Q3 2022 Adecoagro SA Earnings Call

Yes.

Good morning, ladies and gentlemen, and thank you for waiting at this time, we would like to welcome everyone to add a driver of third quarter 2014 results conference call.

Today with US we have Mr. Mariano Bosch CEO .

Mr. Charlie borrow 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, 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 first stars rotary shear operator.

Before proceeding let me mention that forward looking statements are based on the beliefs and assumptions about in collateral management.

On the 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 somebody who agro 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 . Mr. Bosch you may begin your conference.

Good morning, and thank you for joining I think Glassdoor Twenty-twenty do set a quarterly touch skull, France first I would like to leave you a brief update on our distribution policy.

Next week on November 17th we would be paying the second installment of our cash dividend in the amount of $75 million. The total cash dividend of $35 million. The cbot during 'twenty 'twenty do Aesop Brooks.

Did he do sense there sure.

Recently, we continue buying shares under a what do I have that brought them. During the first 10 months of the year, We reported Chase Citi point cheeks media yeah. So.

So studying $29 million now going into the highlights of our operations I wish started with sugar ethanol and energy business. We entered this quarter that are weak.

What sort of came out of the liability.

How do you catch up productivity and the characters recovering from 'twenty to 'twenty, one, but I'll step in enough storage capacity to carry over at what production and deviate in if needed.

We started that work that are crashing at full speed.

And later during August and September we received very good range.

Improving yield expectation, but slowing down our crushing pace and reviews see now what volume in 10% year over a year. It was the cause of this lower volume and higher costs that the adjusted EBITDA during the quarter. It went down by <unk>.

20%, yet or what have you.

But let me point out that the cane that we were not able to process the squad better each being transferred into the following quarters. This will secure our continuous hadaway small then and we will be crashing gain without an even better productivity out too during.

The quarter better prices, what pressured, especially the price so high as it was safe.

But we were able to add that our production mix and our commercial strategy to favor their products that offer the premium.

We focused on selling sugar and exporting anhydrous ethanol, which had a premium of more than 15% better suit their domestic market.

The same time.

We built inventories of high as it was safe and used a widow biogas a few in.

To dehydrate and turn it into more Anheuser, let's say.

We are one of the few players that can benefit from exporting anhydrous ethanol to Europe .

Because we have the necessary certifications on the industry capacity to reach their broad specification, while you're there.

She really deal fall, what assets and our ability to sell into the domestic and export market.

So a very important competitive advantage for us, especially in times like these when we expedia southern change you've seen their market outlook of all the refined products we are producing now.

Now moving to our farming business as already seen in the previous reports we finished 'twenty one 'twenty two kind of a season with Ana Jesse Debbie battery that Sean, Florida, our crops and rice nice nice.

That increase for the Lady at the present time, all our teams are fully focused on planting activities for the new season.

Although conditions started right in some of our regions. We are advancing very well in all of our plantations and we already know Nixon and situations to maximize you'd see all of our production for 'twenty two 'twenty three kind of a season.

Being so well diversified in terms of geography, I'm thrilled that allow us to extend the planting and harvesting window and meet the eight whereas at risks regarding our land portfolio lost every year Cushman and Wakefield conducted their independent appraisal and they valued at 2.5% other.

<unk> last year.

Finally in October we celebrated a they'd go out of 'twenty Sunny we're sorry.

This was good opportunity for us to reflect on our journey.

C. C section, we have been convinced of our mission of producing food and you'll have less energy and that is sustainable production line. We are proud of the work we have them in our affordable business segments, which are a great example of low cost production with a positive carnival and button.

At the same time, we continue to create jumbo boat journey dish and contribute to what is the sustainable development of the regions, where we operate located in the theater of Argentina, but as Ilan Euro way because of their natural advantages of these regions. We've got brother.

Use more with less on top of the hour. So stay not brush our model allows us to make an efficient use of water here about the land and the environment be a source of carnival eats and transform byproducts into bio inputs used in our own operations.

