Good morning and welcome, ladies and gentlemen and thank you for waiting. At this time, we would like to welcome everyone to Adecoagro’s Second Quarter 2021 Results Conference Call. Today with us, we have Mr. Mariano Bosch, CEO and Mr. Charlie Boero Hughes, CFO. 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 session. [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 will turn the call over to Mr. Mariano Bosch, CEO. Mr. Bosch, you may begin your conference.

Good morning and thank you for joining Adecoagro’s 2021 second quarter results conference. As you can see in our release, we continued delivering strong operation and financial results across all of our businesses. Adjusted EBITDA marked a new record-high for the first semester of the year and an increase of almost 50% compared to last year. The continuous growth in EBITDA and cash generation proves the success of the investments we did during the past years. It is thanks to them that Adecoagro is now a larger company, more efficient and better positioned to face all different scenarios. But our DNA remains the same. We are still a group of hard-working people committed to the sustainable production of food and renewable energy at the lowest cost. Now, in relation of the performance of each of our segments, in our Sugar, Ethanol and Energy business, during the first 6 months of the year, we increased our production in 40% compared to last year, thanks to an increase in crushing volume of 1.3 million tons and higher TRS content. This allowed us to significantly increase our sales of Sugar, Ethanol and Energy and capture higher average selling prices of the three products. In addition, our commercial strategy is to carry over $70 million in stocks to benefit from higher expected future prices. I also want to refer to the weather event recorded in Brazil during the last months. As you all may be aware, a frost hit the main productive regions of Brazil, including São Paulo and Parana, as well as Minas Gerais and Mato Grosso do Sul, where our sugarcane plantations are located. We took actions to minimize the negative effect. This includes accelerating our harvesting pace, anticipating the purchase of 5 two-line harvesters to reinforce our equipment fleet and to…

Thank you, Mariano. Good morning, everyone. Let’s start on Page 4 with a brief analysis on the rains in Mato Grosso do Sul. As seen on the top charts, rains in our cluster during the second quarter of 2021 were 45% lower than during the same period of last year, and 53.5% lower than the 10-year average. This was particularly notable during the month of April when virtually no precipitation was observed. However, as can be seen on the graph, we experienced a humid first quarter. This means that our sugarcane was better prepared to go through the dryer weather with no implication of productivity. Before turning to the following slide, I would like to briefly comment on the weather in Brazil. The Central South region of Brazil has been experiencing dry weather for a prolonged period of time, which negatively impacted its productivity. Due to the fact that the region accounts for approximately 85% of Brazil’s sugarcane production, this has put pressure on the supply and demand, and has led to an increase in the prices of both sugar and ethanol. In addition to this, as Mariano mentioned in his introduction, during June and July, Brazil’s main productive areas were hit by a frost. We believe this will put further pressure on the supply side, and thus, continue to improve the outlook on prices going forward. Now, let’s continue with Slide 5, where I would like to discuss our sugarcane crushing strategy. During the second quarter of 2021, the dryer weather led to 7.9% increase in effective milling days compared to the same period of last year, and enabled us to accelerate our crushing pace, resulting in a 10.9% increase in milling per day. In this line, total crushing during the quarter amounted to almost 3.5 million tons, 0.6…

Thank you. [Operator Instructions] Our first question today will come from Guilherme Palhares with Bank of America. Please go ahead.

Good morning everyone. Thank you for taking my question. I have two, actually. The first one is related to the next harvest season. So we are seeing good prices growing across the board, and we would like to have your thoughts about it and how this could impact the company going forward. And the second question is related to the fuel expenses and costs in the operations. So we are seeing there bioethanol is doing very well. We are seeing other fuels like diesel, that it’s a cost to the company doing the same. So if I’m not mistaken, the company had a pilot testing with a biogas plant that should allow the company to produce biomethane and the core this cost increase. So if you could share an update on that project. And what are you seeing in terms of economic availability? And what would be the impact going forward for the company and the results of that operation? Thank you.

