Adecoagro (NYSE:AGRO) Q3 2026 Earnings Call

0:00 Good afternoon, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to ADECO Agro's 2026 3rd Quarter 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 Mrs. Victoria Cabello, Investor Relations Officer. We would like to inform you that this event has been recorded and all participants will be in a listen-only mode during the company's presentation. After the company's remarks are completed, there will be a question and answer section. At that time, further instructions will be given. Before proceeding, let me mention that four Lucan statements are based on the beliefs and assumptions of Adequo Agro's management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to the future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industrial conditions and other operating factors could also affect the future results of Adequo Agro and could cause results to differ materially from those expressed in such a forelooking statement.

1:19 Now, I will turn the conference over to Mr. Mariano Bosch, CEO. Mr. Bosch, you may begin your conference.

1:28 Good afternoon and thank you for joining ADECO AGRO's 9-month, 2026 Research Conference. Consolidated 9-month adjusted EBITDA reached an all-time high of $472 million. This is almost $100 million more than our previous record for this period. A year ago, we announced the acquisition of South America's largest urea plant. Today, it is fully integrated to our operations and continues to set production records. Consistent gains in efficiency, competitiveness, and operational excellence combined with our team's knowledge are generating these greater results.

2:22 In Brazil, tame productivity continues to improve month over month. We are maximizing frashing across all our mills while capturing better sugar and ethanol prices. With Carapó Mill now integrated into our cluster in Mato Grosso do Sul, we have additional industrial capacity and together with our continuous harvest model, It will enable us to crush excess cane and keep growing in volumes. By applying our know-how and best practices in the region, we are becoming the largest sugar and ethanol cluster in Brazil and we believe the lowest cost producers too.

3:11 In food and agriculture, cow productivity reached a new quarterly record Followed by an all-time high in October. Strong operational performance and better commercial results, mainly from our daily consumer goods, drove the improvement in the earnings. We are now in the middle of the planting season with very good conditions and favorable forecasts pointing to good crops development. Following the strategic opportunity that we got with the carapó mill, we still remain committed to achieving our year-end target in terms of deleveraging the company.

3:58 To conclude, I would like to thank everyone at ADECOagro. These achievements are the result of their daily commitment, hard work, and constant drive to do better. Thanks also to our shareholders for their continuous trust and support. Now, I will let Emilio walk you through the numbers of this period. Thank you, Mariano.

4:25 Good afternoon, everyone. Please turn to slide 4, which presents a summary of our consolidated financial results. As a reminder, We are presenting our numbers on a pro forma basis, assuming our fertilizers business had been part of ADECO Agro since the beginning of 2025. We believe this provides a more meaningful year-over-year comparison. Gross sales total $591 million in the third quarter and $1.5 billion year-to-date. The year-over-year increase during both periods was mainly driven by a stronger performance in our fertilizers operations, which more than offset the lower revenues in sugar, ethanol and energy due to lower sugar prices and sales volumes.

5:27 While quarterly adjusted EBITDA remained in line with the prior year, The nine-month result reached a new all-time high, approaching the company's full-year record. Strong urea sales drove the year-over-year growth in the fertilizers business, while improved domestic dairy performance supported a significant rebound in food and agriculture results. This performance, in turn, More than offset the softer results in sugar, ethanol and energy, which I will discuss in a moment. Let's move to slide 6 to review the financial and operational performance of the sugar, ethanol and energy segment.

6:15 First, I would like to remind you that we completed the acquisition of the Carapomil in September 1st, 2026. Since then, The mill has been fully integrated into our operations and consolidated into our results. Turning to our operational performance, we crushed 4.6 million tons of sugar cane during the quarter, slightly below the prior year, as above average rainfall in September reduced effective milling days. Cane productivity improved significantly. with TRS per hectare increasing 31% during the quarter and 24% year-to-date supported by favorable growing conditions.

