Q2 2022 Adecoagro SA Earnings Call
[music].
Good morning, ladies and gentlemen, and thank you for waiting.
At this time, we would like to welcome everyone to a Deco agro second quarter 2022 results conference call.
With us we have Mr. Mariano Bosch, CEO and Mr. Charlie Boiardo 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 session.
At that time further instructions will be given.
Should any participant need assistance during this call. Please press star zero to reach the operator.
Before proceeding let me mention that forward looking statements are based on the beliefs and assumptions of <unk> Deco <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 have.
Her in the future investors.
You should understand that general economic conditions industry conditions and other operating factors could also affect the future results of a deco agro and could cause results to differ materially from those expressed in such forward looking statements.
Now I'll turn the conference over to Mr. Mariano Bosch CEO . Mr. Bosch you may begin your conference.
Good morning, and thank you for joining are they bothered us 'twenty 'twenty second quarter results conference.
Before going into the research I'll say, what does that have a brief update on our distribution policy.
As you know we have committed to distribute B R E V and somebody like a minimum of 40% of the net cash flow from operations generated in the previous year.
In May 2022 we marked a milestone for I think glad it'll actually dwarfs. The first I mean, our history that we made a cash DVD abatement.
We paid out the especially installment of $17 $5 million on in November of this year, we would be the second each settlement.
As announced this will amount to a cash dividend distribution of Saturday fight media no less approximately 32 cents per share.
At the same time, we continue weighing share some data what do I got thrown at them.
During the first seven months of the year, we reported chase two 7 million shares totaling.
More than $20 million.
Now.
Going into the highlights of the operations.
I would like to start with the sugar ethanol and energy business.
During the quarter adjusted EBITDA went up by 42% year over year, despite an increase in costs.
And this was thanks to our commercial strategy, which enabled us to sell most of our production at the peak of bright piece.
Two clear examples of this.
One.
We started the quarter without water tanks full of fish panel.
And in April .
When ethanol prices keep level said, it would be 5% higher than shoe leather.
We emptied our tanks and even sold out what do they do they ethanol production.
Second in June when domestic ethanol bright piece dropped we exported part of anhydrous ethanol to Europe and achieved an average premium of 15%.
Exports are a possible outlet for our production because we have the necessary certifications and the industrial capacity to reach the alcoholic content required in Europe .
Yeah.
It was because of what Hy Vee deal facet, flexi really D and our low sugar a commitment that during the quarter, we were able to divert 80% of our yeah. This with them.
There are trading at a premium you know what region.
Maximizing ethanol production also allowed us to generate more Campbell trades and to produce more of it yes.
But yes is the saprolite used to produce by authority like says that we spread in our own field and Anti-social that may need boots, Florida, what production of biogas.
And regarding carbon grades so far we have reached $7 million in sale.
Unsecured, but I see as Scott, Yes, 40, though less so to say to you.
We expect to make $20 million in 2020 do only from the say southeast got about grades.
As you know the year started slowly in terms of crushing volume because we wanted to secure a K nobody loves it.
We are now accelerating our pace to reach our crashing forecast for the year, which remains unchanged at roughly 11 million tonnes.
We haven't dug into their tickets that method of the year that we would gain availability.
It got to a productivity indicators fully recovered from the 22 and the first for.
Frost event.
And we are also entering into with enough storage capacity to carry over our production until year end if needed.
Now moving to our farming business.
Harvesting activity itself, our crops and rice businesses related to the 2021 'twenty two season out of practically finished.
Totaling over one 1 million tons of production.
Adjusted EBITDA in our farming business presented a year over year reduction partially that he would buy the saudis. They sat itself 2021 when we capture high commodity prices and lower costs.
This year.
That was it mix that four months in terms of prices unused.
In the case of use for instance, right peanuts and called a second crop were lower compared to the previous campaign.
At the same time there.
The low inflationary environment led to an overall increase in costs in dollar terms, which pressured margins.
Including higher cost sulfide equaled charlene boots, as well as higher logistics costs.
