Adecoagro S.A.

Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to ADECO Agro's second quarter 2025 results conference call. Today with us, we have Mr. Mariano Bosch, CEO, Mr. Emilio Nieco, 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 the 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 Adequadro 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 ADECOAGROS 2025 second quarter results conference. Consolidated adjusted EBITDA during the quarter reached $55 million, while year-to-date amounted to $91 million. From the very beginning, we know that commodity prices and weather risks are two inherent risks in our space. Therefore, through the years, we set our minds on becoming the lowest cost producer while also diversifying our operations across geographies and products. We understood that this combination, along with the investment made to consolidate our asset base, would act as a natural hedge against these events and enable us to continue delivering results to our shareholders. These are the years when our sustainable production models are truly put to the test, together with our efforts in enhancing day-to-day efficiencies in order to overcome challenging scenarios like this one. In our sugar, ethanol and energy business in Brazil, weather has not been good to us. We experienced extreme dry weather and even a cold front in June in our operations. Despite this, our strategy of increasing year after year the size of our plantation to secure cane availability enables us to have our crushing forecast in line with the previous year. The same goes with the investment made to have a larger operational flexibility to produce both sugar and ethanol, and storage capacity, which today grant us commercial flexibility to switch between products to always get the better margin and to stop production if needed. Going to our farming business in Argentina and Uruguay, we are focusing on the efficiencies in every stage of the value chain. In rice, prices have significantly calmed down, but our work on seed genetics allows us to offer customized rice varieties at premium prices and cater new markets, which in turn enables us to partially offset the drop in global prices. In David, thanks to our growing market presence, we are increasing the processing volumes in our industries, while we continue working on expanding our product portfolio to access new destinations. In the case of crops, we are finalizing a very challenging campaign in terms of prices and costs. Now, our focus is on the upcoming season, where our main goal is to improve the margins of each of our crops. As a consequence, we are reducing our leased area by approximately 30%. Before passing the word to Emilio, a brief comment on the memorandum of understanding that we signed with Tether. We are analyzing the possibility of using a portion of our energy production for Bitcoin mining. We are excited about this potential innovative project as it proves how cutting-edge technology and the agribusiness industry can join forces to maximize the value of our assets and production. Lastly, an update on sustainability. In mid-May, we published our 2024 Integrated Report in which we explained how, in our sector, sustainability is fully aligned with profitability. I would like to express my gratitude to all the people across Adecoagro. These are the moments where our hard work and commitment ends up making the difference and allows us to be the lowest cost producers at all times. 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 shareholders. Now I will let Emilio walk you through the numbers of the quarter.

Thank you, Mariano. Good morning, everyone. Please turn to page four with a summary of our consolidated financial results. Sales totaled $392 million during the second quarter, while on an accumulated basis, they reached $716 million. Higher volumes sold across all our operations more than offset the lower prices seen for most of our products on a year-to-date basis. Adjusted EBITDA marked a 60% year-over-year decline in both periods, reaching $55 million during the quarter and $91 million year-to-date. Lower results were mainly explained by losses in our biological assets in line our sugar, ethanol, and energy businesses on lower production, as well as in our crops and rice operations on lower prices. In addition, results were also negatively impacted by higher costs in US dollar terms in our farming division together with one-off expenses incurred by the company in connection with Tether's standard offer. 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 20% lower year over year due to a combination of less effective milling days during the second quarter and a selective slower milling pace adopted during the first months of the year. On the other hand, total production in our farming business reported a 12% year-over-year increase explained by higher planted area as well as a record productivity in our rice operations. In the case of crops, harvesting activities are almost complete for the 2024-25 season and the average yield obtained was below our initial expectations. We will describe this in more detail during the presentation. Let's move to slide 7 with the operational performance of our sugar, ethanol and energy business. After experiencing below average rainfall during 2024 and early 2025, precipitations received during April aided our sugarcane yields. Nevertheless, the distribution of rains led to a reduction in effective milling days and consequently a decrease in our crushing volumes during the quarter, which totaled 3.4 million tons. Although productivity indicators remain below the prior year due to the lagging effect of the dry weather explained before, this saw a significant improvement versus the first quarter of 2025 as anticipated. On a year-to-date basis, we have already crushed 4.9 million tons of cane, 20% less than the same period of last year. This was due to a selective slower crushing done in early 2025, focused on cane with limited growth potential, and a rainy second quarter that consequently slowed down our crushing pace. In terms of mix, we continue to maximize sugar production throughout the year, given its attractive premium. Within our ethanol production, we are maximizing the production of hydrous ethanol, given the better margin. Let's please turn to slide 8, where we describe sales conducted throughout the period. Net sales amounted to $183 million during the quarter, while year-to-date, they reached $302 million. The overall increase in sales was fully explained by our commercial strategy to sell our carryover shock of ethanol from last year, as well as our daily production, to profit from the recovery in prices and clear out our storage capacity. Consequently, we have already sold 320,000 cubic meters of ethanol at an average net selling price close to 2,700 Brazilian reais per cubic meter, 18% higher year over year. Regarding sugar, the combination of lower prices and the decline in production given the lower crushing were the main drivers towards the decline in sales year to date. Nevertheless, we were able to profit from the sale of packed BHP during the quarter, which commanded a premium over spot prices. In the case of energy, higher selling prices more than offset the decline in volume exported driven the