Earnings Call Transcript - AGRO Q1 2026

Operator, Operator

Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Adecoagro's First Quarter 2026 Results Conference Call. Today with us, we have Mr. Mariano Bosch, CEO; Mr. Emilio Federico Gnecco, CFO; Mr. Renato Junqueira-Santos Pereira, Sugar, Ethanol and Energy VP; and Ms. Victoria Cabello, Investor Relations Officer. We would like to inform you that this event is being recorded. After the company's remarks are completed, there will be a question and answer section. At that time, further instructions will be given. 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 will 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 First Quarter 2026 Results Conference. Today, we are presenting the first results from the new Adecoagro: a well-diversified agro-industrial platform composed of three segments — Sugar, Ethanol and Energy; Fertilizers; and Food and Agriculture. The $86 million of adjusted EBITDA generated already reflects the change in scale and earnings potential, with further upside ahead. After the major maintenance turnaround in the fertilizer plant, we are pleased with the ramp up of operations, with the plant operating at full capacity since then. Due to the conflict in the Middle East, urea prices have spiked and we are progressively capturing the upside, leading to an even better-than-expected result. In Brazil, we achieved a new first-quarter crushing record, reflecting the returns on our planting expansion investments. The high flexibility of our mills enables us to produce almost 100% ethanol, benefiting from better ethanol prices. Harvesting pace remains on track to meet our annual target, supporting further cost dilution. In Food and Agriculture, results reflect the end of the prior harvest season as we sold our carryover stocks. The harvest of the new crop is well advanced, presenting good productivity indicators. Margins should improve in the coming quarters as we commercialize the new crop, supported by a more efficient cost structure. Overall, higher productivity in Brazil, higher urea prices, and better margins in Argentina and Uruguay should translate into a stronger earnings performance, and most importantly, higher cash generation in 2026. This, in turn, will enable a faster-than-expected deleveraging, one of our main priorities following the acquisition of the fertilizer business. To conclude, I want to reiterate my gratitude to everyone across Adecoagro. It is thanks to their hard work that we are able to navigate different commodity cycles and continue to deliver attractive results to our shareholders. Now I will let Emilio walk you through the numbers of the quarter.

