Adecoagro Q1 2025 Earnings Call Transcript

Quartr
Provided by Quartr
May 13, 2025

Key Takeaways

  • AdecoAgro’s largest shareholder is now Tether with 70% equity following its tender offer, and the new board under Executive Chairman Juan Sartori plans to leverage blockchain, stablecoins and AI to support both organic and inorganic growth.
  • First-quarter consolidated adjusted EBITDA fell 60% year-over-year to $36 million, driven by lower prices in rice and sugar, reduced Brazilian production and one-off tender offer expenses.
  • Recent rains after a dry first quarter are expected to drive a 5–10% recovery in sugarcane yields, enabling accelerated crushing in H2 and lower unit costs, while ethanol margins remain attractive.
  • The Farming division set a record rice yield of 8 tons per hectare and delivered a 25% increase in crop volumes, although EBITDA was pressured by normalized prices and higher costs.
  • AdecoAgro reaffirms its minimum 40% cash distribution policy for 2025, has committed $45 million in dividends and buybacks so far, and maintains a healthy leverage ratio of 1.7× and liquidity of 1.6×.
AI Generated. May Contain Errors.
Earnings Conference Call
Adecoagro Q1 2025
00:00 / 00:00

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Operator

Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Adecco Agro's First Quarter of twenty twenty five Results Conference Call. Today with us, we have Mr. Juan Sartori, Executive Chairman Mr. Mariano Bosch, CEO Mr. Emilio Meneko, CFO Mr. Renato Junquera 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 listen only mode during the company's presentation. After the company's remarks are completed, there will be a question and answer section.

Operator

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 Adecco Agro's 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 Adecoagro and could cause results to differ materially from those expressed in such forward looking statements. Now I will turn the conference over to Mr. Mariano Bosch, CEO. Mr. Bosch, you may begin your conference.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

Good morning, and thank you for joining Adeco Agro's twenty twenty five First Quarter Results Conference. Before we start with the highlights of the performance of the company, we would like to comment on the recent transaction. As you may all be aware, Tether has completed its tender offer process and has become our largest shareholder, holding 70% of the company's equity. This is clearly the start of a new era for the company, and we are all very excited and enthusiastic about the future prospects with this new venture. I still remember when we founded Adecoagro back in 02/2002.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

We had the idea of producing each of the commodities where we could achieve being the low cost producer worldwide. Within this concept is that it has taken us more than twenty years to develop our current four business segments. In each one, we leveraged on the best combination of soil, climate, and people to develop our existing sustainable production systems. We are very happy that a significant shareholder such as Tether, a leader in technology and innovation in its field, has acknowledged our work and wants to support us. I am certain that through the implementation of cutting edge technologies, we will be in a position to continue transforming the traditional agribusiness space while we venture into potential new exciting projects.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

Having said all this, we had invited today our executive chairman, mister Juan Sartori. Juan has recently joined the new board representing Tether together with other four new directors. Juan, welcome to Adecco Agro. I will pass the floor to you.

Juan José Sartori Piñeyro
Juan José Sartori Piñeyro
Executive Chairman at Adecoagro

Thank you, Mariano. Good morning, everyone. I am Juan Sartori. It's an honor to join the Board of AdecoAgro as newly appointed Executive Chairman representing Tether, now a significant shareholder in the company. Following the completion of the tender offer, we have appointed a newly formed Board, which we believe that in combination with the continuing members and the quality of management is now an ideal composition of experience and new ideas that will support and lead the company into the future.

Juan José Sartori Piñeyro
Juan José Sartori Piñeyro
Executive Chairman at Adecoagro

Tether is the creator of the largest, most transparent, and liquid stable coin in the industry, and its mission is to build sustainable and resilient infrastructure for the benefit of underserved communities. By leveraging cutting edge blockchain and peer to peer technology, it is committed to improving financial inclusion while fostering economic growth in emerging countries where there is a huge opportunity to unlock growth. The company currently has more than 400,000,000 users around the world and recently surpassed 150,000,000,000 in assets and EUR 13,000,000,000 in profits in 2024. Tether's investment in Adecoagro is part of its strategy to invest in reserve tangible assets with limited supply, which supports sustainable developments that create real impacts. We are excited to become part of this remarkable company, which owns some of the best agricultural and energy assets in the world.

Juan José Sartori Piñeyro
Juan José Sartori Piñeyro
Executive Chairman at Adecoagro

Assets of particular importance for Tether as it sees in Bitcoin, gold, and farmland, the basic assets for stable and uncorrelated long term reserves. We recognize in Adecoagro, a platform of management efficiency in integrating and operating agricultural and energy assets that will only be improved by the incorporation of a successful and committed long term shareholder. We are committed to supporting Adecoagro's management in executing its current strategy and contributing to its future growth journey. We currently see organic and inorganic opportunities in Latin American countries with very attractive returns, which we may explore and are ready to provide financial support if needed in order to execute. We are here to help strengthen what the company already does so well, which is operating, integrating and managing complex businesses with discipline and excellence.

