Good morning, and thank you for waiting. At this time, we would like to welcome everyone to Adecoagro's First Quarter 2018 Results Conference Call. Today with us, we have Mr. Mariano Bosch, CEO; Mr. Charlie Boero Hughes, CFO; and Mr. Juan Ignacio Galleano, Investor Relations Manager. We would like to inform you that this event is being recorded. [Operator Instructions]. Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of Adecoagro's management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Adecoagro and could cause the results to differ materially from those expressed in such forward-looking statements. Now, I'll turn the conference over to Mr. Mariano Bosch, CEO. Mr. Bosch, you may begin your conference.

Good morning, and thank you for joining Adecoagro's 2018 First Quarter Results Conference. Throughout all these years, we have been investing time and money in enhancing the efficiency of our industrial operations. We have consolidated as one of the most efficient and low-cost producers of sugar, ethanol and energy. Our current prices of sugar, where state of the art cluster in Mato Grosso do Sul, has delivered extraordinary results as we shall see during the presentation. The same could be said about our Dairy business where we are delivering high-quality milk on a daily basis at one of the most efficient kilogram of feed to liters of milk conversion ratios in the world that allow us to have the lowest cost of production. At the same time, from an agricultural perspective, through the implementation of best practices and cutting-edge technologies, we have been able to develop a self-sustainable, diversified and high-quality productive system. As we always stress out, this strategy has allowed us to become an efficient and low-cost producer with the ability to rapidly adapt ourselves to the market dynamics. This, in turn, is a key to generate attractive and stable returns through the different commodity cycles and weather effects. In particular, and starting with the Sugar, Ethanol and Energy business, we were able to fully maximize ethanol production, taking the production mix during the quarter to a record of 87% in order to profit from higher relative prices. As a matter of fact, ethanol prices traded at a quarterly average of $0.19 per sugar equivalent. That's 40% higher than sugar prices. This was only possible thanks to our continuous safra system and the flexibility of our industrial assets. Moving to the Farming and Land Transformation business, once again, we had proved the success of our model. The advantages…

Thank you, Mariano. Good morning, everyone. I would like to start on Page 4 with a brief analysis of the rains in Mato Grosso do Sul. As it can be seen in the bottom chart, the region received higher than average rainfalls during the last six months. Consequently, affected milling days reached 39 days in the first quarter of 2018, 12% lower year-over-year. Crushing activities, however, marked a 4% increase compared to the same period of last year, mainly driven by enhanced industrial efficiencies, which resulted in a 19% increase in milling per hour. Industrial improvements include, but are not limited to, the 17% increase in nominal crushing capacity in Angelica mill, coupled with the installation of a larger roller in the Ivinhema mill. It is important to highlight that we still have leftover cane from last year, which is scheduled to be harvested during the coming months, assuming normal weather, since we have the industrial capacity to do so. Indeed, during April rains, we're significantly lower than the 10-year average. As a result, we crushed 1.3 million tons of sugarcane, more than doubling last year's performance. We feel very optimistic to fulfill the 12 million tons of sugarcane milling for this year. Let's now move to Page 5, where I would like to highlight our agricultural productivity. As you can see on the top left chart, sugarcane yields in the first quarter of 2018 reached 107 tons per hectare, 14% higher year-over-year. Higher yields were primarily explained by abundant rainfalls over the last two quarters, which favored cane development. TRS contents remained virtually flat, reaching 108 kilo per ton. The combination of these two effects resulted in TRS production per hectare of 11.6 tons, 12% higher than last year's first quarter. Let's turn now to Slide 6, where I…

[Operator Instructions]. The first question comes from Isabella Simonato with Bank of America Merrill Lynch.