Hi, Guilherme, thank you for your questions. On the first part of your question, you were asking about the next harvest season. What is the question specifically?

Yes, chemicals and fertilizers, and what would be the impact for the CapEx after next year.

Yes. Clear. Thank you. So regarding your question of next harvest season and the increase of cost of fertilizers, as you know, our production system is in the places where the combination of soil like climate is ideal. That’s why we talk about our sustainable production systems. And within this sustainability includes the lower rates of fertilizers. We use crop rotations and we combine those things in order to minimize the amount of fertilizers that we use. So because of this and the intrinsic system that we have is that the cost of fertilizer is around 5% of our total cost. So the impact of the increase in prices in fertilizer is only on 5% of our total costs. That is thinking for next season and the specific question regarding the price of fertilizer. Then regarding your second part of the question that you were asking about the biogas and the total concept of this project, the biogas is taken from the concentrated vinasse that we have here. And I would like Renato to expand more on what are the general numbers of this project of biogas. So Renato, can you update there?

Okay. So as Mariano mentioned, the stores that we use to produce biogas is concentrated vinasse. We concentrated vinasse in our [indiscernible] in Mato Grosso do Sul to save fertilizer. So we concentrated traditional vinasse 8x. So instead of producing 11, 12 liters of vinasse per liter of ethanol, we produce 1.5, 2 liters of concentrated vinasse. So this concentrated vinasse, with good depth in a bio-digester to produce the biogas in the current phase of the project. We are producing 500 bromides cubic meter of biogas. And we are using the heat of the biogas to a lot of sorts of heat to save steam in the process. And by doing that, we are exporting extra 1.1 megawatts per hour. So if you consider a season of 6,000 hours, so it’s approximately 6,000 megawatt hours a year. So now we are getting ready to the second phase of the project. So we are using the same bio-digester. So – but we are producing new biomethane from this biogas. The position of biomethane, we need to clean and to take it out the sulfur of the biogas and also to compress the biogas to produce biomethane. And now we have been adopting some vehicles that we have in our mill. Actually, we have adopted seven vehicles, three cars, three trucks and one big truck. And now, they are going to be fueled by biomethane. The 5 cubic meters of vinasse that produce 500 bromides cubic meters of biogas can replace the equivalent of 240 liters of diesel. So if you take the 240 liters per diesel and multiply by 6,000 hours, so we will be saving approximately 1.4 million liters of diesel per year in the current phase. I think it’s important to mention here that we have been using less than 4% of the concentrated vinasse that we produce in our cluster. So when we use the total vinasse, that we produce in our culture, we can multiply those numbers to 33x. So it’s a – there is a huge potential of the project.

That’s very clear. Just two follow-up questions on that fact, you said that you’re moving towards the second phase of the project. What is the timeline that you are looking at right now? And is there any opportunity to not only sell biomethane and using your operation, but commercialize that to third parties as well?

I think, the timeline now we are just working in the second phase is expected to start working on September. So then we are going to adjust the increase of the production according to the success of the project that we are going to have. So we have to be testing. And of course, we are very optimistic, but of course, it depends on how good is the fleet powered by the biomethane. We don’t expect to sell it because it’s important to sell to other sources. What we expect to do is to use it in our whole fleet especially the vehicles that are – that came to the mill to be full, not the ones that are in the food in the field because then it’s easier to pull them. And we are just starting to work in an idea to produce some hydrogen from our biomethane, but this is still in a very learning conversation.

That’s very clear, Renato. Thank you for the explanation. I look forward to the next section of the project.

Guilherme, one quick add on this biogas. This makes the whole system much more sustainable, and this will also add additional CBios. And including the whole project, this can add like 85,000 CBios per year. So just to quick remind on that. Are all your question answered, Guilherme, or do you want to ask something else?

