Q3 2021 Adecoagro SA Earnings Call

Good morning, ladies and gentlemen, and thank you for waiting.

At this time, we would like to welcome everyone to other Kroger's third quarter 2021 results conference call.

Today with US we have Mr. Mariano Bosch CEO, Mr. Charlie Boy or shoes, CFO, we were.

Wed 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 session.

At that time further instructions will be given.

Should any participant need assistance during this call. Please press star zero to reach an operator.

Before proceeding let me mention that forward looking statements are based on the beliefs and assumptions of Alex Wagner's 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 our collateral.

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, and thank you for joining I think logging or 2021 set of quarterly tax conference.

2021, Mark they didn't yeah. Neither study of IV glide type deal in the last 10 years, how would I just see that beat that goodwill.

Handed medium to roughly 400 media.

Now what are cashing in Asia became structurally Bosch Cds.

Since the IPO, we expanded our weaknesses and conducted investments that allow us to better do you got any data that would operations improve efficiencies and enhance our competitive advantages.

We have also became a social.

Good day.

In a reference in the sustained out production of food and renewable energy.

I think globally now a more mature company with a healthy capital structure.

And the capacity to call me systemic distribution policy.

As we mentioned in the past during 2021 we are distributing cash to our shareholders via what here reported change program.

So far we have already reported.

Over six media here, if we went into more of them, 5% of the equity deals they call a bunny.

Yeah.

Starting in 'twenty 'twenty do we will distribute annually at least 40% off the adjusted free cash from operations generated during the previous year distribution will consist of ABB. Then also at the least Saturday medium better year.

Which will be paid in May and November.

At the same time, we will continue to repurchase shares under our program.

We see appropriate until reaching their distribution paragon.

Yeah.

On top of what are they traditional policy.

We continue to see attractive growth opportunities that synergize, well with our current operations.

Have potential to make them more efficient and sustain that.

And offer very attractive returns.

I know this will never compromise our solid debt brought fight.

Now in relation to the performance of our businesses consolidated adjusted EBITDAR marked a new record high for the first nine months of the year and then increase our forward of 50% compared to last year.

In our sugar ethanol and energy leases crushing volumes during the quarter that it was Sunday to hungry cellphones don't slower than last year.

Spite the impact of that for us.

This was possible because we accelerated academy thing Dvds.

Chris how do I see the idea and what they will do both Jason some Gainesville from third parties.

As we were expecting lower production was more than offset by the higher prices that we captured in sugar ethanol and electricity.

We continue to see contract the price scenario in the following quarters due to the impact in supply and to literally finish of the how do I see something for most of that maintenance.

Okay.

We had a negative position to continue to benefit from this price scenario.

As we.

We have been hitting the low wind off of what our commercial policy.

We have invested you know what onsite storage capacity, which enables us to carry over 55000 cubic meter self ethanol and then a handy 65 cell phone don't self schuler.

We have recently increased our capacity to produce anhydrous ethanol, which crazy that 24 cents per pound in October marking it then yeah hi.

We have the necessary flexibility to switch from producing shortly.

In fact, we are currently producing 100% ethanol to benefit from higher rate at the prices.

We continue to actively participate in that I know of you throw them through the sale of more than $2 million of Savi, yes during the quarter.

As part of our efforts to continue increasing the sustainability of our operations.

And and improve our and all of your score.

We will soon start testing they use of biomass sun set of team bagels.

Yeah.

We are very excited about the development of this technology and see a great potential for eight moving on to our rice business.

We achieved strong research during the first nine months of the year, including a record high yield of 7.8 tons, but heck that in average.

This was possible thanks to the investment we made that gross the recent ice but specially do they know what do you approach of our team who bought the especially the vocals umbrella D V D getting quality and efficiency through the value chain.

Ashwin throughout what a privilege genetics and all set of customized products that perform well at the farm and the industry level.

We continue to develop new markets and increase our mix of higher value added products.

We are proud of the work we are doing in the segment.

All of our team and of our use of technology to develop a sustainable production system that decent generating great results.

Yeah.

Going to the crop business, we completed how do I think David this floor to sell kind of in 2021 how do we have here.

Totaling 700000 tons of grains.

We achieved good yields although it was a linear year.

This was thanks to all what a geographic umbrella they like suffocation, which is one of our competitive advantages and allow us to extend the blending I, how do I see window.

And thanks to that work of our team and the use of technology.

But ultimately indicators what are more than compensated by the higher average prices.

At the present time.

All of our team has had a fully focused on the blending activities for the 2021 'twenty two higher last year.

So far we are planting crops and rice at that Nexsan base and that it good soil and weather conditions.

