Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Adecoagro's Fourth Quarter 2020 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 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 fourth quarter results conference. 2020 was an atypical year due to the global impact of the COVID-19. Since the pandemic was declared, we immediately prepared safety measures to mitigate the eventual risk of being affected by the disease and prevent an uncontrolled spread of the virus throughout our operations. We provided a safe environment for our employees and contractors, implementing safety measures and developing protocols that allowed us to maintain our facilities 100% operational. It is because of this that we achieved very good operational and financial results even in such challenging times. And once again, we prove that being low-cost producers and focusing on efficiencies definitively pays off. In our Sugar, Ethanol and Energy business, the impact of the pandemic caused a decrease in the prices and demand for ethanol, starting in the second quarter of 2020. In light of these factors, we rapidly shifted our strategy to maximize sugar production. We slowed down our crushing pace, implemented a cost reduction plan and revised our CapEx plan. As signs of a partial recovery started to emerge, we accelerated our crushing pace and finally concluded the year with 11.1 million tons crushed, 0.3 million tons higher than during 2019. A very relevant aspect of our production system is the high flexibility. We have to switch from producing sugar to ethanol and vice versa. This allowed us to triple the amount of sugar we produced compared to 2019 and to increase our relative production of anhydrous ethanol to capture the premium prices. These were decisions we took on a weekly basis given such a changing and unstable environment. Having the ability to change directions in such a short period of time constitutes a very important competitive advantage. As you know, having a sustainable…

Thank you, Mariano. Good morning, everyone. Let's start on Page 4 with a brief analysis on the rains in Mato Grosso do Sul. As seen on the top chart, rains in our cluster during the fourth quarter of 2020 were 10.7% below the 10-year average but 12.8% higher compared to the fourth quarter of 2019. Rainfalls were distributed throughout the quarter and was especially concentrated towards the end of the December, resulting in interruptions in our crushing activities, as can be seen in the following slide. I would like to briefly comment on the weather in the Central South region of Brazil. The region, which accounts for approximately 85% of Brazil's sugarcane production, experienced dry weather for a prolonged period of time last year. This forced mills to shut down operations earlier than usual as they didn't have enough cane to crush. For the same reason, the beginning of this year's harvest season will probably be delayed, resulting in a longer than anticipated in the harvest period. It is worth highlighting that we will continue to crush cane year-round and produce both sugar and ethanol during the interharvest period. This is so because we are based in a region that has a different weather dynamic and because we operate under a continuous harvesting model. Let's continue with Slide 5, where I would like to discuss our sugarcane crushing. During the fourth quarter of 2020, a total of 2.5 million tons of sugarcane were crushed, 40.1% or 700,000 tons higher than the same period of last year despite the reduction in effective milling days. Indeed, in an attempt to make up for the slowdown in crushing activities during the second quarter and in order to profit from high prices, we decided to accelerate milling operations. This was evidenced by the astonishing…

[Operator Instructions] Today's first question comes from Pedro Soares with BTG Pactual.

I have a couple of questions here on the Sugar and Ethanol business and another one regarding farmland. First, now with the end of the investment cycle that you guys delivered in the past years, what should we expect for the crushing levels for the year, where actually it was [ down 21 ] [indiscernible] that's [ down 22 ] crops a year? It would be helpful to have a color on that if you could expect it to increase in the next harvest. And also in the -- regarding the organic sugar market, what's the size of this market for you guys? And what else -- what should we expect as well in terms of how much you could capture in terms of value for -- in the organic segment? It would be nice also to hear. The last one, regarding farmland sales. Now with this recent spike, especially in your soft commodities, could we see or expect you to sell more land and for this to accelerate? Like in previous years that this happened also when inflation picked up in Argentina, this was the case. So if you could also touch base a little bit on this, it would be helpful to us.

Pedro, thank you very much for your question. On sugar and ethanol space, I will ask Renato to answer your question and then I can complement. And then I will go through the -- your farmland question. Renato, do you want to answer Pedro's question?