7:05 As a result, year-to-date crushing volumes reached 10.4 million tons remaining above the prior year level and sustaining the growth trend observed since the beginning of 2026. Regarding our production mix, we continued to maximize crushing volumes while giving priority to the product offering the highest marginal contribution at any given time. Year to date, our production mix was 35% sugar and 65% ethanol. Production costs were negatively affected by the appreciation of the Brazilian RIAI. Excluding this foreign exchange impact, year-to-date production costs in local currency remain in line with the prior year.

8:01 Sales declined both during the quarter and year-to-date, primarily reflecting lower sugar prices and volumes, which more than offset higher ethanol volumes. During the third quarter, we accelerated ethanol sales to capitalize on the significant recovery in prices. This improvement was supported by tighter domestic supply and demand conditions and government measures that strengthened ethanol's competitiveness relative to gasoline. This was consistent with the strategy we implemented during the first half of the year. We sold ethanol inventories and daily production at peak prices ahead of the new harvest and subsequently rebuilt inventories to capture more favorable pricing opportunities later in the year.

8:57 Overall, adjusted EBITDA totaled $101 million for the quarter and $120 million year-to-date. The year-over-year decline primarily reflected lower sales and the impact of lower consecana prices on the mark-to-market valuation of our biological assets, particularly harvested sugarcane. Looking ahead, we continue to expect mid-teens growth in crushing volumes, supported by greater cane availability. Our continuous harvest model allows us to process any sugarcane left unharvested at year-end beginning in January.

9:43 This positions us to benefit from strong yields and potential increases in sugar and ethanol prices during Brazil's traditional inter-harvest period. Let's now turn to slide 8 to discuss our fertilizers operations. We delivered another strong quarter, supported by solid operational execution and commercial performance. The plant continued to operate at high utilization rate, achieving a new monthly urea production record in August and new ammonia production records in both August and September. As a result, urea production increased 4% year-over-year during the quarter and 11% year-to-date, supporting further cost dilution.

10:36 On the commercial front, urea demand strengthened ahead of the 2026-27 planting season, supported by normal seasonality and lower prices following the peak recorded between March and May. Despite the sequential price decline, our average realized price for the first nine months reached $561 per ton, that is $81 per ton above the same period of last year. This performance generated adjusted VDA of $109 million for the quarter, up 7% year-over-year, and $283 million year-to-date, 65% above the first nine months of 2025.

11:30 Higher production volumes and operating efficiencies also contributed to a meaningful expansion in margins. In 2026, we expect the business to outperform prior years, supported by higher production, including new monthly records for both urea and ammonia in October, and the higher prices captured during the first half of the year. Please turn to slide 10 to review the performance of our food and agriculture segment. We completed the 2025-26 harvest season with better than expected yields, producing more than 1.2 million tons of agricultural products.

12:17 In dairy, productivity at our free stalls reached a new quarterly record, while milk processing volumes also increased. On the commercial front, Our consumer brands continue to perform strongly in the domestic market, particularly in UHC milk. We also accelerated white rice sales as prices gradually recovered, contributing to higher sales during the quarter. Together, these operational and commercial improvements drove a significant recovery in food and agriculture results. Turning to the 2026-27 season, planting is progressing, with 57% of the planted area already seeded.

13:07 We are increasing planted area by 3% year over year, mainly in rice and peanuts. We expect yields to be in line with or slightly above historical averages. supported by above average rainfall during crop development and El Niño conditions expected to persist through the first quarter of 2027. In dairy, we expect meal processing volumes to continue growing supported by new product launches across our consumer brands. Productivity at our freestalls also continues to improve reaching an all-time monthly record of 41 liters per cow per day in October.

13:54 Let's move to slide 12 to review our capital allocation strategy. During the quarter, we completed the acquisition of Carapomil for approximately $136 million paid in cash at closing. Carapó has been fully integrated into a sugar, ethanol and energy cluster in Mato Grosso do Sul and is already proving a creative by processing surplus cane from Angelica and Ibinema. This should enable the mill to operate above its historical crushing levels from its first year under our ownership. We are also applying our operational best practices and gradually introducing our continuous harvest model to improve efficiency.

