Q2 2024 Adecoagro SA Earnings Call
[music].
Good morning, ladies and gentlemen, and thank you for waiting at this time, we would like to welcome everyone to the QUADRA second 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 a Decoagro Second Quarter 2024 Results Conference call.
Today with US we have Mr. Mariano Bosch CEO Mr. Immediate yeah of course, she has for Mr. Hanako, even keyed up at Ada sugar ethanol and energy VP and Mrs. Victoria, <unk> Investor Relations Officer.
Operator: Today with us, we have Mr. Mariano Bosch, CEO, Mr. Emilio Gnecco, CFO, Mr. Renato Junqueira, Peretta, Sugar, Ethano, 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 list in only mode during the company's presentation. After the company's remarks are completed, there will be a question and answer section.
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 would be a question and answer section at that time for instructions will be given before proceeding let me mention that forward looking statements are based on the beliefs and assumptions of a big Quad with management and on information currently available to the company involve risks uncertainties and assumptions because.
Operator: At that time, further instructions will be given. Before proceeding, let me mention that four-looking statements are based on the beliefs and assumptions of a Decoagro's management and uninformation 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 a Decoagro and could cause results to differ materially from those expressed in such four-looking statements.
Speaker Change: They relate to future events, and therefore depend on circumstances that may or may not occur in the future invest.
Speaker Change: Investors should understand that general economic conditions industry conditions and other operating factors could also affect the future results of the Nicaragua 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.
Mariano Bosch: Now, I'll turn the conference over to Mr. Mariano Bosch, CEO, Mr. Bosch, you may begin your conference. Good morning and thank you for joining a Decoagro's 2024 Second Quarter Research Conference. Before going into the highlights of each business, I would like to make some comments on our shareholders' distribution. As of this date, we have exceeding $16 million our minimum distribution policy. So far, we invested $51.4 million to repurchase $5.2 million shares, equal to $4.9% of the company's equity, and also committed $35 million in cash dividends, with the first installment being already paid.
Speaker Change: Yeah.
Mariano Bosch: Good morning, Thank you for joining other Glasgow lending 24 second quarter results conference.
Mariano Bosch: Before going into it highlights of each business.
Speaker Change: I would like to make some goldman on a watershed coldest distribution.
Speaker Change: As of this date, we have X gene.
Speaker Change: $16 million, our minimum distribution policy.
Speaker Change: So far we invested $51.4 million to rebuild a case five bond due medial shares.
Speaker Change: Equal to four 9% of the company it would be.
Speaker Change: And also go meet at $35 million in cash dividends.
Speaker Change: The first installment being already paid.
Speaker Change: Furthermore, our board of directors.
Mariano Bosch: Furthermore, our Board of Directors approved the renewal of our buyback program which enabled last to repurchase up to an additional 5% of the company's equity up to year-end. Consequently, we expect to continue allocating cash in share repurchases during the second half of the year. This clearly shows our commitment towards sharing results with our shareholders, while we continue investing in growth projects with attractive Ayarras and maintaining our debt levels. Now, moving on the results, consolidated at just the VTA during the quarter reached $140 million, 3% higher year-over-year, whereas year-to-date amounted to $230 million, that is 2% higher than last year.
Speaker Change: Through the renew one of our buyback program, which he named left to reboot chase up to an additional 5% of the company's equity up to year end.
Speaker Change: Consequently, we expect to continue allocating gosh E Seattle reported tissues during the second half of the year.
Speaker Change: This clearly shows our commitment, though us sharing results with our shareholders.
Speaker Change: While we continue investing in growth projects with attractive idea, that's a Monday evening our debt levels.
Speaker Change: Now moving onto the results consolidated adjusted EBITDA during the quarter reached $140 million, 3% higher year over year.
Speaker Change: Whereas year to date amounted to $230 million that is 2% higher than last year.
Speaker Change: Starting with our sugar ethanol and energy business the investments done in expansion blunting are paying off.
Mariano Bosch: Starting with our sugar ethanol and energy business, the investments done in expansion planting are paying off. Given the good Cain availability, we have crushed more, produced more while our unitary costs remained unchanged. Despite the lower-than-average rainfall received, having ample Cain availability has become a competitive advantage for us. Although sugar continues to be the best product, ethanol prices are also recovering. Still so, the lower-than-expected yields and the year-to-year decreasing selling prices were the main drivers towards the decline in adjusted EVDH generation for these risks.
Speaker Change: Given the route gainer reliability, we have crushed more produce more while our unitary costs remain unchanged.
Speaker Change: Despite the lower than average rainfall received having A&P gain availability has become a competitive advantage for us.
Speaker Change: Although sure continues to be the best brought up ethanol prices are also recovery.
Speaker Change: Steve So the lower the unexpected use and a year over year decrease in selling prices were the main drivers to watch the decline in adjusted EBITDA generation for lease risks.
Speaker Change: In our farming business.
Mariano Bosch: In our farming business, adjust the EVDH generation almost doubled during the first semester, versus prior year. This was possible thanks to our decision to expand our right footprint into Uruguay and its consolidation to our already vertical integrated operation. This, in turn, has placed us as a relevant player in the region, always with the focus of being the low cost-produced. In crofts, normal weather conditions, as they're experiencing the worst drought in Argentina's history, are the main explanations towards the better results, even though these are lower-than-expectations due to decline in international prices.
Speaker Change: Adjusted EBITDA generation almost doubled during the first semester versus prior year.
Speaker Change: This was possible thanks to lower the decision to expand our rice footprint into you light on.
Speaker Change: And its consolidation to our already but he got integrated operation lease.
Speaker Change: In turn.
Speaker Change: Hey, Steph I said really one player in the region.
Speaker Change: Always with a focus on being the low cost producer.
Speaker Change: In crops normal weather conditions after experiencing the worst or out in Argentina skew story out of the main explanation Star Wars, the better results.
Speaker Change: Even though these are lower than expectations due to the decline in prices.