Juan José Sartori Piñeyro
Juan José Sartori Piñeyro
Executive Chairman at Adecoagro

We will contribute to maximize long term value, maintaining a disciplined capital allocation strategy, including a firm commitment to keeping a healthy balance sheet and the company's leverage levels while pursuing aggressive growth opportunities when they present themselves. We will also maintain the current shareholder distribution policies by focusing on dividends and a strong emphasis on maximizing the stock price, sometimes by remaining open to opportunistic buybacks to the extent we conclude it is the best use of the company's resources as well as aligning management compensation even more to the subside. In addition, we intend to offer Adecuadro the latest technological innovation and capabilities, areas where Tether has deep expertise and success and is currently transforming around the world. We see opportunities to explore leveraging stable coins and blockchain technology to increase efficiency in commodity trading, explore real asset tokenization and potentially integrate AI and peer to peer technologies under development to further strengthen operational performance. We are looking forward to working with the board, management team, and investor community on this journey. Thank you, and back to you, Mariano.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

Thank you, Juan. Now going into the results of the quarter, consolidated adjusted EBITDA reached $36,000,000 Starting with our businesses in Argentina and Uruguay, our rice operations achieved a new record in productivity, proving that all the investment made in seed genetics, land levering and machinery paid off. Off. Nevertheless, rice prices, as you've seen, are going down. In dairy, our presence in the retail and export markets grants us commercial flexibility to maximize the production of the product that offers the highest margin, which continues to be the fluid milk.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

Although the crops business is facing another challenging year in terms of prices and costs, we are seeing an improvement in crop productivity versus last year. Let's move into the Sugar, Ethanol and Energy business. During the quarter, we sold all the ethanol that was stored in our tanks at prices significantly higher than in the previous periods. Now that the new season has started, we have once again the flexibility to build up inventories in our storage tanks if needed. In the meanwhile, we are strategically crushing all cane that has impacted by the dry weather.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

In order to maximize productivity during the second half as we accelerate our crushing pace and reach our annual target. The higher the milling, the better we will be diluting our costs as we always say. To conclude, I would like to reiterate my gratitude to all our people in Adecco Agro. But this time, I would like a special thank for our former directors, Plinyo Musechi, Alan Boyce, Guillaume Mandaliden, Andre Belaco and Dana Russo for their support and valuable contributions throughout all these years. Now I will let Emilio walk you through the numbers of the quarter.

Emilio Gnecco
Emilio Gnecco
Chief Financial Officer at Adecoagro

Thank you, Mariano and Juan. Good morning, everyone. Please turn to Page five with a summary of our consolidated financial results. New sales totaled $324,000,000 during the first quarter, '20 '8 percent higher year over year on higher volumes sold, mainly ethanol, as we emptied our tanks, which in turn fully offset the lower prices for some of the commodities that we produce. Despite an increase in sales, adjusted EBITDA was down to 36,000,000 marking a 60% year over year decrease.

Emilio Gnecco
Emilio Gnecco
Chief Financial Officer at Adecoagro

The year over year decline in EBITDA was mainly explained by losses in our biological assets line in our rice and sugar, ethanol and energy businesses due to lower prices as well to lower production in the case of our Brazilian operations. In addition, results were also negatively impacted by one off expenses incurred by the company in connection with the tender offer. Now please turn to Slide six. Regarding our production figures in the bottom right chart, we can see that crushing volume in our Sugar, Ethanol and Energy business was down 31% year over year due to the a slower and selective milling pace adopted during the first quarter, which we will describe in more detail during the presentation. On the other hand, total production in our Farming division reported a 25% year over year increase explained by higher planted area as well as record productivity in our rice operations.

Emilio Gnecco
Emilio Gnecco
Chief Financial Officer at Adecoagro

Let's move to Slide eight with the operational performance of our Sugar, Ethanol and Energy business. In our prior release, we anticipated that during the first quarter, our crushing volume would decline compared to the same period of the last year as a result of the dry weather experienced throughout 2024, which got extended into the first month of this year affecting the yields of our sugarcane plantations. In this scenario, we made the decision to harvest old cane that were in the fifth or sixth cut and had less potential, allowing the younger cane to continue growing and recover productivity indicators in the event we receive rains. As a result, we can see a decrease in both yields and TRS content during the period. We continue to maximize sugar production given its attractive premium.

Emilio Gnecco
Emilio Gnecco
Chief Financial Officer at Adecoagro

Our production mix stood at 42% on lower sugar content of the cane for the reasons previously explained, which resulted in less production flexibility. Within our ethanol production, we continue to preferred hydrose ethanol over anhydrous ethanol given the better margin. Please turn to Slide nine, where we describe sales conducted throughout the period. Net sales amounted to $119,000,000 in the quarter, 15% higher year over year. This was fully explained by our commercial strategy to sell our last year's carry of ethanol to profit from the significant recovery in prices during the first quarter of twenty twenty five.

