Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Adecoagro's Second Quarter 2023 Results Conference Call. Today with us, we have Mr. Mariano Bosch, CEO; Mr. Emilio Gnecco, CFO; Mr. Renato Junqueira Pereira, Sugar, Ethanol and Energy VP; and Ms. Vitoria Cabello, Investor Relations Officer. 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 2023 second quarter results conference. As you may have seen in the report, we are presenting very good results despite the extreme drought that impacted some of our operations. Our adjusted EBITDA was 15% higher compared to last year. It is in times like this, when we can clearly show and monetize the benefits of being diversified and focused on achieving efficiencies in our whole value chain. We are very excited about how our Sugar, Ethanol and Energy business is performing. The development of our sugarcane plantation is really good, and we expect to increase crushing volumes by 15% compared to 2022. We have a large flexibility to shift production, and we are using it to maximize sugar production. We have about 25% of this year's sugar production and almost all of our next year's still are hedged and very well positioned to continue to capture solid prices. 30% of our expected annual ethanol production is stored in our tanks to be sold in the following quarters. This decision to carry forward ethanol is already proving to be a good one, as prices are expected to increase following the increase in gasoline prices and the Otto Cycle growth. The reason why our sugarcane plantation is in great shape, is because of our focus on achieving efficiencies. As I mentioned before, throughout the past years, we have put a special focus on our farming activities. As a result, we are reaching incredible levels of TRS content per hectare. For example, we implemented Muda Pre Brotada or pre-sprouted seedling through the multiplication of meristem which is technology only used by us. This enables us to really reproduce cane varieties that are better adapted to our region at a much faster pace and replace the…

Thank you, Mariano. Good morning, everyone. Let's start on Page 4 with a summary of our consolidated financial results. Gross sales totaled $407 million during the second quarter, making a 6% year-over-year increase while on an accumulated basis, it reached $654 million, 11% higher than the previous year. This was mostly explained by our commercial decision to favor sugar production and execute sales at solid prices, coupled with higher average selling prices in our rice division. Consequently, adjusted EBITDA expanded to $136 million during the quarter, whereas year-to-date, it stood at $226 million. 15% and 10% higher than its respective previous periods. Please turn to Slide 5 for our broader view of our consolidated financial figures. As you can see on the bottom right chart, crushing volumes in our Sugar, Ethanol and Energy business were up 42% on a year-to-date basis on account of greater sugarcane availability and solid productivity indicators. On the other hand, total production in our farming division reported a 27% year-over-year reduction, mostly explained by crops due to the effects of an unprecedented drought in Argentina, which impacted area and volume produced. Let's move ahead to Slide 7. With the operational performance of our Sugar, Ethanol and Energy business. Crushing volume amounted to 3.6 million tons during the second quarter, making a 9% increase versus the prior year. This was mostly driven by solid productivity indicators enhanced by good precipitations registered during the first six months of the year. Thus, agricultural productivity indicators such as yields presented a year-over-year improvement from 60 to 78 tons per hectare in the quarter, while TRS content increased from 119 to 126 kilograms per ton. In terms of mix, we diverted as much as 48% of our TRS to sugar production in line with our strategy to maximize production of…

[Operator Instructions] The first question is from Thiago Duarte from BTG Pactual. Your microphone is open.

Hi. Hello Mariano, Emilio, Renato and the rest of team. Thanks for the opportunity. Yes, I have two points I wanted to address with Renato on the sugar and ethanol business. And then one final question, if I may, to Mariano and Emilio on capital allocation. So to Renato first. Renato, can you talk a little bit about the possibilities that you have for increasing or enhancing even further the flexibility to sort of move away from depressed ethanol prices in Brazil right now. So I'm basically asking if you guys are planning or is there any possibility for increasing the capacity of producing sugar even more than the maximization that you have in place right now? And also, if you could talk a little bit more about the opportunities for exporting ethanol even more than you have been doing. So I see that you guys captured pretty interesting export prices on the ethanol business, but the volumes are still not that representative considering the total ethanol volumes there. So if you could elaborate on whether there is room for, as I said, increasing sugar mix and increasing -- or you think there is room to increasing ethanol price -- ethanol export volumes even further? And the second on biomethane. It's very interesting what you guys are doing in terms of producing more biogas and biomethane and using that as a replacement of diesel. Can you talk a little bit of the economics? How the cost of biomethane compares to the cost of diesel? I don't know if you can talk about unit economics there to -- so you can get a sense. I get the decarbonization impact, but I also would love to hear a little bit of the economic impact of that. And finally, to , I think, to Mariano and Emilio, if you could talk a little bit about capital allocation now, right? Because you guys are heading to a nice year after all, in terms of margin expansion in sugar and ethanol, good rice prices. We think there seems to be a good prospect in terms of cash flow generation. The expansion CapEx, you mentioned in the presentation a few projects that you have ongoing. But it feels like you're either going to be paying more -- paying out dividends and repurchasing a lot of shares or you might have new projects in place. So if you could talk -- elaborate a little bit more on that. What we should expect now that the company is deleveraging apparently, even faster than we thought before? Thank you.

