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.

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. 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 while we poll for questions. Our first question comes from Gustavo Troiano with Itaú BBA.

Good morning, everyone. Thanks for taking my question. Actually, there are two points that I'd like to explore with you guys. The first one, in the earnings release and earlier in the call, you mentioned potential upside for spot prices on sugar. So it would be nice to hear from you what you think are the main triggers for a positive price action on sugar specifically, and what are the milestones or timing for us to see this positive price action going forward? This would be my first question. And the second one in regards to farming and crops, recently we had lots of discussions on the import tariffs between the US and some other players. So just wanted to hear from you, basically your updated thoughts on the potential spillover impacts for your business specifically and how you were seeing these potential changes in global trade affecting ADECO Agro's operations at the end of the day. Thank you very much.

Hi, Gustavo. Thank you for your question. Renato will answer on our sugar prices view, and then I will take the other part of the question. Renato?

Hi Gustavo, thank you for your question. We are positive with the S&D scenario of sugar. There were some disappointing crops in the North Hemisphere, especially India, Thailand and Pakistan. So there is an increasing dependence of the Brazilian production in the short term. And it seems that the Brazilian center-south crop, the next crop that starts in April, is going to be smaller than last year. This is a consequence of a difficult first semester that probably is going to have as a consequence of the drought and the fires in the sugarcane areas of last year. The weather in the center-south region in February, starting in February, is very dry, and the temperature is very high now, which is affecting sugarcane yields. And also, the sugarcane area is a bit lower than last year due to a higher replanted area that occurred last year. So considering this scenario, Brazil will have to keep maximizing sugar and sugar will have to be traded at an attractive premium over ethanol. So our strategy, since we have a tax rebate in Mato Grosso do Sul, so we have 18 cents per pound. get close to the ethanol period. So our strategy is gradually increase our hedge if the price moves higher than 19 cents per pound. Today we have 31% of our production hedged at 20.7 cents per pound.

Thank you, Renato. And regarding your questions about the farming or crops prices, We think that for soy and corn, basically, that is only a portion of our sales when we talk about the farming and a relatively small portion. We do see a benefit for the South American soy and corn production because of the tariffs and the... or because of this commercial war that is going on. So that's a benefit for the South American production. And you can see that on the basis that have already improved. And we believe that that will continue to happen and will be even more stronger. But furthermore, for us, it's very relevant what's going on on rice and dairy also. Rice and dairy production, we compete in some places with some U.S. rice and because of some specific type of rice that we are producing. And so we also see a benefit there with this where we are entering to some new market in Central America, etc., So we are taking some benefits of today's prices in these products also.

That's super clear, guys. Thank you very much. Thank you.

Our next question comes from Matheus Enfeld with UBS.

Hi, morning, Mariano, Emilio, Renato, Victoria. Thank you for your time. Look, my first question, I understand that you can comment a lot, but I do have to ask, given the midterm implications and uncertainty that the Tether offer brings for the company, I want to ask on the offer itself. But if you could provide a bit more visibility on when you expect to have a bit more clarity or to be able to communicate a bit more visibility to the market, particularly in terms of timing, when do you expect the next steps to advance? And how these discussions have changed management's near-term priority on time allocation and how that has become a focus for management for the company at this time. And then my second question on sugarcane crushing. I mean, you mentioned that there's a slight potential for increasing sugarcane volumes for 2025. My question is more on the constraints around raising crushing more. If this is just weather related or if or on the other hand, if we had great weather conditions, If you would have been able to reach the 14 million tons already. And also thinking about third party gain, if there's a potential to maintain a higher third party gain level to improve crushing, perhaps a bit more optimistic than the message for slightly raising for 2025. Those are my two questions. Thank you.

Okay, thank you, Mateus. I'm going to start for your second part of the question. I'm going to ask Renato to answer that question, and I will complement if necessary. Renato?