These are the times weigh out our constant decently a strategy of focusing on increasing operational efficiencies and being the low cost producers is more important than ever.
It is the only way to achieve sustainable profits even during the current circumstances.
Now before concluding I would like to mention that.
Three weeks ago, we published our first integrated report together with our 2021 or did sustainability report.
There, we reinforced our commitment to the city ESG pillars over the past 20 years since we founded that they'd go out at all we created over a 6.6 thousand jobs.
Lighting opportunities in regions, where the outerwear. We also contributed to what's improving the integration of a limit yourself the regions, where we operate.
When we arrived to Angelica and even yeah, Matt to see decent madora. So soon that irrigation at levels well below the national average today I'm proud to say that both cities outside of Forum Rusty's score.
We are also working on promoting the development of women, United a business by offering training such as how to operate tractors.
And that would provide them with necessary tools to get jobs in the region.
Throw in my number of mental point of view.
We manage over 520 seltzer hectares of farmland under the sustained a brush of molded which fix huge amounts of carbon in the soil.
In Pennsylvania G over 90% of the ARINC glad it was total energy consumption is self generated renewable energy.
These are just a few examples of the work we have been doing.
Which is now being overseen by our ESG Committee to make sure. It continues to be integrated into the company's overall strategy.
To conclude.
I want to reiterate my gratitude to all our employees contractors and stakeholders for their hard work and commitment.
I am proud of the company, we have built with it over the past 20 years and excited about the opportunities ahead.
Now I will let Charlie goes through the numbers of the quarter.
Thank you Mariano.
Everyone.
Let's start on page four with a brief analysis on the rains in Mato Sul soon as.
Seen on the co pay booths Racine, our Augusta during the second quarter of 2022, we are 100 and steep when focus and higher than during the same period of last year and 3% higher than the 10 year average.
After a dry start of the year receiving above average rainfalls during March and April allowed our smoking ban patients who continued to recover from the impact Bill 22, nuance Frost event.
But again availability in turn enabled us to increase our crushing pace and continue to take advantage of the constructive price scenario.
Let's move ahead to slide five where I would like to discuss our sugarcane crushing.
In the second quarter, our crushing volume amounted to $3 3 million tons of sugarcane, only 5% lower than last year.
This was thanks to a 27, 3% increase in harvested area, which allowed us to compensate for lower productivity indicators as we will see next.
On a year to date basis crushing volume reached $3 6 million tonnes 35, 7% lower compared to the same period of last year. This was fully explained by the dynamics of the first quarter, namely the late start of crushing activities as expected and the fact that harvesting activities were mostly.
Trading on reform areas with limited growth potential.
Nevertheless, we expect it to make up for the slow starting in the following quarters and reach our crushing volume in line with last year. We're.
For instance, we accelerated our crushing pace and in July 2022, we marked a new monthly record of $1 5 million tonnes crushed in our cluster.
These down to page six where I would like to walk you through our agricultural productivity.
We are expecting sugarcane.
Working years during the quarter were $24, 5% lower compared to the same period of last year, reaching 60 tons per Hector while Trs content presented.
11, 8% reduction to 119 kilograms per ton.
These reductions which resulted in a 33.4% drop in Trs production per hectare were fully explained by the lagging impact of 2021 adverse weather conditions as most of the harvested area was came below its optimum growth stage.
Sugarcane yields during the first half of the year reached 59 tons per hectare or in Trs content reached 117 kilograms per ton, marking our year over year reduction of 24, 6% and 7% respectively.
Our strategy of mostly harvesting reform areas enabled us to allow areas with greater potential to continue to grow.
We varied area two planned new high yielding cane available for next season, and maximized ethanol production and capture attractive prices.
Let's move ahead to slide seven where I would like to discuss our production mix in the second quarter 2022, both hydrous and anhydrous ethanol traded at an average price of 23 and $25 two per pound sugar equivalent 19.1 person.
<unk> and 36% premium to sugar, respectively. Thus, we divert data, Mike just 79% of our Trs to ethanol to profit from higher relative prices compared to the 59% reported in the previous year.