Emilio Gnecco
Emilio Gnecco
Chief Financial Officer at Adecoagro

In 2024, we held to our ethanol inventories waiting for an improvement in prices. Throughout the period, we sold over a 60,000 cubic meters of ethanol, representing 30% of the total volume produced in 2024 at an average price of 2,700 Brazilian UR per cubic meter, 31% 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. The case of energy and despite the lower volume milk, we produce energy using our store bagasse and we're able to profit from the hiking spot prices throughout the quarter. Regarding cargo credits, we sold over 110,000 seballos at an average price of $12 per sebio.

Emilio Gnecco
Emilio Gnecco
Chief Financial Officer at Adecoagro

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 $30,000,000 during the first quarter, '40 '2 percent lower than the same period of last year. Despite presenting higher sales and a year over year gains in the mark to market of our commodity hedge position. Results were mainly offset by year over year losses in the mark to market of our biological assets on lower crushing and constant currency prices on harvested gain. 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.

Emilio Gnecco
Emilio Gnecco
Chief Financial Officer at Adecoagro

Rainfalls received over the last few weeks eight yield recovery. Assuming weather going normal, we expect to accelerate our crushing pace during the second half of the year and reach an annual crushing figure in line to slightly above the previous year. Also, our unitary costs in cents per pound should decline as crushing increases and productivity recovers. From a commercial point of view, the evolution of sugar prices will mostly depend on Brazil's production, while it is still subject to gain productivity, industrial flexibility and logistics. Consequently, we still see some upside to current prices, reason why we have hedged less than 50% of our 2025 sugar production.

Emilio Gnecco
Emilio Gnecco
Chief Financial Officer at Adecoagro

In the case of ethanol, consumer preference continues to favor ethanol, but supply may be limited given the industry expectations to continue maximizing sugar production due to the greater premium that commands. Moreover, new demand is expected to come with the implementation of E30 adding more pressure to the trade balance. Now we would like to move on to the farming business. Please go to Slide 13. We are currently undergoing harvesting activities for most of our grains.

Emilio Gnecco
Emilio Gnecco
Chief Financial Officer at Adecoagro

As of the April, we harvested 52% of the 305,000 hectares of planted area and produced over 790,000 tons of agriculture produce. Despite the precipitations received from February onwards, the productivity of some of our crops such as wheat and early corn was impacted by the dry weather and high temperatures registered during December and January. On the other hand, we foresee a recovery in our late corn production due to the improved weather conditions experienced so far as well as to the absence of Siropla, the bacteria that drove the declining yields in the previous campaign. For the rest of our crops, we are forecasting a slight improvement in yields versus the prior year, but in line with historical levels. In rice, we are almost done with the harvesting activities.

Emilio Gnecco
Emilio Gnecco
Chief Financial Officer at Adecoagro

Our average yield reached eight tons per hectare, a new record for this business and a significant year over year improvement. Lastly, we continue enhancing efficiencies in our dairy free stalls despite the declining crowd productivity reported in the quarter, which we expect to reverse throughout the following months. At the industry level, we are working on product development for the domestic and export markets while expanding our presence across 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 $17,000,000 during the quarter, making a $27,000,000 year over year decrease.

Emilio Gnecco
Emilio Gnecco
Chief Financial Officer at Adecoagro

Starting with our Crop segment, the year over year decrease in results was mainly driven by lower international prices, lower than expected productivity and higher costs in U. S. Dollars, which combined continue to pressure margins during the period. Moving on to Rice, adjusted EBITDA reached $10,000,000 during the quarter. Despite the record productivity and the increase in sales, the decline in EBITDA generation was mainly explained by an uneven year over year comparison as during the first quarter of twenty twenty four, we were able to profit from record prices explains by India's policy to prohibit the exports of wide long grain and a very poor production of rice in South America.

Emilio Gnecco
Emilio Gnecco
Chief Financial Officer at Adecoagro

Prices have currently come down to normal levels, given higher global supply. On an annual basis, we expect a similar performance of this segment compared to 2024, but more evenly distributed during the quarters. Lastly, adjusted EBITDA in our dairy segment totaled $7,000,000 during the period, driven by higher sales on higher prices as we improved the mix of value added products and continue to maximize 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. According to our distribution policy, we are committed to a minimum distribution of 40% of the cash generated during the previous year via combination of cash dividends and share repurchase.

Emilio Gnecco
Emilio Gnecco
Chief Financial Officer at Adecoagro

Based on twenty twenty four's net cash from operations, the minimum amount to be distributed under the policy this year is $64,000,000 out of which we have already committed $45,000,000 between dividends and share repurchases. In terms of dividends, a distribution of $35,000,000 was approved. The first installment of $17,500,000 will be paid on May 16, representing $0.175 per share, whereas the second installment will be payable in November in an equal cash amount. In addition, we have already repurchased $10,000,000 in shares under our buyback program, representing approximately 1.1% of the company's equity. Please turn to Page seventeen for a broader view of our debt position.