Emilio Federico Gnecco, CFO

Thank you, Mariano. Good morning, everyone. Before turning to the results of the quarter, I would like to briefly remind everyone that as part of our efforts to update and simplify how we view our operations, starting in January 2026 the company now operates under three reportable segments. Number one, the Sugar, Ethanol and Energy segment. Number two, the Fertilizer segment, which reflects Profertil's results. And number three, the Food and Agriculture segment, an integrated platform focused on agriculture and food production that was previously reported across three separate verticals: Crops, Rice, and Dairy. Please now turn to page 4 where you can see our first quarterly results under this new organizational structure. Gross sales totaled $394 million in the first quarter, representing a 22% year-over-year increase. This growth was driven primarily by a strong performance in our fertilizers business, supported by higher production volumes and slightly improved prices, together with higher ethanol and energy prices in our Sugar, Ethanol and Energy operations. These factors more than offset the lower prices across the remainder of our commodity portfolio, including sugar, peanuts, and rice. Adjusted EBITDA reached $86 million, more than doubling the level in the prior year. In addition to higher sales, results benefited from a first-quarter crushing record and our operational flexibility to produce nearly 100% ethanol throughout the period, combined with lower natural gas sourcing costs, which is the main input for urea production. Moving to the financial and operational performance of our operations, let's start with the Sugar, Ethanol and Energy segment on Slide 6. Due to the rainfall received in the final months of 2025, the cane that remained unharvested recovered meaningfully in yield and was collected during the first quarter under our continuous-harvest model, one of our key competitive advantages versus other players. As a result, we achieved a new first-quarter crushing record of 2.2 million tons of cane, a 49% year-over-year increase driven by higher productivity despite harvesting a smaller area. In terms of product mix, we reached a 96% ethanol mix during the quarter as ethanol prices traded substantially above global sugar prices and therefore offered superior margins. This highlights the operational flexibility of our industrial assets even while maintenance work was being carried out. On the cost side, production costs were negatively impacted by the appreciation of the Brazilian real and by the acceleration of certain agricultural expenses that were typically concentrated later in the year, which more than offset the cost dilution from higher crush. Although we maximized ethanol production and executed its sales at higher prices than in the prior year, quarterly sales were below last year, mainly due to lower sugar sales reflecting weaker global prices and lower volumes sold. Overall, adjusted EBITDA for the period reached $41 million, exceeding the performance reported in the previous year. As of today, our crushing pace remains on track to meet our full-year target. Accordingly, we expect low double-digit growth in crushing volumes driven by greater cane availability and we anticipate a full year of ethanol maximization given the current price scenario. On page 8, we present the fertilizer segment. The year-over-year increase in urea production was primarily driven by a higher number of operational days compared to the same period last year. As mentioned in our previous call, the fertilizer plant experienced 19 days of downtime during 2025, mainly due to adverse weather conditions that disrupted gas supply. By contrast, this quarter we recorded only 10 days of downtime, as we ramped up operations following the major maintenance turnaround executed at year-end. As of today, the plant is operating continuously at full capacity. In terms of sales, the 68% year-over-year increase was mainly driven by a 16% improvement in urea prices. Following the escalation of the conflict in the Middle East, a region that accounts for approximately 30% of global urea trade, prices began rising sharply in early March, which only had a partial impact reflected in this quarter's results. As a result, adjusted EBITDA showed a strong year-over-year recovery, reaching $53 million. In addition to higher sales, performance also benefited from greater cost dilution due to the increase in production and lower gas sourcing cost as we leveraged contractual flexibility to secure a portion of our gas supply at more competitive prices. Looking ahead, we expect adjusted EBITDA in 2026 to be stronger than previously anticipated, potentially exceeding prior-year levels supported by a favorable market price outlook. Please move to page 10. In our Food and Agriculture segment, first-quarter results were impacted by lower commodity prices, mainly in peanuts and rice, as well as by higher costs in U.S. dollar terms as we finalized the sale of carryover inventories from the previous harvest season. Regarding the 2025/2026 campaign, we are currently in the harvesting phase, which we expect to complete over the coming months. As of today, more than half of the planted area has been harvested, resulting in over 700 thousand tons of agricultural products. In our dairy operations, processing volumes increased year over year driven by higher raw milk production at our Fristall facilities, reflecting improved cow productivity. We expect margins to improve over the coming quarters as the new crop is harvested and commercialized, reflecting the cost initiatives implemented. In dairy, we also anticipate further growth in processed milk volumes supported by the launch of new products under our retail brands. Please turn to page 12 of the presentation where we outline our capital allocation strategy, starting with our CapEx program. During 2026, we paid the final installment related to the acquisition of a 90% equity stake in Profertil. As a reminder, the $1.1 billion transaction was financed through a combination of $400 million in cash on hand, $400 million in new long-term debt facilities, and $300 million in equity proceeds. On the following page, 13, we present our debt profile. Our net debt increased to $1.6 billion in 2026, reflecting the seasonal working capital requirements associated with planting and harvesting activities in our Food and Agriculture business. Excluding this seasonal effect, net debt would have already declined compared to 2025. On a pro forma basis, net leverage stood at 3.2x, consistent with our ongoing deleveraging path supported by improved operating results despite the seasonality in cash needs. Looking ahead, we expect this metric to continue to decline driven by higher adjusted EBITDA generation primarily from our Fertilizers segment. It is also worth noting the company's strong liquidity position and full capacity to repay short-term debt. The majority of our indebtedness is long term, and its currency composition is well aligned with our revenue mix, mitigating currency risk. Finally, regarding shareholder returns, a cash dividend of $35 million was approved. The first installment of $17.5 million will be paid on May 19, with the second installment payable in November in an equal amount. Before concluding, I would like to share a brief closing remark. These are the first quarterly results we present under the new corporate structure, representing an important milestone for the company. The performance already reflects a stronger and more resilient platform supported by increased diversification and a more robust earnings profile. As shown in the top-right pie chart, our revenue base is now more diversified than in the past. This evolution enhances our ability to deliver consistent performance across different cycles while improving the stability and sustainability of our cash generation. Over the years, we have demonstrated a strong track record of results and cash flow generation despite commodity price volatility and adverse weather conditions. Today, the company is particularly well positioned to benefit from upside in fertilizer prices which could translate into stronger-than-anticipated results while we continue to scale up the platform and reinforce our strategic relevance within the set. Thank you very much for your time.

