Q2 2021 Adecoagro SA Earnings Call
Good morning, and welcome ladies and gentlemen, and thank you for waiting at this time, we would like to welcome everyone to Eddie Colorado growth second quarter 2021 results conference call.
With us we have Mr. Mariano Bosch CEO and Mr. Charlie for Aaron Hughes CFO, we would like to inform you that this event is being recorded and all participants will be in listen only mode. During the company's presentation.
After the company's remarks are completed there will be a question and answer section.
At that time further instructions will be given should any participant need assistance. During this call. Please press star then zero to reach the operator.
Before proceeding let me mention that forward looking statements are based on the beliefs and assumptions of anticoagulants management and on information currently available to the company they involve risks uncertainties and assumptions.
Because they relate to future events, and therefore depend on circumstances that may or may not occur in the future investors should understand that general economic conditions industry conditions and other operating factors could also affect the future results of adequate I grow and could cause results to differ materially from those.
And such forward looking statements.
Now I'll turn the call over to Mr. Mariano Bosch CEO.
Mr. Bosch you may begin your conference.
Good morning, and thank you for joining either go out into 2021 second quarter definitely Science conference.
As you can see now what release will continue their drilling strong operation in our financial results across all of our senses.
Adjusted EBITDA eight months, a new record high for the first time instead of the year and.
And an increase of almost 50% compared to last year.
The continuous growth in heavy industry and the nation look the success of the investments we need during the past year.
It is thanks to them that I think what it is now a larger company more efficient and better position to face all the different scenarios.
But that wasn't DNA remains the same.
We have seen a little of hard working deeply committed to the sustained production of food and renewable energy and they know what it costs.
No.
In relation of they've been four months of each of our segments.
In our sugar ethanol and energy business during the first six months of the year, we increased our production and 40% compared to last year.
Thanks to an increase in crushing volume of one 3 million tons and how you see it is funded.
This allows us to significantly increase that what I say itself szuba is on them and energy and capture higher average selling prices of the city.
In addition.
Our commercial had a stat that she has to carry over $70 million in stocks to benefit from higher than expected future branches.
I also want to referred to the weather event occurred in Brasilia during the last months.
As you all may be aware.
If for US keep the main productive regions I'll proceed, including Tom Polen, Banana as Willa minority and motto Ludo, social where our sugarcane plantation sound okay.
We took actions to minimize the negative effect.
This includes accelerating our how do we think base anticipating their purchase of five two lying ahead of us to reinforce our equipment fleet and to contribute to speed up the habit.
And also both testing gained from third parties.
Our assistant indicates that schuh had a cane availability will be reduced by year end and beginning of 'twenty to 'twenty two.
<unk> you know they don't properly.
However, due to the regional effect of the Frost, we expect prices to continue to respond and improve the already gone. So that's the bright scenario.
We are confident that <unk> already offsetting significant bump of the negative impact of the frost.
And will result in no material changes in EBITDA and free cash flow generation.
In this regard we had a negative position to continue capturing the upside in prices.
We have been hedging at the low end of our commercial policy.
More than 50% of our theories for the guarantee Sun remains unhedged.
And 'twenty 'twenty two is 100% open.
Sugar and ethanol, we kept a healthy competition for the B I D.
And we own assets with high flexibility to suite from Joe, you'll seeing ciulla audience and benefit from higher relative prices.
We recently doubled our capacity to produce anhydrous ethanol in panting, even more our flexibility to capture even higher price premiums.
Moving on to our rice weakness.
We achieved strong results during the semester.
Including a record high yield of seven point, they launched but heck that in average.
This was possible thanks to the investment we may that grows their business, but specially to the consolidation of anti nausea approach of our teams.
We have three main goals in mind.
One in three D D D to minimize cost per ton.
To achieve higher quality utilized to improve industrial efficiencies onset of us at Goldman shall dude.
<unk>.
Enhanced efficiencies throughout the value chain.
As we improve our broth genetics I know that's the lifeblood.
But a form where that they find them and industry. David we continue to develop new markets and increase our mix of higher value added products.
Both below what our crops business.
How does the thing at BD practically finished.
Totaling 640 <unk> tons of grains, so far.
Although it was hard landing a year, we achieved would you.
Thanks to the genetic selection the use of technology, our geographic diversification and throat, obviously irrigation.