Speaker Change: Lastly, Navy, we continued to consolidate our position in both the domestic and export market with the development of our high value added product leading to better results each quarter.
Mariano Bosch: Lastly, in the 80, we continue to consolidate our position in both the domestic and export market with the development of our high-value added products leading to better results each quarter. Before passing the word to Emilio, a brief update on ESG in mid-May, we published our 2023 Integrated Report in which we reinforced our commitment towards reducing our carbon intensity by 2030. Moreover, an in-depth description of our sustainable production model is also available together with our ESG strategy and practices. To conclude, I would like to express my gratitude to all our people across adeco agro for their hard work.
Speaker Change: Before passing the word to Emilio a brief update on ESG.
Speaker Change: In mid May we published our 2023 integrated report in which we reinforced our commitment the worst reducing our carbon intensity by 2030.
Speaker Change: Moreover.
Speaker Change: In that the accretion of our sustainable virtual model is also up eight.
Speaker Change: Together with our ESG strategy and practices.
Speaker Change: To conclude.
Speaker Change: I would like to express my gratitude to all our people across other Guangdong for their hard work I am convinced that we have the right people and that we are following the right strategy to generate good returns and value for our existing shareholders.
Mariano Bosch: I am convinced that we have the right people and that we are following the right strategy to generate good returns and value for our existing shareholders.
Now I will let Emilio walk you through the numbers of the quarter.
Emilio Gnecco: Now, I will let Emilio walk you through the numbers of the quarter.
Emilio: Thank you Mariano good morning, everyone.
Emilio Gnecco: Thank you, Mariano. Good morning, everyone. Let's start on page 4 with a summary of our consolidated financial results. Gross sales totaled $398 million during the second quarter, while on an accumulated basis, it reached $651 million. Although volume sold for most of our products represented a significant year or a year increase, results were partially upset by lower prices for some of the commodities that we put. That being said, at just the VTA reached $140 million during the quarter, whereas here today, it stood at $230 million.
Emilio: Let's start on page four with a summary of our consolidated financial results.
Emilio: Gross sales totaled $398 million during the second quarter, while on an accumulated basis it reached.
Emilio: $651 million.
Speaker Change: Although volumes sold for most of our perks represented a significant year over year increase results were partially offset by lower prices for some of the commodities that we produce.
Speaker Change: That being said, our adjusted EBITDA reached $140 million during the quarter, whereas year to date it stood at $230 million.
Speaker Change: Higher results during the quarter were driven by the sale of let's say quality of farm booked.
Emilio Gnecco: Higher results during the quarter were driven by the sale of Lapequaria Farm, booked within our crop segment, as well as to an outperformance of our daily segment. This in turn partially offset the lower results in our rice and sugar ethanol and energy operations.
Speaker Change: Within our crop segment as well as two one outperformance of our daily segment.
Speaker Change: This in turn.
Speaker Change: It's really opposite the lower results in our rice and sugar ethanol and energy operations.
Now please turn to slide five.
Emilio Gnecco: Now please turn to slide five. Regarding our production figures in the bottom right chart, we can see that crushing volumes in our sugar ethanol and energy business were up 21% versus the same period of last year. Higher crushing translates into higher volume and better dilution of fixed costs. In our farming division, the increase in the production of grains was explained by a significant recovery in yields on normal weather conditions during the development of our crops, as well as to higher planted area.
Speaker Change: Regarding our production figures in the bottom right chart.
Speaker Change: We can see that crushing volumes in our sugar ethanol and energy business were up 21% versus the same period of last year.
Speaker Change: Ah you're aggression translates into higher volume and better dilution of fixed costs.
Speaker Change: In our pharma division.
Speaker Change: Increasing the production of Greens was explained by a significant recovery in yields on normal weather conditions during the development of our crops.
Speaker Change: Well as to higher planted area.
Speaker Change: Let's move to slide seven with the operational performance of sugar ethanol and energy business.
Emilio Gnecco: Let's move to slide seven with the operational performance of sugar, ethanol, and energy business. Crushing volumes amounted to 4 million tons during the quarter and 6.1 million tons on an accumulated basis. The increasing crushing was mainly driven by greater sugar can availability thanks to our expansion planting activities and higher effective milling days due to the dry weather experience here today. Regarding productivity, yield as per hectare remaining in line versus the prior year despite presenting a slight decrease in yields.
Crushing volumes amounted to.
Speaker Change: 4 million tons during the quarter and $6 1 million tons on an accumulated basis.
Speaker Change: The increase in crushing was mainly driven by greater sugarcane availability, thanks to our expansion planting and higher effective milling days.
Speaker Change: Due to the dry weather experience year to date.
Speaker Change: Regarding productivity.
Speaker Change: Per Hector remain in line versus the prior year, despite presenting a slight decrease in the yields.
Speaker Change: In terms of mix.
Emilio Gnecco: In terms of mix, we continued to maximize sugar production given its attractive premium over ethanol. Within our ethanol production, we were maximizing the production of hydrogen ethanol as the month for this type of ethanol has been significantly increasing and gaining market share, offering the butter magic. If required, we can dehydrate our ethanol at any time.
Speaker Change: We continue to maximize sugar production given its attractive premium over ethanol.
Speaker Change: Within our ethanol production, we were maximizing the production of hydrous ethanol.
Speaker Change: Demand for this type of ethanol has been significantly increasing and gaining market share offering devoted margin if required we can dehydrate our ethanol at any time.
Speaker Change: Let's please turn to slide eight where we displaced sales conducted throughout the periods.
Emilio Gnecco: Let's please turn to slide eight, but we describe sales conducted throughout the periods. Net sales amounted to $172 million during the quarter, while year to date reached $275 million. As you can see on the top left chart, the decrease in the selling price of sugar was mostly due to lower global prices driven by a stronger base in milling in Brazil during the first half of the year. In the case of ethanol, selling prices continued below the previous year on greater supply, but instead this volume sold throughout the quarter was timely done to profit from spikes in prices.
