Q1 2024 Adecoagro SA Earnings Call
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Speaker Change: Good morning, ladies and gentlemen, and thank you for waiting at this time, we would like to welcome everyone to other cooperatives first quarter 'twenty 'twenty four results conference call.
Operator: Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Adecoagro's first quarter 2024 results conference call. Today with us we have Mr. Mariano Bosch, CEO, Mr. Emilio Gnecco, CFO, Mr. Renato Junqueira Pereira, Sugar, Ethanol, and Energy VP, and Mrs. Victoria Cabello, Investor Relations Officer. We would like to inform you that this event is being recorded, and all participants will be in a listen-only mode during the company's presentation.
Speaker Change: Today with US we have Mr. Mariano Bosch CEO, Mr. Emilio and Yaacov CFO, Mr. Han notches from Cade up at Ada Sugar ethanol and energy VP, and Michelle Victoria, <unk> Investor Relations Officer.
Speaker Change: We would like to inform you that this event is being recorded and all participants will be in a listen only mode. During the company's presentation. After the company's remarks are completed there will be a question and answer section at that time further instructions will be given.
Operator: After the company's remarks are completed, there will be a question and answer section. At that time, further instructions will be given. Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of Adecoagro's management and on information currently available to the company. They involve risks, uncertainties, and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Adecoagro and could cause results to differ materially from those expressed in such forward-looking statements. Now, I'll turn the conference over to Mr. Mariano Bosch, CEO. Mr. Bosch, you may begin your conference.
Speaker Change: Before proceeding let me mention that forward looking statements are based on the beliefs and assumptions of other closet as management and on information currently available to the company. They involve risks uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future.
Speaker Change: Investors should understand that general economic conditions industry conditions and other operating factors could also affect the future results of other collaborative and could cause results to differ materially from those expressed in such forward looking statements.
Speaker Change: Now I'll turn the conference over to Mr. Mariano Bosch CEO. Mr. Bosch you may begin your conference.
Mariano Bosch: Good morning, Thank you for joining other glassdoor plenty plenty for first quarter results conference.
Mariano Bosch: Good morning, and thank you for joining AdecoAgro's 2024 First Quarter Results Conference. Consolidated adjusted EVDA during the quarter reached $90 million, in line with our previous year.
Mariano Bosch: Consolidated adjusted EBITDA during the quarter reached $19 million.
Mariano Bosch: In line with our previous year.
Mariano Bosch: Our sugar, ethanol, and energy business reported a crushing record figure for the first quarter ever since we set foot in Brazil. This was possible thanks to all the investments made in expansion planting to have good cane availability. In fact, we were one of the only players harvesting and producing sugar.
Speaker Change: Our sure.
Speaker Change: No no. She recently reported at crushing record figure for the first.
Speaker Change: Scott.
Speaker Change: Since we set foot in Brazil.
Speaker Change: This was possible.
Speaker Change: Thanks to all the investments done in next bunch of blood they do have good guy.
Speaker Change: In fact, we were.
Speaker Change: One of the only player harvesting umbrella using shore, we continue to go and attack the premium during the quarter.
Mariano Bosch: We continue to command and attract the premium over ethanol during the quarter. Having in place a continuous harvest model enabled us to crush cane year round and to constantly supply new products to the market, especially during Brazil's inter-harvest period. Without mentioning that the higher the billing, the lower our cost of production. Despite this outstanding operational performance, the decrease in the forward curve of sugar prices was the main driver of the year-over-year decline in adjusted EBITDA generation for this particular sector.
Speaker Change: How do you mean place it continues harvest model enabled us to crush.
Speaker Change: Year round.
Speaker Change: And to constantly supplying new products to the market.
Speaker Change: Especially during vaccines in depth, how do with BD.
Without mentioning that.
Speaker Change: The meeting they lower our cost of production.
Speaker Change: Despite these outstanding operational four months, nearly Greece, and therefore work garb of sugar prices. What's the main driver there was the year over year decline in not just the Debbie generation, Florida. These public what I said.
Speaker Change: Moving to our farming operations.
Mariano Bosch: Moving to our farming operation, the outperformance in all three operating segments shows the daily effort and hard work of our teams towards maximizing yields and still being the low cost producer. Incorruptible.
Speaker Change: The output floor months.
Speaker Change: City operating segments shows the daily effort and hard work of our teams.
Speaker Change: Maximizing yields on steel being the low cost for us.
Speaker Change: In crops.
Mariano Bosch: Normal weather conditions translated into a significant recovery in yields, and consequently, into results, despite the lower international prices for soy, corn, and wheat. We are currently in the middle of the harvest season. Therefore, yields are still being defined, but we know that we are on track towards a normal operating year for this sector. Furthermore, having in place a sustainable integrated business model in our RISE operation enabled us to capture an important year-over-year increase in the average selling price, as we were the only rice producers with available production when stocks were leaving.
Speaker Change: No to mild winter conditions translated into a significant recovery yields consequently into results. Despite the lower international prices for soy corn and wheat.
Speaker Change: We are currently and how do we see sudden therefore yields are still being defined but we know that we are on track to what's a normal operating year for this segment.
Furthermore, having in place is sustained.
Speaker Change: <unk> business model in our rice operation.
Speaker Change: To capture an important <unk>.
Speaker Change: Increase in the average selling price.
Speaker Change: We were beyond the rice producers with a very level production when stocks were limited.
Mariano Bosch: This is since we have flexibility to cater to both the domestic and export market with our high-value-added products in the lady segment. The significant recovery in crop yields has led to a reduction in the cost of feed for our daily cows, which is one of the main cost components for this business.
Speaker Change: This is so since we have flexibility to cut there to both domestic and export market with our high value added products.
In the AG segment.
Speaker Change: The significant recovery in crop yields led to a reduction in the cost of fees of our <unk> goals.
Speaker Change: One of the main cost component for these business.
Mariano Bosch: Moreover, we continue working on product development for the domestic and export markets and taking advantage of our flexibility to supply both markets with our daily portfolio. Before passing the word to Emilio, a brief update on our distribution policy. On April 17th, our annual shareholder meeting approved a total cash dividend distribution of $35 million. And, in addition to this, we continue buying back shares under our program. We have already reported 2.6 million shares, equal to 2.4% of the company's equity.
Speaker Change: Moreover, we continue working on product development.
Speaker Change: You've got an export market and they get advantage of our flexibility to supply both markets without what do they do portfolio.
Speaker Change: Before passing the walk to Emilio.
Emilio Federico Gnecco: Update on our distribution policy.
Speaker Change: On April 17.
Speaker Change: I would have called their meeting approval a total.
Emilio Federico Gnecco: Cash dividend distribution of <unk> 5 million.
Emilio Federico Gnecco: And in addition to lease we continue buying back shares under our program.
Emilio Federico Gnecco: We have already reported two.
Emilio Federico Gnecco: 2.6, maybe last year.
Speaker Change: While 224% of the company.
Speaker Change: As you May see we are committed to our policy.
Mariano Bosch: As you can see, we are committed to our distribution policy while we continue investing in growth projects with attractive IRRs and maintaining our debt level. To conclude, I would like to reiterate my gratitude to all our employees, contractors, and stakeholders for their hard work and commitment. Now, I will let Emilio walk you through the numbers of the work.
Speaker Change: While we continue investing in growth projects with attractive IRR on Monday evening, our debt levels.