Hi, Matheus. The last year's weather was very dry. Actually, it was 32% lower than the historical. Our rain was 32% lower than the historical average. So to crush the record of 12.8 million tons, we have to advance in the sugarcane that would be crushed in the first quarter of this year. Consequently, we will have a very slow, less intensive quarter in terms of crushing the first quarter of this year. Now we are selecting the sugarcane with lower potential to growth. to be harvested now, to leave the sugarcane that has more potential to grow, to be crushed later on this year. We think that in the second semester, the situation will improve as we will be crushing a lot of 18-month sugarcane that was planted last year. So the situation in the second semester should improve. Of course, depending on the weather from now on. So if you consider all those factors, we have sugarcane to crush something close to 13 million tons of sugarcane. The problem is that we are going to have a very slow beginning. So I think the challenge will be the crushing pace from April to December. And regarding the 30-party sugar cane question, half of the 30-party sugar cane is contracted, is a recurrent sugar cane. So we will be crushing this year as well. The other half was an opportunistic acquisition that we did last year from mills that have industrial problems in our region. So they were not able to crush the total sugar cane that they had. But we believe that considering normal weather this year, we don't need to acquire additional sugarcane. We have our own sugarcane to be crushed. But if the weather deteriorates, we will always be looking at the best alternative to maximize our crushing. In the first quarter that we need more sugarcane, we don't have third-party sugarcane to be acquired.

Thank you, Renato. Just to complement, as Emilio was saying at the beginning, we've been having in the last 18 months 30% less rain than average. So the climate is playing or the dry weather is playing against the overall availability of cane. Just to summarize what Renato just expressed in all details. Then going to the second part, to your first question, sorry, Emilio will comment on this.

Yeah, Matos, thank you for your question and I apologize, but the company does not intend to comment further on market speculation or disclose any developments until it otherwise seems further disclosure is appropriate or required. There's no assurance that we will reach to definitely agreements or complete a transaction. Nevertheless, we continue operating under absolute normal conditions and always focus on delivering results and creating value to our shareholders.

Okay.

Thanks for the questions.

Once again, if you have a question, please write it down in the Q&A section or click on Raise Hand for audio questions. Please hold while we poll for questions. Our next question comes from Isabella Simonato with Bank of America.

Hi, good morning, everyone. Thank you for taking my question. I wanted to follow up a little bit on the dynamics of prices of sugar and ethanol, but more specifically on ethanol, because you guys mentioned in the release, you believe parity will go back to 70%. If you could... just elaborate a little bit more on which context and timing for that and uh if it's mostly due to the fact that brazil will crush less maximize sugar but i mean how you guys are looking to the supply and demand of ethanol since we haven't seen the parity reaching that level uh for more than a year now thank you thank you isabella renato will comment on this question

Hi, Isabella. The demand for ethanol is still very high. So the monthly demand for ethanol is 3 billion liters of ethanol. If you take only hydros, it's close to 2 billion liters of hydros. The part of the pumps is still faring ethanol, but it's almost at 70%. Today it's at 68%. The current inventories are sufficient to 1.8 months of consumption compared to 2.2 months last year in the same period. So the situation is tighter. As a consequence, prices are higher year over year. If you take in reais terms, it's 32% higher than the same period of last year. And depending on the delay in the new crop, it seems that it's going to be difficult to have a high crushing volumes in March. I think the price can go even higher and surpass the 70% parrots. So our strategy now is to keep selling our ethanol at current price, which is good. We expect to sell everything that we have in our tanks by the end of the first quarter. And just remember that we are still producing ethanol because of the continuous harvest production model. We are having a less intensive quarter in terms of crushing, but still crushing and producing ethanol.

But I mean, when we look at the beginning of the season right now in April and May, do you think this is still possible? I mean, the parity holds on even given the seasonality and the fact that we have a big concentration of ethanol production in the short term.

I think the fact that the next center-south crop should be smaller and more sugar-oriented, I think the consensus that the center-south crop is going to be 600 million tons with 52% sugar mix. If you take into account this reduced 2.7 billion liters of ethanol if you compare to last year. And then we have the increase in the blend that should be announced soon, which add more 1 billion liters of ethanol in demand, plus the auto cycle. So if you take it all in consideration, this is much more important. Then the increase of the supply that came from the corn ethanol, which is approximately 1.5 billion liters. So I think the scenario for ethanol for next season is very positive. And I think the parity rate should be higher than the ones that we saw last year.

Isabella, but having said this, we are selling, as Renato said before, we are selling the current stocks. All our current stocks are being sold now. So in the middle of the season, the price will probably go down comparing to today. But in average, we are expecting what Renato just explained very clear.

That's clear. Thank you.