Speaker Change: Net sales amounted to $172 million during the quarter.
Speaker Change: While the year to date reached $275 million.
Speaker Change: As you can see on the top left chart. The decrease in the selling price of sugar was mostly due to lower global prices driven by a stronger basis milling in Brazil during the first half of the year.
In the case of ethanol selling prices continued below the previous year on greater supply having said this <unk>.
Emilio Gnecco: Moreover, we continue holding to our ethanol inventory to profit from better prices in the future, this represent 84% of our year-to-date ethanol products. Moving on to energy, we focused on complying with our long-term energy contracts, however, lower prices and a weaker Brazilian Riai drove the client in sales. Regarding carbon credits, we have already sold over 240,000 suppliers at an average price of $17 per supplier.
Speaker Change: Volumes sold throughout the quarter was suddenly done to profit from spikes in prices.
Speaker Change: Moreover, we continue holding towards ethanol inventories to profit from better prices in the future. This represent 84% of our year to date ethanol production.
Speaker Change: Moving on to energy, we focused on complying with our long term energy contracts, however, lower prices and a weaker Brazilian real I drove the decline in sales.
Speaker Change: Regarding carbon credits, we have already sold over 240000 survives at an average price of $17 per survive.
Speaker Change: Please go to page nine we would like 2% the financial performance of the sugar ethanol and energy business.
Emilio Gnecco: Please go to page 9 where we would like to present the financial performance of the sugar, ethanol, and energy business. Adjust the VDA amounted to $107 million during the second quarter and $159 million for the first half of the year. Despite presenting year-over-year gains in the market of our commodity hedge position, results were offset by a year-over-year losses in the market of our biological assets on lower expected yields coupled with declining net sales.
Speaker Change: Adjusted EBITDA amounted to $107 million during the second quarter and $159 million for the first half of the year.
Speaker Change: Despite presenting year over year of gains in the mark to market of our commodity hedge position results were offset a year over year losses in the mark to market of our biological assets and lower expected yields coupled with a declining net savings.
Speaker Change: Finally to conclude with the sugar ethanol and energy business. Please turn to slide 10, we would like to briefly talk about the current outlook.
Emilio Gnecco: Finally, to conclude with the sugar, ethanol, and energy business, listen to slide 10 where we would like to briefly talk about the current outlook. Assuming no more weather for the remaining six months of the year, we focused on increasing annual cash in volume versus 2023, given good harvest space and canna-velavidity. From a commercial point of view, the evolution of sugar prices will mostly depend on the sales-crushing volume for the rest of the year, as well as on its industrial flexibility to reach the total annual production expected by the market.
Speaker Change: Assuming normal weather for the remaining six months of the year, we focused on increasing that old crushing volume versus 2023, given good harvest space and kingdom of Levy.
Speaker Change: From a commercial point of view.
Speaker Change: The evolution of sugar prices will mostly depend on Brazil's crushing volume for the rest of the year as well as on its industrial flexibility to reach the total annual production expected by the market.
Speaker Change: We have approximately 30% of our expected 2020 for sugar production still unhedged.
Emilio Gnecco: We have approximately 30% of our expected 2024 sugar production still and has, while the balance was committed at an average price close to 23 cents per pound. In the case of ethanol, the man remains strong, given its attractive price versus gasoline, consequently absorbing new supply and supporting the recovering prices.
Speaker Change: While the balance was committed at an average price close to 23 cents per pound.
Speaker Change: In the case of ethanol demand remained strong given its attractive price versus gasoline, consequently, absorbing new supply and support the recovery in prices.
Speaker Change: We expect to sell our inventories over the following quarters as we believe ethanol prices have room to continue increasing due to the current low quality at the pump as well as to the sugar Max scenario in Brazil.
Emilio Gnecco: We expect to sell our inventories over the following quarters, as we believe ethanol prices are room to continue increasing due to the current low-quality at the pump, as well as to the sugar-max and adium Brazil.
Now we would like to move onto the farming business. Please go to slide 12.
Emilio Gnecco: Now we would like to move on to the farming business. Please go to slide 12. By the end of July, we have a set 98% of the total area and produced over 1 million tons of our crops are produced. The remaining hectares are expected to be fully harvested during the rest of this month. As anticipated, most of our crops presented a significant year-over-year increase in productivity, given the normal weather conditions experience, as opposed to last year, which was affected by La Niña weather events. In the case of late corn, our production in the northern region was negatively impacted by seed of plasma. Consequently, our average yield reached 5.2 tons per hectare below our initial expectations.
Speaker Change: By the end of July we have us at 98% of the total area and produced over 1 million tons of agriculture produce.
The remaining <unk> are expected to be fully harvested during the rest of this month.
Speaker Change: As anticipated most of our crops presented a significant year over year increase in productivity given the normal weather conditions experienced as opposed to last year, which was affected by lending weather events.
In the case of late corn production in the northern region was negatively impacted by CDO of plasma.
Speaker Change: Consequently, our average yield reached five two tons per hectare.
Speaker Change: Below our initial expectations.
Speaker Change: We are planning on reducing coronary during the 2024 25 season to lower our exposure and switch to other more suitable crops.
Emilio Gnecco: We are planning on reducing corn area during the 2020-24-25 season to lower our exposure and switch to other, more suitable crops. Moving on to rice, during this harvest season, we obtain an average yield of 6.1 tons per hectare. Eels were negatively impacted by the excessive rainfalls received by the end of the planting window, which led to a portion of our hectares being planted outside the optimal period. Moreover, this precipitation is continued throughout summertime, reducing yield protection.
Speaker Change: Moving on to rice.
Speaker Change: During this harvest season, we obtained an average <unk> of $6 one tons per Hector.
Speaker Change: Yields were negatively impacted by the excessive rainfall received by the end of the planting window, which led to a portion of our hector's being planted outside the optimal period.
Speaker Change: Moreover, this precipitations continued throughout summertime, reducing yield protection.