14:45 Because Carapó is located in the same micro region as Angelica and Ibinema, it benefits from the same competitive advantages. As we transition to this model, we expect to progressively increase effective milling hours, including the acquisition, year to date, Expansion capex totaled $602 million. The final payment for Profertil completed in the first quarter of 2026 remained our largest capital deployment. We also continue to invest in attractive organic growth opportunities across our businesses, including biomethane production in Brazil.

15:30 Now, let's turn to slide 13 to review our debt profile. Net debt totaled $1.8 billion at the end of the quarter, while our pro forma net leverage ratio stood at 3.2 times. The quarter-over-quarter increase in net debt was entirely attributable to the Carapo acquisition. Our debt levels also reflect seasonal working capital requirements and higher readily marketable inventories consistent with the seasonality of our operations. Excluding these effects, net leverage would already be below the levels recorded in previous quarters.

16:17 We expect leverage to decline as EBITDA generation increases enabling us to reach our year-end target of approximately 2.5 times. During and after the third quarter, we completed several liability management initiatives, including the redemption of our 2027 global notes in late October, further strengthening our debt profile. Following these transactions, long-term debt represents 78% of total debt and average maturity has been extended to 4.2 years. The currency composition of our debt remains closely aligned with our cash generation profile helping to mitigate foreign exchange risk. We remain focused on deleveraging while maintaining a balanced debt structure and extending maturities.

17:19 Finally, on November 19, we will pay the second $17.5 million installment of our annual cash dividend, equivalent to 12 cents per share. This payment will complete our 2026 shareholder distribution program. Thank you very much for your time. We will now open the call to questions. Thank you. The floor is now open for questions. If you have a question, please write it down on the Q&A section or click on raise hand for audio questions. Please remember that the company's name should be visible for your questions to be taken. We do ask that when you pose your question that you picking up your headset to provide optimum sounds quality.

18:07 Please hold while we pull for questions. Our first question comes from Gustavo Troiano for Itaú BBA. You can open the line, sir.

18:18 Hello, everybody. Thanks for taking my question. And my first question is on carapó meal. And now that it's already part of your portfolio, just wanted to have a clear roadmap for the ramp up of the asset. You have discussed the 4.5 million tons of crushing for 2027 and potentially higher volumes over time. I just wanted to understand a little bit more the ramp-up curve for this asset and how quickly it could cut up or converge towards the operational KPIs of your existing cluster. And also to understand a little bit more if the carryover impact of the crushing ramp-up throughout 2027 would automatically imply more volumes for 2028 onwards? And that's my first question. And on the second one, still in the sugar and ethanol space and with the above average rainfall levels that we're seeing recently in the Brazilian center south that is likely to postpone industries, sugar can crush towards next year.

19:15 I just wanted to have an updated view on the commodity prices going forward for 2027, basically to understand if you understand that we are heading towards a more challenging year in terms of commodity prices. Thank you very much.

19:31 Gustavo, thank you for your question. Before passing the word to Renato that will answer in detail, I would like to point out this carapó meal. I think that the carapó meal acquisition was something very important for us. It was a very attractive opportunity. We acquired a meal Thank you very much. that we acquired this mill where we can mill 5 million tons with no problem at all with the cane that we already have in the cluster. We have excess cane in the cluster because this excess of rice that we have and we have a very high productivity this year So we are having excess of cane that we couldn't have meal. So we acquired this meal, if we assume 5 million tons, is less than $30 per ton.

20:54 This is something impressive in terms of the quality of the meal that we acquired for such a low price that includes everything. We are really happy with this transaction. We think this was a great opportunity, and we are very comfortable that we will start showing the results as soon as we continue to meet. So after making this quick clarification that I wanted to point out, because it's something extraordinary, an extraordinary opportunity that presented in front of us This quarter, we couldn't have been so clear in our previous call, so that's why we wanted to point it out this time, this great opportunity that we had by acquiring the Carapó meal. So, making this quick clarification, I will ask Renato to go in detail to your question.