Okay. Thank you, Pedro. So we start with your organic question. We have been producing organic sugar in UMA for 4 years. This year is the first year that we have exported organic sugar because we need 3 years of production to start selling to European and U.S. market. We think that UMA is the right location to do these projects because of the location of UMA, which is very close to the market and also to the [indiscernible] of exports. And also the weather in UMA is very well defined. So we think the conditions to produce organic sugar there is very good. The scale of our projects is about 3,000 hectares, which we will be able to produce 14,000 tons of sugar, organic sugar. We don't think that we can grow more than that because in this particular area, we have been able to use all the byproducts that we produce, vinasse, filter cake, fly ash. So if you grow further, we have to acquire our organic fertilizer from other areas, which would make the sugar cane -- the cost to produce sugarcane very high. So we should -- that's the site that we think is appropriate for our model. The size of the market, the global market is about 400,000 tons of sugar. And so in fact, it's a small market, it's a niche. And the growth of this market is about 10% per year. And regarding the other question about sugar and ethanol, I couldn't understand very well. If you could repeat it, I appreciate.

Sure. It's actually regarding the crushing levels expected for this next harvest year. Should we expect you guys to crush more cane?

Okay. So for the coming year -- for the current year, sorry, we expect to crush around 10% more than we did last year. As Charlie mentioned before, the weather in Mato Grosso do Sul is very good in the second semester. We have very good range in key points of last year and this year. So for example, in general, we have more than 400 millimeters of rain, which was very good. And that's why we are crushing a lot in the first quarter, taking advantage of the prices of both sugar and ethanol that are very high. We expect to reach the 12.5 million tons of sugarcane, which is our goal in our 5-year plan in 2023. I think the good news is that we have already leased all the land that we need. So it's just a matter of planting those lands and to be ready to crush that.

Thank you, Renato. Then Pedro, to answer your question about the farmland, I would say that since September of last year or since the end of last year, there was an increase in the demand of land in Brazil, Uruguay and Argentina. So there was more demand also for our own farmland. And as you know and as we've been explaining many times, selling and buying land is an illiquid market, where we find the right buyer and it takes time to find the right buyer for our already transformed farms. So that's what we did there back in December. We do expect to continue to do it within the same level. But -- that would be the general answer to your question.

Our next question today comes from Lucas Ferreira with JPMorgan.

Two questions regarding capital allocation. The first one is a quite simple one. If you can remind us the CapEx budget for this year, if that was revised up or not because of the outlook on prices. Second question is since you now finished the growth -- your growth cycle, probably you'll be paying more dividends and doing buybacks. But I wanted to think about more strategically thinking. Let's say, a couple of years from now, what are the growth opportunities you foresee for the company? Would you still be investing in Argentina? Do you see opportunities in acquisitions or expansion CapEx in Argentina? If yes, where exactly in which segment, which market? The same question for Brazil, what are the growth perspectives for the operation in Brazil? Would you consider M&A or organic growth? Can you discuss this with us a little bit more?

Lucas, thank you for your question. I will try to answer first on a broad way. And then we can get into more details. I would try to include all the different parts of your questions. I would like to point out the -- as you mentioned, the cash flow positive that since 2017, that is -- wasn't there anymore. So the important point here is that all the investments that we did are currently generating very attractive returns. And because of this consolidation is that we are generating this free cash flow positive. This marks the beginning of a path where we start to generate cash in a structural way and should result on a significant increase in our cash generation in the upcoming years. In addition, our debt level is structured in the long term and reaching the adequate levels. This means that we will have enough cash for both to distribute results with our shareholders and continue to create value by enhancing our operations. Our first priority is to distribute a relevant portion of this cash with our shareholders. In fact, we have already started to do this via our buyback program. Only during the first month of 2021, we have already purchased close to 1 million shares. And we are also analyzing attractive opportunities both in the farming and in the sugar business, as you were asking specifically. All these opportunities are synergized well with our current operations and have the potential to make them more efficient as a whole operation. And all of these things that we are analyzing offers IRRs above 30%. So that's basically how we are thinking about this capital allocation question that you were asking. And specifically in terms of the CapEx of '21 that you were asking, I would consider that it's in the same lines that what happened in 2020. Because in 2020, when we revised some of the CapEx, as we were mentioning, we delayed some of the 5-year plan CapEx that we had already planned.

