Adecoagro SA (AGRO) 2011 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and thank you for waiting. At this time we would like to welcome everyone to Adecoagro's fourth-quarter 2011 results conference call. Today with us we have Mr. Mariano Bosch, CEO; Mr. Charlie Hughes, CFO; Mr. Hernan Walker, Investor Relations Manager.

We would like to inform you that this event is being recorded and all participants will be in listen-only mode during the Company's presentation. After the Company's remarks are completed there will be a question-and-answer section. At that time, further instructions will be given. (Operator Instructions)

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 the 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. Mr. Bosch, you may begin your conference.

Here we are with the senior management team of Adecoagro and with Charlie Boero, our CFO, and Hernan Walker, our IR Management.

First of all, welcome to our earnings release call. After our first full year as a public company, we are pleased to present the annual results of the Company. In this regard, I would like to emphasize that it's important to understand the cycle of our business, that is of its nature -- annual -- and, therefore, the best way to measure our performance.

2011 has been a terrific year for us. I believe that the $150 million of adjusted EBITDA constitutes a very important achievement of the Company and, overall, I would like to highlight two items that you could see on page 10 of the presentation.

First, we have exponentially grown our sugar and ethanol business and our investments are paying off. We own one of the most modern and efficient sugar [mills] in the region that allows us to maintain low cost of production, which is translated in $109 million of adjusted EBITDA and EBITDA margin in excess of 45% for our sugar and ethanol business line.

Secondly, and related to our Farming and Land Transformation business, despite the weather conditions we continued generating results in line with our historic figures and reached $67 million adjusted EBITDA and $62 million of adjusted EBIT.

So after this brief introduction, I will pass the word to Charlie Boero, our CFO, who will explain in more details our results. Charlie, please.

Thank you, Mariano. I would like to walk you through a few slides that reflect the main operational and financial highlights of the quarter.

Starting on page two of the presentation, I would like to summarize the conclusion of our 2011 and 2012 planting season, which we completed during the first quarter of 2012. As the chart shows, total planted area for the 2011 and 2012 harvest year reached 232,000 hectares. Planted area has grown 21% year over year. As the chart shows, our planted area has grown consistently during the last five harvest systems at annual growth rate of 14%, mainly driven by our land acquisition and land transformation activities.

On slide three we may see the evolution of our crop production. As the chart shows, total farming production for the 2010/2011 harvest year reached 656,000 tons, 8% higher than the 619,000 tons harvested in the 2009 and 2010 harvest year. As the evolution shows, our production has grown at an average rate of 14% per year over the last four harvest years.

Through the implementation of our sustainable production model, based in no-till and other best practices, we expect our land to continue increasing its productivity year by year thereby increasing total production. Regarding the new 2011 and 2012 harvest year, as you are all aware, Argentina and the south of Brazil suffered a severe drought with grain levels far below historical averages.

Argentina's Humid Pampas, the country's corn belt region, was one of the regions most affected by the dry weather. December rains are critical in this region since the corn planted in September undergoes plant flowering, a growth phase in which the plants water requirements peak. Therefore, the dry weather negatively affected the early corn planted area.

The drought also delayed the planting of our soybean second crop, which could not be planted at the proper time due to the lack of moisture in the soil during December. This delay in planting is also expected to reduce yields due to the shortening of the crops' life cycle. We believe our geographic and product diversification will partially offset the impact of the drought.

Since rains came back in early January, soybean first crop and corn late varieties have had a good development. Supply of watering dams and rivers was sufficient to flood our rice fields, which is key for proper plant development. Additionally, as of December 31, 2011, the harvesting of our wheat crop was almost finished with yields slightly above our budget.

On slide four I would like to walk you through the financial performance of each of our farming segments for 2011 compared to 2010. Starting on the left, you may see that sales and adjusted EBITDA of our Crops segment grew 37% and 27%, respectively, driven by an increase in wheat and sunflower yields and complemented by higher commodity prices, especially those of corn and wheat. This was partially offset in the fourth quarter by lower changes in fair value of biological assets as a result of the drought which impacted our corn and soybean estimated yields in Argentina.

The Rice segment had an excellent operational performance during the 2010/2011 harvest year with a 23.5% increase in rice yields and a 51.8% increase in planted area compared to the previous harvest year. During the fourth quarter of 2011 we completed the planting of the 2011/2012 harvest year where we have expanded planted area by 14.4%, reaching 31,500 hectares of fully irrigated rice.

