Good morning ladies and gentlemen and thank you for waiting. At this time, we would like to welcome everyone to Adecoagro's First Quarter 2017 Results Conference Call. Today with us, we have Mr. Mariano Bosch, CEO; Mr. Charlie Boero Hughes, CFO; and Mr. Hernan Walker, Head of Investor Relations. 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. 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 and thank you for joining our call. As a result of the constant improvement of our operations and the price coverage strategy of our commercial team, we continue reporting very good results. In sugar, ethanol, and energy business, this is a quarter of a traditional inter-harvest season and 2017 is the second year that we've been implementing a non-stop or continuous harvesting. So far, we have milled the same amount of grain when compared to the same period of last year, however, had more time to perform maintenance of our mills, which put us in a better position to reach the end of the season meaningful capacity. Our expansion project is ongoing at high speed. As we explained in the previous call, our limitation is the lease and planting of new sugarcane area. So far, we are ahead of schedule in terms of leasing new areas to supply our expansion capacity. We believe that our track record and the reputation of the trust associated not only to [Indiscernible], but to our farming teams have made this possible. Our daily operations continue to deliver great results despite the adverse weather conditions that have affected the business all over Argentina, proving, once again, that our production model is the most efficient and sustainable. In rice, we have finalized a harvest with better yields than last year. The harvest of our grain production was delayed due to the excess rains, creating additional challenges in logistics. However, research remain positive and with very good yield. As we have reported in our release, we have very attractive organic growth project for each of these lines of businesses. In dairy, having proved the profitability of our production model. We have plans to duplicate our production by the contraction of two more free-stalls. In rice, after the investment made in our farms, we will enhance our processing by incorporating a [Indiscernible] plant, another handling equipment. For our grain production, we have projects to increase our logistics and conditioning capacity that will translate in an enhancement of our production and add flexibility to our commercialization. As you can see, we have a very interesting year going forward and are fully motivated to execute our strategy, consolidating as a local producer for each of the commodities we produce, generating value to our shareholders. Now, I will let Charlie walk you through the numbers of the quarter.

Good morning everyone. Let's jump to page four of the presentation. Rains in our class in Mato Grosso do Sul in November 2016 through March 2017; we are 25% below the 10-year average. Therefore, we decided to fine-tune our harvest schedule in order to maximize share competitive throughout the year. As a result, we decided to slow down the pace of crushing during the first quarter and only crushed our own sugarcane that has grown between 15 to 18 months and sugarcane purchased from third-parties. This strategy will allow our traditional 12-month sugarcane to grow an additional two or three months and benefit from normalized rains during March and April. At the same time, any spare time was used to accelerate offseason maintenance of industrial equipment, agricultural machinery, and most importantly, sugarcane replanting. As you may see in the bottom right chart, sugarcane replanting increased by 59% in the quarter and we used a total of 20 days for maintenance compared to three days in the same period of last year. This means we are better prepared to operate at full capacity during the rest of the year. Despite our decision to decelerate the milling pace, we were able to crush a total of 1.5 million tons during the first quarter of 2017, essentially in line year-over-year. In terms of third-party sugarcane, we were able to find attractive opportunities to purchase sugarcane from neighboring mills on farmers at very competitive prices. Purchases of third-party sugarcane reached 221,000.9 tons, 306.5% higher year-over-year. Let's turn to slide five, where I would like to comment on sugarcane productivity. Despite dry weather during summer months, sugarcane yields during the quarter reached 94.1 tons per hectare, significantly above the five-year average yield for Brazil's Center South region as you can see on the bottom right…

Thank you. The floor is now open for questions. [Operator Instructions] Our first question comes from Lucas Ferreira of JPMorgan. Please go ahead.

Hi, thank you for the questions and good morning everyone. My first question relates to the proceeds of your free cash flow from the previous crop and I supposed the cash flow of the current crop would be also pretty high. So, wondering what you guys planning to do apart from the projects you already mentioned in your presentation in terms of M&A or dividends that would be very interesting. And if you also could comment on the land market in Argentina. If you think that the market will at some point start to see more transactions or the landowners [Indiscernible] kind of what's going to happen with the mid-term elections or the outlook and the political environment before taking any actions in terms of buying and selling lands? That would be my questions. Thank you.