Speaker Change: However prices more than offset the reduction in production.
Emilio Gnecco: However, prices more than offset the reduction in production. In theory, the increase in total row meal production is explained by better calculator activity as we continue enhancing efficiencies in our feed stalls. At the industry level, we continue working on product development for the domestic and export market, offering higher value added products as well as commodity-sized products, and being present across different price tiers with our consumer product brands.
Speaker Change: In theory.
Speaker Change: The increase in total raw milk production is explained by better co productivity as we continue enhancing efficiencies in RPE cells.
Speaker Change: At the industry level, we continue working on product development for the domestic and export market offering higher value added products as well as commoditized products.
Speaker Change: And being present across different price tiers with our consumer product brands.
Speaker Change: To conclude we begun planting activities for our next campaign, starting with wheat another winter crops.
Emilio Gnecco: To conclude, we began planting activities for our next campaign, starting with wheat and other winter crops. The soil has recovered its moisture in every last to conduct our planting activities within the optimal window, and to expand our planting area to the northern region, which was not included in prior seasons.
Speaker Change: The Sol has recovered its moisture enable us to conduct our planting activities within the optimum window and to expand our planting area to the northern region, which was not included in prior seasons.
Speaker Change: On the following page.
Emilio Gnecco: On the following page, 13, we present the financial performance of our farming business. Adjust the VDA for the farming business totaled $38 million in the quarter, whereas here today, amounted to $82 million. Higher results here today are mainly explained by an outperformance in all three segments. Adjust the VDA for our crop segment amounted to $15 million, reflecting the sale of La Pequaria Farm, which was completed in April of 2024. On a year-to-date basis, Adjust the VDA was $20 million.
Speaker Change: The team will present, the financial performance of our farming business.
Speaker Change: Adjusted EBITDA for the farming business totaled $38 million during the quarter, whereas year to date amounted to $82 million higher.
Speaker Change: Higher results year to date are mainly explained by an outperformance in all three segments.
Speaker Change: Adjusted EBITDA for crops segment amounted to $15 million, reflecting the sale of Lubbock, what are firm, which was completed in April 2024.
Speaker Change: On a year to date basis, adjusted EBITDA was $20 million.
Speaker Change: The year over year growth was mainly explained by these pharmacy as well as to greater yields during the 2023 24 harvest campaign.
Emilio Gnecco: The year-to-year growth was mainly explained by this farm sale, as well as to greater yields during the 2023-2024 harvest campaign. Focusing solely on our crops to results, although we saw a significant year-to-year recovery in production, results were also negatively impacted by lower international prices for our main products, as well as to higher costs in U.S, dollar terms. Moving on to the right segment, the year-to-year declining adjusted the VDA during the quarter was mainly explained by lower sales.
Speaker Change: Focusing solely.
Speaker Change: On our crops results, although we saw significant year over year recovery and production results were also negatively impacted by lower international prices for our main products as well as to higher costs in U S dollar terms.
Speaker Change: Moving on to the Rice segment the year over year decline in adjusted EBITDA. During the quarter was mainly explained by lower sales coupled with higher costs in U S dollar terms.
Emilio Gnecco: However, on an accumulated basis, Adjust the VDA grew by over 50%, mostly explained by year-to-year gains reported in the market of our biological assets on higher prices. Lastly, Adjust the VDA in our daily segment totaled $11 million in the period, whereas here-to-date reached $18 million. Results were positively impacted by higher sales on higher prices, as we improved the mix of higher value added products and maximized the production of fuel milk for the domestic market.
Speaker Change: However, on an accumulated basis adjusted EBITDA grew by over 50%, mostly explained by year over year gains reported in the mark to market of our biological assets on higher prices.
Speaker Change: Lastly, adjusted EBITDA was every segment totaled $11 million during the period, whereas year to date reached $18 million results were positively impacted by higher sales on higher prices as we improve the mix of higher value added products and maximize the <unk>.
<unk> fuel milk for the domestic market.
Speaker Change: Let's now turn to page 15, where would like 2% our capital allocation strategy.
Emilio Gnecco: Let's now turn 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% of the gas generated during the previous year via a combination of gas dividends and share repurchase. As of today, we have already committed $86 million, $16 million more than our minimum distribution policy. From this amount, $35 million dividends were approved. The first installment, $17.5 million was paid in May representing approximately 17 cents per share, whereas the second installment shall be payable during November in an equal cash amount. In addition, we have already repurchased $51 million in shares under our buyback program, which represents approximately 4.9% of the company's equity. Going forward, we expect to continue with our share repurchase.
Speaker Change: According to our distribution policy, we are committed to a minimum distribution of 40%. The guest generated during the previous year via a combination of cash dividends and share repurchases.
Speaker Change: As of today, we have already committed $86 million $16 million more than our minimum distribution policy.
Speaker Change: From this amount.
Speaker Change: $35 million in dividends were approved.
Speaker Change: The first installment $17 $5 million was paid in may representing approximately <unk> 17 per share, whereas the second installment shall be payable during November in an equal cash alone.
Speaker Change: In addition, we have already repurchased $51 million in shares under our buyback program, which represents approximately four 9% of the company's equity.
Speaker Change: Going forward, we expect to continue with our share repurchases to.
Speaker Change: To do so our board of directors approved the renewal of our buyback program to repurchase up to an additional 5% of the company's equity until year end.
Emilio Gnecco: To do so, our board of directors approved the renewal of our buyback program to repurchase up to an additional 5% of the company's equity until the year end.
Speaker Change: Please turn to page 16 for a broader view of our debt position.
Emilio Gnecco: Please turn to page 16 for a broader view of our debt position. Net debt amounted to $632 million, making a 26% decrease compared to the same period of last year. This was explained by the financial strategy carried out in Argentina during the previous year, as well as the better results for operations, which translates into higher cash. As shown in our financial figures, the declining net debt was done without disattending our decision policy and growth projects.
