Bioceres Crop Solutions Corp. (BIOX) Q3 2021 Earnings Report, Transcript and Summary

Thanks, Max, and thank you all for joining us today. Please turn to Slide 2 for a brief overview of the business and financial highlights we will discuss in today's call. As we have done in past calls, we will discuss the progress in the rollout of HB4 wheat and soy from a number of different perspectives, including the [signal digitization] perspective, grower onboarding and valuation of our value proposition, regulatory activities, sustainability framework and consumer engagement. We will also discuss the realignment of non-core GLA assets in exchange for a 6% ownership interest in Moolec Science, a molecular farming company pursuing a hybrid concept between plant and cell-based technologies for the production of animal free food solutions. From a baseline business perspective, we will discuss some reorganizational activities implemented after our second quarter results that are starting to bear fruit, both significantly in our Crop Nutrition segment, with a 4x increase in micro-beaded fertilizer sales year-over-year, resulting in a 35% total comparable revenue growth for the quarter. These top lines growth, combined with operating leverage, enabled the company to deliver improved adjusted EBITDA and margin expansion during the reported period, positioning our financial profile into the double-digit growth trajectory on an LTM basis. Now let us discuss these highlights in greater depth. Please turn to Slide 3 for an update on the upcoming HB4 wheat production season. The strong performance of HB4 wheat varieties observed during the last crop cycle and reported in our second quarter's earnings call, has created an excellent pre-season momentum with contracts already in place for over 60,000 hectares. Our baseline target prior to the import approval. We have collected and will continue to collect indications for additional hectares until the end of May, but we will only turn these indications into contracts if Brazil clearance is obtained in due time. Last season, HB4 wheat out yielded conventional varieties by 13.5% across all environments and locations and up to 42% in low-yielding environment. As we look forward to the planting season, we currently have 200 growers engaged across 550 locations with a near 100% customer repeat rate with past participants more than tripling the number of hectares planted last year. Clearly, this strong adoption validates the HB4 value proposition. As of today, contributed goods for an HB4 wheat hectare averaged approximately $100 with a gross margin above our company-wide average. In terms of financial reporting, the value of these contributed goods will be recognized as revenues once the realized inventories are sold as seed or grain and not longer contributed into significant agreements. For the time being, this has a financial benefit for the company as the corresponding gross profit from contributed goods implies that less cash is required for the HB4 inventory buildup process. Turning to Slide 4. You can see we have made substantial progress, leveraging technology to interact with prospective growers and manage their HB4 program onboarding. We have onboarded almost 50% of our customers via our generation HB4 digital platform. Fully automating the commercial interaction, credit scoring, contract execution and input logistics. In terms of functionality, on the left side of the slide, you can see a mobile like app that makes sign up, data entry and navigation, all seamless, while encompassed in a secure environment with biometric entry parameters. Growers can sign up for the program by geopositioning fields and receiving an automated seed recommendation and inference budgeting among 6 simple steps. As you look to the right, you can see a comprehensive dash board that manages the entire experience with an optional communicational tool, utilizing an AI chat box. On this dashboard, you can manage orders, invoicing, billing, traceability, stewardship and customized KPIs. The platform is still in a beta testing stage. And we hope that input from the current cycle will allow us to perfect it further and make it the prevalent grower acquisition and relationship management channel in coming cycles. Please turn to Slide 5. For an update on HB4 Soy. Of a close to 23,000 hectares planted with 7 different HB4 Soy varieties. We have already harvested slightly over 13,000 hectares, with yields averaging 1.8x on a per hectare basis. Bear in mind that we position current varieties in HB4 targeted regions with deals normally below the 2.5 tons per hectare. We expect harvest to be almost completed before the end of the month, resulting inventories from the current and next soybean cycles and from the upcoming weak cycle, should put us in an excellent position for a meaningful launch once the regulatory clearances are achieved. Turning to Slide 6. As we look to our HB4 regulatory progress, during the fiscal third quarter, our