Thank you, Lucas, for your questions. Regarding cash flow generation, last year, our cash flow generation as you've seen in our financials, we've been reducing debt to the levels where we feel much more comfortable, and we say today cash flow generation, we are also presenting very attractive growth project as Charlie was just explaining and in detail of each one of them. So, with our existing businesses, we are finding very good synergies and we feel very attractive -- or very attracted by these projects we are sharing today. This is something in which these projects are all projects in which we've been working for long. And now we feel it's the right moment to announce them and to start executing them. So, that's my initial reaction to your question. Of course, there is all the year to go, so depending on FX, yields, prices, commodity prices, et cetera, the cash flow generation could be in excess of what we are talking. And so in that case, we'll continue analyze and we'll continue being disciplined in how we allocate capital. Of course, buyback or dividend is always a part of how we think in capital allocation. Then on your second part of the question, the land prices, that's an interesting question. There are really very few transactions and when we talk about very few transaction, it's not only in Argentina, so in terms of the land market, it's being difficult to predict what the prices are because there are being very few transactions in Argentina, Uruguay, and Brazil. So, we don't have clear answers here. I may think that after mid-terms elections, there may be more movement or more liquidity in terms of transactions. That's conceptually the answer.

Thank you very much.

Our next question comes from Isabella Simonato of Bank of America. Please go ahead.

Thank you. Good morning everyone. My question is regarding the new projects that you guys announced. If you could share with us what level of returns are we talking about for each of these projects, and that's it? Thank you.

Thank you, Isabella for your question. In terms of sugar, ethanol, and energy, we've already explained the last quarter, the level of returns and this as the year marginal returns to what our existing operation. In the case of sugarcane, again, they were well above the 20% and even with today's prices with today's scenario, this 30% return is still there in terms of sugar, ethanol and energy. Then going to what Charlie just explained, all of them are synergetic to what we currently have. So, in terms of the grain operations and this grain hunting facilities are part of our overall commercialization strategy, and this is something that is a need, not only for us, it's a need for Argentina. Argentina has increased corn and wheat production. There is a higher need to condition those crops. That's why the profitability of this added capacity of what we are currently doing is very high. And when we're thinking very high, we're always talking about a 20% IRR in a very conservative assumptions. That's for the grains, as an example. Then for the rice, all the projects that Charlie were just mentioning each one of them has a specific IRR, but all of them are above this 20% expected IRR. Then when we're talking about the rice -- sorry, when we're talking about the dairy, the dairy is duplicating our current capacity. So, within our current capacity and with the current scenario of prices and cost of production in Argentina, we've generated very attractive return this quarter. Last year was a very bad year for the dairy system and we proved even in a very bad year to generate $6 million. So, in an average year, we would expect to generate $10 million, and we are talking about a total investment of $50 million. So, the cash-on-cash of this would be around 20%. So, that's conceptually what we are doing with the dairy business.

Perfect, that's very clear. Thank you.

Thank you, Isabella

Our next question comes from Alex Falcao of HSBC. Please go ahead.

Good morning guys. Quick question on the sugar. You comment on -- you're looking at lower prices for this harvest. Can you elaborate on that? And why our competitors seem to actually going the opposite direction on their hedging policies, they're hoping for higher prices? And the direct question related to this is, are you seeing any effects on El Nino at all? Are you guys preparing for that? And if so, anything for the second half of the year? Thank you.

Hi Alex. In terms of our view of the sugar prices, we're not [Indiscernible] in future sugar prices. Having said this, we were covered with 58% at -- with very attractive prices because at that time, we thought that 19.3 was an average of very attractive average price. So, that's why we were -- we are hedged. But going forward, we are not bullish in terms of sugar prices. We think that the fundamentals are still there, and we should expect better prices going forward with sugar prices. And the El Nino effect. Marcelo Sanchez here, our Commercial Director is going to comment on -- more specific on this.

Regarding El Nino effects, it was most the possibility of 50% of chances of El Nino coming forward on the second half of the year that, of course, will be affecting the production in most of the country, but mainly in Brazil. And I think that's another additional supportive item for prices for the second semester.

Okay. Perfect. Just final question. How are you guys seeing the fertilizer -- the context that you guys are negotiating going forward? We saw an uptick there for produce harvest. Are you guys seeing any indication how are you guys thinking about that for the second half of the year?

Sorry. Alex, can your repeat the question, again?