To further take advantage of price premiums, 43% of our total ethanol production was anhydrous ethanol compared to 34% during the second quarter of 2021.
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.
Year to date.
We diverted as much as 80% of our Trs to ethanol.
Product trading as a price premium although production of both ethanol and Shaw was lower as a consequence of the reduction in crushing volume. This was offset by higher average prices, we were able to capture attractive pricing. Thanks to our high inventories at the start of this year, which were up 56% higher.
Then in 2021 in the case of ethanol and 75% in the case of sugar.
Let's please turn to slide eight where I would like to discuss our selling volumes and average selling prices byproduct.
As you can see on the left chart ethanol reported a 16, 6% increase in selling volumes grew 258000 cubic meters, mostly driven by anhydrous ethanol sales, which increased by 37, 5%. Moreover, average selling prices were up 45, 4%.
Year over year to 24 nine cents per pound, thanks to our commercial strategy of clearing out our tanks at the peak of prices and our flexibility to sell into the domestic market and export markets.
And I guess I'm sure there was 75, 8% decreasing volume, which partially offset the 19, 7% increase in average selling prices.
Lower volumes sold were driven by lower production due to both lower crushing and lower mix as well as by higher carryover relative to sales.
In energy higher average selling prices were fully offset by a decrease in selling volumes as a consequence of lower crushing and of our commercial decision to carryover buy gas in order to benefit from higher expected prices.
Regarding carbon credits, let me remind you that U two the efficiency and assistance that sustainability in our operations ranked among the highest in the industry. We have the right to issue carbon credits every time, we sell ethanol year to date, we sold 387000 C. Bio's two five times.
Higher than the previous year at an average price of $18 $3 per <unk>.
Following the end of the first semester, we clear readout, our Stoke oxy bias at an average price of $29 per see Bayou achieving prices as high as $40 plus your buyer before the drop in prices in mid July .
Please jump to page nine where I would like to walk you through our savings.
Net sales amounted to 164 million during the second quarter of 2022.
Marking a 10, 9% increase compared to the same periods of last year.
Higher revenues are fully explained by a 98, 8% increase in ethanol sales during the quarter.
Volumes sold were mostly concentrated in April when ethanol prices peaked driven by a delay in the beginning of August in activities in Brazil, we.
We took advantage of this scenario and conducted a monthly record sale of 125000 cubic meters effectively clearing out tanks at an average price of $26.04 per pound sugar equivalent.
During June we began building inventory to be sold towards year end at higher expected prices.
In addition to profit from higher prices abroad. During the quarter, we exported 10000 cubic meters anodyne when domestic prices traded at lower levels.
This represents a competitive advantage as we are one of the few players in Brazil certified to export ethanol and who can reach the level of purity required in Europe .
Moreover, we sold $5 2 million worth of see buyers under the Renova video program.
On the other hand, sugar sales were $20 2 million, marking a year over year reduction of 71, 7%, whereas energy sales amounted to $9 5 million $15, 6% lower versus prior year.
On a year to date basis net sales amounted to 272 million, marking a five 6% year over year increase.
Out of this amount ethanol sales were 186 million 71, 7% higher compared to the previous year, partially offsetting the 71, 1% reduction issue of sales.
She buys sales reached $7 1 million during the first six months of Leer, whereas energy sales were $11 2 million, marking a 24, 6% year over year reduction.
Despite the late start of harvesting activities and thus the lower production our commercial strategy carryover Stokes from 2021 enabled us to benefit from the constructive bright scenario in particular to capture the hike in ethylene prices, both domestically and in export markets.
Finally to conclude with the sugar ethanol and energy business. Please turn to slide 10, where I would like to discuss the financial performance.
Adjusted EBITDA during the second quarter was 104 million 41, 8% higher year over year.
These solid results were mainly driven by.
The aforementioned increase in sales.
Our 10 million year over year gain in the Mark to market of our Unharvested cane late led by higher than expected yields in prices, coupled with an increasing <unk> prices, which resulted in a gain in the mark to market of our harvested gain and a 9 million year over year gain in the mark to market of our commodity hedge position.