Speaker Change: To conclude I would like to reiterate my gratitude to all our employees contractors and stakeholders for their hard work and commitment.
Speaker Change: Now I will let Emilio walked you through the numbers of the quarter.
Speaker Change: Thank you Mariano good morning, everyone.
Emilio Federico Gnecco: Thank you, Mariano. Good morning, everyone.
Emilio Federico Gnecco: Let's start on page four with a summary of our consolidated financial results. Gross sales totaled $254 million during the first quarter, 3% higher year over year. This was mostly explained by greater sugarcane crust, which enabled us to increase our sugar production and execute sales at a solid price. In addition, our rice operations reported an 83% year-over-year increase in the average selling price, driven by limited supply both in the export and domestic markets.
Emilio Federico Gnecco: Let's start on page four with a summary of our consolidated financial results.
Emilio Federico Gnecco: Gross sales totaled $254 million during the first quarter.
Emilio Federico Gnecco: 3% higher year over year.
Emilio Federico Gnecco: This was mostly explained by greater sugarcane crushed which enabled us to increase our sugar production and execute states solid price.
Mariano Bosch: In addition, our race operations reported.
Mariano Bosch: 83% year over year increase in the average selling price driven.
Mariano Bosch: Driven by limited supply both in the export and domestic market.
Speaker Change: Adjusted EBITDA reached $19 million nine with the previous year.
Emilio Federico Gnecco: Adjusted EVDA reached $90 million, in line with the previous year. The outperformance of all three of our farming businesses fully offset the decline reported in the sugar, ethanol, and energy business, which was explained by a loss in our biological assets driven by a reduction in sugar and ethanol prices. Now, please turn to slide five.
Speaker Change: The outperformance of all the three of our farming businesses.
Speaker Change: Fully offset the decline reported in the sugar ethanol and energy business, which was explained by a loss nor biological assets driven by a reduction of sugar and ethanol prices.
Speaker Change: Now please turn to slide five.
Speaker Change: Regarding our production figures in the bottom right chart, we can see that the crushing volumes now with sugar ethanol and energy business were up four.
Emilio Federico Gnecco: Regarding our production figures, in the bottom right chart, we can see that crushing volumes in our sugar, ethanol, and energy business were up 47% versus the same period last year. Higher crushing translates into higher production volumes, thus increasing sales and diluting costs. Total production in our farming division reported a 19% year-over-year increase, explained by a full recovery in yields after normal weather conditions experienced during the development of our crops, as well as higher planted areas.
Speaker Change: <unk>, 7% versus the same period of last year.
Speaker Change: Hi question translates into higher production volume.
Speaker Change: Increasing sales and diluting costs.
Speaker Change: Production funding Division reported a 19% year over year increase.
Speaker Change: <unk> buy a fully recovering yields after the normal weather conditions experienced during the development of our crops as well as to higher planted area.
Speaker Change: Let's move to slide seven with the operational performance of our sugar ethanol and energy business.
Emilio Federico Gnecco: Let's move to slide seven with the operational performance of our sugar, ethanol, and energy base. During the first quarter of 2024, the brushing volume amounted to 2.2 million tons, an all-time record for our first quarter million figure.
Speaker Change: During the first quarter of 2020 full crushing volume amounted to $2 2 million tonnes and all time record for us.
Speaker Change: First quarter million figure.
Emilio Federico Gnecco: This was mainly explained by greater sugarcane availability due to the expansion planting activities carried out over the past years. Regarding productivity, TRS per hectare remains in line versus last year, as TRS content presented a 5% year-over-year improvement, reaching 117 kilograms per ton, while yields amounted to 70 tons per hectare. In terms of me.
Speaker Change: This was mainly explained by greater sugarcane availability due to the expansion planting activities carried out over the past years.
Speaker Change: Regarding Peru TVT.
Speaker Change: Trs per Hector remain in line versus last year, as Trs content percentage up 5% year over year improvement, reaching 117 kilograms per tonne, while yields amounted to 70 tons per Hector.
Speaker Change: In terms of mix.
Emilio Federico Gnecco: We diverted as much as 49% of our TRS to sugar in line with our strategy to maximize production of the product with the highest marginal contribution, taking advantage of the high degree of flexibility of our mill. Within our ethanol production, 91% was hydrous compared to 29% in the previous year, as demand for this type of ethanol has been significantly increasing and gaining market share, offering a better market. Let's please turn to slide 8, where we describe sales conducted throughout the period. Net sales amounted to $103 million during the quarter, a 7% increase compared to the same period last year.
We talked about it as much as 49% of our Trs to sugar in line with our strategy to maximize production of the product with the highest marginal contribution taking advantage of the high degree of flexibility of our mills.
Speaker Change: Within our ethanol production, 91% was hydrous compared to 29% in the previous year as demand for these type of ethanol has been significantly increasing and gaining market share offering the better March.
Speaker Change: Let's please turn to slide eight where we describe sales conducted throughout the period.
Speaker Change: Net sales amounted to $103 million during the quarter, making.
Speaker Change: Making a 7% increase compared to the same period of last year.
Emilio Federico Gnecco: This was driven by higher sugar sales at higher prices and volumes, which fully offset the overall reduction in ethanol sales due to the decline in selling price. As you can see on the left chart, our average selling price of sugar reached 23.8 cents per pound, thanks to our hedging strategies, which allowed us to capture the rally in global sugar prices.
Speaker Change: This was driven by higher sugar sales on higher prices and volume, which fully offset the overall reduction in ethanol sales due to the decline in selling price.
Speaker Change: As you can see on the top left chart.
Speaker Change: Our average selling price of sugar reached $23.08 per pound. Thanks.
Speaker Change: Thanks to our hedging strategies, which allow us to capture the rally in global sugar prices.
Speaker Change: Moreover.
Emilio Federico Gnecco: Selling volumes amounted to 120,000 tons due to the increase in production versus the prior year as a result of the higher mill. In the case of ethanol, selling volumes were up 11% versus the prior year on higher demand for hydrous ethanol, whereas the average selling price decreased 30% year over year. Lower prices were explained by higher inventory levers carried into the inter-harvest period, which resulted in more supply of ethanol in the market.
Speaker Change: Volume some of it to 120000 tons due to the increase in production versus the prior year as a result of the higher meeting.
Speaker Change: In the case of ethanol selling volumes were up 11% versus the prior year on higher demand of hydrous ethanol, whereas the average selling price decreased 30% year over year.
Speaker Change: Lower prices were explained by higher inventory levels carried into the into how this period, which resulted more supply of ethanol in the market.
Although the average selling price of energy increased by 2% compared to the prior year selling volumes were down 13% as we prioritize the volume contracted and saved our bias for more profitable outcome.
Emilio Federico Gnecco: Although the average selling price of energy increased by 2% compared to the prior year, selling volumes were down 13% as we prioritized the volume contracted and saved our bagasse for more profitable alternatives. Regarding carbon credits, we sold over 80,000 ceballos at an average price of $19 per ceballo. Please go to page 9, where we would like to present the financial performance of sugar, ethanol, and energy distribution. Adjusted VTA amounted to $52 million in the first quarter. 32% lower than the same period last year.
Speaker Change: Regarding carbon credits, we sold over 80000 Tobias at an average price of $19 verse the body.
Speaker Change: Please go to page nine where we would like to present, the financial performance of the sugar ethanol and energy business.
