Adecoagro S.A. Q4 FY2021 Earnings Call

Good morning, everyone, and thank you for your patience. We are pleased to welcome you to Adecoagro’s Fourth Quarter 2021 Results Conference Call. Joining us today are Mr. Mariano Bosch, the CEO, and Mr. Charlie Boero Hughes, CFO. This event is being recorded, and all participants will remain in listen-only mode during the presentation. Following the company’s remarks, we will have a question-and-answer session, with further instructions provided at that time. Before we begin, I would like to point out that forward-looking statements are based on the beliefs and assumptions of Adecoagro’s management and on information currently available to the company. These statements involve risks, uncertainties, and assumptions related to future events and depend on circumstances that may or may not happen. Investors should be aware that general economic conditions, industry conditions, and various operating factors could impact Adecoagro’s future results and cause those results to differ significantly from the forward-looking statements made. Now, I’ll hand the conference over to Mr. Mariano Bosch, CEO. Mr. Bosch, you may proceed.

Good morning, and thank you for joining Adecoagro’s 2021 fourth quarter results conference. Once again, in 2021, the company has delivered strong operational and financial results, as you may have seen in our report. In numbers, we made record sales in excess of $1 billion, almost $440 million in adjusted EBITDA, and generated over $150 million in adjusted free cash flow from operations. Also, as anticipated throughout the year, we distributed part of the research generated back in 2020 to our shareholders via our share buyback program. During 2021, we repurchased 6.2 million shares, more than 5% of the equity of the company. In 2022, as part of our distribution policy, we will distribute $35 million in dividends, and continue repurchasing shares under our buyback program. Now, I would like to give you some highlights on the results of the different business segments. In our farming business, during 2021 we produced over 1 million tons of grains that we conditioned and shipped to different customers across the world. In our dairy operation, we reached a record high production of half a million liters of raw milk per day, that we process in our own facilities to produce high quality value-added products, which are demanded both in the domestic and export markets. In our sugar, ethanol and energy business, we achieved crushing volumes in line with the previous year. The high degree of flexibility we have in our mills to produce the product with the highest marginal contribution, and the strategic decision to maintain our hedging level flow, allowed us to maximize returns. Our sustainable production model includes recycling of byproducts like the concentration of vinasse that is transformed into fertilizer, replacing approximately 35% of our needs. This had an important impact in 2021 to mitigate the overall increase in production costs. And we expect that such benefit will be much more relevant during 2022, where we are already seeing a lack of potash fertilizers in Brazil. In this sense, our sustainable production model will provide for more than 95% of our potash requirements every year. We are strongly committed to improving the efficiency and sustainability of our operations. As you may remember, two years ago, Adecoagro became the first company to commercialize carbon credits under the RenovaBio program. And this year, we became the first company to be certified to issue natural gas certificates. We are proud of the work on this front and of being able to monetize our sustainable production practices. In the case of the RenovaBio program, we will produce 1 million CBios, which under the current price of $20 per CBio, will generate an additional result of $20 million. Environment, social, and governance awareness have always been part of our DNA. During 2021, we formally created an ESG committee that will focus on the development of all these aspects as part of the company's overall strategy. With regard to the current market outlook, we are in an excellent position to benefit from the higher prices of all the products that we produce. Our harvest season is underway, and the development of our crops are looking well. At the same time, more than 70% of this year’s production remains unhedged, and 100% of the inputs have been purchased and applied. In addition, in view of a potential scarcity of inputs, we have secured more than 50% of our needs for next season. As part of our strategy to become more efficient and enhance our rice operation, we encountered a very attractive opportunity to enter into the Uruguayan rice production, a country that is a historical reference in the production of high-quality rice. We signed an agreement to purchase the rice operations of Viterra. The transaction is expected to generate IRRs above 30% and over a $10 million contribution to our adjusted EBITDA. To conclude, I want to express gratitude to all our employees, contractors, and stakeholders for their hard work and commitment. I am confident in the team we have and the company we built, which has proven great resiliency and capacity to generate returns. Now I will let Charlie walk you through the numbers of the year.

