Earnings Call Transcript
Adecoagro S.A. (AGRO)
Earnings Call Transcript - AGRO Q4 2020
Operator, Operator
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. 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.
Mariano Bosch, CEO
Good morning, and thank you for joining Adecoagro's fourth quarter results conference. 2020 was an atypical year due to the global impact of 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 proved 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 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 premium prices. These were decisions we took on a weekly basis given the 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 production model is part of our DNA. Thanks to this, we obtained one of the highest costs under the RenovaBio program and benefited from an additional cash generation of almost $3 million through the sale of CBios in 2020. We are optimistic about the program's consolidation and we will continue to increase the sustainability of our operations to keep on benefiting from this additional source of income. To conclude on our Sugar and Ethanol business and because of all these things I'm mentioning, we ended up 2020 with a cash cost of $0.079 per pound. That is 13% lower than the previous year. Our adjusted EBITDA during the year was 50% higher year-over-year. This is a clear proof of the consolidation of the 5-year plan investments we made across our crops, rice and dairy businesses, together with our focus on efficiencies. In 2020, we completed the harvest of almost 1 billion tons of rice and grains, transporting our production across 10 provinces and reaching customers across the world. We were able to achieve this and overcome the logistical challenges caused by the mandatory lockdown of our people and the work we did alongside with public agencies. We have once again started harvesting activities for rice and some of our crops. While soybean, corn and peanuts are in the period of yield definition. In our dairy operations, we continue ramping up our industrial facilities and achieving high productivity indicators even as our cow herd increases. In terms of land sale, the active demand for farmland in Argentina allowed us to conduct an additional farm sale in December at a significant premium to the Cushman & Wakefield's independent valuation. As anticipated in our past releases, 2020 marks a turning point for us. We became free cash flow positive for the first time since we started our 5-year plan in 2017, generating over $50 million. The expansion of our cluster in sugar and ethanol business, especially in terms of cane availability, the acquisition of our peanuts and sunflower processing facilities, the investments in our rice business both at the farm and industry level and the acquisition of the 2 milking processing facilities are part of the investments we did during the past year. They are all generating returns on invested capital in line or above our expectations, ranging from 20% to 100%. The investment in our peanut processing facility, to name one example, paid itself back in less than 1 year. Now that the results of our bigger, more efficient and vertically integrated operations are in front of us and that our 5-year plan is in its final stages, we are confident that cash flow generation will continue to increase in the upcoming years. Moreover, commodity prices have been increasing. Our cane availability for 2021 is good. And our debt level is underweight and well-structured in the long term. All of this places us in a good position to distribute results with our shareholders. And as you can see, we have already started doing it through our buyback program. Lastly, I would like to express my gratitude to all of our operational and management teams. We are very proud of the commitment shown during these difficult times and the hard work and continued support. I am convinced that we have the right people and that we are following the right strategy to generate good returns and value for our existing shareholders. As always, we need to remain focused on being low-cost producers, enhancing our efficiencies and taking care of our people. Now I will let Charlie walk you through the numbers of the year.
Charlie Boero Hughes, CFO
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 were especially concentrated towards the end of 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 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 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 57.6% increase in milling per day. It was the greater cane availability, coupled with enhanced efficiencies at the industry level, that made it possible. On a year-to-date basis, a total of 11.1 million tons of sugarcane were crushed. This represents an increase of 2.4% compared to the same period of last year. Again, this speaks for the highly efficient and coordinated work during the second half of the year. Please jump to Page 6, where I would like to walk you through our agricultural productivity. During the quarter, sugarcane yields reached 82 tons per hectare, 20.3% higher compared to the fourth quarter of 2019. The year-over-year gap is fully explained by the negative impact of the adverse weather conditions on the 2019 yield as most of the harvested area was cane below optimum growth stage. TRS content was 137 kilos per ton in the fourth quarter of 2020 and 132 kilograms per ton in 2020, 5.5% and 1.1% lower compared to the same period of last year. Again, the reason for the decrease is explained by the dry weather conditions in 2019, which led to higher TRS content. The combination of these two effects resulted in TRS production per hectare of 11.3 tons in the fourth quarter of 2020, 13.6% higher year-over-year. Year-to-date, yields reached 79 tons per hectare and TRS content 132 kilograms per ton, resulting in TRS production per hectare of 10.4 tons, 