Adecoagro S.A. (AGRO) Q2 2015 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. Thank you for waiting. At this time we would like to welcome everyone to Adecoagro's Second Quarter 2015 Results Conference Call. Today with us, we have Mr. Mariano Bosch, CEO; Mr. Charlie Boero Hughes, CFO; and Mr. Hernan Walker, Investor Relations Manager. We would like to inform you that this event is being recorded and all participants will be in a listen-only mode during the company's presentation. After the Company's remarks are completed, there will be a question-and-answer section. At that time, further instructions will be given. [Operator Instructions] Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of Adecoagro'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'll turn the conference over to Mr. Mariano Bosch, CEO. Mr. Bosch, you may begin your conference.

Good morning, everyone and thank you for joining our call. I would like to start by mentioning that as you all know, prices for all the commodities we produce are experiencing a weak cycle portraying a difficult scenario for all commodity producers. It is in this adverse context where our focus and strategy of being the lowest cost producers, peso -- is we founded this company, we have been determined to produce under a sustainable production model. Each crop in the right location where the combination of agricultural conditions such as quality of soil and weather together with our operational efficiency would allow us to become the low cost producers for each of the commodities we produce. In our sugar, ethanol and energy business, our operational efficiencies are improving day by day. We have put together a great team that is motivated and determined on being the most efficient and low cost producer in the field. And I am confident to say, we are in the right path. In this quarter, we are reporting significant improvements in our agricultural and industrial operations. Our sugarcane yield has reached 100 tons per hectare and also improving its sugar content. Our cane milling per day has increased over 20%. As we always say, in cogeneration we are one of the most efficient producers in Brazil, exporting 65 KWh per ton of cane crushed. And that’s higher than last year and we continue to improve. This same enhancement can be seen in every part of the operation such as efficiency in harvesting, transporting, planting etcetera. In our crops and rice operation, we focused on achieving the highest efficiency on a hectare per hectare rate. This includes implementing best practices and technologies such as no till, crop rotation, integrated pest managed, balanced fertilization, among others. But overall it is our operational teams focus on efficiency that is key in increasing productivity and having the lowest cost of production. In our diary business, over the next five years we have developed the revolutionary large scale milking technology in Argentina. After two years of fine tuning and adapting the productive system, this quarter we achieved our target of 35 liters per cow per day which leads us to focus on even more challenging goals. We are really proud of the assets and management teams that we have been able to consolidate. I am satisfied with the operational results obtained thus far. Despite operating in this adverse scenario, our low cost strategy and focus on efficiency has allowed us to still generate good returns. Most importantly, we are very optimistic about the future. On top of this great team [indiscernible], we have completed our growth CapEx cycle on time. And now we are confident we will reap the benefits of the investments made and start generating attractive cash flows. Now I would like to ask Charlie to walk you through the main operating and financial highlights of the quarter. Charlie, please go ahead.

