Q1 2022 Adecoagro SA Earnings Call
Good morning, ladies and gentlemen, and thank you for waiting at this time, we would like to welcome everyone to auto Quag Rose first quarter 2022 results conference call.
Today with US we have Mr. Mariano Bosch, CEO and Mr. Charlie Barrow Hughes CFO .
We would like to inform you that this event is being recorded and all participants will be in a listen only mode. During the companys presentation.
After the company's remarks are completed there will be a question and answer section.
At this time further instructions will be given.
Should any participant need assistance during the conference you May say no by pressing star zero to reach the operator.
Before proceeding let me mention that forward looking statements are based on the beliefs and assumptions of <unk>.
<unk> 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 out of Quadro and could cause results to differ materially from those expressed in such forward looking statements.
Now I'll turn the call over to Mr. Mariano Bosch CEO Mrs.
Mr. Bosch you may begin your conference.
Good morning, Thank you for joining I think while it all 22 adult first quarter results conference.
First and before going into a recession, so forward operations during the quarter.
You mentioned that the last month.
No actually I suppose at a meeting approved a cash dividend distribution of <unk> 5 million employee stock.
But ultimately that is.
The two cents per share.
This is a new milestone that <unk> achieved.
I mean, there are a couple of days and for the first time in our history.
It wouldn't be making the payment of the dividend first installment in the amount of $17 $5 million.
At the same time, we continue lights here and there.
But all of them and in line with our divisional body sheet.
Now getting into it highlights I'll take what I would like to start with the sugar ethanol and energy business.
The first quarter you sounded like the most body in terms of how much gain.
Depending on weather conditions.
Absolutely.
In our basketball uncertainty, we took advantage of lace up less of a diabetes BLK and decided not to crash gain all year round and made a sorting out of Expedia that finished in mid March and be the floor mundane tasks.
As a result.
Production during the quarter was slow.
However, our assays and they beat that tenet Asia stood at solid levels.
We were well positioned to profit from the attractive prices, especially ideal face or not.
Thanks to our strategy to create a need for what at what he meant studies for this time of the year.
We ended the first quarter with a.
Full of faith.
And captured by that.
The prices at the beginning of the second quarter.
Nate Green we sold.
What are the main thing is suddenly been studies and now.
Daily production at that level.
Right, So 26.4 cents per pound of sweating.
That means 75% that the break so sure.
We say, we marked a new record.
125, Palestine, killing Mr. In only one month.
In addition.
Maximizing ethanol production allows us to generate more cash flow great.
They say Oh Gee by us have become a relevant part of our revenues.
She said beginning of 2022 we sold $5 million unexpected to make up to $20 million at the end of the year.
Only for the sake of cardamom craze.
Yeah.
To conclude the segment.
I'd like to highlight.
That research that cheap were in line with our expectation considering weather events.
Our forecast for the rest of the year remains unchanged.
Good race in March on a breed have.
<unk> improved our productivity outlook and we are confident we will continue to take advantage of the price scenario. Thanks to all what opened short positions that they see.
Well, that's what's led to ETP to switch from producing sugar.
I'm from high hurdles to entitle as needed.
Moving to our farming and land transformation business.
We are currently undergoing they had risking activities what are the 2021 'twenty two agricultural campaign with <unk> in line with our forecast.
And we added the signing our planting plan for the next crop season.
Utility Tornante deal Friday culture that activity transaction today Sean.
We analyzed what operation on a manual basis rather than by quarter.
And on these annual basis, we expect our operations to achieve results in line with last year.
But assembly now what across the business despite of the increasing cost price what are the products, we produce at a very attractive.
We are well positioned to capture that we.
We expect this to drive an increase in EV battery and in Asia.
You know what do they deviousness they increase we drive by our gross production of high quality do you mean, which we transformed into value added relative demanded.
In domestic and export market.
In our rice business, we expect a small reduction in now would it be that.
<unk> was lower than the record high levels achieved last.
Year.
Adding alisha rice prices have not yet got beat the increase expedia by the other command.
In defense and in order to meet the eight whether that risk, which you said lease that is part of our business.
We have expanded our rice production business into euro away with that recent that we see shall not be dead last right. So operation.