3.5% higher year-over-year. Let's move ahead to Slide 7, where I would like to discuss our production mix. As already said, in light of the improved outlook on prices and in order to take advantage of the favorable weather and cane availability, our strategy during the quarter was to maximize crushing. As you can see in the top-left chart, during the fourth quarter of 2020, sugar traded at a premium of 14.3% and 3.9% to hydrous and anhydrous ethanol, which traded at $0.125 per pound and $0.14 per pound, respectively. As a result, our efforts were focused on maximizing sugar, the product with the highest marginal contribution. Indeed, we operated our sugar kitchen at full capacity throughout the quarter, diverting as much as 50% of TRS to sugar production compared to 6% during the same period of last year. On a full year basis, we maximized sugar production by 44% compared to 15% during 2019, despite a first quarter of full ethanol maximization prior to the pandemic. I would like to insist that 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 sell the product with the highest marginal contribution. In terms of ethanol, during the quarter, we diverted 50% of TRS to the ethanol distillery compared to 94% during the same period of last year, when our strategy was to maximize this product. Year-to-date, sugar accounted for 36.9% of total EBITDA generation in the Sugar, Ethanol and Energy business, considering other operating income for items higher compared to 2019. Again, this is a clear evidence of our capacity to shift production from one product to the other. Let's please turn to Slide 8, where I would like to discuss quarterly results. As you can see on the top-left chart, ethanol sales volumes decreased by 36.1% year-over-year. This is fully explained by our strategy to maximize sugar production due to the lagging impact of the pandemic on ethanol prices and demand, in particular, during the first semester of the year. During 2020, hydrous and anhydrous ethanol traded on average at sugar equivalent prices of $0.12 per pound and $0.1301 per pound, a 6.7% discount and a 1.3% premium to sugar, respectively. Average selling prices for ethanol were higher measured in reais but lower in U.S. dollars, standing at $0.132 per pound in sugar equivalent, representing a 36.1% year-over-year reduction. On account of the lower selling volumes and lower average prices in U.S. dollars, net ethanol sales during the year amounted to $180.6 million, 46.4% lower year-over-year. In spite of the lower results, I would like to mention once again that ethanol prices experienced a recovery throughout the second half of the year due to higher gasoline prices, an increase in fuel demand and lower supply, thus building a positive scenario for the upcoming months. In the case of energy, year-to-date net sales amounted to $36.9 million, marking a 31.3% decrease compared to 2019 driven by a 5.3% decrease in volume and a 27.5% decrease in average selling prices measured in U.S. dollars. Net sales of sugar increased by 72.7% in 2020 compared to the previous year, reaching $167.8 million. Sales volumes increased by 89.9% year-over-year, led by an increase in production mix and volume, which fully offset the 9.1% decrease in average selling prices measured in U.S. dollars despite an increase in prices measured in reais. Although sugar is traded in U.S. dollars, the depreciation of the Brazilian real does have an impact on prices due to the fact that our functioning currency is in reais and our reporting currency in U.S. dollars. In addition, I would like to comment that during 2020, we started exporting certified organic sugar produced at our UMA mill. Certification is required by the European market and is only granted after having produced organic sugar for a period of 3 years. We successfully exported approximately 5,000 tons of organic sugar at an average price of $0.25 per pound, capturing a significant premium over VHP sugar and plan on doubling the exported figure in 2021. In this way, we not only have a highly efficient cluster model in place but we also continue to add value to UMA. Let's move to Slide 9, where I would like to explain our total cost of production. Total cost of production depicts on a cash basis how much it costs us to produce 1 pound of sugar and ethanol in sugar equivalent. Maintenance CapEx is included in the calculation since it's a recurring investment necessary to maintain the productivity of the sugarcane implantation. As we are calculating sugar and ethanol cost, energy is deemed a by-product and thus deducted from total costs. 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 in 2020 marked a 12.7% reduction on a per-unit basis, reaching $0.079 per pound of sugar equivalent. This decrease was explained by a 29% reduction in total production costs driven by higher crushing volume, which allowed us to dilute fixed costs, coupled with the year-over-year depreciation of the Brazilian real, which further contributed to reduced unit costs measured in U.S. dollars. Additionally, enhanced agricultural efficiencies, lower industrial costs due to reduced third-party services and temporary suspension of wood chips purchases also had a positive impact on production costs. These positive effects were partially offset by the higher cost of third-party cane, both as a result of higher purchased volume and higher Consecana prices. At the same time, the maximization of sugar production led to an increase in SG&A expenses as well as a reduction in PIS/COFINS reimbursements. Finally, to conclude with the Sugar, Ethanol and Energy business, please turn to Slide 10, where I would like to discuss financial performance. Adjusted EBITDA during the fourth quarter of 2020 was $80.3 million, $25.2 million or 45.6% higher compared to the fourth quarter of 2019. This increase was mostly explained by the $19.9 million higher