Q2 2023 Adecoagro SA Earnings Call
Speaker 1: Good morning ladies and gentlemen and thank you for waiting. At this time we would like to welcome everyone to Adecco Agros second quarter 2023 results conference call. Today with us we have Mr. Mariano Bosch, CEO , Mr. Emilio Uneko, CFO , Mr. Renato Junqueda Pereira, Sugar, Ethanol and Energy VP and Mrs. Victoria Cabejmo, Investor Relations Officer.
Speaker 1: 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 section.
Speaker 1: At that time, further instructions will be given.
Speaker 1: Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of the coagulative management and all information currently available to the company.
Speaker 1: They involve risks, uncertainties, and assumptions because they relate to future rating factors, could also affect the future results of a decoagro, and could cause results to differ materially from those expressed in such forward-looking statements.
Speaker 1: Now, I'll turn the conference over to Mr. Mariano Bosch, CEO . Mr. Bosch, you may begin your conference.
Speaker 2: Good morning and thank you for joining us at the COAGROS 2023 second quarter results conference. As you may have seen in the report, we are presenting very good results despite the extreme drought that impacted some of our operations. For All Time
Speaker 2: was 15% higher compared to last year. It is in times like this when we can clearly show and monetize the benefits of being diversified and focused on achieving efficiencies in our whole value chain.
Speaker 2: We are very excited about how our sugar ethanol and energy business is performing.
Speaker 2: The development of our sewer cake plantation is really good and we expect to increase crashing volumes by 15% compared to 2022.
Speaker 2: We have a large flexibility to shift production and we are using it to maximize sugar production.
Speaker 2: We have about 25 percent of this year's sugar production and almost all of our next years still unhedged and very well positioned to continue to capture solid prices.
Speaker 2: 30 percent of our expected annual ethanol production is stored in our dams.
Speaker 2: to be solved in the following quarters.
Speaker 2: This decision to carry forward ethanol is already proving to be a good one, as prices are expected to increase following the increase in gasoline prices and the auto cycle growth.
Speaker 2: The reason why our sugarcane plantation is in great shape?
Speaker 2: It's because of our focus on achieving efficiencies as I mentioned before.
Speaker 2: Throughout the past years we have put a special focus on our farming activities.
Speaker 3: That certainly says.
Speaker 2: We are reaching incredible levels of TRS content per hectare.
Speaker 2: levels of TRS content per hectare. For example,
Speaker 2: We implemented Muda Prebrotada or press-prouded seedling through the multiplication of Meris-Tem, which is a technology only used by us. This enables us to reproduce came varieties that are better adapted to our region at a much faster pace and replace the older varieties.
Speaker 2: We even built the factory that now produces 26 million moths every year. We are using two-line harvester, which not only reduces.
Speaker 2: This is the consumption of the concrete, but also soy contaction.
Speaker 2: Leading to better years of sugar.
Speaker 2: We use biological pesticides to control plates.
Speaker 2: We use drones and artificial intelligence to monitor our plantation and apply heritage only in the areas with weed infestations.
Speaker 2: We use drones and artificial intelligence to monitor our plantation and apply service as only in the areas with with infestation among many other examples.
Speaker 2: These innovations are good not only for our productivity levels, but also reduce our cost per ton and improve our carbon footprint.
Speaker 2: Another good example of this is our production of biometan.
Speaker 2: which we are already using to power more than 130 VATES replacing this consumption.
Speaker 2: We are very happy with the region where we are located with our Shureken Plantation and our Miss, the work that we did and the potential that we still have ahead.
Speaker 2: Now let's move into our farming business in Argentina and Europe .
Speaker 2: In our crop business, as we mentioned in the past releases, we experienced an impressive drought, our results in this segment at a reflection of these.
Speaker 2: Now we are focused on the 23-24 campaign where we are starting fresh with no long term impact in our Ernest's potential from the drought.
Speaker 2: We have already started planting activities and we have good expectations for the new crops with the favorable El Niño forcas.
Speaker 2: In our daily basis.