It does thanks, Sean will not only provide whether diversification, but bringing commercial benefits. Thanks to the ultimate quality of Euro YM Bryce.
As well as logistic advantages.
I would summarize saying that we are in a niche and positioned to benefit from the current context and continue providing the war, we high quality food and renewable energy.
Pay TV costs.
And Thats why the advantages of the regions, where we operate allows us to produce more with less.
And on top of this our sustained Bradshaw.
Allows us to recycling by drugs, such as <unk> sort of mind Mueller and transform them into by your 30 day says used in our own operations.
At the time of courtesy of imports, we are well positioned to meet the eight the overall increase in production costs, while also being efficient.
On operational I mean viral meant that point of view.
To conclude.
I want to race day, my gratitude to all our employees contractors as they call them what are they kind of work and commitment.
I am proud of the company, we are really the weather over the past 20 years and excited about the opportunities ahead.
Thank you Mariano good morning, everyone, let's start on page four with the Brooklyn analysis on the rains in Mato Grosso, Sweden.
As seen on the top table ranging our Augusta during the first three months of the year were 31, 3% lower than during the same period of last year and $18, 6% below the 10 year average Nevertheless, rainfalls during March and April were above average favoring the recovery of our Shaw.
<unk>.
Our cluster in Mato Grosso sooner normally operates based on a continuous harvest model.
These means that subject to weather going normal, we can harvest and crush cane year round, even during the first quarter of the <unk>, which is the traditional into harvest periods of Brazil's sugar and ethanol industry.
We already knew I had anticipated and centered on opportunities the adverse weather.
<unk> absorbed in 2021 caused a reduction in sugarcane availability towards year end and beginning of 'twenty to 'twenty two.
As a result in December 2021, we entered into the harvest period until mid March 2022, when we resumed activities. Thus.
Thus, our crushing volumes decreased 86, 9% year over year, reaching 272000 tons all of overhead goes I've already implanted and will be harvested at a later date to allow them to further recover.
We expect to make up for the slow start in the following quarters and reach aggression volume in line with last year.
Please jump to page five where I would like to walk you through our agricultural productivity.
As we were expecting during the first three months of the year yields were down 49% year over year, reaching 44 tons per hectare, whereas trs per ton decreased 11% to 100 kilograms per ton.
As a result, Trs production per hectare was 47, 4% lower than last year. This decline is fully related to the fact that we focus on harvesting reform area with limited growth potential mainly related to the fifth cut I know Bob.
By doing this we were able to produce ethanol and capture attractive prices, while allowing areas with greater potential to continue to grow and even relating area to plant new high yielding gain which will be harvested next season.
Before turning to the following slide it is important to highlight that the results achieved are not a reflection of our expectations for the full year, we have a positive outlook in terms of cleaner availability and productivity.
<unk> bye good rates in March and April .
This will allow us to increase our crushing pace and continue to take advantage of the constructive price scenario.
Let's move ahead to slide six where I would like to discuss our production mix.
In the first quarter of 2022, both hydrous and anhydrous ethanol traded at an average price of $19, one and 20 point 10, eight cents per pound sugar equivalent, marking a three 2% and two.
One 5% premium to sugar respectively.
Thus, we diverted 97% of our Trs to ethanol to profit from higher relative prices.
Out of our total ethanol production, 49% with anhydrous ethanol compared to 11% during the same period of last year.
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 profit from higher relative prices.
The decline in sugar and ethanol production due to lower crushing was offset by higher average selling prices.
We weren't able to capture the increasing prices. Thanks to our beginning of Peter inventories, which were 56% higher than in the first quarter of 2021 in the case of methanol and 75% in the case of sugar.
To conclude with this slide ethanol accounted for 65, 7% of total adjusted EBITDA generation in sugar ethanol and energy business, considering other operating income while sugar accounted for 33, 5% during the first quarter of the year.
Let's please turn to slide seven where I would like to discuss our sales throughout the quarter.
As you can see on the right chart net ethanol sales for the quarter amounted to 57 million, marking a 31, 1% increase year over year on higher average selling prices, mainly led by anhydrous ethanol.
This was to point out that attracted prices for ethanol during the quarter were driven by.
The late start of harvesting activities in the center south of Brazil.