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 tables, rains in our cluster during the fourth quarter of 2021, were 4.3% lower than during the same period of last year, and 15.6% below the 10-year average. After a very humid month of October, starting in November, rains in our region were lower than the average for this time of the year. It is worth pointing out that the March rains have returned to average levels, favoring the recovery of our sugarcane plantation. As we had anticipated here, diverse weather conditions that impacted Brazil's main productive areas throughout the year, caused a reduction in sugarcane availability towards year-end, resulting in an early start of the harvest season for all players in Brazil’s sugar and ethanol industry. Thus, expectations for the 2021 and ‘22 season point to a total sugarcane production of $525 million compared to the $608 million tons in the previous harvest year. Evidently, the reduction in supply generated a positive impact in the prices of sugar and ethanol, which we were able to capture thanks to our production flexibility and through our hedging strategy. Before turning to the following slide, I would like to briefly comment on our expectation going forward. Although current weather conditions in our cluster are good, we foresee below average agricultural productivity indicators during the first semester of the year, given the lagging impact of 2021’s adverse weather. Nevertheless, our recovering productivity towards the second half, along with strong prices, should continue to drive solid results. We are in a good position to keep on capturing the increasing prices, as 76% of our expected sugar production, and 100% of ethanol production relating to the ‘22 and ‘23 campaign, remain unhedged. Now, let's continue with Slide 5, where I would like to discuss our sugarcane crushing strategy. During the last quarter of 2021, our crushing volume decreased by 50.4% year-over-year due to both weaker agricultural productivity indicators and lower sugarcane availability. The latter was explained by the fact that during the third quarter of 2021, we accelerated harvesting activities, as anticipating area was critical to minimize the impact of the frost in our sugarcane plantation. Therefore, despite having a continuous harvest model in place, by the beginning of December 2021, we entered into the harvest period. We expect to resume operations in March 2022, making this a shortened harvest period compared to other players. On an annual basis, crushing volume reached 10.9 million tons, marking a slight decrease of 1.5% compared to 2020, even though agricultural productivity indicators presented a decrease of approximately 15%. Despite the challenges presented by the weather during 2021, to mitigate the damage, we accelerated our harvesting pace, anticipated the purchase of five two-line harvesters and three one-line harvesters, and were able to enter into 15.5% more area thanks to our ongoing strategy of expanding our sugarcane plantation. Please jump to Page 6, where I would like to walk you through our agricultural productivity. During the fourth quarter of 2021, yields were down 20.4% compared to the same period last year, reaching 65 tons per hectare. Moreover, TRS per ton decreased 12.2% year-over-year to 120 kilograms per ton. The combined effect in yields and TRS content resulted in a TRS production per hectare of 7.9 tons, marking a 30.1% reduction year-over-year. The lower-than-expected agricultural productivity indicators were fully explained by the adverse weather conditions, as most of the harvested area came below optimal growth stage. Looking at the full year, the year-over-year reduction of 13.3% in sugarcane yields and 15.7% in TRS per hectare is fully explained by both the third and fourth quarter dynamics. Nevertheless, the decreasing agriculture productivity indicators were almost fully offset by a 15.5% increase in harvested area, as mentioned before. Let's move ahead to Slide 7, where I would like to discuss our production mix. Both hydrous and anhydrous ethanol traded at an average price of 20.2 and 22.20 cents per pound sugar equivalent during the fourth quarter, marking a 3.8% and 14% premium to sugar, respectively. It is worth highlighting that we had the flexibility to increase ethanol production, the product that was offering a premium, as we remained at the low end of our sugar hedge throughout 2021, thus had low volumes committed. As a result, we diverted 93% of the TRS to ethanol to profit from higher relative prices during the fourth quarter. Out of our total ethanol production, 64% was anhydrous ethanol, compared to 40% during the same period of last year. This was possibly thanks to the recent incorporation of our molecular sieve in Ivinhema, which