free cash flow positive 2021 each day yet.
We are distributing part of discussion with our with our shareholders and we are currently discussing on as we've been saying that we have gone on a.
Tried to stretch it much more a clear distribution policy, we are working on that as we've been saying we are in the middle of that process. So we will come up some point of a D E M.
And with a distribution policy D. C Division on policy will talk about a percentage of the operating free cash flow what is the operating free cash flow east there gosh that the operations that are generating after discounting the Monday non Capex day interest.
The taxes on the working capital needs, so that amount of money that is increasing on on.
We are but operating Florida, all what the investment that we need not on the rise in the in the of course initial one a weakness in the cut offs say, we'd been mentioning before then on also in that 80, so all that the gasoline generated.
A portion of that is the one that will be reviewed.
True.
Buybacks or buybacks or dividends or a combination that Easter discussion on what we are currently undertaking.
Then in each one of the businesses that we are operating we continue to see good also bought a few on it is how do we continue to see improvement things that that team that he thinks that makes us more so stay now I won't match on a small example of their body on my son that Easter day a hat.
And in a way our sugar and ethanol operations data, we are collecting them Hassan predominate, David Yeah in D C Bio SA.
My son plants, we are involved in that project, where we are concentrating this we have Peru, we are trying with some price in order to be able to move them. When they so there are projects like this that that are very interesting on.
We see not just with our current operations. So that we continue to occur but as I mentioned before the first priority is to distribute the cash that we have seen anything within our channel partner.
Yeah.
Mariano. Thank you so much for your detailed answers very helpful. Thank you.
And our next question today comes from Lucas from JP Morgan. Please go ahead.
Can you hear me.
Yes perfect.
Okay, So sorry, hi, guys.
My my questions are somehow pull up so far thiago questions on the.
The first one if you can briefly talk about the capex itself, so with a company generating more cash I assume you guys have.
You know probably some some projects in the pipeline.
The efficiency project, so how big the topics can be this year next year day I'm talking about the the expansion capex.
And if you can give us a color.
And the second question more specific guidance about the free cash flow to be generated in Argentina. So not a I don't want you guys to make any projections here in your forecast or guidance, but looking at the EBITDA you guys generated in Argentina in the first quarter.
In the bio bio asset formation, you shouldn't have a very strong year and in Argentina, and I suppose that if the markets don't change much also a very good 2022. So if not mistaken you still have over 150 close to $200 million in debt in Argentina, so, but given that this business.
Seems very low Capex, you should be generating a lot of cash in Argentina, and Mexico, a couple of years. So.
Beyond paying the debt what can be done. So when are you guys planning to pay will be bad debts.
So what will be done in the future with the cash generation and more specifically generating in Argentina.
Yeah. So these are my my two questions. Thank you.
Thank you will.
Luke on for your question.
First of all in terms of the overall capex that you would asking.
We expect Capex capex to continue to be in line with what you've seen last year. We don't see significant change. He say are all these projects that are projects that have real leaks of up 25% that we've been mentioning.
What we have achieved so what we ought to continue to do.
More or less within the same things.
We continue to see very specific a small project in each one of the businesses that we are undertaking so are we.
We in general what we hadn't happened now is in line with what you've seen in 2020 so.
For now you should continue to expect them that they'd like.
Then moving to the part of Argentina.
We always think about that and the non U Y altogether, so that Debbie.
Based on that he's being generated in in the.
Two countries at the same time.
On <unk>.
Yes, we are generating good returns. We are also having interesting a small capex eats as I mentioned in the case of price on you can see the same thing in the gay yourself based on plywood or in the case of peanuts on deal where it all crops on also in the database and so they are there any things.
That are growing theyre on.
We continue to do invest more or less in line with what we've been doing in the who on Earth on business. So.
Argentina, and Brazil that are telling me that in terms of the amount of money that D. C generating on in terms of debt, we think on the debt at the holding company. So some types, we have intercompany debts in order to be more efficient, but that's a all day, there Casey and genetic.
You'll have to analyze our total debt.
And that we are very much in line with where we want it to be.
Thank you.
And our next question today comes from Guillermo <unk> with Bank of America. Please go ahead.
Good morning, everyone and thank you for taking my questions.
Questions from our side first.
You are reading in terms of the input cost of the agricultural business. So we see that fertilizers cost probably.
On a rolling right now so if you could share something on their thoughts for the next.
He then as well in terms of costs that you expect or Hector and the second question on <unk>.
Sugar and ethanol business.
Looking at productivity gains that the company achieved first quarter.
Could we expect for no remaining on the scene.
As the company is pursuing a greater capacity utilization.
We'll talk about.
The use of that true are expecting.
Yeah.
You should actually persist called the season that would be true.
Okay.
Okay.
Hi.
Thank you Hey, I want to take the cost of the agriculture in General and then Europe and then there will still be motivated to have out there. What we can expect doesn't know what she wore on ethanol yields on an on milling capacity.
In terms of course as you mentioned the cost of satellite set US a are increasing on the cost of transportation on with increased imports are falling a solid so increasing on that out of some costs are as all the different day inks that we sell.
Good evening.
In that they live on the nightmare that out of course that that increasing part of that is being offset by day improvement that we are having in every single line of our operations.
But the overall cost they can continue to increase.
But as you will see that day, our sales are improving their price by way more than that our margin in general on improving but we kind of expect on increasing the overall cost of the agriculture in general that is one point and then.
On the issue on ethanol I will ask Renato to go more in detail on what could be on what I expected yields for the rest of the year on not what a meeting in the overall.
Okay. So as it was mentioned multiples will soon have the Japan, where their father in India order reaches into the center solve so we had good range in the second semester of last a year.
Do we have the 200 millimeter in August you can engender on January of this year, we have 200 million users. So.
Can you help look for the first quarter was very good. That's why you will have the crushing records there first.
Quieter.
Whether it be king.
Drier in March after the last two range that we had was at the beginning of March. So if you get weather persists dry now we expect that we are going to have a huge reduction that we will be partially offset by the trs content industry broken a two day the Trs <unk>.
<unk> percent higher than.
FERC casting.
Yeah sure Neal when he knows you're right I think the way.
It is more similar to the other regions in the center solve that remember this hour.
Importantly, 200 kilometers from whom they don't put it so it's suffering more.
With the lack of range.
So we expect to have a huge reduction.
Five and 10%.
With all of those those vulnerable together.
Crs and lower yields will be broken.
On processing, 5% to 10% margin than we did last year.
Hmm.
Okay.
Perfect. Thank you.
Okay.
And ladies and gentlemen, as a reminder to ask a question. Please press star one at this time.
We'll pause momentarily, while we pull for questions.
And ladies and gentlemen. This concludes the question and answer session. At this time on let's turn the floor back to Mr. Bosch for any closing remarks.
Before closing the call I want to thank you all for joining the call.
The market outlook.
That we produce is looking promising.
And we are in on them.
Better positioned to take advantage of such flavor scenario.
But again.
This is only possible because of the strategic investments, we made that cut off I went on but Asia Sealy in the last couple of years.
And we believe we are in non Nexsan position today Whooped finance has reset that we had already these TV thing to our call. This throw out on what about that program.
And we plan to continue.
Doing so in a more structural way during the coming year.
Yeah.
I would like to raise guidance my gratitude to all our operating teams that are moving an outstanding job on to our shareholders for their continued support.
So thank you and see you in our upcoming events.
Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.