Speaker 2: Last year we finished populating our four free stones.
Speaker 2: Productivity per cow came marginally down as we navigated the challenges of operating at full capacity.
Speaker 2: This year, productivity is at record levels, which is almost 38 liters per cow per day on average.
Speaker 2: In terms of prices, there is a mixed performance, but we have the flexibility to adapt to the context.
Speaker 2: In the case of our rights business
Speaker 2: The decision we made last year to set the foot in Uruguay, may acquiring four rice meals strategically located, is already paying off.
Speaker 2: In Argentina, even after that right year, we managed to do very well.
Speaker 2: We all now operate one of the largest fully integrated rights operations in the world. Under the Sustainable Production Model, where we develop our own cinematics and produce varieties customized to our clients' needs.
Speaker 2: We are building, drafting relationships with clients all over the world and consolidating as a leader of this market, offering high quality rise and food production traceability, coming from Uruguay and Argentina.
Speaker 2: Now, we have a huge opportunity in front of us.
Speaker 2: There is a lack of water in many rice producing countries of the world.
Speaker 2: and they are cutting their right sections.
Speaker 2: This means that there will be a very clear need for South American rights.
Speaker 2: Having operations in Argentina and Uruguay, we are uniquely positioned to benefit from this. Another thing we are very enthusiastic about is the work we are doing in the ESC front. We have been working on emphasizing the sustainability profile of our production model.
Speaker 2: and monetizing them. The sale of carbon-credits in gasil is a most obvious example.
Speaker 2: But we also have several certifications for our products and processes and clients willing to pay a premium for them.
Speaker 2: Sustainability is part of our DNA.
Speaker 2: Every day we work to develop sustained ablation models in the interior of the countries where we operate.
Speaker 2: In our integrated ESC report, we show with great details how we do this.
Speaker 2: I invite all of you who are interested to read it.
Speaker 2: We have a very positive outruth to head.
Speaker 2: Also, we are compliant with our distribution policy.
Speaker 2: We recently distributed dividends and we continue reporting shares, always maintaining our debt derivatives below two times a VDI.
Speaker 2: To conclude, I want to thank our teams.
Speaker 2: This year started off with many challenges.
Speaker 2: We now have a very positive outlook ahead of us. I feel confident that we will continue to generate good returns and value to our shareholders. Now I will let the media walk you through the numbers of the quarter. Thank you, Mariano. Good morning, everyone. Let's start on page four with a summary of our consolidated financial results. Growth sales total $407 million during the second quarter, making a 6% year over a year increase.
Speaker 2: While on an accumulated basis, it reached $654 million, 11% higher than the previous year. This was mostly explained by our commercial decision to favor sugar production and execute sales at solid prices coupled with higher average selling prices in our rice division.
Speaker 2: Consequently, adjust the VDA expanded to $136 million during the quarter. Whereas here today, it stood at $226 million, 15% and 10% higher than its respective previous periods.
Speaker 2: with the operational performance of our sugar, ethanol, and energy businesses. Crushing volume amounted to 3.6 million tons during the second quarter, making a 9 percent increase versus the prior year. This was mostly driven by solid productivity indicators enhanced by good precipitations registered during the first six months of the year. Thus, agricultural productivity indicators, such as yields, presented a year-over-year improvement from 60 to 78 tons per hectare in the quarter, while TRS content increased from 119 to
Speaker 2: to 126 kilograms per ton. In terms of mix, we diverted as much as 48% of our TRS to sugar production in line with our strategy to maximize production of the product with the highest marginal contribution. Within our ethanol production, 70% was anhydrous.
Speaker 2: and to further profit from the premium that this ethanol commanded, we dehydrated over 22,000 cubic meters of hydro-cetanol stored in our tanks.
Speaker 2: 42 percent higher year over year. This is explained by a significant improvement in yields and TRS content, as well to the greater sugar cane availability, which enabled us to resume our continuous harvest model during the first quarter of 2023. As mentioned before, production mix to that 48 percent sugar in line with the quarter, as shown in the bottom right chart, while we maximize sugar production throughout the first semester to profit from the rally in global sugar prices. The opposite was observed last year as ethanol prices reached record levels in Brazil.