Thiago, thank you very much for your question. I think as you mentioned, Renato will address your three main points on the sugar and ethanol, and then we will take the capital allocation. Renato?

Thiago, thank you for your question. Regarding sugar production, I think first, it's important to highlight that we have been producing a lot of sugar this year, reflecting the existing capacity. In July, we have reached our monthly sugar production in record. Actually, we have produced 116,000 tons of sugar in a month, which is 12% higher than the last record. We have been able to produce more sugar than our installed factory capacities. Actually in July and August, we are producing 18% more than our installed capacities. So we are producing a lot of sugar this year. And I think it's also important to mention that the sugarcane in the third quarter is very rich, TRS lateral in August is higher than 150 kilograms per ton. So that's what we are doing regarding sugar. Regarding expand our capacity for the next year, we think that we're still having some bottlenecks that we can remove out of the sugar process, especially the bottlenecks in the operation. So we believe that we can produce more sugar by investing into the bottlenecks -- removing the bottlenecks. When sugarcane content is lower than it is now. And then, we would -- I would say, had approximately 40,000 tons of sugar for next year. Regarding ethanol, what we are doing, we are starting our production. Today, we have more than 215 million liters of ethanol in our tanks. And we think that the growth of the Otto Cycle is growing in a faster pace than everybody was predicting, attracting the growth of the Otto Cycle is close to 11% and also the increase that Petrobras announced in the last week in the gasoline price puts the competitiveness of ethanol -- in a very good position. I think the part rate today is close to 61 -- 62%. So we think there is a lot of room for ethanol -- for the price of ethanol increase, especially when the Brazilian season start to get close to the end. And then we will be selling the ethanol at a higher price. Regarding the methane, I think we are very optimistic about the project. Today, we -- our production cost of methane is close to -- biomethane, I'm sorry, is close to [two AI] 1 liter of diesel. So it's including depreciation. So it replaces diesel that was today BRL 4.5 -- BRL 4.8 per liter. Of course, we have a potential to produce much more biomethane than we can use in our fleet. So at some point, you have to sell biomethane to some buyers, and then we are analyzing the best option to grow.

Thank you, Renato. Thiago, regarding the capital allocation, the first point I want to make is that we need to be -- to have clarity that we started a very challenging year. Now we are very optimistic on our future results but we have to understand that we are changing that situation as we speak. So it is important to understand that we maintain our distribution policy. That is the most important thing. And also, we want to be below 2x EBITDA -- net debt-to-EBITDA. So assuming both things, as you've seen, there are very specific projects and very synergetic projects in the sugar and ethanol business and some of them in the rice and some of them in the dairy. But we don't see any large specific project that will change our policy that is the most important thing that we have ahead.

All right. That's very clear. Thank you.

Next question is from Guilherme Palhares from Bank of America. Your microphone is open.

Good morning, everyone. Thanks for taking my question. I would like to explore a bit on the farming side, right? We are finally moving away from El Nino and maybe going into a season that might look a bit better in terms of primary conditions. So a question that we have around that is regarding yields for the next year, right? Because we had three years of El Nino conceptually and we would like to have a bit of a sense whether you see yields normalizing already in the next harvest season or whether the depletion of the soil through three consecutive droughts could have an impact that would be long standing in terms of productivity for the coming season. So that's question in terms of farming. And another one, in terms of dairy, we are seeing that the company is already beating its initial estimates in terms of the herd that you are managing, you see that herd continues to grow and whether you're reaching a new goal in terms operational just the sheer size of the operation of dairy, whether you see herd continue to grow or we are stabilizing on that level? Thank you.

Guilherme, thank you for your question. Number one, regarding the El Nino forecast and the yields expected for next season in crops, it's very clear that there is no effect on the past drought. So we are starting from scratch the new season. So we can expect normal yields going forward. Furthermore with El Nino, we should expect above normal yields, but we are only using as a budget, the normal yields for the five years -- the last five years average. That is regarding crops in general. Then to your specific question on dairy, in the dairy cows, we are achieving and even going beyond the productivity levels, but this is within the same cow herd. We are not planning to increase our cow herd for now. We are simply increasing its productivity unit per cow basis. This increase in productivity also has to be taken into account a new biomethane production that will start to produce by the end of this year, so that will also increase our sales through the sales of electricity generated by the biodigestor. So those are the increases that will happen in the dairy business. On top of this, also in the dairy business, we should see improvement through this investment that we've done in the cheese factory that will also increase our total sales. But in terms of the cow productivity, it's only this increase in productivity per cow basis. Furthermore, there are some value-added products in the domestic markets that we are also improving or achieving the market, and that will also generate some additional profits on the daily business.