21:52 Okay, so as Mariano mentioned, Carapó is in the same micro region as Angélica and Ivinhema, so it's part of the same cluster. So we see Carapó almost as an organic growth of the cluster. So we're going to adopt the same operational model that we have in Angélica and Ivinhema. The equipments of Carapó have a lot of potential. The milling system is exactly the same as Ivinhema, which is crushing 6.5 to 7 million tons. The sugar factor is the same size as Ivinhema, and the distillery is even bigger than Ivinhema. The steam generation is also bigger than Ivinhema. So we think that Carapó has a lot of potential.

22:43 Also, we think that we can adopt the best practice that we have in our cluster to improve some important KPIs of Carapó. For example, the industrial efficiency, which is basically the sugar input and the sugar output transformed in either sugar or ethanol. We think that we can improve this This KPI, which is very important. Also, the use of time. We think that there are a lot of potential to improve the use of time. In other words, we think that we can have less mechanical problems in Carapó and crush more hours during the year.

23:32 Also, the energy consumption in Carapó is higher than in our cluster, and we think that with small adjustments, we can put it in the same level. And finally, in the agriculture area, we think that we can improve the sugar or the TRS per hectare of Carapó, adopting the same way that we are doing in our cluster. Also, the Carapó team is very good. I think the integration was very, very good. It seems that they are working with us for a longer period of time. So, we are very, very happy overall.

24:18 And regarding our second part of the question, I think it's important to talk about 2026 before to get into 2027. I think the scenario is very positive, especially for ethanol. Today the supply of ethanol is smaller than everybody was thinking as a consequence of the rains that the whole center-south region is receiving. So the delay in crushing and also the lower TRS content decrease the ethanol output. In the other hand, the demand of ethanol is very high.

25:04 Actually, the higher demand since 2019. The hydro demand per month is more than 2 billion, 2.3 billion liters of ethanol. Departure rates at the pump is still, in São Paulo, 62%. So favoring ethanol consumption. If you take the inventories now, It's 14% lower than the same period of last year. So we think that the scenario is very tight and prices should be high at least until to finish the first quarter of next year.

25:52 We are taking advantage of this scenario. The price is very good and also we are taking advantage of the subsidies that the government is giving. The subsidy is in the hydrous ethanol and is based in the sales of ethanol that we have during the period. And we are taking advantage of that. I think it's very important to mention that we don't have any commitment of anhydrous with contracts of anhydrous. So we are maximizing hydrous now to get all this benefit. So we believe that the beginning of next year, the scenario for ethanol is going to be really good.

26:38 Once the season starts, we think that the ethanol supply is going to increase. But although the amount of the sugarcane probably is going to be very high, that sugarcane first has to be crushed. I think Brazil has crushed 655 million just one year in the history, in 2023. So it's not easy to crush all that cane. Also, we believe that the mix is going to be more sugar-oriented. This year probably is going to finish around 46%, and next year probably is going to be close to 50%. So part of the ethanol is going to be transformed in sugar.

27:31 but the corn ethanol is going to increase. But if you put all those variables into equation, we think that the ethanol supply is going to increase around 3% only. We think that 3% more ethanol can be easily absorbed by the flex fuel cars. We could see this year how responsive the demand is to the part of the rate, the part of the pump. So we think the excess of ethanol is going to be absorbed. In the case of sugar, We think that Brazil is the same situation of ethanol.

28:17 So the 40 million tons that everybody was talking at the beginning of the season, today is difficult to reach 37, 38 million tons. So the amount of sugar that Brazil is going to produce is lower. Also, this El Niño effect is causing a dry weather in other producer countries, especially in India. So India probably is going to produce less than it consumes this year. And for the next year, probably India is not going to increase the production because of the planting period that was very dry. So we think that the scenario is good for sugar as well.

29:07 That's quite helpful. Thank you, Renato. The next question comes from Matheus Yancid for UBS. You can open the line.

29:28 Hi, thank you, thank you, thank you for the time. I want to, my first question on, on, on, or one of my two questions on, on, but the first one on the potential explant of the expansion of the Uriel plant. So any updates around that on potential timeline for, for an FID? That's my first question, that's sort of the first point, but I also want to get your sense on how do you think that once your project potentially is running in the The other competitor is also producing urea in Argentina, and Argentina becomes a net exporter of urea. I know that Brazil may be a target for sales, but pricing will need to absorb freight costs to Brazil. So I'm just curious on how you think that the outlook for urea production expansion looks in Argentina and how that could change.

