Good morning ladies and gentlemen and thank you for waiting. At this time, we would like to welcome everyone to Adecoagro’s Third 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. [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 conference over to Mr. Mariano Bosch, CEO. Mr. Bosch, you may begin your conference.

Good morning and thank you for joining Adecoagro’s 2021 third quarter results conference. 2021 marked a 10-year anniversary of Adecoagro's IPO. In the last 10 years, our adjusted EBITDA grew from $100 million to roughly $400 million. And our cash generation became structurally positive. Since the IPO, we expanded our businesses and conducted investments that allow us to vertically integrate our operations, improve efficiencies and enhance our competitive advantages. We have also became a source of carbon credit and a reference in the sustainable production of food and renewable energy. Adecoagro is now a more matured company with a healthy capital structure and the capacity to commit to a systemic distribution policy. As we mentioned in the past, during 2021, we are distributing cash to our shareholders via our share repurchase program. So far, we have already repurchased over 6 million shares equivalent to more than 5% of the equity of the company. Starting in 2022, we will distribute annually, at least 40% of the adjusted free cash from operations generated during the previous year distribution will consist of a dividend of at least $30 million per year, which will be paid in May and November. At the same time, we will continue to repurchase shares under our products, as we see appropriate until reaching the distribution target. On top of our distribution policy, we continue to see attractive growth opportunities that synergize well with our current operations, have potential to make them more efficient and sustainable and offer very attractive returns. And all these will never compromise our solid their profit. Now, in relation to the performance of our businesses, consolidated adjusted EBITDA marked a new record high for the first 9 months of the year, and an increase of over 50% compared to last year. In our sugar,…

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 range in our [indiscernible] third quarter of 2021, we are lower than during the same period last year and the 10-year average. However, increased precipitations during April were very favorable for the recovery of sugarcane yields. Before turning to the following slide, I would like to briefly comment on the cold front that hit most Brazil's key productive area at the beginning of the quarter. As you know, low temperatures at the end of June and July caused severe frost damage on sugarcane plantations in regions including South Paulo and Parana states, as well as Mato Grosso do Sul and Minas Gerais. This caused a negative impact in yields, which were already affected by the dry weather observed through all the year in the center, south region of Brazil. In light of this, market estimates of Brazil shirking supply were cut in as much as 15% by some analysts. While expectations at the beginning of the year pointed at a crushing volume of 590 million tons of sugarcane. Current expectations range between 520 million and 510 million tons. The pressure on the supply side translated into higher prices for all three products. This made the price scenario even more constructive than it already was. As we'll see in the following slides, we were in an excellent position to capture this upside because of our strategy to hedge at the low end of our commercial policy. In fact, for the 2022 and '23 campaign, we still have over 90% of TRS unhedged. Please jump to Page 5, where I would like to walk you through our agriculture productivity. During the third quarter…

[Operator Instructions] Today's first question comes 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 being on the sugar and ethanol business. Looking at the huge [indiscernible] you guys had this year and looking for the next crop season, what we could expect in terms of recovery of TRS of cane? And the second one is related to the fertilizers and the market price that we are seeing. And if you could explain a bit what will be paying that for your organization? And what is the exposure that you have in the Farming business? Should these prices would be very important for us. If you could give more details on that front. Thank you.

Hi, Guilherme, good morning. Thank you very much for your question. I want to take the second part of the question, and then I'm going to ask Renato delve more into the details on the sugar and ethanol business and what can we expect for the future. So regarding our fertilizer position for this year, we are pretty well covered. We anticipated our buying soft [ph] fertilizers. So we are in a very good position in the medium or short-term. And for the longer term, of course, there has been an increase overall for [indiscernible] in general. And we will -- that will have an impact in the total cost that applies to the 15% of the total costs. This 15% includes fertilizer and agriculture approach that both are increasing in terms of dollar prices. So that is what we need to take into account. And for next year that is not the season, so the season that we are planting is already covered. So therefore the following season we will need to adjust the leasing costs etcetera, etcetera to try to compensate this increase on the fertilizer costs. That is one part of the equation and the other part is that this also gives us an opportunity to be even more efficient in the transformation of the vinasse and the transformation of the [indiscernible] into organic fertilizer. So this transformation of organic fertilizer is being very profitable and we are increasing and we have our growth opportunity there to continue to increase the value of our devices because of this reason in chemical fertilizer. That makes us also more sustainable that the sustainability and the increase in the [indiscernible] generation of carbon credits through the transformation of this manure into a biological fertilizer is also allowing us to capture…

Now that's very clear. Just one additional question, if I may, in terms of the dividend policy that the company disclosed this quarter, which is a milestone for the company that I understand. If you could just walk us through the rationale of choosing this 40% threshold and the metric looking at the free cash flow. And what we could expect that the impact of that policy in terms of the investments ahead of the company would like to perform going forward.

