Q3 2025 Adecoagro SA Earnings Call
Good morning, ladies and gentlemen, and thank you for waiting.
At this time we would like to welcome everyone to a deco Deco arose, third quarter 2025 results conference call.
Today, with us we have Mr. Mariano Bosch, Bosch CEO and CFO.
Mr. Henato junk, and energy, VP, and Miss Victoria. Cabo investor relations officer.
We would like to inform you that this event is being recorded and all participants will be in listen-only mode during the company's presentation.
After the company's remarks are completed, there will be a question and answer a section at that time. For the instructions will be given.
Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of a deco, arroz management. And on information currently available to the company.
They revolve around 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 of results of a deco Aro and could cause results to different maturely from those expressed in such forward-looking statements.
Now, I will turn the conference over to Mr. Mariano Bosch, CEO. Mr. Bosch, you may begin your conference.
Good morning, and thank you for joining arroz 2025 third quarter Research Conference.
Consolidated. Adjusted Aveda during the quarter reached 115 million dollars.
While year to date it amounted to 206 million.
In Brazil.
We achieved an all-time quarterly crashing record of 4.9 million tons.
And even produced.
40% more ethanol than the previous year. As we switched, our production maximization giving premium commanded over sugar.
Now.
Came productivity has improved as we completed the Harvest of all the frost impact it came thus with lower productivity.
Going forward and assuming normal weather.
Crashing volume should improve, as we have greater K, availability leading to a greater cost dilution.
In Argentina and Euro. Why the challenging price cost scenario continues to pressure results? Our businesses.
In crops.
We are undergoing planting activities for the new campaign reducing approximately 30% our list area and adjusting our crops mix to improve margins.
In rice.
Export price.
Of the long rise are still looking for a support level given the greater Supply.
therefore,
Our decision is to reduce the long grain rice, and to increase the mix of varieties.
In Daily.
Car, productivity and processing volumes. Have achieved a new record.
We continue to prioritize the domestic market with the production of fluid milk and value added products.
In early September.
We signed an agreement to acquire a 50% stake in profitability.
The largest producer of granular Yura in South America,
Property is one of the lowest cost producers within the industry, and it is strategically located.
In a net importing region with access to competitively priced natural gas.
It is run by a highly experienced management team and has consistently generated cash through the years.
The producer owns a 50% stake, and together with Daka, we will be joining jointly in acquiring the balance.
Closing is expected before year end and subject to wipees 908 right of a refusal.
To conclude. I would like to thank all the people in Aro.
I know that this year has been 1 of the toughest.
But we need to remain focused on efficiency and on being the lowest cost producer to overcome this challenge in context.
Thanks to our shareholders for their support.
And now, I will let Emilio walk you through the number of the quarter.
Thank you, Mariano. Good morning, everyone.
Please turn to page 4 with a summary of our Consolidated Financial results.
Gross sales total of 323 million during the third quarter, making a 29% year-over-year decline due to lower volumes and prices across our different operations.
Despite this adjusted immediate improved versus the prior year to 115 million dollars on greater results from our sugar ethanol and energy business.
On a year-to-date basis sales and adjusted. The vda stood at 1 billion dollars and 206 million respectively.
Lower Consolidated results, were mainly explained by a combination of lower Global prices and higher costs. In US dollar terms.
Now, please turn to slide 5.
Regarding our production figures on the bottom right chart. We can see that crushing volume in our sugar ethanol and energy business.
Was focused and lower compared to the same period of last year.
The year-over-year Gap. Reported in the previous release has decreased.
By the crushing record achieved during the third quarter, which we will get into more details shortly.
In the case of the farming business, total production is up 13% year-over-year.
Explained by higher planted area.
As well as record productivity in our rise operations.
Let's move to slide 7 with the operational performance of our sugar, ethanol, and energy business.
During the period. We achieved a new quarterly crashing record.
Of 4.9 million tons and a 20% year-over-year increase.
This was explained by the acceleration of our harvesting pace.