These are a few examples of the things, we do and the weather without what ESG Committee that oversees all our developments, we continue enhancing our sustainable production model.

Lastly, thank you to all our employees our stakeholders for being part of this journey. We are excited about the opportunities ahead and motivated to continue taking steps in this direction now let's go into the numbers of the quarter Charlie Please.

Thank you Mariano good morning, everyone, let's start on page four with a brief analysis on the regime of the Russell as soon as seen on the dog tables range in our glass to the third quarter of 2022 were four times higher than during the same period of last year.

<unk>, 28.8% higher than the 10 year average.

Moreover year to date range presented at 22, 9% increase compared to the same period of last year.

These fever, the development of our sugarcane plantation and improving its productivity outlook.

However, the uneven distribution of raised during the quarter impacted our harvesting and crushing activities as we will see next.

Let's move ahead to slide five where I would like to discuss our smoking brushing.

Fight, having good shrinking availability and achieving a monthly crushing record over one 5 million tons in July .

Increased precipitation registered during August and September resulted in frequent interruptions and crushing activities.

The lower use of time led to our sugarcane crushing volume of 3.8 million tons during the quarter, 9% lower compared to the same period of last year.

It is important to highlight that the sugarcane left on the ground would be carried into the following quarters with an improved productivity outlook and will ensure the implementation of our continuous harvest model.

Being able to cross screen wrong is one of our competitive advantages.

Most means and they're into the into how this theory, which means that they stopped crushing activities. During summer season. So they have to carry over inventory of the product. They believe will be trading at a premium in our case, we are able to make production decisions and maximize the one offering the highest marginal contribution at all times.

In addition to being more efficient in diluting our fixed costs throughout the whole year.

On a year to date basis crushing volume reached seven 3 million tons 24, 4% lower compared to the same period last year.

This was fully explained by the dynamics of the first quarter, namely the late start of boxing activities as expected and the fact that harvesting activities in that period were mostly concentrated on reform areas with limited growth potential.

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

Sure Kate years during the quarter were nine 4% higher compared to the same period of last year, reaching.

Reaching 65 tons per hectare, while Trs content presented at six 4% improvement amounting to 141 grams per tonne.

On a year to date basis shrugging units were impacted but presented in gradually recovery as we expected during the first quarter of the year use we are 49% lower year over year due to the impact of 2020 once adverse weather.

In the second quarter, they were $24, 5% lower but during the third quarter yields improved nine 4% year over year.

Trs content enduring reached 129 kilograms per ton flat compared to the same period of last year.

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

During the quarter prices of ethanol experienced significant changes in light of.

New regulatory.

<unk> related to a temporary reduction.

Axis and.

Of adjustments in domestic gasoline prices to reflect the national authority.

Our production mix reflected these changes in order to consciously maximize the product offering the highest marginal contribution at all times.

The beginning of the quarter, we maximized anhydrous ethanol followed by hydrous ethanol and lastly, sugar.

By mid quarter sugar prices, so bust hydrous ethanol and by the end of the quarter. They serve bust anhydrous ethanol effectively becoming the most attractive option decide.

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

The average during the third quarter anhydrous ethanol in Mato Grosso soon traded at 19.8 cents per pound eight 5% premium sure while hydrous ethanol traded at 17th the cents per pound.

5% discount to sugar, thus, we diverted as much as 60% of our Trs to ethanol to profit from higher relative prices further.

Further take advantage of price premiums.

57% over total net production was anhydrous ethanol most of which was exported to Europe at attractive prices.

We are one of the few players, which has the necessary certifications to export to Europe and industrial capacity to meet production states specifications, yet they were diverted need as much as 69% of our Trs to ethanol.

Product trading as a price premium.

Although production of both ethanol and sugar was lower as a consequence of the reduction in crushing volume. This was offset by higher average prices we.

We were able to capture attractive pricing, thanks to our high inventories at the start of this year.

Please turn to slide eight where I would like to discuss our setting volumes and average selling prices byproduct.

As you can see on the left chart yet.