result derived from the mark-to-market of our biological assets, partially offset by a loss derived from the mark-to-market of our commodity hedge position and an increase in SG&A on account of higher freight and farming costs due to higher sugar sales. On a full year basis, results were impacted by the effects of the pandemic. However, adjusted EBITDA amounted to $253.1 million, in line with last year. I would now like to move on to the Farming business. Please direct your attention to Slide 12. As of today, Adecoagro finished its planting activities for the 2020/'21 harvest year. We planted 262,000 hectares, 10% higher than the previous harvest season. This increase is expected to come primarily from a greater leased area. So far, rents have been adequate on average. However, we continue to closely monitor water requirements as we are going through the critical phase in the development of most of the crops. Let's move to Page 13, where I would like to walk you through the financial performance of our Farming and Land Transformation businesses. In 2020, adjusted EBITDA in the Farming and Land Transformation businesses reached $107.7 million, $35.9 million or 50.1% higher year-over-year. The decrease in financial performance is mostly explained by the $28.3 million higher result generated by the Farming business, although the Land Transformation business contributed with a $7.6 million increase following the completion of 2 land sales during 2020. The Crops business generated an adjusted EBITDA of $35.7 million during 2020, 39.1% or $10 million higher compared to 2019. This is mainly explained by a $17 million gain in the mark-to-market of our biological asset and our grain inventory as a consequence of the increase in commodity prices, the higher planted area and the increase in yields for most of our crops; and by a cost dilution in U.S. dollars on account of enhanced efficiencies and the depreciation of the Argentine peso. These results were partially offset by a $10.5 million loss in the mark-to-market of our commodity hedge position. The Rice business accounted for an increase in adjusted EBITDA of 67.8% or $13.7 million compared to the previous year, reaching $34.1 million in 2020. This was mostly driven by a $6.3 million gain in the mark-to-market of our biological assets explained by the increase in commodity prices, coupled with an increase in area and yields as a result of recent investments that enhanced productivity; and a $6.9 million reduction in selling expenses due to a 4% reduction in export taxes and the cost dilution effect as a result of the depreciation of the Argentine peso during 2020. The Dairy business was responsible for an increase in adjusted EBITDA of 21.3% and or $3.8 million compared to last year, totaling $18.2 million during 2020. This increase was driven by our enhanced efficiencies at the farm and the industry level led by our continuous focus on increasing productivity in every stage of our value chain; our production flexibility, which enabled us to capture the increase in demand in the domestic market, driven by COVID-19 pandemic; and an increase in gross sales, thanks to a 58.7% increase in sales volumes, partially due to the 3-month gap in 2019's industrial operations. Let's now turn to Page 15, which shows the evolution of Adecoagro's consolidated main figures for the year. I would like to highlight the fact that despite all the challenges, we managed to outperform both from an operational and financial perspective. Consolidated adjusted EBITDA totaled $342 million, 12.1% or $37 million year-over-year. As previously explained, the good results in Farming and Land Transformation explained the increase. At the same time, 2020 marked a milestone for the company as it was the first year that we generated positive free cash flow following the initiation of our 5-year plan back in 2017. Turn now to Slide 16 to take a look at our net debt position. As you may see in the bottom-left chart, our net debt as of December 31, 2020, reached $635 million, $33 million or 4.6% lower than the previous quarter, driven by a $122.7 million increase in cash and equivalents, which fully offset the higher gross debt. The higher cash equivalents was mainly explained by our strategy to raise long-term debt during the second half of the year with the idea to cancel short-term debt during the first semester of 2021. This will result in a significant improvement in our debt profile while substantially reducing capital payments for the year. On a year-over-year basis, net debt in the fourth quarter of 2020 was 6.4% or $43.2 million lower compared to the fourth quarter of 2019 in spite of gross debt being flat year-over-year. This is explained by the 15.8% higher cash and equivalents, driven by positive free cash flow during the last 12 months and by short-term working capital lines we raised throughout the year as part of our risk management program. The fourth quarter of 2019, in turn, reflects the inflow from the insurance of the CRA bond in Brazil that took place by 2019 year-end. We believe that our balance sheet is in a healthy position, not only based on the adequate overall debt levels but also on the term of our indebtedness with approximately 78% having a long-term tenor. As of December 31, 2020, both our net debt ratio as well as our liquidity ratio improved compared to the previous quarter. Indeed, our net debt ratio reached 1.86x, 18.9% lower than the third quarter of 2020 and 16.4% lower year-over-year. At the same time, our liquidity ratio, which is calculated as cash and equivalents plus marketable inventories divided by short-term debt, reached 2.62x compared to 1.49x during the second quarter. This ratio shows the full capacity of the company to repay short-term debt with cash balance without raising external capital. Thank you very much for your time. We are now open to questions.