Which in turn enable us to crash, all the sugar cane that was hit by the frost event experience by the end of June.
our average yield and TRS content declined compared to the previous year explained by the impact of the frost, in the sugarcane harvested,
On a year to date basis. We have already mil 9.8 million tons of sugar cane.
Despite the strong quarterly performance, we concluded the period with an accumulated, crushing slightly below the previous year due to the combination of dry, weather, followed by rainy days. Experienced through the first half of the year,
Which consequently slowed, our crashing pace.
Despite this.
We still foresee an annual aggression volume in line with the previous year, assuming normal weather conditions, until the end of the year.
In terms of mix.
We switched our strategy to maximize ethanol production during the third quarter, giving the better margins compared to sugar.
We reached 58% ethanol, mix compared to 45% the previous year.
When we were maximizing sugar.
This clearly reflects the high level of flexibility of our meals as we maximize sugar production throughout the first semester and then switch to ethanol, due to its attractive premium, AS Global sugar, prices started to decline.
What we describe sales conducted throughout the period.
Net sales amounted to $131 million during the quarter.
while year to today, they reached 433 million
despite the increase in ethanol production.
Lower sales during the quarter were explained by a decline in volume. So
Throughout the period, we strategically conducted our sales to profit from better prices.
For the last year, we had our tanks pulled and had to sell our daily production.
Ethanol sales were 8% higher yet today.
Thanks to our commercial strategy to sell our 2024 inventories once prices recovered.
Regarding sugar, the combination of lower prices and declining production, given the lower crushing and switching mix, are the main drivers contributing to the decline in sales.
In the case of energy, the increase in sales was driven by higher selling prices year over year as we comply with our long-term contracts as well as profit from the peaks in spot prices.
Regarding carbon credits, we sold over 560,000 sebas at an average price of $9 per seio, reaching $5 million in revenues.
Please go to page 9. What we would like to present the financial performance of the sugar ethanol and energy business.
Adjusted. The BDA amounted to 120 million during the third quarter.
Making a 20% year-over-year, increase.
This was mostly explained by year-over-year gains in the month to Market of our biological assets. Given an improvement in yield coupled with gains in the mark to Market of our commodity hedge position.
On an accumulated basis, adjusted to the BTA reached.
218 million 16% lower than the same period of last week.
Now, we would like to move on to the farming business.
Please go to slide 11.
by the end of October, we concluded harvesting activities related to our 202425 have a season, reaching 1.2 million tons of agricultural produce
Now, we are in the middle of planting activities for our 202526 campaign with 52% of the total area already seated.
As you may have seen, we reduce our planting plan by 72% compared to the prior season. As we decided to diminish the amount of lease ha.
Prioritizing the Farms with higher productivity potential, and therefore maximizing the margin per hectare in each of our crops.
Rice, the declining planting area was driven by the challenging price scenario of the commodity AS Global prices continue to decline, given the worldwide over Supply.
On the other hand, we are increasing our mix of Premium varieties of a long grain, white rice to offset the lower prices from the commodity type.
In the case of dairy.
Not only the cow productivity improved versus the first semester, but it even achieved a new record at 39.1 liters of milk per cow per day during the quarter.
At the industry level.
We continue to maximize production of UHD milk for the domestic Market product that offers the highest marginal contribution.
On the following page, 12.
we present the financial performance of our farming business,
Adjusted the VA for the farming business, Total 1 million dollars in the quarter.
whereas here today, it amounted to
19 million.
Starting with our crops segment, lower results were explained by lower International prices and higher costs in US Dollars, both of which continue to pressure. Mar margins During the period and mainly for our peanut production
Driven by lower sales, given the outlier prices reported the previous year coupled with higher costs in US dollar terms.
Lastly, adjusted the vda generation in our Dairy business.
Was impacted by higher costs and a mixed performance in prices. Despite the increase in volume sold mainly from fluid milk for the domestic Market.
Please turn to page 14 for a broader view of our capex program.
Expansion capex. Excluding inorganic growth.
Represented, 32 million dollars in the quarter and 85 million on an accumulated basis.
In Brazil.