They hide in international oil prices and a greater than expected rebound in hydrous ethanol consumption in March compared to February .
Despite the year over year reduction in ethanol production, we were able to benefit from the price scenario due to our commercial strategy to push forward sales and Harry high inventories.
At the start of 2022, we had a carry over of 93000 cubic meters of mine hydrous ethanol.
61000 cubic meters of hydrous ethanol.
Half of these inventories were sold in the first quarter of 2022, while the other 50% were sold in April along with our monthly production.
That being said sales in April marked a new record high for ethanol amounting to 125000 cubic meters at an average price of $26.04 per pound in sugar equivalent, including 10000 cubic meters exported.
A brief comment on see values due to the efficiency and sustainability in our operations ranked among the highest in the industry. We have the rights to issue common trade is every time, we sell ethanol during the first quarter of the year, we sold 2 million worth of XI buyers under the rain overview program.
In the case of energy net sales amounted 2 million, marking a 53, 6% year over year decrease this was fully attributable to a 45, 7% decline in average selling volumes along with a 14, 5% decrease in average selling prices on high yield.
Most of water in reserve worse.
Lastly, net sales of sugar during the quarter declined 69, 1% year over year to <unk> 8 million.
This was driven by a 72, 5% decrease in selling volumes due to the lower production, partially offset by a 12, 4% increase in average prices, which reached 25 cents for pompe.
Nevertheless, we believe we are in a good position to continue to capture the increasing prices as we still have unhedged, 62% of sugar and 95% of ethanol production related to the 'twenty two 'twenty three campaign.
Finally to conclude with a short ethanol and energy business. Please turn to slide eight where I would like to discuss the financial performance. Despite the late start of harvesting activities and thus the lower production adjusted EBITDA. During the first quarter was 57 million in line with last year.
These solid results were mainly driven by a 10 million gain in the mark to market of our sugarcane, along with a 6 million gain in the mark to market over commodity to hedge position. Nevertheless results were impacted by an increase in costs, mostly driven by phone realizes fuels and lubricants.
With an appreciation of the Brazilian currency as well as lower sales registered.
I would now like to move on to the farming business. Please direct your attention to slide 10, we have completed our planting activities for the 2021 and 'twenty two campaign in which we have dented a total of 281000 hectares, marking a seven 4% increase in NAREIT <unk>.
The previous season.
Toibin, sunflower and cotton, where their crops with the largest increase in planted area.
We are currently undergoing harvesting activities for most of our Greens.
At the end of April of 2022, we harvested 146000 acres or 52% of total area and produced over 600000 tons of aggregate gains.
Let's move to page 11, where I would like to walk you through the financial performance of our farming and land proclamation businesses.
Adjusted EBITDA in the farming and land transformation businesses amounted to 36 million for the first quarter $36, 6% below the same period of last year. The decline is fully explained by a lower contribution from our <unk> business into the overall results.
Adjusted EBITDA in our rice business reached 8 million, marking a 79% decrease compared to the same periods of last year.
Klein is mainly explained by lower yields due to the impact of linear and some of our farms, which reduced water availability and by an 8% year over year declining prices at the moment of harvest.
In addition, higher costs due to inflation in Argentina in U S dollars.
Also negatively impacted results by expanding our rice business into Uruguay, We believe geographic diversification will enable us to mitigate weather risks.
Going into our crop business adjusted EBITDA amounted to 18 million, marking a three 2% year over year increase the main drivers were an 8 million increase in gross sales and a $12 million year over year gain related to the mark to market of our biological assets due to the higher planted area and better.
Rices.
<unk> were partially offset by a loss in the mark to market of our commodity hedge position and inflation in U S dollar terms, which drove cost and expenses.
Moving on to the DRA business.
Adjusted EBITDA, Mark the year over year increase of 48% to $7 million higher results, where he explained by an increase in both volume and average prices and our continuous focus on achieving efficiencies in our vertically integrated operations.
Again results were partially offset by higher costs due to inflation to us dollar terms and higher cost of feet due to higher prices of corn and soybeans.
In the case of Atlanta information, Although no farm sales were conducted the positive results reflect the mark to market of unaccounted receivable corresponding to the latest sale of farms in Brazil, which tracks the evolution of soybean prices.
