Adecoagro SA (AGRO) 2015 Q2 法說會逐字稿

Good morning ladies and gentlemen. Thank you for waiting. At this time we would like to welcome everyone to Adecoagro's second-quarter 2015 results conference call. Today with us we have Mr. Mariano Bosch, CEO; Mr. Charlie Boero Hughes, CFO and Mr. Hernan Walker, Investor Relations Manager.

We would like to inform you that this event is being recorded and all participants will be in a 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 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 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.

Good morning everyone and thank you for joining our call. I would like to start mentioning that as you all know, prices for all the commodities we produce are experiencing a weak cycle portraying a difficult scenario for oil commodity producers. It is in this (inaudible) context where our focus on strategy of being the lowest cost producers pays off).

Since we founded this Company, we have been determined to produce and sustain our production model each group in the right location where the combination of agricultural conditions such as quality of soil and weather together with our operational efficiency will allow us to become the low cost producers for each of the commodities we produce.

In our sugar, ethanol and energy business, our operational efficiencies are improving day by day. We have put together a great team that is motivated and determined on being the most efficient and low cost producer in Brazil and I am comfortable to say we are on the right path.

In this quarter we are reporting significant improvements in our agricultural and industrial operations. Our sugar cane yield has reached 100 tons per hectare and also improving its sugar content. Our cane milling per day has increased over 20%. As we always say in cogeneration, we are one of the most efficient producers in Brazil exporting 65 kilowatt hour per ton of cane crushed and that is even higher than last year and we continue to improve. This same enhancement can be seen in every part of the operation such as efficiency in harvesting, transporting, planting, etc.

In our crops and rice operation, we focused on achieving the highest efficiency on a hectare per hectare ratio. This includes implementing best practices and technology such as no till, crop rotation, integrated pest management, [balanced fertilization] among others. But overall it is our operational teams' focus on efficiency that is the key increasing productivity and having the lowest cost of production.

In our dairy business over the last five years we have developed a revolutionary large-scale milking technology in Argentina after two years of fine tuning and (inaudible) the (inaudible) production system this quarter we achieved our target of 35 liters per cow per day which leads us to focus on even more challenging goals. We are very proud of the assets and management teams that we have been able to consolidate. I am satisfied with the operational results obtained thus far.

Despite operating in this adverse scenario, our low-cost strategy and focus on efficiency has allowed us to still generate good results. Most importantly, we are very optimistic about the future. On top of these great teams and assets we have completed our growth CapEx cycle on time and now we are confident we will reap the benefits of the investments made and start generating attractive cash flows.

Now I would like to ask Charlie to walk you through the main operating and financial highlights of the quarter. Charlie, please go ahead.

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

Let's start on page 4 where I would like to comment on the weather conditions in our cluster in Mato Grosso do Sul. As you may see in the chart during May we suffered an excess of rain which caused logistics and operational disruptions which were later compensated by a very dry June which allowed us to accelerate the pace of harvest. Overall weather during the quarter was well in line with the historical average.

Moving on to the next slide, I would like to focus on sugarcane milling. During the second quarter of 2015, our mills crushed 2.9 million tons of sugarcane compared to 2.1 million tons in the second quarter of 2014. This 36% increase is explained by two main factors. Firstly, milling per day increased by 22% as a result of the ramp up of capacity at the Ivinhema mill together with higher milling efficiencies in all of our mills. And secondly, (inaudible) milling days increased by 11% primarily by the (inaudible) commissioning of the Ivinhema mill.

On a year-to-date basis, sugarcane crushing raised 3.4 million tons, 54% higher year-over-year. In addition to the drivers I just explained for the second quarter, the cumulative growth reflects our strategy of accelerating the start of the 2015 harvest in each of our mills in order to extend the (inaudible) zone and increase annual sugarcane crushing. This will allow us to enhance our margins and dilute our costs. This strategy was reportedly by our focus on minimizing the inter-harvest (inaudible) but most importantly by the increase in sugarcane availability.

Let's now shift your attention to page 6 where I would like to highlight a few agricultural productivity metrics. Over the last couple of years we have focused on training and strengthening our agricultural team and improving our agricultural efficiency. Some specific areas we focus on with very good results include, effective implementation of pest controls, selecting the best sugarcane varieties of the regions in terms of yields and (inaudible) risk potential, allowing sugarcane to reach optimal growth before harvest and refinancing sugarcane each year to renew and maintain the productivity of our plantations. These operational improvements are starting to show on our productivity metrics.

As you may see in this chart, our sugarcane yields in the quarter have increased 26% while TRS increased by [7%]. These two factors combined have resulted in a 34% increase in TRS per hectare.

The same trend can be seen in (inaudible) productivity for the first six months of the year where TRS per hectare has increased 31%.

Next, move to slide seven. Sugarcane ethanol output boosted in the quarter driven by the increase in sugarcane milling and the higher TRS. Shown in the top chart, sugar production increased to 174,000 tons making up 56% increase over the second quarter of 2014. Regarding ethanol, production stood at 113,500 cubic meters representing a 35% increase compared to the same period of last year. Overall this represents an increase of 44% in total production measured in terms of TRS equivalent.

Turning to slide eight, I would like to comment on cogeneration. In the top chart, you may see that exported energy or in other words the energy which is sold through the grid increased by 79% year-over-year and by 71% on a year-to-date basis. The growth in cogeneration is explained by two main factors.

