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spk02: Thank you for your patience. This morning's call will begin shortly. Please stay on the lines. Thank you. Thank you. Good morning, or good afternoon, or welcome to the Biosaurus Crop Solutions Fiscal First Quarter 2023 Financial Results Conference Call. My name is Adam, and I'll be your operator today. If you'd like to ask a question during the Q&A portion of today's call, you may do so by pressing star followed by one on your telephone keypad. I will now hand the floor over to Pula Savanti, Head of Investor Relations, to begin. So, Pula, please go ahead when you are ready.
spk01: Thank you and good morning to everybody. Thank you for joining. Presenting today during the call will be Federico Trucco, our Chief Executive Officer, and Enrique Lopez-Lecube, our Chief Financial Officer. Both will be available for the Q&A session. Before we proceed, I would like to make the following safe harbor statement. Today's call will contain forward-looking statements, and I refer you to the forward-looking statements section of today's earnings release and presentation, as well as the region's filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed circumstances. This conference call is being webcast. The webcast link is available at the WSETI's crop solutions investor relations website. At this time, I will turn the call over to our CEO, Federico Trucco. Thank you.
spk03: Thank you, Paula, and thanks, everyone, for joining us today. Good morning. Please turn to slide three so that we can start our earnings call. The first quarter of fiscal 23 has been a fantastic quarter in multiple ways. We have grown revenues by 71%, and this is after including pro-farm historical revenues in the year-over-year comparisons. And this revenue growth has trickled down to profitability, with our adjusted EBITDA almost steadily falling over and reaching $24.5 million. a record quarterly number that is even more impressive if you consider that we're now fully accounting for Profarm, which is initially a negative EBITDA contributor, which we intend to quickly turn around into a positive contributor. On this last point, and as we discussed in our September call, we have finalized the Profarm merger on July 12th and have started the integration process during the reported quarter. This transaction triggered a change to U.S. dollars as a functional guarantee in our main subsidiary in Argentina, which we believe will help us better reflect the reality of this business in our consolidated financials. And Richard will expand on this in his part of the presentation. We will report on H3-4 crop status in a few minutes with H3-4 seed plantings underway and H3-4 wheat harvest to start in the next few weeks. Finally, we would like to use today's presentation to discuss the long-term agreement we have recently reached with Syngenta Feedcare to accelerate the expansion of our endowment internationally. Discuss why we did it, the expected benefits, what is included and what is not included in the agreement. Before we move to the next slide to more deeply address these key highlights, we also would like to announce the completion of our Shared Buyback Program. The program was launched back in March of 2020, and we have seen approximately 570,000 shares with an average acquisition price of $8.77. We have used the program opportunistically, where we observed significant dislocation in the market, and intend to continue to do so by refreshing the program for another $5 million on a forward volume basis. Please now turn to slide four. This slide shows the year-over-year growth of paid and comparable revenues for the last six quarters and the growth reported in the current quarter. It is obviously not the same to grow at a 71% rate if you're coming from a flat year than when you're running at a 62% growth rate from the fiscal year immediately before. We are very proud of this quarter's performance and Enrique will further address this in his part of the presentation. Moving to slide five, as we have already discussed, we have completed the NERGEN with ProPharm and now have an NMED platform for future growth in biological ag inputs, positioning our company as a clear leader in sustainable solutions for the agriculture of the future. With the integration of Profile, we now have an existing portfolio or pipeline of products designed to replace or significantly reduce the use of synthetic chemicals in most functions for which they are required in high productivity agriculture. Where we can most immediately achieve this substitution is in the feature segment of the industry. As we will describe shortly, when we discussed the long-term collaboration agreement breach with one of the segment leaders, CU-Genta. Before we do that, let's review the status of HP4 drops in the next three slides. Severe drought conditions in Argentina may transiently slow down sales in our second quarter, the current quarter. However, and at the same time, the drought is creating a unique opportunity to showcase H3PORT technology, with a countrywide wheat crop decline expected to be at the 40% level compared to last year's harvest. As you know, HP4 crops are drought tolerant, not drought-proof, so we expect to lose some fields where the conditions have been too extreme and the crops will not be taken to