Year to date ethanol reported an eight 7% increase in sending volumes to 385000 cubic meters, mostly driven by an happens ethanol sales, which increased by 43%.

Moreover, average selling prices were up 22, 8% year over year to $22.07 per pound. Thanks to our commercial strategy of clearing out tanks of the FICO prices and our flexibility to sell into the domestic and export market.

We will go into more detail in the following slide.

In the case of sugar there was a 41, 5% decrease in volume, which partially offset the 13, 7% increase in average selling prices.

Lower volumes sold were driven by lower production due to both lower crushing lower mix.

This was highlighting that sure continue to trade at stable levels.

Throughout the quarter, even though Brazilian Ms switch to maximize production of these products.

This was so because Brazil was the only region at the time with available sure to meet global demand.

Energy selling volumes were down 27, 2% year over year, driven by lower average selling prices coupled with a decrease in selling volumes as a consequence of lower crushing and of our commercial decision to use over bagasse to dehydrate ethanol.

Regarding carbon grades, let me remind you that due to the efficiency and sustainability in our operations ranked among the highest in the industry. We have the right to use carbon credits every time, we say Nathan.

Year to date, we sold 457000, she Bios 24, 2% higher than the previous year and an average price of 18 cents or bio.

We do not speculate on C buys prices, but rather sell our credits as we generated.

And in fact prices were voted and throughout the year impacted by regulatory changes in the underlying product.

For example prices reached peaks as high as $40 Mercy, bio, which we weren't able to capture.

Please jump to page nine where I would like to walk you through our anhydrous ethanol sales throughout the year.

As previously mentioned during the third quarter of 2022.

Hydrous ethanol prices in Brazil.

<unk> downward pressure.

And hydrous ethanol in the domestic market also experienced a decrease in prices as seen on the graph, although demand remained stronger due to the 27% mandatory blend with gasoline. However, the export market in particular euro remain an attractive debt for players with the necessary certifications.

And the ability to meet product specification.

In this line in hand, with a switch in our production mix our commercial strategy during the quarter focused on the commerce indecision of sugar and the export of anhydrous ethanol, which amounted to $61 2000 cubic meters at an average price of 29 cents per pound.

$171 per cubic meter.

The same time, we build inventory of hydrous ethanol either to be sold and how you expect the prices at the later stage or be converted into hydrous and anhydrous ethanol.

On a year to date basis anhydrous ethanol sales were 74, 2% higher.

We are to the same period last year.

On hydro volumes sold abroad at more attractive selling prices rather than in the domestic market.

Exports amounted to 82 1000 cubic meters and an average price of 28 cents per phone seven.

$768 per cubic meter.

And we have an additional 50000 cubic meters to export and year end.

Please turn to page 10, where I would like to walk you through our sales.

Net sales amounted to 163 million during the third quarter of 2020, 295% higher year over year.

This increase was driven by higher selling volumes and higher average selling prices of sugar and anhydrous ethanol.

They should both in Riyadh is as well as in U S dollars.

Despite the changing price environment.

Served during the quarter.

Especially regarding heightens ethanol, we were able to benefit from the scenario as we end up in our production mix and commercial strategy to favor the products offering a premium.

On a year to date basis net sales amounted to 395 million seven 2% higher year over year.

It sounds sales were 41, 5% higher compared to the previous year.

What are you offsetting the 33, 5% reduction issuer sales and 33 or 9% in energy.

She buys sales and done reached 8 million during the first nine months of the year.

Finally to conclude with a short ethanol and energy business. Please turn to slide 11, where I would like to discuss the financial performance.

Adjusted EBITDA during the third quarter was 111 million nine 6% lower year over year.

Despite higher sales.

The decrease was driven by a year over year loss in the mark to market of our sugarcane fully explained by the impact of lower volume and higher agricultural costs.

Our harvest at gain.

And by an increase in costs, mostly explained by fuels lubricants salaries. In addition to the reduction in volume.