Speaker Change: Net debt amounted to $632 million, making up 26% decrease compared to the same period of last year.
Speaker Change: This was explained by the financial strategy carried out in Argentina during the previous year.
Speaker Change: Well as to better results for operations, which translates into higher cash.
Speaker Change: As shown in our financial figures the declining net debt was done without this attending our distribution policy and growth projects.
Speaker Change: As of June 32024, our liquidity ratio reached two nine times showing the company's full capacity to repay short term debt with its cash balances, whereas our net leverage ratio.
Emilio Gnecco: As of June 30, 2020, 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 same period of the previous year.
Speaker Change: Was one three times zero six times lower compared to the same period of the previous year.
Speaker Change: Subsequent to the end of the quarter, we announced a cash tender offer for up to $100 million of our senior notes due in 2027.
Emilio Gnecco: Subsequent to the end of the quarter, we announced a cash tender offer for up to $100 million of our senior notes due in 2027.
Speaker Change: Out of which $83 $6 million were accepted by the early tender date.
Emilio Gnecco: Out of which, a $3.6 million were accepted by the early 10 of date. This is an example of our discipline and constant surge for liability management opportunities to better finance our operations at attractive rates, while continuing adding value to shareholders.
Speaker Change: This is an example of our discipline in constant search for liability management opportunities to bear to finance our operations at attractive rates, while continue adding value to shareholders.
Speaker Change: On the following slide will describe our Capex program.
Emilio Gnecco: On the following slide, we describe our CAPEX program. Expansion CAPEX represented $17 million during the quarter and $45 million on an outcome-related basis. In Brazil, we continue increasing our sugar cane plantation and investing in our biogas unit in Yvine Mamiro, where our biomass and production takes place. Now, from our business, we invest it on minor industrial improvements in our two-day processing facilities, as well as in new offices for our rights operations.
Speaker Change: Pension capex represented $17 million during the quarter and a 45 million on our accumulated basis.
Speaker Change: In Brazil, we continue increasing our sugarcane plantation and investing no biogas unit <unk> or our Biomethane production takes place.
Speaker Change: Now our pharma business, we invested on minor industrial improvement in our two day processing facilities as well as in new policies for our <unk> operations.
Speaker Change: Thank you very much for your time, we're now open to questions.
Emilio Gnecco: Thank you very much for your time. We're now open to Thank you.
Speaker Change: Thank you the floor is now open for questions. If you have a question. Please write it down into Q&A section alright, click on raise hand for audio questions. Please remember that your company's name should be visible for your question to be taken.
Operator: 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 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 that you pick up your headset to provide optimum sound quality. Please hold what we pull for questions.
Speaker Change: We do ask that when you pose your question that you pick up your headset to provide optimum sound quality. Please hold while we poll for questions.
Renato <unk>: Our first question comes from Renato <unk> with it that will be big.
Bruno Tomasetto: Our first question comes from Bruno Tomasetto with ITAO BBA. You can open your microphone. Thank you for taking my question.
Speaker Change: You can open your microphone.
Speaker Change: Thank you for taking my question. It's only one actually you guys have been carrying these higher level off.
Bruno Tomasetto: It's only one actually. You guys have been carrying this higher level of ethanol inventory as it's considered here. And this strategy to benefit from higher price in the future is a clear thing. But I would like to hear more about the expected time to deploy these volumes into the market. So just wondering if you guys could please share your most updated thoughts on the ethanol price curve perhaps from the perspective of parity to gasoline prices and the level that makes the company more comfortable to accelerate sales. Maybe the expected timing for parity reaching this level.
Speaker Change: All your inventory as discussed it here and the strategy to benefit from higher prices in the future is there a clear thing.
Speaker Change: I would like to hear more about the expected timing to deploy this volumes into the market.
Speaker Change: So just wondering if you guys could please share your most updated thoughts on the ethanol price curve, perhaps from the perspective of parity to gasoline prices and the lateral that makes the company more comfortable to whats alerting to accelerated sales.
Speaker Change: Maybe the expected timing for reaching this level that's.
Speaker Change: That's it from my side. Thank you.
Renato Junqueira: That's it from side. Thank you. Hi Bruno. Thank you for your question. I think that Renato can address your question in detail.
Speaker Change: Hi, Bruno Thank you for your question.
Speaker Change: I think Kevin talk on.
Speaker Change: Dress your question indeed.
Bruno: But in adult and Iberdrola and thank you for your question now we are.
Renato Junqueira: Renato and Hi Bruno, thank you for your question. We are positive regarding ethanol price. The high to demand has been very strong. Actually, 50% higher than the same period of last year. The money is reaching almost two billion liters of hydro per month and the pirate rates at the pump is still at 67% which benefits the construction of hydro ethanol. Also, the off season is expected to be much longer than last year.
Speaker Change: Auditor.
Speaker Change: Regarding ethanol price.
Speaker Change: The demand has been very strong.
Speaker Change: Actually <unk>.
Speaker Change: Percent higher than the same period of last year.
Speaker Change: Demand is reaching almost 2 billion liters of hydro's.
Speaker Change: Love.
Speaker Change: In the barge rates at the pump is <unk>, 67%, which benefits the constraint shut off offer hydro's.
Speaker Change: <unk>.
Speaker Change: Also the off season is expected to be much longer.
Speaker Change: And then last two year, so lower supplied during this period.
Renato Junqueira: So lower supply during this period. Sorry, if you take the hydro stock to use right now, it's one month lower than the same period of last year. So we think the only way to curb demand is through prices. So prices has to surpass the 7% parity rate that we think it's going to happen in the next month. It's difficult to predict exactly when, but in the next month, that's going to be the case.
Speaker Change: Sorry to disappoint you the hydro's historic shoes.
Speaker Change: Right now, it's one month lowered in the same period of last year.
Speaker Change: So we think the only way.
Speaker Change: To curb demand is through prices surprises pass through to surpass the 7% aspire too.