Speaker 2: Net sales amounted to $179 million during the quarter and $274 million in the first semester, making a 9% and 18% increase compared to the previous year respectively.
Speaker 2: In both cases, this was driven by higher sugar sales on higher production and prices, which fully offset the year-over-year reduction in ethanol sales.
Speaker 2: As you can see on the top left chart, selling volumes of sugar amounted to 317,000 tons a year today.
Speaker 2: as our mixed decision favored sugar production to capture the price premium over ethanol. Consequently, our average selling prices increased 9% during the first semester and we benefited from an excellent sugar prices.
Speaker 2: In the case of ethanol, the decrease in volume sold was driven by a reduction in ethanol production coupled with our commercial decision to increase our carryover stocks.
Speaker 2: The year-over-year comparison does not see fair. During the second quarter of 2022, we took advantage of a market opportunity that Ethanol offered and sold Ethanol at very attractive prices.
Speaker 2: As explained in prior releases, last year we sold most of our ethanol volumes at prices as high as 26 cents per pound equivalent.
Speaker 2: taking advantage of a shortage in supply caused by the late start of harvesting activities in Brazil.
Speaker 2: It is worth highlighting that this year we also benefited from a peak in demand and sold 52% of our ethanol volume there capturing 12% above the average price of the quarter.
Speaker 2: Within the 132,000 cubic meters of anhydrous ethanol sold year to date, 22,000 cubic meters were exported at an average price of 20.5 cents to found equivalent, out of which 16,000 cubic meters were conducted during the second quarter at an average price of 20.8 cents.
Speaker 2: On an accumulated basis,
Speaker 2: Energy selling volumes increased 13 percent compared to the prior year, even though its average selling price decreased by 10 percent due to low energy spot prices.
Speaker 2: Regarding carbon credits, year to date, we sold over 250,000 ceballos, 34 percent lower than the previous year, at an average price of $18 per ceballo. This is explained by the lower year-over-year production and sale of ethanol, which led to a lower amount of carbon credits issued.
Speaker 2: Please go to page nine where we would like to present the financial performance of the sugar, ethanol and energy business.
Speaker 2: Adjustment of the BTA amounted to $117 million and $194 million during the second quarter and the first half of the year respectively.
Speaker 2: In both cases, the increasing adjuster VTA was driven by higher net sales, as well as gains in the market of our Havaset gain on higher crushing volume.
Speaker 2: However, results were partially offset by a year-over-year loss reported in the mark-to-market of our commodity hedge position.
Speaker 2: Finally, to conclude with the sugar, ethanol, and energy business, please turn to slide 10 where we would like to briefly talk about the current outlook for the rest of the year.
Speaker 2: Assuming weather going normal, we expect our crushing volume in 2023 to be approximately 15% higher than in 2022, as we have sufficient sugarcane availability to use our natural capacity.
Speaker 2: This, in turn, will result in a reduction of unitary costs due to better dilution of fixed costs.
Speaker 2: From our commercial point of view, sugar prices continue to be supported by strong fundamentals and are trading on average about 24 cents per pound.
Speaker 2: We are in an excellent position to profit from this scenario as we have 25% of our expected 2023 sugar production and hedge and for 2024 90% of our sugar position remains open.
Speaker 2: In the case of ethanol, we are taking advantage of our storage capacity to carry over production into the following quarters to profit from higher expected prices.
Speaker 2: We believe that ethanol will continue to play an important role in the energy transition matrix, not only in Brazil, but globally. And we believe that Aécoagro will make its contribution.
Speaker 2: Now we would like to move on to the farming business. Please go to slide 12.
Speaker 2: As of the beginning of August 2023, we harvested 96% of the total area and produced over 800,000 tons of albuterol substance used.
Speaker 2: The remaining hectares are expected to be fully harvested during the rest of this month.