Speaker Change: Adjusted EBITDA amounted to $52 million in the first quarter.
Speaker Change: 32% lower than the same period of last year.
Emilio Federico Gnecco: Despite the year-over-year increase in milling and sales, results were negatively impacted by a year-over-year loss in the mark-to-market of all biological assets, as the outlook for sugar prices is lower compared to last year, coupled with higher freight costs on higher sugar sales. Finally, to conclude with the sugar ethanol energy business, please turn to page 10, where we would like to briefly talk about the current art. Rainfalls received over the last few weeks continue to favor the productivity of our plantation.
Speaker Change: Despite the year over year, increasing milling and sales results were negatively impacted by a year over year loss in the mark to market of all biological assets at the outlook of sugar prices is lower compared to last year, coupled with higher freight costs on higher sugar savings.
Speaker Change: 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.
Greenfields received over the last few weeks continued to paper of the productivity will bolt in patients.
Emilio Federico Gnecco: Assuming weather goes normal, we expect to increase our crushing volume versus 2023 as we have sufficient sugarcane availability to use our industrial capacity. This, in turn, will result in a reduction of annual cash costs due to better dilution of fixed costs.
Assuming weather going normal we expect to increase our crushing volume versus 2023, so we have sufficient sugarcane availability to use our industrial capacity.
Speaker Change: This in turn will result in a reduction of unitary cash costs due to better dilution of fixed costs.
Emilio Federico Gnecco: From a commercial point of view, the evolution of sugar prices will mostly depend on Brazil's production and logistics. We have approximately 40% of our expected 2024 sugar production still unhit, while the balance was committed at an average price close to 24 cents per pound. In the case of ethanol, by the beginning of April, prices had recovered 30 percent compared to the lowest levels reported in early 2024. Consequently, we sold over 80,000 cubic meters of ethanol at an average price of $566 per cubic meter, profiting from the peak in prices to partially clear our tanks. We believe ethanol prices have room to continue increasing due to the current low parity at the pump. Now, we would like to move on to the farming business. Please go to slide two out.
Speaker Change: From a commercial point of view the evolution of sugar prices will mostly depend on Brazil's production and logistics.
Speaker Change: Approximately 40% of our expected 2020 core sugar production still unhedged.
While the balance was committed at an average price close to 24 cents per pound.
Speaker Change: In the case of ethanol by the beginning of April prices recovered, 30% compared to the lowest level reported nearly 2024.
Speaker Change: Consequently, we sold over 80000 cubic meters of ethanol.
Speaker Change: Average price.
Speaker Change: $566 per cubic meter.
Speaker Change: Profiting from the pecan prices, partially clear our tanks.
Speaker Change: We believe ethanol prices have room to continue increasing due to the current below parity at the pump.
Speaker Change: Now we would like to move on to the farming business. Please go to slide 12.
Speaker Change: We are currently undergoing harvesting activities for most of our agreements.
Emilio Federico Gnecco: We are currently undergoing harvesting activities for most of our grain. At the end of April, we harvested 47% of the total area and produced over 600,000 tons of agricultural produce. Normal weather conditions registered throughout the yield definition stage of all our crops favored crop development and led to a full recovery in yield. In the case of late corn, the northern region of Argentina has been negatively impacted by pseudoplasma, a bacterium which is carried by a leaf groper. This bacterium reproduces under tropical conditions, as in Brazil and Paraguay, and recently spread to the north of Argentina, given the high humidity and temperatures registered.
Speaker Change: At the end of April we harvested 47% of the total area and produce over 600000 tons of agricultural produce.
Speaker Change: Normal weather conditions reduced throughout the yield definition stage award our crops favored crop development led to a full recovery.
Speaker Change: In the case of late corn, the northern region of Argentina.
Speaker Change: Be negatively impacted by sito plasma our activism, which is conducted by a lethal post.
Speaker Change: This bacterium Rick would you see some of the tropical conditions as in Brazil, and Paraguay, and recently spent two and all of the Argentina, even the high humidity and temperatures reduced.
Emilio Federico Gnecco: Thus, approximately 15% of our total corn production was impacted in line with the decline in Argentina's total corn production. Regardless of that, we are still focusing yields in line with historical levers, since our geographic diversification enables us not only to mitigate weather risks but also this type of disease that may affect a given crop in a certain year. Lastly, we have already harvested 88% of our rice, reaching an average yield of 6.5 tons per hectare. Although it was a challenging campaign due to the evolution of weather conditions throughout the different growth stages of our rice, we were able to obtain an improvement in yield.
Speaker Change: Thus approximately 15% of our total current production was impacted in language.
Speaker Change: Argentina's total corn production.
Speaker Change: Regardless over that.
Speaker Change: We are still focused in yields in line with historical levels seen so a geographic diversification enabled us not only to mitigate weather risk, but also these type of diseases that may affect a given crop in a certain year.
Speaker Change: Lastly, we have already harvested 88% of our rice leaching.
Speaker Change: Reaching an average yield of six five tons per Hector.
Speaker Change: Although it was a challenging campaign.
Speaker Change: Due to the pollution of weather conditions throughout the different growth stages of our rice, we were able to obtain an improvement in yields.
Speaker Change: On the following page 13, we present, the financial performance of our farming business.
Emilio Federico Gnecco: On page 13, we present the financial performance of our farming business. Adjusted VTA for the farming business totaled $44 million in the quarter, making a $25 million year-over-year increase. Higher results are mainly explained by an out-of-formance in all three sectors.
Speaker Change: Adjusted EBITDA for the pharma business.
Speaker Change: $44 million in the quarter, making at $25 million year over year increase.
Speaker Change: However results are mainly explained by an outperformance in northeast.
Speaker Change: Before going into the results of each operating segment I would like to briefly call that we have modified our internal reporting to refine the way we view our firm ambition and its.
Emilio Federico Gnecco: Before going into the results of each operating segment, I would like to briefly recall that we have modified our internal reporting to refine the way we view our farm and business and its interaction with our land transformation activity. Consequently, we have recast the previously reported segment financial information. Adjusted EVTA for our crops segment amounted to $5 million in the first quarter, making a $6 million year-over-year increase. This was fully driven by the recovery in yields, which resulted in a $15 million year-over-year gain in the mark-to-market of our biological assets. Subsequent to the end of the quarter, we completed the sale of La Pecuaria Farm, located in the province of Duragno, Uruguay, for a selling price of $21 million, collected in full at close.
Speaker Change: The interaction with our lunch installation activity.
Speaker Change: Consequently, recast it previously reported segment financial information.
Speaker Change: Adjusted EBITDA for our crops segment amounted to $5 million in the first quarter, making a $6 million year over year increase.
Speaker Change: This was fully driven by the recovery in yields which resulted in a $15 million year over year again, and the mark to market of all biological assets.
Speaker Change: Subsequent to the end of the quarter, we completed the sale of lumpy quality of farm located in the province of <unk>.
Speaker Change: Right.
Speaker Change: Selling price of $21 million collected in food at closing.
Emilio Federico Gnecco: This transaction generated an adjusted VTA of $15 million, which will be built in our crop sector in the second quarter. Adjusted DVDA in our right segment was $33 million, $19 million more than the same period last year. This was mainly explained by a $13 million year-over-year gain in the mark-to-market of our biological assets on a better campaign in terms of area, productivity, and pricing. Moreover, we were able to capture an average selling price of $433 per ton higher than the prior year as we weren't the only rice producer with available stocks at the moment when rice supply was limited.
