Adecoagro SA Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Consolidated adjusted EBITDA for the quarter was $115 million, with year-to-date at $206 million.
• In Brazil, an all-time quarterly crushing record of 4.9 million tons was achieved, and ethanol production increased 40% due to premium command over sugar. Frost-impacted cane harvest completed, expecting improved crushing with normal weather.
• In Argentina and Uruguay, challenging price-cost scenarios pressured results; crops reduced leased area 30% and adjusted crop mix; rice reduced long grain production and increased premium varieties; dairy achieved record cow productivity and processing volumes, prioritizing domestic market.
• Signed an agreement to acquire a 50% stake in Profertil, the largest granular urea producer in South America, valued at ~$600 million, with closing expected by year-end.

Segment Performance

• Sugar, Ethanol and Energy: Third quarter adjusted EBITDA was $120 million, with year-to-date reaching $218 million. In Brazil, the third quarter saw an all-time crushing record of 4.9 million tons, and ethanol production was 40% higher than the previous year. Year-to-date net sales were $433 million, with ethanol sales up 8% due to strategic selling of inventories. Energy sales increased due to higher prices, and carbon credits generated $5 million in revenue.
• Farming: Third quarter adjusted EBITDA was $1 million, with year-to-date at $19 million. The Farming business reduced leased area by approximately 30% and adjusted crop mix. In rice, long grain rice production was reduced, and premium varieties were increased. Dairy business achieved record cow productivity and processing volumes, focusing on the domestic market.

Guidance

• Assuming normal weather, crushing volume is expected to improve, leading to cost dilution.
• CapEx will be reduced, with a focus on organic CapEx with synergies in business segments.
• Expect 5-6% increase in crushing in 2026, with costs projected to reduce 15-20% due to higher volumes, yields, and operational efficiencies.

Risks

• Challenging price-cost scenario in Argentina and Uruguay impacting business results.
• Lower prices and oversupply affecting rice sales.
• Weather conditions impacting crushing volume and productivity.
• Higher costs and mixed prices affecting dairy business performance.

Question and Answer

• Q: Thoughts on 2026 crushing growth, cost advances, and CapEx for 2026?

A: CapEx will be significantly reduced, focusing on organic CapEx with synergies; 2026 crushing is expected to be 5-6% higher, with costs projected to decrease 15-20% due to higher yields, volumes, and operational efficiencies.

• Q: Actions to reduce leverage, rationale for reducing crop area?

A: Revising CapEx and distribution policy; reducing leased area to cut costs, and adjusting rice mix due to a 50% drop in long grain rice prices.

• Q: Profertil acquisition details, financing, dividends?

A: Financing for the acquisition is in place with long-term structured debt; Profertil has a history of high dividends, and accounting for the acquisition will be on an equity method.