Speaker 2: As anticipated, yields for most of our summer crops presented a significant decline compared to the previous campaign due to the record drought that Argentina and Uruguay experienced as a consequence of La Niña weather events.
Speaker 2: anticipated yields for most of our summer crops presented a significant decline compared to the previous campaign due to the record drought that Argentina and Uruguay experienced as a consequence of La Niña weather event. Nevertheless
Speaker 2: There have been positive developments impacting the price of some of our products, which helps us to partially mitigate the weak performance at the farm level.
Speaker 2: The Agile government passed a resolution that allowed for the use of a preferential FX rate to convert the proceeds from sales of rice, soybean, corn, peanut and sunflower, which partially offset the decreasing yields.
Speaker 2: Also in the case of rice, India, the world's largest rice exporter, recently announced the ban of long-range white rice exports to secure domestic supply. Thus, the government has also announced the ban of long-range white rice exports to secure domestic supply.
Speaker 2: We expect to profit from this thanks to our flexibility to sell into the export market and offer full product traceability. To conclude, we began planting activities for our next campaign, starting with wheat and other winter crops. We expect a positive outlook for the upcoming season, especially since the weather forecast is shifting to moderate and linear patterns.
Speaker 2: which should allow for an improvement in soil moisture and recovery of water levels in the reservoirs, favoring the outlook for the 23-24 harvest season. On the following page 13, we would like to present the financial performance of our farming and land transformation businesses.
Speaker 2: Adjusted BDA total $24 million in the quarter, making a 22% year-over-year increase.
Speaker 2: Here today, adjusted VDA was 43 million, 23% lower than the previous year.
Speaker 2: In both cases, this was explained by an outperformance of our rice and dairy divisions, which fully offset the poor performance of crops as expected due to the record drought caused by La Niña weather that affected yields.
Speaker 2: Starting with our crop business, adjusted VTA amounted to $313,000 and $509,000 during the second quarter and first semester of the year respectively.
Speaker 2: As previously explained, results were mainly impacted by the reduction in yields, coupled with a genuine increase in costs in U.S. solar terms as a reduction in planted area versus the previous season.
Speaker 2: Adjustment of EDA in our rice business was $15 million during the second quarter and $27 million on an accumulated basis. Despite a reduction in yields compared to the previous campaign and higher costs in US dollar terms, adjusted EDA was higher year over year.
Speaker 2: This was driven by an increase in both volume and average selling prices due to a better mix of higher added value products, as well as the use of the preferential exchange rate mentioned above, among other factors.
Speaker 2: Moving on to the dairy business, adjusted EVDA total $10 million, 41% higher than prior year, while year to date it stood at $16 million, making a 15% year-over-year increase.
Speaker 2: Results were explained by higher average selling prices as we produce more fluid milk for the domestic market which offered the highest marginal contribution during these periods, coupled with our continuous focus on achievement efficiencies in our vertically integrated operation. Results were partially offset by higher costs.
Speaker 2: including cost of fee of our dairy cows. In the case of land transformation, although no farm sales were concluded, results reflect the mark-to-market of an account receivable corresponding to the latest sale of farms in Brazil, which tracks the evolution of Soviet prices. Let's now turn to page 15.
Speaker 2: where we would like to present our capital allocation strategy. In 2022, we generated $141 million of net gas from operations. According to our distribution policy, we are committed to a minimum distribution of 40 percent of the gas generated during the previous year via a combination of gas dividends and shared reputations.
Speaker 2: In terms of dividends, on May 24th we paid $17.5 million in cash dividends, representing approximately 16 cents per share, which corresponds to the first installment of our annual cash dividend. The second, shall we pay in or about November in an equal cash amount.
Speaker 2: resulting in an unknown cash dividend of $35 million. In addition,
Speaker 2: We have already repurchased $14 million in shares year-to-date, which represents approximately 1.6% of the company's equity.