increased our dehydration capacity by 50%. Nevertheless, total production of both ethanol and sugar was lower compared to the fourth quarter of 2020, due to lower crushing, even though this was more than offset by higher prices. The production mix for the full year favored ethanol, to which we diverted 62% of TRS compared to 56% the previous year. Thus, volumes produced for sugar decreased 15.5% on a year-over-year basis, whereas ethanol volumes increased by 6.5% compared to 2020. Anhydrous ethanol during the year amounted to 45% of total ethanol production, compared to 37% during the same period of last year. In 2021, we maximized sugar production during the first quarter to benefit from higher relative prices, and switched to ethanol during the rest of the year. The opposite was observed in 2020 when we maximized ethanol during the first quarter, then switched to sugar as ethanol prices plummeted in light of the pandemic. Went back to maximizing ethanol in the third quarter and then returned to sugar maximization in the fourth quarter. This high degree of flexibility constitutes one of our most important competitive advantages since it allows us to make a more efficient use of our fixed assets and profit from higher relative prices. In 2021, ethanol accounted for 62.2% of total adjusted EBITDA generation in the sugar, ethanol, and energy business, considering other operating income, while sugar accounted for 29.8%. Please turn to Slide 8. I would like to comment on our energy production strategy. As you know, Brazil’s energy matrix is heavily reliant on hydroelectric energy. Due to the prolonged period of dry weather in the center-south region of Brazil, the average level of water in reservoirs for 2021 ended 33.3% lower compared to last year. Thus, average spot prices increased from 117 BRL per megawatt hour in 2020, to 220 BRL per megawatt hour in 2021. To profit from this situation, we increased our energy production by owning bagasse, both owned as well as purchased from third parties, wood chips purchased from third parties, and sugarcane straw collected from the field. Our higher energy production enabled us to participate in high margin operations as well, as we'll see next. As a result, exported energy totaled 731,000 megawatt hours, marking a 1.8% increase compared to 2020, whereas our cogeneration efficiency ratio was 3.3% higher. Let's please turn to Slide 9 where I would like to discuss annual sales. As you can see on the right chart, net ethanol sales from the full year amounted to $172 million, marking a 50.4% increase year-over-year. This was mostly explained by a 46.1% increase in average selling prices, despite the 3.3% drop in ethanol volumes compared to 2020. Looking at the fourth quarter, ethanol net sales increased 18.2% on a year-over-year basis to $80 million, driven by a 76.4% increase in average selling prices measured in US dollars, mainly led by anhydrous ethanol. This was partially offset by a 33% year-over-year decrease in ethanol selling volumes due to lower crushing, which resulted in lower ethanol production despite full maximization, combined with a 55.6% increase in our inventory levels to benefit from higher expected prices. A brief comment on CBios. Due to the efficiency and sustainability in our operations ranked among the highest in the industry, we have the right to issue carbon credits every time we sell ethanol. During 2021, we sold 503,500 CBios under the RenovaBio program, at an average price of 41.2 BRL per CBio, approximately $7 per CBio. In the case of energy, net sales amounted to $43 million, 17.3% higher compared to 2020. This was fully attributable to an 18.5% increase in average prices measured in US dollars, standing at $46 per megawatt hour. Driven by the low levels of water in the reservoirs during most of the year, energy spot prices increased, especially during the third quarter of 2021. And by increasing our energy production, we were able to capture the upside. The Brazilian government program called Portaria 17, through which companies that generated more energy than they did in the previous year, could make a price offer. This enabled us to sell 15,321 megawatt hours at an average price of 1,659 BRL per megawatt hour, approximately $300 per megawatt hour. Lastly, net sales of sugar during the full year reached $207 million, 23.1% higher year-over-year. Positive results were driven by a 46.8% increase in average selling prices measured in US dollars, which stood at 17.40 cents per pound. Higher average selling prices were partially offset by a 16.2% reduction in selling volumes explained by lower sugar production on account of full ethanol maximization, along with increasing inventory levels in line with our commercial strategy to carry over stock in order to profit