Driven by a decrease in prices.
Results were partially offset by an increase in costs, mostly fertilizers fuels lubricants. In addition to the slight reduction in volume.
These same drivers explain the 22, 7% year over year increase in adjusted EBITDA during the first semester, which amounted to 162 million.
In terms of breakdown in the first half of the year ethanol accounted for 81, 5% of total adjusted EBITDA in generation in the sugar ethanol and energy business, considering other operating income while sugar accounted for 14, 5%.
To conclude with the section I would like to briefly comment on the outlook of our sugar ethanol and energy business for the second semester.
One year ago, when our sugarcane plantations was keyed by a regional frost, we communicated to the market. What we believed would be the potential implications for our business in line with our expectations and as explained above we entered into an inner harvest period from December 2021 to meet.
March 2022 to allow <unk> to continue to recover from the impact of the Frost.
In terms of productivity yields were impacted during the first semester as expected, but presented a gradual recovery between the first and second quarter. We expect it will return to normal levels towards the second half of the year, there will no longer be sure and impacted by the Frost.
Lastly, we are now accelerating our crushing base to make up for the slow start of the year.
That being said our operational focus for the year was designed with these events in mind and seeing US our view has so far materialized our forecast for the full year remains unchanged.
I would now like to move on the farming business. Please direct your attention to slide 12.
As of the end of July 2020 tool. We have is 271000 acres or 93% of total area and produce over 1 million tons of aggregate ratings. The remaining hector's are expected to be fully harvested de novo's.
Regarding our rice business. This quarter. We included 12000 hectares related to our recent acquisition of <unk> operations, which had an average yield of seven three tons per Hector and marginally increased these campaigns average yield from six eight to $6 nine tons per hectare as.
As anticipated being geographically diversified enabled us us to mitigate weather risk.
Let's move to page 13, 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 reclamation businesses amounted four to an amendment for the second quarter $38, 4% below the same period of last year.
The decline is fully explained by a lower contribution from our crops and rice businesses into the overall results yet.
Year to date, adjusted EBITDA was 56 million 37, 3% lower than the previous year due to the aforementioned lower contribution.
Which fully offset the improved performance in our DRA business.
Higher costs, driven by our global inflationary environment, coupled with a mixed performance of yields and prices were the main reasons towards the decrease.
One infection in the United States amounted to $8 five for the last 12 months, whereas in Europe . It reached eight 9%. This caused a pressure on margins across industries and geographies.
In our core businesses adjusted EBITDA amounted to $6 million in the second quarter, marking a 63, 4% reduction compared to the same period last year.
Sales were mainly impacted by higher costs in the U S. Dollar terms, mostly seen in agricultural input costs, such as fertilizers and diesel as well as logistics costs.
Moreover, we reported a year over year loss of $6 million in the mark to market our forward contracts due to higher commodity prices.
Nevertheless results were partially offset by a 66, 9% increase in gross sales coupled with a year over year gain of $5 million of mark to market of our biological assets on higher harvest diarrhea, and bad debt prices.
Year to date, adjusted EBITDA was 24 million $28, 5% lower versus the previous year.
It was mostly explained by higher costs in U S. Dollar terms driven by global inflation are mixed with four months in terms of years with BNET in corn second crop presenting our 4% and an 11% reduction respectively, coupled with a 12 million loss in the mark to market of our forward contracts.
Adjusted EBITDA in our rice business was $5 million during the quarter and $13 million in the first semester.
In a 49, 4% and 65, 4% year over year reduction respectively.
Results were mainly impacted by lower years, and a 9% decline in prices at the moment of harvest.
Thus this resulted in a year over year loss in the mark to market of our biological asset.
And in the net realizable value of our agricultural produce after harvest of $3 million in the second quarter and of $20 million in the first six months of the year.
Regarding years, the decrease was caused by the impact of blending and yet in some of our rice farms. We are confident that the acquisition of <unk> operations will contribute to mitigate weather risk and increase our geographic diversification in the region.