Good morning, everyone. I would like to walk you through a few slides the reflect the main operational and financial highlights of the quarter. Let's start on page 4, where I would like to comment on the weather conditions in our cluster in Mato Grosso Do Sul. As you may see in the chart, during May we suffered some excessive rains which caused logistics and operational disruptions which were later compensated by a very dry June which allowed us to accelerate the pace of harvest. Overall, weather during the quarter was well aligned with the historical average. Moving on to the next Slide. I would like to focus on sugarcane milling. During the second quarter of 2015, our mills crushed 2.9 million tons of sugarcane compared to 2.1 million tons in the second quarter of 2014. This 36% increase is explained by two main factors. Firstly, milling per day increased by 22%, as a result of the ramp up of capacity at the Ivinhema mill together higher milling efficiencies in all of our mills. And secondly, the effective milling days increased by 11% primarily by the timely commissioning of the Ivinhema mill. On a year-to-date basis, sugarcane crushing reached 3.24 million tons, 54% higher year-over-year. In addition to the drivers I just explained for the second quarter, the commodity growth reflects our strategy of accelerating the start of the 2015 harvest in each of our mills in order to extend the season and increase annual sugarcane crushing. This will allow us to enhance our margins and dilute our costs. This strategy was made possible by our focus on minimizing the inter-harvest maintenance but most importantly, by the increase in sugar availability. Please now shift your attention to page six, where I would like to highlight a few agricultural productivity metrics. Over the last couple of years, we have focused on training and strengthening our agricultural team and improving our agricultural efficiency. Some specific areas we focused on had very good results include, effective implementation of pest control, selecting the best sugarcane variety for the region in terms of yields and TRS potential, allowing sugarcane to reach its optimum growth before harvest and re-planting sugarcane each year to renew and maintain the productivity of our plantation. These operational improvements are starting to show on our productivity leverage. As you may see in this chart, our sugarcane yields in the quarter have increased 26% while TRS increased by 7%. These two factors combined have resulted in a 34% increase in TRS per hectare. The same trend can be seen in commodity productivity for the first six months of the year, where TRS per hectare has increased 31%. Let's move to Slide 7. Sugar and ethanol output boosted during the quarter driven by the increase in sugarcane milling and the higher TRS. As you may see in the top chart, sugar production increased to 174,000 tons, making a 56% increase over the second quarter of 2014. Regarding ethanol, production stood at 113.5 thousand cubic meters, representing a 35% increase compared to same period of last year. Overall, this represents an increase of 44% in total production measured in terms TRS equivalent. Turning to Slide 8. I would like to comment on cogeneration. In the top chart, you may see that exported energy or in other words the energy which is sold to the grid, increased by 79% year-over-year and by 71% on a year-to-date basis. The growth in co-generation is explained by two main factors. First of all, the consolidation of a cluster has resulted in higher co-generation efficiencies. As you may see in the bottom chart, exported energy per ton of cane crushed reached 65 KWh/ton in the second quarter of 2015, 32% higher than the same period of the previous year. It is one of the highest co-generation ratios in the industry and we believe there is still upside for improvement. And secondly, the ramp up of the Ivinhema mill has expanded our milling capacity and boiler capacity. If you can please turn to Slide 9, I will proceed to comment on ethanol sales. As you may see in the chart in the middle, ethanol sales during the second quarter of 2015 were affected by weak price. Ethanol prices were affected by the seasonality of the harvest as mills in the Center-South of Brazil starting crushing and increasing supply of ethanol in the market. In addition, most mills have been maximizing ethanol production given shorter cash conversion cycle. Average hydrous prices in the second quarter of 2015 denominated in local currency decreased 1.3% compared to the previous year and 6.2% compared to the first quarter of 2015. In dollar terms, prices were also affected by the devaluation of the Brazilian real. The result of these two factors, or realized prices in dollar terms were 30% lower year-over-year. It's worth mentioning that during 2015, there has been a strong demand of hydrous ethanol mainly driven by the increase in gasoline prices. Hydrous ethanol consumption in Brazil year-to-date has increased by 43% but production has only increased by 16%. So [indiscernible] of the scenario in early June, we decided to minimize ethanol sales and begun storing ethanol in our tanks in order to capture more attractive prices in the inter-harvest season. This explains why our annual sales volumes increased only 24% compared to the production goal of 35%. On the chart on the right hand side, you can see how our inventory level had increased as a result of increase in [indiscernible]. Ethanol inventories grew by 68% reaching a total of 66.4 thousand cubic meters, which represents 59% of accumulated production compared to 47% in the