Good morning, ladies and gentlemen and thank you for waiting. At this time we would like to welcome everyone to Adecoagro's Second Quarter 2016 Results Conference Call. Today, with us we have Mr. Mariano Bosch, CEO; Mr. Charlie Boero Hughes, CFO; and Mr. Hernan Walker, Investor Relations Manager. We would like to inform you that this event is being recorded and all participants will be in listen-only mode during the Company's presentation. After the Company's remarks are completed, there will be a question-and-answer section. At that time, further instructions will be given. [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 2016 second quarter results conference. As you may have seen in our release, we reported the strong results in all of our businesses. This was a combination of a number of factors of which our daily work and efforts to maintain a low cost of production constitute the most important one. As we have always remarked, being the low cost producer is the only way to run a profitable business in an industry where we cannot control variables such as price and weather. Basically, our formula to control and reduce cost consists of, one, enhancing both industrial and agricultural efficiencies and two, increasing productivity. In our earnings release, we are showing productivity increases in all of our businesses. For example, in Argentina, we are reporting crop yields inline with the previous season which were record harvest despite the abundant rainfall that we suffered. Our milking cows continue increasing productivity, reaching more than 35 liters per day per cow, the highest in the industry. In our sugar ethanol and energy business, TRS per hectare increased quarter-over-quarter reaching 13.3 tons per hectare. This industrial and agricultural investments dilute our fixed cost and are reflected in the results of each quarter. Specifically, in the sugar ethanol and energy business, we have reported that our industrial and agricultural costs measures per ton of sugarcane crushed and per ton of TRS have decreased by 12% and 9% respectively. We are aware that there are still many things that can be improved and consumed to continue reducing our cost of production. While many of these things, I am excited about our prospects. We are really proud on the quality of the operational and management team which we have developed in each business and are confident that we will reach our operational and return targets. At the same time, we continue looking for accretive growth opportunities in each of our business lines to continue generating value and effective returns for all of our shareholders. Now, I would let Charlie walk you through the numbers of the quarter.

Thank you, Mariano. Good morning, everyone. Let’s start on page 4 where I would like to comment on the water conditions in our cluster in Mato Grosso do Sul. As you may see on the chart, the recent excess rainfall during May which caused logistic and operational disruptions as we have explained the fact and the soil humid we have to stop harvesting activities to avoid the damaging of soil with heavy harvesters, tractors and trailers. Ranged in May and the first half of June were not only a part of the historical average, but also highly dispersed resulting in significant operational downtime. Let’s move to Page 5. As a result of the excess rains, we had 13% net effective milling time in the quarter. At the same time, our milling volumes a day increased by 6% as a result of the ramp up of Ivinhema mill and higher operational efficiencies across harvesting, logistics and milling operations. As a result of these two factors, we were able to crush a total of 2.7 million tons in the second quarter of 2016, 8% below last year. On a year-to-date basis, however, due to the early commencement of the harvest as part of the continuous harvest model that we have implemented since the beginning of the year sugarcane crushing has increased by 24% year-over-year. Finally, I would also like to highlight that in July and first week of August, rains have normalized and returned to historical average. Therefore, we have been able to accelerate the pace of billing and have compensated most of the delay generated in the second quarter. Please turn to Page 6, where I would like to highlight our fuel, agricultural, productivity metrics. We remain fully focused on agricultural productivity since we understand that is the main driver for…

Thank you. [Operator Instructions] The first question comes from Thiago Duarte with BTG. Please go ahead.

Hi, good morning everyone. Well, I have two questions, one is related to this CapEx, projected CapEx that you mentioned in your last slide and the comment that you made on the free cash flow. So, just, on the CapEx is basically whether we should see, okay, understand that 2016 we should see the CapEx a little bit higher than what we were previously expecting on the back of this $40 million expansion CapEx. So, just wondering going forward, if we expect to have any incremental expansion CapEx at this point or if we should consider the $70 million as a good proxy of what you should see in terms of recurring CapEx in the coming years? And regarding the free cash flow, just to understand, you previously had, my understanding that you previously had this expectation of any $80 million to $90 million of free cash flow this year, before we had this higher CapEx? So just wondering why you think you are going to be able to meet this goal of $80 million to $90 million free cash flow, now if $40 million is more CapEx. So just wondering, what else you are seeing down the road, so that you are going to be able to offset the higher CapEx and keep the free cash flow guidance?