Moreover, EBITDA generation was also negatively impacted by higher costs in the U S dollar terms, which pressured margins.
Moving on to the dairy business, our adjusted EBITDA amounted to $7 million during the second quarter flat as compared to the previous year.
Whereas during the first half amounted to 14 million, marking a year over year increase of 17, 6%.
In both cases, we saw.
Were explained by an increase in both volume and average prices and our continuous focus on achieving efficiencies in our vertically integrated operations.
Again, the sales were partially offset by higher costs in U S dollars tons, driven by the global inflationary environment in.
In the case of land reclamation, although nufarm since were conducted.
Positive results reflected the mark to market of an account receivable corresponding to the latest sale of funds in Brazil, which tracks the evolution of soybean prices.
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 expanded 27, 7% year over year to 588 million.
Adjusted EBITDA amounted to $1 5 million, marking a two 7% decline compared to the same period of last year.
<unk> production, we expect crushing volume two and in line with last year as we are accelerating our aggressive pace. However.
However, it is worth to highlight that despite lower year to date crashing we weren't able to capture high prices. Thanks to our commercial strategy.
To conclude please turn to slide 16 to take a look on our net debt position.
As of June 30 of 2022, net debt amounted to 830 million five 3% higher compared to the previous quarter. This was fully explained by a nine 4% increase in gross debt, partially offset by a 31, 8% increase in our cash position.
A reminder, cash generation is concentrated in the second semester of the year, whereas the first has the highest working capital requirements as our crops are planted and harvested thus.
Thus, we expect to reduce our indebtedness as with finished with harvesting activities and start collecting sales throughout the next quarter.
On a year over year basis net debt increased by 11, 5%. This was mainly driven by the impact of adverse weather conditions in Brazil, resulting in a year over year reduction of $3 5 million tons.
<unk> volume are negatively impacting our last 12 month results, coupled with higher working capital build up mostly on account of higher input costs.
We believe that our balance sheet is in a healthy position not only based on the added weight overall debt levels, but also on the term of our indebtedness most of which is long term.
Our net debt ratio was one nine times in this quarter that is versus the previous quarter.
The same time, our liquidity ratio reached one three times.
This clearly shows the full capacity of the company to repay short term debt with cash balance without raising external capital.
Thank you very much for your time, we are now open to questions.
Thank you the floor is now open for questions. If you have a question. Please press star one on your Touchtone phone at this or any time.
If at any point. Your question is answered you may remove yourself from the queue by pressing star two.
<unk> will be taken in the order they are received.
We do asset when you pose your question that you pick up your handset to provide optimal sound quality. Please hold while we poll for questions.
Our first question is from Izabella Simona with Bank of America. Please go ahead.
Good morning, everyone. Let me hear from Bank of America, two questions from our side in terms of the sugar and ethanol business.
First congratulations on the commercial execution.
In this first half.
Looking forward if you could just share your thoughts in terms of the mix do you expect to crush in terms of ethanol and sugar.
Just in terms of the commercial strategy. When you look in terms of hedges for this season and the next one.
Is your strategy there we saw marginal improvement in terms of the volume of sugar and if you could share thoughts going forward. Please.
<unk>.
Hi, Julien.
Thank you very much for your question.
And we also have in their website and I have a question from.
A lot of ammonia is related to the same point and the question is related.
Related to the reduction.
A reduction in Brazil, what are the impact to your strategy for the rest of 'twenty, two anti Tau and Ethan hydrous ethanol production preferred.
Hydrous prices sustainable how do you see the trend for the ethanol exports.
And that's actually Okay. That's helpful second half under hypnosis therapy can expect stronger EBITDA growth margin expansion on the year on a year on.
Year on year, So I think.
Your question glass.
Question in the website.
They will be answered by Renato that they.
Can give more color on this at all.
Okay. Thank you for the question, so I will start with sugar.
We remain very positive with real sugar outlook, we think that the drop off Brian a couple of weeks ago.
It was a technical movement.
Nothing related to the fundamentals of the sugar.
We are positive for the SMB scenario.
If you take the supply side of the equation, we think that the center itself.