Speaker 2: This was explained by the financing of our working capital requirements, mainly related to advanced purchases of agricultural inputs at attractive prices in order to take advantage of low cost of capital. Furthermore, the Brazilian Real appreciated 8 percent versus the prior year, consequently impacting our debt denominated in such currency. As of June 30th of 2023, our liquidity ratio reached 1.3 times, showing the company's full capacity to repay short-term debt with its cash balances, whereas our net leverage ratio was 1.3 times higher than the previous year.
Speaker 2: was 1.9 times in line with the previous year. To conclude, 29% of total capex invested throughout the quarter was destined to expansion projects. Investments on this front were mostly related to continue increasing our sugarcane plantation as well as other complementary projects.
Speaker 2: such as the construction of our second biodigester in Brazil, to increase our biogas production, which later is converted into biomethane and is used to replace our diesel consumption.
Speaker 2: In our farming division, we are finalizing the construction of our second bio digester in our dairy business, which will be using cow manure as an input to generate renewable energy, a project that is aligned with our sustainability committee.
Speaker 2: Thank you very much for your time. We are now open to questions.
Speaker 1: Thank you. The floor is now open for questions.
Speaker 1: If you have a question, please write it down in the Q&A section or click on raise hands for audio questions.
Speaker 1: Please remember that your company's name should be visible for your question to be taken.
Speaker 1: We do ask that when you pose your question that you pick your headset to provide optimum sound quality.
Speaker 2: The first question is from Tiago Duarte from BTG PAC-12. Your microphone is open. Hi. Hello, Mariano, Emilio, Renato and the rest of the team. Thanks for the opportunity. I have two points I wanted to address with Renato on the sugar and ethanol business and then one final question, if I may, to Mariano and Emilio on capital allocation. So to Renato first, can you talk a little bit about the possibilities that you have for Rowan to
Speaker 2: there any possibility for increasing the capacity of producing sugar even more than the maximization that you have in place right now? Also if you could talk a little bit more about the opportunities for exporting ethanol even more than you have been doing so I see that you guys
Speaker 2: captured pretty interesting export prices on the ethanol business, but the volumes are still not that representative considering the total ethanol volumes there. If you could elaborate on whether there is room for, as I said, increasing sugar mix and increasing or you think there's room to increasing ethanol price, EthanolX.
Speaker 2: sport volumes even further. The second on biomethane, it's very interesting what you guys are doing in terms of producing more biogas and biomethane and using that as a replacement of diesel. Can you talk a little bit of the economics, how the cost of biomethane compares to the cost of
Speaker 2: I don't know if you can talk about unit economics there so you can get a sense. I get the decarbonization impact but also would love to hear a little bit of the economic impact of that.
Speaker 2: Finally, to Mariano and Emilio, if you could talk a little bit about capital allocation now because you guys are heading to a nice year after all in terms of margin expansion in sugar and ethanol, good rice prices, we think...
Speaker 2: There seems to be a good prospect in terms of cash flow generation. The expansion of CapEx, you mentioned in the presentation a few projects that you have ongoing, but it feels like you're either going to be paying out dividends and repurchasing a lot of shares, or you might have...
Speaker 2: new projects in place. So if you could elaborate a little bit more on that, what we should expect now that the company is deleveraging apparently even faster than we thought before. Thank you.
Speaker 4: Thank you very much for your question. I think as you mentioned, Renato will address your three main points on the sugar and ethanol and then we will take the capital allocation. Renato? Hi, Thiago. Thank you for your question.
Speaker 2: Regarding sugar production, first important to highlight that we have been producing a lot of sugar this year with existing capacity. In July , we have reached our monthly sugar production record. We have produced 116,000 tons of sugar in a month.
Speaker 2: which is 12% higher than the last record. We have been able to produce more flue than our installed factory capacitors. Actually in July and August , we are producing 18% more than our installed capacitors.
Speaker 5: So we are producing a lot of sugar this year. I think it's also important to mention that the sugar can in the third quarter vary. The GRS lab in August is higher than 150 kilograms per ton. So that's what we are doing regarding sugar. Regarding expand our capacity for next year,
Speaker 5: We think that we still have some bottlenecks that we can remove out of the sugar process, especially the bottlenecks in the evaporation. So we believe that we can produce more sugar by removing those bottlenecks.