Expansion capex was mostly allocated to increasing our sugar, cane plantation size, and the expansion of our biomass and production.
In our farming business, I will make campex program consisted of the acquisition of agricultural, machinery. For our rice operations together with marginal investment in our mortars milk processing facility, to expand our product portfolio.
Now, please turn to slide 15. What we would like to make a reference to the acquisition of property.
On September 8th.
We announced the market that we sign an agreement to acquire nutrients 50% interest in profit.
The largest producer of granular urea in South America, through an 8020 partnership with Association.
The transaction was valued at approximately 600 million out of which 96 million. Advanced payment was made against the signups
The remaining 50% stake of is owned by ypf.
Argentina's largest producer of oil and gas was of this day continues to hold the right of first refusal to purchase nutrients equity on the same terms and conditions.
This right? Expires at the beginning of December.
Once and if the closing conditions are met, we will provide more details.
Commented earlier.
I firmly believe that by acquiring this state-of-the-art asset.
We will be reducing the validity of our results while diversifying operations across other value chains within the, our industrial space.
What we have shown a well-proven track record.
On the following slide, we describe our data evolution.
Net debt amounted to $80,072 million.
Making a 35% year-over-year. Increase.
Due to the lower Consolidated results together with the 96 million Advanced payment main for professionals acquisition.
Consequently, our net leverage ratio increase to 2.8 times compared to the 1.5 times reported in the same period of last year.
Going forward, and once we conclude the EOS,
We intend to reduce our leverage ratio as we implement cost-saving initiatives across all our operations, together with the revision of our capital allocation strategy.
Unexpected, operational results.
Despite the increasing Leverage.
Our liquidity ratio suit, at 3.2 times, showing the company's full capacity to repay short-term debt with its cash balance.
Let's now turn to page 17 where we would like to present our shareholder distribution program.
The 2025 shareholder distribution amounted to $45 million.
We repurchased $10 million in shares under our buyback program, which is equal to 1.1% of the company's equity.
In addition.
35 million were distributed via cash, dividends with the lasting assortment being paid in a few days. On November, the 19th representing approximately an annual dividend per share of 35 cents and a dividend yield of 4%.
With the second final dividend payment, the company concludes its distribution policy for the year 2025.
Code questions.
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 Hand" for audio questions.
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Please hold while we proof for questions.
Our first question came from mottos and felt from UBS.
Your microphone is open.
Um, hi morning. Mik at the cargo team. Um, thanks for your time. I, I want to think a bit about the upcoming year, and the upcoming crops. Um, I mean your crushing volume is, despite of the challenges in whether we're relatively okay. Um, and and I was just wondering how this outlook for 2020 2026.
If we could still see some crush and growth and and and sugar, and ethanol, um, and sort of get closer to the 14 million times, um, capacity. Um, and how how you see cost advancing for for the upcoming crop as well. Um and then my second question is when you think about capex particularly for next year but I think for the next 1 to 2 years, which we might
See, um, some some pressure in in earnings given the the weak pricing environment that we are seeing right now. Um, you were doing around 250300 million years of capex per year um outside of m&a, which I assume uh which there's still some some installments for professional. What's the level that we could see moving forward for next year? Given the, the the compression in in cash Generation? Um, due to prices? Um, those are my 2 questions. Thank you.
Okay. Um, thank you mate for your question. I'm going to ask the the capex and then um, Renato will answer regarding our crushing expectations and and costs they are going forward on your capex as we are mentioning. We are having this more compressed Eva and Evita margins and so we are revising. All the different capex in each 1 of the segments that we have today and also taking into account was with the potential acquisition of Professor. This we are reducing this at the maximum level so we are only doing the organic capex that really, really makes sense and has a lot of synergies and so you can clearly expect
A relevant reduction, in terms of the growth capex coming into one of our four business segments.
That's for 2026 and then Renato. Can you take the, the question regarding the crashing?
Expectations and cost.