team made a formal submission for HB4 wheat production approval to the USDA in the United States. Although this is not an immediate opportunity for us, certain regions of the U.S. represent attractive medium-term markets, with progress in Latin America continues to be favorable. You will see similar submissions to other medium-term geographies in quarters to come. No additional information has been requested during the quarter by Chinese regulatory authorities regarding HB4 Soy, nor by Brazil [indiscernible] regarding their ongoing evaluation of HB4 wheat. We believe both regulators should be able to resolve approval requests in their upcoming meetings and look forward to communicating their findings as they are informed to us. Now let's review our new corporate ESG initiatives. Turning to Slide 7. Our value proposition has always been centered on developing highly differentiated solutions that create economic incentives in the form of [indiscernible], management practices and other efficiencies to further decarbonize our customers' production processes while regenerating agricultural ecosystems. Even though our HB4 program integrates several good farming practices such as provocation, notes of farming, biological nutrition and protection, among others, aligned with the progeneric agriculture, we decided to initially focus our sustainability framework on the HB4 technology alone. HB4 seed varieties increased yields by 10% to 20% under the route conditions, resulting in up to 7% additional yield to savings on average when compared to non-HB4 varities. We have engaged with Vigeo Eiris, a global leader in ESG assessment to produce an independent of linen on our sustainability framework. Vigeo Eiris is of the opinion that the selected KPI tons of CO2 equivalent relative savings in signing with primary production systems results relevant, coherent and material from an environmental standpoint as well as it reflects relevant sustainability challenges for the activities of the company related to the agricultural sector, mainly United Nations Sustainable Development Goals 2 and 13, mainly 0 hunger and climate action. Moreover, the framework set Bioceres to achieve ambitious goal of fixing 156,000 tons of CO2 equivalence by 2025 as HB4 Soy and wheat rollout projections are met. Please turn to Slide 8. Subsequent to the closing of a fiscal third quarter and on the yields of validating HB4 sustainability framework, we entered into our first agreement with a consumer brand, Havanna, to roll out food products manufacturer with HB4 wheat flower. The new agreement will give Havanna customers in Brazil and Argentina, the option to choose food products with a significantly reduced carbon footprint and other environmentally positive exceptionalities that help fight climate change and preserve many different ecosystems. Importantly, the Farm-to-Fork identity preserve process structure under the ongoing generation HB4 program will enable Havanna Bioceres products to include field specific information, climate facts and other key data of potential interest to consumers, all secured on blockchain technology. Founded in 1947, Havanna has become a leading player in the high-end coffee shops segment in South America, operating over 300 stores to premium locations across Argentina, Brazil, Chile and Peru as well as Spain and the United States. Turning now to Slide 9. Towards the end of fiscal third quarter, we realigned non-core GLA assets in exchange for a 6% ownership interest in Moolec Science, a molecular farming company pursuing a hybrid concept between plant and cell-based technologies for the production of animal 3 food solutions. This transaction allowed us to gain exposure to the fast-growing alternative food industry, an industry aligned with our purpose of helping food systems transition to carbon neutrality. We believe this transaction will unlock greater potential value from these assets and contribute to our consumer and market exposure. This concludes my prepared remarks. And I will now turn the call over to our CFO, Enrique López Lecube to discuss our fiscal third quarter financial results. Enrique? Enrique López Lecube: Thanks, Federico. Good day to everyone, and thanks for joining us today. Before entering into financial performance review, I would like to recall that during the quarter, we completed the transfer of our listing from an Asia American to the NASDAQ Global Select market. We are grateful to NYSE for having been such a great host during more than 2 years since our initial listing back in March 2018. We are now thrilled about our new partnership with NASDAQ. It is an ideal fit for us as they represent some of the leading biotech technology and ag tech companies in the world. This move also aligns with Bioceres' current ESG initiatives and NASDAQ's ESG platform and suite of products and services. Now getting to the financials. Please turn to Slide 10 for a review of the revenue performance during the quarter on an