from higher expected prices. On a quarterly basis, sugar sales decreased 10.7% to $64 million on lower selling volumes due to the same dynamics of the full year. Let's move to Slide 10, where I would like to explain our total cost of production. Total cost of production describes, on a cash basis, how much it costs us to produce one pound of sugar and ethanol in sugar equivalent. Maintenance CapEx is included in the calculation, since it is a recurring investment necessary to maintain the productivity of the sugarcane plantation. As we are calculating sugar and ethanol cost, energy is deemed a byproduct and thus deducted from total cost. As for the tax recovery line, it includes the ICMS tax incentive that the State of Mato Grosso do Sul granted us until 2032. As shown in the table, total cash costs on a per unit basis in 2021, increased by 33.4% compared to the previous year, reaching 10.50 cents per pound of sugar equivalent. Higher cost per unit is explained by a 44.8% increase in total production costs due to a 15.5% increase in harvested area, an increase in agricultural partnership costs driven by a rise in Consecana prices, higher costs of idle capacity due to the early start of the interharvest season, and lower dilution of fixed costs on lower productivity. Moreover, there was an increase of 25.6% in maintenance costs related to higher replanting costs as a consequence of the frost and the anticipation of the purchase of equipment to accelerate harvesting activities. On the other hand, these negative effects were partially offset by a 36.4% higher tax recovery on account of higher ethanol sales, and a 32.8% higher energy cogeneration. It's important to point out that since we own 95% of the cane we crush, every time Consecana’s prices increase, our agricultural margin also increases. Regarding the hike in fertilizer costs, our exposure to potash fertilizers is marginal, as we replaced it with concentrated vinasse, generated in our own operations. Finally, to conclude with the sugar, ethanol and energy business, please turn to Slide 11, where I would like to discuss financial performance. During the quarter, adjusted EBITDA amounted to $65 million, marking a 19.8% decrease compared to the same period last year. The main driver behind the EBITDA decline was the increasing costs, mostly driven by fertilizers, fuels, and lubricants, in addition to high costs associated with idle capacity in our mills due to low sugarcane availability during the quarter. However, adjusted EBITDA for the full year marked a new record at $335 million, 31.9% higher than during the same period last year. Higher results were explained by a 38.7% increase in net sales, coupled with a $38.3 million gain derived from the mark-to-market of our harvested cane due to higher Consecana prices. This was partially offset by an increasing cost combined with a loss in our commodity hedge position, and a $7.3 million increase in selling expenses. I would now like to move on to the farming business. Please direct your attention to Slide 13. We ended our 2021 harvest season with over $1 million tons of agricultural products harvested and transported across 10 provinces in Argentina and in Uruguay. For this new campaign that we are currently engaging, we have increased our total planted area by 8.1% compared to the previous harvest season, to over 280,000 hectares. The increase is driven by a greater leased area. In most of our regions, abundant rainfalls have been registered, favoring planting activities and crop development. However, other regions experienced dry weather throughout December until mid-January, which, coupled with high temperatures, caused a minor delay in the completion of planting activities across a few hectares. Since then, precipitations have increased. Nevertheless, we are following closely the water requirements as we are going through a critical phase in the development of most of the crops. Let's move to Page 14, where I would like to work you through the financial performance of our farming and land transformation businesses. Adjusted EBITDA in the farming and land transformation business amounted to $124 million for the full year, marking a 15.8% year-over-year increase. The increase is mostly explained by an overperformance of our farming business. In the case of land reformation, we have not conducted any farm sale throughout the year. Starting with our crop business, adjusted EBITDA for the full year amounted to $52 million, marking a 48.9% year-over-year increase. The main drivers towards this growth were a $59 million increase in gross sales, a $25 million year-over-year gain related to the mark-to-market of our biological assets, giving an increase in hectares, yield, and prices, and a $9 million year-over-year gain driven by our