Emilio Gnecco
Emilio Gnecco
Chief Financial Officer at Adecoagro

Net debt amounted to $679,000,000 6 percent higher year over year. This was explained by the increase in short term debt throughout the period as we were able to secure new financing at attractive rates to finance part of our working capital consisting of the planting and harvesting activities of our crops. As shown in our financial figures, this was achieved without us attending our distribution policy and growth projects nor compromising our liquidity ratio, which stood at 1.6x, showing the company's full capacity to repay short term debt with its cash balances. By the end of the quarter, our net leverage ratio reached 1.7 times given the lower results presented. We expect to reduce our short term debt exposure throughout the second half of the year as we collect the cash from our sales as well as to reduce our net leverage ratio on greater expected results in the upcoming quarters.

Emilio Gnecco
Emilio Gnecco
Chief Financial Officer at Adecoagro

In the following slide, we describe our CapEx program. In the first quarter of twenty twenty five, we invested $30,000,000 in expansion projects. In Brazil, expansion CapEx was mostly allocated to increasing our sugarcane plantation size and expanding our harvesting equipment with the acquisition of Turo Harvesters and Gruener Trucks. In our Farming business, our main CapEx program consisted of the development of rice production areas, the expansion of our drying and storage capacity in our Paso De Aragon rice mill and the construction of a new warehouse for dairy products at our Chivulco dairy processing facility. Thank you very much for your time. We will now open the call to questions.

Operator

Thank you. The floor is now open for questions. If you have a question, please write it down in the Q and A section or click on raise hand for audio questions. Please remember that your company's name should be visible for a question to be taken. We do ask that when you post your question that you pick up your handset to provide optimum sound quality.

Operator

Please hold as we collect the questions. Our first question comes from Thiago Duarte with the Tejepactual. Your microphone is open.

Thiago Duarte
Analyst at BTG Pactual

Yes. Thank you. Good morning, guys. Thanks for the opportunity. Yes.

Thiago Duarte
Analyst at BTG Pactual

I have a couple of questions. The first one is on the sugar ethanol energy business and trying to reconcile your expectations that you throughout the year, you should be able to meet last year's sugarcane crushing volumes and coming from a pretty weak quarter on a year over year basis. So I'm just trying to understand whether this is you expect this to come from better yields. So last year, you delivered, if I'm not mistaken, 70, tons of cane per hectare. So if you expect to be able to meet that on the balance of the year or if we should be looking for higher, harvested area.

Thiago Duarte
Analyst at BTG Pactual

So whether the cane availability improvement should come from higher area or higher yields? That would be the first question. The second question comes from, is related to the crops business. I was wondering if you could provide a little bit more color in terms of the unit economics for the different crops. Because this quarter, what we saw was a bigger representation of corn in terms of your sales volumes relative to soybean and wheat mainly.

Thiago Duarte
Analyst at BTG Pactual

And so, was wondering how those unit economics compare and whether they could explain or at least partially explain the low margin that you delivered this quarter in the crop segment? And if I may, a third question, and I'm not sure why is in the call. But in his prepared remarks, talks about one of the things he talked about was providing financial support if necessary for Adecuagos growth. And he even mentioned both organic and inorganic opportunities across Latin America. So I was wondering what kind of opportunity, he sees as compelling in the region, what segment within Adecuagro's different business segments would make some sense, and whatever other color he could provide on the opportunities that he he foresees in terms of growth for Adecco. That would be it. Thank you.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

Hi, Thiago. Thank you for your questions. Yes. Juan is with us in the call. So I'm gonna take the opportunity of starting answering the your third question.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

So, I'm gonna ask Juan to to take that question that is directed for him. Juan, do you want to to take that question?

Juan José Sartori Piñeyro
Juan José Sartori Piñeyro
Executive Chairman at Adecoagro

Yes. Perfect. Hi, Thiago. Very nice meeting you, and thank you for the for the question. All those strategic directions that the company are going to to take now in the in the future with the shareholder, I think, are a combination of continuation.

Juan José Sartori Piñeyro
Juan José Sartori Piñeyro
Executive Chairman at Adecoagro

We believe the company is well managed, and it owns very high quality, low cost production assets that are well positioned into the future. So what we want to do on top of that continuation is simply giving it a little bit more dynamism and acceleration when capital is needed or strategic direction is to be supported. And I think what we are seeing right now because of the of the timing is that in most of those four segments, there are integration opportunities. That's what we mean by organic. There are, CapExes to be approved with a much higher return on equity than the average of the company.