Speaker Change: <unk>.
Speaker Change: We think it's going to happen in the next months.
Difficult to predict exactly where air Bud.
Speaker Change: The next months, that's going to be I think this is going to be the case. So we will have an upside of our own 10% of the core and food prices remember that the core enterprising dollar terms.
Renato Junqueira: So you have an upside of around 10% of the current prices. Remember that the current pricing dollar terms are 12% higher than the same period of last year and 25% higher than the beginning of the year. Once again, if you have a question, please write it down in the Q&A section or click on raise hand for audio questions.
Our 12% higher than the same period of last year, and 25% higher than the beginning of the year.
Speaker Change: Guys. Thank you.
Speaker Change: Once again, if you have a question. Please write it down into Q&A section click on raise hand for audio questions.
Speaker Change: Our next question comes from Isabella <unk> with Bank of America.
Isabella Simonato: Our next question comes from Isabela Simonato with Bank of America. You can open your microphone. Thank you. Good morning, everyone. So I have a question also on sugar and ethanol, but more focused on sugar because I think there are several moving parts at this point and the price has been quite volatile. So I would like to hear more your thoughts on the sugar price outlook, at least for the remainder of the year, and in light of that and what can not to just add about ethanol, right?
Speaker Change: You can open your microphone.
Speaker Change: Thank you and good morning, everyone.
Speaker Change: So I have a question also on sugar and ethanol, but more focused on sugar because I think there are several moving parts at this point and the price has been quite volatile. So I would like to hear more of your thoughts on the sugar price outlook at least for the remainder of the year and in light of that and what not to just that.
Isabella Simonato: How should we think about the max towards the end of the season between sugar and ethanol? And my second question is on rice, right? We're definitely seeing rice prices at high levels, seasonally weaker in the last quarter, but I was wondering also if we if you remain optimistic about rice for the remainder of the season and if there's any outlook for 2025 as well. Thank you. Okay, thank you for your question, Isabella.
Speaker Change: <unk> about ethanol right, how should we think about the mix.
Speaker Change: Or is the end of the season.
Speaker Change: Between between Sugar and ethanol and my second question is on Rice right, we're definitely seeing price prices up high level seasonally weaker in the last quarter, but I was wondering also if we are.
Speaker Change: If you remain optimistic about price for the remainder of the season and if there is any outlook for <unk>.
Speaker Change: 2025 as well.
Speaker Change: Okay.
Speaker Change: Okay. Thank you for your question Isabela.
Renato <unk>: Let them Renato answer your question a follow up question on price yourself for sugar and mix. So Renato can you take that part of that question and then I would take the rice prices question.
Isabella Simonato: I will let Renato answer your question, the follow-up question on prices of sugar and mix.
Renato Junqueira: So Renato can you take that part of the question and then I will take the rice prices question. Thank you for the questions, Isabella. So we are we remain positive with sugar price for the for the short term. Take the low levels of word sugar stocks, very low that the level of stocks actually is one of the slowest in the in the last 10 years. Also the supply of sugar is very dependent on the Brazil crop and Brazil is facing a difficult year in terms of of weather.
Speaker Change: Good. Thank you for the question Isabella.
Renato <unk>: So we are we remain positive with sugar biased towards further short term.
Renato <unk>: I think the low levels of award sugar stocks bird load or the level of stocks actually is one of the lowest.
Speaker Change: And the last 10 years.
Years, but also the supply of sugar is very dependent on the Brazil.
Renato Junqueira: So the weather is very dry and there are there were like a cold front that hit some parts of Brazil with not helping the the yield situation. Also the mix is disappointing. Everyone was expecting a mix to reach 52% this year and it seems that it's not going to be possible. It should be far close to 50%. So we believe that we will have some opportunities to hedge our production. There are many production of this year and next year at higher prices.
Speaker Change: Claude crop.
Speaker Change: Zero is tracing.
Speaker Change: Difficult year in terms of weather for the others very dry and there were a lot of our code for all that he has some parts of Brazil not helping the.
Speaker Change: Situation.
Speaker Change: Also the mix is disappointing.
Speaker Change: Everyone was expecting to reach 52.
Speaker Change: This year and assume.
Speaker Change: That does not going to assume thats not going to be possible mix should be or close to 50%.
Speaker Change: So we believe that where you have some opportunities to hedge.
Speaker Change: All of our production the remaining production of this year and next year, that's higher prices, but also we have been focused on producing the added value.
Renato Junqueira: Also we have been focusing producing added value VHP baggage sugar which is 10% premium over the conventional VHP, the price of the the baggage VHP. And Renato Grosso, since we have the tax rebate program, we also we always have a floor to change the mix towards ethanol. The floor today is around 18 cents per pound, so the price of sugar goes below this number. We will be changing the mix. We don't think that's going to be the case, but that's that's the floor. And today we have our seventh percent of the current estimated production had at the price of 23.1 cents per pound. Thank you, Renato. Is it clear? Isabella on the Schuane Sanón? Sure, yes.
Speaker Change: Pete Berg of sugar, which is 10%.
Speaker Change: A 10% premium over the conventional mortgage bid the price of the bag.
Speaker Change: H B.
Speaker Change: And any multiples also seems to have the tax rebate program. We also we always have a floor.
Speaker Change: To change the mix towards ethanol.
Speaker Change: Floor today is our own 18 per bonds. So if the price of Super bowls below this.
Speaker Change: Number we will be changing the mix, we don't think thats going to be the case, but that's the floor.
Speaker Change: And today, we have our.
Speaker Change: 7% of the current.
Speaker Change: Submitted production hedged at two <unk>.
Speaker Change: Price of $23 one per pound.
Speaker Change: Okay.
Renata: Thank you Renata.
Renata: <unk> the issue on ethanol.
Renata: Jim.
Speaker Change: Sure Yes.
Speaker Change: If thats okay.