commodity hedge position. This was partially offset by an increase in costs due to inflation in US dollar terms. In our rice business, adjusted EBITDA reached $41 million, a 19.5% increase compared to 2020. The increase is mainly explained by an increase in sales led by higher yields, which reached a record high of 7.8 tons per hectare, along with an increasing area and prices, and an $18 million year-over-year gain in the value of our biological assets and agricultural produce. Positive results were partially offset by greater costs related to inflation in US dollar terms. Moving on to the dairy business, adjusted EBITDA marked a year-over-year increase of 26.2% to $23 million for the full year. Higher results were explained by an increase in both volumes and average prices, and our continuous focus on achieving efficiencies in our vertically integrated operations, together with increasing our productivity levels in every stage of the value chain. On the other hand, results were partially offset by higher costs due to inflation in US dollar terms. Although no farm sales were conducted during 2021, the land transformation business reported an adjusted EBITDA of $7 million. The positive result reflects the mark-to-market of an account receivable corresponding to the latest sale of farms in Brazil, which tracks the evolution of soybean prices. Let's now turn to Page 16, which shows the evolution of Adecoagro’s consolidated operation and financial performance. During the year, our operations delivered a new record in gross sales, which exceeded $1 billion, and in adjusted EBITDA which amounted to $437 million, marking a 27.8% increase compared to the previous year. At the same time, 2021 marked the last year of our five-year plan in which we invested and expanded our business lines in order to integrate vertically our operations, improve efficiencies, and enhance our competitive advantages. Thus, our operations delivered $152 million of adjusted free cash flow from operations during 2021, compared to the $109 million generated in the prior year. This amounts to a minimum distribution of $61 million to be paid during 2022 through dividends and buyback. $35 million will be paid via dividend in two installments of $17.5 million each in May and November. The balance will be distributed via share repurchase under our existing program, as the case may be. Year-to-date, we have already repurchased $10.6 million in shares. From an operational point of view, we are continuously increasing our planted area each year, while enhancing our efficiencies at the farm and industrial level. Thus, our production of crops and rice increased by 8.2% year-over-year, whereas a greater area planted in the sugar, ethanol, and energy business allowed us to mitigate the impact related to frost and dry weather during 2021 at the industry level. To conclude, please turn to Slide 17, to take a look at our net debt position. As of December 31, of 2021, net debt amounted to $618 million, marking a $107 million or 14.8% decrease compared to the previous quarter. Lower debt levels from our farming business, along with a 5.3% quarter-over-quarter increase in our cash position, were the main drivers towards debt reduction. Cash generation was driven by greater collections throughout the quarter, whereas positive free cash flow allowed us to pay down debt at the farming level. On the other hand, net debt decreased by 2.7% on a year-over-year basis, due to the higher cash, which enabled us to pay down debt, as well as distribute it to shareholders. However, cash and equivalents dropped 40.6% compared to the previous year, mostly explained by an increase in marketable inventories of $60 million in order to benefit from higher expected prices. It’s worth to mention that our cash position for the fourth quarter of 2020 reflects the short-term working capital lines we raised throughout the year in light of the COVID-19 pandemic as part of our risk management program. We believe that our balance sheet is in a healthy position, not only based on the adequate overall debt levels, but also on the terms of our indebtedness, both of which are long term. Our net debt ratio went down to 1.4 times in this quarter, compared to the 1.6 times and 1.9 times seen in the previous quarter and last year, respectively. At the same time, our liquidity ratio, which is calculated as cash and equivalents plus marketable inventory, divided by short-term debt, reached three times, 50.3% above last quarter’s ratio of two times and 14.6% higher than the same period of last year, which reached 2.6 times. This clearly shows the full capacity of the company to replace short term debt with cash balance without raising external capital. Thank you very much for your time. We are now open to questions.

