Q2 2023 Bioceres Crop Solutions Corp Earnings Call
Okay.
Thank you for your patience everyone. The buyer is a crop solutions fiscal second quarter 2023 financial results conference call will begin shortly.
The presentation, you will have the opportunity to ask a question by pressing star fill up by one on your telephone keypad.
[music].
Yeah.
Hello, and welcome to buy <unk> crop solutions fiscal second quarter of 2023 financial results Conference call. My name is Jay and I'll be your operator today.
If he would like to ask a question during today's call. Please press star followed by one if you change your mind. Please press star followed by Chase.
I'd now like to turn the call over to Paula <unk> head of Investor Relations. Please go ahead.
Thank you good morning, and welcome to everybody. Thank you for joining presenting today during the call will be for that he go through go our chief Executive officer, and linking up with Nick <unk>, Our Chief Financial Officer, both will be available for the Q&A session. Before we proceed I would like to make the following.
Safe Harbor statement today's call will contain forward looking statements and I refer you to the forward looking statements section of today's earnings release and presentation as well as our recent filings with the SEC, we assume no obligation to update or revise any forward looking statements to reflect new or changed circumstances.
This conference call is being webcast and the webcast link is available at Bill citizen crop solutions Investor Relations website.
At this time I will turn the call over to our CEO Federico Trucco. Thank you.
Yes.
Thank you Paula and good morning, everyone and welcome to our second quarter's earnings call.
Please turn to slide from the deck for a quick overview of these periods.
Some financial highlights.
As we have anticipated you in our prior earnings call.
Our growth momentum has been momentarily interrupted by unusually severe drought conditions in Argentina that extended throughout the entire planting window for summer crops.
Although were flat when compared to last years revenue for the quarter were down by 7% year over year for the period on a pro forma basis after including pro farm's operations.
The <unk> decline interrupt our run of seven consecutive quarters of top line growth and profitability expansion.
Which we expect to resume in the second half of the fiscal year as weather conditions have done more favorable in our key commercial regions.
On a less cyclical time, so a more permanent fronts.
Drought conditions in Argentina have allowed us to put H before technology to the desk like never before.
And the performance of HP for wheat has been outstanding in all fronts.
In environment's, yielding less than two tons per Hector.
Before we'd wasn't.
It's outperformed commercial materials by on average yield improvement of 43%.
<unk> hundred 40, <unk> on track, despite unusually difficult planting conditions in Argentina.
All of the current season was application area was planted with new generation varieties, which will help us quickly rotate the existing portfolio and improved performance compared to the earlier deals.
An important milestone on the H before soy front was the initiation of the multiplication program with farmers in Brazil.
Which we expect to give us enough seed for an initial 10000 hectares in the upcoming season.
We have closed our previously announced acquisition of with bringing assets in Australia.
Where we expect to expand on the H B Fuller opportunity after Latin America.
We will discuss all of these highlights in greater detail throughout the presentation, but let us first better not qualified.
The severity of the drought experienced in Argentina and for that please turn to the next slide.
The bus drought in Argentina was of historical proportions due to two main factors.
<unk> <unk>.
Extending throughout the winter and that's the entire summer crop planting window.
And its reach affecting a very large part of the agriculturally productive area of the country.
Wheat output was slashed by 50% compared to the prior year and the planting of summer crops displaced by 20% to 30% outside of the optimal planting window.
With an irreversible decline in total drop area and unexpected production decline well above 20% compared to the year before.
And <unk> will now describe sort of the financial implications of this drought and then I will provide.
Detailed information on an H before performance.
<unk>, obviously has experienced a unique year in terms of the severity of the weather event.
And recap.
Okay.
Thank you if I recall and good morning to everyone on the call today.
So Eddie call indicated I'd like to dive further into our financial results and provide some insight on our expectations for the remainder of our 2023 fiscal years.
As we have often mentioned in previous calls geographic and portfolio diversification are cornerstones to our long term strategy and once that drove decisions like investing into a new facility in Brazil.