Results were partially offset by a gain in the mark to market of our commodity hedge position due to a decrease in prices.

On a year to date basis, adjusted EBITDA amounted to $273 million to.

$2 8 million higher year over year. This was explained by higher net sales.

Year over year gains in the mark to market or sugarcane and of our commodity hedge position.

And notwithstanding the expenses we.

We saw were partially offset by the aforementioned increase in costs.

In terms of breakdown in the first nine months of the year ethylene amounted 472% of total adjusted EBITDA generation in the sugar ethanol and energy business, considering other operating income while sugar accounted for 24%.

I would now like to move on to the farming business. These are regular attention to slide 13.

As of the end of October of 2022, we harvested 292000 hectares with uneven performance of yields.

<unk> fully completing the 2021 and 'twenty two harvest season.

These amounted to over one 1 million tons of agricultural products Augustinian transported across 10 provinces in Argentina and Uruguay.

We're currently engaged in planting activities for 2022 and 'twenty see how the season.

In which we expect to plant 279000 hectares, one 3% lower than the previous campaign fully driven by a reduction in second probing area due to the impact of below average range. During the past, Matt let's move to page 14, where I would like to walk you through the financial performance of our <unk>.

And lateral commission businesses.

Adjusted EBITDA amounted to 17 million in the third quarter and $73 million a year to date.

31, 1% and 35, 9% below the same period of last year, respectively.

The decline is fully explained by a lower contribution from our crops and rice businesses into the overall result, which fully offset the improved performance.

They are a business.

Results were mainly impacted by higher costs, a mixed performance appeals and lower rice prices.

Now we're CRO business, we took advantage of a temporary government measure to convert earnings from the scene of soybean and a more favorable FX rate than the official one.

This together with higher average prices of most of our crops resulted in higher sales.

However, adjusted EBITDA margin of 57, 5% reduction compared to the same period last year.

Results were mainly impacted by.

Higher costs in U S dollar terms, driven by our global inflationary environment brushing margins.

A loss in the mark to market of our biological assets, mostly due to a foster harvesting base of corn, which resulted in less volume to be recognized in this quarter compared to last year.

And by a loss in the mark to market of our forward contracts mostly related to corn.

Year to date, adjusted EBITDA was 30 million 76, 8% lower versus the previous year as.

This was mostly explained by higher costs in U S dollar terms driven by global inflation.

Uneven performance in years compared to the previous campaign, coupled with a loss in the mark to market of our forward contracts.

Adjusted EBITDA in our res business was 2 million during the corner and $15 million a year to date, marking a 23, 3% and a 62, 6% year over year reduction respectively.

Results were mainly impacted by lower yields caused by the impact of an anemia and some of our rice farms and a 9% decline in prices at the moment of harvest.

This resulted in a year over year loss in the mark to market of our biological assets and in the net realizable value of our agricultural repeat use us up to harvest.

EBITDA generation was also negatively impacted by higher costs in the U S dollar terms, which pressured margins.

Moving on to the dairy business adjusted EBITDA amounted to 9 million during the third quarter and 24 million year to date.

Marking a 29, 6% and at 22, 1% year over year increase respectively.

In both cases resize were explained by an increase in both volume and average prices and our continuous focus on achieving efficiencies nowhere in our vertical integrated operations.

Again, besides were partially offset by higher costs in U S dollars terms driven by the global inflation environment.

Case, Atlanta formation, although nufarm seats were conducted with <unk>.

Reflecting the mark to market upon an account receivable corresponding to a latest stage some farms in Brazil.

Which tracks the evolution of soybean prices.

Now turn to page 16, which shows the evolution of on the go items consolidated operational and financial performance on a year to date basis gross saves expanded 24, 8% year over year to 970 million, whereas adjusted EBITDA amounted to 327 million.

Marking an 11% decline compared to the same period last year.

Intensive production, we harvested over 1 million tons of crops and rice, while our sugarcane crushing volume presenting that year over year reduction for reasons previously explained.

To conclude please turn to slide 17 to take a look at our net debt position.