However, as of December 31, 2011, rough rice prices were significantly lower than last year which consequently lead to a reduction in the gain recognized for the biological growth of the crop. As a result, total changes in fair value recognized in the fourth quarter of 2011 related to the 2011 and 2012 rice crop reached $1.9 million compared to the $6.3 million in 2010. As a result, 2011 adjusted EBITDA for the rice business decreased 7% compared to 2010.

In our Dairy segment the increase in 2011 gross sales and adjusted EBITDA compared to the previous years is explained by an increase in our milking cowherd and a 13.1% increase in cow productivity. This productivity improvement is a result of the fine-tuning of our milking operations in the free-stall dairy since this is the first year we are operating the dairy at full capacity. As a result of the above, our Farming business gross sales and adjusted EBITDA for 2011 have increased 37% and 31% compared to the previous year.

On slide 5 we would like to explain the decrease of the fourth-quarter's adjusted EBITDA. Fourth-quarter 2011 Farming and Land Transformation adjusted EBITDA was lower than that of fourth quarter of 2010 for two main reasons.

Firstly, during the fourth quarter of 2011 we completed the sale of La Alegria farm. The farm was sold at a 23% premium to our independent farm operation and generated an adjusted EBITDA of $8.8 million. The sale of La Alegria resulted in an investment with an internal rate of return of 23.2%.

Selling a portion of our mature farmland each year is an important strategy which allow us to capture and monetize the gains from land transformation in our P&L and cash flow. In addition, it provides support to independent farm operational leadership by Cushman & Wakefield.

The economics and returns of this sale were very similar to the sale of La Macarena farm in December of 2010. However, La Macarena farm generated adjusted EBITDA of $20.8 million because the farm was two times larger than La Alegria. Therefore, in absolute terms, adjusted EBITDA in the fourth quarter of 2011 was $12 million lower than in fourth quarter of 2010.

Secondly, I would like you to observe the chart on the right. In this chart you may see the month and accumulated rainfalls of the 2011 and 2012 year compared to historical averages. This data corresponds to the Humid Pampas region, Argentine's most productive farming region.

As you may see, compared to historical averages, the 2011/2012 harvest year has had extremely dry conditions during the months of November and December of 2011. The lack of rains mostly affected our early planted corn, which during the month of December undergoes plant flowering, a growth phase in which the plants water requirements is big.

The soybean crop was also partially affected, but yield impact was less meaningful. As a result of the drought scenario, as of December 31, 2011, we reduced the expected early corn and soybean first crop yields used to calculate the fair value of both of these biological assets. Hectares corresponding to these crops generating negative changes in fair value of $1.6 million compared to a $7.4 million gain generated in the fourth quarter of 2011.

The chart also shows that the critical drought situation ended during early January. As of mid-January and throughout the entire month of February, most of our productive regions received abundant rains exceeding historical averages, improving the general production outlook.

Let's move on to page 6, which shows the operational performance of sugar, ethanol, and energy business. Overall, our two mills crushed 4.2 million tons of sugar cane in 2011, 3% more than the previous year. This expansion in cane crushing was driven mainly by the ramp up of the Angelica Mill.

After a few years of fine-tuning of the equipments and going through the natural learning process, Angelica began the 2011 harvest year prepared to meet a full capacity of 900 tons per hour. However, lower-than-expected yields as a result of the drought and frosts that impacted the Brazilian Central South region during the first half of 2011 prevented our operational initiatives from showing the growth in milling we expected.

Production of sugar in 2011 increased by 5% while ethanol production decreased by 7%. Production growth was below our expectations as a result of the low cane yield and TRS content caused by the two weather impacts previously described. Moreover, the drop in ethanol production was also a result of the production mix favoring sugar production, which during most of the year was more profitable than producing ethanol.

Electricity production increased 46% in 2011. This growth is the result of the increased operating efficiencies of our core generation equipments at the Angelica Mill. Complimented by the fact that electricity production does not vary according to sugarcane TRS levels. It only varies according to the amount of cane crushed.

Moving on to page 7, on the left side chart you may see a breakdown of sugar, ethanol, and energy sales. Due to the lower yields and TRS content and the commercial decision of carrying sugar and ethanol stocks in the inter-harvest season, physical sales of sugar remained in line with those of last year while liters of ethanol sold were 33% below that of 2010. However, due to good commodity prices and Angelica's flexibility to take advantage of the record high prices of anhydrous ethanol during the start of the harvest year, the dollar amount of sales of both sugar and ethanol increased by 32% and 2%, respectively.