Speaker Change: Distance transaction generated an adjusted EBITDA of <unk>.
Speaker Change: $15 million, which will be built.
Speaker Change: <unk>.
Speaker Change: In the second quarter.
Adjusted EBITDA in our <unk> segment.
Speaker Change: $33 million $19 million for the same period of last year.
Speaker Change: This was mainly explained by a $13 million year over year again in the mark to market, although biological assets on a better campaign in terms of area, Peru, TMT and prices.
Speaker Change: Moreover, we were able to capture an average selling price of $433 per ton higher than the prior year as we were the only rice producer we have a level of stocks at the moment when rates supply was limited.
Speaker Change: Moving onto the daily segment, adjusted EBITDA totaled $6 million, 5% higher than the prior year results were positively impacted by a year over year decline cost structure, mainly related to the cost of peak.
Emilio Federico Gnecco: Moving on to the dairy segment, Adjusted EVTA totaled $6 million, 5% higher than the prior year. Results were positively impacted by a year-over-year decline in our cost structure, mainly related to the cost of feed, as our in-house production recovered lower crop output reported during the prior year due to the dry weather.
Speaker Change: As our in house production recovered lower crop while reported in the prior year Youtube dry weather.
Speaker Change: Let's turn now to.
Emilio Federico Gnecco: Let's turn now to page 15, where we would like to present our capital allocation strategy. According to our distribution Policy, we are committed to a minimum distribution of 40 percent of the cash generated in the previous year via a combination of cash dividends and share repurchase. For example, in 2023, we generated $176 million of net cash from operations. Consequently, our minimum distribution amounts to $70 million during the current year.
Speaker Change: Page 15, where we would like to present, our capital allocation strategy.
Speaker Change: According to our distribution policy, we are committed to a minimum distribution of 40% of the <unk>.
Speaker Change: Cash generated in the <unk>.
Speaker Change: This year, yeah, a combination of cash dividends and share repurchase.
In 2023, we generated $176 million of net cash from operations. Consequently, our minimum distribution amounts to $17 million during the current year.
Speaker Change: In terms of dividends a dividend distribution of $35 million was approved during our analyst shareholder meeting held on April 17.
Emilio Federico Gnecco: In terms of dividends, a dividend distribution of $35 million was approved during our annual shareholder meeting held on April 17th. The first installment of $17.5 million will be paid on May 29th and represents approximately $0.17 per share, whereas the second installment will be payable during November in an equal cash amount. In addition, we have already repurchased $27 million in shares under our buyback program, which represents approximately 2.4% of the company's equity. Please turn to page 16 for a broader view of our debt position.
Speaker Change: First installment of $17 $5 million will be paid on May 29, and represents approximately 17 cents per share, whereas the second installment Toby payable during November and then equal customer.
In addition, we have already referred to.
Speaker Change: $7 million in shares under our buyback program, which represents approximately two 4% of the company's equity.
Speaker Change: Please turn to page 16 for a brother view, although that decision.
Emilio Federico Gnecco: Net debt amounted to $639 million, making a 23% decrease compared to the same period last year. This was explained by a significant reduction in the gross debt position as a result of a financial strategy carried out during 2023 and the first quarter of 2024 and also better results from operations. As shown in our financial figures, the reduction in our net debt position was done without disrupting our distribution policy and growth budget.
Speaker Change: Net debt amounted to $639 million, making at 23% decrease compared to the same period of last year.
Speaker Change: This was explained by a significant reduction in the gross debt position as a result of our financial strategy carried out during 2003 in the first quarter of 2024.
Speaker Change: Also better results from operations.
Speaker Change: As shown in our financial figures the reduction in our net debt position was done without these attending our distribution policy and growth.
Speaker Change: As of March 31, 2024, our liquidity ratio reached two nine times showing the company's full capacity to repay short term debt with the cash balances, whereas our net leverage ratio was one three times.
Emilio Federico Gnecco: As of March 31st, 2024, our liquidity ratio reached 2.9 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, 0.6 times lower compared to the previous year. On the following slide, we describe our CAPEX program. Expansion CapEx represented $29 million in the first quarter of 2024. In Brazil, we continue increasing our sugarcane plantations, investing in our biogas unit in Ipanema Mill, where our biomethane production takes place.
Speaker Change: 0.6 times slower compared to the previous year.
Speaker Change: On the following slide we describe where our Capex program.
Speaker Change: Capex represented $29 million in the first quarter of 2024, and Brazil, we continue increasing our sugarcane plantation investing or biogas unit and even you have a meal, where our biomethane production takes place.
Emilio Federico Gnecco: In our farming business, we paid the third and final installment of the acquisition of Viterra's rice mills in Argentina and Uruguay to expand our geographic footprint in the rice portfolio. Thank you very much for your time. We're now open to questions.
Speaker Change: Finally in business, we paid the third and final installment of the acquisition of with the best price Nielsen in Argentina, and Uruguay to expand our geographic footprint in rice portfolio.
Speaker Change: Thank you very much for your time, we are now open to questions.
Speaker Change: Thank you the floor is now open for questions. If you have a question. Please read it down into Q&A section or click on race hand for audio questions Steve.
Operator: Thank you. The floor is now open for questions. If you have a question, please write it down in the Q&A section or click on raise your hand for audio questions. Please remember that your company's name should be visible for your question to be taken. We do ask that when you pose your question, you pick up your headset to provide optimum sound quality. Please hold while we poll for questions. Our first question comes from Henrique Brustolin of BTG.
Speaker Change: Please remember that your company's name should be visible for your question to be taken.
Speaker Change: We do ask that when you pose your question that you pick up your headset to provide optimal sound quality.
Speaker Change: Please hold while we poll for questions.
Speaker Change: Our first question comes from and he kept telling with BTG.
Speaker Change: Hi, Hello, everybody. Thanks for taking my questions I have.
Henrique Brustolin: Hi, everybody. Thanks for taking my questions. I have two, I think both of them are for Renato in the sugar and ethanol business. The first, I would just like to hear a little bit more about what your view is on what's happening to sugar prices, right? We saw this sharp contraction in recent weeks. So how do you, what do you think is behind it?
Speaker Change: Two I think both of them for not doing the sugar and ethanol business.
Speaker Change: The first Oh, just like to hear a little bit more about how is what's your view behind what's happening to sugar prices right.
Speaker Change: We saw this sharp contraction in recent weeks.
Speaker Change: So how do you what do you think is behind this and what do you expect for the remainder of the year when it comes to two sugar right and.
Henrique Brustolin: And what do you expect for the remainder of the year when it comes to sugar, right? And the second one, also on sugar and ethanol, is how that changes the company's perspective in terms of results for the year, right? We are seeing that the hedging position was already pretty advanced. Ethanol prices are higher at the margin, but the sugar curve is now lower. And on the other hand, you also have, I think, a good perspective in terms of unitary costs.
Speaker Change: And the second one also on sugar and ethanol is how that changes the company spirit perspective in terms of results for the Youre right Youre seeing.
The hedging position was already pretty advanced ethanol prices are stronger at the margin, but but but the sugar curve is now lower and then on the other hand, you also have I forgot good perspective in terms of unitary costs. So if you could just discuss a little bit on how that changes or how is the view in terms of results for the whole crops.