If I may, just a quick follow-up. This potential high-return projects you're talking about, are -- what's the size of those? I mean could we expect something like a major, like a significant increase in your CapEx going forward? Or do you see those as more like a marginal -- my point is do you see any large CapEx or big CapEx acuity will impair your dividend payments in the next few years? So that would be my question.

No. The important thing is what I was just mentioning, and I also mentioned in the introduction, is that our priority is to distribute with shareholders. So including that is that we are open for different projects with attractive IRRs. All these projects can include M&A or can include organic growth or can include changing one machine that makes us much more profitable so that a small investment has a specific IRR because of its marginal contribution of 50% or 70%. So those are all the different projects that we can do but always with this idea that we have a priority, that is, distributing with shareholders also. So that's how we are approaching on all this thinking of the capital allocation. So to be more specific, I don't see a huge CapEx coming online. And all these different CapEx also takes time because they imply improving on the operations on the day-to-day, so are all things that cannot be done from one day to another.

And today's next question comes from Rodrigo Almeida with Santander.

Congratulations on the impressive results and the successful implementation of the CapEx plan as well. My first question here is related to the sugar and ethanol business and more specifically to the expansion in harvest scenario. I think Renato already mentioned that you've already leased the area that you need. But I wanted to understand a little bit more on the pace of planting and harvesting on this area through 2023 just so we can understand a little bit better the sugarcane availability year by year. And also, just out of curiosity here, with the higher sugar, soy, corn prices, is there any way that the lease expenses could increase? Or do you have everything very well, say, wrapped up so that these changes in prices do not affect your contracts? And just also out of curiosity, if you were to lease more land right now, do you think you'd have a higher cost than you did before just because of the higher prices you saw throughout the year? And then the second topic here that I wanted to touch a little bit is on the buyback program. As far as I remember, this program was extended into September of last year. But then maybe I missed something. But the program is now -- just wanted to understand until when the program is going to be valid? And what's the size of the program that is active right now? Those are my questions.

I'm going to start from the end of your question, Rodrigo. Thank you for them. On the buyback program, the buyback program is 5% what has been approved by the Board and is renewed every year. And if we reach that level, it can also be opened by the Board. So this is a Board decision that is -- always can be taken. Today, what is on place is 5% product. Then going to your question about the costs, the different costs and leasing the land and with this increase in commodity prices. Yes, it's clear. There is an increase in costs. But the increase in the revenues because of this increase in prices is higher than the increase of costs. So the margins improve even with this increase in costs. Of course, we are working with that. We have several part of the gain that has been leased for 2 years for 2 cycles. That means 14 years. So that is not going to change. But there is a portion of the leases that is due this year, that when we renew those leases, there are some small increases. And that's part of the negotiation that we continue to do every day and that's part of what we do. But if we take your question, we see what you are seeing and it's part of our reality. But at the end, the margins, of course, are better with these higher prices. And finally, on the expansion of the harvesting area, I couldn't understand exactly well. Specifically on the Farming and Land Transformation, there is an increase of 10%, where we're increasing more profitable growth that, in this case, are sunflower, peanuts and rice. But on the sugarcane question, I couldn't understand exactly what was your question. We have already leased all the land to continue to finalize the 13.2 million tons of total crushing that we will reach in 2022 that Renato was talking about. But I couldn't understand exactly what was that part of your question.

Yes. Look, I just wanted to understand sort of the pace of the planting and harvesting, how much we can expect in more sugarcane availability in 2021, '22 and then we reach the full capacity. Just -- I just want to understand the year-by-year pace.

Renato, do you want to answer more specifically? Of course, always, it depends on the climate of every year. And as you've seen, that is changing. But we have our own projection that is between 5% to 10% growth every year.