Given the merger with pro forma both initiatives that we expect to have even a substantial revenue growth yet Argentina remains an important unprofitable and market to us and of course the situation for it equaled just described presented a challenge for sales from profit.
Our baseline business in Argentina as much seed offered a great opportunity to highlight the strong needs of technology spec H before in the context of challenging weather conditions.
Before diving into discussing our financial performance, we must note here that all numbers referenced in this presentation include pro forma figures and all year over year comparisons are made against pro forma numbers, which include pro farm historical figures. This for ease of comparison.
As you can see on slide for the first half of our fiscal year started strong with a 26% of increasing revenues.
This performance is a contrast of two quarters.
You will recall that we reported a 71% increase in revenues in the first quarter.
Which was driven by an outstanding performance of our crop protection crop nutrition segments in part as a result of our commercial teams looking in early sales in anticipation of what's already look like a dry season.
While we anticipated drought conditions, the severity was beyond anyone's expectations, particularly in the most productive growing regions of Argentina.
Our 7% decline in second quarter revenues reflected the slowdown in volumes as farmers minimize their investments due to a lack of rains in the planting season.
An estimated $20 million to $25 million of potential sales were lost because of the weather during the quarter.
Approximately half of this total represents a permanent loss from products that would have been used in summer crop planting activities, such as ctrip and inbox and fertilizers.
Also as I just pointed out a portion of second quarter planned sales were realized in the first quarter of our fiscal year 'twenty three.
Patient of challenging weather conditions.
On slide five we can see the segments most affected in the quarter and also the value of our diversification strategy have helped mitigate the revenue loss.
Despite weather conditions during soybean planting being amongst the worst of the last two decades in Argentina, we recorded our first HP for soybean revenues and this supported the 7% growth in seed <unk> integrated products segment.
<unk> sales were partially offset by the decrease in seed treatment packs.
Importantly, during the second quarter, we launched the HP for soy program with growers in Brazil, which we expect to ramp up significantly in the coming to see <unk>, helping us further diversify whether risk through geographic expansion.
Crop protection revenues declined by 5% as dry weather led to less pest pressure and decreased demand for fungicides insecticides and adjuvant in Argentina.
These product lines continued to deliver growth in other regions of Latin America, but the main contribution to partially offsetting the drop in Argentina was done by <unk> sales in the U S through increased adoption of our biological seed protection products.
Again in terms of geographic diversification. It is comforting to see how all of this is playing out.
<unk> saw the largest sales decline at 16%, mostly driven by lower micro beaded fertilizer sales in Argentina.
Farmers were reluctant to invest heavily on firstly rice and crops are planted beyond the roughly more planting window, and thus less likely subject to lower yields.
I would like to point out that improved rainfall during the month of January we start some soil moisture, which generates expectations of an end to the drought.
Normalization of rainfall would foster the use of crop protection products, but more importantly could trigger a meaningful increase in winter crops acreage if farmers intend to recover profitability lost from soybeans and corn through newly planted wheat and barley.
Both these dynamics the resuming crop protection sales and higher winter crops acreage would allow us to recover a portion of sales loss to drought in Argentina and provide a favorable scenario for the rollout of HB for wheat, putting us on track for our annual sales plans.
Please turn to slide six.
For the first half of the year, we delivered a five 5% increase in gross profit, which was driven by first quarter performance, mostly in the second quarter, though gross profit was down 28% due to a combination of price and product mix effects.
Mix played a role this quarter a sales contribution of higher margin products, such as adjuvant and ctrip impacts fell relative to others. Both products are highly seasonal in the second quarter and were impacted by dry weather.
In addition, there was some margin contraction across the portfolio in Argentina, particularly in the case of fertilizers as a pricing strategy was adjusted to accommodate for the drought conditions.
Mostly aimed at maintaining market share through customer proximity.
For the full year as rainfall in Argentina normalizes, we do expect our margins for sales in the country to trend back to normal and get us back on track with our annual goals.
Please now refer to slide seven.
Adjusted EBITDA for the second quarter was affected by the negative impact on sales and margins in Argentina.
A corresponding decrease in gross profit was partially offset by lower operating expenses when excluding non cash considerations and one timers, such us DNA transaction expenses and share based incentives.