Operator, Operator

We will now open the call to questions. Thank you. The floor is now open. If you have a question, please write it down in the Q&A section or click on "raise hand" for audio questions. Please remember that your company's name should be visible for your question to be taken. We do ask that when you pose your question that you pick up your headset to provide optimum sound quality. Please hold while we poll for questions. Our first question comes from Matheus Enfeldt with UBS.

Matheus Enfeldt, Analyst

Good morning. Thank you, Mariano and Emilio, and Victoria and Renato. Thank you for your time. My first question on capital allocation midterm: how do you think Profertil is — you mentioned that one of the avenues for future growth could be the expansion of the fertilizer capacity from Profertil. How do you think that would be the best path moving forward? In particular, would it make sense to perhaps find a partner to accelerate a potential FID, to take advantage of investment programs in Argentina in the near term and perhaps take advantage of higher fertilizer prices for longer? Do you think a partnership could make sense and how to do that? And then my second question also on the fertilizer business: trying to understand how the pricing of urea is evolving in Argentina. Previous comments mentioned pricing at import parity. How are the consumers of your fertilizers taking this impact of higher urea prices, and how do the contracts work? Do you set prices in advance? What is the timeline for that? When do you expect set prices for the remaining sales for the year? Those are my two questions. Thank you.

Mariano Bosch, CEO

Hi, Matheus. Thank you very much for your question. I am going to start with your second question, and then I would like to ask you to repeat the first one because some part of it we could not understand. Going to the fertilizer business and how prices are generated: you mentioned import parity, and the import parity in Argentina is because Argentina consumes 2.4 million tons of urea and only produces 1.3 million tons — that is 100% produced by Profertil. So there is always a need of importing urea, and that is why there is a clear import parity pricing. The reduction in potential uses of urea is at most a 10% reduction, so we are far away from becoming a net exporter. We will always be a net importer at this level of production and the capacity is only that one. So that is absolutely clear. When urea is needed in Argentina, it is mainly for wheat and corn, and also for rice and many other crops, but the main drivers are wheat and corn. For wheat, the needs are June, July onwards. So the need for the usage of fertilizers is starting now or in the following two months — that is where the needs for wheat will be delivered. Then during September, October, November it is mainly for corn. So those are the two moments where the consumption of fertilizer is higher within Argentina. That is how urea is going to be priced domestically. Now, could you please repeat the first part of your question?

Matheus Enfeldt, Analyst

Sure. I was thinking about the potential to expand the fertilizer plant, the urea plant at Profertil. You mentioned this was a potential but a longer-term plan. My question is, could you find ways to potentially accelerate that given how high prices are in the near term and likely to stay higher for the next couple of years? Could finding a potential partner, perhaps someone with natural gas or someone willing to reinvest in Argentina, make sense to accelerate a potential FID? That is my question. Thank you.

Mariano Bosch, CEO

Okay. Clear. Thank you, Matheus. In any case, constructing a urea plant needs four years, and the total timing in general is five to seven years. So in this case, it is difficult to go below four years. Taking that into account, this increase in fertilizer prices as of today we are not expecting to influence our decision on making a urea expansion decision immediately. Having said this, of course, we are interested in expanding the plant because we do believe in being a low-cost producer of urea in that specific area. We do believe that Argentina will be a net exporter of natural gas for many, many years going forward. There are many projects being developed in gas production, including Vaca Muerta as the main leading area where gas is increasing. We do see that happening in Argentina. There is transportation being built, and there are more transportation routes going through Bahía Blanca, which is where we have this port. So we do see a great opportunity to expand this plant. We do believe that makes sense, and we also believe that the region is a net importer of urea even in situations like this where the urea price goes up. The region, including Brazil, will import around 10 million tons of urea, and the region only produces 2.5 million at most. So there is still a lot of space to be a producer of urea. But this is a project that we are studying in detail and we are working on it. We still do not see exactly when and how we will start to make it happen. And, of course, there are several ways of financing, including partners, etcetera.

Operator, Operator

Our next question comes from Isabella Simonato with Bank of America.