Renato Junqueira: Okay, if that's okay, I take the rice prices. Here it is important to understand that when we consider our own rice prices, this is a component that includes high value added product and we are producing different varieties as we've been explaining since the beginning where we developed a whole rice business where we sell different varieties to different clients. So we are specializing our own production and we are producing what every client needs.
Speaker Change: The rice prices here. It is important to understand that when we can see that our own rice prices. This is a component that includes high value added product.
Speaker Change: And we are producing different varieties as we've been explaining since the beginning where we developed a whole rice business, where we sell different varieties to different clients. So we are specializing our own production and we are producing what every client.
Speaker Change: So we are always going to take a different theme Bryce respect off the average price or the commodity price or the U S price.
Renato Junqueira: So we are always going to take a different price, respect of the average price or the commodity price or the US price that sometimes we follow as a general price. So that is important to understand the increase when we compare the price of last year with the price of this year in a per ton basis. So making that clarification, the general view is that the whole region in South America will continue to have reasonable prices for all this year and then for the following campaign, it will depend on the crop harvest in South America.
Speaker Change: Sometimes we follow west side did not priced so that is important to understand the increase when we compare.
Speaker Change: The price of last year, we the price of this year in a per ton basis, so making that clarification shall we start.
Speaker Change: Called region in South America, we continue to have reasonable prices for all of this year.
Speaker Change: And then for the following campaign.
Speaker Change: It will depend on the crop harvest in South America crop harvest in South America last year and the previous year was relatively low and.
Renato Junqueira: Crop harvest in South America last year and the previous year was relatively low and this year it will depend on the planting that we are starting in a few days. So whatever happens in next year campaign, we will affect next year prices. So it's too early to talk about future prices in the longer term. But in the short term, we are very confident on today's level of prices. That's clear. Thank you. Once again, if you have a question, please write it down in the Q&A session or click on raise hand for audio questions.
Speaker Change: This year it will depend on the planting that we are starting in a few days. So whatever happens in next year campaign. We lap next year prices. So it's too early to talk about future prices in the longer term, but in the short term we are very confident on it today.
Speaker Change: This level of prices.
Speaker Change: That's clear thank you.
Speaker Change: Once again, if you have a question. Please read it down into Q&A session Barclaycard raise hand for audio questions. Please.
Speaker Change: Please hold while we poll for questions.
Thiago Duarte: Please hold while we pull for questions. This concludes the, sorry, we have another question from Thiago Duarte. You can open your microphone. Yeah, thank you very much. Hello everybody. Yeah, quick one on our side here. Just if Renato could talk a little bit about cash production costs for the year, crushing is at the very strong pace as you know, there's expectations of growth in the crushing volume throughout the year. And we had previously expectations that production costs could come down as a result of combination of currency, lower input costs, and obviously the operational leverage that your business should be capable of generating.
Speaker Change: This concludes that.
Speaker Change: Sorry, we.
Speaker Change: Another question from Thiago Duarte you can open your microphone.
Thiago Duarte: Yes, thank you very much and Hello, everybody.
Speaker Change: Yes, a quick one on our side here.
Speaker Change: Just if I could talk a little bit about <unk>.
Speaker Change: Cash production costs for the year.
Speaker Change: Crushing is at the very strong pace as you guys show.
Speaker Change: There is expectations of <unk>.
Speaker Change: Growth in the crushing volume throughout the year.
Speaker Change: And we had previously expectations that production cost could come down as a result of.
Speaker Change: A combination of currency lower input costs, and obviously the operational leverage that your your business should be capable of generating so.
Speaker Change: Just if we if we should expect something different in terms of year over year production costs in the second half of the year relative to what we saw in the first half of the year and the sugarcane business that'll be all thank you.
Thiago Duarte: So just if we should expect something different in terms of year-over-year production costs in the second half of the year relative to what we saw in the first half of the year in the sugar cane. Thank you. Thank you, Thiago Renato. Thank you for your question, Cabello, regarding the projection costs, there are some components that are decreasing, such as fertilizers, freight and leasing rates, and some components that are increasing, such as salaries, according to the inflation, 30-party services and these, 30-party services, just because of the diesel, and the use should be slightly lower than the one that we obtained last year, especially because of the dry weather, and the yielding is slightly higher, because we have, by the automation planting, focusing a lot on our plantation, and also because we acquired some opportunistic 30-party sugar cane.
Speaker Change: Thank you.
Speaker Change: At all.
Speaker Change: Thank you for your question Thiago regarding the production cost there are some components that are decreasing such as fertilizers.
Speaker Change: Freight and leasing leasing rates.
Speaker Change: And some components that are increasing such as dollar is according to the <unk>.
Speaker Change: <unk> third party services and diesel third party services because of the diesel.
Speaker Change: In the U S should be slightly lower than the one that's being obtained in the last few years because of the especially because of the bride.
Speaker Change: Weather.
Speaker Change: And the the Neely.
Speaker Change: Slightly higher <unk>.
Speaker Change: But the other management planting.
Speaker Change: Focusing a lot in our expanding our plantation and also because we acquired some opportunistic third party.
Speaker Change: Our sugarcane.
Speaker Change: All of those factors into the equation, we think that's our our costs in <unk> should be very similar.
Thiago Duarte: If you take all those factors into the equation, we think that our costs in high ice should be very similar to the one that we had last year. I think we lost Renato, but just to finish the cost in real, similar to the previous year, so including the evaluation of the real cost in dollars, that is how we measure and how we express slightly lower than what it was last year. Thank you, Mariano.
Speaker Change: That we had less.
Speaker Change: Thank you.
Speaker Change: I think we lost and not all that capital to finish the cost in <unk> similar to the previous ESL, including the devaluation of that remodel.
Speaker Change: Cost in all of that is how we measure and.
How we express slightly lower than what it was last year.
Mariano Bosch: Thank you Mariano.
Mariano Bosch: Yeah.
Speaker Change: Our next question comes from <unk> with Morgan Stanley You can open your microphone.