Now we are entering into the period, where most of the physical year Saturday fine.

You know what do they do operations, we continued to achieve high productivity indicators and transform raw milk into value added products demanded both in domestic and export markets.

As every year Cushman and Wakefield conducted an independent appraisal of our land portfolio and value the 2.4% above last year.

Okay.

To conclude I would like to express my gratitude to our shareholders for their continued support.

I also want to thank our operational and management teams for their hard work and the effort they need throughout all these years.

I am convinced that we have the right team and that we are following the right strategy to continue to generate attractive and sustainable margins for all of our shareholders.

Now I will let Charlie walk you through the numbers ourselves like water.

Thank you Mariano good morning, everyone, let's start on page four with a brief analysis on the res Makoto Soc.

See the adult charts, ranging Augusta during the third quarter of 2021 were lower than during the same period last year and the 10 year average.

However, increased precipitation is doing the gogo, who are very favorable for the recovery of working us.

Before turning to the following slide I would like to briefly comment on the gold front that keep most Brazil's key productive area and the beginning of the quarter.

As you know low temperatures and the end of June and July caused severe frost damage onshore contagious regions, including so Paulo, but in other states azuela ask murdo to source food I mean as you guys.

This caused a negative impact in yields which were already affected by the dry weather observed throughout the center.

Third south region of Brazil.

In light of these market estimates on Brazil, sugarcane supply work in as much as 15% by analysts.

Our expectations at the beginning of the point is that the crushing volume of 590 million concept too okay.

Current expectations, ranging between 520 510 million tons.

The pressure on the supply side translating into higher prices for all three products. This made the price scenario even more constructive.

Randy was as.

As we've seen in the following slide we were in an excellent position to capture this upside because of our strategy to hedge from the low end of our commercial policy.

While the 2022, 1% when you become base, we still have over 90% of Drs unhedged.

Please jump to page five where I would like to walk you through our agricultural productivity.

During the third quarter of 2021, shortly and years Mark on 27, 2% reduction compared to the same period last year.

59 tons per hectare Trs content enduring presented at $6, 9% reduction in total 132 grams per tonne.

The lower than expected agricultural productivity indicators were fully explained by the adverse weather conditions as most of the harvested area was case below optimal growth stage.

It is worth mentioning that accelerating harvesting base is very important to avoid that broad we've got some additional damage was the key.

The combined effect yields and Trs.

Trs content resulted in a Trs production per hectare of seven eight times during the quarter, resulting in a 32, 2% reduction year over year.

On a nine month basis, the year over year reduction of 11, 7% in sugarcane yields and 12, 5% in Trs per Hector is fully explained by the third quarter dynamics.

Going forwards.

It is expected that productivity will return to normal levels as pure <unk> continues to recover favored by increased precipitation during October.

Now, let's continue with slide six where I would like to discuss our sugarcane crushing strategy.

Because we have in place and integrated business, our crushing volume during the third quarter of 2021 was only 200000 tons lower year over year, despite lower than expected agricultural productivity indicators.

This achievement was possible because we harvested 28, 2% lower area than during the same period of last year.

<unk> increased the amount of gain purchased from third parties and 15, 5%.

In addition to this our team responded quickly and these third party harvest is in order to accelerate harvesting activities to minimize the weather effects baidu.

By doing so we achieved a crushing volume.

With 1 million times during the quarter only five.

2% lower year over year.

As of September 30th crushing volume reached $9 7 million times, $11 1 million tons or 13% higher year over year.

This increase was explained by the good cane availability on the early start of the crushing activities. During the first quarter of the year as opposed to last year and by the favorable weather during the second quarter of 2021.

Let's move ahead to slide seven where I would like to discuss our production mix.

As you can see that Douglas chart during the third quarter of 2021, hydrous and anhydrous ethanol.

Traded at an average price of $19 two on 'twenty, one two cents per pound.

Representing a two 8% and 13, 2% premium to sugar, respectively. 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 55% of Derisked with profit from higher energy prices.

To further take advantage of price premiums, 63% of total ethanol production was anhydrous ethanol compared to 41% during the third quarter of 2020.

This increase.

With ethanol production was possible thanks to the recent incorporation of our molecular team.

Which increased our dehydration capacity and 50%.

Total production of both ethanol and sugar was 11, 2% and seven 3% lower compared to the third quarter of 2020, respectively.

As previously mentioned this was explained by the lower production of your risk, but it was more than offset by an increase in prices.

As Brazil is one of the world's main producers and exporters of sugar.

Any weather event that might impact supply will be studying in increasing prices, our low hedging volumes enabled us to capture the benefit that this natural hedge offered on a year to date basis production mix was in line with the first nine months of 2020 standing at 58% ethanol and 14th.