harvest. We think that 86% of the fields will be harvested and provide good indication of the benefit of HP4. We believe also that we will have enough inventories to stay on track and meet our fiscal year 23 goals for the crop, positioning us to reach the guidance provided for fiscal year 24. In the next slide, you can see that the phenotypic difference observed for one of our second-generation materials when compared to its isogenic, non-HB4 system line, which is currently a top-selling conventional variety in Argentina. We are looking forward to see these differences translate into yield benefits and report these in more detail in our next earnings call. In the next slide, we will provide a brief update on HP4 soil. We are making big progress with HP4 soil breeding and multiplication efforts with added season planting well underway. and with two varieties being scaled in the fall for an upcoming launch with multipliers next season. Importantly, we have onboarded the four new licensees, or germ planting providers, covering genetics for Argentina, Brazil, the United States, and South Africa, where we recently obtained feed and food clearance for those days before we even started. We're doing this while advancing our cyclical collaborations. For instance, We expect varieties from Grupo Don Mario to become available to multipliers next year in Argentina and the following year in the United States. Let's now move to the next slide to discuss the announced long-term collaboration with Ingenta SeedCare. First, why SeedCare? This is a $4,000 to $5,000 segment within the input market, in which biologicals are currently at 20% of the segment, with one-third of that penetration resulting from inoculants. After that category, where we have achieved significant success in Argentina, and are starting to do so internationally. Biologists in this segment are expected to reach $1.6 billion by the end of the decade, and we believe we can be a clear winner in capturing that growth. Turning to the next slide. To do this, to be a clear winner, we partnered with a segment leader, Syngenta Seed Care. We have been collaborating with Syngenta Seedcare for 20 years in Argentina and have jointly achieved and held the number one position for our inoculants, biofungicides, and Syngenta molecules for a long time. This new collaboration creates the right structure to expand its success internationally at an accelerated pace. We expect the international revenues generated by our inoculants alone to at least double in the next two years. While Syngenta will now cover working capital needs as well as sales and marketing activities, we have secured minimum profits that average $23 million on a per year basis over the life of the agreement. And this is not including an upfront fee of $50 million in exchange for the different rights granted for the collaboration. On top of these annual minimum profits, we will receive between 50% and 30% of the incremental profits generated by the collaboration, depending on the geography and the year. The collaboration is not just designed to maximize our commercial reach, but it is also focused on accelerating our R&D efforts. With Syngenta covering 70% of the R&D investments required for every pipeline product, a new product that we may opt to develop jointly within this framework. Finally, I'm turning to the next slide. We have not sold our in-Oakland business to Syngenta. We have partnered with Syngenta to make this business far more relevant over the next 10 years. The current agreement does not include pro-farm portfolio. It is retaining rights for us to use seed treatment solutions in our H-Report Farming as a Service channel or H-Report program. And we are also making southern rice non-exclusive in the United States for the over-the-top solutions derived from products within the agreement. We want to thank Engenda Seedcare leadership for their trust and hard work to get to this point. and reassure them of our full commitment to the success of this joint endeavor. Enrique, all yours. Thank you Federico and thank you to everyone for joining us today. We are delighted to have kicked off a new career with such a strong performance. And so what we're reporting today builds on top of outstanding growth achievements throughout the previous six quarters. So I would like to take this opportunity to congratulate and thank our sales and operations teams for doing a fantastic job of getting our technology from product to market with relentless execution. I will address the drivers behind our quarterly financial performance in the next few slides, but a strategic outline. This was predominantly a very important quarter from a strategy standpoint. We started the fiscal year on a strong note by completing the merger with ProFarm, and then continued to make considerable progress on our integration efforts and synergy targets in the quarter. Simultaneously, we executed an IOCAT agreement with Syngenta Seed Care that created value on multiple fronts. It provides a long-term profitable growth path for our inoculants. It broadens the scope of our research and development activities around sea treatment biologicals by having Syngenta co-fund 30% of the investment. And it also strengthens our dialogue by bringing in 50 million dollars in a context of global turmoil in which liquidity has become an