Regarding electricity, during 2011 we sold 245,000 megawatt hours to the local power grid, representing a 37% increase year over year, reflecting the increased efficiency of our cogeneration equipment. Electricity prices per megawatt hour were marked up 18% as a result of the inflation adjustment of our long-term contract prices and the slight appreciation of Brazilian currency since energy prices are denominated in local currency. Adding up, total sales of the sugar, ethanol, and energy segment were $277 million, 21% of our sales in 2010.

Moving to the chart on the right of page 7, adjusted EBITDA for the sugar, ethanol and energy business grew by 112% in 2011 from $51.7 million to $109.5 million. Adjusted EBITDA growth is mostly explained by the ramp up and the fine-tuning of the Angelica Mill complemented by better selling prices of sugar, ethanol, and energy. Adjusted EBITDA margin has increased from 25.3% to 42.3%, reflecting solid operational and financial performance and the quality and efficiency of our assets.

On the right chart of slide eight you will find the evolution of Adecoagro's sugarcane crushing since 2008. As you may notice, crushed cane had a considerable increase from 2009 to 2010, year in which Angelica started crushing at over 70% of its normal capacity. As a result of the climactic issues already mentioned, crushed cane in 2011 increased by only 3%.

Moving forward, we expect crushed cane to continue growing during 2012 and 2013 as we make full utilization of our 5.2 million tons of nominal crushing capacity and continue growing between 2013 and 2017 as we ramp up the Ivinhema Mill, which is expected to add 2 million tons of nominal crushing capacity in 2013 and gradually increase to 6.3 million in 2017.

As you may see on the chart on the left side of the page, complementing the expansion of our crushing capacity our sugarcane plantation has increased its size by a compounded annual growth rate of 26% since 2008 and during this year it has grown 21%. In addition to expanding our plantations, we have renewed and maintained our plantations adequately. Planting, growing, and harvesting sugar cane with high yields and sugar content to supply our mills is an important factor of our strategy of becoming a low-cost producer of sugar, ethanol, and electricity.

Our commitment and focus on growing and renewing our plantations will allow us to face the upcoming harvest years in great shape with sufficient cane to supply -- to fully supply all mills.

Now let's please move to page nine to analyze Adecoagro's consolidated financial performance for the period. Moving to the chart on the right, adjusted EBITDA for the sugar, ethanol, and energy business grew by 112% in 2011 from $51.7 million to $109.5 million.

Adjusted EBITDA for the fourth quarter of 2011 stands at $22.6 million, slightly below the fourth quarter of 2010 adjusted EBITDA. This is primarily explained by the unusually high amount of cane crushed during the last quarter of 2010, mainly as a result of the delay in the start of the 2010/2011 sugar cane harvest year, which led crushing to extend more than usual. Despite low sugar cane yields and sugar content levels in cane across all of Brazil, adjusted EBITDA margins for 2011 reached 42.3%.

Adjusted EBITDA for the Farming and Land Transformation businesses reached $65.7 million in 2011 and $8.1 million in the fourth quarter of 2011. On an annual, adjusted EBITDA increased by 3% primarily as a result of an increase in planted area; better coffee, rice, and wheat yields; and better selling prices across most of the commodities we produce. However, adjusted EBITDA corresponding to the land transformation segment was $8.8 million in 2011 compared to $20.8 million in 2010. This $12 million decrease partially offset the growth of the businesses adjusted EBITDA.

On a quarterly basis, the adjusted EBITDA of our Farming and Land Transformation businesses decreased by 77% from $35.9 million in 2010 to $8.1 million in 2011. As we mentioned on slide five, lower adjusted EBITDA is mainly a result of our $12 million decrease in our land transformation business and lower gains derived from the biological growth of our corn and soybean crops. On a consolidated basis, adjusted EBITDA reached $150.1 million, $54.9 million above 2010.

I would now like to move on the next slide to analyze the evolution of our adjusted EBITDA during the last five years. In order to understand our financial performance better it is important to analyze each business line separately.

Farming is our oldest and more mature business within the Company. As you can see in the chart, its adjusted EBITDA has been growing steadily year after year as the result of the transformation of our funds, the increase in productivity of our soils, and the expansion of our operations, except for fiscal year 2009, which reflects the impact of one of the worst droughts of the last 50 years in which our crops suffered yield reductions of between 15% to 20%.

The gains from land transformation generated are including in the Farming adjusted EBITDA because all of the farms sold have been transformed and put into production for farming activities.