Henrique Brustolin: So if you could just discuss a little bit about how that changes or what the view is in terms of results for the whole crop season, even when compared to the previous one, I think it would be very helpful. Thank you.
Speaker Change:
Speaker Change: Even when compared to the previous one I think it would be very helpful. Thank you.
Speaker Change: Okay.
Mariano Bosch: Hi Enrique. This is Mariano.
Speaker Change: Hi, Andrew.
Speaker Change: Do you see money I don't thank you for your questions.
Mariano Bosch: Thank you for your questions. The second question is talking about the impact on the result. It is important to understand that the sugar price, although we have already fixed 57% of the price at a much higher price than today's prices, has an impact on the biological assets. So that's why the EBITDA is reduced. And that's what we explained in the numbers. For the full year, the same concept would be there in terms of biological asset impact.
Andrew: The second question talking about the impact on their results.
Speaker Change: It is important to understand that the sugar price, although we have already fixed 57% of that.
Speaker Change: The price at a much higher price than today's prices. There is an impact on the biological asset. So that's why the EBITDA <unk> reveal and Thats, what we explained in the numbers for the full year. The same concept would be there in terms of the biology of that asset impact. So we can expect.
Mariano Bosch: So we can expect the whole sugar and ethanol business to be lower than the previous year, although there is an increase in production efficiencies, etc. But we can also see an increase in other crops that will probably compensate for that reduction in the sugar and ethanol sector. So after this quick clarification on what we expect, I would like Renato to go deeper in terms of what our view is on the price of sugar and what could happen one way or the other.
On the whole, Sean and I'll be sure to be.
Speaker Change: <unk> lower than the previous year, although there is an increase on production efficiencies et cetera, but we can also see an increase on the other crops that it will probably compensate the reduction on the issue on that sector. So making this clarification on what we expect I would like to play in that though too.
Speaker Change: Hello deeper in terms of.
Speaker Change: What's how what have you on the price of sugar on what good copper in one way or the other.
Speaker Change: Hi.
Renato Junqueira: Hi Henrique. So I think it's important to talk a little bit about the price of sugar and ethanol because both are important to see how our price is going to be. So starting with sugar, we think that, with the perspective of Brazil, you produce 42, 43 million tons of sugar. The market projections have moved from a small deficit to a small surplus. But the stocks worldwide are still very low. Actually, the stock to user ratio is one of the lowest. I think it's the lowest since 2011.
Speaker Change: So I think it's important to talk a little bit about the price of sugar and ethanol was both are important to truly see.
Renato Junqueira: And the supply is very dependent on Brazil's crop. So any news about reductions in the Brazilian crop, any weather issue, it can trigger an increase in sugar prices. We are, as Mariano mentioned, we are 57% hedged at 23.6 cents per pound, and we are very optimistic about the ethanol, or very constructive about the ethanol scenario in the short term. So we think that it is very likely that we are going to change the mix in Mato Grosso do Sul at some point in the second semester.
Speaker Change: Oh lower prices going to be so we start to issues sugar.
Speaker Change: The perspective, Brazil, you produce 42 3 million tons of sugar.
Speaker Change: The market projections have moved from a small desk.
Speaker Change: She was more surplus but the stocks worldwide. It is still very low stock to use ratio is one of the lowest I think is the lowest since the 2011.
Speaker Change: And the supply is very dependent on the Brazil crops.
Speaker Change: So any news about the reductions in the Brazilian crop, but any weather issue.
Speaker Change: Three good.
Speaker Change: Inquiries in sugar price.
Speaker Change: We are as Mariano mentioned, we are shipped to 7% hedged at $23 six sainsbury bonds.
Speaker Change: And we are very optimistic about the ethanol are very constructive about the ethanol scenario in the short term.
So we think this is very likely that we're going to change the mix in Mato Grosso Sue.
Speaker Change: And at some point in the second semester.
Renato Junqueira: And we are very concerned with the ethanol scenario because we think that the supply of ethanol is going to be lower this year, as the sugarcane crushing in Brazil is going to be lower than last year, which was a high crushing season, between 5 and 10 percent lower. I think the mix is going to be even more oriented to sugar, 3 percent or 2 percent more than it was last year. That was already very high, 49 percent.
Speaker Change: And we are very conservative we just don't know scenario, because we think that the supply of it.
Speaker Change: I'm always going to be lower does the year of the sugarcane crushing in Brazil was going to be lower than last year, which was a high.
Speaker Change: Crushing season between five and 10% lower.
Speaker Change: The mix is going to be even more oriented to sugar.
3% or 2% more than it was last year that was already very high 49%. So as a result, the ethanol supply is going to be lower between two and 3 billion liters.
Renato Junqueira: So as a result, the ethanol supply is going to be lower between 2 and 3 billion liters, which is much more than enough to compensate for a small increase in the ethanol supply, in the corn ethanol increase. And the demand for ethanol is very high. Actually, ethanol demand has increased 60 percent since January, and the part of the pump is still at 65 percent. So very competitive, ethanol is still very competitive. Ethanol demand, monthly hydrous demand, is reaching almost 2 billion liters of ethanol.
Speaker Change: Which is much more than enough to compensate.
Speaker Change: Its more inquiries into digital no in the corn ethanol and inquiries and the demand offset on always being very high.
Actually just did it.
Speaker Change: The net increase of 60% since January.
January and the part that the bumps at this deal.
Speaker Change: 65%, so very competitive done obviously still very competitive.
Speaker Change: If there are no demands monthly hydrous demand is reaching almost two 2 billion liters of ethanol. So we think that the.
Renato Junqueira: So we think that the S&D of ethanol is very tight, so price has to move towards the 7 percent parity to curb demand at some point. And in this situation, we are going to change the mix from sugar to ethanol, we believe.
Speaker Change: The essence of it doesn't always is very tight so price has to move towards the 7% Paris.
Speaker Change: To curb demand at some point and in these situations, we are going to change the mix.
Speaker Change: From sugar to ethanol we believe.
Speaker Change: That's very clear thanks very much.
Henrique Brustolin: That's very clear. Thanks very much.
Speaker Change: Okay.
Operator: Thank you all again.
Andrew: Thank you Andrew.
Speaker Change: Next question from is that Dallas Yamanaka with Bank of America.
Speaker Change: Hi, Mariano Emilia.
Isabella Simonato: Hi Mariano, Emilio. Good morning.
Dallas Yamanaka: Good morning, Thank you for the opportunity.
Isabella Simonato: Thank you for the opportunity. I have two questions. First of all, on the rice business. Okay.
Speaker Change: Two questions first of all on the Rice business right, we have been seeing a pretty big.
Isabella Simonato: We have been seeing pretty big freezing prices, right? And even the prices that you guys delivered to one. It calls up a lot of attention, but I would like to hear from you.
Dallas Yamanaka: Freezing prices right and even the prices that you guys delivered in Q1.
Speaker Change: There's a lot of the attention but.
Speaker Change: I would like to hear from you how do you see a rice price dynamics right, especially considering.
Isabella Simonato: How do you see the rice pricing dynamics, especially considering a potential impact in the south of Brazil? So if you could elaborate a little bit on the outlook for the rest of the year, it would be quite helpful. And the second question is on capital location, right? As you mentioned, you guys are finishing some CapEx, right, on sugar and ethanol and also on the rice business. So I was wondering what we could expect next, right, in terms of CapEx and potential investments, if there are any. Thank you.