This reduction was driven by good performance in the execution of cost synergies from the merger with pro farm.
As we grow pro form revenues and complete the integration process. We continue to believe we are on path for this acquisition to be adjusted EBITDA neutral for the full year.
We saw good progress towards this goal in the quarter.
Importantly, despite a tough second quarter adjusted EBITDA for the first half of the fiscal year 'twenty three reached almost $35 million.
Which represents a 13% improvement compared with the first half of the previous fiscal year on a pro forma basis.
Finally, let's look at the summary of our financial position shown on slide eight.
Our higher debt position and the corresponding higher interest expenses are mainly explained by the execution of the agreements in connection to the merger with profile being.
The increase in short term debt is explained in full by higher working capital position from incorporating pro farm as well as progress in launching H before.
We will remain at a very healthy run rate of interest expenses with an annual annualized average cost of debt of approximately 7%.
Our cash position increased with a $50 million upfront payment from the Syngenta agreement and stood at roughly $87 million.
Leading to a net financial debt of $170 million on December 31, 2022.
Our net debt to adjusted EBITDA ratio was three point 13 times and although our target is to keep our leverage ratio below three turns we are comfortable at the current metric is fully explained by a temporary drop in this quarter's EBITDA.
More importantly, we have a strong cash position on our working capital is well above our short term debt obligations.
After quarter close we completed a 26 $6 million public offering of corporate bonds in the Argentine market to support our local business in that country.
These bonds mature in February 2025, and February 2026, and biannual rates of one 5% and three 9% correspondingly.
All of the proceeds will be used to pay down short term debt, thus improving the composition of short and long term financial debt.
Let me wrap up by saying that although this quarter breaks at two year streak of uninterrupted growth due to an exogenous weather shock we are confident in the underlying fundamentals of our business.
While weather may temporarily affect our quarterly results from time to time, our long term growth trajectory remains robust.
With that I will hand, the floor over to vertical well heiko.
Thanks, Enrique and please turn to the next slide so that we are.
Diving to the <unk> four week results.
When we talk about the H before targeted region as an area or areas, where yields are expected to be below the two tons per hectare Mark. We may think of these as a limited opportunity in normal years.
Average yields are often above the three tons per hector level.
Now.
In our crop year like the one we just experienced.
Over 30% or close to 2 million hectares nationwide well below these thresholds.
So to be able to improve the yields consistently in these fields by more than 40% as shown in multiple systems, it's quite outstanding.
We are no longer talking about field trials or limited number of deals. These are results from.
Hundreds of growers.
Thousands of vectors and multiple seasons.
Indeed very compelling.
But let's go slightly more scientific in our analysis and look at the isolated effect of the <unk>.
As we turn to the next slide.
What we need here in 20 different locations or 34 locations that we looked at the past three years.
Was to ask farmers to compare tweens.
Or what we call near estrogenic lines.
There are varieties, otherwise genetically identical except for the presence or absence of the <unk> hundred <unk>.
This is important because as you may well know by now.
Final performance of an H before varieties, often consolidate bites genetic background. So we talk about first generation materials second generation materials or even third generation materials like we do in soy.
Now when we mutually that background noise.
What we see is that 84 converted lines win in all environments, not just those with yields below two tons per Hector.
<unk> hundred 40 set through yield gene with win rates above 80% ratifying the broad Hector opportunity, resulting from these technology.
So as we improve background genetics and reduce the yield gap of the first generation materials in an environment with yields above four tons per Hector.
We can expand the <unk> opportunity to the entire week production area.
And this is what we are showing in the next slide with our close to 15% yield improvement observed in the highest yielding environments. During the last season, when compared when comparing the <unk>.
Data from last year.
From first generation materials to what we.
Served with second generation materials in the current year.
The good news is that we should be able to cover up to one third of next season's HV for plantings with second generation with deals, allowing us to replace first generation by these almost 40 by fiscal year 'twenty four.
While we expect eight before we do deliver between 15% to $20 million in guidance.
Pat.
Now.
These technologies to important for it to be limited to Latin America.