Okay, so, so regarding the, the crushing, uh, I think it was mentioned here that we had a excellent third quarter in terms of of crushing. So we we finished all the low yields sugar cane special. Those can that was were affected by the frost
Uh, so we we we pushed the cane that otherwise would be crossing the third quarter for the, for the last quarter, with much better use. So they use for, for the the, the final quarter should be much higher than than the average of this year. And it put us in an excellent condition for for next year, uh, uh, especially in the first quarter that we're going to have an intensive first quarter in terms of corrosion. And, of course, take advantage of price that I know that should be high at, at, at this moment. Uh, and we have a potential to crush, uh, during this year, I would say 5 to 6% more than we are going to crush, uh, uh, uh, in this, in this year here. Uh, so 26. Uh, 5 to 6% more than, uh, 25. Thanks to the the
A reduction between 15 and 20% of of a cost. It is mainly, uh, uh, consequence of the volume, uh, both the crushing volume and the youth that should be higher. Next year, diluting our our fixed cost.
And also, the consequent of price that is lower. Uh, so the raw material uh, is lower for for next year. And I also, we have been working and a lot of efficiencies, uh, both in the Agriculture and the industrial operation. So we think that we are going to uh, decrease our cost because of those efficiencies, that we are getting
Awesome. That's super helpful. Thank you.
Our next question comes from Isabella simionato, from Bank of America, you can open your microphone.
Hi, good morning everyone and Milo Mariano. Thank you for, for taking my questions. I have to, uh, first of all, uh, you mentioned in the press release, right? That, that you guys want to pursue a couple of actions to, to reduce leverage, right? I understand that as you just said, reducing capex is 1 of them, but if you could uh, give a little bit more color on on what other actions, uh, are you thinking about
Out or uh, what your expectation, or eventually a Target, right to be reached in 2026. I think that would be quite helpful. And, and the other question is regarding the decision, right? To to
Significantly reduce your area of crops in the next season, I think.
Is the first time that you you, you take such a drastic. Um,
Uh, reduction, right? Uh, and just if you could, give us a little bit more.
sorry, I think I, I got muted, so the rationale to to go uh with this decision,
Uh and eventually the economics, right? That are are driving it. I think will be
Uh, would be interesting. Thank you very much.
Thank you very much for your question. I'm going to take the radiation, the second, your second question. And then ask Emilio Gnecco to answer the first question regarding the zip level.
So, on on explaining the reduction in the crop area, I think it's important there that since we started this new campaign that starts in August, where we start planting, and the old campaign, the, the numbers that we are reporting today that are so negative in the crop business, is what we've been harvesting since since April until September. So now we are starting this new campaign in this new campaign is where we started reducing the cost of leasing. So cost of living, is 1 of the main costs in crop production in general. And that's what we are reducing. And because of reducing the, the cost of leasing many people didn't want to lease to us. So we reduced the, um, the area on top of that. We are only securing the Farms where
We have a high productivity levels and the level of return that we are asking and the level of risk that we are running are more more, more important that the we are asking more returns for each 1 of the fans. So the qu, the consequence is that we are reducing this. On top of that, we are reducing the structure to manage these farms. And on top of that, we are reducing the cost of planting. The cost of
Of all what we are doing at the farm level. That is in the crop business, including the peanuts that was, is where we have the highest. Um,
Decreasing prices.
And that is how we've been able to maintain certain level of prices, just for you to have an idea that with action in the price of long grain, rice was around 50% comparing to the previous year. So the 50% reduction in in, in the price of rice is a very relevant and that's why we are adjusting making all these adjustment including re reducing part of of the the total area that's the reason why we are doing it and because of this is that we are more optimistic in terms of the levels of aita that we can expect for next year, comparing to this particular level to this year.
All this assuming today, prices of all these different Commodities that we are having. Today, we are not assuming to go back to the other levels. That's what we are where we are working and that's why the consequences the reduction of the area. So thank you for this part of this of your question. Then Emilio can get into more details on our depth levels. And what are we thinking about this?
Yeah, sure. Thank you, thank you. So thank you. Well, well let me start. If we if we take a look back at our history you can see that we have been very disciplined uh with our debt ratios.