We channel thus to extend the planting and harvesting windmill, what is clearly one of our competitive advantages.
We are currently undergoing blending activity for next season and benefiting from higher average selling prices and the fact that we control the logistics of our production in our storage and conditioning facilities strategically located.
You know what are the operations, we continue to improve our productivity indicators, even during the commencement of operation of our new four freestone and.
Transform raw meat into the value added bolt demanded both in the domestic and export markets.
I mentioned in our past release.
We are generating positive free cash flow.
We're targeting attractive opportunities, which synergize, well with our operations and enhance our results.
We remain committed to distribute a portion of our cash generation with our shareholders.
Is one of our priorities and as you can see during the first seven months of the year, we have repurchased over 3 million shares under our buyback program.
Totaling $28 million.
This is equivalent to almost 3%, albeit with Europe, they've gone but.
Going forward, we expect to continue repurchasing shares in line with our strategy to generate long term value to our shareholders.
To conclude I would like to express my gratitude to all the operational and management teams.
2021 is proving to be a complex here from a climatic point of view in addition to an extended pandemic.
I know, we still have challenges ahead of us, but they feel confident that we have the right teams and that we are following the right strategy global economy situation and generate attractive and sustainable margins for all of our shareholders.
Now I will let Charlie walk you through the numbers of the quarter.
Thank you Mariano good morning, everyone, let's start on page four with a brief analysis on the rains came up I would also assume.
As seen on the top charts, raising our cluster during the second quarter of 2021, we are 45% lower than during the same period of last year.
And 53, 5% lower than the 10 year average.
This was particularly notable during the month of April when virtually no precipitation was observed.
However, as can be seen on the graph, we experienced a COVID-19 first quarter.
This means that our sugarcane was better prepared to go through the drier weather with no implication on productivity.
Before turning to the following slide I would like to briefly comment on the weather in Brazil.
The center South region of Brazil has been experiencing dry weather for a prolonged period of time, which negatively impacted its productivity.
Due to the fact that the region accounts for approximately 85% of Brazil's sugarcane production. This has put pressure on the supply and demand and has led to an increase in the prices of both sugar and ethanol.
In addition to this.
Mariano mentioned and keeping production during June and July Brazil means productive areas, where are keyed by a frost.
We believe this will put further pressure on the supply side and thus continue to improve the outlook on prices going forward.
Now, let's continue with slide five where I would like to discuss our sugarcane crushing strategy.
During the second quarter of 2021, the drier weather led to a seven 9% increase in effective milling days compared to the same period of last year and enabled us to accelerate our crushing pace.
<unk> in a 10, 9% increase in milling per day.
In this line total crushing during the quarter amounted to almost $3.5 million tonnes 016 million tons or 19, 6% higher during the same period of last year.
In addition to the favorable weather, which favored harvesting activities and to enhance efficiencies at the industry level. The increase in crushing volume was also explained by the dynamics of the second quarter of 2020, namely the fact during that time, we've temporarily slowed Donna work.
Crushing phase in light of the COVID-19 pandemic as markets were fairly liquid, especially in the case of ethanol.
As of June 30, crushing volume reached $5.6 million tonnes, one 3 million tons or 31, 7% higher year over year.
This increase was explained both by the second quarter dynamics as well as by the good cane availability on early startup crushing activities during the first quarter of the year as opposed to last year.
Please jump to page six where I would like to walk you through our agricultural productivity.
During the quarter Trs content marked us six 7% increase reaching 135 kilograms per ton.
Seven 6% increase during the semester, reaching 126 kilograms per ton.
This increase is explained by the fact that dry weather favorable the concentration of sugar juice in the game I.
I would like to point out that the increase in crushing volumes, coupled with higher Trs content resulted in an increase in Trs equivalent of 29, 1% during the quarter and 42, 2% during the semester.
This in turn will translate in the greater production of both sugar and ethanol as we will see next.
Continuing with productivity indicators choke in years reached 80 tons per hectare during the quarter in line with last year and 78 tons per hectare during the semester, marking a three 6% increase compared to the same period of last year.
Going forward. It is expected that yields will be negatively impacted by the effect of the region in France and Brazil.
The combined effect in Trs content and yields resulted in Trs production per hectare of 10 eight tons during the quarter and nine eight tons during the semester, four 7% and 11, 4% higher year over year.