Speaker Change: Potential impact in the south of Brazil.
Speaker Change: So if you could elaborate a little bit on the outlook for the rest of the year I think would be.
Speaker Change: Quite helpful and second question is on.
Speaker Change: On capital allocation as you mentioned you guys are finishing.
Speaker Change #100: Some sub capex right on sugar and ethanol and also the rice business. So I was wondering.
Speaker Change #100: What could we expect backs right in terms of Capex and potential.
Speaker Change #100: Investments.
Speaker Change #101: If there is any thank you.
Speaker Change #101: Okay.
Speaker Change #101: Sure.
Mariano Bosch: Sure, thank you Isabella. On your first question regarding rice prices, I think it is important to understand the international general rice price and our particular increase in terms of rice prices. As we've been talking about before, we have this model where we are developing the genetics to produce at the farms and then process at the mills and then sell it to our specific clients, where we are developing this whole chain, attending to the needs of our specific clients.
Speaker Change #101: Yeah.
Speaker Change #102: On your first question regarding rice prices.
Speaker Change #102: I think it is important to understanding the match on either general rice prices on our parts equal or increase in terms of rice prices as we've been talking before we have the small and where we are.
Speaker Change #103: The Asian antiques to produce at the farm and then process had their means and then sell it to our specific client where we are developing this whole chain attending to the needs of our specific client that is important to understand that there is a portion of that increase in prices that east Bay.
Mariano Bosch: That is important to understand that there is a portion of that increase in prices that is specific to the increase in quality. We call it quality, but it's selling for the right price to the guy that is asking wherever in the world we are selling this rice. So that is a part of the answer or the increase in prices. There is another part of the increase in price that is very important in this quarter, that is the ability to sell in the domestic market and in the export market.
Speaker Change #104: <unk> floor.
Speaker Change #104: <unk> seen we call it quality by selling the right price to the value that east asking wherever in the world. We are setting the right. So that is a part of the neon.
Speaker Change #104: The answer or the increase in prices that is another 5% of the increasing breadth in prices are very important in this quarter that really need to sell in the domestic market and the export market. So.
Mariano Bosch: So as there was a lack of rice in the region, we were able to capture a benefit in the domestic prices in terms of those prices. And going forward, we continue to implement this strategy, and we are working every time more with this strategy. And I think it was very important to develop this strategy, what we did last year in increasing or two years ago when increasing and buying these Viterra assets in increasing Uruguay and consolidating our whole footprint in Argentina and Uruguay.
Speaker Change #105: I will say that golf right in that region, we were able to capture benefits in the domestic prices in terms of the of those share prices.
Speaker Change #105: And going forward, we continue to see the strategy and we are working every time more with Easter This year and I think it was very important to develop the strategy. What we did last year in increasing our three year slowly increasing on buying the same.
Speaker Change #106: Asset <unk>.
Speaker Change #106: In Uruguay, and consolidate our whole footprint in Argentina and Uruguay.
Mariano Bosch: To continue absolutely in line with, Furthermore, the global supply of rice in the region is lower than the average and probably within the lowest of the last years in terms of the total production of South America. And this total production has been affected by, in general terms, lower yields than the average because the planting was late and then at the harvesting time it was too rainy, so that happened to the overall area.
To continue.
In line with <unk> strategy.
Speaker Change #107: Furthermore, the low blood sugar <unk> of that region is being lower than the average and probably within the law with the last year in terms of the total production of South America and these total production has been affected by in general dentists.
Speaker Change #108: At lower yields than the average because of the planting was say late and then how do I think time it was too rainy. So that's happened to the overall area.
Mariano Bosch: And on top of that, we had this sad situation in Rio Grande do Sul that is also, Rio Grande do Sul is a very important state in terms of the total supply of rice for the region, so we still don't know how much this will affect the situation, but there is, of course, an effect on this lack of supply. So that's the overall concept for the rice business. I don't know if you want to make any clarification. So, going to your second question. And I was going to say that it was clear.
Speaker Change #109: On top of that we had D C sad situation in Rio Grande do Sul that is also.
Speaker Change #109: A very important state in terms of they thought that supplier for ice for the region.
Speaker Change #109: So we still don't know how much this will effect, but there is some of course.
Speaker Change #109: Effect on lease a lack of supply so that's the overall concept for that right.
Speaker Change #110: I don't know if you want to make any clarification.
Speaker Change #111: So going to your second question.
Speaker Change #111: Tony.
Tony: No no I was going to say that it was clear thank you.
Mariano Bosch: Okay, so going to the second part of your question and regarding capital allocation and CAPEX, as Emilio explained pretty well in his last two slides of the presentation, we are complying with our distribution policy; we are being very consistent there. And, as you can see, we are well advanced in our buyback program. And that has been the case because we saw an opportunity for buying back shares and the returns we are obtaining there, and we may see that opportunity to continue to be there. So, we'll see, but there is a huge potential for increasing there. The policy talks about the minimum and doesn't talk about how much we can do.
Okay. So volumes to the to the second part of your question on regarding capital allocation on Capex as Emilio explained briefly wording is flat too.
Speaker Change #113: A slide presentation.
Speaker Change #114: We are compliant with out what are the original policy, we're being very consistent there and as you can see we are well advanced now what a buyback program.
Speaker Change #115: And that has been the case because we saw.
Speaker Change #116: And opportunity on buying back shares.
Speaker Change #117: Turning there.
Speaker Change #117: We may see that opportunity to continue to lead the ASO would see but that is a huge potential for increasing their auto policy. He talks about their minimum doesn't talk about how much we can do.
Speaker Change #117: So that is one indication.
Mariano Bosch: So, that is one indication. And on the other part of the question regarding CAPEX, we are seeing a very good opportunity in our own sugar, ethanol, and energy business. And as Renato has been explaining so many times, the competitive advantages that we have there in the cluster that we are seeing today in how we've been harvesting during this inter-harvest period, we continue to grow there. And we continue to see this growth path that we are on.
Speaker Change #117: In the other.
Speaker Change #118: Part of the question regarding Capex.
Speaker Change #118: We are seeing a very good opportunity now with all our sugar ethanol and energy business.
Speaker Change #119: Asking explaining so many times stay competitive advantages that we have they are in the class that we are seeing today on how we'd be how do I think during this.
Speaker Change #119: Is that kind of a speedy.
Speaker Change #119: We continue to grow there and we continue to see these say a growth path that we are going on today, particularly you can see in the report that we've been planting.
Mariano Bosch: And today, particularly, you can see in the report that we've been planting more cane at the right moment, that is, in this first quarter. So, we are happy with what we've been investing there. And that can continue to happen, consolidating the full planting of what we are doing. And on top of that, this law of fuel for the future that Brazil has just passed, or sorry, it's still to be passed in the Senate, but it has already been passed in the lower house.
Speaker Change #120: More again in the right moment that D C.
Speaker Change #121: In D C. In the first quarter. So we are happy with what we've been investing there and continue to happen consolidating therefore plantation of what we are doing.
Speaker Change #122: And on top of that.
Speaker Change #122: This low fuel of the future Thats David Hatfield.
Speaker Change #122: Bye.
Speaker Change #123: Or sorry, it's still to be passing the Senate has already been passed and narrower in the lower.