LTM basis. Even when our fiscal third quarter is the slowest from a seasonal perspective, this year, we had an outstanding performance with a historic high in revenues. Total comparable revenue rose by more than $9 million from $26 million in the third quarter of fiscal year 2020 to $35 million in the third quarter of the current fiscal year, a 35% increase. On a reported basis, the increase for the quarter was slightly about 40% from $25.7 million to $36.2 million. Crop Nutrition expansion was behind the growth achieved during the quarter, characterized by the lack of planting activities across the market in which we operate. As we discussed in previous calls, to smooth down the effect of seasonality and have a good grasp of the midterm performance of the business, we also keep a close eye on the trailing 12 months. The exceptional performance in a rather usually low season quarter got us back on track with growth, leaving behind the slowdown we have seen in the second quarter. On an LTM basis, revenue as of March 2021 was $177 million, a 12% increase compared to the year ago period, confirming the potential of our baseband business to deliver attractive growth even ahead of HB4 impacting our top line. Please move on to Slide 11 now for a breakdown on revenues per business segment. As I just explained, the $9.1 million growth for the quarter was delivered entirely by the Crop Nutrition segment that grew to $15.1 million in comparable revenues and more specifically, fully explained by 4x growth in micro-beaded fertilizer sales. A strong performance in this particular product line during the quarter is the initial outcome of a shift in the commercial strategy to improve the attractiveness of the value proposition to farmers. We fundamentally believe that showing conviction in the technology and making the first move with a more aggressive pricing structure will allow us to achieve higher volumes at a faster pace. With higher use of our installed capacity, which increased from 25% to 34% on a sequential basis. We expect to capture economies of scale that in turn will allow us to crystallize the level of gross margins that we have seen until now, which are very attractive compared to conventional fertilizers, but with a significantly bigger business line in terms of revenues and profits. The current momentum in grain commodity prices could not have been a better scenario to launch this new value proposition as farmers are more inclined to spend dollars on fertilizing their fields. Margins for fertilizers remained fairly stable, with the overall Crop Nutrition segment dropping only 89 basis points versus the year ago quarter, basically explained by significantly higher participation of fertilizers versus higher margin in uplands. Crop Protection sales in the third quarter of fiscal 2021 were roughly flat compared to the year ago quarter at $16.4 million. Average gross margin for the segment expanded by 148 basis points to 39.4% and a positive shift in the product mix with a higher contribution to sales from adjuvants and their sales of third-party products. For seed and integrated products, comparable revenues in the third quarter of fiscal 2021 were $3.5 million, slightly down from the year ago quarter. Most, but not all of the 96% seed treatment packs growth, our French subsidiary had accomplished last year was retained, which explains the $400,000 decline. Margins for the segment remained fairly flat at 68.3%. Overall, we are very satisfied with growth during the quarter, which was achieved with an average margin expansion of 362 basis points achieving a 50% average gross margin for the business. Now looking to the near future. Similarly, to the reorganizational process we pursued in the Crop Nutrition segment, which has already begun to show results. We are currently endeavoring initiatives to reignite profitable growth in our baseline, Crop Protection and seed and integrated products business segments. We are optimistic about the near and midterm effects of these strategy adjustments and expect them to positively impact our financial performance in the coming quarter and in the second half of the year, respectively. Moving on to Slide 12 now, which shows the breakdown of gross profits per business segment. Following increase in revenues and margins expansion that we just discussed, comparable gross profit rose by $5.5 million during the quarter, moving from $12 million in the third quarter of fiscal 2020 to $17.5 million during the third quarter of the current fiscal year, a 45.4% increase. Reported gross profit increased from $10.8 to $15.3 million. Comparable gross profit for Crop Protection was $6.5 million in the third quarter of fiscal 2021, slightly above gross profit of the previous fiscal year quarter despite a slight drop in revenues. This was primarily due to higher participation of adjuvants in the mix in detriment of lower-margin third-party products. Seed and integrated products contributed $2.4 million in