Moving on the sugar and ethanol business, which should be analyzed into UMA and Angelica. UMA is the mature and stabilized mill in Minas Gerais, which, after investments in co-generation in 2009, is now operating efficiently and at full capacity.

Conversely, Angelica, the first phase of our class in Mato Grosso do Sul, finished its CapEx plan during 2010. As a startup, Angelica has been contributing negative results to the Sugar and Ethanol segment for the first three years. In 2010, the negative trend was changed as a consequence of Angelica made an efficient utilization on its nominal crushing capacity.

During 2011 the mill crushed 3.2 million tons of sugar cane, 75% of its nominal capacity, generating adjusted EBITDA of $88.3 million. We expect the adjusted EBITDA contribution of our Angelica Mill to continue increasing as the mill approaches its full capacity.

To conclude, as you may see in the slide, adjusted EBITDA has grown at 121% CAGR during the last five years. The most aggressive growth took place during the last two years in which our sugar, ethanol, and energy businesses started delivering strong operational results.

To finish with our financial overview, please turn to slide 11, which shows the breakdown of our net debt. Total outstanding debt currently stands at $360.7 million, 7.7% above the previous quarter, primarily as a result of the agreement that Adecoagro executed with the Inter-American Development Bank in which the IDB agreed to increase the amount of debt outstanding, reduce interest rates, and extend the average maturity of the loan.

Also, cash was deployed in capital expenditure related to the acquisition of farmland, the construction of the new rice mill and the free-stall dairy, and the investment in the construction of our sugar and ethanol cluster. Our cash position remains strong at $330 million to continue executing our short-term growth plans. As a result of these changes in debt and cash, net debt stands at $30.2 million.

Moving on to the next slide, we would like to go over one of the main investment projects relating to the farming business. Six years ago we realized there was a great opportunity in transforming vegetable protein into animal protein through a highly standardized large-scale milking model. After analyzing different production systems and technologies worldwide we came to the conclusion that the best way to produce milk was through the implementation of our free-stall dairy.

In 2007 we started the construction of the first free-stall dairy model which began operating in 2008. As you may see in the lower part of the slide, due to the higher efficiency of this model, during the last three years our free-stall dairy cows have been converting feed into milk at a ratio 43% more efficient than the cows at our grazing dairy. For every kilogram of feed grazing dairy cows were able to produce 0.96 liters of milk, while free-stall dairy cows were able to produce 1.36 liters of milk. As shown in the lower right chart, this feed to milk efficiency directly translating to higher productivity.

On average during the last three years, our free-stall dairy cow has provided almost 10 more liters of milk per day compared to grazing dairy cows. After successfully implementing this new milking model in Argentina, we have decided to start the construction of a second free-stall model. This new facility will have a capacity of 3,500 milking cows and produce approximately 125,000 liters of milk per day, over 45 million liters per year.

We expect the new dairy to begin operating during mid 2012 and reach full capacity in 2014. Total investment, considering equipments and cows, is estimated at $21 million.

I would now like to conclude the presentation showing the progress of the construction of the Ivinhema Mill in Mato Grosso do Sul. The construction of Ivinhema Mill is well advanced and on schedule. The first phase of construction in Ivinhema will have a nominal sugar cane crushing capacity of 2 million tons.

As you may see on the upper left picture, the boiler has already been delivered on-site and it's currently being assembled. The foundations and buildings of the sugar cane reception and milling processers have been completed and we expect to begin their assembly in May. Construction of the powerhouse and the foundations of the first generator, as well as the assembly of other parts of the sugar and ethanol processes, are also progressing according to plan.

We expect Ivinhema to undergo test runs in late 2012 and be ready to commence milling and production at the start of the 2013 harvest.

Thank you. We are now open to questions.

(Operator Instructions) Fernando Ferreira, Merrill Lynch.

Good morning, everyone. My first question is related to what is your estimate for yields, especially in Argentina, that you are assuming for the new harvest and that impacted your biological assets?

In that same regard, should we expect also the first-quarter results to be impacted with the same adjustment and biological assets given that we had more volumes in the first quarter? That is my first question.

Fernando, this is Mariano. To answer your question, we have reflected the losses of the drought as of December 31. So during this first quarter, of course we don't give guidance, but we are -- we will be subject to the average weather that we are having with the different crops that are already planted there.

Okay. Then my second question on the land transformation business; should we expect more sales of farms in Argentina even with the new farm regulation or not going forward?

Yes, you should expect more or less the same thing that we have been doing in the past years.

Okay. Thank you, Mariano.

Javier Martinez, Morgan Stanley.