And our ambition is to bring H before we'd to farmers everywhere in the world, where we this relevant and droughts are prevalent.
And the next stop in this road for US is Australia.
So in line with these.
We have closed the previously announced deal with <unk> genetics acquiring through our subsidiary <unk> genetics, 80% ownership of their wheat breeding program.
This is shown in the next slide Australia will not become an immediate opportunity for <unk>. Since we have to still do regulatory working country. We have been clear from a food or feed perspective, but not yet from a production viewpoint. So that is expected to be done in the next two.
Yes, while we consolidate that breathing efforts locally and start developing.
Adapted HV fault lines, we believe that HV fault in Australia will become meaningful in about five years and that is.
Beyond sort of our peak.
<unk> penetration in Latin America, So a good way to follow up on what we're currently doing in Argentina, Brazil, and the rest of the region.
Finally to close the earnings call I'd like to provide a brief update on HVAC for soy.
HP foresight seed multiplication hector's were kept steady despite very challenging planting conditions.
We commented earlier in the presentation.
Importantly half of the multi application area was planted with the newest varieties nine new third generation materials that will allow us to quickly rotate the portfolio and improve performance.
For for this crop.
And inventory projections.
To meet what we expect to in fiscal 'twenty, four and meet the guidance that we.
Provided for fiscal 'twenty five.
Enrique indicated we are delighted to see H before advancing in Brazil with initial multi applications.
<unk> done with farmers.
From using two varieties derived from the DMD program.
Hopefully.
Target about 10000 hectares in the upcoming season.
So with this I think we can now open up the floor for Q&A. So operator.
Thank you we will now start today's Q&A session. If you would like to ask a question. Please press star followed by one on your telephone.
Now if you change your mind, Please press star followed by one.
I'm going to ask your question. Please ensure your phone is on mute.
Our first question today comes from Ben <unk> from Lake Street Capital Markets. Your line is now open.
Alright, Thanks for taking my questions and congratulations on a really solid first half despite the tough backdrop that you outlined.
The first question and <unk> for you.
You noted that $20 to $25 million revenue headwind in the period due to weather and I confused myself, a little bit kind of breaking this down so I want to clarify this if possible.
You suggested the half of it was a permanent loss.
So was the other half pulled forward into Q1.
Or was the other half.
It can be pushed right into Q3.
Hi, Ben Thanks for the question and good to have you on the call.
That is a good question. So the half that was permanently loss was mainly around fertilizer since he treatment box both things that are heavily used.
On the planting window and obviously those are tasks that don't go back. So that's the part that we believe that it's going to not come back the remaining half I would say Ben that has to do mostly with products that were pushed.
Further down the road. So for example in the case of adjuvant.
If there is more rain, then obviously that would.
It would explain more spring and more spring resumes sort of like our sales about UMC in the country. So there is a big part of that even with fertilizers and that's why I highlighted the wheat acreage.
We might recover some of our annual estimated sales for fertilizers in weeks. So what we lost in soy might be recovered in weeks.
And there is obviously a part of that that got pulled into the first quarter, but mostly east was lost to planting activities.
That explains about half of that was lost and the remaining is something that we do believe that can be fully recovered through more agile on sales, maybe some insecticide sales and most importantly fertilizers for wheat planting.
Winter crop planting season.
Late May June .
Okay very helpful. Thank you.
On the agency force so a lot of positive news here did you provide the revenue contribution for HD for slowing in the quarter and sorry, I missed it and then do you expect 100% of HB course soy revenues.
Fiscal year to be in the second quarter or do you think any of that is going to get pushed into Q3 for some reason.
No no obviously whats happened in HB for soil already happened so thats in the second quarter or if that happens in the second quarter.
The contribution was.
The $2 $2 million.
And this is something that I believe that its also worth putting in context of the drought.
Obviously, the farmers decide to spend less on technology.
Stacey sort of like that drove complications and even though H before Isa drought trait is not something that allows to surpass planting difficulties. So if you don't have enough soil moisture, obviously, youre not going to be able to plant and it's not something that can be solved through H before so I think that we were expecting probably.