2% sugar.

Volumes produced were 14, 4%.

And $13, 6% higher respectively.

By a strong production during the first six months of the year.

In 2021, we maximize sugar production during the first quarter to benefit from higher relative prices and switched to ethanol during the second and third quarter.

Yoga.

Also absorbed in 2020, while we maximize ethanol during the first quarter, then switched to sugar as ethylene prices in light of the pandemic and went back to maximizing ethanol in the third quarter.

These high degree sensibility constitutes one of our most important competitive advantages since it allow us to make a more efficient use of our fixed assets and profit from higher relative prices.

Year to date ethanol accounted for 61, 7% of total adjusted EBITDA generation in sugar ethanol and energy business, considering other operating income while sugar accounted for 32%.

Please turn to slide eight where I would like to comment on our energy production strategy.

As you know, Brazil energy matrix is heavily reliant on hydroelectric energy.

Due to the prolonged period of dry weather in the center South region of Brazil.

Leather of water in the resource was low.

Can be seen in the top right chart. This resulted in a high <unk> spot prices, which increased from 92, we added per megawatt hour last year to 580 to reality for megawatt in the third quarter of 2021.

To Brookfield from this situation, we increased our energy production by burning bagasse, both owned as well as purchased from third parties.

Wood chips purchased from third parties and sugarcane straw collected from the field.

East 40, <unk> energy during the quarter totaled 263000 megawatt hour, 4% higher compared to the same period of 2020, while our co Gen efficiency ratio was nine 6% higher.

Let's please turn to slide nine where I would like to discuss quarterly savings.

As you can see on the right chart net ethanol sales during the third quarter of 2021 amounted to 83.4 million 121, 7% higher year over year. This was mostly explained by an increase in average selling prices measured both in <unk> as well as U S.

Resulting in a 78% increase mostly led by anhydrous ethanol.

Despite a lower production of ethanol during the quarter.

And an aggressive carryover strategy to benefit from higher expected prices.

<unk> sales volume presented a 15% increase compared to the third quarter of 2020.

This was fully explained by the Lockdown measures adopted in 2020 in response to the COVID-19, which negatively affected demand for fuels, resulting in a decrease in sales and a stock buildup.

On a year to date basis ethanol sales were $69, 6% higher than during the first nine months of 2020. This was explained by a 49, 3% increase in average selling prices.

And $13, 6% increase in selling more units.

A brief comment on C by.

During the quarter, we sold $255 eight thousands he buyers under the <unk> program at <unk>.

An average price of 46, we added squishy bio approximately $8 $7 bursey volume.

Year to date, we sold 367 nine thousands he bias at 41, six we added 40 Bayou approximately seven eight does <unk>.

The gateway energy selling volumes during the quarter reached 319000 megawatt hour Martin at two 6% year over year increase.

Average selling prices were higher both measured in reality as well in U S dollars standing.

$8 $9 per megawatt hour, implying a 64% increase compared to the same period of last year.

As mentioned before this was driven by the low levels of water source, which reduced the supply of hydroelectric energy.

All in all net sales of energy in the third quarter of 2021.

$18 8 million $68, 3% higher year over year.

On a nine month basis net saves of energy were $37, 7% higher year over year as a consequence of the increase in selling volume and average selling prices.

Net sales of sugar during the third quarter of 2021 reached $46 6 million.

97, 2% lower year over year.

This increase was driven by a 57% decrease in setting volumes, partially offset by a 52, 1% increase in average prices, which reached 17 two cents per pound.

There are two points was high <unk> 19 during the third quarter of 2020, we increase the volume of sugar sold at the market for ethanol early illiquid and prices were low due to the pandemic.

Due to our commercial strategy to Carryall with stops in order to profit from higher expected prices stocks of sugar in the current quarter almost doubled compared to last year.

On a nine month basis <unk> sales reached $143 3 million led by a 48, 7% increase in average selling prices, which fully offset the two 4% decrease in selling volume.

Finally to conclude with the sugar ethanol and energy business. Please turn to slide 10, where I would like to discuss financial performance.

Adjusted EBITDA during the third quarter of 2021 was $138 1 million $51 7 million or <unk> 59, 8% higher compared to the same period of last year.

The main driver behind EBITDA growth was the 36 million, increasing net sales coupled with a $20 million year over year gain in the mark to market of our harvesting gains led by an increase in caustic prices of 67%.

The increase in adjusted EBITDA was partially offset by a $25 2 million increase in cost mainly explained by the increase in harvest EBITDA area to make up for the lower productivity of the team, which resulted in higher salaries and higher use of diesel and higher maintenance costs, among others as well as.