Let's now turn to page 13, which shows the evolution of the go out of <unk> consolidated operational and financial performance.
Our gross sales expanded 17, 6% year over year to 205 million, whereas our adjusted EBITDA amounted to 86 million, marking a 28% decline compared to the same period of last year.
It is worth to highlight that despite weather challenges, we weren't able to capture high prices. Thanks to our commercial strategy to carryover stocks as mentioned before we expected to make up for the lower production volume in the following quarters and continued to benefit from attractive prices now.
Lastly, the functional currencies in the regions, where we operate may experience changes compared to the U S dollar, which is our reporting currency, consequently, causing an impact on our FX gain losses line with our P&L. During the first three months of this year both of our functional currencies appreciating the real terms.
Especially the Brazilian real, causing a decrease in our debt level in local currency and hence again in our net income that is later neutralized where adjusted net income bridge construction for more details on the matter. Please refer to page three of our first quarter 2022 are in this release.
To conclude please turn to slide 14 to take a look at our net debt position as.
At March the 31st of 2020, due net debt amounted to $788 million $170 million or 27, 5% higher compared to the fourth quarter of 2021.
This was fully explained by a 13, 8% increase in gross dead, along with our 28, 5% reduction in our cash position. The first semester as the highest working capital and Capex requirements. As we performed most of our maintenance in the sugarcane industry and our crops are planted whereas in the.
Second semester, we collect all the cash generated by the sales of our products. Thus.
Thus it is important to highlight on our operations should be analyzed annually rather than by quarter, even the seasonality of our cash generation.
We expect to reduce the working capital requirements and our indebtedness as we continue with our harvesting activities throughout the second and third quarter.
On a year over year basis net debt increased by seven 6%. This is mostly explained by an increase in marketable inventories of $45 million compared to the first quarter of 2021 led by higher prices and higher carryover stock, especially soybean and corn.
We believe that our balance sheet is in a healthy position not only based on the adequate overall debt levels, but also on the total of our indebtedness most of which is long term debt. Our net debt ratio went up to one nine times in this quarter compared to the one four times in the previous quarter, whereas it would remain flattish.
With the first quarter of 2021.
At the same time, our liquidity ratio, which is calculated as cash and equivalents plus marketable inventories divided by short term debt reached one five times. This clearly shows the full capacity of the company to repay short term debt with cash balance we found raising external capital.
Thank you very much for your time, we are now open to questions.
Ladies and gentlemen at this time the floor is open for questions.
If you have a question please press star and one on your Touchtone phones at this or any time.
If at any point. Your question is answered you may remove yourself from the queue by pressing star two.
Questions will be taken in the order in which they are received we.
We do ask that when you pose your question that you pick up your handset to provide optimal sound quality.
These hold while we poll for questions.
And our first question today comes from Jeremy Paul Harris from Bank of America. Please go ahead with your question.
Good morning, everyone and thank you for taking my question two questions from our side actually the first one English will and ethanol business.
And to understand the strategy to resolve the question of tissue. So what do you expect in terms of the balance of sugar and ethanol.
Given that the company focused mostly on ethanol in this first quarter and the second question is regarding to the cost for the fund me visas issued 2022 and 2023 season.
What do you expect looking at the current fertilizer prices and.
The inflation that we're seeing in terms of both labor and mother items like these low or no.
No.
I'll leave at that.
Hi, good morning.
Thank you for your question.
I'm on Alaska Renato to answer the first part of your question regarding sugar and ethanol and then I'm going to take the the one in front of me I'll, let that formation.
Hi, Julia and thank you for your question.
We remain very positive for both price of sugar.
In the ethanol.
We think that the total Trs produced by Brazil is not going to increase compared to last year. So we think that there is going to be a lot of competition between sugar and ethanol for the same crs.
And the sugarcane so it gives a lot of support for both.
Products, So it's not clear that center yourself of Brazil, which mix.
The news when you decide to choose to prioritize in our case I think it's a little bit different because you're already in Mato Grosso Sue.
Have the tax.
Theyre Rebating.
Yes tax rebates, which gives us an advantage to produce ethanol it already happened in the first quarter that we produce are 97% of.