Yes production is going to be in line with last year, a little bit more crushing and a little bit less.
As per ton.
The mix I think we think the mix is going to be.
Going to increase a little bit towards sugar, approximately 1% which represents.
There are approximately 1 million tons of sugar.
There's not a big.
<unk> because the news.
What I read is maximizing sugar before the tax change.
And also because in the third quarter is more difficult to have flexibility to produce.
Do you have more flexibility because the Trs content is very high the sugarcane is reach and use our dry into true crush as much as possible.
Uh huh.
Also the European.
<unk> is having some issues. So we expect a lower growth from Europe .
So I think that there are a lot of points in the supply side going to the demand side.
The lower price increase the demand for our sugar from the destination.
We think that a good indication of death is a strong cash premium and a strong lineup.
And here just a point to regarding a dec water since we have not hedged our total position. We havent had now 63% of our 22 production at $19.58 per pound, we are being able to capture.
The spot market premium approximately 2% with cash premium that I.
I was just mentioning.
And also that the market is predicting adapt sugar deaths in the Q3 and Q4.
Maybe this is more positive for price and I think the last point on sugar.
The price of sugar.
Below the pirates.
So and the market needs are there.
India Sugar. So we believe that the sugar has to increase close to 19 or even a bit higher.
Sure Rod.
Sugar so at those levels, we might inquiries, our our hedging position.
Regarding the ethanol outlook and strategy and we are also positive.
All our independent from the from the tax change, which clearly puts some pressure in the in the hydro's.
No.
We are positively with the SMT scenario.
The Pis production at the same thing as I said to sugar the Prs in the center South of Brazil will be Zimbra true through last year. The fact that the meals are maximizing sugar in inquiries and 1 million tons of sugar, we will put more pressure in the in the hydro as well.
The markets are.
The exports that have been increasing a lot I think the exports are our more than 80% higher than the same period of last year. So it's.
Consuming more more ethanol.
We can see that demand is also recovering.
When it got reported some numbers now and we considered the demand is recovering the buyer at the right at the pump is closer to 7%, which would the incentivize the consumption and I think most important our strategy.
It's scary.
Gary also at our hydro production.
We have a lot of flexibility in our tanks because as was mentioned we sold all of our production in April .
At a very high level with more than 26 sainsbury bonds. So we'd have a lot of thanks to restore our hydro is right now and Thats exactly what we are doing we are maximizing dinner hydrus.
We can produce almost 7% offer and hydro's ethanol of the total production and our meals.
And we can also do.
Hi, great the hydro get through having the tanks, because we have a lot of Burgos true true to produce.
And there's it would be.
The high grades.
So eventually we can we can produce even more anhydrous dehydrating the hard work that we're having there. Thanks.
And we are delivering our hour.
Hydro's contract.
Hybrid contracts have approximately between 15 and 20% premium over hydrous. So we are delivering our contracts today at a price of 21 Sainsbury palm.
Also we are taking advantage of the international market to export.
We have already exported 8000 cubic meters.
And we think that we can export some extra 20000 could commuters, reaching a 100000 could commuters in total.
This is exports have a premium over 15% over.
Hi.
Before and they didn't they're no market.
Here I think it's important to highlight that not all of them you can do those exports neutral have the certification.
Joe mentioned, the beginning of the call we have the bone Foucault certification.
And we have the opinion of political large which is the equipment to produce to produce anhydrous that we can reach 90 999 seven.
Degrees offer alcoholic lab, which is required by the European market.
So I think it depends on the scenario, we might dehydrate more but this is true.
That's the main.
Got it.
At least for now.
And regarding the sugarcane that I think Mariano asking the second part of the question.
As we have been discussing the first semester, we were having lower yields better than we expected due to the the frost of last few years.
Also because of our strategy to prioritize the harvest and the beginning of the year of the gain we true lower potential growth. So basically we crushed only rip blending areas now that we are moving to the second semester, we can see that the yields are recoup.
Orbiting very fast I should say that the sugar cane fields are looking very good.