Juan José Sartori Piñeyro
Juan José Sartori Piñeyro
Executive Chairman at Adecoagro

There are maybe acquisitions to be considered around all of those segments. But also, are some areas which start going a little bit beyond. For example, we believe that energy, which so far was mostly a byproduct of agricultural production, could be an area where Adecuagro could have a stronger focus generating some stable long term return returns there, and there's people retreating from from Latin America right now. There are areas related to the inputs of agriculture that could be provide both a a hedge and even long term exposure because of the of the correlation to the to the demand. What what we mean in Tether by supporting and even very aggressively is that we believe this management team has the capacity of integrating and operating assets in Latin America in an incredible fashion.

Juan José Sartori Piñeyro
Juan José Sartori Piñeyro
Executive Chairman at Adecoagro

And I think if it was needed of any type of capital, whether it's debt, equity, partnered or joint venturing, we would be ready to to anchor any of those transactions, always with an idea of focusing on on a discipline allocation of capital with a strong return on equity. So we may analyze stock buybacks or repurchase or issuing debt or making or not acquisitions internal or externally, always compared with the average return that the company is doing, in current operations and in order to improve it in the in the long term.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

Thank you, Juan, very much for the question. Very clear. Nothing to add there. So, I'm gonna ask Renato to go on the first part of your questions regarding the our sugar and ethanol expectation for crushing volumes.

Renato Pereira
Renato Pereira
Vice President of Sugar, Ethanol & Energy Business at Adecoagro

Hi, Thiago. Good morning. As Emilio mentioned, the weather was very dry, both during the whole 02/2024 and also the first quarter of of this year. That's the reason our yields declined. But despite this dry weather, we had a crushing record last year.

Renato Pereira
Renato Pereira
Vice President of Sugar, Ethanol & Energy Business at Adecoagro

So we anticipated the sugarcane that otherwise would be crushed in the first quarter. That's why we had the less, intensive intensive, quarter in terms of of of crushing. And we did the the strategy to leave the sugarcane with a better, potential to grow to be crushed in the second part of the year. I think this strategy was good because in April, the weather changed. We had a lot of rains in in April. Actually, the the rains in April was 50% higher than the historical, average.

Renato Pereira
Renato Pereira
Vice President of Sugar, Ethanol & Energy Business at Adecoagro

So so the the the sugarcane outlook, the biological assets looks much better now. So we expect that the yields of this year is going to be higher than than the one that we had last year. I would say something between 510% higher. I think the challenge now will be crush the sugarcane that we have. We have the sugarcane, but the challenge will be the the time to crush the sugarcane.

Renato Pereira
Renato Pereira
Vice President of Sugar, Ethanol & Energy Business at Adecoagro

So use of time is going to be the key point to be following now. But since we have the the the continuous harvest model, if you don't crush the sugarcane this year, we can crush more in the first quarter of of next year and have much more intensive quarter there. So we think that is possible to crush, but the key point now is the the use of time, from now on.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

Okay. Thank you, Renato. Clear. And then on your second question regarding the economic unit of the traditional crops, here, it is important to understand that the crops have to be analyzed in a campaign. It's difficult to analyze within only a quarter how the the economic performance of of a crop is.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

So when we think on what are the the economic benefit of the different traditional crops, today, the first crop is the corn full season, then we have the wheat and soybean double crop, and third, the soybean full season. So within these three, allocations of, land when we decide our planting crop, that is what we are deciding now, that's gonna be the priorities. Corn full season, wheat soybean double crop, and then full season of soybean. Within those three that are in in a rotation, we can always change 15% in an OT system to maintain our sustainable production system. We cannot do a % of corn, so we cannot we have to always maintain this rotation, but we are gonna be a little bit more inclined.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

So we may have 10 or 15% more on corn compared to soybean full season when we think on the economic results on these traditional crops. So those were the three questions you were asking. If you don't have any follow-up question, we can go to the next one.

Thiago Duarte
Analyst at BTG Pactual

No. That's all that's all very clear. Thank you, Hugo, Mariano and and Renato.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

Thank you, Thiago, for your question.

Operator

Our next question comes from Giulia Rizzo with Morgan Stanley.

Julia Rizzo
Julia Rizzo
Analyst at Morgan Stanley

Hello. Good morning. Are you hearing me? Yeah. Thank you very much for having me, Mr. Sotori. Thank you, Mariano, for the remarks. I would like to direct my question to Mr. Sotori if possible. Sir, Adeccoagul is one of the largest agricultural companies in Latin America.

Julia Rizzo
Julia Rizzo
Analyst at Morgan Stanley

It's known for being low cost producer with great assets, strong management, as you already probably know. Also, it has a great reputation for transparency, fairness with shareholders. In in that sense, I would like to ask if the new control group in place, we want the cloud group keep its high standards of transparency, good governance for all shareholders. How do you think it is how how important do you think is that? And lastly, a follow-up on the on the on the first question from my colleague, Thiago.

Julia Rizzo
Julia Rizzo
Analyst at Morgan Stanley

Adecco Agro also generates a lot of cash over time even at low cycles times like this year. How does the new control group plan to use this cash flow in the future? I know I understand you told about some opportunities that may come. It will be ready to comply. But in on a running rate, how how you plan to to use this cash flow?