Let's move ahead to slide seven where I would like to discuss our production mix.
You can see on the top left chart during the second quarter of 2021, anhydrous and hydrous ethanol in Mato Grosso tool traded at an average price of $18 six and 17, two cents per pound sugar equivalent representing an 11, 4% and two 7%.
<unk> premium to <unk>, respectively.
However, it is worth pointing out that the evolution of sugar prices during the quarter was also very positive.
In line with our strategy to maximize production of the product with the highest marginal contribution during the quarter, we diverted 59% of Drs to ethanol to profit from higher relative prices compared to 46% last year.
Ethanol production increased by 66, 4% compared to the second quarter of 2020 due to the combined effect of ethanol maximization and the increase in Trs equivalent produced.
In hand, with the increase in Trs produced is that sugar production was in line with last year's volume, despite having diverted a lower percentage of Trs.
On a year to date basis production mix was in line with the first semester of 2020 standing at 59% ethanol and 41% sugar, although volumes to produce differed on account of the higher production of Trs equivalent.
While we maximize sugar production during the first quarter of the year to benefit from higher relative prices and switched to ethanol during the second quarter. The opposite was observed in 2020 as ethanol prices planted during the second quarter due to the pandemic.
This high degree of flexibility constitutes one of our most important competitive advantages since it allow us to make a more efficient use of our fixed assets on profit from higher relative prices.
Year to date ethanol accounted for 64, 7% of total adjusted EBITDA generation in the sugar ethanol and energy business, considering other operating income while sugar accounted for 28, 6%.
Let's please turn to slide eight where I would like to discuss quarterly sales.
As you can see on the Douglas chart during the second quarter of 2021 ethanol sales volumes increased by 49, 4% year over year.
This increase is mainly explained by the lockdown measures adopted during the second quarter of 2020 in response to the COVID-19, which negatively affected demand for fuels and resulted in fairly illiquid markets.
The increase is also explained by our decision to maximize ethanol production in the current quarter and capture higher energy prices.
Despite the increase in cubic meters sold in absolute figures carryover increased by 77, 5% to take advantage of higher expected prices in the second semester of 2021, and beginning of 2022 driven by adverse weather conditions.
Average selling prices for ethanol, where higher measured both in <unk> as well as in U S dollars standing at $17 nine per bond issue or an equivalent representing 67% year over year increase.
On account of the higher selling volumes and higher average prices.
<unk> sales during the quarter amounted to $64.9 million almost three times higher year over year.
In the case of energy selling volumes reached 277000 megawatt hour, marking a six 7% year over year increase.
Average selling prices were higher both measured in reais as well as in U S dollars standing.
$48 per megawatt hour, implying that 16, 5% increase compared to the same period of last year.
This was driven by the low levels of water source, which reduce the supply of hydroelectric energy all in all net sales of energy in the second quarter of 2021, we are 11.3 million $24, 3% higher year over year.
Net sales of sugar during the second quarter of 2021 reached $71.6 million over two times higher year over year.
This increase was driven by a 47, 6% increase in selling volumes, which reached 198000 tons and up 52, 1% increase in average prices, which reached $16.04 per pound.
Sugar prices rallied during the quarter, mainly driven by the continued dry weather absorbed in the centre solve in Brazil.
As mentioned before these hiking prices is expected to be accentuated in the upcoming months.
The market factors and the impact of the Frost.
In this regard we are in a good position to capture the increasing prices as our estimated <unk> production for the current campaign remains mostly in hedge and we have yet to begin hedging 'twenty two 'twenty three campaign.
Finally to conclude with the sugar ethanol and energy business. Please turn to slide nine where I would like to discuss financial performance.
Adjusted EBITDA in the second quarter of 2021 was $73.6 million.
62, 1% higher compared to the same periods of last year.
The main driver behind our EBITDA growth.
The 92.9 million increase in net sales due to higher selling volumes and prices of all three of our products.
This was partially offset by <unk>.
On increasing selling expenses explained by the increase in sugar and ethanol selling volumes, which derived in higher freight costs and an increase in fiscal <unk> respectively.
And our.
Our loss in the mark to market of our sugarcane.
Even though our harvested gained experienced again in its mark to market due to the greater volume and higher <unk> prices. This was fully offset by a loss in the mark to market of our Unharvested cane caused by negative impact of the frost on future expected yields.