We it was mentioned in July we have Edwards crushing monthly heparin cushion in our.
Closer to multiple Vasu, we put up a regression almost one 6 million tons of sugarcane in a month.
Also I think it's important to mention that earlier. This week, we had a 55 million, but there's a range.
In leather goods, we saw which was a fantastic furnish sugarcane outlook supporting the improvement towards the end of the year and then in the in the next few years.
So oh the season advance we expect to catch up the the crushing.
GAAP.
Finishing the year with a crushing similar or slightly higher.
As of year end.
By doing this our costs will be diluted so we expect that the total cost.
This year, we will be there.
10% to 15% higher than last year, so something closer to the inflation.
So I think that that's where the questions right Mariano.
Yeah.
Thank you Renato.
Okay.
Thank you.
Yeah.
The next question is from Lucas Ferrara with J P. Morgan. Please go ahead.
Hi, everybody can you hear me.
Yes, exactly right. Okay. Thank you. So I have two questions. The first one and maybe also to hand out to about the quality of the sugarcane and the damage that was caused by the.
Last year events. So my question is if you cannot do if you have if we have like a normal rain season during the summer. So how will be the quality of your sugarcane next year for the next season. So how fast can crushing recover if you have no weather issues.
During the summer and the second question to Martin and Charlie So she can talk about the outlook for the following.
Seasoning to farming and rice businesses regarding your expectations on the weather and also costs. So if you can comment on how that especially the fertilizer line and back to you. This season and how regarding considering your per cheeses, how should we think about this fertile.
Your line going forward. Thank you.
Thank you Luca. Thank you Luca for your question and then I told you you want to comment on on College, who are then it will come.
Hi, Lucas.
I was mentioning the sugarcane.
Is very is looking very good I'll just kinda through our harvesting now they are we growing and this is ratoon crop that we call is looking very very good. The fact that a year that we didn't have a.
Much ranks.
Keep periods were very good because you didn't have damaged during the harvesters.
The operation.
So we are we are very optimistic about the sugarcane for for next year, but didn't have any frost. This year. So we haven't basically finished the window that we have for us in multiples and so so no frost. This year. So we are very optimistic about next year. So we expect to show inquiries our crushing.
In at least 10% compared to this year.
I think the next two years, which will be a transition year.
Year.
We are recovering from a lot of weather bad events. So.
Is that year after recovery, and probably where you'll reach our full capacity or gets very close to our full capacity not next year, but to do the following one.
Very clear thank you.
Luca regarding the outlook for the following season.
We are very well positioned today in rice and crops for next season and.
We are starting the planting season the amount of work that we have already in the last set of Otis, Florida that writes operations are very good on enough to have a they.
Our next sentence, Jason and regarding the <unk> and all the pieces have ready to start the plantation, we have all the necessary inputs, we have I play it more and that's why you'll see more important more working capital for the season in order to we will prepay at a floor and that.
Planting season weight that is what we would be reflecting in 'twenty two 'twenty three numbers.
So just to give you a little bit more color.
Yeah.
The campaigns are shown in the following year. So the campaign 2021 is what we reflected in the numbers.
2020 one.
On the 2021 year that for rice and crops was an excellent year that's excellent.
<unk> 21 has to do with very low cost at the planting time.
And all of the price increase in 2021, so that was an exceptional year 2021 when we analyze all the history of our results in crop Sandra.
Then when we go to the following year that is the current year, we are having.
Good results not that good result.
Because we have a small increase in prices, 10% to 15% decrease in prices.
Almost a 40% increase in the price of mainly freight fertilizers and chemicals. So all of that the increase in crashes is being reflected in the current.
I'm, saying that we just finished that is reflected in this current year 2020 to sell for next years 'twenty to 'twenty three that is what we are starting to plan right. Now is where we think we are much more optimistic because the price increase has already okay.
We are still bullish in the price of the commodities that we wouldn't have to we will be out of it.
I would like to make a special point in a production perspective for rice production right is something we are feeling we are seeing that he was demanded today.
All of these generate out of that out an excess of a hot issue.