Speaker 5: when sugar cane content is lower than it is now. And then we could add approximately 40,000 pounds of sugar for next season. Regarding Italy, what we are doing, we are exploring...
Speaker 5: of the auto cycle which is growing faster pace than everybody was for predicting. Actually I think that the growth of the auto cycle is close to 11% and also the increase that Petrographs announced in the gasoline price.
Speaker 5: puts the competitiveness of ethanol at the pump in a very good position. I think the part rate today is close to 61-62%. So we think there is a lot of room for ethanol, for the price of ethanol to increase, especially when the Brazilian season starts to get close to the end.
Speaker 5: and then we will be selling this at a higher price. Regarding the mid-term, I think we are very optimistic about the project. Today, our production cost of the mid-term is close to 2,official
Speaker 5: per cubic meter, which is equivalent to one liter of diesel. So it's including depreciation. So it replaces diesel that was today 4.5, 4.8 IIs per liter. Of course we have a potential to produce much more.
Speaker 5: to throw some buyers and then we're analyzing the best option to do this.
Speaker 4: Thank you, Renato.
Speaker 4: Regarding the capital allocation, the first point I want to make is that we need to have clarity that we started a very challenging year. Now we are very optimistic on our future results.
Speaker 4: But we have to understand that we are changing that situation as we speak. So it is important to understand that we maintain our distribution policy. That is the most important thing. And also we want to be below 2 times the EBITDA.
Speaker 4: specific project and very synergetic projects in the human health business and some of them in the rice and some of them in the dairy, but we don't see any large specific project that will change our policy that is the most important thing that we have.
Speaker 1: is from Guilherme Palaris from Bank of America. Your microphone is open.
Speaker 6: Good morning everyone. Thank you for taking my question. I'd like to explore a bit on the farming side. Right? We are finally moving away from the La Nina. I'm going in positive that it might look a bit better in terms of family conditions. So a question that we have around that is regarding.
Speaker 6: yields for the next year, right? Because we had three years of planilla conceptually and we would like to have a bit of a sense whether you see yields normalizing already in the next harvest season or whether the depletion of the soil through free consecutive droughts.
Speaker 6: could have an impact that would be long-standing in terms of productivity for the Camiscesa. So that's the question in terms of farming and another one in terms of dairy.
Speaker 6: It's initial estimates in terms of the herd that you are managing. You see that herd continues to grow and whether you are reaching a new goal in terms of operational, just the sheer size of the operation of the area, whether you see herd continue to grow or we are stabilizing on that level. Thank you.
Speaker 4: Hi, Lierme, thank you for your question. Number one regarding the El Nino forecast and the yields expected for next season in crops. It's very clear that there is no effect on the past drought, so we are starting.
Speaker 4: from scratch the new season so we can expect a normal yields going forward. Furthermore with El Nino we should expect above normal yields but we are only using as a budget the normal yields or the five years.
Speaker 4: the last five years average. That is regarding crops in general. Then to your specific questions on daily.
Speaker 4: also increase our sales through the sales of electricity generated by the biodigester. So those are the increases that will happen in the daily business. On top of this also in the daily business we should see improvement through this investment that we've done.
Speaker 4: in the cheese factory that will also increase our total sales. But in terms of the cow productivity, it's only increasing productivity per cow basis.
Speaker 4: Furthermore, there are some value-added products in the domestic markets that we are also improving or achieving the market and that will also generate some additional profits on the daily business.
Speaker 1: Thank you, Mariana. That's very clear. Next question is from Lucas Fajeda from JP Morgan. Your microphone is open. 1
Speaker 5: Hi everyone, good morning. Thanks for taking my questions. I have a few on Argentina. The first one on the rice business. You mentioned the India ban on exports.
Speaker 2: I was checking some important Asian markets, you see already rice prices increasing 30-50% depends on the index. So my question is, on the rice business, when you look at the marginal price you're selling, right now, how much bigger this is versus the prices?