Isabella Simonato, Analyst

Hi. Good morning, everyone. Thank you for the call. I have two questions still on the fertilizer business. When we look at the average prices that you had in Q1, it looks quite similar to urea prices in Europe and Brazil, right? So my question is, can we assume that trend continues into Q2? When we look at April and May, can we see a high correlation of the prices you have been selling at to the prices in Brazil? And to that point, can you comment a little bit on how volumes are being sold? I mean, the pace — are you seeing farmers taking a step back and trying to delay purchases or not? Just to have a sense of the overall environment. The second question is on the sugar and ethanol side. You mentioned that costs moved up because of FX, but also some agricultural costs. But I assume that since you are crushing more this year you have more cane availability and better productivity. Can we think about some normalization or decline in unitary cost going forward?

Mariano Bosch, CEO

Thank you. Hi, Isabella. Thank you for your question. I am going to address the first one, and then I will ask Renato to take the second one. On the first one, the answer is yes: urea price is very correlated to CFR Brazil. So the main market for urea is CFR Brazil, and that is how we all price urea in the region. You will see a correlation there. The urea price is always a spot price, and the CFR reflects the spot price of urea. Regarding the pace, as I mentioned before, June, July, and August is when the needs for fertilizers start in Argentina. We do not see that the need is being reduced. The most that can be reduced is 10%, but we do not even see that reduction happening. So we continue to see producers using urea because it has the highest reaction on productivity at the farms. Urea has the higher impact on productivity among fertilizers in general. That is why producers continue applying it, and we do not see that as a relevant reduction. Now I will ask Renato to speak about the sugar and ethanol costs.

Renato Junqueira-Santos Pereira, VP, Sugar, Ethanol and Energy

Hi, Isabella. We expect a cost reduction in reais. The reduction is expected to be between BRL 10 and BRL 15 per ton. I think the main factors for the reduction are the volume, as you said — we are going to have more cost dilution — and some efficiency gains that we are achieving in our operations, and also a lower CONSECANA price. These factors are more than enough to offset some pressuring costs in fertilizer and diesel costs. The cost in the quarter is just an anticipation of some agricultural operations that we did because the weather was in good conditions to do it, especially weed control and pest control. But this is just the cost that we have in the first quarter; we are not going to have it in the future. That is the reason we think it is difficult to measure cost of production by quarter; it makes more sense to see it annually.

Isabella Simonato, Analyst

Thank you. Super clear. Thank you very much.

Operator, Operator

Once again, if you have a question, please write it down in the Q&A. Our next question comes from Gabriel Baja with Citi.

Gabriel Baja, Analyst

Hi, everyone. Thanks for taking my questions. I have two here. One, I am trying to change gears and understand a little bit better the scenario for the crop season this year. I remember in the last conference call you talked a little bit about the mix for this crop season. As we have discussed, it seems that the strategy to focus on ethanol is up and running, but we are seeing ethanol prices drifting to lower levels given the higher supply at the beginning of the crop. My question is trying to understand the company's strategy for the mix from now on, given these lower ethanol prices and the weak sugar price that we are seeing today. I am trying to understand the structure of the company and the commercialization strategy for this crop season. The second point is seeing this quite strong market for fertilizers, and in the end the company, given the recent acquisition, has net debt/EBITDA close to 3.2x, above the comfort zone. How should we think about the deleverage path to reach 2.0x? Given this better scenario for fertilizers, do you think it is feasible to reach this number by the beginning of next year? Is deleveraging the focus of the company right now? How should we think about the capital structure given the commodity outlook? Those are my two questions. Thank you.

Renato Junqueira-Santos Pereira, VP, Sugar, Ethanol and Energy

Hi, Gabriel. The year started with tight ethanol inventories and high prices. That is why we took advantage of this scenario to sell almost our whole production of the first quarter and all the carryover until April, with prices close to $0.20 per pound equivalent. Since then, with the beginning of the new sugarcane season, ethanol prices have fallen about 20%. This was passed to the pump, so the parity rate at the pump today is close to 60%. We think that this 60% at the pump is enough to absorb the ethanol surplus from one year to the other since demand for ethanol is going to increase and hydrous ethanol can reach about 30% of market share. In our case specifically, the 60% parity rate at the pump is still an ethanol equivalent close to $0.17 per pound. That is why we are still maximizing ethanol production and we think we are doing the right thing; we are going to keep maximizing maybe for the whole year. At this point, we have stopped selling our ethanol and are holding it in our tanks to sell the ethanol in the last part of the year.

Mariano Bosch, CEO

Thank you, Renato. And then Gabriel, regarding your second question on leverage, I will ask Emilio to answer.