lower milling year today. Regarding carbon credits, we sold over 390,000 Cevallos at an average price of $10 per Cevallo, reaching $4 million in revenues. Please go to page 9, where we would like to present the financial performance of the sugar, ethanol, and energy business. Adjusted EBITDA amounted to $68 million during the second quarter and $98 million for the first half of the year. Despite presenting higher sales, results were mainly observed by year-over-year losses in the mark-to-market of our biological assets on lower volume of harvested cane, together with the year-over-year losses in the mark-to-market of our commodity hedge position, due to less gains presented compared to the same period of last year. Finally, to conclude with the sugar, ethanol, and energy business, please turn to slide 10, where we would like to briefly talk about the current outlook. As explained in prior releases, our sugarcane plantation has gone through different weather events throughout the last year and a half. However, our annual crushing forecast remains unchanged thanks to, first, our continuous harvest model that enabled us to flexibly advance or delay harvesting activities, together with higher cane availability due to the expansion planting made during the last years, as well as to higher sourcing of third-party cane. This, in turn, will result in flat to slightly higher cash costs versus the previous year. From a commercial point of view, we are constructive on both sugar and ethanol prices for the upcoming months as we still have the flexibility to switch our maximization strategy to always produce the product that offers the highest marginal contribution. In the case of sugar, we still have a portion of our 2025 sugar production still unhedged, and no commitments for the next year in order to profit from any upside in spot prices as the global supply and demand balance continues to rely on Brazil's production. In ethanol, inventory levels are considerably below the prior year, and the industry continues to prioritize sugar production due to its premium. On the demand side, parity at the pump continues to favor ethanol consumption, and new demand has emerged with the implementation of the E30 mandate. Therefore, any decline in crushing volume could further pressure this tight scenario. Now, we would like to move on to the farming business. Please go to slide 12. As of the beginning of August, we harvested 97% of the total area and produced over 1.2 million tons of agricultural produce. The remaining hectares are expected to be fully harvested during the rest of this month. Despite the precipitation received from February onwards, Some of our crops were impacted by previous of dry weather and high temperatures, excess rainfall, or even below average temperatures. Therefore, average yields for this harvest season ended up below our initial expectations in line to below historical average. In rice, our work on seed genetics and the implementation of new technologies resulted in an average yield of 8 tons per hectare, a new record for this business. In the case of dairy, we are working on reversing the decline in cow productivity seen years ago. At the industry level, we continue to maximize the production of UHC milk for the domestic market, a product that offers the highest marginal contribution while developing our brand portfolio across several markets. To conclude, we began planting activities for our next campaign, starting with wheat and other winter crops. We are foreseeing a reduction in planted area of approximately 20,000 hectares versus the prior campaign, due to our decision to reduce our exposure in the northern region of the country, as well as to diminish the amount of leased area to improve crops margins. On the following page 13, we present the financial performance of our farming business. Adjusted VTA for the farming business totaled $1 million during the quarter, whereas here today amounted to $18 million. Starting with our crops segment, the year-over-year decrease in results was mainly driven by an uneven year-over-year comparison, as in April 2024, we sold La Pecuaria Farm, which generated $15 million in adjusted BTA. Furthermore, results were also impacted by lower international prices, lower than expected productivity, and higher costs in US dollar terms, which combined continued to pressure margins during the period, mainly for our peanut production. Moving on to rice, the decline in adjusted VBA during both periods was mostly explained by the outlier prices reported the prior year, coupled with higher costs in U.S. dollar terms, which in turn fully offset the record production at the farm level. Lastly, adjusted VPA generation in our dairy business was impacted by higher costs in US dollar terms despite the increase in volume sold and our work towards improving the mix of higher value added products and maximizing the production of fluid milk for the domestic market. Please turn to page 15 for a broader view of our debt position. Net debt amounted to $699 million, 11% higher year over year. This was due to higher short-term borrowings raised to finance working capital in our farming business, given the lower results presented at a consolidated level. Consequently, our net leverage ratio stood at 2.3 times, one turn more than the same period of last year. Despite the increase, we continue with our disciplined capital allocation strategy, which also includes investing in growth projects with attractive returns and distributing cash to shareholders while keeping financial flexibility and a strong balance sheet. Subsequent to the end of the quarter, we completed the issuance of a $500 million bond with a 7-year tenor and a 7.5% coupon. A portion of these proceeds was used to partially tender our 2027 senior notes, totaling $150 million. This transaction proves our constant work towards anticipating our debt matching release and therefore having most of our debt in the long term. As an example, the average life of our debt, which got extended from 2.5 years to 4.5 years. On the following slide, we describe our CAPEX program. Expansion CAPEX represented $23 million during the quarter and $53 million on an accumulated basis. In Brazil, expansion CAPEX was mostly allocated to increasing our sugarcane plantation size and expanding our harvesting equipment with the acquisition of two row harvesters and gruner trucks. In our farming business, our main CAPEX program consisted on the development of rice production areas, the expansion of our power bowl production capacity at San Salvador Rice Mill, and some industrial improvements in our Monteros milk processing facility. Let's turn to page 17, where we would like to present our shareholder distribution year today. As of this date, we have already committed $45 million to shareholder distribution. From this amount, $35 million in dividends were approved. The first installment of $17.5 million was paid in May, representing approximately 17.5 cents per share, while the second installment will be payable during November in an equal cash amount. In addition, we have already repurchased $10 million in shares under our buyback program, representing approximately 1.1% of the company's equity. Thank you very much for your time. We will now open the call to questions.