Today's first question comes from Isabella Simonato with Bank of America. Please go ahead.

Thank you. Good morning, everyone. Good morning, Mariano, Charlie. Thank you for the call. I have two questions, first of all on sugar and ethanol, more on the cost side. We saw a big increase last year, which I understand has a combination of various factors, including the area extension, right? Could you give us some color, what do you expect in terms of area growth in the 2022, 2023 season? And on your mill unit phases, right, how much cost should increase in the next crop season as well? Just to understand how this crop space will continue moving forward. And the second question on the farming side, I think you provided some color, right, about the weather impacts in La Niña. And at this point, the planting is pretty much concluded and harvesting is beginning. Is it possible to quantify any potential downside in terms of yields, or can we assume something similar this season compared to the last one? Thank you.

Okay. Thank you, Isabella, for your question. I’m going to ask Renato to give you more color on the crop on the sugar and ethanol and what our plans are regarding area growth. So, Renato, can you provide more color there?

Okay. Thank you, Isabella for the question. As was mentioned by Charlie and Mariano, we will have a very challenging first semester in terms of sugarcane yields due to the frost last year, but our sugarcane is looking very well for next year. We don't have any weed problems or pests. The sugarcane growth is very good. The nutrition of the sugarcane is excellent. We have planted a lot of sugarcane that will be harvested in the second semester. So, we expect a lot of sugarcane could be harvested in the second semester. Thus, we think that it is going to be more than sufficient to compensate this lower productivity in the first semester. And we are likely to see crushing being higher this year compared to last year. Regarding the increase in the area, we are going to expand by possibly 9,000 hectares, which was the expansion planting that we did last year. But we don't think that we will have a cost increase in those areas because we expect that our yield this year is going to be higher than last year. Overall, we think that the overview of our sugarcane situation for the second semester will likely bridge the gap that we had in the first semester because we are starting the crushing season in early March. We have already started in Angelica, and we will start in Ivinhema in a few days.

Got it. Just to make sure I understood correctly. So, the cost per unit, right, that we saw grow 30%, if I'm not mistaken last season, should be largely flat in 2022, ‘23, even considering the area expansion. Is that it?

Yes, that's exactly it because we are going to have higher yields this year compared to last year. And we don't expect the same amount of increases in agriculture inputs that we had last year. I also think, as Mariano mentioned before, we had some advantages in terms of costs. I think the concentrated vinasse, which is our bio-fertilizer, which we have a plant in Ivinhema and Angelica, that is capable of producing all the potash fertilizer that we consume, represents a saving of approximately 1,000 AIs per hectare. So, it accounts for a significant saving in the fertilizer line. Additionally, we have other factors that will help us like the increase in our bio factory in Angelica that will produce 26 million seeds of MPB, which is enough to plant between 16,000 and 20,000 hectares at a much lower cost than traditional planting. So, we are confident that we will not see an increase in costs as we had last year.

Thank you, Renato. Isabella, to address the second part of your question regarding the weather in Argentina and Uruguay, and how the crops are shaping up, I would say that we are in the middle of the season. So, we have already completed 100% of planting, and we have done so under very good conditions. All fertilizers, chemicals, and everything has been applied on time. Therefore, I would say the crops are looking very well. Of course, there are different climatic situations throughout our very diversified crop landscape. Within this diversification, I would say that in general, we expect to be within the average of previous years. So, we are continuing to monitor the situation. On average, I believe that rice may come in somewhat lower than what happened last year, while corn and soybean may be a bit higher than last year. Thus, on the whole, I would say we are anticipating an average outcome as we begin harvesting.

That's very clear. Thank you very much.

Thank you. And our next question today comes from Thiago Duarte with BTG Pactual. Please go ahead.