30:20 negative impact prices, particularly domestic, even if you have to export to Brazil. That's my first question. And then the second one is on unprofessional costs. It looks to us, if we're not seeing the wrong number here, that OPEX per ton for urea production is up 16% year-on-year. And then when I look into natural gas prices in Argentina, again, might be seeing the wrong reference here, but we see them up 5% in the same period. So the question is, what's driving this increase in urea production costs? And if you could just help us sort of understand what's the outlook from here and normalization from here, just because we're seeing about $270 per ton cash cost per ton of urea for this quarter.

31:08 And at this level, it looks like the normalized EBITDA for perpetual will be slightly below what we were previously discussing once the acquisition was concluded. So trying to get a sense of really how to think total cost for the area plant there. Those are my two questions. Thank you.

31:28 Okay, thank you, Mateo, for your question. I'm going to address first your second question just to clarify in terms of cost of production of urea that there were some misunderstandings here. Number one, it is important to look at it on an annual basis or at least on the nine-month basis, because when we talk about quarter by quarter, sometimes there are some small specifications. So, going specifically for the nine months, we have nine months, 25, $262 per ton. While in nine months, 26, we have 237. So, this is a 10% decrease in terms of cost of production. So, we are having a lower cost of production this year than before. in the pro forma of the previous year. And this is around 10% lower cost of production.

32:35 This also includes some additional expenses. So in reality, it's even lower than this number of 237, because we are including the sales of some other products on top of urea. And that's the cost of production of all that. When you make that type of calculation, that includes ammonia, peroide, and N-plus. So that is a small change that have to be adjusted. And then we are also including in the 237 some growth and maintenance capex that are marginally contributing today to an increase in production. And also some of the expenses that may be related to this potential expansion that is what you were also asking. So all in this, we are around 15% lower costs comparing to the previous year. This means some improvements in terms of gas prices, some improvements on logistics.

33:48 So there are several improvements that are happening during this year that makes this Thank you very much. What we believe and we believe since the very beginning when we analyzed this business and when we acquired this Profertil business, we were always thinking on this increase of the plant of this project or potentially more than duplicating.

34:38 Because what we see is that we can be the lowest cost producers in terms of urea to export within the region. We are going to be very competitive to go to Paranaguá. Going to Paranaguá is even cheaper than going to Rosario Port within Argentina. So once Argentina completes its normalizations in terms of imports and exports, it's going to be equally cheaper or even cheaper going to Paranaguá port in Brazil than to Rosario port. So for us, we are not looking at the plant and Argentina as only for the domestic market. Argentina has a possibility to sell The region still imports more than 8 million tons and so it's 9 million tons what the region is importing today and the ability to make these two projects will only add 3.5 million tons. So there are still more than double to be a net importer in the region that is how we really look at this potential business.

35:55 So we don't see any risk if the two projects are being completed. We think that we can continue to deliver this kind of results that we are delivering today. That's why we are so optimistic and we are working hard on Thank you. And just one clarification on the urea cost.

36:35 In December, I think we were discussing a normalized mid-cycle EBITDA for perpetual for around $300 billion per year. Do you think that that's still reasonable compared to what you're seeing today? I know that prices can move, real prices can move, but if in general, that's a mid-cycle EBITDA that we can expect for perpetual.

36:55 Yes, and as I was mentioning before, we are finding more and more opportunities to continue improving, so we can even have better numbers than that. We are certainly going to close this year on a higher number. This is affected by Only two months of higher prices than normal because March, April, and a portion of May were when the prices of urea were out of the historical numbers. Then during the rest of the year, we had historical numbers when you look at the CFR urea price in Brazil.

37:43 Okay, that's clear. Thank you. Once again, if you have a question, please write it down on the Q&A session or click on raise hand for audio questions. Our next question comes from Guilherme Palhares for Santander. You can open a mic, sir.

