Adecoagro S.A.

Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to ADECOagro's 4th Quarter 2024 Results Conference Call. Today with us we have Mr. Mariano Bosch, CEO, Mr. Emilio Inheco, 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. 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 ADECO Agros 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 ADECO Agro 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.

Good morning and thank you for joining ADECO-AGROS 2024 Fourth Quarter Research Conference. Consolidated adjusted EBITDA during the quarter reached $103 million and amounted $444 million in 2024. Starting with our businesses in Argentina and Uruguay, both our rice and dairy operations presented record results. This was possible thanks to the investments made throughout the years to increase production and consolidate our asset base, while being efficient in every stage of the value chain. Our vertical integration enabled us to cater both the export and domestic markets with our large product portfolio, profiting from higher selling prices. In spite of the challenging year for our crops operations, we continue to deliver results thanks to our continuous focus on being the low-cost producer. We are undergoing harvesting activities for our 2024-25 campaign. In rice, we have already harvested over 50% of the planted area with yields above the previous year. And on the other hand, we foresee an improvement in crops productivity versus prior season, despite the uneven weather dynamics seen on our farms during summertime. Now let's move into our sugar, ethanol and energy business. As anticipated, not only did we achieve a new crashing record, but also a sugar mix and consequently a new record in total sugar produced. Thanks to our commercial strategy, we sold our production at attractive prices. while we continue to carry over ethanol stocks waiting for the perfect timing to clear out the tanks, which indeed has arrived. Although the weather has been bright, we are currently crushing and supplying the market with our products thanks to our continuous harvest model and the investment carried out to increase the size of our sugarcane plantation. A brief comment on shareholder distribution. During 2024, we distributed $102 million between dividends and share buybacks, $32 million more than our distribution policy. This was done without compromising our debt commitments nor disattending our growth projects, such as the cane expansion and the production of biomethane in Brazil, or the development of our rice and dairy operations in Argentina and Uruguay. For this year, based on the $161 million in net cash from operations presented, we should be distributing at least $64 million via a combination of dividends and buybacks. Before passing the word to Emilio, a brief comment on ESG. As we grow the company, we are also growing our presence in the communities where our operations are located by looking for new talents to complement our businesses' needs and to strengthen our culture. Key actions implemented include our Women in Agribusiness program, in which we train them in how to operate agriculture and industrial machinery aiming to consider them for hiring when employment opportunities arise furthermore through our leadership program we identified employees with potential in order to prepare them for leadership positions to conclude i would like to reiterate my gratitude to all our teams although we face some challenges through the year, we were able to achieve these results thanks to their hard work and dedication. Thank you to our shareholders for your continued support. Now I will let Emilio walk you through the numbers of the quarter.

Thank you, Mariano. Good morning, everyone. Let's start on page four with a summary of our consolidated financial results. Gross sales total $368 million during the fourth quarter, while on an annual basis, they reached almost $1.5 billion. Despite the quarterly drop in sales, annual revenues were 2% higher year over year on greater volumes sold, given the overall increase in production, which in turn fully offset the lower prices for some of the commodities that we produce. Adjusted EBITDA reached $103 million during the quarter, making an 8% year-over-year increase, whereas for the full year, it amounted to $444 million. During the year, we achieved record results in our rice and dairy segments and marked operational records in our sugar, ethanol, and energy business. However, results were negatively impacted by a year-over-year loss in the mark-to-market of our biological assets in our sugar, ethanol, and energy business, coupled with an uneven year-over-year comparison in our crop segment due to farm sales conducted throughout both periods. Now please turn to slide five. As you can see on the upper right chart, we generated $161 million on net cash from operations in 2024. Despite the challenges faced, cash generation across our businesses prevailed thanks to our focus on efficiencies and low-cost production, together with the investments made throughout the past years. Regarding our production figures in the bottom right chart, we can see that crushing volumes in our sugar, ethanol and energy business were up 2% versus 2023, making a new record. 