Sorry, Guilherme, I'm not sure I understood exactly the question, but with this policy as we explained that the regaining, we are committing that 40% of the free cash flow generated from operation is what is going to be distributed to the shareholders, then the rest continues to be for these growth projects that we are seeing very attractive in the different businesses that we currently have.

Sure. That’s very clear. Thanks, Mariano.

And our next question today comes from Thiago Duarte with BTG. Please go ahead.

Thank you. Good morning, everybody. Morning, Mariano, Charlie. Yes, I have two questions on the sugar, ethanol and energy business. The first one is, is similar to the previous one, but still focus on this ongoing prop. I think last quarter after the frost and knowing the impacts of the drought, you mentioned that you were expecting to crush for the full year around the same volumes that you crushed last year. So just wanted to check whether this assumption is still valid after the third quarter or not and what would be a reasonable cane volume for the year as per your expectations. The second question is a more specific one regarding you mentioned very briefly in the earnings release the biomethane project. And the investments that happened. Can you hear me?

Yes, perfectly well.

Okay. Sorry. So -- and the investments that you're making to develop that project. So can you -- you mentioned in the release that you are looking to eventually be able to fully replace the diesel that the company currently buys from the market? So just if you could, can you provide any more color on the size of the CapEx, the volumes that that the biomethane production capacity that you expect to be able to have in the future. Any color on these fronts would be much appreciated. Thank you.

Good morning, Thiago. Thank you for your question. Very interesting. On the second -- on your second question on the biomethane project that we are very keen on that project and we are very enthusiastic of a technology that we've been developing now for the last 7 or 8 years. It is advancing every year, a little bit in the development of this project. And now we have this biodigester [ph] that we take them from the vinasse. And we are currently generating electricity through that biomethane. Now we are making an investment where we are transforming that biomethane into -- or concentrating it to put it into the vehicles. We have already transformed that in vehicles. And so this is our first step. We expect that during 2022, we are going to be using biomethane for these 13 vehicles. This is still under testing way. We are very enthusiastic, but we analyze the potential of the total vinasse that we are having, and that we could be transforming into the same thing that we are facing today, and that we are having an excellent performance. We could be able to replace almost 100% of all our diesel that is conceptually what the potential of these technologies are. On top of this, we have an agreement with a guy with whom we've been developing this that we could be even selling the technology for third parties. So that is [indiscernible] we are having, but it's still within a very developing technology. And that of course, we are very keen, but we are not projecting nothing specific as of today. Is it clear, Thiago?

Yes, that's clear. But do you have any -- can you size up the project for us in terms of CapEx, just so we understand that the amount of investment that you expect to be deploying there, that would be nice, I got the rest.

Yes, we still don't know the amount of the CapEx, that's why we are talking about the possibilities. The CapEx we will have to be pay [ph] in a very short period of time, as we've been seeing now on all these CapEx is that are within our existing businesses have very attractive returns, very short period of payback. So that would be the analysis once we have or we are pretty sure about the technology. So it will be communicated very clearly communicated if it's not the situation.

Thank you.

Then going to the other part of your question, Thiago, to regarding the total crushing of this year. In our last quarter, we mentioned that it was some way below last year because of the impact of the frost. Now that we were able to accelerate the harvest and the quarter was excellent in terms of all the actions that we're taking to accelerate the harvest and to harvest all these frosted cane and that performed even better than with what we were projecting because we were able to hire some additional working harvesters and some we accelerated was [indiscernible] bought at the end of the year or at the -- we anticipated all those moments as we're pretty well done. We can see that, we are going to be pretty near what we harvested last year, it's probably 1% or 2% below last year. We are currently harvesting. We will end up harvest by December. We are now harvesting with 100% ethanol. The difference between ethanol and sugar prices weigh in favor of ethanol. I know Charlie was explaining in the beginning, within the ethanol, the hydrous ethanol is said performing very, very good prices. So today we are doing 100% of ethanol in our current harvest.