By the higher purchase volume of third party cane, biogas and wood chip among others.

Year to date adjusted EBITDA stood at $269 8 million 56, 2% or $97 1 million higher than during the same period of last year higher results were explained by <unk>.

60% increase in net sales coupled with our <unk>.

$39 7 million gain derived from the mark to market of our sugarcane, mostly related to harvest the team.

This was partially offset by an increase in costs combined with a $23 7 million loss in our commodity hedge position and the $8 8 million increase in selling expenses in line with increasing sales.

And Peter Stopes amounted to over 135 million, marking a year over year increase of two point lead times led by our commercial strategy to carryover stocks.

Benefits from higher expected prices.

I would now like to move on to the farming business. Please direct your attention to slide 12.

As of the end of October 'twenty, 'twenty, one and we harvested over 260000 echos successfully completing the 2020 and 21 harvest season.

This amounts to over 1 million tons of agricultural Cogs harvest didn't transported across 10 provinces in Argentina and Uruguay.

We are currently engaged in planting activities for the 2021, and we need to have the season, so far observing normal weather conditions.

We expect to plant 282880, Hyksos, seven 9% higher than the previous harvest season.

Let's move to page 13.

What I would like to walk you through the financial performance of our farming of non confirmation businesses.

Adjusted EBITDA in the farming and natural permission businesses reached $24 8 million in the third quarter of 2021, and $113 4 million in the first nine months of the year.

This marks a year over year increase of 19, 9%.

32, 6% respectively.

Clinical team focusing on the farming business result stood at $23 9 million during the quarter and 107 million on a nine month basis, marking that year over year increase of 31, 6% and 55, 7% respectively.

Adjusted EBITDA in our <unk> segment was $13 7 million during the quarter $7 9 million higher compared to the same period of last year.

This was explained by an increase in average selling prices of $127 per ton increase in the case of soybean and $71 per ton in the case of corn, coupled with a year over year gain in the mark to market of our biological assets on the account of an increasing yield.

Prices.

This was partially offset by an increase in costs driven by inflation in U S dollars does.

Year to date, adjusted EBITDA amounted to $47 9 million 89, 5% higher compared to the same period of last year.

The improved performance was also mostly explained by a year over year gain in the mark to market of our biological asset on accounts and increasing prices.

End of period stops were at two three times higher than last year amounting to over 15 million, mainly as a consequence, all commercial strategy to carry stocks that did benefit from higher prices.

In the case of right most of the margin was already captured during the first quarter of the year in this line our adjusted EBITDA reached $2 8 million during the third quarter, marking our year over year loss of 54, 3%.

However, during the nine month period, adjusted EBITDA stood at $40 7 million 37, 9% higher year over year.

Boston Financial performance was mostly explained by an increasing gears, which reached a record high of seven eight tons per Hector.

Increasing area and an increase in prices, which led to a year over year gain in the value of our biological lesson and agriculture produce.

These results were possible due to our continuous focus on protein DVD enhanced efficiencies and the consolidation of our team.

The theory. This is generating an adjusted EBITDA of $7 2 million during the third quarter of 2021, and $19 3 million. During the first nine months, an increase of $13 five and 32, 6% compared to the same period of last year respectively.

In both cases higher results were explained by an increase in gross sales.

<unk> achieved efficiencies in our vertically integrated operations, including hybrid of DVD at the farm level and the flexibility of our industrial assets.

In the case of land transformation, a minor gain was registered in the current year compared to $16 3 million result in 2020, which reflects the sale of a plot of our lingo bar.

Let's now turn to page 15, which shows the evolution of <unk> consolidated operational and financial performance.

On a year to date basis gross sales reached 777 million and adjusted EBITDA 368 million, marking a year over year increase of 33, 9% and 54% respectively.

During the quarter gross sales reached $317 million, while adjusted EBITDA totaled 157 million, marking a 33, 2% and 53, 7% increase compared to the same period of last year.

From an operational point of view, we continue increasing our density area, both in our farming and sugar ethanol and energy business.

In line with our enhanced efficiencies on the farm and Disney industry lever as net to an eight 2% increasing our production of crops and rice and a 13% increase in crushing volume as previously mentioned.

To conclude please turn to slide 16 to take a look at our net debt position as you may see in the bottom left chart. Our net debt as of September 30 of 2021 reached 725 million $19 4 million or two 6% lower than the previous.

Quarter.

This was explained by the combined effect of a one 6% reduction in gross debt and a two 5% increase in our cash position, even though marketable inventories in the third quarter of 2021, we are 66 million higher compared to the previous quarter.