Julia Rizzo
Julia Rizzo
Analyst at Morgan Stanley

Can we stay with the 40% dividend policies? Or and the remaining part, what will be done?

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

Thank you, Julia, for your questions. The first part of the question regarding the transparency, I will ask Juan to to answer, but, and then I can complement. And same thing for the second part of your question. So, Juan, if you want to address?

Juan José Sartori Piñeyro
Juan José Sartori Piñeyro
Executive Chairman at Adecoagro

Of course. And and thank you, Julia. Nice meeting you for the for the questions. In in the whole first of all, everything you said about high quality of assets of management to transparency and credibility is what attracted us to invest in Adecogoro in the in the first place. It was very important in the acquisition for us to do it in a way that it respects the history, the culture, and the existing achievements, particularly in transparency and and in corporate governance.

Juan José Sartori Piñeyro
Juan José Sartori Piñeyro
Executive Chairman at Adecoagro

One of the main discussions was that we wanted the company to remain listed precisely because adhering to all of the standards of being a public listed company in New York was an important message to the market. That's how we defined leaving a 30% float in order to be sufficient for it to have a controlling shareholder, but also have the possibility of investors to participate in the best way to the growth story that we think is going to to happen. In addition, as we got them as we became controlling shareholders, we also implemented a lot of minority protections that were not present before. So we committed now to to protection that are of a much higher standard than what the stock exchange requires until now. Maybe they are Emilio can go through through each of them, but all related parties have to be validated by independent directors.

Juan José Sartori Piñeyro
Juan José Sartori Piñeyro
Executive Chairman at Adecoagro

We are restricted to a full takeover of the company if we ever go beyond 80%. So I believe the company is going to be continuing with everything that's made it a great company so far, but probably right now has even a a higher higher standard, and that's what we we commit also as controlling shareholder to the market going going into the future. On the second aspect of distribution, first of all, 2025 distribution policy is approved, so it's going to stay exactly like this. And into the future, as you say, the company generates a lot of a lot of cash flow. And if anything, it was probably consistently misunderstood or undervalued by by the market.

Juan José Sartori Piñeyro
Juan José Sartori Piñeyro
Executive Chairman at Adecoagro

So we're going to be seeing how to invest that that cash flow in the most profitable way in the future. First of all, by continuing a dividend policy and then investing in repurchasing shares or making acquisitions, but always with the idea of improving the return on equity of of these investments in the future.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

Super clear, Juan.

Julia Rizzo
Julia Rizzo
Analyst at Morgan Stanley

Super clear.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

Okay.

Emilio Gnecco
Emilio Gnecco
Chief Financial Officer at Adecoagro

Nope. Nothing to add. Let's go to the following question.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

Yeah.

Operator

Once again, if you have a question, please write it down on the Q and A section or click on raise hand for audio questions. Our next question comes from Lucas Ferreira with JPMorgan.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

Luca, we cannot hear you. You're on mute.

Lucas Ferreira
Lucas Ferreira
Executive Director at J.P. Morgan

Hi. Sorry. I was on mute. Hi, everybody.

Lucas Ferreira
Lucas Ferreira
Executive Director at J.P. Morgan

So thanks, very much for this space to to ask questions. I have a couple for Juan. And and Juan, by the way, don't know if you remember me, but I remember you from February '11 during the UAG IPO attempt. So we interact a couple of times. So nice to to speak to you again.

Lucas Ferreira
Lucas Ferreira
Executive Director at J.P. Morgan

The first question is about the land of the company. So if Tether has any specific plan to monetize the land, that's one of the key assets for the company. It's very undervalued in the stock price. So if you see any opportunity, don't know if a sale leaseback or anything that could unlock value for the land of the company. And the second point since you just mentioned that the plan is to keep the company listed.

Lucas Ferreira
Lucas Ferreira
Executive Director at J.P. Morgan

If you also have some plan for the liquidity of the stock because that has been one of the main pushbacks on the Adecco Agro's investment case historically. And now I believe that the liquidity could shrink further with a large better stake in the company. So for all the minorities here in this, so if there is any plan, for liquidity to to improve in the future. Thank you.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

Hi, Lucas. Thank you for the for the question. Juan, do you want to to address?

Juan José Sartori Piñeyro
Juan José Sartori Piñeyro
Executive Chairman at Adecoagro

Yes. Perfectly. Lucas, good good good to reconnect after so many years. So, you know, we've all been working for a long time with all these issues, and I think that's why we may end up having some of the solutions right now. Land as a publicly listed asset has always underperformed, and it's really one of the biggest challenges that as soon as you have large land holdings in a public company, they tend to be under undervalued and underappreciated.