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 after having experienced better weather conditions throughout our latest harvest season. Let's move to slide seven with the operational performance of our sugar, ethanol and energy business. Total crushing volume reached 12.8 million tons during 2024, a record for our mills. Although on a quarterly basis, our crushing was down 12% compared to the same period of last year, this new achievement was possible thanks to greater sugar cane availability given our expansion planting activities and third party cane. This in turn enabled us to mitigate the reduction in yields driven by lower than average rainfalls received throughout the year. In terms of mix, we continued to maximize sugar production, given its attractive premium over ethanol. This resulted in a sugar mix and volume production of 52.2% and 832,000 tons respectively, marking new records for our mills. Within our ethanol production, we are maximizing the production of hydrous ethanol, as demand for this type of ethanol has been significantly increasing and gaining market share, offering the better margin. If required, we can dehydrate our ethanol at any time. Let's please turn to slide eight, where we describe sales conducted throughout the periods. Net sales amounted to $178 million during the quarter, making a 22% year-over-year decrease, whereas on a full year basis, they reached $680 million in line with the previous year. As you can see on the top left chart, the increase in our annual volume sold of sugar was fully offset by declining prices. As explained in prior releases, global sugar prices have come down versus the record level seen during 2023. Nevertheless, when considering the gains related to our commodity derivative financial instruments within our other operating income line, our average selling price for the year stood at 22.6 cents per pound compared to 23.2 cents per pound in 2023. Regarding our ethanol sales, prices have been recovering month over month on strong domestic consumption due to the low parity at the pump versus gasoline, even though this in US dollar terms continued to be below the previous year due to the depreciation of the Brazilian real. Carlos Ortiz- Consequently, we continue holding on to our ethanol inventories by year end to profit from higher expected prices our stocks represents 31% of our 2024 ethanol production. Carlos Ortiz- Moving on to energy. Throughout the fourth quarter, we used our stored bagasse to produce energy to profit from the hike in spot prices explained by lower water reservoir levels. This in turn enabled us to book sales at 480 Brazilian real per megawatt hour during the peak of the demand. On an annual basis, lower prices and a weaker Brazilian real fully offset the increasing energy exported. Regarding carbon credits, we sold annually over 600,000 Ceballos at an average price of $14 per Ceballo, making a total of $9 million in net sales. On the following slide, we explain our cash cost. Total cash cost reflects on a cash basis how much it costs us to produce one pound of sugar and ethanol in sugar and equipment. On a per-unit basis, our cash costs amounted to 12.7 cents per pound of sugar equivalent, 8% lower than in the prior year. This is mainly explained by first, a 53% year-over-year increase in tax recovery due to higher ethanol sales conducted, second, a lower maintenance capex on lower renewal area, and third, the depreciation of the Brazilian real, which positively impacted our cost structure. Cash cost was also benefited by the year-over-year increase in TRS equivalent produce, which in turn enabled us to better dilute our costs. All our efforts are devoted to further enhance efficiencies to continue reducing it. As we continue ramping up operations in our cluster, cash costs will continue its downward trend. Please go to page 10, where we would like to present the financial performance of the sugar, ethanol, and energy business. Adjusted EBITDA amounted to $105 million during the fourth quarter and $364 million on an annual basis. Despite presenting a year-over-year gains in the mark-to-market of our commodity hedge position, our annual results were mainly offset by year-over-year losses in the mark-to-market of our biological assets on lower consequent prices on harvested cane. Finally, to conclude with the sugar, ethanol, and energy business, please turn to slide 11, where we would like to briefly talk about the current outlook. Despite the dry weather experience throughout 2024, we are currently one of the few players in Brazil crushing and producing sugar and ethanol. Being able to crush cane year-round, even during the traditional inter-harvest period, is one of our main competitive advantages. We expect a slower crushing pace during the first semester of the year as we undergo harvesting activities in cane with a limited growth potential. while we allow areas with greater potential to continue growing to be harvested during the second half with much better productivity. Therefore, we focus a slight increase in our annual crushing figure versus 2024, assuming weather evolving normally. From a commercial point of view, the world's supply of sugar continues to depend on Brazil's production. whose cane productivity is still recovering from last year's adverse weather conditions. Consequently, we still see some upside to current spot prices, reason why we only have hedged 31% of our 2025 sugar production. In the case of ethanol, Demand continues strong given the low parity at the pump versus gasoline, resulting in a recovery in prices given the limited new supply and low stock-to-use ratio. Our commercial strategy to carry over inventories is paying off as we are clearing out our tanks under a much more profitable price scenario. Now we would like to move on to the farming business. Please go to slide 13. For the new campaign that we are currently engaged in, we have completed planting activities over 300,000 hectares under good soil moisture conditions, representing a 9% increase in planted area compared to the previous campaign. Despite the combination of high temperatures and lower than average rainfalls experienced by the beginning of 2025, precipitations received by the end of