Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Adecoagro's Fourth Quarter 2017 Results Conference Call. Today with us, we have Mr. Mariano Bosch, CEO; Mr. Charlie Boero Hughes, CFO; and Mr. Juan Ignacio Galleano, Investor Relations Manager. We would like to inform you that this event is being recorded. [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 Adecoagro's conference. Today, we will be presenting our 2017 year-end numbers. Despite the different weather-related challenges we experienced during the year, we were able to deliver good results and generate attractive cash flows. From an operational standpoint, we had an excellent performance in all our business, supported by a very well-executed commercial strategy, which allowed us to mitigate the effects of the adverse weather scenarios. Let me insist, these are a result of our disciplined focus on maintaining our costs low. As we always stress out, we need to be highly efficient in those factors that we can control, such as cost of production and, to some extent, yields, in order to mitigate any downside risk that may arise from factors that we don't control, being weather the most obvious example. Starting with the Sugar, Ethanol and Energy business. Our harvesting and crushing operations suffered delays as a result of abundant rainfalls, especially during the last quarter. Milling efficiencies, on the other hand, increased by 6% year-over-year, reaching 50,000 tons of cane crushed per day. This enhancement clearly evidences the continued effort and strong consolidation of our industrial teams, who allowed us to mitigate the impact of adverse weather condition in our financial results. At this point, it's very important to highlight that all the sugarcane that we couldn't harvest in 2017, which continue growing on the face of increasing TRS content, is expected to be harvested during 2018, implying a deferment in EBITDA recognition from 2017 to the present fiscal year. Moving to our Crops business. We also suffered harvest delays for 2016/'17 crop season as a result of the floods and heavy rains that hit most of the productive regions of Argentina. Nonetheless, we managed to get the crops out of…

Thank you, Mariano. Good morning, everyone. I would like to start on Page 4 with a brief analysis on the rains in Mato Grosso do Sul. As you can see on the chart, the fourth quarter was the most affected by excess rains. In fact, it rained 11% more than the 10-year average and 8% more compared to the same period of last year. I would like to remind everyone that sugarcane cannot be harvested when the soil is wet because the heavy combines and trucks may damage the sugarcane roots and the soil. Let's move to Page 5 to see the impact on our crushing activities. The excess rains during the quarter resulted in significant delays in sugarcane harvesting and crushing. Sugarcane milling during the fourth quarter of 2017 reached 2.2 million tons, 29% lower year-over-year and lower than our expectations. This effect was partially offset by higher industrial efficiencies, which resulted in a 7% increase in milling per day. It is important to highlight that part of the sugarcane, which was not harvested during the fourth quarter, is scheduled to be harvested during 2018. In fact, as of today, we have harvested over 1 million tons of sugarcane. Let's now move to Page 6, where I would like to highlight our agricultural productivity. As you can see on the bottom charts, our sugarcane yields in 2017 reached 85 tons per hectare, 13% lower than last year. TRS content remained flat at 127 kilos per ton. The combination of these two effects resulted in TRS production per hectare of 10.8 tons, 13% below 2016. It's worth highlighting that last year's agricultural performance was mainly driven by extremely favorable weather conditions. The region received abundant rainfalls in the fourth quarter 2015, positively affecting cane yields during 2016. At the same…

[Operator Instructions]. First question comes from Danniela Eiger with Bank of America Merrill Lynch.

I have two quick questions. The first one is on the Crops division. Could you provide an update on how they are evolving given Argentina's drought? And also, what could be the potential impact if it doesn't rain in the next few days, as you're expecting? And my second question is on sugar. We've seen that you advanced very well, you're hedging this quarter at very good prices. And I would like to know your view on, how do you expect to proceed with your hedging strategy given that prices are currently very low, like below $0.13? And what's your view on prices for the following months?

Thank you for your question. I want to take care of the first question and then give Marcelo Sanchez the second question. First of all, on the evolution of the crops, I would like to mention that corn and soybean are the ones that are being affected by the drought and that, that portion of our business is less than 10% of the EBITDA of Adecoagro. So only corn and soybean is less than 10% of the EBITDA of the whole company. Of course, the drought is negatively affecting these two crops, but on the other hand, it is positive for our rice yields. We are in the middle of the harvest of the rice, and we are experiencing above-budget yields in rice because it's all irrigated, and all this insulation that we are experiencing from the drought is helping the rice with better yields. So that's part of the diversification that is playing on, on this situation of this high weather or extreme weather event. Then going specifically on how this drought is impacting our corn and soybean, the effect to the total country is around 25%. So there are many or several estimates for the total country. And with that is around that 25% reduction. In our specific case and because we consider we are within the top producers, using all best practices, being disciplined on the crop rotation, on the weed control, on the no-till system, this long-term view that we have to -- for the crops, that's why we can expect between 15% to 20% reduction. Of course, we are affected by the drought but not in the same ratio that is being affected for the country. And furthermore, the last comment on regards of the dry season, of the dry situation of the crops, in terms of EBITDA, this is somewhat mitigated or offset by an increase on prices for soy and corn. And when we talk about the increasing prices, it's important to remark that the increase in the local prices in Argentina is higher than the increase in prices that we see in the Chicago Board of Trade. So both things are playing on, and our commercial strategy, of course, is taking into account the situation of the bases in Argentina that are being improved. So all the logistics is calling '18, according to that. So that's a quick comment that I wanted to mention about the dry situation that Argentina is experiencing today. And now I will ask Marcelo to comment on your question regarding our sugar hedging strategy.