That's clear. Thank you, Mariano.

Thank you, Thiago, for your question.

And our next question today comes from Christian Audi with Santander. Please go ahead.

Thank you. Hi, Mariano and Charlie. First of all, congratulations on the great results. I would like to ask a question first on capital allocation, Mariano. Can you as we go through the different elements on the leverage front, as you showed very clearly in your presentation, you're very low net debt to EBITDA. What is the target that you plan to maintain that you're comfortable with going into next year? On the second, use of cash in terms of CapEx? Or can you just detail a bit more your expectations for CapEx for major products into next year? You already touched on this test element of biogas? Are you looking at any other products such as [indiscernible] or anything else that could result into higher CapEx than expected? And then in terms of dividends, versus share buybacks, congratulations on establishing a dividend policy? That's something that I think the market was looking for. And I know you were working very hard on it. So congratulations on getting it done. How do you think about the dividend versus share buyback decision? Is that purely a tax issue where you will pay the dividends? And then what's leftover you use for share buybacks? And then the second set of questions was more related to pricing. You already touched on your expectation for continually good ethanol and sugar pricing. Can you just elaborate a bit on that, particularly as it relates to sugar and how you're seeing the global deficit or surplus into next year place? Thank you.

Hi, Christian. Thank you for your question. Regarding the first part of your question, similar to what I was explaining when we started the call, we feel that today we are in a very good position to implement this distribution policies. And our policy refers to at least 40% of the adjusted free cash flow from operations that has been generated in the previous year. And here I would like to point out for example, this year 2021, where we acquired 6 million shares that is over $50 million. And if we take a look at the net cash from operations generated in 2020, that was around $100 million. So in this particular year 2021 because of the projects that we performed, and because of our solid debt position, and because we are below 2x EBITDA and we feel very comfortable in that area that's always being on during the whole year below the 2x EBITDA is that we were able to use some way more than 50% of the net cash from operations for revival assuming the previous year. So that's why within our distribution policy we are assuming and understanding our capital allocation thinking. And the same way that we've been explaining in the last 3, 4, 5, 6 calls is always understanding this asset capital allocation system. So going, why, at least $30 million of dividend and the rest to complement through the buybacks. It includes many things, including this [indiscernible] features that can affect some of our investors or not. But this can, of course, vary from time to time. Finally, the last comment regarding the CapEx and the opportunities that we are seeing within these growth opportunities. I would say that all of them that we are looking at within the four business lines that…

Great. And can you give us a sense as you analyze these opportunities, what levels of return via [indiscernible] you use as a threshold to in order to pursue them, please?

Yes, of course. The threshold for the different business and how sustainability impact, there are many specific things. But in general, I would say that all -- most of the things that we are looking at are all of them above 20%, 25% IRR. There are some of them with 50% IRR. So the IRR that we are using are very attractive for us.

Great, very helpful. And then if you could just comment on your outlook for sugar and ethanol prices, please?

Yes, sure. As we've been anticipating, we are in a very constructive mood in terms of sugar and ethanol prices with the petroleum at $80 and the relations between importing and exporting in Brazil, hydrous, anhydrous ethanol at still a very [indiscernible] scenario especially when we talk on the anhydrous scenario. That's why you saw that at the end of this quarter we were full of inventories and same thing for the sugar prices. We were anticipating this frost effect that we were talking in our previous goal that we have in the market talking too much about these previous effects. And I think it was clear that the effect was there and the increase in prices came. And for the next year until the second half of the next year, we also see the scenario very constructive in both sugar and ethanol prices.

Great. Thank you very much.

And ladies and gentlemen, the next question comes from … [Operator Instructions] A lot something for the say, a show on ethanol. Scenario.

Renato, do you want to add something to this sugar and ethanol scenario?

Yes, can you hear me or not?

Yes, perfectly well.