comparable gross profits during the quarter, slightly down from the year ago period and in line with the revenue dynamics that I described in the previous slide as margins remain flat. Finally, Crop Nutrition delivered $8.7 million in comparable gross profit during the third quarter of fiscal 2021, which represented almost half of the total comparable gross profits for the quarter, something unusual compared to past quarters and which Crop Nutrition represented on average, no more than 20% to 25% of overall gross profits. Let's please move on to Slides 13 and 14 for a review on EBITDA performance for the quarter on the last 12 months, respectively. The $5.5 million increase in comparable gross profits versus the year ago quarter was partially offset by IAS 29 adjustments, netting a $4.6 million increase in reported gross profits. This sharp increase in gross profits fully impacted on adjusted EBITDA, which totaled $6.9 million, a 163% increase versus the year ago quarter that stood at $2.6 million. JV results were also a main contributor to the adjusted EBITDA improvement with $1 million as micro-beaded fertilizers performance increased results from senior tech, our fertilizers manufacturing JV, which is equity accounted for in the adjusted EBITDA line. A separate note on operating expenses, which totaled $11.7 million, up 17% from the year ago quarter. The increase in SG&A expenses was primarily due to additional outsourced professional services partially offset by decreased travel expenses and lower distributions of share-based incentives. SG&A expenses down 659 basis points as a percentage of revenue denoting continued operational leverage as SG&A grows at a slower pace than our gross profits. R&D expenses were also up in the quarter explained by the development of wheat-oriented technologies, including the registration of HB4 wheat for production in the U.S.A., which Federico previously mentioned. In Slide 14, similarly to what I mentioned about revenues, we usually keep an eye on profitability over a period of 12 months to assess the performance of the business. The 12% growth in sales on an LTM basis versus the year ago period delivered a solid 14% increase in adjusted EBITDA, growing from $40.6 million in the previous 12 months to March 2020 to $46.4 million over the 12-month period ending in March 31, 2021. Now in breaking down contributions to that growth even when IAS 29 adjustments significantly eroded an increase of $11.8 million in comparable gross profits. Operational performance delivered almost $2.8 million in additional reported gross profits versus the year ago. That was further increased by a reduction in operating expenses and JVs performance. Finally, let's please turn to Slide 15 to address our debt and cash position, together with our performance on financial expenses. We continue to make good use of [indiscernible] partnership with Argentina credit markets throughout the quarter as we completed a $26 million public offering of Series 5 corporate bonds in early March. 30% of this issuance corresponded to Class A, which had a 1-year maturity and an annual coupon rate of 0.98%, and the remaining 80% was issued with the maturity of 36 months at an annual coupon rate of 5.5%. Proceeds are being used to support working capital needs, extended maturities and to continue reducing our financing costs. As discussed in previous calls, we have used the capital markets to replace inefficient sources of working capital, manufacturing with financial debt. Even when our total financial debt increased by $35.7 million from the third quarter of fiscal 2020, first left-hand column for the third quarter of the current fiscal year, cash financial expenses decreased by $7.9 million from $20.6 million for the 12-month period prior to March 2020 to $12.7 million for the last 12 months as of March 31, 2021. That is a 38% decrease in LTM financial expenses, reflecting a significantly lower average cost of debt. Total net debt as of March 31, 2021, was $134.2 million, 2.89x net debt to LTM adjusted EBITDA. Increase in the company's debt ratio compared to the prior fiscal year was primarily due to the aforementioned increase in total financial debt. Now on a sequential basis, net debt to LTM adjusted EBITDA decreased from 3.05x on December 31, 2020, primarily due to the adjusted EBITDA growth during the third quarter. On the liquidity front, cash and cash equivalents restricted short-term deposits and other short-term investments represented approximately 58% of the current portion of debt, totaling slightly below $50 million. In addition to the strength of Bioceres' core business, we retain a solid liquidity position to continue serving the rollout of the HB4 wheat and soy during the upcoming quarters as the main growth priority for the company. That concludes the financial remarks we have prepared for today's call. So I will now turn it to Federico for concluding remarks or to go directly into any questions that you might have.