increasingly important lever to have at hand. These two milestones put us in a unique strategic position to structurally benefit from the secular growth trend and high profitability profile of the biological software. Before I dive further into the quarter results, I would like to call your attention to a couple of important reporting changes we have introduced. The most relevant aspect relates to a switch in functional currency of our main Argentine subsidiary, which is addressed on slide 12. The merger with Opam and the subsequent business integration triggered the need to adopt the U.S. dollar as the functional currency in our main operational subsidiaries in Argentina, starting in the first quarter of this fiscal year. Despite starting out operations mostly in U.S. dollars, these subsidiaries had historically used the Argentine peso as the functional currency, and their financial statements were therefore subject to IAS 29 accounting adjustments that created distortions in our reported results and forced us to provide compound metrics to better assess our underlying performance. The graduate report pump has enabled this long-standing shift, which now eliminates the need for IAS 29 inflationary adjustments and, as a result, comparable figures will no longer be presented except in reference to past quarters. Long-term, this change will simplify our financial reporting and provide our shareholders with a much clearer picture of our problems. On a different note, to allow a fair comparison of our organic crop and growth year-over-year, we have taken the extra steps to provide pro forma comparisons for fiscal year 2022 revenues and gross profit, two metrics that would otherwise benefit from the addition of crop farm in our fiscal 2022 results. Perform a compiling of figures reflect the addition of pro-farm to historical numbers and isolate any IAS and denying distortions on fiscal 2022 figures to favor a cleaner comparison of our results to past performance. Otherwise, as reported results from prior reporting periods will be used for other line items to the income statement and balance sheet, including adjusted EBITDA. We recognize there will be a bit of adjustment as we go through the 2022-2023 fiscal year, but again, we believe this change more accurately reflects our evolution as a company. If you would turn now to slide 13, please. Our first quarter is dominated by sales in the southern hemisphere, where the growing season started in earnest. Summer crops planted in Latin America, an important source of earnings for us, spans the first half of our fiscal year, and our team did an exceptional job of anticipatively locking in a 71% growth in the first quarter in the face of dry weather, particularly in Argentina. As I mentioned, revenues from ProPharm are incorporated into our sales results, which gives you a light-for-light comparison of our total business first quarter to first quarter. By any measure, a 71% increase in revenues has been a strong start and provides us with comfort on the outlook for the first half of the fiscal year, even as we navigate rough waters on what has now been confirmed as a historical drought in Argentina. Let's please move to slide 13 for more detail on the revenue breakout by segment. Co-administration was the main contributor to growth in quarter, We saw continued strong adoption of our microwave fertilizers in an environment of tight and costly fertilizer supplies. The expansion was driven by the winter season and pre-season summer sales in Latin America. Inoculant sales also expanded across multiple regions. These gains were somewhat offset by lower sales of pro-farm biothymulants on a competitive basis because of the timing of sales last year. All of the biostimulants from the ProPharm portfolio are now included into the crop nutrition segment, while all of the products that come from the legacy ProPharm biocontrol portfolio have been incorporated into the crop protection segment. Sales of crop protection products increased by 54%, even as growers faced dry water conditions in key Latin American markets and in the United While drought conditions in the western United States continue to curtail specialty crop sales, U.S. row crop sales of pro-farm bioprotection products grew. Agilent sales in Brazil and Argentina also delivered solid performance with higher B2B sales. Finally, sales of seed treatment packs ahead of planting were higher in both Latin America and South America. We anticipate drought conditions will likely hamper the planting and growing seasons in Latin America. But on the other hand, we will have the added benefit of profile revenues, which we expect to rebound with growth as we move through the fiscal year. If you turn to slide 15, revenue growth translated into a 52% increase in gross profit. Also led by our crop nutrition segment, which delivered an impressive 85% growth in gross profit with a 50% gross margin. Growth in feed treatment bags was also achieved with a healthy 50% gross margin. Overall gross margins of 40.5% were down roughly 500 basis funds from the same period last year because of the mix of products sold within each segment, dumping margins across the board. We, like others in our industry, experienced high interest and price costs in the first quarter, which also played a role in putting pressure on margins of some