I have two questions. First of all, on sugar and ethanol, we saw a big increase - a bigger shift in the mix towards ethanol. I understand that it's also because of the seasonality. But how are you looking for the mix for the entire 2018, '19 season given the big price differential between both products? And also, you mentioned in the release that you see a little bit of downside risk to soybean yields. And we have been reading articles also that there is an excessive rains in the last couple of months after the drought. So if you could just give us a little bit more color for the remaining soybean that needs to be harvested? What sort of yields are we looking at?

Thank you, Isabella, for your question. I will ask Renato to answer the first part of the question on how we see the mix for the whole year and how we see that we are improving so much this flexibility capacity. Renato, do you want to answer the first question please?

[Indiscernible].

Okay. Sorry, we are not getting Renato on the speaker line. So I'm going to answer that question. I think this 87% ethanol mix that we've been able to do this first quarter, of course, it's not something that we can do all the year round because during the months where we start crushing full capacity and the TRS content of the cane increases, then we don't have that much flexibility. So for the whole year, we are expecting mere 70% of ethanol as the whole year. This is a lot more than what we were projecting or what we were thinking we were going to be able to do. This is the first time that we pushed as much as possible into the ethanol production and because of the differential margin that we have, especially in Mato Grosso that are even higher than in the Center itself, that's why we are being so aggressive, and we are making some changes in the industry. We are increasing the syrup that is being sent to the tanks of fermentation. So because of that, we are incrementing the alcoholic content on those tanks. And because of that, is that we are being happy, surprised by these additional potential increase that we are getting today. So that's why, we are expecting to reach near 70% in the whole year if we continue maximizing and we continue seeing these differential on prices that we expect to continue to see during the year. And then on the soybean yields that was the second part of your question, Isabella. We don't expect more downside risk on the soybean that hasn't been harvested yet. We are almost finished. We only still have 20% of - to be harvested. And then the yield - the drought has already been closed. So for the following year - for the following part of the year, we do have moisture. We do have enough moisture now, so the farms should be okay from now on regarding this drought. So we could say that the drought is over, and we don't expect more yields going down on our soybean that we are finishing harvesting now.

The next question comes from Vito Ferreira with BTG.

Just a follow-up on Isabella's question. I would like to hear from you, what is your expectation for sugar and ethanol prices for the year. And my second question is on SanCor. Could you provide us more details regarding the closing of the deal? And how you expect to fund it? I mean, it would be great to hear from you what you're expecting in terms of funding cost for this transaction.

Okay. Vito, thank you for your question. I'm going to ask Marcelo Sanchez, our Commercial Director to answer your question regarding our view on prices, and then I will take the question on SanCor.

Thank you, Vito. As you might be following the market, the global on sugar scenario for 2017, '18 is looking to allow surplus. That has been pushing the prices down. And we think that prices will be - continue to be under pressure within the next coming months. That is regarding our sugar view, and that's the reason why we've been accelerating since the first Q of 2017. We've been accelerating our price in sugar, as you might be seeing in the results that we are almost 90% hedged already with our sugar production standing at 16.70, our average. That is roughly 400 points above today's price. Contemplating 2019 prices, we are also - with an average of 70% ethanol production, we have for 2019 already 25% hedged at 15.28, as you might be seeing in the report. Regarding ethanol, even though that - we are seeing an incremental in the shift towards ethanol in Brazil within the next coming months, given the ethanol is paying much better compared to sugar, these exceeding production will be offset by really a high demand that we are seeing in the coming months. Therefore, we are pretty positive in pricing for the next coming months in ethanol.

Okay. Thank you, Marcelo. Then on SanCor and closing and funding, I would say that as we informed previously, we made this investment proposal but it's subject to a number of conditions. So today, we are currently performing a full due diligence and outline what would be a sustainable company on SanCor, what's a company that we can imagine that is the real sustainable company. So all those condition presents have to happen in order for a potential closing. Regarding timing, there are many things that are not under our control, so they depend on judicial issues, on renegotiation of debts, on many different things that are not under our control. So regarding timing, there is not much that we can see - that we can say other than we are going through this due diligence and trying to outline what's the sustainable company that we can get into. Then regarding potential leverage and funding, all this is in a function of the restructuring of the assets and the liabilities, and that's part of what's currently undergoing. So it's difficult to be more clear now on where we are there.