Ethanol, just 3% just to multiply that they're used to start the season, and we think that where you keep maximizing ethanol and thats. One of the reasons that we are flexible in terms of hedging to to give us possibilities to.
Keep the prototyping the product for.
Which is more profitable.
Thank you Renata.
And then going into the second part of your question regarding the cost.
The.
Total cost of bottoming Atlanta formation.
I would like to specifically mention that we are producing.
In the Rds were awarded wiped out of more efficient. So we know what our sustainable production model. We are using very small amounts of input regarding what we are producing and that's part of the essence of our strategy. Since we started with east So that's why.
How do you see an increase in prices that you see of 100% or you had more than 100% in the last two years in <unk> are some of the AG inputs like how do we cite.
In our particular case because of using <unk>.
Really small amount.
On producing in our systems is that we have I know with all the increase and where I mean closing.
How do we cite therapy life set us on the sell off around 20% from 'twenty one to 'twenty two campaign and when we think of 'twenty two campaign to 'twenty three campaign that Isa campaign that we are preparing now.
We are estimating another 15% increase so going to the outset, specifically your question I would say, 20% or around 20% on 22, 15% more in in 'twenty, three and those out of their overall costs.
When we look at the price each of our different product.
Or are there different commodity saw products that we are producing that increase depends on each one of the truck bodies way higher than the increase in costs.
The only exception that we pointed out.
As we pointed out in the in the presentation is that right way out of the increase in prices.
Have not yet of course, we are very.
I'm confident that this price is already increasing and we continue to increase because it follows the other commodities, but it takes some time to follow the rest of the commodity.
Yeah.
Very clear thank you.
Okay. Thank you Jeremy.
Our next question comes from Tycho Duarte from Banco BTG Pactual. Please go ahead with your question.
Thank you good morning.
Yeah, I know, Charlie and opt wherever you want yeah I have one question I think a two notch two one on the sugar ethanol and energy business.
Just trying to build up the.
You know you you you you expect the same amount of cane crushing this year versus last year, but just trying to build up on how that should.
Take place in terms of harvested area and yields right because last year.
You guys manage to maintain the crushing volume.
In spite of lower yields because you had a much higher a much larger harvested area. So just wondering how you see the area versus yields playing out this year. So that you can reach the same roughly a 11 million tons of cane. This year. Thank you.
Good morning. Thank you for your question and then I thought you want to address yes, that's it.
My childhood. Thank you for the question.
We think that the us this year is going to be a person with between five and 7% higher than last year.
This is going to change a lot during the year as we mentioned here. The first quarter you will just were very low because we prioritize.
Hey, I guess that has to be.
Planted 80% of the air is harvesting the first quarter was more than 50 and 60.
Kurt.
And we think that the sugar cane who's going to improve a lot in the second semester, because we're not going to have any residual impact from the froth of last few years.
So.
We think that we have went through speed up the pace is there.
And just to complement we have a very good two ranks in March.
In April which will help.
The yields for for next two years and for sorry for the next part of the second semester and also the we have planted a lot of sugar at kindred is going to be a harvest in the circle C. Master. So it's going to be a lot of difference between their use in the first and the second semester.
We have now we think that the weird when she will have a challenge to crush the whole sugarcane, because we have a start the campaign later at all so crushing is going to be a very a key point in the second semester, but we feel comfortable that we're going.
To achieve.
Crushing is slightly higher than last year, especially in the third and fourth to you because we're going to take.
Part of the harvest that we use in the planting.
Operation to help through to supply more sugarcane to renew so we think that we're going through to achieve a total crushing luxury hard on last year.
And if I may hand off to a follow up question on that how you see your costs are playing out this year because I understand that there's better use is going to be very positive in terms of diluting your costs at the same time there is this cost inflation.
Cross the whole industry. So if you if you could if you could comment a little bit on how you see your unitary costs or cost per ton or per Hector.
Playing out this year it would be nice as well.
Yes.
I think the beach and inquiries and cost happened.
From 'twenty into 'twenty one.
Harvests.
Actually we had an increase in cost of approximately 40%.
For this year, we think that the cost is going to increase.
Around 10%, which is basically the the inflation that we have in.
In Brazil, I'm talking some caution here is not considering the effect of the exchange rates.