The increase in cash position was a consequence of a greater collections and lower working capital requirements since in the second semester of the year.

Planting and harvesting costs have already been incurred and we start sending and collecting income from multiple of our products.

On a year over year basis, net debt increased by one 9% compared to the same period of last year.

The one 1% reduction in gross debt was fully offset by an 11, 2% decrease in our cash position.

This reduction in our cash position was mostly explained by an increase in marketable inventories of 144 million compared to the same period of last year.

We believe that our balance sheet is in a healthy position not only based on the I think Wade overall debt levels, but also on the term of our indebtedness most of which is long term debt.

September 30 of 2021, our net debt ratio reached 156 times.

Can be seen we continue the downward trend compared to both the previous quarter of 2021 and the same period of last year, marking a reduction of 14, 1% and 31, 9% respectively. In the same time, our liquidity ratio, which is calculated as cash and equip.

<unk> plus marketable inventories divided by short term debt reached two times eight 9% above last quarter's ratio of 184 times and 33, 8% higher than the same period of last year, which reached 149 times.

This clearly shows the full capacity of the company to repeat short term debt with cash balance without racing as Tom and cabin.

Thank you very much for your time, we are now open to questions.

Thank you.

The floor is now open for questions.

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Today's first question comes from Jeremy <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 being in the sugar and ethanol business looking at the yield that you guys had this year and are looking for the next crop season.

Could you expect in terms of recovery of Prs.

Of gain and the second one is related to the fertilizers.

The market price that we are seeing and if you could explain a bit what will be paying for your organization and what is the exposure that you have in the farming business to these prices.

Very important for us.

Okay.

If you could give more details on that front. Thank.

Thank you.

Good morning, Thank you very much for your question.

I'm Ron I'll take the second part of the equation and then I'm going to ask Renato do it more into these dates on the sure ethanol yields and what can we expect for the future salary auditing our fertilizer position for <unk>.

Here, we are pretty well covered we anticipated that we're in.

And buying sulfate fertilizer. So we I didn't have very good position in the medium one shot it's Adam on for that long that then of course, there has been an increase over our loss.

You guys have seen general.

And then we will add that we have.

Impacting the total cost that applies to the <unk>.

15% of the thought that this 15% includes fertilizer and agriculture.

That both are increasing in time self dot for IC. So that is what we need to take into account then for next year that is not D. C zones holiday season that we are planting has already covered some of that for the following season, we will need to add that the leasing costs.

They'd have to try to compensate the increase on the 30 <unk>.

That is one part of that question and the other part is that this also leaves us an opportunity to be even more efficient in a transformation of the vignettes on the transformation of the mine you are up there they take out into organic fertiliser sell these transformation.

Did I said.

Being very profitable that we adding anything that we highlighted also but you only do they have to continue to increase the value of <unk> because of the team in <unk>.

That makes us so more sustained evidence that the sustainability on the increase in the TV side and the generation of apparel grades through the transformation of this.

Manure into.

Biological fertilizers.

So, allowing us to capture more value through the face of commodity why youre sort of parallel I'm crazy.

And so we see all this as an opportunity.

Regarding the first part of your question of the sugar and ethanol yields and what that expected there.

I would like.

Total debt more into those needs.

Nathan.

And I thought.

And I think we don't have that they're not doing it.

In the line, so I'm I'm Lenovo.

Through <unk>.

And.

They.

The sugarcane yields.

Jim.

Costs have been affected by the stuff we have explained in our previous calls.

Yes.

Effective.

This quarter you know one is starting to improve our win will start to improve because we are now one will be out of athene today, we had a gain that has been less affected by these fraud.

For next year that was your question, we can expect lower than the average because of the first half of the year, but in the second half of the year. We will we can expect even better because after they if at all.

Leaving during October excellent ratings, so they threw out a game plan based on is now looking pretty well and so for the second week.

We can expect you had higher than average as we can see a developing today. So we know that each fortinet here, we would expect lowered on their first half hiring the second.

It's basically a quick summary.

No that's very clear just one additional question.

If I may in terms of the dividend policy that the company disclosed this quarter, which is a milestone for the company as I understand.

If you could just walk us through the rationale of choosing this 40% threshold than the metric you're looking at the free cash flow and what we could expect that the impact of that policy in terms of the investments ahead of the company like.

I would like to perform going forward.

I'm sorry.

Sorry.

Jeremy I'm not sure I understood exactly that question, but.

With these policy assay, we explained at the beginning.

We are.

While meeting that 40% of the free cash flow.

G&A dethrone them, all but Asia, each what the funnel we distributed to the shareholders than the rest continues to leave for these growth projects that we are seeing very attractive in the different businesses.

