Adecoagro SA Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Consolidated adjusted EBITDA for the quarter was $103 million, with an annual total of $444 million.
• In Argentina and Uruguay, rice and dairy operations achieved record results; ongoing harvesting for the 2024-‘25 campaign is underway.
• The sugar, ethanol, and energy business saw a crushing record, sugar production record, and ethanol stocks being cleared; continuous harvest model and sugarcane plantation expansion supported operations.
• In 2024, $102 million was distributed between dividends and share buybacks, with $64 million expected to be distributed in 2025 via a combination of dividends and buybacks.
• ESG initiatives included a women in agribusiness program and a leadership program to develop potential employees.

Segment Performance

• Sugar, Ethanol and Energy Business: Fourth quarter adjusted EBITDA was $105 million, with an annual adjusted EBITDA of $364 million. Total crushing volume in 2024 reached 12.8 million tons (a record), sugar mix was 52.2% with total sugar produced at a new record of 832,000 tons. Ethanol stocks represented 31% of 2024 production.
• Farming Business:
  • Crops: Fourth quarter adjusted EBITDA was negative $3 million, with an annual adjusted EBITDA of $19 million. Excluding farm sales, 2024 adjusted EBITDA for crops was $4 million (vs negative $3 million in 2023), impacted by lower international prices, higher costs, and corn yield issues.
  • Rice: Full-year adjusted EBITDA was $50 million (a new record). Quarterly adjusted EBITDA was negative $1 million due to higher costs and lower carryover stock prices.
  • Dairy: Fourth quarter adjusted EBITDA was $8 million, with an annual record adjusted EBITDA of $34 million driven by higher sales and prices.

Guidance

• Based on $161 million in net cash from operations in 2024, Adecoagro expects to distribute at least $64 million in 2025 via dividends and share buybacks.
• Forecast a slight increase in annual crushing volume in 2025 assuming normal weather conditions.
• Hedged 31% of 2025 sugar production at 20.7 cents per pound, with a strategy to gradually increase hedging if sugar prices move higher than 19 cents per pound.

Risks

• Weather-related challenges affecting crop yields and sugarcane availability.
• Fluctuating international prices for commodities such as sugar, corn, and soy.
• Uncertainty surrounding Tether's proposed acquisition, with legal restrictions limiting further comment on the matter.

Question and Answer

• Q: Potential triggers for sugar price action and spillover impacts on farming/crops. A: Renato discussed the S&D scenario for sugar, noting Brazil's production dependence and smaller upcoming center-south crop; Mariano mentioned benefits from tariffs on South American production of soy, corn, rice, and dairy.
• Q: Clarity on Tether offer timing and impact on management focus. A: Emilio stated the company does not intend to comment further on market speculation regarding Tether's offer, emphasizing focus on normal operations.
• Q: Ethanol parity outlook. A: Renato discussed high ethanol demand, inventory levels, and potential price increase, expecting parity to surpass 70% depending on market dynamics.
• Q: Production cost margins for sugar/ethanol division. A: Renato stated production costs should be similar to last year in real terms, slightly lower in dollar terms, with labor and leasing costs balancing out with decreasing crop protection inputs.
• Q: Production cost and CapEx for expansion. A: Renato discussed planting costs of strategic farms at around BRL13,000 per hectare, with CapEx outlook tied to expansion of sugarcane plantations and expected improvements in planting costs