Thanks, Enrique. We will now open up the floor for questions. And after that, we will add some concluding remarks. Operator?

[Operator Instructions] Your first question comes from the line of Ben Klieve of Lake Street Capital.

Congratulations on a really good quarter here. On the quarter itself, I have a question about the fertilizer business. I'm really trying to understand who was buying this high level of -- or high-volume of product here. I understand you're using your plant more efficiently, you have a new strategy, but I want to understand really who really drove this volume. I mean, was it greater exports? Was it existing customers buying more volume? Was it new customers reached by the new strategy? Any color on this would be helpful.

Ben, it's great to have you in the call. This is Federico. I will pass that specific question to Enrique. Enrique López Lecube: Ben, thanks for both for joining the call and for the question. I think that as we take your question, it is a combination of a couple of factors. There was customer repeat rate that was very good but also, we have seen increased volumes per customer as well as new customers. So I think that the new pricing strategy is working fine in the sense of increasing volumes per customer and also bringing in new customers. Those are the 2 variables that we have been monitoring so far in the beginning of this new pricing structure. Most of this happened in the Argentinian market initially. We still will have to wait at least a quarter to see if there's an impact coming from neighboring countries or neighboring markets such as Brazil, Paraguay and Uruguay, where we had been selling the fertilizers and basically a product called Microstar. But those are the values that we have been monitoring. And so far, we are happy to see that new customers are joining the technology.

Got it. That's helpful. Like to pivot over to a couple of questions on HB4. Federico, I have a question for you regarding the timing of the commercial launch for both the wheat and the soybean product. You talked in your prepared remarks about the need for Brazil and Chinese approval for import to support a commercial launch. If these approvals don't come here in the next few months, do you still plan on launching these products locally with an identity preserved supply chain? Or do we really need those approvals to come here to enable a launch in 6 months from now?

So that's a very good question, Ben. In terms of wheat, the contracts that we already have in place for 60,000 hectares are contracts that we can execute within the identity preserved approach regardless of the Brazil approval. Initially, we indicated a range between 60 and 130 thousand hectares. The top number in 1 that would require Brazil approval, which we continue to identify interest. And if a Brazilian come -- Brazilian approval is obtained before early June, we will probably have some additional hectares into the identity preserved channel. But all of what we are doing now is identity preserved in terms of wheat. In the case of soy, the next cycle is somewhat agnostic to the Chinese approval. Since we are planning to do all of that underwrite preserve anyways. Remember, we still have small inventories in terms of soy, so we won't be affected in the coming cycle. What will dictate the range of hectares there, in the quality of the seat being obtained now. And the performance of the different varieties, the 7 materials that are currently being multiplied now. Going into 2022 for us to launch above where we will be from out of the next cycle in soybeans would require an approval because identity result will be tough to manage above the 500 hectares level, if you will. That's -- we still are not sure in terms of how efficiently we would be able to do this. But that might be more challenging. This is something we can do fairly well today, particularly with the use of the digital platform. But our ability to move above the 0.5 million hectares March with identity preserved. It's one that we are not fully set in rock as of today.

Got it. That's very helpful on both fronts. Question about the Havanna agreement. The -- and I know I understand it's maybe too early to get much information on this, but do you have a sense of if they're going to be basically integrating flower from HB4 wheat into their existing product line. And then -- and as such, they would be an almost immediate consumer of that wheat? Or are they going to be engaged in kind of a long R&D process to figure out the right products for that wheat to go into. I'm just trying to understand kind of if this agreement is affecting the immediate term commercial launch. Or if this is kind of a longer-term thing?

So thanks for the Havanna question. To us, the Havanna agreement is more qualitative and quantitative. As we sort of tackle this monumental quest with HB4 wheat. We work on the product development side, scaling of inventories, the regulatory front, and we work on the commercial aspects, and we also need to work on consumer engagement. So this last consideration is the one that drove us to Havanna agreement. This is not wheat flower that will be immediately incorporated into all of the Havanna product lines. There'll be a specific product line with the HB4 claim, where we intend to show the water and carbon footprint and underlying these particular products. And in doing so, initiate a conversation with consumers. This is not meaningful from a volume's perspective in terms of how much flower might end up in this particular channel. But I think it does create valuation and greater comfort for other good processors. That might be sort of concerned about the GM aspect of HB4 wheat where we can sort of come back with data from consumers and from product performance to generate during the comfort in this particular product line. So that's kind of the approach we intend to announce other agreements with consumer brands on HB4 wheat and create without a platform of consumer engagement to build on this last aspect of, of course, if you will, around the social license required for a product line of this nature.