VSAT piece that we currently have.

Okay.

Sure that's very clear thanks man.

And our next question today comes from Thiago Duarte BTG. Please go ahead.

Thank you good morning, everybody. Good morning, Charlie Yeah, I have two questions on the on the sugar ethanol and energy business. The first one is is similar to the previous one, but but still focus on this ongoing crop.

Thank last quarter after the the frost and knowing.

The impacts of the drought.

You mentioned that you were expecting to rush.

For the full year.

Around the same volumes that you crushed last year.

So just just wanted to check whether this assumption is still valid.

After after the third quarter.

Not at what would be a reasonable king volume for the year as per your expectations.

The second question is a more specific one regarding you mentioned very briefly the earnings release, the Biomethane project.

And the investments that have been.

Sure.

Can you hear me.

Yes perfectly well.

Oh, Okay, sorry, so and then the investments that you're making to develop that project. So.

Can you you mentioned in the release that you were you were looking to eventually be able to fully replace.

The diesel that the company currently buys from the market.

So just if you could can you provide any more color on.

The size of the Capex the volumes that that that the biomethane production capacity that you expect to be able to to have in the future and any color on these fronts would be much appreciated. Thank you.

Good morning, Thank you for for your question.

Very interesting.

The second on your second question on the Biomethane projects that we are very keen on the project that we are very enthusiastic off by technology that we've been developing now for the last seven or eight years.

Yeah.

Advancing every year.

And needle waiting in the development of the project that now we have these vials I guess does that we take them from the from David Yeah, and we are currently.

Generating electricity through that biomass that now we are making an investment where we are transforming that biomass and means to end.

Our concentrating ito bolted into the way, we have already transformed that team bakers and so.

Our first step we expect that reloading 2022 we are going to be using my son for these had a team.

D.

Steel and it being a way we are very enthusiastic, but we analyzed the potential thoughts.

Yes that we are.

Having and that we could be transforming into the same thing that we are facing today and that we are having an accident.

Okay, an excellent performance.

It could be able to replace almost 100% of all our leases that conceptually what the potential of these technologies that on top of this we havent already met.

With whom we've been developing these that we could be even selling the technology for a third party. So that is the end of the chassis that we are having but the deal within a very developing technology.

That of course, we had a very keen but we are not they're projecting nothing specific as of today.

Hey team.

Clear CLO.

Yeah, that's clear, but do you have any any can you size up the project for us in terms of Capex. Just so so we understand that the amount of investment that you expect to be the point, there that would be nice, but I got the right.

Oh, Yeah, we still don't know the amount of the Capex. That's why we're talking about the possibility that the capex will have to leave it.

Phase in a very short time.

Time last night, so we've been seeing now on all D C capex within our existing business He's got very attractive returns.

It should be the adult pay you back.

So that would be the analysis. Once we have we are pretty sure that all that technology.

So a way to be communicated that very clearly communicated.

That the CECO Asia.

Then thank you.

Going to the other parts of Europe.

Of your question Thiago.

They thought that it could asking off this year in our last quarter. We mentioned that it was on will be some way below last year because of the impact of that now that we were able to accelerate the academy stat in the quarter that it was excellent in terms of <unk>.

Excellent at what they do.

Going to oxidize, they kind of a central kind of it does visa trusted gain.

And that they perform even better than what we were projecting because we were able to hire some additional.

So I think part of it.

A.

Accelerated was going to be bought at the end of the year.

We believe we anticipated those say a moment, that's what Brady well then.

We can see that we are going to we pretty near to what we thought of it stays a lot here.

But why don't we why not 2% below last year.

We are currently have I think we will in that part of it by December we are now cloud are acting with 100% ethanol.

But I would say between ethanol and sugar prices weigh in favor of faith that are not necessarily what's explaining in the beginning.

Within the ethanol.

Hi, little safe and artist he said better farming very very pricey. So today, we are doing 100% of ethanol in our current part of it.

That's clear thank you Mariano.

Thank you all for your questions.

Our next question today comes from Christian Audi Santander. Please go ahead.

Thank you Hi, My Dan and Charlie first of all congratulations on the great results I would like to ask a question first on capital location in Montana can you as we go through the different elements.

On the leverage front cause there showed very clearly in your presentation, they're very low.

Net debt to EBITDA, what is the target that you plan to maintain that youre comfortable with going into next year.

The second use of cash in terms of Capex.

Or can you just detail a bit more your expectations for capex for major products into next year you already touched on this.

Element of biogas.

And the other products such as the two G or anything else that could resulting to higher capex than expected.

And then.

A dividend versus share buybacks, congratulations on establishing a dividend policy that's something good.