As of September the 30th of 2022 net debt amounted to 816 million.

One, 7% lower compared to the previous quarter.

The decreased net debt is fully explained by a 15 million increase in our cash position, which offset the three 6% increase in our gross debt.

It's worth highlighting that as we entered the second semester of the AR. We have started collecting income from most of our products sold.

On a year over year basis, net debt was 12, 6% higher compared to the same period of last year due to a 15, 3% increase in our gross debt position.

This was mainly driven by the financing of our inventor is finished goods loss raw materials, which increased 43 million year over year, coupled with a $81 million increase in our biological assets versus the previous year.

This was explained by our strategy to secure our supply chain as we enter into the 2022 'twenty three harvest season, along with higher costs.

Puts.

These working capital requirements are being fined financed by short term borrowings in our pharma division and attractive rates. Thus short term debt was 55% higher compared to the same periods of last year.

The same time, our liquidity ratio reached one three times. This clearly shows the falling capacitance company to repay short term debt with cash bonds without raising his son the cabin.

We believe that our balance sheet is in a healthy position not only based on the adequate overall net debt levels.

Also on the term of our indebtedness most of which is long term debt.

Our net debt ratio was two one times and this quarter $6, 9% higher than the previous quarter.

Thank you very much for your time.

Now open open to questions.

Thank you before is now opened for questions. If you have a question. Please press star one on your phone or at any time.

Definitely point. Your question is answered you may remember yourself for the Q1 person star two.

Questions will be taken in the order they are received.

We do ask the one he pose your question that you pick up your handset to provide optimal sound quality.

Please hold while we poll for questions.

And today's first question comes from monitoring and.

Personal limb.

<unk>. Please go ahead.

Hi, good morning, everyone and thanks for the space for questions I have two on my side, the first on the sugar and ethanol business.

You mentioned in previous quarters that are expected sugarcane crushing volumes to be flat to this year and and your expected unitary production costs growing in line with inflation.

I just wanted to hear on how that stands today.

How that stands today based on our.

Our yields and Trs content evolves throughout the course of the crops. So far and also how they impact from the delayed Roche in Q3 could could affect that and also on this topic.

Our expectations for 2023 based on the better rainfall levels that you have seen so far in the Mato Grosso so.

That's the one almost forgotten ethanol and the other one I just wanted to hear your expectations for 2022 2023 on the crops and rice businesses, especially in terms of how your fertilizer and production costs. Good advance year on year and how that balances. We saw your expectations. So far in commodity prices that you are seeing.

So those are the two questions from my side.

Hi, Anthony.

Thank you very much for your question.

I think you are covering.

A lot of.

What we wanted to share fell.

The first question on the sugar and ethanol.

<unk>.

They are indeed take your question.

Hi.

As it was mentioned here, the lessee or frost impact a lot our yields for the first semester that we can.

The first semester.

And this is a consequence of that we had a late.

Starts.

Crushing and also we slow down the crushing pace in the first semester.

And once we finish the sugarcane that was affected by the frost by the end of June .

July .

We speed up our crushing pace and we've had there.

The monthly records. It was it was it was mentioned before.

But then we had a lot of rain.

In August September and October actually in August .

So we ended more than 200 million meters.

As.

Usually there is a.

Dry mouth. So we had a lot of delay in our crushing pace, which probably will be crushing less sugarcane busier than we were expecting earlier.

It can get to a bunch of crush is slightly lower than last year, but the situation and the outlook for our sugarcane has improved a lot. So far for the final part of this year is looking great.

Actually today, we are crushing sugarcane refer yields with more than 80 tons per Hector and I think the situation for next year. It is also it was also very good.

Looking very good for especially for the first quarter and second quarter of next year.

For this reason we will have a very intense continuous harvest we have learned from corrosion.

A lot of sugarcane in the first quarter, which is a which is a good news because we think the price of ethanol is going to be very good, especially the hydro's ethanol I know you'll be you'll be able to capture.

Dessert pate joined it regarding the costs.