second quarter of 2014. Now let's please turn to Slide 10, where I would like to discuss our sugar sales. If you take a look at the graph on the left, you may see that our sugar sales volumes during the second quarter of 2015 totaled 122.4 thousand tons, marking a 53% increase compared to the second quarter of 2014. The increase in volumes is the result of three main factors. One, our 36% increase in sugarcane milling, second a 7% increase in TRS, and third, a slight decrease in sugar inventories measured as a percentage of accumulated production, shown on the chart to the far right. As you may see on the chart in the middle, the increase in volumes was partially offset by lower sugar prices. A result of the global sugar surplus and weak sugar cycle, our realized sugar prices during the second quarter of 2015 were in average 19% lower than the prices in the second quarter of 2014. Nonetheless, total sales in the second quarter of 2015 reached 39 million, 32% higher year-over-year. Now let's please turn to Slide 11, where I would like to discuss energy sales. As you may see in the top chart, hydroelectric power in Brazil continued to suffer from the lack of water. Water levels at reservoirs remain at 5 years low. Despite this situation, on November 25, 2014, the Brazilian national energy agency decided to lower the ceiling price of energy from 822 reals to 388 reals per megawatt hour. Spot energy prices during the quarter traded at the price, half, as you can clearly see in the top right chart. Therefore, as you may see in the chart below, despite a 79% growth in volumes, our net sales grew by 31%. Our realized prices in dollars were also affected by the devaluation of the Brazilian real. Year-over-year prices decreased from $126 per megawatt hour to $92. Let's move to Slide 12, where we can see the overall financial performance of the sugar, ethanol and energy business. Total net sales during the quarter reached $86 million, 12% higher than same period of 2014. As explained during the previous Slides, the growth is mainly explained by the increasing sugar and ethanol sales volumes and partially offset by lower sugar, ethanol and energy prices. Adjusted EBITDA during the period increased from $36 million in the second quarter of 2014 to $41 million in the second quarter of 2015. Adjusted EBITDA margins in the same period expanded from 46% to 47%. This growth which has been primarily by higher sales, higher agricultural productivity which resulted in fixed cost dilution and partially offset by low prices. Now let's turn to Slide 13 to get an overview of our sugar hedge position. As part of our risk and commercial strategy, we mitigate price volatility by forward hedging across the forward and derivative markets. Despite the weak commodity prices environment, our commercial teams have been able to hedge prices above current market prices, protecting the company's cash flows. As of June 30, 3015, we had 390,000 tons of sugar from the 2015 and '16 harvest hedged at 15.5 cents per pound of sugar equivalent. Futures contracts at that time were trading at 12.7 cents per pound. Therefore, the mark-to-market of the position generated a gain of $12 million which is mostly realized. Related to the 2016 and '17 harvest season, as of June 30 we had 115,000 tons of sugar hedged at 14.6 cents per pound of sugar equivalent. Futures contracts at the time were trading at 13.9 cents per pound, thus generating an unrealized gain on that position of $1.8 million. Before moving on to other businesses, I would like to comment on our sugarcane planting activities on Slide 14. As you can see on the left hand chart, our sugarcane plantation has been consistently growing year after year at an average growth rate above 10%. We currently have 127.7 thousand hectares of sugarcane planted. In addition, considering the consistent increase in agricultural years over the last three years, we are very close to reaching a stabilized plantation size, which would allow us to supply our 10 million tens of nominal crushing capacity. This explains why sugarcane planting has slowed down in the second quarter of 2015 compared to the previous year, as you may see on the chart to the right. Let's now move on the farming business. We will now turn to Slide 16 of the presentation where I would like to given an update on the harvest of our most relevant crops. Implementation of a sustainable production model, together with the best practices such as crop rotation and no till among others, coupled with excellence in execution, have allowed us to achieve high yields despite average weather in the year. As you can see on the top left chart, as on July 2015, the harvest of soybean first crop was fully completed. Average yields achieved were 10% higher than the previous harvest season. These allowed us to produce over 200,000 tons of soybeans. The harvest of soybean second crop was also completed. Average yields reached 2.4 times per hectare, 26% above the 2013 and '14 harvest year. High productivity was driven by executing and efficient planting schedule. In the case of the corn crop, as of the end of July, total harvested area for early and late corn totaled 23,000 hectares or 74% of the total planted area. The average yields obtained so far were 6.2 tons per hectare, in line with the previous season. As you may see in this pie chart, in order to diversify our coverage and water requirements, approximately 29% of the corn was planted early in September whereas the remaining 71% was planting during November and December. The harvest is expected to be completed during the third quarter of 2015 and we