I think the market was looking for and I know you were working very hard on it so congratulations on getting it done.

How do you think about that.

Versus share buyback decision.

It's purely a tax issue, where you will pay the dividends and then what's left over for share buybacks and then the.

The second set of questions was more related to pricing you already touched on your expectation for a continued really good.

The ethanol and sugar pricing can you just elaborate a bit on that particularly as it relates to sugar and how youre seeing the global.

<unk> set a surplus into next year. Please thank you.

Hi, Gary.

Thank you for your question.

Regarding the first part of your question.

Assuming that to what I was explaining.

When we started the call.

We feel that today, we already know very well.

Sean.

And implement the distribution policy.

And our policy referred to at least 40% of the adjusted free cash flow from operations that has been generating the previous year and here I would like to point out for example, this year 2021 where.

We acquired six media she asked that the OLED $50 million.

We take a look at the net cash from operations generated in 2020 that was around $100 million. So in this particular year 2021.

Most of the projects that we farmed and because of.

Our solid.

Debt position and because we are below two times have you done we feel very comfortable in that area. That's the only way to being on during the whole year to be below the two tanks I read that is that we weren't able to.

Use some way more than 50% of it and it's got some operations in Florida.

Assuming that previous yet so that's why within our budget, we are assuming an understanding our capital allocation and king and the same way that we've been explaining in the last day.

3456 quarters.

Hey.

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Understanding this is a capital allocation.

So.

Why at least $30 million of David in that.

To complement through a buyback.

It includes many things, including the Dod.

<unk> ensures that <unk> tomo holiday makes us or not but at.

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And finally, the last government regarding the Capex and the opportunities that we have seen within the Sig, There's always opportunities I would say that all of them that we are looking at it we deem the four business lines that we currently have.

And that is where we are seeing many different small projects like they'd be biomass and that we just discussed.

But a lot of it's something that we wouldn't expect a huge capex during 2020, though but we can see some small capex is on the <unk> concentration with <unk>.

But I see yourself.

I said, they've been increasing living a concentration and applying more.

But it's more of a or that incredibly light.

He said very very profitable on top of that that makes us more sustained and others that generates commodity values. So they pay you back off the <unk>.

Type of investments.

Less than two years on the returns of course had a very very high same thing in different places itself. There sure on ethanol chain you will find many small investment there and all of them will go through this good idea that I'm just explaining.

When we look at that.

Argentina, and Uruguay part of the company, we see very attractive things seem that rice weakness.

It is doing very well.

Well, the better, Florida myself being able to develop a genetic off right.

But how do you see being sold to a specific client and we have not seen my sense prices through that way is putting us in a very yet that I think position and so we're getting that the sector. We also see some specific opportunities that all of the opportunities that we are looking today.

Lean the existing businesses and where we feel very very comfortable.

We kind of thing in that the specific 8-K most of them.

Solving some bottlenecks in the whole chain of our investments that we are talking about.

Okay.

Great.

We.

Can you give us a sense as you analyze these opportunities.

What levels of returns IRR as you use as a threshold to in order to pursue them.

Yes of course is a threshold for the different business that helps sustain Natalie team backfill that many specific things, but in general I would say that most of the things that we are looking at.

All of them are alive Duane.

20% to 25%.

Some of them, we say, 50% I got that so the.

Yeah.

We are using out of Virginia attractive for us.

Yeah.

Great very helpful. And then if you could just comment on your outlook for sugar and ethanol prices. Please.

Yes sure.

As we've been anticipating.

We are in a very constructive.

In terms of sugar and ethanol prices.

But already a month eight or less and the relations.

Sweden embarking on the next thing in Brazil.

Valued was on a high utilization on that.

Dean.

And if anything what would the ideal.

Especially when we felt on the on hydro scenario. That's why you saw that at the end of each quarter, we let it fall off inventory and same thing for the prices we were anticipating the.

Ross to affect that.

In our previous call that we see.

The market's talking too much about the previous effect and I think it was clear that the effect was there and the increase in per Se game.

For the next year until the second half of the next year. We also see the scenario very constructive in both the two letter on ethanol prices.

Yeah.

Great. Thank you very much.

Yeah.

My last question a lot something for the sake.

Sure Jonathan.

Scenario.

Yeah, that's kind of hearing or not.

Yes perfectly well.

Yes, so just just to add the desert, we don't think that the Brazilian crop you'll have an important to recover next year.

Because of the reduction of the 18 months planting because of the dry weather.

Going back to that type of planting.

Also the frost and the fires that we were mentioning before we were in fact, the first half.

Off next year in Brazil.