Emilio Federico Gnecco, CFO

Well, as you may have seen during the presentation of our quarterly results, we are already showing a reduction in our net debt, even taking into consideration some seasonality of our working capital during the first semester of each year. Now, when we think about our net debt on an annual basis and given the current scenario for all of the prices of the commodities that we produce, including fertilizers, what we thought would require one or two years to bring net debt levels down to 2x EBITDA we are probably going to see by the end of this year. So, hopefully, by 2026 we will be at levels of around 2x EBITDA on an annualized basis.

Gabriel Baja, Analyst

Thank you. Very clear. Thank you.

Operator, Operator

Our next question comes from Bruno Tomazetto with Itaú BBA.

Bruno Tomazetto, Analyst

Hey. Good morning. Thank you for taking our questions. The first one is regarding your view on El Niño. Recent studies suggest a stronger event this year and we would like to hear more about what you are anticipating in both terms of the Sugar and Ethanol segments — maybe more focused on sugar price and the pace of your harvest moving forward — but also for Food and Agriculture. You mentioned in the earnings release an average yield expected for crops in 2026. Just wondering what could change in a scenario where a stronger El Niño materializes in the coming months. The second question is on the Food and Agriculture division: how are you looking at this segment in the medium and long term considering its lower relative contribution to consolidated results, also assuming that the company is consolidating several operations into a business unit? Could there be opportunities for M&A or divestments that could make sense, especially now that the Fertilizers unit has gained a lot of relevance for Adecoagro? That is it. Thank you.

Mariano Bosch, CEO

Regarding El Niño, there are several aspects that can be affected if we have an El Niño year. The main impact is on the prices of the different commodities that we produce. This can affect sugar prices positively. If we do have an El Niño year, the Northern Hemisphere can have less production, and that can improve sugar prices — basically that is probably where the higher impact is. In terms of our own productivity, we are not that affected in the sugarcane area. Mato Grosso do Sul is not affected in terms of production by El Niño or La Niña because it is in a relatively stable area. In general, El Niño would mean more rains, and more rains would mean more use of fertilizer, so that can be positive for the fertilizer business as a global comment. So, if this apparently looks like an El Niño year, that could potentially be positive. Regarding Food and Agriculture, as we mentioned several times last year, last year was probably the most difficult year for Food and Agriculture in general. We experienced a huge reduction in prices of most of the commodities that we were producing and we were selling inventories from a previous campaign where the cost was higher. Today, we are harvesting the new campaign where the prices have already gone down, so we do expect that going forward in the following quarters Food and Agriculture will start delivering more relevant results than what you have seen in this quarter. We do expect this to continue to improve, and we do like the different businesses that we have. In all of them we believe we are the low-cost producers. We went through a difficult time, and now we are in a good position to take advantage of being the low-cost producers of these different products in the whole Food and Agriculture business.

Bruno Tomazetto, Analyst

Super clear. Thank you.

Operator, Operator

Next question from Thiago Duarte.

Thiago Duarte, Analyst

Hi. Hello, everybody. Thanks for the opportunity. I have one question. Circling back to the discussion about deleveraging and the company's confidence in getting back to your leverage target by the end of this year instead of a few years ahead given the positive outlook for some of your businesses: what should we expect next in terms of capital allocation, either in terms of speeding up dividends and share buybacks or eventually thinking about new growth opportunities? How are you thinking about this given that deleveraging might happen sooner than expected?

Mariano Bosch, CEO

Hi, Thiago. Thank you for your question. Of course, the first focus is on deleveraging. And as you have heard us say before, we have been always looking to be disciplined. We also have several projects in each one of our existing businesses that have potential for growth. We were talking about the particular one regarding expansion of the fertilizer business. There are many interesting projects within our Sugar and Ethanol business as you have seen with biogas and several other initiatives that are growing and performing well. So we continue to see interesting projects. The returns of those projects need to meet our required thresholds in order to support maintaining debt levels and to continue with our distribution policy. As we have already mentioned before, thank you.

Operator, Operator

This concludes the question and answer section. At this time, I would like to turn the floor back to Mr. Mariano Bosch for any closing remarks.

Mariano Bosch, CEO

Thank you all for participating in our call. We are very happy with how the company is progressing with this new Adecoagro, and we hope to see you at our next event.

Operator, Operator

Thank you. This concludes today's presentation. You may disconnect at this time and have a nice day.