Operator, Operator
Today's first question comes from Pedro Soares with BTG Pactual.
Pedro Soares, Analyst
I have a couple of questions regarding the Sugar and Ethanol business and farmland. First, with the completion of the investment cycle you executed in the past years, what can we anticipate for the crushing levels this year, especially considering it was down 21 and also down 22 crops a year? It would be helpful to know if you expect this to increase in the next harvest. Additionally, concerning the organic sugar market, what is the size of this market for your company, and how much market value do you anticipate capturing in the organic segment? Lastly, regarding farmland sales, with the recent spike in soft commodities, can we expect you to sell more land and accelerate sales? Similar trends occurred in previous years when inflation rose in Argentina. Any insights on this would be appreciated.
Mariano Bosch, CEO
Pedro, thank you for your question. I will have Renato address your inquiry about sugar and ethanol, and then I can add some comments. After that, I will discuss your question regarding farmland. Renato, would you like to respond to Pedro's question?
Renato Pereira, Manager
Thank you, Pedro. To address your question about organic production, we've been growing organic sugar in UMA for four years now. This is the first year we've started exporting organic sugar because it requires three years of production to sell in the European and U.S. markets. We believe UMA is ideal for this kind of project due to its proximity to both the market and export points. Additionally, the climate conditions in UMA are very stable, making it a good environment for organic sugar production. Our project covers approximately 3,000 hectares, where we expect to yield 14,000 tons of organic sugar. We don't anticipate being able to increase production beyond this level, as we've utilized all byproducts generated in the area, including vinasse, filter cake, and fly ash. Expanding further would necessitate sourcing organic fertilizer from elsewhere, significantly raising the production costs for sugarcane. Thus, we see this site as fitting for our business model. The global sugar market is roughly 400,000 tons, so it's relatively small and niche, growing at about 10% annually. Regarding your other question about sugar and ethanol, I didn’t quite catch it; could you please repeat it?
Pedro Soares, Analyst
Sure. It's actually regarding the crushing levels expected for this next harvest year. Should we expect you guys to crush more cane?
Renato Pereira, Manager
For the current year, we anticipate processing about 10% more than last year. As mentioned earlier, the weather in Mato Grosso do Sul is quite favorable in the second half of the year. We have good rainfall exceeding 400 millimeters, which has positively impacted our output in the first quarter, maximizing our opportunity with high sugar and ethanol prices. We aim to achieve 12.5 million tons of sugarcane, aligning with our 5-year plan for 2023. The positive news is that we have secured all the necessary land, and now it's simply a matter of planting and preparing to process it.
Mariano Bosch, CEO
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 for 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.
Operator, Operator
Our next question today comes from Lucas Ferreira with JPMorgan.
Lucas Ferreira, Analyst
I have two questions regarding capital allocation. The first is straightforward: could you remind us of the CapEx budget for this year and whether it has been adjusted due to price outlooks? The second question addresses your recent growth cycle completion. I'm curious if you'll be increasing dividends and undertaking buybacks, but I'm also interested in your strategic perspective a couple of years down the line. What growth opportunities do you see for the company? Will you continue investing in Argentina, and do you anticipate any opportunities for acquisitions or expansion CapEx there? If so, in which specific segments or markets? Similarly, what are your growth prospects for operations in Brazil? Are you considering M&A or organic growth there? Could you elaborate on this?
Mariano Bosch, CEO
Thank you for your question, Lucas. I'll address this broadly first and then provide more details. It's important to highlight that since 2017, we've shifted to being cash flow positive. The key takeaway is that our investments are currently producing attractive returns, which is contributing to our ongoing positive free cash flow. This indicates the start of a sustainable cash generation process and is expected to significantly enhance our cash flow in the coming years. Furthermore, our long-term debt levels are well structured, allowing us to have sufficient cash to distribute returns to our shareholders while also continuing to add value through operational improvements. Our top priority is to return a significant portion of this cash to our shareholders, and we have already begun doing so with our buyback program, having repurchased close to 1 million shares in January 2021. We are also exploring promising opportunities in both the farming and sugar sectors that align well with our existing operations and could enhance overall efficiency. These opportunities are projected to deliver internal rates of return above 30%. This summarizes our approach to capital allocation. 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.