Yes. We still need to plant 12,000 hectares of the expansion planting. And we think that we will increase this year 10% compared to last year, then another 10% compared to this year. And then finally, in 2023, we will reach the 12.5 million tons in the cluster. And we have to add the 1.2 million tons of UMA to get the total crushing capacity.

And our next question today comes from Santhosh Seshadri with HSBC.

Remember, in one of your presentation a couple of years ago, you mentioned that your EBITDA could reach well about USD 400 million by the end of your 5-year CapEx plan. I know that's a bit dated presentation. But I'm just wondering if we were to refresh those estimates to reflect the current commodity price increases, which are obviously much higher than it was at the time of presentation, do you think we'll still be able to generate EBITDA of about $400 million in 2021? Or is there any other factor that is necessary to achieving that number? I'm basically trying to understand the possible scenarios for 2021 earnings and underlying drivers.

Thank you, Santhosh, for your question. And thank you for participating in the call. Of course, we don't give guidance as EBITDA guidance. But you can -- clearly, as you were making your own calculations with our crushing volumes and what we are going to be producing, and subject to all these climatic events that our business has we can reach those levels that you are talking about, the EBITDA levels. But it's something that you can do your own calculations and work with the models. And it's clear that it's something that we cannot [ take pre-COVID ] guidance but it's -- that we could easily reach.

I have another question. So if you look at ethanol prices in Brazil, it has seen a strong rally in February 2021. So assuming this momentum would continue, do you think you will be producing more ethanol instead of sugar for 2021? So if you can give some numbers on the production mix between sugar and ethanol, that will be helpful.

Yes, that's an excellent question. Today, in this exact moment, we are, again, maximizing ethanol. But that's something that we are changing every week. So that's the great competitive advantage that we have as a company. And that's the great flexibility that we have. So every week, we know what is it that we are going to be maximizing. So we've been maximizing sugar for many months. Now that has just changed. And that could change next week or -- that's one of the great advantages of our whole production system, not only the asset but the whole production system. And the other important thing I would like to point out with your question is that we are currently producing ethanol, that in general, nobody is producing ethanol today. But because of our continuous harvest and our model of harvesting all the year round, in this moment, we are taking advantage of all the excellent prices of ethanol.

And my last question is on your yield expectation in your crop business. Since your nearing harvest for most of the crops, can you give some sense on the potential yield impact due to the dry weather in Argentina?

Okay. Good question. For the whole sugarcane operation, we are in an excellent situation in terms of climate. There has been a relatively right period for the Center South region. We are in the Mato Grosso do Sul region. And we are with an excellent sugarcane plantation. That is for the whole sugarcane operation. And then for the total farming in Argentina and Uruguay, there has been a dry period in the last 15 days. And soybean, corn and peanuts are in the middle of its yield definition. I would say that we have already done a portion but we are still subject to climatic events. And this dry period can continue or not. So there is still variability of those 3 crops. But then we have the other crops like rice and sunflower that are important for us today, that are having very good yields in this scenario or in this situation of -- in this climatic situation. And we are in the middle of the harvest of those 2 crops that are yielding pretty well and some way above our projections. So that talks about the amount of different crops that -- how we minimize our risk because of having all these different crops and climatic production regions.

And ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to Mr. Bosch for closing remarks.

Okay. I would like to use this opportunity to reiterate my gratitude to all our employees, contractors and stakeholders for their hard work and commitment during such hectic times. 2020 was a very difficult year, full of challenges that tested the limits of organization and adaptability against an unexpected event. However, our investments, our devotion to efficiency in each process across the different business lines of businesses and our low-cost production model have proven us right one more time. We closed the year with attractive returns in every segment, resulting in strong consolidated figures. But the challenges are not over yet. 2021 is already showing us signs of difficulties that we shall have to overcome. We are confident that we have the right people and strategy to continue generating value for our shareholders and obtaining attractive results. Thank you very much. And see you in our upcoming events.

Thank you. This concludes today's conference. You may now disconnect your lines and have a wonderful day.