Thank you. Good morning, everybody. Mariano, Charlie, Renato. Yes, I have two questions on our side here. The first one is a follow-up on Renato regarding the sugar and ethanol sugarcane yields. Renato, can you quantitate a little bit more the yield improvement that you expect for the year? I understand that you still expect below-average yields for the first half of 2022 due to the lingering effects from last year's drought. We have an improvement in the second half of the year. But can you give us a sense of how much of an improvement if you consider the balance of the year? We are hearing improvements from 5% to 10% in yields across the center-south of Brazil. I would just like to know where you expect to fit into that range. It would be nice to have. The second question is also about farming, particularly in Argentina. I wanted to hear your thoughts on the news this week regarding bans on exports of soybean meal and oil. I would also like to know whether you think this could potentially lead to higher export taxes or redefinitions on the soybean for the coming crop. It would be helpful to hear your thoughts on this as well. Thank you.

Okay. Thank you, Thiago, for your questions. Renato, do you want to answer the first question?

Hi, Thiago. Thank you for your question. I think we are expecting increases in yields between 5% and 10%. I believe that all the efficiencies we have in the sugarcane supply, along with our mills, will be sufficient to crush more sugarcane in a shorter period of time. Overall, we're anticipating more sugarcane this year than last year, but regarding the yields, we align with the rest of the center-south regions.

Thank you, Renato. Regarding your second question on Argentina, concerning export taxes and the potential increase thereof, this is a discussion that arises due to the significant rise in commodity prices. However, the government can only raise the export tax by 3% without going through Congress. Thus, the potential increase is only at 3%. What we heard from government officials yesterday is that they are not intending to utilize this 3% increase that they could implement. So, while there is a possibility, I'm personally inclined to think that it will not occur across the three products.

That's very clear. Thank you, Mariano. Thank you, Renato.

And ladies and gentlemen, our next question today comes from Lucas Ferreira with JPMorgan. Please go ahead.

Hi. Good morning, everybody. So, my first question, Charlie, is on the distribution policy. You are committing to a 40% payout, but my question is simple: when do you anticipate a further room in the balance sheet, given the free cash flow generation you should be generating in 2022? It seems like you should have a strong year ahead. When can you analyze if there is potential for increasing those amounts over the year? Can you also remind us if there could be any extraordinary payments throughout this year? That’s my first question. Secondly, I haven't asked you much about this one before, but on rice, do you think that the overall agricultural prices, especially wheat, soybeans, and corn, could also push rice prices up? I think we haven't seen such a significant move in the prices, but if you can provide an update on that, I would appreciate it. Should we expect rice prices to benefit from an environment of higher overall costs and grain prices? Thank you.

Thank you, Lucas, for your questions. Regarding our distribution policy, as you mentioned, it is clear that it is at least 40%. We have this capital allocation strategy where we are very comfortable now that we have these sustainable cash flows, and that we are generating enough free cash from operations to always comply with this policy, as well as to continue pursuing some growth opportunities that synergize with what we are currently having. During last year, we distributed 50% of the net cash from operations. This year, we are discussing at least 40%. Naturally, this could potentially be higher, but that will depend on various opportunities, the different prices of shares, and what unfolds throughout the year. So, our commitment here is very clear and will be maintained. That has been stated since we announced our five-year plan, back in 2017. In 2021, we distributed more than 5% of the equity of the company through our share buyback program. This year, we are confident that we will continue on the same track and possibly enhance it. Then, regarding the second part of your question on rice and potential price increases, generally, rice and other commodities such as peanuts and sunflower tend to react slower than the more liquid products like corn and wheat that you've highlighted. Currently, we are seeing an uptick in rice prices as we speak. At the beginning of the year, rice prices had not increased with the hikes in wheat, but now rice is showing increases. Therefore, we would expect rice prices to continue to rise alongside increasing prices of other commodities.

Great. Thank you very much.

Thank you. And ladies and gentlemen, this concludes the question-and-answer session. At this time, I'd like to turn the floor back to Mr. Bosch for closing remarks.

Thank you very much, everyone, for your participation. See you in our next calls.

And ladies and gentlemen, this concludes today's presentation. You may disconnect your line at this time, and have a wonderful day.