Hi, Thiago, this is Mariano.

Hi, Mariano.

On your first question, on your question on what should we expect going forward to 2017, the recurring CapEx of $70 million, I think, it sounds reasonable and it’s something that we could potentially expect. Regarding whether we could see some additional expansion of CapEx or not, as we always mention, we are going to be very disciplined on the return on investment that we could see there. So if we have very attractive projects like what we presented this year, like this expansion of 1 million tons more with very small investment of less than $30 million or this additional investments that we are talking in right that because of all the changes that happened in Argentina and we are, for example, transforming a pump station in rice field that we are transforming the pump station from diesel to electricity. This – the pay-off of this project is a year and a half, so returns are above 50%. So, as we continue to find these additional marginal projects with very high returns, we can see some additional investments, but only in that case and continue with our focus of being always the low cost producer on each of the commodities that we are producing. So, that’s the answer to your first question. Then, on the second question on whether these projected free cash flows of $80 million to $90 million why is it that we continue to project that, is because we are projecting our results and we are projecting our carry strategy et cetera, et cetera. That will continue to see this number in the free cash flow generation.

Okay, that’s good. Mariano, thank you very much. And if I could have a follow-up question, just to get your view a little bit, it’s been more than six months since you had a reduction in the export taxes in Argentina. My understanding is that the business environment in your sector has improved substantially since that happens, the currency has appreciated as well. So, just from the - looking specifically into the land transformation business, you guys have consistently sowed farms in the past, even when the business environment was not as compelling. So just wondering whether you are seeing good prospects in terms of more land monetization and land transformation land prices improving or anything like that. Just seeing in the real world whether this changing the taxation in the rather bitter business environment is really impacting your business in the form of seeing more bids for land, higher land prices something that we could expect to see even more and even better prices going forward. Thank you.

Okay, Thiago, good question. Basically, the returns of the land that we own have improved because of this improvement on the business environment all over Argentina. So, we do expect the prices of land to grow in line with what had happened on its profitability. So, in general, we would say that, we would expect higher prices of land for Argentina. In terms of our land transformation business, I would say that, we will continue to monetize in line with what we’ve been doing in the past and that’s something that we will be doing for ten years. So, we can expect that to continue to happen. And also to offset a little bit land prices, commodity prices for – sorry, for corn and soybeans have decreased compared to two year sales. So, that lower prices in commodity – in this commodity price, in this commodity are reducing the profitability of the land in the rest of the region except Argentina. So, for Uruguay, Brazil and Paraguay, we don’t expect prices to increase. We do expect as we’ve been telling some calls ago, prices do go down in terms of the land and that’s something we’ve been seeing.

Very helpful. Thank you, Mariano.

The next question comes from Isabella Simonato with Merrill Lynch. Please go ahead.

Good morning everyone. Thank you for the call. So I have a question on sugar and ethanol. You mentioned in the release that you’ve been quoting inventories of ethanol to sell in inter-harvest worst than always hopefully better. But, I’d like to understand better your view for this year specifically when we have potentially taxes coming back for the sector, what would be in your view the impact on prices and your view also on sugar prices going forward? Thank you.

Hi, Isabella. Good morning. Thank you for your question. I am going to ask Marcelo Sanchez, our Commercial Director to take this question. Marcelo?

Hi, Isabella. Regarding the taxes that are expected to be coming in, the PIS/COFINS tax, specifically in the ethanol, we understand that short-term impression may have a positive adjusted – in sales part of the charges that are coming, and of course, as this PIS/COFINS will be in place by January next year, starting in place by January next year most probably. The increase in the seasonal price of ethanol will be compensating that increase. Regarding the ethanol view, the sugar view in our – in the part of your question. I think that we are very positive for 2017 and we do think that we are going to be enjoying good prices for next year.

Thank you.

[Operator Instructions] The next question comes from Javier Martinez with Morgan Stanley. Please go ahead.

Hi, Mariano. I would like to ask you, if you can please share with us a little bit about the mood at the Board level, the mood regarding, what you should do with the cash that you are going to generate this year and the following year? I am trying to understand if the mandate you have is a consensus-weighted mandate? Is there is a debate on the Board? I want to understand the thresholds at which point is you don’t find the internal rate of return that you are looking for you will start to pay dividend. I would like to understand to try to map a little bit how is going to be that decision or when may we see a dividend coming on the table? Hello.