expect corn yields to remain in line with current levels. Lastly, in the bottom right graph, you can observe that as of the end of July, the harvest of sunflower was completed producing over 20,000 tons. The average yield was 1.8 tons per hectare, in line with the previous harvest year. Let's move to page 17 where I would like to walk you through the financial performance of our farming business. In the case of crops, adjusted EBIT has decreased by 53% to $0.2 million. The reduction is primarily explained by $7.9 million, mostly in realized loss generated by the mark-to-market of our commodity hedge position. The year-over-year fall in commodities and the rising inflation in Argentina that has more than offset the nominal depreciation of the Argentine Peso, resulting in an appreciation of the currency in real terms, which increases our costs measured in dollars and putting pressure on our margins. These effects were partially offset by higher yields in most of our crops. Regarding the rice business, that 67% fall in adjusted EBIT is mainly explained by the combination of lower yields due to adverse weather and higher costs in dollar terms driven by the appreciation of the Argentine Peso in real terms. In the dairy business, we delivered solid operational performance in the quarter. We were able to capitalize the benefits of the consolidation of our free stall facilities, reaching our target level of 35 liters per cow per day. Consequently, milk production volumes increased 14% year-over-year driven by a 9% increase in productivity and a 5% growth in our dairy cohort. The gains from productivity were offset by lower milk prices and higher costs measured in dollar terms, resulting in an 8% decrease in adjusted EBIT. On an aggregate basis, despite higher productivity in our crops and dairy segments, consolidated EBIT decreased by 94% in the second quarter of 2015 and by 54% in the first six months of 2015 for the reasons I have just explained. Let's turn to page 18. As previously noted, we generated $7.9 million on realized loss related to the mark-to-market of our soybean and corn hedge position. This will [indiscernible] of the rally experienced by soybean and corn prices during the end of June. The increase in prices was bonded to lower than expected grain stocks in the United States coupled with excess rainfalls that created uncertainty regarding planted areas and yields. As you can see in the top chart, as of June 30, 165,000 tons of soybeans related to the 2015 and '16 harvest were hedged at 1,006 cents per bushel. The price of soybean in July futures contract as of June 30 was 1,014 cents per bushel, generating a mark-to-market loss. In the case of corn, 141,000 tons of corn were hedged at 436 cent per bushel compared to the contract future price of 446 cent per bushel as of June 30, also generating a mark-to-market loss. I would like to highlight that since mid-July, soybean and corn future prices have reversed and are now [called] [ph] at the same levels as before the rising commenced. As per the chart, the mark-to-market loss we booked in the second quarter has been fully reversed. Let's now turn to page 20, which shows the evolution of Adecoagro's consolidated operational and financial performance. On a consolidated basis, net sales decreased year-over-year from $197.5 million in the second quarter of 2014 to $164.6 million in the second quarter of 2015. The 17% decrease is primarily the result of lower price coupled with lower selling volumes in the crop segment explained by a late corn harvest. Adjusted EBITDA in the second quarter of 2015 totaled $39.5 million compared to the $72.8 million in the second quarter of 2014. The $33.3 million gap in the financial performance is fully explained by the absence of a [farm] [ph] sales in the current quarter compared to the $25.6 million gain last year and the $7.9 million unrealized loss booked in the second quarter of 2015, related to the mark-to-market of our commodity hedge position compared to the $7.2 million gain in the second quarter of 2014. Let's move on to page 21. As you may see on the top left chart, our gross indebtness as of June 30, 2015, stands at $785 million while net debt stands at $622 million. I would like to highlight that 71% of our debt is in the long-term composed mainly of loans from multilateral banks such as the BNDES at very competitive rates as you can see on the bottom left chart. Finally, let's move to page 22 where I would like to comment on CapEx. As anticipated in our first quarter 2015 conference call, total CapEx is expected to slow down during 2015, driven by the completion of the Ivinhema mill and the consolidation of our sugarcane cluster in Mato Grosso Do Sul. We can already see the downward trend reflected in the current quarter. Capital expenditures during the six month period ending June 30, 2015, reached $96 million, 49% lower than the same period of 2014. As of today, no major growth project has been committed for 2016 and forward, therefore we expect CapEx to consist primarily of maintenance related to the sugar and ethanol business. This includes a financing of sugarcane to renew our plantations and the inter-harvest maintenance of milling and agricultural equipment. We expect CapEx to range between $140 million and $160 million in 2015 and between $70 million to $80 million in 2016. Combination of decrease in CapEx and increasing cash generation will allow Adecoagro to become cash flow positive by year-end and start generating attractive levels of free cash flows starting in 2016. Thank you very much for your time. We are now open to questions.