Year to date adjusted EBITDA stood at $131.7 million.
52, 6% increase year over year.
Higher results were explained by an increase in net sales driven by higher volumes and average selling prices measured in U S dollars for all three products.
Coupled with a gain derived from the mark to market of our sugarcane, mostly related to harvest at gain.
This was partially offset by a loss in our commodity hedge position.
And an increase in selling expenses in line with the increase in sales.
End of the period stocks amounted to over $700 million, marking an increase of two times year over year led by our commercial strategy to carryover stocks in order to benefit from higher expected prices.
Regarding EBITDA margin. It is worth highlighting of the decrease is not indicative of awards performance, but rather by the fact that the last year's figures were an outlier.
Especially during the second quarter of 2020 net sales experienced a sharp decrease driven by the pandemic and we embarked into a strict cost reduction plan. In addition to achieving higher results of our biological assets.
I would now like to move on to the farming business. Please direct your attention to slide 11.
So at the end of July of 2021 over 240000 acres were successfully harvested representing a 93% of our total planted area.
These amounts to almost 1 million tonnes of agricultural products harvested and transporting across 10 provinces in Argentina and Uruguay.
The remaining hectares are expected to be harvested by early August.
Let's move to page 12, 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 $32.4 million in the second quarter of 2020.177 million lower year over year.
The decrease in financial performance was fully explained by the sale of bonds, we made in 2020.
Baird to no farm sales this year.
Adjusted EBITDA still mainly from the farming business stood at $32.8 million.
Marking an increase of $4.2 million or 14, 7% year over year.
Year to date adjusted EBITDA in the farming business marked at 64, 7% increase compared to the first semester of 2020.
Adjusted EBITDA in our crops segment was $16.3 million during the quarter four 8% higher compared to the same period of last year.
This was explained by.
An increase in average selling prices of $100 per ton increase in the case of soybean and $60 per ton in the case of corn, partially offset by a reduction in spending volumes as a consequence of our commercial strategy to carry Stokes forward in order to benefit from higher expected prices.
The increase in gross sales was partially offset by an increase in cost driven by inflation in dollar terms.
Our net loss in the Mark to market of our inventories on account of decreasing prices since the time of harvest compared to an increase during the same period of last year.
Year to date, adjusted EBITDA amounted to $34.2 million SEC.
75, 7% higher compared to the first semester of 2020.
In the case of Rice most of the margin was already captured during the first quarter of the year in this line adjusted EBITDA reached $9.6 million during the second quarter and 37.9 million during the semester, marking our year over year increase of 16, 2% and 61.
9% respectively.
The positive financial performance was mostly explained by.
An increase in yields which reached a record high of seven eight tons per hectare and increasing area and an increase in prices, which led to a year over year gain in the value of our biological asset and agriculture produce.
These results were possible due to our continuous focus on productivity enhance efficiencies on the consolidation of our team.
The dairy business generated an adjusted EBITDA of $7.3 million during the second quarter of 2021, and $12.1 million during the first semester and increase of 46, 7% and 47, 5% compared to the same period of last year, respectively.
Sure.
In most cases higher results were explained by an increase in sales volumes, which fully offset the increase in average prices and achieved efficiencies in our vertical integrated operations, including the high productivity of the farm level and flexibility of our industrial assets.
Let's now turn to page 14, which shows the evolution of either Gladys consolidated operational and financial performance.
On a year to date basis gross sales reached $460 million and adjusted EBITDA of 211 million, marking a year over year increase of 34, 5% and 48% respectively.
During the quarter gross sales reached 286 million, while adjusted EBITDA totaled 101 million, marking a 54, 2% and 24, 9% increase compared to the same periods of last year.
From an operational point of view, we continue increasing our blended area both our farming onshore.
On an energy business. This in line with our enhanced efficiencies on the farm and industry levels as net to a five 4% increase in our production of crops and rice and a 31, 7% increase in crushing volume as previously mentioned.
To conclude please turn to slide 15 to take a look at our net debt position.
You may see in the bottom left chart, our net debt as of June 30 of 2021 reached $744 million $12 million or one 7% higher than the previous quarter. This was fully explained by an 11, 2% decreasing our cash position.
This reduction even our cash position was mostly explained by an increase in working capital an accountable and increasing prices and our commercial strategy, regardless stock in order to benefit from higher expected prices, especially ethanol.