Hi, Javier, thank you for you questions. Yes, of course, this is a very important matter and it’s an important discussion that we are having at the Board and it’s a matter that of course we are always addressing. So, number one, we have a clear idea that for this year’s cash flow, we are going to be reducing that. So, we are – we will be certainly reducing debt as deferred debt. And then, after going below the two times EBITDA or a certain, there is not one specific number but, after we are reducing debt that’s the first step. Then the second one is, the discussion we are having every time, whether there is an accretive growth project or we will start giving dividends or buying back shares. So those alternatives are always in the table and we are always comparing any of the growth project with the alternatives to either give dividends or buyback shares. So, it will depend on what the projects that are presented or the IRR that we are presenting in the projects are accretive or not. So that’s basically now we think at the Board level.

Mariano, let me – obviously, this is my opinion, but let me question that the season always goes, at the end of the day you have a cost of leverage that is pretty low below 7% in Brazilian reals, 5% in US dollar, but with the capacity to generate higher return on debt and with a loan to value that is pretty low, so, why to reduce debt? Why don’t you buy shares or pay some dividend?

Okay, I understand what you are challenging. This cost of debt is what we have because of the growth projects that we had in the past. So that’s what we ask this level of debt to build what we build as a company, so to build basically this sugar and ethanol clusters. So from now on, after we review some of the debt level that we have today, we will start doing what you are saying or thinking that way.

I know, but again, sorry, sorry to be pain, but, you have low cost production, you have quite liquid high quality assets, you have a cost of debt that is pretty low, with below the rates in Brazil and you have the share prices trading with this company’s net asset value. So, that the Board – so is this a consensus-weighted view in the Board and that is the base use of the money?

This is, of course a discussion that happens at the Board level, and as of now, we have agreed that the first step is still reducing debt, because we feel comfortable in this business that is a volatile business where you don’t have full control of weather and commodity prices. We feel very comfortable with a lower level of debt.

Okay, understood.

Thank you, Javier.

The next question comes from Viccenzo Paternostro with Credit Suisse. Please go ahead.

Hello everyone. Thanks for the question. My first question is on the planning for the planting of the next season. I’d like to understand whether the potential La Nina could change your strategy for planting in the next season? I mean, we know that La Nina can severely affect the yields in Argentina. So what’s your view on that? And how this could change your planting strategy? That would be my first question. My second question is on the land transformation. Adecoagro has been selling $5 million to $10 million of land every year. I’d like to understand whether this is going to be the case for this year and for the next year? Thank you.

Okay, so regarding your first question on La Nina, we understand that today, the index is in a weak La Nina that would certainly benefit our crops, that would mean that we would have relatively dry weather in order to be able to have a good harvest on all our sugar ethanol and energy operations. So, that would be welcome for our own business and our own cash generation. And then, regarding corn and soybean planting for Argentina, we are in a very good situation of humidity all over the farm. So we will be able to plant in good conditions and we expect with a weak La Nina to continue having very interesting yields in both. Whether we are going to be planting more or less, we are growing a little bit in sugar, sorry, we are growing a little bit in corn and soybean past, we don’t have improved and in terms of sugarcane, we continue to plant sugarcane and we will continue to grow in order to be on the secure side and being able to have enough cane to continue milling at full capacity as we’ve been doing in the past two years. So, those are our strategies regarding this weak La Nina as we are seeing today. Then on the second part of your question - on your second question, we’ve been selling on generating someway more in the last ten years, that’s $5 million to $10 million, it’s more in $15 million to $20 million. And we expect to continue to be more or less in the same range and we are analyzing the sale of the farms according to its return on investment and we are always very disciplined on the analysis of the return on investments either for buying or selling any of the assets.

Perfect, thank you.

[Operator Instructions] Showing no further questions, this concludes our question and answer section. At this time, I would like to turn the floor back to Mr. Bosch for any closing remarks.

So, we are now in a very important time of the year in sugar, ethanol and energy business. We are in a most important period of the cane harvest and in the farming land transformation, we are entering into the main planting season. So, we have all our teams highly motivated and focused on execution. That’s how we see our business and the key of our business to focus on execution. So we hope to see you in our upcoming event and thank you for joining the call today.

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