[Operator Instructions] Our first question is from Thiago Duarte of BTG. Please go ahead.

I have two questions. The first one in Argentina, I would love if you could share your thoughts on the upcoming elections and what kind of impact that you believe, of course depending on the results, but what kind of impact you believe that could have in your business going forward. And still on Argentina, any update on land monetization, if you have seen any change in the land market in terms of liquidity or prices or anything that you believe might change the pace in which you have been monetizing land over the last year. That will be the first question. And the second one is based on your very last comment regarding cash generation and leverage. Can you share with us a little bit on your thoughts of how much cash you expect to be able to generate under the current price environment for this year, next year, and what's your leverage target is right now considering the current environment in terms of net debt to EBITDA. Thank you very much.

Hello, Thiago. This is Mariano, I am going to take the first part of the question regarding Argentine election and the impact on our business. Simply taking into account what all the candidates are saying, it's clear that for our specific business, any candidate should be better than what we have. So it should be beneficial for the business in which we are in. So that’s the first part of your first question. And then on the second part regarding the land sales and what we expect to so in this current year. I would say that we continue to focus on potential sales on the already developed farms. So that something we are currently marketing and depending on the specific opportunities, if there is potential buyer that is willing to pay a price at which the future cash flows would not be attractive enough for us, in that case we are sellers because a return of that asset is not good enough and we will be able to re-allocate that money into something more attractive. So we continue to expect a sale as we have been doing in the last ten years. We see the market in a very similar situation that it would have been in the last three-four years. So we don’t expect changes regarding what we have been doing in the past. So that is for all the Argentine part of your question. Then regarding the cash generation and our expected debt, Charlie, would you like to take that part of the question?

Yes. Hi, Thiago. As we have already said, we are finishing our CapEx plan for this year and not commissioning [important] [ph] CapEx for 2016. Having said this, we are expecting to generate cash as we continue with our efficiencies in milling of the sugar and ethanol business. So by the end of the year, we are expecting to finish the year with net debt to EBITDA ratio around 2.7. Obviously this will depend on our current strategy and some other things. So in terms of cash generation for 2016, if we consider a consensus, the EBITDA by the [indiscernible] minus the taxes and CapEx, some interest that we are expecting to spend in 2016, we are estimating we would generate a free cash flow after CapEx in a range of $90 million to $120 million for next year.

Thank you very much, Mariano and Charlie. Just two follow up questions on your comments. First, on the economics of the business in Argentina, the farming business in Argentina right now. What do you see as the economics of that business? I mean you mentioned that you would grow for further land sales if you think that the economics is not making much more sense or anything like that. What do you think of the economics given how the prices for most of your commodities are right now? That would be the first follow up question. And the second one is, is basically on this cash flow and you mentioned the consensus figures for the year. How challenging or comfortable are you with those estimates right now for cash flow towards this year and next year, based on the consensus figure that you mentioned. Thank you.

Taking the first part of your question. We expect that margins for next year improving to compared to this current year. Compared to what we are harvesting right now and that will depend on how much we can adjust the costs of planting. That is where we are right now in that situation. As an example, a cost of glyphosate is being 20% lower than last year at the same time in dollar terms. So we are reducing 20% price in that specific input. And in planting for example, that is more peso denominated and part of problem is that the Argentine peso is too strong, we are also reducing in dollar terms between 12% to 20%. So in every single line of our cost lines, we are reducing this plating season compared to last year planting season. So that’s why we are optimistic on a margin say for following years given at this level of commodity prices. On top of that, if you assume any kind of devaluation in Argentina, that will of course benefit us in a much more extreme numbers than what I was just mentioning. So that’s the first part of your question. Going to the second part on the cash flow generation and how comfortable we are, Charlie?

Yes. Thiago, basically of course you have to consider weather and prices but on the variables that we do control, looking at what we have done and the achievements that we have done, we feel comfortable on the efficiencies and productivity. So I would say that in terms of EBITDA and cash generation for both 2015 and 2016, we feel very comfortable.

[Operator Instructions] The next question is from [Nam Tron] [ph] of UBS Capital. Please go ahead.

It's Edmond Safra from Ems Capital. I was just wondering how the recent floods in Argentina may have affected production in general and Adecoagro in specific.

Hi, Edmond. Thank you for your question. According to where we have the farm and where flooding has occurred, we are almost not affected by the flooding. It's only 1% of the area of all our planted and future planted area that has been affected. So I would say that we are not affected in terms of the flooding. The positive thing here is that we start the season with all moisture of the - soil is full of moisture. So we are in a situation where we can expect a good year because of having the soil full of moisture and water.

Our next question is from Vincenzo Paternostro of Credit Suisse. Please go ahead.

My first question is regarding the sugar and ethanol business in Brazil. We have seen low ethanol price and naturally also low sugar price in international market. I don’t know whether you can comment on what's your view on profitability in the short term and even term-end we expect any sugar price recovery or more specifically on volumes, when do you expect to reach full production at Ivinhema mill. So my first question are related to the sugar and ethanol business. My second question is regarding the potential impact of the El Nino, so I don’t know if you have any view on what could be the impact of El Nino on yields for Adecoagro, both in Brazil in the sugar and ethanol and also in Argentina for grain. So that would be my two questions. Thank you.