Our next question comes from Larissa Pettis with JP Morgan.

Thank you for taking my question. I would like to ask Renato if he could give us some color on his expectations of margins on the sugar and ethanol division 2025, especially if he could elaborate a bit more on key cost components beyond sugarcane. That would be great. Thank you.

Renato? Hi, Larissa. We think that the production cost should be very similar to the one that we had last year in real terms. If you consider it in dollar terms, I think it's going to be a bit lower than it was last year. I would say 5% lower. I think there are some components that are slightly increasing and others that are slightly decreasing. The changes are not very relevant. I'd say that labor is going to increase according to inflation. The consequent part of the leasing is going to increase as a consequence of better ethanol prices. But on the other hand, there are some crop protection inputs that are decreasing. So if you take the balance of everything, it should be similar in reais and a bit lower in dollar terms.

That's clear. Thank you.

Once again, if you have a question, please write it down in the Q&A section or click on Raise Hand for audio questions. Please hold while we poll for questions. Our next question comes from Julia Rizzo with Morgan Stanley.

Hello, good morning. Thank you for taking my question. I would like to make a follow up on this question on the production cost. This year was a meaningful decline. And one of the reasons you mentioned in your initial comments was the higher sales of ethanol with some tax credits. Can you elaborate a little bit further? Is that that production cost was made because you sold a lot of ethanol? It was made with the combined production because you were holding inventory, you're selling a lot. But how would be the production cost with the tax credits like normalize it for the production mix? Is that... I'm clear with my question. The idea is to understand what will be the recurring production cost with the mix of 52% sugar and 48% ethanol.

Thank you, Julia, for your question. Renato, do you want to answer?

Hi, Julia. If I understood correctly your question, I'm not sure if I got your point, but the mix of this year should be similar to the mix of last year because we are still maximizing sugar. So we expect a mix close to 52%. So we don't see change in the tax credits affecting our costs. So considering this scenario with similar mix and tax, costs in reais is going to be similar and in dollar a bit lower than last year.

Yeah, okay, so I think you answered my question. My question is that more related how you manage to calculate your production costs if you get the credits, taking in consideration the amount of the volumes that you sell during the year, because sometimes you have some inventories carry over from one year to the other, or if you take the consideration how much of ethanol you produce.

No, no, the ethanol that we sell during the year. That's the way that we do the calculation.

Okay, so you sold more ethanol in 2024, a lot more than in 2025, right?

Yes.

Because we're holding inventories. That kind of helped. And for the next year, you expect to sell the same amount of ethanol?

I think it's going to be about the same amount, but we have to wait to see the dynamics of the market.

Okay, thank you. And also on the production cost, I have a follow-up because one of the things that I noticed was expansion in the harvest area and also in the expansion area. For a long time, I wasn't seeing you growing like this. Can you go over a little bit of how are the costs of those expansion in terms of leases, agriculture, and in connection to that, what is the outlook for CAPEX for this year?

We were able to lease some strategic farms in our region that we improve our average distance, the distance from the sugar cane to the mill, the average of the soil quality and also the topography of the areas. So very strategic farms. Those farms were farms that they have a higher quality, so we need to put less inputs. And those farms used to be grains, so it's cheaper to plant sugarcane there. So we expect to have an improvement in our planting cost in the next years that is going to reflect the planting of these areas. And so that's why we increased the expansion planting. Regarding the replanting, despite the dry weather that negatively impact the sugarcane yields, the status of our sugarcane was very good in terms of nutrition, plague and weed control. So there are some areas that we thought that would be good to put some more fertilizer and have another harvest because the weather was very bad, but the treatment of the sugarcane was good. So the sugarcane conditions are okay. Of course, it needs water. So that's why we decided to treat those areas and crush it again.

But what was the plantation cost or the expansion cost of this new area and the outlook for CAPEX given the increase in area? And how can we translate that in milling?

The planting costs of those areas in this region is about R$ 13,000 per hectare, which I would say is like 15% lower than areas that we were leasing some years ago.

Thank you.

Thank you. This thus concludes the question and answer section. At this time, I would like to turn the floor back to Mr. Bosch for any closing remarks.

I just want to thank you all for your continuous support and we hope to see you in our upcoming events.

Thank you. This concludes today's presentation. You may disconnect at this time and have a nice day.