Thank you, Mariano. That's very clear.

Next question is from Lucas Ferreira from JPMorgan. Your microphone is open.

Hi, everyone. Good morning. Thanks for taking my questions. I have a few on Argentina. The first one on the rice business. You mentioned that India ban on exports, was checking some important Asian markets, you see already rice prices increasing 30%, 50%, depends on the index you look. So my question is on the rice business, when you look at the marginal price you're selling, exporting right now, how much bigger this is versus the, let's say, the prices -- the realized prices in the second quarter. So just -- we have a sense of sort of the size of the potential upside you could see in the third or the fourth quarters in the rice business. The other question is more about Argentina macro. So if you can remind us, given the recent devaluation. Your net exposure to the currency, I mean, you obviously sell some local, but mostly exports, but you have also the inputs that you still need to buy. So just wondering the net effect that you would expect on the devaluation. And you mentioned the preferential rates, FX rates. So if that continues in this scenario. Just wondering what to expect now with this new FX levels in your business? Thank you.

Lucas, thank you for your question. Regarding rice, as we explained in our presentation, we are very optimistic. We see this advantage. We see that we are very well prepared from South America, from Argentina and Uruguay with this large operation that we have and the investment we did last year in getting into Uruguay. We are very well positioned to supply the world's market and these needs that the world has today. So how much this increase could be. We are increasing compared to the last year in relevant value in terms of prices. Regarding the last particular increase in the Asian prices because of the ban of India, there is also an increase for next year, and we feel more comfortable there, and we continue to benefit from that specific situation. But it is more important than that because we are developing this specific varieties to specific clients all over the world. And that is giving us an advantage on top of the long grain rice that is the more commodity in the rice commercial business. So that is regarding rice. And then regarding the market of Argentina and this recent devaluation. Just to remind you, from Argentina, we export 70% or between 70% to 75% and 30% to 25% on the domestic market. So the devaluation in general is positive for our margins. It depends on when and how this devaluation happens is more or less positive. We are well positioned to take advantage of this specific measure. Furthermore, we anticipated some acquisitions of inputs for this campaign that we are planting now and that I mentioned we were optimistic and there, we also took some advantage of how this fertilizers and chemicals already acquired and in our balance sheet that are dollar-denominated cost within the total production. So I would say this is very positive for us in terms of our future results.

Excellent. Thank you very much.

[Operator Instructions] Next question is from Daniel Sasson from Itau BBA. Your microphone is open.

Daniel are you there? Daniel from Itau I think is not there. Daniel is saying his mic is not working. You may ask your question. Can you type your question in the prompt.

So Daniel Sasson from Itau. He is asking, I also have a question on innovative projects. Could you please give us some color if you're looking into the submarket for ethanol. Also on biomethane, do you see any potential to sell your technology to other mills in the medium to long term in exchange for royalties? And another question regarding your sugar division, given the hike in prices over the last couple of months, do you have plans to increase your sugar capacity? For how long do you think that prices would have to remain this high before we see the industry increasing capacity as a whole once again?

Okay. I will ask Renato to answer the question regarding the sugar division and the expansion that he has already mentioned something, but he can be more precise on this, Renato?

Daniel, thank you for your question. As I mentioned before, we have plans to increase our sugar production for next year by removing some bottlenecks that we have in the operation of the process. By doing this, we will be able to produce more sugar and if TRS content is lower than the mix in the third quarter, for example, so we have some potential to increase anything [indiscernible] of sugar.

Thank you, Renato. We are hearing some noise on your microphone. So I'm going to take the question on the biomethane and the technology, if that could be sold to third parties on exchange of royalties for that. That is clearly a possibility, but today, we are focusing on the execution of our own project. We have some specifics on our production system that includes this continuous harvest model. So because of these reasons and that we use all the vinasse as a fertilizer -- as a biofertilizer and that we are concentrating the vinasse. So there are some specifics to our own project that makes as very profitable on developing these biodigesters on our own production system. So we are going to focus on the short term on our own specific project and develop that with the financing of Finep and all the different alternatives that we have in Brazil and after that, we are going to analyze in more details this possibility of getting some money from the technology. Then you also asked about these new technologies like the sustainable aviation fuels. This is very interesting. The sustainable aviation fuels comes from oils and from ethanol. So both technologies are things that we are looking at. There are some petroleum companies that have asked about this potential possibility. So we are simply looking at those, understanding how this will impact to this sector and whether there is any specific possibility for us regarding this. So we are knowing what's going on and analyzing that what we can share with you at this moment, Daniel.

[Operator Instructions] 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.

Thank you all very much for participating and hope to see you all in our upcoming events.