And of course, the improve in yields is helping to dilute those costs better.
We are considering it I think.
For July they're where we are in a very good position because we are producing a lot of <unk> larger actually a 48% for July as their needs is produced with our own products. So we are basically self sufficient in port awesome, It's a bigger.
Good for all of them in Brazil.
Today, So we're comfortable that we're going to have a cost.
Unfortunately, 10% of the ingredient cost is always going to be only 10% aligned with inflation.
That's very helpful. Thank you.
Hi, Dan.
Yes.
Our next question comes from Lucas Ferreira from Jpmorgan. Please go ahead with your question.
Yep. Thank you very much.
First question maybe too.
To have two as well so she can.
Talk about.
You're still pretty open in terms of hedges, especially for sugar.
What's your outlook there should we think you should be speeding up of hedging a little bit.
India coming with a very large crop ahead. So are you still comfortable to keep hedges at these levels or are you guys should be speeding up a little bit.
The hedging what's the can you can you just give us a little bit there's a commercial strategy.
For both ethanol and sugar as you can.
And the second question more overall too early.
Charlie you can discuss the capex.
Capex expectation for the full year for both sugar and ethanol.
And and crops.
How much you guys expected to spend both in terms of for maintenance and expansion Capex for this year. Thank you.
Okay.
Okay.
Thank you Luca.
But not the other you want to answer that.
As part of your question, yes. Thanks for our question Lukas as I said before I think we will have a very good competition between sugar and ethanol.
For the same Trs of the sugarcane. So we are positive that both products will be in a positive scenario.
We want to maintain a very flexible tool to use our flexibility as better as possible.
During the first Q, we showed how our flexibility Kim can health, we produced 9% to 7%.
Oh Hello.
Regarding Egypt that you mentioned I think everyone is already expecting India exporting 9 million tons.
The offshore <unk> and even in this scenario, but you have to produce 32 million tonnes of sugar.
In order to show the market to beat on balance and.
And we think this competition that I've mentioned between sugar and ethanol.
There is.
A big risk that Brazil was going to produce less than 32 million tons of sugar. So we think that the scenario is very positive and it seems the scenario is very positive if you want to be flexible.
To maximize the product.
As more profitable and in addition, we would have a price floor.
I mean ethanol because we are we have we are able to export ethanol Europe .
Well one of the few meals in Brazil that can export ethanol.
Europe , because we'll have the bone sukru certification and a possibility.
90% of our production.
And also we have our opinion, a molecule or which is the prepayment that produce anhydrous ethanol is very efficient and can produce a very high anhydrous ethanol degree.
As required by the European markets.
Mark if you could give us a floor.
On price closer to gorgeous place closer to 22 cents per pound.
Yeah.
Yeah.
Thank you Renato and.
Regarding the expectation for Capex on Monday, and on Capex, I would start saying that too.
Our priority is complying with our distribution policy as you know we have this 40% of the net cash for all of them, but Asia.
Daddy to Honeywell.
So.
At least we are going to lease that $35 million in dividends and the rest in buybacks. So abe.
Within that but are you already in mind is that of course, we've got Daniel without weather and ongoing growth.
That that these are regarding the dose that is happening in the sugar and ethanol with the planting and we are planting.
You don't have that.
That eastward.
Mainly the diving outward.
Uh huh.
Capex.
And that will continue depending on the area that we have a lot of the automobile.
The ability to.
Lee.
So that will drive the X five show them a good old adult both some small investment in different parts of their operation that generates very good.
The synergy.
Returns all of them are about 25% I got as an example.
And then.
Whether we can expect higher lower Monday night Capex on.
Expansion Capex on the month, Dana and Capex.
Depends also on the FX on that day cost so in general I'm, not saying that.
And we'll continue in line, but a affected by that at least 10% inflation in Riyadh.
And will depend on the on how we finalize it with.
The FX.
And so that's the the uncertainty regarding capex.
Okay. Thanks, Charlie but just a quick follow up do you have like at least a range of how much total wind.
Expansion Capex it should happen this year.
Hey.
We should expect similar to what we had last year.
In line with last year.
Yeah.
Perfect. Thank you.
Once again, if you would like to ask a question. Please press star and then one to withdraw your question you May press Star and two.