January and throughout February enable our crop production to continue with its normal course of development. As of today, most of our crops are undergoing its yield definition phase, so the evolution of the weather during the upcoming weeks will be key. We expect yields for most of our crops to be in line with historical levels, while for our rice segment, we are forecasting a significant recovery in yields due to gut weather conditions and water availability during its yield definition stage. In dairy, we continue enhancing efficiencies in our free stalls, which are already at full capacity. At the industry level, we are working on product development for the domestic and export markets, while expanding our presence across the different price tiers with our consumer product brands. On the following page 14, we present the financial performance of our farming business. Adjusted EBITDA for the farming business totaled $4 million during the quarter. whereas on an annual basis, it amounted to $103 million in line with the previous year. Starting with our crop segment, adjusted EBITDA amounted to negative $3 million in the fourth quarter, while on an annual basis, it reached $19 million. Excluding the farm sales conducted in both 2024 and 2023, Adjusted EBITDA for crops amounted to $4 million in 2024 compared to the negative $3 million in 2023. Although the segment performed better than the previous year, as we saw a significant year-over-year recovery in production, Results were negatively impacted by lower international prices for our main products, as well as by higher costs in US dollar terms and lower than expected corn yields due to the impact of seroplasma. Moving on to rice, adjusted EBITDA reached $50 million for the full year, making a new record for this segment. Results? were driven by year-over-year gains reported in the mark-to-market of our biological assets on higher prices and higher printed area. Focusing on the quarterly figures, adjusted VDA stood at negative $1 million due to the higher costs in US dollar terms and declining the price of our carryover stocks, which negatively impacted results. Lastly, adjusted EBITDA in our dairy segment totaled $8 million during the period, whereas on an annual basis, it's reached record results with $34 million in adjusted EBITDA generation. 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 fluid milk for the domestic market. Let's now turn to page 16, where we would like to present our capital allocation strategy. Throughout 2024, we distributed $102 million 32 million dollars more than the minimum stated in our distribution policy, marking a 9.4 percent distribution yield. This was executed via cash dividends in the amount of 35 million dollars, coupled with the repurchase of 67 million dollars in shares equal to 6.2 percent of the company's equity. In 2024, we generated $161 million of net cash from operations. Consequently, our minimum distribution amounts to $64 million during 2025. Year to date, we have already repurchased $10 million in shares, which represents approximately 1.1% of the company's equity. Please turn to page 17. for a broader view of our debt position. Net debt amounted to $522 million in line with the previous year. Throughout the year, we have diligently reduced our gross debt and cash in the most efficient manner while looking for opportunities to finance our operations at the lowest cost. Consequently, our liquidity ratio reached 4.5 times versus 2.8 times in the prior year, showing the company's full capacity to repay short-term debt with its cash balances, while our net leverage ratio stood at 1.2 times. As shown in our financial figures, this was achieved without disentangling our distribution policy and growth projects. On the following slide, we describe our CAPEX program. In 2024, we invested $104 million in expansion projects. In Brazil, expansion CAPEX was mostly allocated to increase our sugar cane plantation size during the year we were able to secure more area at attractive lease rates as our cluster is based in a region where there is plenty of land availability and low competition for land. In our farming business, our main CAPEX program consisted of the development of cropable area for rice production, the third and last installment of rice mills acquisition in Argentina and Uruguay, the expansion of our drying and storage capacity in our Paso Dragón rice mill, the construction of a new warehouse for our dairy products at our Chivilco Dairy Processing Facility, among our other projects. Before we conclude our earnings presentation and open the call to questions, I would like to address recent developments concerning Tata's proposal to acquire a majority stake in ADECO Agro which we announced in recent press releases. On February 14th, 2025, our board received an unsolicited non-binding proposal from Tether Investments to acquire outstanding common shares of $12.41 per share, aiming to increase their holdings to 51%. Tether currently holds approximately 20 0.2% of our shares as per their last public filing on February the 25th. Our board convened on February 16th to discuss this proposal. We engaged legal and financial advisors to evaluate the proposal's terms and whether they align with the best interests of our shareholders and the company. Subsequently, we entered into discussions with TETA and signed an exclusivity letter to facilitate further negotiations. While these discussions are ongoing, there's no assurance that we will reach to a definitive agreement or complete a transaction. Having said this, please note that due to legal restrictions, we will not be able to comment further or answer questions on the TETA proposal. Thank you for your time. We will now open the call to questions.