38:06 Good afternoon, everyone. Thank you for taking my questions. Just a follow up on Matteo's question. Of course, you have a great opportunity there on the fertilizer market in Brazil and the Argentina consumption. I just want to try to drill down a bit on the costs between natural gas and other costs. And if you could just explain a bit on a high level, you mentioned a bit The benefits that you guys are seeing because you are reaching the record production levels. So which of the lines and fixed costs are you being able to...

38:43 Sorry, Guillerme, we lost you.

39:00 I just want to understand, you mentioned that you guys are putting out record production numbers for the fertilizer business. I'm just trying to understand a bit how much is fixed versus variable cost there and how we can model a bit the cost curve going forward as you guys continue to deliver those lower costs year over year and what is the level that we should be looking at long term?

39:28 Okay, in terms of fixed cost or variable cost, probably 70 to 75% are variable cost, but within the variable cost, you can also work on them. The gas is the number one variable cost, and there are some opportunities to continue improving this gas pricing, and especially gas pricing at the level of the plant, including all the transportation of that. So that is something that we do expect to continue to improve. And then on the logistics in general have been improved and there are still some room for improvement while Argentina continues to normalize.

40:18 That makes sense, but just drilling down a bit on that, if you could just share with this such high level of production, how much of the gas today is coming from the fixed cost that you guys have and how much is variable? And have you already been able to manage a bit those spot prices of natural gas and how are they doing now?

40:48 Yes, sure. Around 80 or 85% is a fixed price. And then there is still 20 to 15% variable price that you can take opportunity of cheaper gas prices at these moments of the year. I think that's very clear. The next question comes from Gabriel Barra from Citi. You can open the line, sir.

41:25 Hi, Tim. Thanks for taking my questions. I have two for my end here. The first one, the discussion about ethanol is quite interesting at this point, right? To have the subsidy that should be renewed by next month. We are seeing the unhydrox ethanol in a really tight market today when you take a look at the inventory levels. Demand is peaking on the hydros. So my question is how to operate this market, right, mainly in terms of the commercialization strategy here from now on until next crop season. I want to hear a little bit more about terms of mix. You mentioned that you don't have contracts on hydros, but on the other side, we are seeing a more tight market on this side.

42:15 and we have oil price decreasing and price spread normalizing, so it's an interesting moment to understand a little bit more on the commercialization side from you guys. The second one, back to carapoa discussion, in the end of this crop season, We still see some challenges here in order to crush the rest of the sugarcane. We understand that to have this continuity on the crushing process during the end of the year. And to have this spare capacity on carapoa, right? Given the fact that you have more sugarcane and you have, I would say, if I'm correct, right here, you are reaching the maximum capacity of the legacy place that you have, carapope could be one of the ways for the bottleneck, this higher productivity and high production of sugarcane.

43:10 So if you could give us more color about that and in terms of cost, if this should be a net positive or a net negative in a cost perspective for the average cost for the company, this could help us a lot here to discern the trend of the cost and the creation dynamic. Thank you.

43:31 Thank you, Gabriel, for your color. In a quick answer, we are selling as much ethanol as possible. We are selling all our ethanol during this period of time. And also, the second question is a clear net positive. Then Renato can give you some more color on these two questions.

43:55 Renato? Okay, so regarding the ethanol question, we are producing hydrous ethanol now to take advantage of the subsidy, and we think that in the first quarter of next year that we're going to be crushing in our continuous harvest model, probably we're going to be producing anhydrous. We have the equipment to produce anhydrous in all We are ready to change the mix to anhydrous and to capture this price. We think that the anhydrous is going to increase, also because the gasoline consumption is going to increase because hydrogen ethanol is going to move toward the 7% parity.