To see a little bit higher sales in these situations.
<unk> with route.
What's a little bit complicated on that I don't know if eight eco if you want to add something on that front.
The reality is that we were.
Targeting twice that much.
To be fully on it and we.
We lost many fields that were not planned it.
That probably doesn't explain 100% of the situation. While we prioritize then was the multiplication of the new variety. So that got all planted so all the inventory we had a third generation materials, which are very relevant from an inventory ramp up viewpoint got done.
The incremental revenues that come from second generation materials, or even that might be a first generation material that we were targeting to meet that.
Revenue threshold is what we compromised if you will because of the situation described by <unk>.
So from a strategic viewpoint or ability to rotate and have the inventory in place for the meaningful years I think we're in good shape.
Even though we are below where we expected to be.
Coming into the quarter.
Got it got it that makes sense and very sensible.
Okay last one for me and then I'll get back in queue. You noted the cash contributions from from the Syngenta agreement now that operationally. This is six month or six weeks old something like that do you have any operational update on on how that agreement is proceeding here in the early days or is it still too early to really make any comments there.
No I think we're making very good progress in terms of <unk>.
<unk> the agreement having the people in place that can operate.
Sales that are required so we arent, helping to engender on that front.
<unk>.
That has been fully accomplish for instance, in Brazil, which is a very important geography for the objectives of the agreement remember that we're targeting on average $23 million.
It's coming from these agreement on an annual basis on top of the.
Prepayment that we got.
That is reported here. So I think that is moving as good as it can go.
We believe.
That <unk> in a way the sort of the floor of the opportunity because we do see tremendous momentum for biological seed treatments globally, and hope that syngenta that can help us capture that in a way that is more meaningful than what we would be able to do ourselves.
I think also like going back to what happened in the quarter with is it always going Argentina to be able to have these 45 sources of revenues now that does not add then so much of a weather or one particular geography.
Speaks to sort of the type of <unk>.
Multi faceted strategy that we want to provide our investors to keep sort of a resilient business performance.
Got it okay very helpful.
I appreciate you, taking my questions and I'll get back in queue.
Our next question comes from Bobby Burleson from Canaccord. Your line is now open.
Thank you.
Thanks for taking my questions I guess the first one is just can you elaborate a little bit on that.
Pro farm impact.
The top line it sounds like you.
Got some positive offsetting.
Benefit there for.
For revenue, but also youre getting some integration synergies maybe.
Carve that out a little bit for us so we understand the magnitude.
Hi, Bobby this is enrique.
How are you on the call and then we can explore for the question Hi, how are you doing.
Look I mean this.
From a sort of like from a magnitude perspective, it's something that was obviously helped was not something huge but it did help. So we had about we saw the main category that explained the offsetting from pro forming the U S has to do with the seed treatment biologicals, the venerate product thats diverse.
One of the two six that will be replaced at some point with the 306 that mostly coming from to be to be partners.
And we are glad to see that trending in a very good direction. I mean, we have these type of agreements that provide some sort of like floor on sales and we saw those floors being far surpassed by our partners. So good prospects on that end, but it was mostly around the <unk>.
Piece, we are still waiting to see how the whole situation in California rains.
<unk> help us or not we will see in the coming quarter.
The rest of the portfolio that is full year applications in cash crops. So that is one part.
Might have provided Bobby on additional $2 million to $3 million of additional revenues compared to last year.
Then I would say that on the cost front. This is also meaningful as you might have seen in the EBITDA bridge.
We had close to $2 million from cost synergies on a pro forma basis and most of this is coming from synergies with pro forma so we're tracking well to that regard. So I think that if we continue on this trend seeing healthy growth on the top line and if we continue sort of like keeping cost.
At the level that we planned for we will see pro farm turning into positive or neutral at worst EBITDA for the full year. When we look back in June 2023.
Great. Thank you.
And my next question is just about.
Yeah.
Fertilizer opportunity weak.
But we should be looking out for kind of late may and into June .
Is that really dependent.
Our farmers basically at this point.
Given what's happened so far this year.
Really focused on making up for it.