The supply of Trs for the first half of the year and also the appropriate there is going to be a reduction in the sugarcane area of about 3% of next tier. So the Brazilian Corp is not grinch will recover a lot.

There are some recovery in some countries like.

In Asia in Thailand, but.

Lower proportion than what's in Brazil.

Yes.

Also to reduce so we think.

Absent the award is around 3 million tons.

Sugar and we think that the scenario for next year is going to be almost.

And our for next year is going to be very very good us while we were discussing here.

Oil prices remain at.

The current levels and the Otto cycle.

Isn't breathing, we think that there's going to be I would say a healthy fight for all sugar and ethanol for the Trs of the gain so probably the mix can be impacted and his desk.

You're going to hire.

Yes.

Thank you ladies and gentlemen, our next question comes from Lucas from JP Morgan. Please go ahead.

Yes.

Hello, Lucas your line is open.

Yes.

So good morning, everybody. Thanks for the opportunity to ask questions and congrats on the on the distribution policy I just wanted to make a follow up question on this.

And Charlie.

I think the only maybe missing link on the Diwali season, exactly like what's the limit.

What's your leverage limit you expect so we have a.

Normally you have some visibility on the minimum payments, but what could be like a potential payments. So given your capex planning expansion Capex plan and what's the what's the limit of leverage you one on one.

Maintain.

So ctrip leverages quite low firmly there is no major topics.

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Can you can we can you share what's the leverage maybe net debt to EBITDA limit you. Once you want to keep us. So we have also a visibility on what could be the.

Actual payment.

So to shareholders. That's the first question. The second question maybe to hit not too.

And I thought we'd just senior.

Senior carrying a lot of inventories for the coming quarter, especially with sugar.

Do you want to talk about your commercialization strategy for the coming quarter, you see do you see that market sort of ethanol that you see companies importing ethanol in the fourth quarter. All do you see the inventory balance down.

And could you just explain me why carrying so much as sugar.

Inventories for for the coming quarters.

Yeah. Thanks, Thanks, all for the opportunity.

Hi, Lucas. Thank you for your question.

Regarding the distribution policy I think that pretty much in line with what we've been saying it the ABL below two times EBITDA.

Leverage on a Saturday DIY, we feel very comfortable.

We think that way.

Daily in our company.

Somebody that they say generating very good results and sustain that.

Gosh.

But we want to maintain.

Labor itself that Betty.

Concerned about the way we are in Latin America, and we are.

Now Latin America, so we want to maintain our assets in there.

Safe area in terms of the amount of net debt that we would like to have so.

No.

The most of what we've been saying today regarding our Jewish home policy.

As already said that in.

Okay.

40% of the net cash from operations is a minimum to which we are maintaining our sales.

And we don't want to have.

It's a soft patch in the Gulf, but nothing like that that you can see what we've done.

During the current year and so AI team, we will be continuing.

Continued.

In line with how we've been managing the combined.

Yes.

And so that's regarding the English on policy and regarding.

On your question on Sunday mentor is I would like to have it right at the onset of precisely.

Hi, Lucas.

We also remain very optimistic about the short term.

I think the Brazilian crop this year is going to be.

Something close to.

520 million tons.

Much below than everybody was expecting so the supply of of the Trs is much lower than previously thought.

The oil prices and the auto side was given support for price of Prs.

Thats why ethanol prices are very high and helping shore barrels of oil.

There isn't that recur at all where our stocks for the fourth quarter.

In the sugar appropriately through this Saturday.

As sugar in this fourth quarter.

Today, we have 85% of our sugar <unk>.

Further production hedges.

16, Sainsbury balls, so we still have troops.

Price.

75000 tons approximately.

And the ethanol we haven't we haven't been carried the tariff.

Talks to the last quarter and now we are starting to sell ethanol at the very high prices actually we are selling ethanol right now.

Okay.

It goes the equivalent of the higher dose of 22 cents per Pauls and then on the high dose 24 cents per Paul at the change it's very.

<unk>.

So probably we're going to keep selling something now and something in the first quarter of next year, that's probably the.

We will remain very attractive.

Yeah.

Perfect. Thank you very much all.

Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to Mr. Bosch for closing remarks.

Okay.

Before finishing the call I wanted to thank you all for joining the conference.

The market outlook of the products that we produce.

Looking promising and we are in a new <unk>.

<unk> unique position to continue to take advantage of such favor a scenario.

We are confident that we will continue delivering strong financial results.

We will continue to distribute to our shareholders now in a more structural way.

Lastly, I would like to reiterate my gratitude to all our operating team that is doing an outstanding job.

Until our shareholders for their continued support.

Thank you ladies and gentlemen. 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.