Mariano Bosch: I think it's very much aligned with what we are doing there in Matarazzo Azul. That gives us a lot of enthusiasm for the long-term view of what we are building there and how efficient we are being there, totally aligned with Brazil's policy as a very long-term trend. So that's why you can see the CAPEX in Suanesa continue to be there.
Speaker Change #122: House.
Speaker Change #124: I think it's very much aligned with what we are doing there in methode also shows that gives us a lot of enthusiastic on the long term view of what we are building there and how efficient we are being there and totally aligned with Brazil policy I say very long.
Speaker Change #125: So that's why you can see those capex ensure that he'll continue to lead there.
Speaker Change #126: And then particularly in the rice business the social has been a.
Mariano Bosch: And then, particularly in the rice business, this also has been a very good investment what we did two years ago with this Eviterra opportunity that we were talking about, and now that is having small increases in terms of production, that is a key as when sugarcane we talk about sugar in the sugar business, we talk about sugarcane in the integrated business, and the most important portion is the total production of rice.
Speaker Change #127: They will be based on what we need to yes, Hello on these savings.
Speaker Change #128: A opportunity that we were talking and now that he's having.
Speaker Change #128: Small increases in terms of production that you think EES, we ensure again, we talk about the initial.
Speaker Change #129: In the short NFL business, we felt that all true again in the rise in data.
Speaker Change #130: The most important portion is the total production of rice, producing rice is something important for us.
Mariano Bosch: So producing rice is something important for us, and we are doing some growth there in terms of the total production of rice. So that is a CAPEX that we continue to see in this consolidation. And again, small synergetic projects in the whole chain of the rice business, from genetics till the final consumer, we always find small projects to continue improving there. Then the whole daily system and the processing, which is doing pretty well, and this opportunity domestic market and some benefits that Argentina is having today in this particular business.
Speaker Change #131: We are doing some growth there in terms of the data collection off right. So that is the capex that we've continued to see on the consolidation.
Speaker Change #132: Again smaller CNET as yet the projects in the whole chain of their rice <unk> genetics.
Speaker Change #132: The final consumer that we always find a small projects to continue improving there.
Speaker Change #132: Then.
Speaker Change #132: Right.
Speaker Change #132: The whole <unk> system, and the processing that we're doing pretty well and this opportunity the domestic market.
Speaker Change #133: Benefits that that Andy nice say, having today in this particular business. All stated we can also see some improvement on small projects that continue to happen and continue to increase efficiency.
Mariano Bosch: We can also see some improvements and small projects that continue to happen and continue to increase efficiency. All of them with very attractive returns, and when I talk about very attractive returns, I'm talking about above 20%, and levered IRR is what we are getting on all these projects. So that's a quick summary of how we are seeing this total CAPEX and capital allocation in general.
Speaker Change #134: All of them with very attractive returns on when I tell them, all very attractive return Seinfeld thinking about that.
Speaker Change #135: 20% Unlevered IRR is what we are getting they are in all of these projects. So that's it.
Murray: Murray on how we are seeing this.
Murray: Diluted GAAP based on.
Speaker Change #137: Capital allocation and yet.
Speaker Change #137: Okay.
Speaker Change #138: Well, thanks for the detail.
Isabella Simonato: Well, thanks for the detailed explanation. Thank you.
Speaker Change #139: Explanation. Thank you.
Speaker Change #140: Once again, if you have a question. Please bedded down in the Q&A section or a click on raise hand for audio questions.
Operator: Once again, if you have a question, please write it down in the Q&A section or click on raise your hand for audio questions. Our next question comes from Larissa Perez with Ita BBA.
Our next question comes from Lydia <unk> with <unk>.
BBA.
Lydia <unk>: Good morning, everybody and I mean, you cannot do in Victoria and great. Thank you for taking my questions I actually have two follow ups. The first one would be for cannot though and it's a follow up on <unk> question. I was just wondering it was mentioning that the company expects to increase.
Larissa Pérez: Good morning, Mariano, Emilio, Renato, Victoria, Ingrid. Thank you for taking my questions. I actually have two follow-ups. The first one is for Renato, and it's a follow-up to Enrique's question. I was just wondering, you were mentioning that the company expects to increase sugarcane crushings this year, and you were just explaining how this could have a material impact on unitary costs given the fixed cost dilution effect. So I was wondering if you could please give us some color on the size of this increase in crushing expected for this harvest and or the drop in unit costs expected for this harvest. That would be my first question for Renato. And my second question is for Mariano, and it's actually a follow-up to Iso's question.
Larissa Pérez: You just mentioned that you have the policy to distribute at least 40% of your adjusted free cash flow from operations. I was just wondering, under which circumstances would the company consider increasing distribution even further? Because, as you said, 40% is just the minimum. So I was wondering, what could make that code distribute even more than 40%? Those would be my two questions.
Larissa Pérez: Thank you so much.
Speaker Change #142: Sugarcane crushing this year and you were just explaining how this could have a material impact on unitary cost given the fixed cost dilution effect. So I was wondering if you could please give us some color on the size of this increase in crushing expected for this harvest.
Speaker Change #143: In or are in the drop in unit costs expected for this harvest that would be my first question for <unk> and.
Speaker Change #144: And my second question is for money I know and it's actually a follow up on <unk> question are you just mentioned that you have the policy to distribute at least 40% off your adjusted free cash flow from operations I was just wondering under which circumstances would the company consider increasing distribution even further because as you.
Speaker Change #145: Said, 40% is just the minimum so I was wondering what could make that could distribute even more than 40% as it would be my two questions. Thank you so much.
Speaker Change #145: Yes.
Speaker Change #146: Thank you Larry for your question.
Mariano Bosch: Thank you, Larissa, for your question. I will ask Renato to go on with more details on this crash, and then I will take the other one.
Speaker Change #147: I will ask Renato to low and moderate based on the crushing and then I will take the other one.
Renato Junqueira: Thank you for your question. So, as it was mentioned, we have been investing in our sugarcane fields and growing our sugarcane fields. So, that's the reason we had a record crush in the first quarter. We initially thought that we were going to have a higher yield this year than last year, but since the weather is a bit drier now, we think the yields are going to be quite in line with the yields that we had last year. But due to the increase in area, we think that we are going to crush more cane than last year. I would say around 5%. The crush is going to be 5% higher than last year.
I used to think for aggression.
Speaker Change #148: As it was mentioned we have been investing.
Speaker Change #148: Our sugarcane fields growing out our sugarcane fields. So thats the reason we have.
Speaker Change #148: Our record corrosion in the first quarter.
Speaker Change #149: We initially felt that we're going to have a yield higher this year than last year, but since the weather is a bit drier now we think the yields are going to be.
Speaker Change #150: Quite in line with the yields that we had last year, but due to the increase.
Speaker Change #151: In the area, we think that we are going through true crush Mark Kingdon last year.
Speaker Change #152: See our own 5% of course is going to be 5% higher than last year.
Speaker Change #152: Of course, it is going to help our costs. So we think that we have potential true should decrease our cost between five and 10% of <unk>.
Renato Junqueira: And, of course, it is going to help our costs. So, we think that we have the potential to decrease our costs between 5% and 10% as a consequence of the volume because of dilution. And also because there maybe some gains in the price of sugarcane, but concern is a little bit down. Even the price of alternative crops in the region is down. So, maybe leasing rates are going to be lower. So, we think that 5% to 10% decrease is appropriate.
Speaker Change #152: <unk> of the volume because of the dilution and also because there are some some.