products that require volunteers involving international logistics, such as Agilent. Adjusting use of the quarter reached a record high of $24.5 million as shown on slide 16. The increase in gross profit drove improvement and more than offset higher operating expenses with increasing healthy operational leverage. SE&A increase in the quarter was mainly driven by the addition of pro-farm operating expenses and by transitory costs related to the integration efforts, such as severance and higher than usual traveling expenses. Baseline business operating expenses were also higher, mainly explained by variable SG&A costs on higher sales. Even with these additional one-timers, SG&A is a percent of sales after deducting 2.8 million dollars in merger transaction expenses, was roughly 23%, in line with the first quarter of last year. Despite not benefiting from the pro forma exercise from historical 2022 numbers, the adjusted data margin remained relatively stable at 19.3% year-over-year. Slide 17 gives you a slightly different look at what were the adjusted data improvements. These calls have been to see that our Baseline business was strong enough to absorb the Mayor de Minca contribution from Proparm and still allow us to report an impressive $24.5 million result. It is also important to note that within the first quarter, we made meaningful progress on achieving cost synergies from the merger, which also contributed to minimizing the Mayor de Minca to Mayor de Minca from Proparm's results. Within the next two quarters, we expect to fully achieve the cost synergies we targeted at the time of the merger and believe that by year-end, profile assets will have turned into positive Indica contributors, which should be the basis on which we continue to build sales synergies in the next 12 to 18 months. Same as mentioned when describing sales, having achieved such an impressive EBITDA result in the first quarter gives us great comfort on the outlook of profitability for the first half of our fiscal 2023. If you return to slide 18, let me wrap up by covering three of the values. Total financial debt increased to $228 million related to the execution of the two financing agreements in connection with the pro-farm merger. Part of the proceeds were allocated to paying off all existing ProHAR financial obligations, and the remaining were used to reinforce working capital at ProHAR and our overall cash position. Our net debt ratio remained relatively flat at 2.36 times LPM adjusted EBITDA, with a healthy balance of cash, current and non-current debt. Cash and equivalents rose to $51.3 billion at the end of the quarter, including cash used to fulfill our $5 million share repurchase commitment. Subsequently, to the close of the quarter, we received the $50 million of payments from Syngenta, which brings our cash position to over $100 million. In completion, we have had an exceptional start to the 2023 Peace Career, and despite severe weather conditions in some key markets, our strong first quarter results and the revenue diversification we gained from ProPharm makes us feel confident about the growth outlook for the full Peace Career and allows us to remain focused on executing our H3-4 strategy and making ProPharm assets into contributors before year-end. With that, I would like to turn the call back over to Federico. Thank you, Enrique. I don't want to take much longer, but I do want to finish with some looking forward remarks for the remainder of fiscal year 23 if we turn to the next slide. I think we expect to see sustainable double-digit growth in our core business year over year. And this is despite coming out of a and also after the volatility that we might be experiencing due to the weather conditions in Latin America. So we are highly confident on this continued growth trajectory for the company. for the fiscal year 23. Obviously the ProPharm integration process is an important aspect for the fiscal year where we expect to reduce that negative EBITDA contribution from ProPharm and turn that into a positive number by the end of the year. and also take advantage of the R&D capabilities that exist within ProcFarm to make them available not only to other internal customers but also to external clients so that we can utilize this in full. We will fully launch HP4Weed in Argentina. We will have data coming out from the current harvest in the next earnings call. and use that to validate and promote HP4 technology for the next season. And we continue to scale HP4 soy breeding and multiplication in Argentina and Brazil with the inventory levels set in place and the performance achieved to meet the fiscal year 24-25 guidance we have already provided. And to recap on those, we expect HB4E to contribute between $15 to $20 million of EBITDA in the next fiscal year, and so to do that at the $20 to $25 million level by fiscal year 25. It is important that during fiscal year 2023 we meet the initial KPIs that we set in place for the Tintenza collaboration and scale up our production capacity for biological cytotentina and also for Agilent in Brazil. hoping to finish the new facilities by the end of the fiscal year and have that fully operational in fiscal year 24. So these are some of the sort of expectations for the current fiscal year that we wanted to finish the call with. We can now open up the floor for Q&A.