Yes. So, just wanted to know how you guys are seeing the futures market for fertilizer as you prepare for the next harvest or as you guys are looking for appointing for some of the for the second half. Is there any change there? Anything that should concern us in terms of input prices?

Now it's clear Alex, I would ask Marcelo to answer that question.

No, Alex. We think that the current prices -- current level for fertilizers, so far, are also following oil prices as well. Then we don't see an increase in prices for the next coming months, although that we do have roughly 30% to 40% of our fertilizer already bought and I think that we won't have any negative effect on the prices so far.

Okay. Perfect. Thank you.

Our next question comes from Thiago Duarte from BTG. Please go ahead.

Thank you. Good morning everyone. I have two questions. The first one is starting with the farming business in Argentina. So, just wanted to get a sense of what your expectations are for EBITDA generation for this year compared to the $54 million that you generated last year? I mean, there are a couple of moving parts that I understand as being very important such as the appreciation of the Argentinian peso in real terms, but you also -- on the other hand, expecting much higher yields for this year. So just wanted to, if you could, elaborate a little bit on how you see the EBITDA generation coming from there that would be very helpful. And the second question is regarding your sugar cane or sugar business in Brazil. First of all, whether you see -- where you see your crushing volumes going for this year. If I'm not mistaken, in the last conference call, you discussed your view of having a little bit lower crushing volumes this year as opposed to what you did last year, a little bit higher than 11 million tons. But when you look at what you did in the first quarter and despite of the higher number of date of maintenance, you still managed to make flattish year-over-year volume. So, I was wondering whether you're still going to be to meet last year's figures considering normal weather for the rest of the year. And the second part of that question, where you see your production costs -- unitary production cost in BRL terms for the sugar and ethanol business. Is it too conservative to believe in flattish year-over-year cost and where you see that going that would be very helpful as well?

Hi, Thiago. Thank you for your questions. Regarding farming and land transformation in Argentina and what's the EBITDA number that we can expect, of course, we don't give guidance, but we can share with you that there are a lot of moving parts this always happen with this. We do have much higher expectation as you can see in the first quarter, with the dairy business, so that's something that is going upwards for sure. In rice, we are also optimistic because we are starting with a better yield than the last year, although slightly lower prices in Argentina more appreciated the currency I think that's part of the business. And in terms of the crops, we have -- we're having some way better yields, but lower commodity prices. And again, higher FX, higher currency for the peso. So, taking into account all these moving parts, I think you are more or less in line on how we're thinking, but still a long way to go. Then regarding the sugar and ethanol volumes. I think we've been very clear that in terms of sugar and ethanol volumes, we shouldn't expect lower than last year. We are very well prepared to crush full capacity. And of course, we always depend on the climate, so if we cannot mill because it's raining every day, we won't be able to reach the full capacity. But assuming normal weather from now on, it's very clear that we should be full capacity with no doubt. That's for the sugar and ethanol volumes. So -- and the last part of your question regarding the unitary cost in Brazilian real, we will be in line with last year assuming these same volumes as we've been talking. And there are some small efficiencies in every part of the chain that we are always increasing that may be even improve a little bit in terms of the Brazilian real terms. And then I can give the work here to Renato Pereira who is responsible for our sugar and ethanol business to give a little bit more color in terms of cost analysis for the sugar -- for our sugar and ethanol costs.

Hi. Considering the current exchange rate and productivity estimates, our cash cost in 2017 should be a positive BRL0.30 per pound. Of course, it depends of many variables that is still open, but that's our best estimates now.

That's very helpful. Thank you.

Our next question comes from [Indiscernible] of Bradesco. Please go ahead.

Hi, good morning everyone. Thanks for taking my questions. Basically if you guys can give us some color on your -- you mentioned the ethanol a little bit more profitable we see that especially in the Midwest given current sugar prices that ethanol production have already become profitable, not only in terms of margin for us in terms of working capital. So, you guys could give some guidance on how you're expecting your mix if you consider sugar prices. I understand you're optimistic, but prices sugar will go up, again. But imagine the scenario sources sustains how are you imagining your mix for the end of the year? That will be my question. Thank you.

Okay, thank you, [Indiscernible]. I'm going to ask Marcelo Sanchez to answer these questions. Marcelo?