[Operator Instructions]. The next question comes from Gustavo Allevato with Santander.

I have two questions. First one, regarding the weather conditions in Brazil, how is the weather conditions in Mato Grosso so far year-to-date? And the second question is regarding the commercialization strategy for ethanol in Brazil? So we recently saw a drop in prices. Will the company build inventories just out for the mid to the end of the crop season? Or we wait for like - or the company will sell on average the same quantity per quarter?

Thank you, Gustavo. Regarding the weather in Mato Grosso, I think Renato's line is okay now. Renato, can you answer that part of the question regarding the weather in Mato Grosso and how sugarcane's looking?

Okay. Thank you for the question. [Indiscernible] water sugarcane areas in Brazil, we have the rains above historical average in the last quarter of '17 and the first quarter of '18. As a result, our yields were not affected by the drought. In fact, we have achieved 107 tons per hectare in the first quarter, which is a very good number. It's also important to highlight that even with more rains than usual in the first quarter, we have crushed more sugarcane than the same period of last year as a consequence of the higher crushing per hour. Also, as already mentioned, we have been crushing very well in the second quarter, taking advantage of drier weather.

Okay. Thank you, Renato. And on the commercialization of the ethanol, I'm going to ask Marcelo Sanchez to comment on that.

Thank you. Ethanol prices have recovered from the lows and returned to the levels of $0.15 per ton in Mato Grosso do Sul. And given the level of demand that was mentioned before, we are serving Brazil and Cuban oil prices, we believe that there's a high potential of appetite. And our strategy is to maximize our results and sell in the pieces of higher prices that are going to be further down the curve at the end of the year - I mean, the curve for the second half, just to be more precisely. That's basically what we see in the ethanol and our strategy.

It will link some part of the ethanol.

The next question comes from Javier Martinez with Morgan Stanley.

Mariano, I would like to ask you something about SanCor. The price that has been suggested by the press, had a component of debt from the company in equity, any of those you've seen in Argentinian pesos or those are in dollars?

Good question. As I mentioned before, this is part of all this condition present. And part of those considerations present is that most of the debt that remains in the company will be kept in pesos, and that's how it has been discussed until now. And it's part of this process that we are under due diligence.

The next question comes from Augusto Ensiki with HSBC.

Sorry, I hopped on late. So if this was already discussed, I apologize. Could you just talk a little bit about what the peso deval means for you guys? How much of your production in Argentina is export versus local consumption? And if the changes in interest rate affect any of your debt? I don't know that you have too much of local debt. And secondly, a little bit of how weather conditions have restored or not for your farming operations?

Okay, on your second part of the question, I have already mentioned that the weather conditions or the drought is already over in Argentina. So we are now starting from in - as a normal year on all our crops. And Renato had just commented on Mato Grosso do Sul. So in weather terms, I would say that today, we are very well positioned. And regarding your first part of the question on how the deval affects us, Charlie can be more specific there on the answer.

Augusto, the devaluation in Argentina that we've seen in the last three weeks, considering that most of our revenues are dollar-linked, as 85% of the products that we produce are exported directly or indirectly. And considering our cost structure, which is approximately 50% in local Argentinian pesos and 50% in dollars, every time we have a devaluation that we witness the peso, impacts positively as we have our cost being diluted. So this means that our margins are better, and our cash flows enhanced. Taking advantage of your question, I also wanted to say that the devaluation in Brazil that we are seeing, actually, the real was trading today at levels of 3.63. It's also good for our P&L and bottom line, as I would say, most of the costs that we do have in Brazil, our operational cost and maintenance costs are in reals. So this means that these costs are being diluted, and this helped us to gain competitiveness in our costs. And on the other hand, since the last six months, everybody knows that Petrobras has this formula that takes the domestic industrial oil price with the international oil prices and the effects. So every time that we have a stronger dollar, a weaker real in Brazil, we see an enhancement in ethanol prices in reals, which impacts positively our margins as well.