And there is a lack of water all over the northern hemisphere, including the U S.
And we see lots of demand from Central America that was used to be supplied to put on the U S. And now we are opening that supply even in reducing some of the the extra cost the impact they have on the import the.
Limits that they have in the Central America and also in Europe . We've sold this year, 35% of all our production to Europe , something that has never happened and we see that demand increasing because Europe has a problem.
They said describing I think probably my I have just mentioned and when they look for rice, they cannot there and supply their needs from Asia that they and they keep their right and they need to come here to South America until the demand from South America is being higher because they have the necessary.
Quality that they need that are really and the security that they need when they are searching for the Sip. That's why I wanted to make these special point in right way out today for that that we have improved a lot in the logistics, our support and having you the way we ought to be coming in May.
Supplier from South America, including dry from Uruguay, and Argentina, So we position our tests in the commercial discussions.
Probably the main supplier from South America to those solid gains.
Perfect. Just one quick clarification. So the fertilizer is you're going to be using the 2023 crop season with Don are you starting to play now so how much how much that increased over 'twenty 'twenty. Two just so we have an idea.
The main impact is 2022 the the impact.
Increased so dynamics, we are reflecting that they increased 40% now from that 40% to today, he say almost flat.
Okay perfect that's tough.
Why do I want to thank thank you very much.
Yep.
Again, if you have a question. Please press Star then one the next question is from Henry Gabriel stolen with BTG. Please go ahead.
Hi, Good morning, everybody one question on my side on the sugar and ethanol business as well.
I just wanted to hear from you what when we look forward how much how do you see the current environment to continue expanding the the sugarcane fields you have in your current cluster.
And why do you think about your installed capacity to fill that up how much do you believe you know.
Improve the yields should help that and how much should come from.
From a peak of Iraq special So that's my question on the sugar and ethanol side.
Yeah.
Okay. Thank you very much and thank you for your question and I thought you want to comment and then I can complement yes, yes. Thank you for the question.
All recordings area of sugarcane is almost an off.
Supply.
Our industrial capacity.
Capacity in the glossary multiples of Sue is around $12 5 million tons and in Montreal that'd be 1.2.
And we have in the area.
Uh huh.
Almost an offshoot to supply all the things that we need.
But of course, we depend on the on the yields that we are we are just get us and so we feel have a news between 85 and nine 9 million tons per Hector.
We are fine but.
But very few are planting new areas.
Because we think that we always can can crush a little bit more than that in.
In the English three hour can get we always going to remove some bottlenecks in grocery a little bit more and we have a lot of farms in our grocery multiple doses that are very strategic very close to our or meals. So we can reduce the average distance of our our sugar.
Kim fields.
So take you take a drink consideration as I said before next year is a transition year. So we should be crushing multiple dosing so closer to 11 million tons of sugarcane.
1 million tonnes more than this year and probably reach something between 12 and $12 five.
On the following year.
I just want to complement.
Oh, yes, they are clear that 1.5 fish honestly in my thorough social lagging the one point to our format reached 13 seven that we all wait for adult assay.
The total amount that we will be crushing tested that clarification and on top of that I would add to your question that you have seen although what it would've seen sugarcane nivea renewed being reused and in these specific gave you of my daughter, social because of the particular competitive advantage of the sugarcane old whether they soya and corn.
Equally a different case, so we could we've been continuing to increase our share gain ADR comparing to the stadium because it is more competitive because of the combination will they'll give out there. So young climate on what these motor pelfrey doubled.
To do in that they basically gave yes. That's why we are so optimistic to complete our crashed.
Crushing capacity and on top of that that's not the law, saying hey.
We can go even further when we think when we think in the long term.
But all checked off day organic good ourselves D. Sadia that can continue to improve.
That's very clear thanks very much.
This concludes the question and answer session. At this time I would like to turn the floor back to Mr. Bosch for any closing remarks.
Yeah.
Thank you everyone for participating in the call and hope to see you in our next day events.
Thank you. This concludes today's presentation you may disconnect. Your lines at this time and have a nice day.
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