On a year over year basis net debt was in line with the second quarter of 2020.
The decrease in gross debt was offset by increasing our cash position also explained by the increase in working capital in fact marketable inventories as of the second quarter of 2021 amounted to $147.6 million.
$73 million higher than during the same period last year, driven by our carryover strategy and the impact on prices.
Year over year increase in working capital was also driven by an increase in planted area in the crops rice and sugar ethanol and energy businesses as well as an increase in making calls in our dairy business.
We believe that our balance sheet is in a healthy position on only based on the adequate overall debt levels, but also on the term of our indebtedness most of which is long term debt as of June 32021, our net debt ratio reached 181 times and presented that downward trend comparable.
The previous quarter as well as the second quarter of 2020, marking a reduction of three 3% and 26, 1% respectively.
The same time, our liquidity ratio, which is calculated as cash and equivalents plus marketable inventories divided by shorten that reached 184 times in line with the previous quarter and 49, 7% higher than last.
123 times ratio. This clearly shows the full capacity of the company to repay short term debt with cash.
<unk> without raising external capital.
Thank you very much for your time.
Now open to questions.
Thank you the floor is now open for questions. If you have a question. Please press Star then one on your Touchtone phone at this time.
Todd.
If at any point. Your question is answered you may remove yourself from the queue by pressing Star then two.
Questions will be taken in the order that they are received.
But when you post your question that you pick up your handset to provide optimum sound quality.
Please hold while we poll for questions.
Our first question today will come from Guillermo <unk>.
<unk> with Bank of America. Please go ahead.
Good morning, everyone and thank you for taking my question I have two actually.
The first one is related to.
The next harvest season, so we are seeing quite well across the board.
We would like to have your thoughts about it.
Or how this could impact the company going forward.
And the second question is related to the expenses.
Expenses cost inflation. So we are seeing that <unk> does very well there.
Seeing auto team.
Diesel that its a cost to the company.
So.
If I'm not mistaken the company had a pilot testing in the biogas plants that should allow the company.
Produced by a bank and then.
This.
Boston Cui.
If you could share.
Good on that project and what are you seeing in terms of economic visibility and what would be going forward for the company.
The results of that operation.
Thank you.
Okay.
Hi, gentlemen, thank you for your question on the first.
On the first part of your question you were asking about the next how do I see some.
What what Lisa questions, Kevin to close them.
Chemicals and fertilizers.
That's for the Capex for next year.
Yes, yes. Thank you.
So.
Yes.
Regarding your Europe question.
After next how do I see Tom and Lisa.
The soft cost of fertilizers.
As you know our water.
Excellent system.
In the places where the combination of solid like climate <unk>. That's why we feel good about our sustainable production systems and within the sustainability includes the lower rates of therapy license, we use crop rotations and we combine those things in order to many more.
The amount of the license that we use so because of these unnamed greensick system that we have is that the cost of LTE license. He said around 5% of our total cost so the impact of the increase in prices.
Is only on 5% of our total costs that is thinking for next season.
For your question regarding their price helps us the data.
Then.
Regarding your second part of the question that you were asking about the biogas.
<unk>.
They've got other concepts.
The concept of the SEC project.
The value of that.
Taking from the concentrate at <unk> that we have here.
I'd like.
To expand more on.
What's what's out of it.
Much of the same.
These projects of biogas, so Renato can you update there.
Thank you so as Mariano mentioned the source that we use to produce biogas is a contained <unk>.
Concentrated do not in our cluster in Mato Grosso to seed fertilizer. So you can see break the traditional NAS in eight times. So instead of producing 11 dwell the need there is often math where needed of ethanol. We produced $1 five two liters of continental Europe denials so difficult.
<unk>.
We put that in our view the digester to produce the yoga.
In the quarter into phase of the project we are producing.
500.
Where might could meet their of biogas.
Losing the heat off the biogas.
Two two other sorts of heat.
To save.
Steam in the process and by doing that we are exporting extra one one megawatts.
So we still considered a season of orphan.
6000 hours. So we've got growth would be at $6 a megawatt hour a year. So now we are getting ready to that through the second phase of the project. So we are using the same need bio digester so what.
We are producing new midterm from this deal does the peninsula do midterm that we need to clean.