Hi, Vincenzo, thank you for your two questions. Regarding your first question on sugar and ethanol and difficult price scenario that industry is having. We are very convinced on our strategy of being low cost producers as Charlie mentioned in detail, in each one of our operational metrics, we are doing within the best in each one of these variables. So that’s why we are convinced that even though the industry is going through a very difficult situation, we are doing very well in terms of generation of cash flow that we were projecting. So that’s why we are so committed on our sugar and ethanol industry and how well we are performing there. On top of that, the current devaluation that happened in Brazil is helping us in all our costs of this three commodities that we are producing from the sugarcane. So that’s why we are convinced, we will be able to generate what we are projecting. And regarding the full capacity of Ivinhema, we are currently almost there, so we have done all the CapEx to produce in an hourly basis. So next year, we feel very comfortable that we should be there in terms of full capacity. That’s regarding sugar and ethanol. Going to your second question on El Nino, the effect on our company of El Nino is confirmed and occurs, we would have higher yields or better yields in terms of sugarcane production but we could potentially have more difficulties in terms of crushing all that capacity because of the more rainy days. That’s why we started earlier in the season and that’s why we are lengthening our harvesting season. So that the El Nino for our sugarcane production. And El Nino for crops in Argentina, I would say that in general terms of what happened in the past, more moisture and humid [indiscernible] on our productive areas of soy and corn. Positive in terms of yield. So that’s the concrete effects on El Nino on our company.

Our next question is from Rodrigo Mugaburu of Morgan Stanley. Please go ahead.

One follow up question on the weather. The recent rains in Argentina, did they affect the planted wheat, the current '15-'16 planted wheat. And then the second question also related to wheat, if we see the hedged volumes that you have of the '14-'15 season is roughly 30,000 tons out of a production of around 84-85,000 tons. So if I am right, there is a 50,000 tons missing, not sold yet. That is because of the difficulties due to sell the wheat in Argentina or you are just holding and waiting for the change in government? I wanted to understand a little bit better the strategies there. Thanks.

Rodrigo, one question. Regarding the wheat, the moisture in Argentina and the flooding in Argentina regarding wheat, are you asking about the market or are you asking about us in particular?

No, Adecoagro. The area that has been already planted.

Now in the areas, I mentioned before, the area of Adecoagro is less than 1% that has been affected and wheat is within the same, only 1%. So I would say it's not affected at all. And all the areas of wheat are with very good moisture, so we should expect good yields in terms of wheat. So that’s particular for Adecoagro. Then for the market and how we are hedged and how this expect the price of the market or the price of wheat, I would ask Marcelo Sanchez, our Commercial Director to answer that part of your question.

Hi, Rodrigo, how are you. Regarding the remaining wheat that we do have still on hedge is part of our strategy of having it segregated as per quality. I mean that’s not something like we are playing with the government or any changes in the government allowance etcetera for exports. And regarding the impact of the flooding in the overall wheat area in Argentina. We have received the [indiscernible] report where the expectation of the planting is below last year in an average of 28%-29% below last year planting. And the affect on the flooding, as per some guys that we have been talking to, is something around 200,000 hectares in total in the Buenos Aires province.

[Operator Instructions] I am showing no additional questions. This concludes the question-and-answer section. At this time I would like to turn the floor back to Mr. Bosch for any closing remarks. We do have an additional question come in so we will take that, from [Nam Tron] [ph] of UBS Capital. Please go ahead.

Sorry, it's Edmond Safra again. I wanted to know if you have any acquisition plans in Brazil given the distress of many other producers and the fact that you are going to become cash flow positive very soon?

Hi, Edmond. As we always say, we are always analyzing potential opportunities and we do have a pipeline of things that we are analyzing. But we are always focused on the return on investment that we can achieve from there. And with the positive cash flows that we will be generating, we are going to be always analyzing the best return on investment and we are going to maintain our strategy of looking for the best return on investment that we can achieve. And that includes analyzing all the different options within these potential opportunities in the different, current businesses that we have. Including giving back the money to the shareholders. So those are the different ways on how we analyze, what we are going to be doing with future cash flows that we will be generating.

This concludes the question and session. At this time I would like to turn the floor back to Mr. Bosch for any closing remarks.

Thank you everyone for joining the call. On our sugar and ethanol business, we are in the middle of the harvest and it is very important for us to continue to be focused on all the efficiencies that Charlie just mentioned. So we are committed to be the low cost producers of these three commodities we are producing there. Regarding the farming business, again, we are starting our planting season and it's very important for us to negotiate every cent that we will be investing in our new crop. So we will maintain our commitment to be, again, the low cost producers in this commodity. So thank you for joining the call and hope to see your in our next events on the IR calendar.

Thank you. This does conclude today's presentation. You may disconnect your line at this time and have a nice day.