I think this year, we have this factor off the cost dilution that we expect that to where you expect that will be lower because of the lower volume of sugarcane crushed this year, but next year, we have a bunch of big promotion Marshall, Greg Camden in it than we were expecting actually.

That's where a bunch of inquiries the crushing for next year close to 20% and then where you have definitely we will have a lower cost than we have this year, we can get through everyone should degrees our costs and approximately 11%.

Of course, the numerator is going to be a little bit higher in line with inflation, but the denominator, which is the amount of sugarcane that youll be crushing there's going to be much higher.

Thank you Renato and recap.

Any follow up questions on the sugar and ethanol.

Okay.

Is it this quickly here.

Okay, Great. So let's go to your second question regarding the outlook for our crops and rice.

Today, we are in the middle of the planting of corn crops.

Crops and rice in the case of Rice, we have already planted 90% of our expected there yes, Florida. This year on its all looking great. So in terms of productivity. We can expect a afterwards after we've gotten us what we've done up to now but of course.

The what happens from now on and dated March is the more relevant part of how they put up evolves there.

How that evolves.

They're not the other crops.

The stomach or I'll say, corn soybeans and sunflower.

Peanuts again, we are in the middle of the planting or.

More than half of the clarity there yet all the clarity E Sun in our Nexsan integration, we started the year.

The classic T. Some very bright but now eight.

Take rate and we.

We are advancing very well.

So again, we kind of expect.

Actual results.

Possibly depending on whether it's all about what the cost that you were asking yes.

They are pretty much in line with what we saw the previous year as I mentioned it is called the main increasing costs happened in the previous campaign. So this campaign, we are seeing cost in line with what we.

We had the previous campaign.

And regarding the outlook for the prices and again, we are in general.

Soy corn and wheat in line or slightly above and in rice, we are particularly optimistic and we are seeing some opportunity. So in writing, but I think what we are.

Last year.

Sure.

Our expectation of off price at 420 <unk>.

That's great thanks very much.

Thank you, ladies and gentlemen, as a reminder to ask a question. Please press Star then one our next question comes from Christian Audi Santander. Please go ahead.

Hi, everyone. Thanks for taking my questions here.

I'd like to know what are your what are your thoughts on the federal tax.

The whole thing going on are the sugar and ethanol business.

The reduction in taxes hurt B segment right as the biofuel Luke lost its competitiveness.

And I'd like to know your thoughts about this do you expect them through.

Taxes to come back soon is it a problem for maybe next year.

For I don't know.

And I'd also like to make a quick follow up on your on your answer to the last question.

You guys mentioned that you expect to cause dilution looking forward. So I was wondering what what what's your rationale here since investors sometimes.

Say things regarding a global recession, perhaps so you guys think that will now be an economic downturn.

For the next couple of years or so thanks.

Yeah.

Yeah.

Okay, let's take a first.

Sure. Your initial question regarding the taxes someday biofuel policy.

And what do you see specifically that we are doing their thing regarding that sell right.

<unk> gotten that question too.

Hi Christian.

We're seeing that in this moment that the award is looking for.

In this moment of the energy transition that the award is looking for sustainable energy and energy security, it's any governments will recognize the role of ethanol.

To achieve those two subjects.

And I think that's always the case since Bronco, we felt better moments in the worst moments, but ethanol was always supported so everything that is going to be the case again.

But in any case, we are very prepared to export a lot of anish as you.

You saw in our results. This year, we are going through exports.

134000 cubic meters true to Europe .

Premium over 15%.

Compared to the to the local markets.

We can do maybe we can do this again you should the opportunities there are.

Actually we are increasing.

Our bone Shokku certification and our sugarcane, so you'll have more.

No Joe exports, if the Windows are open and you should that's the kids.

Thank you Renato.

Yeah.

Good ECM regarding the second part of your question I Couldnt understand exactly but you were asking about the dilution of costs.