They could alter the sofa off the yoga and also to compress.
<unk> got to produce boom. It then and now we have been adapting some vehicles that we have now revenue absolutely we have adopted seven vehicles.
Three cards.
<unk>.
And one of them.
<unk>.
Drug.
And now they are going to be foods bye bye.
<unk>.
The five meters.
<unk>.
But produce.
500, more mice with the meters of biogas.
Getting replaced.
The equivalent of 240 meters of <unk>. So we can ship.
<unk> hundred 40, <unk> for diesel and multiply by by 566000 hours. So it will be saving approximately one point.
4 million liters of Mizuho.
In the quarter into the.
The Covid claims.
It is important to mention here that we have been losing less than 4% of the counterintuitive gymnast that we produce in our cluster. So when we use the total debt that we put Nielsen our culture, we can multiply those numbers to 32.
So there's a huge percentage of the project.
That's very clear just a follow up question.
Thanks.
You said that you're moving toward the second phase of.
The project what is the timeline that towards looking at right now.
Is there any opportunity to not only sell biomass and then it is in Europe.
One more question, but.
Commercialize that should third parties as well.
Yes.
The timeline now now we are we are just working through the second phase.
Expected to start working on <unk>.
So then we are going to adjust.
Of the production. According to the success of the project that we are going to have them. So we have to be testing and of course, we are very optimistic but before it depends on how how goods.
Is the fleet powered by the new midterm.
Uh huh.
We don't expect to sell it because it's important to say.
Two to order.
So ours is what we expect to do is true too.
Do you believe in our whole fleet, especially the vehicles that are getting to the new tribute foods, but there was a dog food.
Food in the future because then.
These are true true true full them.
And we are just starting to work.
An idea to produce some hydrogen drove an hour.
We'll get them, but this is a steering up very early in your conversations with them.
That's very clear thank.
Thank you for the explanation for the whole quarter to the next steps in the project.
Matt one quick add on DSA by Europe.
This makes the whole system much more sustainable and this will also add additional savi, yes.
And including the whole project these kind of like 85, south on Cvs she values.
A year.
So just a quick reminder, on that IRA.
Question on <unk> do you want to add something.
That's very good.
Just to cover with you the number it's 50000 deal right.
85 cell phone they thought that project a recharge Cvs.
Okay.
Hey.
If you replace 100% of our diesel which has the potential of the project.
Next quickly.
Thank you.
Again, if you'd like to ask a question Star Button. One Star then one to ask a question.
Our next question today will come from Lucas Ferrara with J P. Morgan. Please go ahead.
Yes.
Okay.
First of all just not sure if I missed them sorry.
What's <unk>.
As of now the expected impact of roast combined with droughts in Europe crushing for this year. So what's the expected the upbeat of crushing guidance you guys may have for 2000.
'twenty, one 'twenty two and.
Do you already see coming back off this to 'twenty two 'twenty three is it possible to anticipate something.
And if you can't comment obviously on the expected Trs production decline as well and the other question that I have is even though super.
Welcome guys are opened in terms of hedging hedges, especially for next season right.
Prices are getting combined with the currency are getting to a level that I believe will get grain chugai super good margins. So on a risk perspective wouldn't it make sense to start array to hedge something for the next season at these prices of as you look at the curve.
Over 2018.
For the next two years pretty much we didnt make sense to already start to position yourselves.
And locking in some some good margins for the farming seasons.
Thank you Luca for your question.
No not at all.
Okay.
And your answer both please.
Okay.
So thank you Lucas.
Question.
Depends on the rest of the St itself, we had.
Good.
The decline in terms of offerings, that's why requests very well in the first quarter actually wasn't was a heparin grocery.
And also our our yields accumulated the yields for the six months is higher.
And then last two year.
Because we didn't have that such impactful.
If the drought that is affecting the rest of the center itself.
In July.
As you know there was a frost in Brazil, which affected the main sugarcane yeager's, including some volatile bottomed.
And our first multi dosing soon.
Does your lives. So we were also affected by by the Frost.
This should impact our sugarcane.
<unk> for the remaining part of this season and for the beginning of the next one.
And we are doing.
All that we can do to try to minimize.
The impact which includes of Mariano measure the beginning to speed up the crushing pace.
Especially additional work and that will be harvest this year.