spk02: Reminder, if you'd like to ask a question today, please press star followed by one on the telephone keypad now. When preparing to ask your question, please ensure your headset is fully plugged in and unmuted locally. That's star followed by one on your telephone keypad. And our first question today comes from Bobby Nelson. Bobby, your line is open. Go ahead.
spk08: Yeah, thank you for taking my questions. I'm not sure exactly what time it is for you guys, but good morning if it's still morning for you, obviously. So I guess, yeah, the first one is just know if we think about uh pro farm you know formerly maroon they had nice growth they had pretty healthy gross margins but they always seem to struggle a little bit with the opex and i know you guys are targeting reducing that negative ebitda drag and then turning that positive so maybe just walk us through some of the low-hanging fruit there that'll help you kind of achieve that objective this fiscal year.
spk03: Hey Bobby, this is Enrique. Good to have you on the call for the first time, so thanks for taking the time to ask questions. It is still morning for us, so you were right. Not enough time for you, Bobby, but... Yeah, yeah. Well, you're right on your comment. I mean, that's right on the spot. There's obviously local proof that we had identified at the time of the merger. And that was mostly related to sort of the delisting of the company. And that was what we achieved first. So not having the costs or duplicative costs of two public listed companies is something that gave us a quick win in the beginning. There were obviously some team restructuring measures that we took that were a bit harder to do, but we already accomplished those as well. So we are currently today about 80% of the top synergies that we have targeted. What we expect is that in the next couple of quarters, we will execute the remaining. And that plus role coming from the sales teams in the next three quarters should allow us to put to a farm positive contribution or the asset coming for pro farm. Now bear in mind that the way that we structure the business and that we announced the time of the merger we will no longer be looking at the firm as a single standing entity. There will be business units and there's cross-selling there. So at some point, this will begin to be sort of like a one company. What we wanted to do today is give you some sort of notion of how we are targeting and tracking those operating expenses synergies. And then on top of that, if we get to year end and look back on a trading last 12 months basis and Procon has become a positive unit entity, that should set the basis for us to continue executing on the medium term synergies that were related to sales. Remember that we targeted between 5 to 15 million dollars in sales synergies that take a little longer to be executed, mostly because it requires some work on the registration front So already during some of the pro-control in geography where we have a sales muscle, it takes a bit of a time, but that's what we're looking for, a strong basis on which then to add those synergies.
spk08: Great. Very helpful. And then just maybe just a quick follow-up or slightly different question, I guess. You know, if we think about all the supply chain concerns and export issues for grain out of Ukraine, et cetera. Obviously, over the past few years, and it looks like it will continue to be so, South America has become a major export source for the world's food in certain areas in particular. And I'm wondering... With the GM seed and trait capability you guys have developed with HB4, is there an increasing acceptance maybe for GM seeds and in regions of the world that maybe were resistant to GM, you know, Europe and, you know, etc.? ? What are your thoughts on that environment and how it's maybe broadening the scope of your opportunity there for HB4?
spk03: That's a great question, Bobby. Thank you for joining the call today. I think that the situation that you just described has created a shift in focus from sort of the way GM technologies may be perceived by certain groups to sort of more important focus on food security law. All of a sudden, we see the importance of food production and technologies that can help us increase productivity while preserving natural resources become center stage regardless of the tools that we use to achieve these types of solutions. So yesterday, for instance, we received news from Indonesia. approving HP4 wheat for feed use. That is on top of Nigeria, coming from a continent where there was a high level of reluctance to GMO approval, perhaps high interest by the historical European position. I'm not saying that we are ready to file a grant for HP4 wheat here. But today we're much closer, much, much closer than we ever were in trying to get these technologies to become accepted, even by the more sort of... skeptical or reluctant consumers. This is an opportunity we're seeking. After we approved in Argentina, you saw how approval cascaded in very meaningful geographies for wheat and soy. Wheat obviously is more of a challenge because we are the only company today with a GM wheat event, and wheat has been historically for human consumption, unlike soy and corn. which were more dedicated to animal feeding and biofuels. But we're taking advantage of this situation. I think the current goals in Latin America will make this even more relevant, and we expect to see many more approvals cascading down in the upcoming months.