I have three questions. The first one is following with a previous question on the drought and the impact we may see. So my understanding is that most of the impact is already accounted, so apart from the soy or late planting of corn, there is no more, no? There is no more this important impact that is going to be reflected in the first quarter, assuming normal weather from now on.

Exactly, normal weather is the case. Of course, we are starting to harvest and we will realize the exact yields as soon as we go over the harvest.

Good, good. So now on sugar and ethanol, a 43% margin plus that you are already aligned with the best mills in Brazil. I would like to understand or maybe you can help us to understand a little bit better two things.

First of all, on the short term you mentioned that you will increase cane crushing. What is the cane yield outlook for this year? Second, more in the long term, I want to understand the upside in margins through the cycle, obviously.

So what is your level of capacity utilization? What is the activity potential in the future with more volume? The $2 million you are going to include in 2013 or once you get the cluster synergies?

Javier, I am going to approach first your short-term question. Of course, our sugar cane plantations are within the average of Brazil, so Brazil in general you have heard that is reducing its sugar cane volumes for this year. And so that similar thing is what we could expect on our plantations. To offset a little bit of that, you can also see the amount of new hectares that we have been planting so that should be helping a little bit.

That is on the short term, and as we don't give guidance, we cannot say exactly what is the expected yields. But it has been a dry period during the summer and that is clear, but there is still a lot to come regarding weather for the whole sugar cane operation. That is the answer on the short term.

Mariano, sorry, just to -- so it's fair to assume that the new cane deals are higher and because of that part of this should be compensated?

Higher than last year?

No, because it's new cane, no?

Yes, in average should be. And if we compare to last year, last year we also had the impact of a frost that normally shouldn't expect that to happen again.

And on the long term -- Mariano, sorry.

On the long term I think there is a lot to come in terms of improvement. Other than the specific small synergies or a small improvement, small efficiency improvement in the day-to-day operation of Angelica that even though we are in line with [the West].

In terms of the efficiencies, we still have a young team that is evolving and we do expect more to come in terms of specific efficiencies in Angelica. But we also do expect that synergies coming from the cluster that [Ivinhema] is putting into production and all the benefits of the cogeneration or full cogeneration that we are having and that we have shown this year that are so important.

Marcello, do you want to add something on this regards both short and/or long term?

I would say, as Javier asked about upside in margins, that we had some very good results in 2011 and there is no (inaudible) [expect] much higher margins than that on the long run. (inaudible) very good for the sector -- for the history of the sector.

Regarding production for this year and in the future, we do see a better use and less typical (inaudible) adjusting bad weather from 2010 and the trough in 2011. So this year, even if we have some downside because of the current [drought] that affected those (inaudible) not going to be as [bad as last year].

Thank you, Marcelo. Also to ask, Javier, on your question, on the long run, and even in the medium run, one of the most important [emphasis] on the increase on the nominal capacity, we are still far away from 100% of nominal capacity.

This was my [final] question. I don't know if you can give an idea on the capacity utilization.

Yes, I think what we have used in the past is here we have for Angelica 4 million tons and we have milled -- 4 million tons capacity and we have milled 3.2 million.

Okay, clear. Mariano, finally, I would like to also ask you something on farming. I am trying to understand net asset value potential, so asking you a few questions related with that.

So, first of all, what is your perception on land prices in Argentina? Did the drought impact land prices or not because of the high commodity prices still we didn't see any impact? Second, can you quantify, once again please, the increase in the area you can crop in your current land portfolio? Also, how much incremental land you can put into production in the future?

Third of all, do you plan to keep selling land like you did every year in the past? Finally, would you [reset] your price out in mid-2012?

Sorry, finally?

So if you have the plans of keeping releasing on a price out middle of the year or something like that?

Okay. Sorry, again the first part of the question. There were four.

I am trying to understand your perception on, obviously, probably there is less land transactions in Argentina so it's good to have you there that you are an operator to have an opinion on the evolution of land prices in Argentina, because of the drought on one side. But on the other side we have strong commodity prices. So is land prices in Argentina being affected by the drought?

To me the answer is no. I don't see land prices being affected. We had our last appraisal release last September, so as of last September I don't see that being the case. We have seen some slight increases and quite a few transactions going on.

As always, in these last five years relatively small transactions in terms of the amount of money transacted. And I don't see, and I had never seen, the prices of land being affected by particular drought situation. The drought has also recovered, so I don't see any special thing on that first point.