Lucas Ferreira, Analyst
If I may, just a quick follow-up. What is the size of the potential high-return projects you mentioned? Can we expect a significant increase in your capital expenditures going forward? Or do you view them as more marginal? My main question is whether you anticipate any large capital expenditures that could impact your dividend payments over the next few years.
Mariano Bosch, CEO
No. The important thing is what I was just mentioning, and I also mentioned in the introduction, is that our priority is to distribute to 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 to shareholders also. So that's how we are approaching on all this thinking of 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.
Operator, Operator
And today's next question comes from Rodrigo Almeida with Santander.
Rodrigo Reis de Almeida, Analyst
Congratulations on your impressive results and the successful execution of the CapEx plan. My first question relates to the sugar and ethanol business, particularly concerning the expansion in the harvest scenario. I believe Renato mentioned that the necessary area has already been leased. I would like to know more about the pace of planting and harvesting in this area throughout 2023 to better understand the sugarcane availability year by year. Additionally, with the rising prices of sugar, soy, and corn, could the lease expenses potentially increase? Or are your contracts structured in a way that shields you from these price changes? Also, if you were to lease more land now, would the costs be higher than before due to the increased prices seen throughout the year? My second topic is about the buyback program. As I recall, this program was extended until September of last year. If I missed something, I would like to know how long the program will remain valid and the current size of the active program. Those are my questions.
Mariano Bosch, CEO
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 portions 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.
Rodrigo Reis de Almeida, Analyst
Yes. I wanted to understand the pace of planting and harvesting, specifically how much sugarcane we can expect to be available in 2021 and 2022, and when we will reach full capacity. I am looking for a clear year-by-year expectation.
Mariano Bosch, CEO
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.
Renato Pereira, Manager
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.
Operator, Operator
And our next question today comes from Santhosh Seshadri with HSBC.
Santhosh Seshadri, Analyst
Remember, in one of your presentation a couple of years ago, you mentioned that your EBITDA could reach well above 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.
Mariano Bosch, CEO
Thank you, Santhosh, for your question and for being part of the call. We don't provide specific EBITDA guidance, but based on your own calculations with our crushing volumes and anticipated production, along with consideration of the various climatic events affecting our business, reaching the EBITDA levels you mentioned is feasible. You can perform your own calculations and use the models to assess this. It is important to note that while we cannot rely on pre-COVID guidance, achieving those levels is certainly within reach.
Santhosh Seshadri, Analyst
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.
Mariano Bosch, CEO
Yes, that's a great question. At this moment, we are focused on maximizing ethanol production, but this is something we reassess weekly. This flexibility is a significant competitive advantage for us as a company. We have recently shifted from maximizing sugar production, which we had been doing for several months, and this could change again next week. This adaptability is one of the key benefits of our entire production system, not just the assets we own. Additionally, I want to highlight that we are currently producing ethanol that others are not producing at this time. Thanks to our continuous harvest model, which allows us to harvest year-round, we are capitalizing on the favorable prices for ethanol right now.
Santhosh Seshadri, Analyst
And my last question is on your yield expectation in your crop business. Since you're nearing harvest for most of the crops, can you give some sense on the potential yield impact due to the dry weather in Argentina?
Mariano Bosch, CEO
We are in a favorable position regarding our sugarcane operations due to the suitable climate in the Center South region, specifically in Mato Grosso do Sul, where we have a strong sugarcane plantation. However, in Argentina and Uruguay, the last 15 days have seen a dry spell, and crops like soybean, corn, and peanuts are still in the process of defining their yields. We've completed part of the harvest, but weather conditions remain unpredictable, meaning these three crops could still be affected by ongoing dry weather. On the positive side, we have other crops, such as rice and sunflower, which are performing exceptionally well in this climate. We are in the midst of harvesting these crops, and their yields are surpassing our expectations. This diversity in crops helps us mitigate risks associated with varying climate conditions.
Operator, Operator
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.
Mariano Bosch, CEO
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, 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.
Operator, Operator
Thank you. This concludes today's conference. You may now disconnect your lines and have a wonderful day.