spk08: Fantastic. Thanks for taking my questions. Congratulations on such a strong quarter.
spk02: The next question comes from Ben Clee from Lake Street Capital. Ben, please go ahead. Your line is open.
spk07: All right. Thanks for taking the questions, and congratulations on just another exceptional quarter across the board here. Two quick ones from me. My first question is on the quarter itself. Enrique, I'm wondering if you saw any kind of lumpiness that benefited the quarter, either revenue getting pushed from Q4 into Q1, some revenue getting pulled from Q2 into Q1 or any kind of outside orders or if the success was just kind of brought across the board.
spk03: Hey, Dan. Thanks for joining us.
spk05: I've been to a question.
spk03: Well, I think that... The way we tend to look at the performance in the first quarter is all together with the second quarter. If you think about it, the first and the second quarter of our fiscal year are basically where all of the summer crops planting activities take place in Latin America. That remains an important market to us. We have Argentina. We will do white by white. So I would say that we are looking at this as part of the summer crops planting season that we allow to every people. There's a bit of sales that transcended from before winter crops micro fertilizers, but that's not as meaningful as it is in terms of looking at the first half as a whole. That's what I would say and that's why I think it's so important that we lock in this growth early in the season. That makes us feel comfortable as we look to the full fiscal year growth outlook. We remain positive about that, even as we transition what they described as one of the most severe drugs that Argentina has faced in the last probably three decades. And Argentina is going to come back to us.
spk07: Got it.
spk03: That's helpful.
spk07: And that kind of helps a bit my... Second and last question here, and that's around these drought conditions. I mean, you guys have been very vocal about this, and reports widespread around the terrible dynamic that Argentinian farmers are facing. A couple years ago, there was a similar dynamic underway, and I'm wondering if you can help characterize your outlook here into the second quarter and the chemical fertilizer application that's coming up. period relative to similar conditions that arose a couple of years ago. Are you looking for as material of a headwind as you faced two years ago? Do you think that's going to be offset by other variables? Help us kind of frame the outlook here for the next quarter relative to the experience a couple of years ago.
spk03: Hi, Ben. This is Federico. Thank you for joining us once more, and thanks for the question. I think that we're better prepared than what we were back then. First, because we have a more diversified base today, so we will have, I think, more meaningful contribution from crop farming in North American Europe in the quarter. In terms of the fertilizer impact, uh that is mostly related to corn planting and that depends on the rain event that might happen in the upcoming days or weeks so i i think if those great events don't occur and and sort of there's a transition from that season corn to later season corn we might see a slow down in in the fertilizer sales but i i have to say that we're much better positioned than what we were two years ago when we faced a similar situation. And having had sort of this great start I think gives us enough of a cushion to deliver the first half revenues and results that we expected to deliver for fiscal year 23. Got it.
spk07: Got it. Okay. Very good. Plenty more to talk about, but I'll pass the time here. Congratulations on a great quarter, and I'll get back in line. Thanks, guys. Thanks.
spk02: The next question comes from Brian Wright of Roth Capital Partners. Brian, please go ahead. Your line is open.
spk04: Thanks. Good morning. First of all, just wow. That's all I've got to say. Commentary. Question. On the global minimum targets with ascension to agreement where you said the average is $23 million on a yearly basis of the life, is that over the first four years or the 10-year period and how to think about maybe how that minimum target kind of moves from the beginning to the end?
spk03: Okay. Hi, Brian. Great to have you in the call and thank you for your initial welcome. We feel the same way. So the $23 million average is basically the $230 million that are contractualized as minimum profits for the life of the agreement divided by 10 years, no? So initially, that number, so what we expect in the initial year is that we are still pursuing some of the business ourselves, so this is not starting all at once. It's probably below that $23 million average, and then as we move to later years, it's going to be above that $23 million average. So that's the guaranteed profitability under the agreement, almost in a take-or-pay type format. On top of that, if we have sales from the collaboration that exceed those minimum targets, we will be sharing profit at the 50% to 40% rate depending on the geography and the year. So that is basically what we are reflecting with that average number in terms of the collaboration.