Our next question comes from Christian Audi from Santander. Please go ahead with your question.
Thank you so much hello, everybody.
I wanted to go back for a second to the capital allocation.
Topic.
So you mentioned very clearly that their priority is dividends.
Buybacks.
And then you also touched on Capex expansion and maintenance what I wanted to ask about is on.
The capex growth front anything that you're seeing are related to M&A.
It could be considered for this year.
And then secondly on the debt side can you remind us given all that's happening in those markets what.
They have of net debt to EBITDA, you would feel comfortable with going forward.
I think the other questions were already answered so yeah. It was just related to how you prioritize your capital allocation among these different elements.
Dividends Capex, that's M&A, yeah, so that would be very helpful. Please. Thanks.
Okay. Thank you Christy I'm very much for your question.
Number one we've been talking about the debt level at which we feel comfortable and we've been always talking about two times or below to be always below two times, a b M. A beat that.
So that's something that we continue to think and we are very.
We're committed to the same numbers. So you shouldn't expect to see higher numbers than what I just mentioned D. C. Two times have you done all the way below that number.
And so taking that into account.
Yeah.
What we are expecting today is to continue with these as I just mentioned.
Small.
<unk> seen that project or that round out what a difference the existing businesses.
I wouldn't expect any M&A outside with where we are currently making focus on our four lines of east, Tennessee, So I would be very clear that I wouldn't expect anything.
Whether M&A within our existing business is of course, we always look at them.
But we haven't seen anything attractive enough to.
The aim to create value to our shareholders that that's why we haven't entered into any of those things that we've been looking at.
Understood and all the Capex front.
It's a little bit about.
New particularly on the sugar and ethanol front any new.
Products you may be.
Looking into as a potential areas of growth.
Future.
Yeah, you know, our second generation ethanol biogas et cetera.
Oh, sorry.
Thank you <unk> and good.
D C N N.
I think.
As we've been talking about and.
Where we are working on our sustainable production model. So within this sustain that Russia more than we added a seeing steel.
More things to EM.
To get into so to be more sustained downturn in the value of fertilizer from hereon.
We are increasing the amount of vignettes that we are transforming into by your therapy like <unk> and we are also increasing the amount of marathon that we are taking from the body arena and using it as an energy generator and that NSE generator could be us.
Replacing diesel that each one of the projects that we are involved in and also a creating modest same store.
D C. D. So there is where we are at a working in order to continue increasing our sustainability around and to generate more revenues coming from the current system that we have.
Great and then the last follow up.
Corn ethanol is that something that you're.
Do you think it's interesting from a strategic point of view.
Thank you for the question Chris.
We've been analyzing corn ethanol many times and we think that that concept makes sense, but florida, particularly and because of that region, where we are we think that the sugarcane is much more efficient than the corn because at the end of the day, we are taking it out of the land.
Got out of Iowa.
A sustainable production model, so taking that into account, we think that we are much more efficient with the sugarcane then we the corn in the specific areas, where we are.
Yeah.
Great and sorry, and the very last one.
So you talked about sticking to your 40 per cent of net cash.
The ability to give it.
You may continue to do so while generating so much cash with a high sugar and ethanol prices your willingness to pay extra ordinary dividends take would tell us a little bit about how you think about that in other words paying dividends. In addition to the 40%.
That your formula coals for place.
No we've been and that we.
We are committed to phase two.
Distribute through dividend.
Got it.
At least 40% of our net cash from operation.
Last year in 2021 we distributed 51% of our net cash from operations of the previous year. So can.
And we expect to distribute model not yeah, we can't expect to distribute model because we've done it in the past on a we can do it going forward what.
But that will depend on dis.
A capex opportunity is on that is not always being below the two times.
Net debt the REIT that sets it up.
All the criteria that we've been talking about.
Perfect very clear thank you so much.
Once again, if he would like to ask a question. Please press star and then one to withdraw your question you May press Star and two.
And ladies and gentlemen, this will conclude today's question and answer session. At this time I would like to turn the floor back over to Mr. Bosch for any closing remarks.
Thank you everyone for participating in the call.
See you in our upcoming event.
Yeah.
Thank you. This concludes today's presentation you may now disconnect. Your lines. Please have a nice day.