And regarding that that's really not explaining the at the beginning in the sugar and ethanol business that he said dilution of cost because of the increasing volumes. We are expecting to increase for next year almost 20% in terms of volume that they do.

The main impact on the dilution of costs and for the rest of their crops. As we are expecting even better than last year, because last year were particularly low.

The policies that has its own but it appears we have our first speaker line.

I was wrong, apparently while we reconnect the speaker location, you'll hear hold music, while we wait thank you.

[music].

And ladies and gentlemen, once again, we thank you for your patience, we reconnect the speaker location, we should have this call up and running here shortly.

Bye thank you.

[music].

And ladies and gentlemen, we appreciate your patience, we have reconnected the speaker location. Please proceed renato.

Okay.

Sorry for the inconvenience Christiana.

When we did it.

We've cut off have you heard that and Thats a question to answer.

Yeah, Yeah I did.

Oh, okay.

The alphacat, saying.

Saying about yields.

Yes.

Yeah.

Okay.

Yes.

Okay. Thank you.

Oh. Please proceed sir.

Okay.

You heard the answer on the Grub Saturday dilution of costs of course because of that.

The increase in yield.

Yes, yes, that's exactly why I'm cutoff you May proceed.

Okay, Hey, thank you for that so Victoria we.

And we that some questions that are being asked.

In written by the web.

We received a question from Larry <unk> from <unk>.

The question is thinking about ethanol strategy can you elaborate a little on the company's strategy the off season in the first quarter of the calendar year can we assume that given the new scenario in Brazil, I think wouter has adapted.

Off season commercialization strategy.

Yes.

Okay. Thank you.

Renato will answer.

Just to clarify because of our continuous harvest model, we don't have an off season.

Our continuous service shall we continue our T cells. So we will continue to come out of it we see very good yadkin gain that we are having now.

Okay highlight Isa.

So we are very optimistic about the ethanol price in the short term.

That's because the crushing in Brazil might be lower than everybody is expecting because of their ranks. It's Iranian deal all regions of Brazil also the Otto cycle in Brazil, using these inquiries in a faster pace than you initially thought.

He is increasing 5% instead of 3% that's everyone everybody was expecting.

So price of ethanol has already improved 20%.

In the past.

So hydro's ethanol now has reached a virus.

At the pump close to 7% to 8%, which probably is going to reduce hydro's demands and inquiries on hydro demand.

So our strategy is to produce as much as an ideal as we can.

True true sale.

The internal and external markets and also all the hydro that we are getting to the first quarter.

We can do.

These are the right date death, thus far I mean, hi.

Hydro.

Hi, sorry.

The high dose and selling more those debts. It has a better price today as is.

Is close to 20 cents per pound.

The the sugar equivalent price.

And also as Mariano mentioned, we will be crushing in the first quarter.

And probably maximizing a lot of anhydrous and produces some sugar that is very good in the short term Israel because of the <unk>.

The cash premium that is very high right now, it's close to 5% so by producing sugar, we will be able to capture the.

This price as well.

Thank you Vanessa.

The audience is telling us that we can work cut off before answering the question about the price environment for ethanol and federal taxes. So we'll I'm sorry, Keith again.

[noise], sorry going back to the deal.

Other question.

Considering our moment of energy transition that is all the governments all of the countries are looking for sustainable energy and energy security, we think that any government real support ethanol in Brazil, regardless of who is the who is the president.

The case since the Bronco here in Brazil, with better more moments and Wars mall.

<unk> that's always.

Supported.

But in any case, we are very prepared to export a lot of a lot of ethanol are.

Actually we are increasing our bone sucralose certification area. So we will have capacity to exports.

The 20% more ethanol than we're exploring this year this year, we exported our one.

135000 cubic meters with a premium over 15% compared to the local markets. So next year, we will be prepared to export more if the opportunity is there.

Thank you Vanessa.

Yeah.

Thank you ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to Mr. Bolles for any closing remarks.

Alright.

Okay.

Thank you all for your participation we are sorry for the technical inconveniences.

And hope to see what upcoming event right.

Thank you. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.