spk04: Great. Thank you. And then just a follow-on if I could. The cash position post that agreement, it's robust. I know you completed the $5 million share buyback. There seems to be room for potentially more. Just any kind of comments along those lines?
spk03: In terms of the buyback you mean? Correct. I think... We would like to continue to do what we have done in the past, which is take advantage of these locations in the market and exercise the buyback program. If we need to refresh on a monthly basis because we are meeting the $5 million cap every month, we will ask our board permission to do so. kind of a capital allocation decision that needs to provide a level of return that is attractive compared to the other capital allocations that we might have in our business. So this is not something that we're doing to support the price of the stock. This is an investment opportunity or something we really know well when the market gives us sort of an opportunity to do so. I don't know. I think if you want to add anything to that. I think I do, and I think it also helps us potentially minimize dilution coming from the converter nodes. Remember that we have issues with the nodes that have a strike price of 18, and this is a fantastic way if we are positive about the outlook of the company to minimize that potential dilution.
spk04: Okay, great. Thank you so much.
spk02: The next question comes from Kent Oliver from Brookline Capital Markets. Kent, please go ahead. Your line is open.
spk05: Great. Thank you, and good morning. So two questions. First is, where do the seed multiplication efforts you've discussed in the presentation put you relative to the fiscal 24 and 25 EBITDA goals? Essentially, thinking of it as percentage of target, where will this put you?
spk03: Hi, Ken. Thank you for joining us, and thank you for the question. I think, obviously, we're not halfway in terms of fiscal 2014. The key here is to make sure we have enough inventories to reach those numbers in fiscal 24. I think that even though the yields will be lower because of the significant drought, we will have those inventories in place. Drought is a top of mind aspect today in all farms in Argentina, so I don't think we'll have an issue placing those inventories. in the current year so that we can reach the $15 to $20 million next year from an EBITDA viewpoint. The only caveat, if you will, is that we might rely a little heavier or we might be depending a little more on the first-generation materials compared to the second-generation materials, which were the materials that we were just starting to multiply this season. So we had limited inventories and sort of reduced yield because of the drought. In a way, it doesn't allow us to go full speed ahead with those. This is not an issue when you're facing drought because the first range of materials have shown terrific benefit. But it is something we need to clean up in the event of normal years or years where yields are expected to be high so that we avoid any kind of dry in the overall performance. So that's the only thing I would say. We need to readjust in the current season, but not affecting what we need to be the $15 million to $20 million guidance.
spk05: Thank you. My second question is, what is the status of the joint venture talks between Trigal and S&W in Australia?
spk03: That's a great question. So we're moving forward with that joint venture process. We are now finalizing the definitive agreement. It took a little longer, but we expect to have this closed by the end of the year. And we're starting to coordinate bringing activities to them. This has been ongoing since September already. Not including this in the bag, but it continues to be an important aspect of the trigger opportunity in Australia.
spk05: Very good. Thank you. And I will ask a third question, which is, are you going to miss doing the IAS 29 adjustments?
spk03: That's a great question, Rick. No, we're not. And actually, it's even hard to differentiate. So we're not going to miss that at all. I guess it won't be here.
spk05: I will not. Thank you.
spk02: As a reminder, if you'd like to ask a question, that's star one on your telephone keypad. And the next question comes from Stephen Ralston from Zax. Stephen, please go ahead. Your line is open.
spk06: Good morning, and congratulations on a great quarter. My first question concerns your collaboration with Syngenta. Could you expand upon that and clarify some specifics? especially towards product lines. As I understood it, it was a very symbiotic relationship in Argentina where you distributed Syngenta's fungicides and insecticides, the Maxim family and the Italic family of products. And in return, Syngenta distributed Rhizobacter's seed treatment products. How is that changing? I know it's global and in some cases exclusive, you know, exiting out the U.S. And could you also get into the specifics of the potential you see in China and Brazil?