Julia Hizu: Our next question comes from Julia Hizu with Morgan Stanley. You can open your microphone. Hello, good morning, everyone. Thank you for taking my question. I would like to touch on the outlook for sugar production in Brazil and sugar prices. A lot have been said about the dry weather and how that will affect the market. Can you explain what needs to happen because so far sugar production and crochet across the board in Brazil has been really strong?
Speaker Change: Hello, Good morning, everyone. Thank you for taking my question I would like to touch on the outlook for for sugar production in Brazil, and sugar prices a lot have been said about the dry weather.
Speaker Change: And how that will affect the market.
Speaker Change: So can you explain it.
Speaker Change: What needs to happen because so far sugar production in question across the board in Brazil has been really strong.
Speaker Change: How much yields or Trs has to decline in order to affect the expectation of sugar production in Brazil, and four have an effect on global prices.
Julia Hizu: How much yields or TRS has to decline in order to affect the expectation of sugar production in Brazil and to have an effect on global prices? Thank you, Julia, for your question. Renato, are you back? Yes. Can you hear me? Yes, perfectly well. Hi, Julia. We think that there are two main points that are going to affect sugar production. First, is the yield? I think the yield is going to start to decline from now on in the centers of Brazil.
Speaker Change: Thank you Julien for your question Renato <unk>.
Renato <unk>: Yes can you hear me, yes perfectly well.
Speaker Change: Hi, Julien.
Speaker Change: We think that our two main points that are going to affect ore production first the huge I think the yield is going to start to decline from now on in the center South of Brazil actually the number that was just published.
Julia Hizu: Actually, the number that was just published from July was about 10% lower than the same period of less a year. And the weather remains very dry and there are some cold fronts that hit the part of the sugar cane areas of Brazil causing some damage. Something very, not very intense, but not helping the situation which is already pressured because of the dry weather. The first part of the year, the yields were higher because there are a lot of kind of disaster that was perished in 18 months to regain that's not the case anymore.
Speaker Change: On July <unk> was about 10% lower than the same period of last year and no other remains.
Speaker Change: Very dry and there are some things are a quote from Dr.
Speaker Change: Part of the sugarcane in areas of Brazil, causing some some some damage something very not very intense but is not helping the situation.
Speaker Change: Which is already pressured because of the dry.
Speaker Change: Weather.
Speaker Change: The first part of the year.
The yields were higher because there are a lot of kind of disaster that was Russia and 18 months to go again, that's not the case anymore. So now the winter speed a lot of.
Julia Hizu: So now we are going to speak a lot of the reduction in the yield from now on. And also the production mix. I think the mix is disappointing. Everyone is trying to maximize sugar. I think the initial expectation was that Brazil would reach 52% of sugar mix. Up to now, the mix is 49%. So probably the mix is going to finish the year close to 50%, 2% lower than initially thought. And if you lose in the mix, I want two million tons of sugar.
Speaker Change: A reduction in <unk> in <unk>.
Speaker Change: Yields from now on and also the production mix.
Speaker Change: I think that mix is disappointing everyone's Brian to maximize.
Speaker Change: Sugar I think the initial expectation was that Brazil will reach a 52% of sugar mix.
Speaker Change: Up to now the mix is 49%.
Speaker Change: So probably.
Speaker Change: Uh huh.
The mix is going to finish the year close to 50%.
Speaker Change: 2% lower than initially thought and if you lose in the mix or one 2 million bonds.
Speaker Change: October.
Speaker Change: Okay.
Speaker Change: And then on the dry weather.
Julia Hizu: And Henato, on the dry weather, can you give me a color on where is this and when is it close to your region, should we expect also Adecoagro to face the hapsis on this orange 2025, a declining version in use as well? Yeah, so we start the year with a very good outlook of sugarcane, mainly because of the rains that we received in the last quarter of last year. But then the weather changed and the weather became very, very dry, actually from January through to the end of July, we received 38% lower rains than the historical average.
Speaker Change: Can you give me a color on where is this and when.
Speaker Change: Is it closer to a region should we expect also other quadrature face perhaps.
Speaker Change: On Dania are in 2025.
Speaker Change: A declining crushing and is this fall.
Speaker Change: Yes, we started the year with a very good outlook of sugarcane, mainly because of the range that we received in the last quarter of last year, but then the weather changed and the weather became very very dry actually from January through to the end of July we received a 38% lower.
Speaker Change: <unk> ranks than historical average.
Speaker Change: That's why.
Julia Hizu: That's why our yields are under pressure right now. We expect this year, we're going to finish the year with a yield is likely lower than last year. But we're going to crush more sugarcane because of the plantation and because of the third part sugarcane that we have been acquiring for next year. I think it's too early to say anything. We still think that we're going to crush a little bit more than we're going to crush this year.
Speaker Change: Our U R R.
Speaker Change: Under pressure right now.
Speaker Change: Expect this year, we're going to finish the year with our yield is slightly lower than last year, but we're going to gross more sugarcane because of the plantation and because of the third barred truecar agenda that we have been acquiring.
Speaker Change: For next year I think it's too early to say anything.
We still think that we're going to crush.
Speaker Change: A little bit more than our residential growth this year.
Speaker Change: Okay. Thank you very much congratulations.
Julia Hizu: Okay. Thank you very much. Congratulations. Thank you. Once again, if you have a question, please write it down in the Q&A session or click on raise hand for audio questions. Please hold while we pull for questions.
Speaker Change: Thank you.
Speaker Change: Once again, if you have a question. Please write it down in the Q&A session or click on race hand for audio questions.
Speaker Change: Please hold while we poll for questions.
Speaker Change: This concludes today's question and answer session. At this time I would like to turn the floor back to Mr. Mariano Bosch for any closing remarks.
Operator: This concludes today's question and answer session.
Mariano Bosch: At this time, I would like to turn the floor back to Mr. Mariano Bosch for any closing remarks.
Got it thank you for everyone to participate on hope.
Just a thank you for everyone to participate and hope.