On the second point, on the amount of hectares that we could potentially develop for that, we are continually developing in our current land portfolio. Those are 18,000 hectares, the ones that are in the first stage of development. Then you know that there are many other hectares that are on the second or third stage of their development.

Third point on whether we are going to continue selling land, the answer is, yes, we would keep the same pace that we have been having these years. That is our goal and we will continue doing the same thing with the already transformed land. When we think we are finding a better return on investment in another opportunity we are going to continue with our strategic sales.

And the fourth point, whether we are going to continue doing our independent operations, the answer is, yes, we will continue doing it once a year. And that will happen as last year in September and that is what we will continue doing every September.

Okay, thank you. Thank you, Mariano.

Rodrigo Mugaburu, Morgan Stanley.

Thank you very much. I have two questions. One, on the rice, as you mentioned by the end of the year rice prices were below last year and that affected the biological assets. Can you give us some idea how price evolved year-to-date and if this positive issue affect profitability first quarter of this year?

Then the second one is more on strategy. What would you say would be the next country in which you will buy land? Are you thinking of places like Paraguay or Colombia?

On your first question regarding prices of rice, we haven't seen an extreme change or we haven't seen much change on the rice prices from December till now. They are unique to take into account that the most important thing is the white rice -- the white rice price rather than the rough price. That is the one affecting the biological assets. But even at that level is that we haven't seen a lot of changes; that is why we shouldn't expect much surprises there.

And on the second part of your question regarding the strategy, the answer is we are looking a lot in Brazil as we have been looking. We think we had a vast pipeline there and we hope we can do something there, but, yes, we are also looking at Paraguay and Colombia as you mentioned. Those are the other two countries, other than Brazil and Uruguay, that we are currently there. I wouldn't say that we are seriously looking ahead of those two countries that you have mentioned.

Great, thank you very much.

Pedro Richards, Raymond James.

Hi, Mariano, Charlie, actually my questions have been answered, so thanks for the call.

Giovana Araujo, Itau BBA.

Mariano, on land prices I would like to know your views about how prices are evolving in Argentina versus Brazil, if you think the appreciation of the land in both countries will be more aligned or not.

Hi, Giovana. Good question. I don't have a clear answer to your question. I would say that in general both are going to be affected by the commodity prices. In terms of the liquidity and how it's going to evolve between Brazil and Argentina, as this level of prices that this one is, I would assume that they should be similar.

Similar. Okay, thank you.

I am not absolutely sure though.

Okay. And on the sugar and ethanol space, what is going to be your strategy on energy sales in Brazil? If prices in the upcoming auctions remain depressed, you will postpone sales or not?

We did postpone -- we didn't participate in the last auction and, as you know, spot prices are better today than what they were on the auctions of the last six months or something like that. We do expect the auctions to start improving and we do expect that there will be some division of the energy by results and maybe also some divisions by how is this co-generated.

Okay, great. Thank you, Mariano.

Pedro Richards, Raymond James.

Mariano, quick question. Following the low land in Argentina, do you see in the future risk of higher intervention of the government in the farming sector in Argentina, some changes in, I don't know, export taxes or export quotas or something like that?

I don't see further intervention. You know that there is intervention, as we have had in the last four or five years, so we don't see any incremental intervention there.

Okay, so you don't see any additional attempt to move in export taxes or something like that?

No, really no and I don't think that there is political room for that.

Excellent, excellent. Very clear, thanks.

(Operator Instructions) This concludes the question-and-answer section. At this time I would like to turn the floor back to Mr. Bosch for any closing remarks.

Okay, thank you. Before we end the call, I would like to make the following final remarks.

We are convinced that we are on the right track to continue generating value for our shareholders and the different communities where we operate. We will continue at full speed with the expansion of our plant in Mato Grosso do Sul. The success of our first mill has brought more confidence and experience to our teams who are doing a great job in putting together the Ivinhema Mill.

During 2011 we acquired 13,000 hectares with high transformation potential and sold 2,500 hectares already developed. 2012 is also a year full of challenges for our Farming and Land Transformation businesses. We will continue expanding our rice and dairy operations in Argentina, our crops in Brazil, Uruguay, and potentially other countries as they were mentioned.

Our teams are highly motivated to continue performing and delivering results, and at the same time we maintain good working environment with focus on an economic, social, and environmental sustainable production.

Before we end the call, I would like to encourage you one more time to learn more about our company and visit us. We have an intensive IR program for 2012 and look forward to seeing many of you. So thank you very much for joining us today.

Thank you. This does conclude today's presentation. You may disconnect your line at this time and have a nice day.