44:48 Regarding the second part of your question, I think it's important to mention that Carapó, we are going to have two months of inter-harvest because Carapó is not ready to do the continuous harvest. So we are going to start crushing in Carapó in March 1st. And that's why we are considering that Carapó is going to crush between 4 and 5 million tons of sugarcane. In our continuous harvest model, we don't see those cane as a kind of . So in this model, at some moments when the weather is wet and it's rainy and we are delayed in the crushing, We end up crushing that sugar cane with more months, but in other moments when the weather is drier, we anticipate the crushing of those sugar canes, sometimes with less than 12 months. So we expect that at some time during the year, the weather is going to give a chance to put the sugar canes in the right age to be crushed.

46:03 Thank you, Renato. Only a follow-up here. I don't know if you could comment on that, but what's your base case in terms of the subsidy? You guys are working with the subsidy being postponed for some months here, or do you think that's going to end by December? How are you guys working with this base case at this point?

46:25 We also don't know. We are selling as much as you can. Today, the hydro's equivalent is 21 cents per pound in Mato Grosso do Sul. And we know that the subsidy is going to be in place until December 9. After this date, we don't know what's going to happen.

46:47 Thanks a lot. Very clear. The next question comes from Thiago Duarte from DTG Pactual. You can open a line, sir.

47:03 Thanks for the opportunity. Hello, everybody. Two questions on my side. First one, following up on Renato's previous comments on the market outlook and very detailed color that I appreciate very much. A follow-up on that, Renato, particularly with regards to ethanol market. I get your optimism regarding prices for the coming months, especially towards the beginning of 2027. But as you mentioned, there is like mounting supplies coming, especially from corn ethanol. So my question to you is really where you think the demand is going to have to come from?

47:49 Do you think it's just a matter of... Hydro's ethanol becoming more affordable and then gaining share against gasoline so it will be a price mechanism and or how how optimist or confident you are that other routes for ethanol will will will deploy such as SAF and bunker and other other different sources of demand that might absorb this The second question, I appreciate the target leverage for the end of the year, two and a half times, as you put in the presentation. So the question is, where do you expect or where do you want to see the net leverage ratio getting?

48:42 These are my questions. Thank you.

48:59 Okay, thank you Tiago for your question. I will ask Renato to answer your first question and then Emilio your second question. Renato?

49:08 Hi Tiago. As I mentioned, we think that for next year there are two variables that we don't know what's going to happen. First is the amount of the sugarcane that's going to be crushed. I think it's difficult to crush 650 million tons. And even if it's crushed, I think the mix is going to be more sugar oriented. So it's going to decrease the mix, the ethanol mix in the sugar cane ethanol. And the excess of ethanol that we are going to have, even considering those variables that I mentioned, we think in the short term is going to be absorbed by the hydro's market share, as we saw this year happening.

49:54 If you're thinking in the mid-long term, and then we think there are other sources of demand as the agricultural machines, biobankers, SAF, but in the short term, I think it's going to be the hydros market share.

50:14 Okay, thank you, Renato. Then, Emilio, can you take the question on the leverage?

50:21 Sure. First, and I will use this opportunity to reiterate that as we do from time to time, our businesses are best evaluated on an annual basis. Accordingly, the results of any single quarter are not necessarily representative of the full year performance of each business. As we showed in the presentation and you just mentioned, we are anticipating that we will fall to 2.5 times our net debt-debit-debt ratio by December 31st. But this is after doing certain liability management that allow us to extend the maturity of our debt for more than four years. And most importantly, with a cost below 7%.

51:11 Now, specifically to your question, we always say that something between two and a half times is where we would feel comfortable to be. And if you look at our history, we've been below that threshold. And that is when... We took the opportunity of increasing our leverage when we saw very creative opportunities such as Pro Fertil. And to the extent we reach that level, which hopefully we can be there by 2027, well, we are going to be in a position to rethink. But as always...

51:57 and what happened in the past. If there's an opportunity that meets our thresholds and the repayment is clear going forward, we might take that chance. And always with the support of our shareholder that has been there in recent acquisitions.

52:27 Thank you, Emilio.

52:30 Thank you. The next question comes from Julia Rizzo from Argan Stirling. The floor is yours.