Your next question comes from the line of Kemp Dolliver of Brookline Capital.

I have two questions. The first one relates to the Crop Protection business and the strategic adjustments you're considering -- could you give more detail with regard to the types of actions that you plan to take?

Thanks, Kemp, for joining the call, and thanks for the question. What we would like to do there in the Crop Protection side is uncoupled, if you will, the proprietary adjuvant business with the post-patent products some of which are third-party products that we usually commercialized also in that segment. I think that if we are able to have dedicated teams and structure alternative channels, for these 2 types of products that we currently commercialize within the segment, we are likely to achieve a better performance. And that is kind of the reorganizational angle that we are pursuing and that we believe will show some incremental growth in the fourth quarter of the current fiscal year.

That's helpful. The second question relates to Verdeca. And now that you have complete ownership of it, the next steps you plan to take with regard to building out that part of the business?

Kemp, I don't know if it's my line or yours, but it's sort of fading away, if you can repeat the question?

Yes. I hope this is better. Great. Just the second question is your plans with Verdeca now that you have 100% ownership and some of the specific actions you're planning to take now -- and now that you totally control it.

Okay. So if I understood correctly, the question is around the full control of Verdeca and how we intend to sort of move forward now that we own 100% of the JV. Essentially, what that is doing for us is giving us greater flexibility in engaging with third parties for the development of alternative geographies, mainly in the U.S. and to some extent in Brazil, where we have that historic relationship with PMG. So we are now actively working to secure germplasm that is complementary to the one we currently have in Verdeca to be able to address these additional geographies. For instance, there is a meaningful area of the U.S. where is before can potentially deliver significant value where we need materials that are maturity groups to and below, which we currently would not have within the Verdeca breeding program. So that is one space where we are looking to secure relationships with germplasm providers that are already onboarded with HB4 so that we can address a particular opportunity, which is upwards of 1 million hectares. Similarly, for maturity groups, 6 and above, which are important in some areas of Brazil, in other tropical regions of the world. We can now engage without sort of the necessity to negotiate with our partners. In the JV because we fully own it, so that we can have relationships that allow us to have incremental hectares addressed with HB4 soy. So that's a meaningful aspect of controlling the JV in pool.

[Operator Instructions] Your next question comes from the line of Steven Ralston of Zacks.

I was in the middle of transitioning from the webcast to the telephone during the first question, which was about the micro-beaded fertilizer. I had assumed that because there was a delay in the soy ban planting season this year that sparked the incremental demand of micro-beaded fertilizer. Is that correct? I'm sorry, I missed that first answer. Enrique López Lecube: This is Enrique. Thanks for joining us there for the question. If I understood correctly, you're referring to the seasonality of the increase in sales from the micro-beaded fertilizers, is that correct?

That is correct. Enrique López Lecube: Yes. So look, the increase in sales that you've seen in micro-bead fertilizers is corresponding to the season to the winter crops planting season in Argentina. So this is kind of like the beginning of sales for winter crops, mainly weak in Argentina. So that is where we're seeing an increase obviously, this is a product that is even more suited for soybeans. So that is something that makes us be optimistic about the shift. If we are able to capture demand for winter crops, then this value proposition should be working even better for summer crops. But to your specific question, this is the [indiscernible] for the winter crops planting system in Latin America and more specifically Argentina.

In the second quarter call, you mentioned that there was an increase in commodity fertilizer sales that we're competing against the micro-beaded fertilizer of Bioceres. Did that fade out some? Or is there another dynamic about the commodity fertilizers?

Steve, hold on a second. Operator, can we switch to the back-up line because we're having a lot of difficulties with this line.

Yes, one moment. Okay. And the back-up line has been transferred.

Do you want me to repeat the question?

Yes, please, Steve. We can hear you much better now.