Juan José Sartori Piñeyro
Juan José Sartori Piñeyro
Executive Chairman at Adecoagro

For us, a standard land is a excellent long term assets, and we want to have more of it. We think it's something that's going to appreciate over time to generate stability, and we think a company, Dan Adecco Agro, solves one of the big problems, which is operating it in an efficient manner at large scale, which as you know is not is not easy. Now in order to to treat the other side of that challenge, I think definitely one of the big works that we have to do is what are the mechanisms or why whereby we can materialize or crystallize the evaluation of those land holdings into the Adecaldro story. And we will be working definitely on on several mechanisms to present to to the market in the in the coming months in order to to see how we can we can attack that that usual usual challenge.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

Thank you. Very clear. And regarding regarding liquidity, I think Juan was also clear explaining how minority shareholders will be protected and have even better protections than what they had before. And having 30% on the float, we believe, is something that can continue to have liquidity.

Juan José Sartori Piñeyro
Juan José Sartori Piñeyro
Executive Chairman at Adecoagro

Yeah. If you if you allow me, Mariano, one more comment. I mean, the the float is definitely smaller from a technical point point of view, but you had before relatively large shareholders that would not trade. So I don't think the float has dramatically been reduced. Of course, the transaction plays part of it, but what we have seen in the latest trading days at post transaction, the liquidity is not worse than before, and maybe we can expect that to to continue in the future.

Juan José Sartori Piñeyro
Juan José Sartori Piñeyro
Executive Chairman at Adecoagro

And at the same time, what we had is a big amount of people who would follow the stocks purely as a NAV discount traders. They would buy this company at a strong discount to NAV and then sell it when it gets close to NAV. And I think what we have done also is remove a lot of that structural overhang. So our perception is that we are interested in in a high stock price and maximizing the stock price and having a liquid and well covered stock for the future, and we're going to be trying to operate on that basis the future of the strategy of the company.

Operator

Our next question comes from Bruno Tomazeto with Itau BBA. Your microphone is open.

Bruno Tomazetto
Equity Research Associate at Itau BBA

Good morning, everyone. Mariano, Mariano, Juan, I have two questions on our side, if I may. Mister Juan already presented some interesting topics about the new investment plan mentioned by Tether. We appreciate all information provided, but it would be great to also discuss the expected timeline for this in both terms of implementing these new projects or even how quickly could we expect to see results to be reflected on company's results we are with higher relevance. If you could break down the answer between projects to accelerate current operations or new projects to be implemented moving ahead, it would it would be great.

Bruno Tomazetto
Equity Research Associate at Itau BBA

And my second question is focused on operations in Argentina. Just to point with your most recent thoughts on the macroeconomic environment in Argentina, we recently had some new developments on export tariffs and, of course, FX dynamics. So we are glad to discuss what you guys can already perceive in the country or expected, in terms of impacts for the company and also to hear your general perception about these operations in the medium to long term. That's it. Thank you.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

Okay. Thank you, Bruno, for your question. I'm gonna address the second part of your question regarding Argentinian economic development. Here, there are two main forces. Number one is now we have the same dollar when we export, and we export all all our sales for for export.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

So we are receiving the real dollar for first time in a long period of time. So that's, of course, very much welcome conceptually. And then, the the overall costs are increasing. So in dollar terms, that is how we report the costs and and and the overhead cost and the general costs are increasing. Although variable costs, as they have always been in dollar terms, not necessarily increasing in the same pace, are, in some cases, reducing.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

So we are now in a much more real system. We are very happy to be in this system. We've been always working to be the local producer in each one of the segments that we have. So we are optimistic that we can improve, in the long term, our results in Argentina. So we are in a better situation than before within this whole economics results for Argentina.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

Then we are affected by commodity prices, etcetera. That that, of course, affects in different ways our EBITDA one way or the other. So that's conceptually what's going on in Argentina. So we welcome all these changes in Argentina for our company in the medium and long and and long term and in the short term also. And then regarding the timeline of these projects that Juan has been explaining pretty well, I would add one comment and then let Juan comment on top of this.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

These projects take time. All our projects that in the organic project that Juan was talking about, they are all carefully analyzed. Execution for us is the key element, and we we don't need to be in a hurry to execute because that's when execution doesn't goes perfect. So the projects take time, and we are analyzing each one of the projects with the right timing, and we are not in a hurry to do them. So they will be done in the way we've been always working that is maximizing the or minimizing the execution risks and maximizing our execute execution fashion.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

So, Juan, I don't know if you want to complement something on on on timing.

Juan José Sartori Piñeyro
Juan José Sartori Piñeyro
Executive Chairman at Adecoagro

Oh, I I support % what Mariano said. The idea is not announce things for announcing things. They all have to go through a thorough process of due diligence. But the new board, which was incorporated last last week, already has the different strategic lines in sight. We'll start working on validating several of the areas that we discussed about.

Juan José Sartori Piñeyro
Juan José Sartori Piñeyro
Executive Chairman at Adecoagro

And I think it would be likely over the next twelve months, I hope that we see results and and execution in several ones of those lines, but we cannot commit to a a timing or a short term timing on any of them because they will probably validate it or not based on the on the outcome and the results rather than the absolute necessity to to do something quick.