They are weak.
The programs or.
Was that kind of a done deal and it's just all about the weather at this point and so we should just be watching.
Abatements.
<unk> just.
Hoping that the weather continues to be on this positive trends and then.
The higher wheat plantings are just kind of.
So fulfilling prophecy at that point or are there still decisions being made.
Hi, Bobby this is Federico it's great to have a nickel.
Et cetera.
<unk>.
It's probably too early to tell now because farmers are today, 100% dedicated to making the most out of their current crops. The summer crops, which are the ones that are economically more meaningful to them.
Now.
As we indicated.
There are losses in the summer crops that are non reimbursable. So the expectation is for the overall crop to be 20% below a normal year.
And this is happening after a very tough week campaign in the prior season. So.
Revenues from our <unk> decline revenues from summer crops will decline so I think.
Weather is acceptable and we have good moisture in the ground there'll be a lot of we planted.
And we don't anticipate prices to sort of come down given sort of the shortage that not only Argentina in Latin America, probably will see in other geographies around the globe. So I think it is.
It will be highly dependent on the weather situation.
We don't need it to be perfect. We just needed to be moist enough. So that farmers will go full force in trying to recover part of that lost revenue.
Okay, Great and then just one last one.
And maybe this is for you officer Federico.
The Cortina acquisition of Stoller.
And what that does to the kind of the state of play in.
South America does that.
Yes.
Okay.
Does that create more of a sense of urgency person Gen sets.
Target, Brazil with this agreement.
<unk>.
Create bigger opportunities for <unk>.
In the area.
Look I think it's obviously evident by now that industry leaders have put a lot of energy and resources into trying to have a strategy around biologicals.
Stoller is.
Well known company, particularly in bio stimulants, and particularly in Brazil, that's whereas <unk>.
And there is I think a consensus view today.
Is that to be able to do the trick.
You need specialized sale.
<unk> teams so in part what we're doing with Syngenta with the operating agreement.
Holding hands.
<unk> seen our platform and our capabilities to help them execute.
Of these more technical sale for us, but what.
Core <unk> is intending to do with dollar.
And it's reflective of broader M&A in the space. There are a number of other deals that have been announced recently, so I think to be an industry leader in a space that is turning harder every minute is obviously.
Nice to see because that's great alternatives for us.
Hopefully.
In the future we are in a position where we can materialize.
This leading position we're building today.
In ways.
That can vary depending on the scenarios, but.
I think there's a clear race to drive to.
Lead on their biological space and industry views are recognizing that.
The only way they can build these businesses internally is through M&A.
Great. Thanks.
Thanks Enrique.
Our next question comes from Brian Wright from Roth Capital Partners. Your line is now open.
Thanks, Good morning, just real quick.
Dana follow up.
You said you had $26 6 million.
Could you.
Thank you Mrs.
Those interest rates again, it sounded like $1 five to three three when that happened then three 9% and I just wanted to make sure.
I got that correct.
Hi, Brian this is going to reject things for for joining us for the question.
Yeah. So it was an issuance of $26 $6 million of which 21 were in the tranche after 24 months maturity.
With one 5%.
The interest rate and then there was about $5 5 million borrowers and we're in the tranche that matures in 36 months and that tranche of bonds face coupon of three 9%.
Sure come a long way congrats.
Thanks.
We will keep the soft part of our financial strategy.
Think that east coast.
Hand, with our leverage ratio and keeping sort of like the short term of our debt.
Well beyond at well below.
Sort of like current assets, that's what we're looking for as well as the strong cash position. So all of these three things go hand by hand, and what's important to us to be able to sort of like bring down the short term piece of our debt.
Great. Thank you.
Jeff can you remind everyone. If you would like to ask a question today. Please press star followed by one on your telephone keypad. If you change your mind. Please press star followed by Keith.
Our next question comes from Jonathan <unk> Capital markets. Please go ahead.
Great. Thank you and good morning.
Just a couple of questions first there is reference to some transaction expenses in the quarter.
Which I think you mentioned related to <unk>, which closed in July .
Were those expenses they would show up after closing.