Speaker 2: they realize that price is in the second quarter. So just that we have a sense of sort of the size of the potential upside you could see in the third or the fourth quarters in the rice business.
Speaker 4: We are very optimistic. We see this advantage. We see that we are very well prepared from South America, from Argentina and Uruguay with this large operation that we have and the investment we did last year in getting into Uruguay. We are very well positioned to supply the world's market and the needs that the world has today.
Speaker 4: So, how much this increase could be, we are increasing compared to the last year in relevant value in terms of prices. Regarding the last particularly increase in the Asian prices because of the ban.
Speaker 4: specific situation. But it is more important than that because we are developing these specific varieties to specific clients all over the world and that is giving us an advantage on top of the long-term rise that is the more commodity in the...
Speaker 4: you from Argentina we export a 70% or between 70 to 75% and 30 to 25% on the automatic market so the evaluation in general is positive for our margins
Speaker 4: It depends on when and how this evaluation happens. It's more or less positive. We are well positioned to take advantage of this specific measure.
Speaker 4: Furthermore, we anticipated some acquisitions of inputs for this campaign that we are planting now and that I mentioned we were optimistic. And there we also took some advantage of have these fertilizers and chemicals already acquired.
Speaker 4: very positive for us in terms of our future results.
Speaker 7: Excellent. Thank you very much.
Speaker 1: Once again, to ask a question, you need to click on Raise Hand.
Speaker 1: Next question is from Danielle Sasson from Itaobba. Your microphone is open.
Speaker 8: Daniel, are you there?
Speaker 9: Daniel from Idaho, I think it's not there.
Speaker 10: Thank you.
Speaker 4: Daniel is saying his mic is not working. You may ask your question.
Speaker 4: Daniel is saying his mic is not working. You may ask your question. Can you type your question in the prompt?
Speaker 11: So, the next question is from Itau. He's asking, I also have a question on innovative projects.
Speaker 11: Could you please give us some color if you're looking into the submarket for ethanol? Also, on biomethane, do you see any potential to sell your technology to other mills in the medium to long term in exchange for royalties?
Speaker 11: And another question regarding your sugar division, given the height in prices over the last couple of months, do you have plans to increase your sugar capacity? For how long do you think that prices would have to remain this height before we see the industry increasing capacity as a whole once again?
Speaker 4: Okay I will ask Renato to answer the question regarding the sugar division and the expansion that he has already mentioned something but he can be more precise on that on this Renato.
Speaker 5: Thank you for your question. As I mentioned before, we have plans to increase our sugar production for next year by removing some bottlenecks that we have in the operation of the process.
Speaker 5: By doing this we will be able to produce more sugar when the KRS content is lower, lower than in the third quarter for example. We have some potential to increase the amount of something lower than 40,000 tons.
Speaker 4: Okay, thank you Renato. We are hearing some noise on your microphone, so I'm going to take the question on the Biomethan and the technology if that could be sold to third parties on exchange of royalties for that. That is clearly a possibility.
Speaker 4: But today we are focusing on the execution of our own project. We have some specifics on our production system that include this continuous harvest model. So because of these reasons and that we use all the vignas as a fertilizer, as a bio-fertilizer.
Speaker 4: on our own production system. So we are going to focus on the short term on our own specific project and develop that with the financing of Finepi and all the different alternatives that we have in Brazil. And after that, we are going to analyze in more detail the possibility of getting some money from the...
Speaker 4: fuels. This is very interesting. The sustainable aviation fuels comes from oils and from ethanol. So both technologies are things that we are looking at. There are some petroleum companies that have asked
Speaker 4: asked about this potential possibility. So we are simply looking at those, understanding how this will impact to this sector and whether there is any specific possibility for us regarding this. So we are knowing what's going on and analyzing that.
Speaker 1: what we can share with you at this moment, Daniel. Once again, to ask a question, you need to click on raised hand.
Speaker 1: This concludes the question and answer section. At this time, I would like to turn the floor back to Mr. Bosch for any closing remarks.
Speaker 4: Thank you all very much for participating and hope to see you all in our upcoming event.