52:41 Hi, hello everybody. I think I have two questions, maybe a third. I know you have already discussed a lot about the ethanol in the commercialization, but if you could be a little bit more specific of how much, we are already in November, how much it was already sold and the price improvement that you're seeing in the fourth quarter versus the third. And I'm saying that the direction is important to us because it was quite confusing, the third quarter analysis because of the The subject is without subsidies and that will be helpful to know a little bit of the direction here and the commercialization pace. Also, if you could give us some clarity of how much cane do you expect to crush in 2026 and the leftovers, if any, for 2027.

53:29 And the third and the final one is the running rate of Prof. Reda, the 110 million, the 110 that you did on the third quarter. Is that a good running rate that we can assume in the next couple of quarters?

53:54 Hi, Giulia. I'm gonna get your last... A question, your last question on the Evitao Pro Fertil. As I mentioned before, somewhere above the 300 million dollars is okay, so 110 is a little bit higher per quarter than what we would expect per quarter. This quarter we sold some more urea from the previous quarter as we explained before in our previous call. That's why you are seeing this again. It is important to see it in an annual basis as we were explaining before also. So we will always expect to sell almost 100% of what we produce and if we don't sell 100% it's because we have a specific strategic view of putting a little bit more urea from one quarter to the other or from one year to the other.

54:48 So, all what we produce is being sold because it is a commodity and as I explained before, the whole region imports a lot more than what is being produced here. So, making that quick clarification, I will ask Renato to answer your questions on the ethanol specifics.

55:07 Hi, Julia. In the last quarter, we believe that we are going to sell 200,000 cubic meters more ethanol than in the third quarter, with a price approximately 25% higher than in the third quarter. already included the subsidy. And regarding the crushing, we are going to crush, we believe we are going to crush about 15% more than we crushed last year, including carapaz crushing.

55:48 Any leftover for the next one, Renato? Sorry to interrupt.

55:53 The leftover, as I mentioned, we have the continuous harvest model. So we don't consider that kind of bisada. So it's a cane that is with age in months higher than usual. So we are going to be crushing the first quarter. And at some point when the weather gets better, The next question comes from Lucas Ferreira from JP Morgan. You can open the line.

56:39 Hi everybody, thanks for the time. Two questions, one to Renato. Renato, what's your forecast for the unitary cost of production this season? And how this number should compare, like now in the second half of the season versus the first half? I would imagine that some of these effects of El Nino... Ezequiel Garbers And then on the farming and rice business, pretty much how do you guys are seeing productivity? I think they have been much better and then boosting your results. But I'm wondering if you have any views now into the summer season coming in. in terms of how to think about the productivity in each of the crops so we better understand what's coming next in terms of margins and especially that prices are being a bit better for most of the products, right?

58:00 Thank you.

58:03 Okay. Thank you, Luca, for your question. Renato, do you want to answer the cost of production on the sugar ethanol?

58:12 Okay, so Lucas, we think that the cost of production just makes sense to look at the annual basis. So if you take the annual basis, we think that our cost of production is going to be similar to slightly Thank you very much. And I think the reason for this increase in cost is the cost dilution that is lower now.

58:59 We are going to crush less sugarcane than initially thought because of the rains and also the TRS content, which is lower also because of the rains.

59:10 Thank you, Renato. And then answering your question on food and agriculture business, that is a business that we've been suffering the last year and a half. From now onwards, we are in a very good situation. All our production costs are doing very well because they were all adjusted accordingly. And also we are having an excellent planting season. We are just finishing or in the end of the planting season. All our plantations are in excellent conditions. As was expressed before, the cow productivity is also getting records. and all the sales in the domestic market is also doing great and the export market also doing great. So we are in a very good situation going forward, especially because of the price recovery coming from the rice and the peanuts that are the two products that substantially changed prices, reaching the bottom of prices, historical bottom of prices around six months ago. So we are well positioned and we should continue to see this some way above 10% EBITDA sales, more than 10% of EBITDA over the sales.

1:00:37 So that's what we should expect going forward.

1:00:44 Thank you very much. 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.

1:00:58 Thank you all for participating in this conference and we hope to see you in our upcoming... Thank you. This concludes today's presentation. You may disconnect at this time and have a nice day.