Yes, just to add that we don't think that the Brazilian crop, you’ve an important recover next year, because of the reduction of the 18 months planting, because of the dry weather that impacted that type of planting. Also, the frost, and the fire that we were mentioning before, will impact the first half of next year in Brazil, the supply of TRS for the first half of the year. And also the probability there is going to be a reduction in the sugarcane area of about 3% of next year. So the Brazilian crop is not going to recover a lot. There are some recovery in some countries like India, and Thailand, but in a lower proportion, then what Brazil is supposed to reduce. So we think that the [indiscernible] in the world is around 3 million tons of sugar. And we think that the scenario for next year is going to be -- the [indiscernible] next year is going to be very, very good as we were discussing here. If the oil prices remain at the current levels, and the auto cycle is increasing, we think that there's going to be, I would say, a healthy fight from sugar and ethanol for the TRS of the cane. So probably the mix can be impacted and these debts can be even higher.

Thank you. Ladies and gentlemen, our next question comes from Lucas Ferreira with JPMorgan. Please go ahead. Lucas your line is open.

Yes, so good morning, everybody. Thanks for the opportunity to ask questions and congrats on the distribution policy. I just wanted to make a follow-up question on this Mariano and Charlie. I think the only maybe missing link on the policy is exactly like what's the limit? What's your leverage limit you expect? So we have a normally some visibility on the minimum payments. But what could be like a potential payments that given your CapEx [indiscernible] CapEx plan? And what is the limit of leverage you want to maintain? So since your leverage is quite low, apparently there's no major topics in the pipeline, can we -- can you share what's the leverage? Maybe not that to [indiscernible] want to keep, so we have also a visibility on what could be the actual payment to shareholders? That's the first question. The second question maybe to Renato. Renato, just see you're carrying a lot of inventories for the coming quarter, especially sugar. If you want to talk about your commercialization strategy for the coming quarter. You see -- do you see the market short of ethanol? Do you see companies importing ethanol in the first quarter? All these see the inventory balance there? And could you just explain you why [indiscernible] carry so much sugar at inventories for the coming quarters? Yes, that's it. Thanks all for the opportunity. Thanks.

Hi, Lucas. Thank you for your question. Regarding the distribution policy, I think that's pretty much in line with what we've been saying. This area of below 2x EBITDA that leverage and it's an area where we feel very comfortable. We think that we feel are in a company that they say generating very good results and sustainable gas. But we want to maintain our leverage of that very -- in a [indiscernible] way we are in Latin America. We all know Latin America. So we want to maintain ourselves in a safe area in terms of the amount of net debt that we would like to have. So the most of what we've been saying today regarding our distribution policy has already been said and this 40% of the net cash from operations is a minimum to which we are committing ourselves. And we don't want to have exceed of -- excess of cash in the company, nothing like that. You can see what we've learned during this current year. And so I think we will be continued in the same lines of what of how we've been managing the company in the --- in all these years. So that's regarding the distribution policy. And regarding your questions on [indiscernible], I would like to have Renato answer precisely.

Hi, Lucas. We also remain very optimistic about the shorter, I think the Brazilian crop this year is going to be something close to 520 million tons much below than everybody was expecting. So the supply of [indiscernible] is much lower than previously thought. The oil prices and they also cyclists given support for price of TRS. That's why it's an oil price are very high in helping sugar as well. So that's the reason that we carried our stocks for the fourth quarter. In the sugar property, we're going to be selling [indiscernible] sugar in this fourth quarter. Today, we have the 85% of our sugar, the [indiscernible] production heads at 16 cents per pound. So we still have to price 75,000 tons approximately. In the bottom row we have been carried, we have carried the stocks to the last quarter. And now we are starting to sell ethanol at a very high prices. Actually we are selling ethanol right now. The multiples will sue at the equivalent of the high dose of 22 cents per pound, and then Hydros [indiscernible] per pound. I think it's very attractive. So probably we're going to keep selling something now and something in the first quarter of next year that will resist the price you will remain very attractive.

Perfect. Thank you very much all.

And ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to Mr. Bosch for closing remarks.

Before finishing the call, I wanted to thank you all for joining the conference. The market outlook of the products that we purchased is looking promising and we are in a new unique position to continue to take advantage of such favorite scenario. We are confident that we will continue delivering strong financial results that we will continue to distribute to our shareholders, now in a more structural way. Lastly, I would like to reiterate my gratitude to all our operating teams that are doing an outstanding job and our shareholders for their continued support.

Thank you ladies and gentlemen. This concludes today’s conference call. We thank you all for it. myself and so we thank you all for it.