Speaker Change #152: Maybe some gains.
Speaker Change #153: In pace of sugarcane Consequently.
Speaker Change #154: We're a bit down.
Speaker Change #154: Even price of offer alternative crops in the region are down so maybe leasing rates is going to be lower so we think thats, a 5% to 10% decrease.
Speaker Change #155: Thank you Vanessa.
Renato Junqueira: Renato, Larissa, and to be more specific about what we've been talking about capital allocation and you mentioned under what circumstances we can increase the distribution policy. You can see that in today's circumstances, if we continue to do the same that we've been doing, we would, of course, surpass the distribution policy and distribute more than what the policy requires. That is a very quick answer.
Speaker Change #155: Ladies.
Speaker Change #156: And to be more specific on what we've been talking about the capital allocation and you mentioned that are out there.
Speaker Change #156: Circumstances.
In.
Speaker Change #157: We can increase the distribution policy.
Speaker Change #158: You can see that in today's circumstances. If we continue to do the same that we've been doing we would of course serve bus the distribution policy on this.
Speaker Change #158: Viewed through by much more than what we did.
Mariano Bosch: But we still need to go the full year ahead. The year has unknown things about weather and prices, so we still don't know what our EVDA is going to be this year. So, of course, we also take that into account and how we are projecting our annual EVDA, which today we are projecting, as I mentioned at the beginning, very much in line with what we had last year. And we are also following very closely all our investment projects.
Speaker Change #158: And what.
Speaker Change #159: The policy requires that Easter have any concept, but we still need to load the full year.
Speaker Change #159: Okay.
Speaker Change #160: The year to pass a unknown things that on weather.
Speaker Change #161: So we still don't know what the what EBITDA is going to be this year. So of course, we also take into account that in how we are predicting what annual EBITDA that today, we are projecting as I mentioned at the beginning of very much in line with what we had last year.
Speaker Change #160: Sure.
Speaker Change #162: And we are also following very closely all our investment projects, we have room for both of them on the list that <unk> seen today, yes, we have been decreasing in the last year's level of depth that we have.
Mariano Bosch: We have room for both of them, and the depth levels that you've seen today, and as we've been decreasing in recent years, the level of depth that we have is beyond, so we still have room for doing both of them, but that's something that we make decisions about as we go through the year.
We are beyond so we still have room for doing both of them.
Speaker Change #162: That's something that we make decisions as we go through the year.
Speaker Change #163: That's super clear. Thank you henna answer thank you Mariano.
Larissa Pérez: That's super clear. Thank you, Renato. Thank you, Mariano.
Speaker Change #164: Once again, if you have a question please vetted down into Q&A section or a click on race <unk> for audio questions.
Operator: Once again, if you have a question, please write it down in the Q&A section or click on raise your hand for audio questions. Our next question comes from Julia Rizzo with Morgan Stanley.
Judah <unk>: Our next question comes from Judah <unk> with Morgan Stanley.
Speaker Change #166: Hi, Hello, everyone. Thank you for getting my question at.
Julia Rizzo: Hi, hello, everyone, thank you for getting my question. Renato, I would love if you could share your view.
Judah <unk>: And I would love if you could share with you.
Julia Rizzo: It's now that sugar prices have gone down, and the discount from ethanol to sugar has narrowed significantly. At what point do you decide to switch? It's no longer more interesting for you to stay at max sugar and start to switch in your production to produce ethanol instead of sugar. And if that changes your outlook, your scenario for or expectations for higher ethanol prices, likely in the second half.
Speaker Change #167: Now that sugar prices went down and discounts.
Judah <unk>: From ethanol to sugar have narrowed significantly that's what point it's.
Judah <unk>: You've decided to switch no longer more interesting are you just stay Max sugar and such a switching your production to produce ethanol instead of sugar.
Hum.
Speaker Change #168: And if that changed also your outlook your scenario for <unk>.
Speaker Change #169: We're expecting a higher ethanol prices likely.
Speaker Change #169: Second half of the year.
Speaker Change #169: Okay.
Renato Junqueira: Hi Julia. Thank you for your question.
Speaker Change #170: Hi, Judah Thanks for question.
Judah: I mentioned, we are optimistic about the ethanol perspective in the short term.
Renato Junqueira: As I mentioned, we are optimistic about the ethanol perspective in the short term, especially because of the supply that is lower, as was mentioned. However, the demand is very, very high. So today, in Mato Grosso do Sul, our ethanol equivalent, or hydroethanol equivalent, is $0.17 per pound. So we are still a bit below sugar parity. But we think the scenario for ethanol is going to keep improving, and we are going to reach the $0.18, $0.19 per pound price at some point in the future.
Judah: Especially because of the.
Speaker Change #172: <unk> supplied that Theres lower as it was mentioned the demand is very very high.
Speaker Change #173: So today in Mato Grosso suit or it doesn't.
Speaker Change #174: We will anhydrous ethanol equivalent is 17 cents per pound. So we are still.
Speaker Change #174: Below.
Speaker Change #174: <unk> borrowers, but we think we can.
Speaker Change #174: The scenario, if it's not always going to keep improving.
Speaker Change #174: <unk> reached the 18 19 cents per pound.
Speaker Change #175: At some point in the future and then we do.
Speaker Change #176: Change the mix.
Renato Junqueira: And then we will change the mix to produce as much ethanol as possible in Mato Grosso do Sul. So this 57% that we have hedged in sugar is considering a max sugar scenario. So if you consider that we're going to change the mix, this 57% is more than that. So I think that's going to be the case in the near future.
Speaker Change #176: To produce as much as at the lowest possible multiples as sue. So this 57% that we have hedges in sugar is considering a much sugar scenario.
Speaker Change #177: So if you consider that we are going through change.
Speaker Change #178: This 3% to 7% is more than that so I think that's.
Speaker Change #179: That's going to be the case in the near future.
Speaker Change #180: But when do you think the industry will start to rethink the next sugar.
Julia Rizzo: But when do you think the industry will start to rethink the max sugar? What is the minimum discount for ethanol?
Speaker Change #181: One is what is the minimum discounts for ethanol.
Speaker Change #181: Yeah.
Renato Junqueira: Since you are in Mato Grosso do Sul and we have the ECMS tax rebate, we are the first ones to switch mix, so the rest of the industry has 200 points of difference. So today we are at 17, and the rest of the industry is close to 15.
Speaker Change #182: Since you are in Mato Grosso, Sue you and we have the same yes.
Speaker Change #183: <unk> rebates.
Speaker Change #184: We are the first ones to true switch mix.
Speaker Change #184: So the rest of the industry has 200 points of difference. So today, we are at 17, the rest of the industries closed through 215.
Speaker Change #185: Okay. Thank you very much I appreciate that.
Julia Rizzo: Okay. Thank you very much. I appreciate that.
Speaker Change #186: 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.
Mariano Bosch: 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 Change #187: Thank you everyone for participating on our call and hope to see you in upcoming meetings.
Mariano Bosch: Thank you everyone for participating in our call and I hope to see you at our upcoming meetings.
Speaker Change #188: Thank you. This does concludes today's presentation you may disconnect at this time and have a nice day.
Operator: Thank you. This does conclude today's presentation. You may disconnect at this time. Have a nice day.
Speaker Change #188: Okay.
Speaker Change #188: [music].
Speaker Change #188: Okay.
Speaker Change #188: [music] Goodbye.