Thank you for the question. Regarding our strategy for the ethanol taking advantage in our situation in Mato Grosso do Sul. Today, we do have 9% premium on the sugar price with anhydrous production. Therefore, our strategy will be producing as much as anhydrous as possible within this coming months in order to be able to capture that premium.

Okay. Thank you.

Our next question comes from Javier Martinez of Morgan Stanley. Please go ahead.

Yes, hi, thank you. If I may ask, again, about the sugar prices on your commercial strategy, please. Because my reading of what you have released is a little bit different than the comments that you have been released before. I didn’t read that you are optimistic or pessimistic, I think that -- what you are saying is that you expect price volatility going forward. And given that you have already hedged great prices more than half of the production, probably you're already covering most of the fixed cost for this year. What I want to understand is, Marcelo, what is your level of flexibility? So, do you have flexibility considering your hedging policies to wait for prices to recover or not? At a given point you have to keep closing prices to cover cost or how does it work? How flexible -- what is your commercial strategy on sugar prices going forward?

Thank you, Javier. Yes, we do have flexibility going forward. As you mentioned, we are hedged 58% of $0.193. The flexibility that we do have will be from our -- from the view that we don't have in the sugar, we'll be able to capture this upside in the prices for the rest of the year. If Brazil is coming up with a lower harvest, that would, I think, what we think at the level of 580 million tons of crushing that will be the range of Brazil at the end of this year. Prices will be coming up from this levels and we think that we would be able to capture that given that we are open. And for 2018 prices that we are already hedged 20% -- 22%, we do have some optionality. The hedges that we don't have considers options as well. That will also be able to capture in case of an upside next year.

So, you don't have any limitation to wait -- to close anymore prices for sugar for another, let's say, quarter or two quarters, or fiscal year?

Yes, for the next two quarters for sugar, that, we don't have any limitation.

Great. If I may ask something out of curiosity, these [four store] conditioning project you have, this is only for your grains or this is potentially also a business for third-party grains?

This is mainly for our grains, but can also be used for third-party's grain. Today, we already do that in our existing milling capacities with 15% of third-party's grain. So, it can easily be used for 15% to 20% of third-party's grain.

Great. Thank you very much Mariano.

[Operator Instructions] Our next question comes from Matthew Guinness of Somerset Capital. Please go ahead.

Hello. I was wondering if you could provide a little bit more color on how the dairy business -- what operational similarities there are of the dairy business compared to your existing businesses, and that's why you have the competitive advantage in that business. And then linked to that, I'd be interested to hear your thoughts on dividends and/or buybacks. Is that sort of a last resort for free cash flow or might you pay one? And then secondly, could you just go into a little bit more detail about the margin contraction in the farming business and the cause of that?

Thank you, Matthew for your question. Regarding the dairy, the specifics of what we have today is absolutely unique in South America. There's nobody else with the production system that we have there in South America. If you haven't been able to take a look at it, I think it's -- the things that we are proud of what we've done and this is the most efficient system to produce milk in South America. And when we compare to the best producers of North America that there are with which we compare, we are always within the 10% superior guys. So, that's what we've developed in Argentina and it took us almost 10 years to develop the system and now we feel that system is in optimal situation and ready to be expanded. That's the main benefit that we have in our dairy business, and that's why we are interested on growing with that business and we think that's a very attractive use of capital. Then regarding the cash flow generation, as I mentioned before, there are still a lot of things to happen during the year, so depending on how much cash we'll be generating, we will always analyze these different options when we are thinking on capital allocation in which we include the buyback or dividends as part of the analysis. As you've seen, for example, in the last six months, we've been buying back shares as reported in our 20-F in April. And finally, regarding the contractions in margins, that contraction -- when we are reporting this particular quarter, that contraction is higher because we haven't harvested yet all those grains. So, part of that contraction is delaying of the harvesting that has happened because of the rain that generated a delay on the planting. And then, obviously, postponed on the harvesting. So, in some ways, they were postponed, but having said these, in terms of the grains, in general, as we have more appreciated peso, the results were some kind of structure construction in terms of those margins coming from the land.

Thank you very much.

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.

Okay, thank you very much for participating on the call and we expect a very good year going forward and we -- and all our teams are fully motivated to continue developing this company. We are proud of what we've done until now and we are fully motivated to continue growing and generating attractive returns for our shareholders with this company. We expect to see you in our upcoming events.

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