Hi, Ken This is enrique thanks again for joining us for the question so those transaction expenses.
Related mostly to the two financial agreements that were finalized in connection with the merger with pro farm right. After the closing so those strengths entered into the second quarter as well as some other expenses that had not been accrued for in the first quarter that were related to the merger itself.
And all of those amounts to $800000.
Okay Super.
And then my other question relates to the performance.
The HB for.
<unk>.
And I'm trying to put your current comments in context with.
What you had said.
Yes.
Two years ago, when you were mainly referencing what would've been field trial data and.
Roughly.
Were looking at increases in crop production.
I think generally in the teens, whether it's 13%, 16% or the like is probably less critical to the question, but when you step back from the data and look at it in aggregate is the current performance for the current generation of crops consistent with that or is it a little bit better or how would you care.
Richter is it in that way.
Hi, Ken this is fairly equal thanks for.
Participating in the call and thank you for the question I think.
That.
It's kind of surprising but.
The field data that we're collecting.
It's turning out to be better that what we anticipated.
In the product development process and the R&D.
And if you will that was done with the technology or.
Or the state where we were.
Two years ago, even though we still allude to.
Before we'd have been at 20%.
Yield improvement and that is because we are trying to expand sort of the targeted region to above the two tons per Hector and not just be limited to.
Low lowest yielding areas, where we can get these 43% averages.
What we're seeing in the field today in wood fibers I've seen in the field, which is far more relevant and that what we see ourselves is better than that so I think.
It's unusual because it usually goes the other way when you could take technology to a fairly tends to perform not as well as.
How it performs in controlled trials or even in greenhouse settings. So we were very pleased with the outcome and obviously to have farmers generate these information themselves gives us a level of awareness that ive seen we can profit from in the upcoming season.
That's great and just wanted to a related question.
That is when you are.
Farmer.
Do you.
Do you really know in advance.
Likely hood of severe drought I think this is one of the great uncertainties.
Being a farmer.
Where I'm going with this is it.
Okay.
If you're able to deliver something in this range that even if you generally have good experience.
There is an incentive to go ahead and use and HB for product just because it gives you say somewhat higher level of certainty that youll be able to.
Have a decent harvest.
Right I think thats the right way to think about this almost like an insurance policy.
And one aspect of the technology that is critical.
In working that way is that we were able to uncouple. If you will the benefit that is observed on the drought with any kind of yield drag and or otherwise normal conditions. So there is.
And what we're even seeing east Youll delivery.
High yield in high yielding environments and Thats part of what we tried to present in in the in the calls cell.
Obviously like any other insurance policy.
You don't want to use it you would rather have the high yields and then you don't care about the incremental cost of our seed body for whatever reason.
Our heat by our historical drought.
Are hurting because of the significant decline to be able to outperform by 40% compared to conventional varieties more than justifies. The investment. So that is where we are today with <unk>. I think this is one of the reasons why we think the technology can be as.
Deep well beyond these.
Drought prone regions.
And become a true sort of broad acre opportunity in Latin America, and potentially in other geographies around the globe.
Okay.
Great. Thank you.
Thank you no further questions at this time I will now hand, you back over to <unk>.
<unk> CEO for closing remarks.
Well, thanks, everyone for joining obviously, we much rather like to report quarters, where we grow sales by 70% and double our profitability.
No.
Be assured that we are or where strategics will identify ways.
By which we can improve.
Even the <unk>.
By the historical drought conditions, there are always things that we can do.
To be slightly slightly better.
So this is in a way also.
Uh huh.
Dental warning to keep our business discipline.
And controlling costs, particularly in geographies, where we might have become a little bit more lenient because of the growth and expansion.
<unk> been observing over the last few years so.
We like to win in everything we do everywhere and that attitude.
We would like to reiterate the investors in the skull.
I hope, you're having a great week and we look forward to further communicating progress in our business in the months to come.
Thank you very much.
And I think.
They call.
Hi, Sarah.
<unk> solutions fiscal second quarter 2023 financial results Conference call has now concluded you may now disconnect your lines.
Okay.
Yeah.