Bruno Tomazetto
Equity Research Associate at Itau BBA

So that's super clear. Thank you.

Operator

Once again, if you have a question, please write it down on the q and a section or click on raise hand for all your questions. Our next question comes from Matheus Enfeld with UBS.

Matheus Enfeldt
Matheus Enfeldt
Equity Analyst at UBS Group

Congrats on the positive conclusion of the tender offer. I think I was very clear on the direction and what is the strategic rationale behind the stake in in other quagga from Tether. But I was wondering if you could discuss sizing or what size of the quagga could take in a couple years now. Right? Because if we look over the past four or five years, CapEx has been around 204 hundred million dollars per year, which has allowed the to to deliver a a strong growth over the past number of years.

Matheus Enfeldt
Matheus Enfeldt
Equity Analyst at UBS Group

But looking forward, my question here is, what's the size that Adecco could become in the near future? Right? Because there are m and a potential deals in Brazil. This is public that could essentially increase the cargo's capacity by, like, 50% or something like that, but that would require a very large amount of capital in the near term. So I'm really trying to get a sense of I know the timing is over the next twelve months to get a bit more visibility as in the previous question, but my question is more on size.

Matheus Enfeldt
Matheus Enfeldt
Equity Analyst at UBS Group

If we could see other Cuyahoga taking this large step, seeing CapEx double for the year or over the next couple of years to really increase the size of the company or if it's much more a complementary approach for the existing projects and existing capacity moving forward. I think that that's my my only questions. Thank you.

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

Thank you, Matthew, for your question. Juan, do you want to address, or you want me to go for it?

Juan José Sartori Piñeyro
Juan José Sartori Piñeyro
Executive Chairman at Adecoagro

No. I have to give a a quick comment, but I think the size will be or usually, it's determined by two things. The first one is the capacity to integrate good assets, and this management team has shown that it's capable to do much more. We actually see that they coagro the the platform to be able to deploy capital very successfully because they can manage and integrate those assets. And I think now you have a shareholder whose net profits last year were $13,000,000,000.

Juan José Sartori Piñeyro
Juan José Sartori Piñeyro
Executive Chairman at Adecoagro

So the access to financing, if these are good, I would say, just from the the support of the existing shareholder. So I think that if we find good deals to deploy and we have those two factors, we could grow quite a lot.

Matheus Enfeldt
Matheus Enfeldt
Equity Analyst at UBS Group

Thank you. If if I could just follow-up on that, then there's obviously a limitation on how much of a stake Tether could reach in in the cargo up to 80%, which implies there's a limitation to how much capital in the end of the day Tether could be could be allowed to to inject into Adecco. On that, what's the what's the leverage that Adecco would be comfortable in a in an expansion cycle? Like, two and a half, three times, which is sort of what we discussed for the sector, would that be a reasonable leverage to to support growth moving forward?

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

I think, Juan, let let me jump in here. As Juan explained at the beginning, there are several ways on how we can explore opportunities together with Tether. And, of course, this 80% minimum in terms of the potential growth is taken into account. And, also, the level of debt that we can get into is also gonna be taken into account. So according to all these things and depending on how interesting are all the projects that we have in the pipeline, that's the decision that we would be taking, and we'll be sharing with you how this evolves.

Matheus Enfeldt
Matheus Enfeldt
Equity Analyst at UBS Group

Okay. Thank you.

Juan José Sartori Piñeyro
Juan José Sartori Piñeyro
Executive Chairman at Adecoagro

Okay. You know, one one more thing is that we mentioned the strategic tokenization in areas of technology whereby capital can be opened by technology on other routes that the the traditional ones. I think we can analyze that also. A way of putting more capital into assets can be through joint ventures or capital intensive assets, partnership with other companies, or other ways of financing that doesn't mean dilution of the of the equity.

Matheus Enfeldt
Matheus Enfeldt
Equity Analyst at UBS Group

Okay. Thank you.

Operator

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

Mariano Bosch
Mariano Bosch
Co-Founder, CEO & Director at Adecoagro

I simply want to thank everyone for participating in our call, and we hope to see you in our upcoming events. Thank you, everyone, very much.

Operator

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

Executives
    • Mariano Bosch
      Mariano Bosch
      Co-Founder, CEO & Director
    • Juan José Sartori Piñeyro
      Juan José Sartori Piñeyro
      Executive Chairman
    • Emilio Gnecco
      Emilio Gnecco
      Chief Financial Officer
    • Renato Pereira
      Renato Pereira
      Vice President of Sugar, Ethanol & Energy Business
Analysts
    • Thiago Duarte
      Analyst at BTG Pactual
    • Julia Rizzo
      Analyst at Morgan Stanley
    • Lucas Ferreira
      Executive Director at J.P. Morgan
    • Bruno Tomazetto
      Equity Research Associate at Itau BBA
    • Matheus Enfeldt
      Equity Analyst at UBS Group
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