Uh and and and this is not an exception. We always said that if we encounter an opportunity that today we have in hand, we would incur in additional debt and rest assure that that this opportunity would contribute, uh, to our results in the coming years and therefore become a creative to our shareholders.
um and I know though we would finish the year uh with that level of sabab, the 2 times 2 times and a half uh
We this this that is very well structured in the long term with an average, uh, life of for 4 and a half years, and also at very competitive prices. Um,
now, at the same time that we, we do this,
uh,
we are revising all our Capital expenditures.
And and and namely our distribution policy, we are we're discussing that for the coming years, well, within management and our board.
uh, Decap programs, as we said in the previous,
In the previous, uh, question. Uh, we are revising all the capital, uh, all the capex programs for each of our different businesses that will definitely is expected to be significantly lower, uh, in the next, uh, in the next years.
and,
And as part of a specific uh plan. We started on the implementation of additional cost savings and and additional enhancements uh in each of our businesses.
And last, uh, but not not least, uh, and this is something that that, uh, has been, uh, very vocal, uh, in our previous calls. We are having conversations with our controlling shareholder exploring, uh, potential capitalization structures, uh, in the company.
All of that, of course, will will, will contribute to bring down, uh, in the coming years, the the, the net debt ratios, uh, of the company.
Thank, you know, that's very, very clear. Just a quick follow-up. Mariano, as you mentioned, right, you are reducing mainly least area, to, to save cost. But how that
Shape you for 2027. I mean, how easy is for you to
Plan more again in 2027 how that change uh planted area in the midterm.
Um I think there is no problem there. This is a market where you can decrease or increase from 1 year to the other for us. The key is the efficiency and the return. So that's our focus. And the the area is a consequence on the return or the return that we are asking the return that we are willing to have. So, uh, we don't see any problem on growing again in terms of the lease area.
Perfect, thank you very much.
Again, if you have a question, please, write it down in the Q&A section or click on. Raise hand for audio questions.
Our next question comes from Julia. Rizu from Morgan St. Your microphone is open.
Hello, good afternoon.
Thank you for.
To acquisition. Um,
you still have some some debt to take. I would like to understand what are the rates of how you expect that to be in terms of financing time to pay average cost also um in your best, guess or or in the last years. How much uh preferred you were able to deliver distribute in term of dividends, what that would be the base case uh,
for 20126, uh,
Distribution for coming from professor professor. If the, if the m&a gets concluded,
Hi Julia, thank you very much for your question.
In general terms, as we explained in in the specific call that we did talking about this. We are very enthusiastic within this is a very attractive deal and this is a very accurate to what we have today. So we are very enthusiastic and Keen to be able to close it by mid December, as we just said for that closing, it's all financed, all 100% of the financing is already in place and at the same levels that the media just explained that are long term and very good the rate.
So there's no issue there, but in order to get into more details, Etc, I think it is important to wait until we can make this final closing.
And in terms of how we report and how this company has been giving dividends, you can see in their own financials that they've done a lot of dividends during the fall during every year, and they have already said more than 1 billion dollars of dividends in The Last 5 Years.
and,
And regarding our accounting, as we have already mentioned, the accounting is going to be on the equity method.
Yeah. Okay, so you think it's a it's too early to ask for opportunities within within the business. How will explore eventually Supply. You see that dividend
Or expectation for 2026 in terms of how that could help to finance uh the cost of that is that you earlier you can give us a guidance uh on that sense. No, I think it's too early to get into all the details. Again we are very optimistic. We think that the back amart and gas production is growing. A lot in Argentina that you've all heard about all the the possibilities that Argentina has, you know, to produce gas. We are going to take advantage of this natural condition that Argentina has, and we can be the local producer of urea. So there's a lot of expectation on that going forward, but in order.
To let him know. All the details, we prefer to talk. Once this is something real
Thank you.
This concludes the Q&A session.
At this time, I would like to turn the floor over back to Mr. Bosch for any closing remarks?
Thank you. Thank you for coming today and hope to see you in our next take calls.
Thank you. This concludes today's presentation. You may disconnect at this time and have a nice day.