In the second quarter call, you mentioned that basically commodity fertilizers were gaining share, and that's one of the reasons for the lower level of micro-beaded fertilizer during your second fiscal quarter, did that dynamic change as you went into the third quarter? Enrique López Lecube: Yes, that's a very good question. So absolutely, I think that the uprise that we're seeing in the steep up pricing in commodity prices has made farmers more technology inclined. So farmers are back on track with adopting new technologies that provide ROIs even when they require more investments. So this is the perfect scenario for the microwave fertilizers where you might need to have a technology adoption in versus potential technologies is. That is something that might be unchanged since -- from the second quarter into this third quarter and more now with the commodity prices that you are seeing this particular month of May.

And I'm sorry, I didn't see it, but what is your capacity figure now? You usually give it on a 12-month trailing basis of the micro-beaded fertilizer plant. Enrique López Lecube: Yes. So we move on a trailing 12 months basis, we moved from 25% to 34%.

To 32%? Enrique López Lecube: 34%, 34%.

34%. Also, to tag on to the other analyst's question about your reorganization. I would assume that there are going to be costs involved in building up these dedicated teams to emphasize your branded products in Crop Protection and seed in your comments, it seems like you're also going to, let's say, deemphasize the micro-beaded fertilizer, and maybe I read too much into that.

No. So the -- let me be as specific as I can at this stage. But in terms of the micro-bead fertilizer, the strategy was already put in place and what is yielding results today, we are reporting in the current quarter. It's more around pricing and scaling up capacity so that we can retain the same level of profitability. As we become more price competitive, obviously, with improved commodity prices that has sort of an incremental effect beyond what we need ourselves, that is creating the kind of outcome that you are seeing in the current numbers. Now that's the Crop Nutrition segment. In the Crop Protection segment, we are not sort of investing in a new team, we are just reassigning, if you will, resources that we currently have. So we don't expect to see a significant increase in sort of operational costs or management costs to have the strategy in the Crop Protection segment put in place. We believe that if we can -- it's essentially a channel strategy where we are operating at 2 different channels instead of just 1 and where we have 1 channel dedicated to the high-value products, the adjuvants where we make significant profits and another one for the post patent products that we commercialize as a complement. And finally, on the seed front, which is something we expect to be in place the second half of this year. What we are doing is also structuring an alternative channel for the conventional wheat, this is not inclusive of the HB4 program. This is just for the conventional soya and wheat we currently sell. And expand on that portfolio so that we can materialize a number of synergies with our existing organization. So those are the 2 reorganizational initiatives that will be executed in the coming days and months. That we expect will recognize growth, particularly in our main market of Argentina.

Just to rephrase, it sounds like the goal of the program is to enhance your product mix to your higher margin products?

So if you will, our current channel will be more dedicated to that. So that is correct. But that is not to the detriment of the post patent products that we currently sell because there will be an alternative channel operating on those that we expect will generate growth as well.

Your next question comes from the line of Matias Cremaschi of Delta Asset Management.

Congratulations for the results. I'm wondering if you can comment on the rationale of the acquisition of [ Osvaldo ]. And what type of incremental revenue or synergies do you expect to capture there?

Thanks, Matias. Your comments and your question, the rationale of [indiscernible] is right on the line of what we discussed before in terms of the Crop Protection segment to provide an alternative channel for post patent products so that we can have our reselected channel, fully dedicated to adjuvants and biologicals that we do sell like the biofungicides, for instance, that are very important to us.

And any color on synergies or incrementality there? Enrique López Lecube: Yes, this is Enrique. Yes. I think that the question is kind of like overlapping what Federico said about the channels, I think that the synergies that we might see there is basically having specific channels for specific types of technologies. So this is a channel that can be better at commercializing lower technologies or products that are replacing commercial technology. So there might be some synergies also in some opportunities for fertilizers, for example, to further get capillarity on the market through this new channel. But that is to be seen, and that is not something that we are competing as of today, but there might be some opportunities for products that we place, conventional technologies.

At this time, there are no further questions. I would now like to turn the call back over to Federico for any closing or additional comments.

Well, I want to thank everyone for joining. I think we are at an inflection point in the company as we gained a significant momentum with not only the baseline business, but also the HB4 progress. We appreciate everyone's interest. We remain fully available for follow-ups. And wish everyone a great week.

That does conclude today's conference call. You may now disconnect.