Thank you for your question, and I will be addressing your question, dividing the view that we do have in three, I mean, short term, medium term and long term for the sugar. Within the last two weeks, we've seen sugar prices really under pressure due to a higher-than-expected Indian sugar output, resulting on a reaction on the farms. I mean, the farms increased their sugar position. They're accounting now for above 130,000 lots, more than roughly 7 million tons. We see any reduction on this regard with the Center-South crop are higher than expected, and our mix can cause the market to rally. Of course, we don't see this opportunity to last for long given the surplus, but it could be taking us a chance for the unhedged portion of production. Considering medium term, we expect sugar prices to be under pressure until Q1 and Q2 next year, given surplus starting materializing by then. And in the longer term, alternative crop prices of producing countries have been low and not stimulating a switch from sugar. This won't be the case when sugar prices continue below cost of production on those countries, and we see those lows on alternative crops recovering as they seem to have reached the bottom and need to recover promoting sweets at second half of next year, mainly in Europe where sugar beet expansion will no longer an issue. A sugar price recovery, the conservative demand increase projections of, for instance, 1.2%, it should be coming at Q3 2019 onwards. That's why considering this view, we are well advanced in our hedges and considering any short-term rally as a pricing opportunity, I think that Charlie mentioned, that we are already hedged in -- by the time we wrote our report by 50%. Now we are 66% at an average price of 16.68 for 2018 production, and we started already hedging our 2019 production. We already reached 15% at an average price of 15.28. That is reflecting our view on the sugar.

If we can add on, because of this view, we are maximizing ethanol today on our mix, and that's also an important measure taking into account because of this view.

The next question comes from Thiago Duarte with BTG.

Yes. I'd like to follow up on the land sale and Land Transformation business. We discussed that 1 or 2 earnings calls ago, and Mariano, you sounded very optimistic that you could strike a deal very soon. You guys put on pretty firm words in the release. So it looks like you have ongoing negotiations for that. So my question on this would be, I think for you, Mariano, how confident you are that you could deliver on the Land Transformation business this year. I think that will be an interesting answer. And my second question would be on use of capital and use of cash. We noticed that you guys accelerated on the share buybacks, particularly in the fourth quarter of 2017. So my question would be, if you could guide us through whether what kind of level of share buybacks you expect to keep executing, considering the lower share price today and how you see that vis-à-vis your leverage and your expansion CapEx plans for the ongoing expansion plans that you have for the different business units.

Okay. So if we can answer on your first question regarding land sales, this year, we continue to see -- or we're announcing more demand for farms. This demand is something that is clearly more active now than what it was in the last two years for sure. This has been increasing by the end of last year. We also started to see this increase in demand. Now as you mentioned, we are under active negotiation in some of our already-transformed farms. And we are very optimistic on achieving a land sale at an attractive price for us. So we are very optimistic now. And then on your second question regarding the buyback and dividend capital allocation, et cetera, that we said something very, very important and we take very seriously. I would like to mention that the company continues to generate free cash flow from operations, that we have already announced these organic growth projects in each one of the business lines. And as they are marginal investment, the returns we expect there are very attractive, all of them above 20% IRRs. These, as Charlie mentioned, expect us to obtain a 50% more EBITDA in the next four years and significantly increase our free cash flow from operations. And as we ramp up our investments and always being mindful in our leverage ratios, we will either continue executing our buyback program or start paying dividends.

[Operator Instructions]. The next question comes from Roberto Browne with Morgan Stanley.

Actually a very quick one. I was just wondering if you could provide more details on the change of soybean area for crop. We see that in the forecast for the planning area in 2017/'18. There's quite a reduction for soybeans and an increase in corn. And I was just thinking if this is related to the change in the export taxations or maybe relative prices. Some color on that would be helpful.

Production model.

Thanks, Roberto, for your question. On regards on these differences that you see in the areas of corn and soybean, as I mentioned before, for us, the key is the long-term rotation. So the planting plan is coming, taking into account the different prices, but the most important driver there is what each field is asking for. So each field needs and have a particular yield and thus a particular margin, according to the type of which it have the need for cover on the soil. So there are many specific reasons that take into account the yield expected in each farm. So this yield expected is according -- is measured and analyzed whether with a price expected, and this gives us the best specific crop to be planted in each farm. So this consolidated figure is the result of all this detailed work being done in each one of the farms. And of course, we can project -- with the projected prices, we take into account what we already know, that is this lifting of export taxes for soybean in the future, the full export taxes having been lifted a year ago for corn.

The next question comes from Edmond Safra with EMS Capital.

Mariano, my question relates to your capital return policy. In the past, you have emphasized stock buybacks, and today, you're mentioning buybacks or dividends. I just want to know, given the current share price, whether you're backing off your commitment to share buybacks or you're just making a generic comment. I would think that given where the price is, you at the margin want to do more buybacks rather than dividends to the extent you have excess capital.

Good point, Edmond. We continue more or less within the same lines that I have just mentioned. And whether it's a buyback or dividend, we've been always opportunistic on thinking what's the best return for the company, either one way or the other.

[Operator Instructions]. This concludes the question-and-answer session. At this time, I would like to turn the floor back to Mr. Bosch for any closing remarks.

So before closing this last earnings call for the year, I would like to thank you all for the support and confidence and let you know, as we do every year since our inception, that we have renewed our commitment to continue with our obsession to create shareholder value by allocating our resources in projects that generate attractive returns. We have a promising 2018 coming ahead and are ready to accept the challenges.

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