We had acquired some some third party sugarcane that is being delivered by by the owner of the gain so it helps to supply should work into our.
News, we are taking part of the planning team and structure to help to crush the sugar cane affected by Frost as quickly as possible. So we're trying to do to try to do our best to minimize the impact for this year and the beginning of all through the.
The next few years.
It should be quite impact our corrosion I think that this year, we should be crushing.
<unk> is slightly lower than we had of course should last a year.
And for next year for 2020 true globally, we're going to grow shooting for short more than this year.
I would say a little bit more than more.
11 million tons of sugarcane altogether.
And I think the good points of the of the philosophy there.
Good point.
Is the fact that the prices of both sugar and ethanol are very high <unk>.
The SMB of sugar and ethanol are very.
Constructive.
Because specifically because of the drop in the supply of sugarcane in Brazil, I think the markets.
Is it starting to realize the impact that the drought and the frost is having in the Brazil crop. So everyone is adjusting their projections to 500 million bonds or closer to depth, which would give you sugar production goes from 30 million bond.
Of sugar, which is.
Is much lower than everyone was really originally forecasting.
And we are very.
We're going to be able to capture those prices.
As we mentioned, we have 30% off of our sugar or almost 5% of our <unk> year swap hedges, yet and 100% for next two years.
And I think it's important to also to mention that the price of energy is very very high at the moment.
The blocked a range off the spot market. So we are selling energy now of almost 600 reais per megawatt hour.
And we have the.
Approximately 9000.
Megawatts hour to be sold in the spot market, which represents.
Approximately 10% of our.
Energy production.
Regarding the hedging.
Question of course its.
We're already starting to bulk a bulk of the hedging part of the sugar.
Sugar, but we still believe that the market is going to keep.
Moving up because.
We don't think that the scenario of the drought and the Frost is full.
Bryce.
There are a lot of.
Barton.
Analysts that are still saying that Brazil has 550 million tons of sugarcane.
<unk> because so we are starting to monitor those variables sure at some point to start to hedge into production.
And I think that one last comment that I think is maintenance.
It is important to mention here is the fact that we think that theyre on hydro.
The situation is very tight.
Because the auto cycle is growing in Brazil.
Higher base and everyone was expecting.
The pirates all through high dose is very high at the moment. So the gasoline is gaining market share in the Otto cycle, So the demand for Florida and hydrogen.
And growing a lot and we are happy that we just finished our our opinion about what local or which of the equipment to produce hydrogen even irma so you'll be able to increase our on hydro's production and 50%. So I think we are very well positioned to depth.
The upside of prices in all the products that we produce.
That's perfect.
222, Sainsbury falling just as a reference and multiple dosing soon.
Excellent.
Sorry, just a follow up and should be quite me.
Want to start with the sugar prices and now.
With more hydro capacity, what should be our mix going forward are you adjusting.
Europe production mix and for the second half of them.
So we saw the other was mentioned.
<unk> today is already equivalent to 22 sainsbury bonds, so spring margin than sugar right now and the high dose is about the same.
So we think that we are going to be maximizing.
It's in all the parts of the season.
And then also.
You have to consider that the sugarcane.
Yes.
When when the harvest progress the sugar cane gets lower Trs so it's all.
I'll always easier to produce ethanol. So we think that we will be producing ethanol and benefited from both higher price and sufficient multi business.
Perfect. Thank you very much.
Okay.
Again that you'd like to ask a question Thats Star then one star then one.
There being no further questions at this time this will conclude our question and answer session.
At this time I would like to turn the floor back to Mr. Bosch for any closing remarks.
Okay. So before finishing the call I wanted to thank you all for joining the conference.
As you know whether it.
The inherent risk of our business.
However, we are uniquely positioned to continue taking advantage of the constructive price scenario.
It's true for all the products, we produce and I'd say.
I have mentioned before.
It is on the possible because of the strategic investments we made across our operations.
Cost of the hard work of our team.
We believe we are in our Nexsan positioned to continue generating good financial results.
We have already started to distribute this resets with our chef caused us throw out what our value add program.
We plan to continue doing so in a modest truck weight in the coming years.
Lastly, I would like to reiterate my gratitude.
All our operating teams.
Doing an outstanding Jill and shareholders for their continued support.
Thank you. This concludes today's presentation you may disconnect. Your lines at this time and have a nice day.
Okay.