Perfect. And how about your land portfolio, does that get affected at all?

Okay. Thank you. Regarding the land portfolio, it's always traded in dollars in Argentina. In Brazil, the land portfolio, in general, is traded in reals or in soybean box that are - that is more related to the dollar or is linked to the dollar. But in Argentina, it's always traded directly in dollars, and the cash flow generation of a farm is higher with the deval because of what Charlie just explained. So in theory, prices should go up because of deval.

The next question comes from João Soares with Bradesco. João Soares: My first question is with regards to leverage and M&A. Assuming that SanCor goes well, you guys concluded the transaction, your balance sheet is going to be a little bit more heavy. So I imagine that, that's going to limit your M&A strategy or anything that you have planned up. And also on M&A, I realized that Odebrecht has plans in Mato Grosso do Sul that are very close to yours, if I'm not mistaken. And so I don't know if those assets have come up to mind. And the second question is in regards to carry, I think it's more for Renato. If you could talk a little bit more at the current haggler's prices, what will be your sugar equivalent, taking into equation your working capital and all other adjustments into the formula?

Sorry. Again, the second part of your question, can you clarify, João, please? João Soares: Yes, just concerning the current ethanol prices, of course, you have the pharma with - usually with the TRS, and we can reach a current sugar price. But with regards to your operation, I mean, I realize that there are some specific industry efficiencies and working capital that you are operating the market. I mean, you live a little far off from the port. So I imagine that plays out into the carry. But I mean, if you would choose to, we could follow up later.

Okay. Good question on the second part. I want to ask Renato to answer your question, and then if I have something to add, I'll do it. Renato, can you answer the second part of the question, please?

Today, the equivalent for hydros in Mato Grosso do Sul is $0.15 per pound. And then on hydros, it's close to $0.16 per pound, considering all the details of our operation.

Okay. Regarding the first part of your question, first, regarding this mill that Odebrecht has near our mill, this two mills Odebrecht has near our mills. Of course, these are types of discussions we've been always having with the company and our neighbors and so we have a very close relationship regarding that, that they have a much bigger issue that they want to solve as a whole. They don't want to sell specific assets, and we've never heard from them that they would be willing to sell a specific asset. So depending on what happens there, we could be part of the solution or not. So that's always open. And if it is accretive and makes sense for us, we would explore something that is accretive for us. Do we have a balance sheet for something like that or not? Of course, depending on relative values, we think that our balance sheet is very well structured. The length of the debt is in an average of eight years. Our cash generation is improving every year. And according to our five-year plan, we will be very well positioned in three, four years from now regarding this cash generation. So we think that we do have room for some activity on these very specific M&A opportunities that, of course, always have to be accretive to our current shareholders. So that has been our approach in the analysis, and we continue to be there. So that's basically for that specific case and more globally also. João Soares: Okay. Mariano, just to try to understand a little bit more. Post-acquisition of SanCor, what - do you have any targets of leverage that you have on your mind at the end of the year? At the end of 2019?

We've been always talking to the market that we feel comfortable on around these 2x net debt-to-EBITDA margin - net debt-to-EBITDA ratio. That's something where we feel comfortable, and that's the place where we want to be. Of course, if there is one very specific transaction on the M&A side that is really accretive, we can go higher from - for a period but where we could have a very clear plan to go back to these 2x net debt-EBITDA ratio. That has always been our target and continues to be the target. These, as I mentioned, having eight years of average life allows us to potentially increase on a very short period of time.

Okay. This concludes the question-and-answer session. At this time, I would like to thank you. This concludes today's presentation. You may disconnect your line, and have a nice day.