spk03: Great. So thanks a lot, Stephen, for joining the call and for the great question regarding the Syntem Dynamics. So as you described, in Argentina we have achieved unprecedented success. We are by far the leaders in the inoculant business and also in the biopharmacy side of the business in the seed treatments. And I believe Syngenta has obtained in Argentina a level of molecule penetration that is unmatched anywhere in the world. I think when you consider both channels, it's probably close to 40 to 50%. So that's something Syngenta was not able to replicate in other geographies for their active ingredients. So the question was, how do we scale these up internationally in a way that is attractive to both parties, and that's why we went into this long-term distribution collaboration that has an R&D component as well. So the footprint that we have in Argentina, we don't have that footprint in Europe, we don't have that footprint in the United States. and let alone Asia, like China or Australia. So being able to build that ourselves organically will take a long time. Being able to use in general that existing footprint, I think, can give us an opportunity to quickly penetrate those markets with a one product category where we have done this jointly in a very successful way. So we are initially doing this all in the development and the rest of that is part of the seed treatment portfolio. And this is not saying that we're making the opportunity to use it just as a footprint for the bio-dematicides, for instance, that come out of Maroon, but that is not today included. So that's something that we might discuss in the future. We might even consider other opportunities But this was kind of a starting point for us to fully penetrate that four to five million dollar market, where biologicals are already at the 20% level. Significant part of that because of inoculates where we are global leaders. and where we believe we can be at $1.6 billion market-wide in biologicals in general by the end of the decade. So that's kind of the thesis behind the Syngenta collaboration. We are not going into a blinded relationship. We've known each other for 20 years, the positive and the negative. So this is what we are sort of now deciding to do jointly on a forward-going basis.
spk06: Thank you. Now turning to EBITDA, it seems like the major contributor was crop nutrition, and that's related to your microbeaded fertilizer plant. And I've noticed the last quarter and this quarter you have not given out the 12-month trailing capacity utilization in your press release. It must be very high at the current time. Can you share that now, and what are your plans there in the future? Because you should be getting very close to maximum capacity.
spk03: Hi, Steve. This is Enrique. Thanks for joining the call, and thanks for the question. Yes, you're right. I mean, we have been ramping up the use of installed capacity. We have used a metric of LDM use of installed capacity to basically travel evolution on an asset that was historically asset that is most industrial in nature the rest of our gardens are not heavy relying on industrial assets or manufacturing facilities that are complex. That's the reason why we use the metric. We are standing today at close to 80% use of the installed capacity. We can still use additional 20%, but that requires investing in working capital because this is a highly seasonal product. So we are already looking into expanding capacity in that plan. We are thrilled about how this product has rolled out into the market in Argentina and the southern states of Brazil. And we're looking into opportunities maybe in our market, maybe in the northern states of Brazil, and why not even in the U.S. at some point. So, yes, we will need to do some investment. Now, It's not the same to start from scratch than to add capacity on what we already have. So to continue expanding Latin America, we will be doing mobile investments to ramp install capacity up as we see that there is further demand for the product.
spk06: Thank you. And I want to congratulate you on your strategy there on that. on that plant because basically it was a wasting asset with very low capacity utilization. And through your strategies, you've made it into a true cash generator.
spk03: Thank you for taking my question. Thank you, Steve. We know you've been tracking that part of the business closely, so it's great to see you. We could make progress there as well, so... Very proud to see that happening.
spk04: Thank you.
spk02: We have no further questions, so I'll hand back to Federico for any concluding remarks.
spk03: Okay. I want to thank everyone for joining us today. For those that woke up at 5 a.m., a particular thank you, because it's very early. We are really proud of the quarter we just finished, the progress that we're making, and hope to continue to sort of bring these type of results on a forward-going basis. It's going to be challenging because the bar is high and the weather is not helping. So maybe a little bit of rain might help, you know, despite our age before investment and how important drought is for us from a technology viewpoint. But we are really happy to be where we are. And please feel free to reach out if you want additional information or follow up with any additional questions. Thank you and have a great rest of your day.
spk02: This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.
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