No. That’s very clear. Just if you could repeat the number, it’s 50,000 CBio, right?

85,000 the total project additional CBios.

Then you replace – if you replace 100% of our diesel, which is the potential of the project.

Thanks.

[Operator Instructions] Our next question today will come from Lucas Ferreira with JPMorgan. Please go ahead.

First of all, just I’m not sure if I missed, I’m sorry. But what’s, as of now, the expected impact of frost combined with drought in your crushing for this year? So what’s expected of the updated crushing guidance you guys may have for 2021, ‘22? And do you already foresee some impact of this ‘22 to ‘23? Is it possible to anticipate something but if you can comment, obviously, on the expected TRS production decline as well? And the other question that I have is, even though I welcome you guys are open in terms of hedges, especially for next season, right? Prices are getting – combined with the currency are getting to a level that I believe could grant you guys super good margins. So on a risk perspective, wouldn’t it make sense to start already to hedge something for the next season at these prices of – if you look at the curve over $0.18 for the next 2 years pretty much. So would it make sense to already start position yourselves and locking in some good margins for the following seasons?

Thank you, Lucas, for your questions. Renato, can you answer both, please?

Okay. So thank you, Lucas, for your questions. So different from the rest of the Center-South, we had a good summertime in terms of rains. That’s why we crushed very well in the first quarter actually it was a hefty crushing. And also, our yields – accumulated yields for the 6 months is higher than last year because we didn’t have such impact of the drought that is affecting the rest of the Center-South. In July, as you know, there was a frost in Brazil, which affected the main sugarcane areas, including São Paulo, Parana and Mato Grosso do Sul and Minas Gerais. So we were also affected by the frost. This should impact our sugarcane yields for the remaining part of this season and for the beginning of the next one. And we are doing all that we can do to try to minimize the impact which includes, as Mariano mentioned, at the beginning to speed up the crushing pace, especially the sugarcane that will be harvested this year. We have acquired some third-party sugarcane that is being delivered by the owner of the cane. So it helps to supply sugarcane to our mills. We are taking part of the planning structure to help to crush the sugarcane affected by frost as quickly as possible. So we are trying to do to – trying to do our best to minimize the impact for this year and at the beginning of next year. It should be, of course, impact our crushing. I think that this year, we should be crushing similar or slightly lower than we have crushed last year. And for next year, for 2022, probably we are going to crush per share more than this year. I would say, a little bit more than 11 million tons of…

Excellent, Renato. And sorry, just then a follow-up, if I may. What is with the sugar prices and now you with more anhydrous capacity, what should be your mix going forward? Are you adjusting your production mix in – for the second half?

Well, Mato Grosso do Sul, as I was mentioning, the anhydrous today is already equivalent to $0.22 per pound. So it’s paying more than sugar right now, and the hydrous is about the same. So we think that we are going to be maximizing ethanol in the end part of the season. And also, we have to consider that the sugarcane is – when the harvest progress, the sugarcane gets with lower TRS. So it’s always easier to produce ethanol. So we think that we will be producing ethanol and benefiting of higher prices, especially Mato Grosso do Sul.

Perfect. Thank you very much.

[Operator Instructions] There being no further questions at this time, this will conclude our question-and-answer session. At this time, I would like to turn the floor back to Mr. Bosch for any closing remarks.

Okay. So before finishing the call, I wanted to thank you all for joining the conference. As you know, we’re an inherent risk of our business. However, we are uniquely positioned to continue taking advantage of the constructive price scenario. This is true for all the products we produce. And as I have mentioned before, it is only possible because of the strategic investments we made across our operations and because of the hard work of our team. We believe we are in an excellent position to continue generating good financial results. We have already started to distribute these results with our shareholders through our buyback program, and we plan to continue doing so in a more structural way in the coming years. Lastly, I would like to reiterate my gratitude to all our operating teams that are doing an outstanding job and to our shareholders for their continued support.

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