First of all, the consolidation of the [tractor] has resulted in higher cogeneration efficiencies. As you may see in the bottom chart, exported energy per ton of crushed reached 65 kilowatt per hour ton in the second quarter of 2015, 32% higher than the same period of the previous year. This is one of the highest cogeneration ratios in the industry and we believe there is still upside for improvement.

Secondly, the ramp up of the Ivinhema mill have expanded our milling capacity and boiler capacity.

If you could please turn to slide nine, I will proceed to commence on ethanol [savings]. (inaudible) the chart in the middle, ethanol savings during the second quarter of 2015 were affected by weak prices. Ethanol prices were affected by the seasonality of the harvest as mills in the Center-South of Brazil started crashing (inaudible) supplier of ethanol in the market.

In addition, most mills have been maximizing ethanol production even shorter cash conversion cycles. Average hydrous prices in the second quarter of 2015 denominated in local currency decreased 1.3% compared to the previous year and 6.2% compared to the first quarter of 2015. In dollar terms, prices were also affected by the devaluation of the Brazilian real. As a result of these two factors, our realized price in dollar terms were 30% lower year-over-year.

It is worth mentioning that during 2015 there has been a strong demand of hydrous ethanol mainly driven by the increase in gasoline prices. Hydrous ethanol consumption in Brazil year to date has increased by 43% but production has only increased by 16%. As a result of this scenario in early June, we decided to minimize ethanol sales and begun storing ethanol in our reservoirs in order to capture more attractive prices in the retail harvest season.

This explains why our (inaudible) volumes increased only 24% compared to production growth of 35%. On the chart on the right-hand side you can see how our inventory levels have increased as a result of this current strategy. Ethanol inventories grew by 68% reaching a total of 66,400 cubic meters which represent [59%] of accumulated production compared to 47% in the second quarter of 2014.

Now let's please turn to slide 10 where I would like to discuss our sugarcane. If we take a look at the graph on the left and we see that our sugarcane volumes during the second quarter of 2015 totaled 122,400 tons marking a 63% increase compared to the second quarter of 2014. The increase in volumes the result of three main factors.

One, our 36% increase in sugarcane milling. Second, a 7% increase in TRS. And third, a slight decrease in sugar inventories measured as a percentage of accumulated production shown on the chart to the far right.

As you may see on the chart in the middle, the increasing volumes were partially offset by lower sugar prices. As a result of the global sugar (inaudible) and weak sugar cycles, our realized sugar prices in the second quarter of 2015 were an average 19% lower than the prices in the second quarter of 2014.

On the left, total sales in the second quarter of 2015 reached 39 million, 32% higher year-over-year.

Now let's please turn to slide 11 where we like to discuss energy sales. As you may see in the top left chart, hydroelectric power in Brazil continues to suffer from the lack of water. [More than ever], (inaudible) remain at five year lows. Despite this situation on November 25, 2014 the Brazilian National Energy Agency decided to lower the ceiling price of energy from 822 reals to 388 reals per megawatt hour. Forward energy prices during the quarter traded at a price cap as you can see in the top right chart. Therefore as you may see in the chart below, priced at 79% growth in volumes, our net sales grew by 31%. Our realized prices in dollars were also affected by the devaluation of the Brazilian real. Year-over-year prices decreased from $126 per megawatt hour to $92.

Let's move to slide 12 where we can see the overall financial performance of the sugar, ethanol and energy business. Total net sales during the quarter reached $86 million, 12% higher than the same period of 2014. As explained during the previous slides, the growth is mainly explained by the increasing sugar and ethanol volumes and partially offset by lower sugar ethanol and energy prices.

Adjusted EBITDA during the period increased from $36 million in the second quarter 2014 to $41 million in the second quarter 2015. Adjusted EBITDA margins in the same period expanded from 46% to 47%. This growth is explained primarily by higher sales, higher agricultural productivity which resulted in fixed cost dilution and partially offset by low prices.

Now let's turn to slide 13 to get an overview of our sugar hedge position. As part of our risk and commercial strategy, we mitigate price volatility by forward hedging our cost in the forward and derivative markets. Despite the weak commodity price environment, our commercial team has been able to hedge prices above current market prices protecting the Company's cash flows.

For June 30, 2015, we had 390,000 tons of sugar from the 2015 and 2016 harvest hedged at 15.5% per pound of sugar equivalent. Futures contracts at the time were operating at $0.127 per pound therefore the mark to market of the position generated a gain of $12 million which is mostly realized.

Related to the 2016 and 2017 harvest (inaudible) at June 30, we had 115,000 tons of sugar hedged at $0.146 per pound of sugar equivalent. Futures contracts at the time we are trading at $0.139 per pound, thus generating an unrealized gain of net position of $1.8 million.

Before moving on to other businesses, I would like to comment on our sugarcane planting activities on slide 14. As you can see on the left-hand chart, our sugarcane plantation has been consistently growing year after year at an average growth rate about 10%. We currently have 127,700 hectares of sugarcane planted. In addition considering the consistent increase in agricultural yields over the rest of the year, we are very close to reaching a stabilized plantation size which would allow us to supply our 10 million pounds of nominal crushing capacity. This explains why sugarcane planting has slowed down in the second quarter of 2015 compared to the previous years as you may see on the chart to the right.

Let's now move on the farming business. We will now turn to slide 16 of the presentation where I would like to give an update on the harvest of our most relevant crops. Implementation of our sustainable crushing model together with best practices such as crop rotation and no till among others coupled with excellence in execution has allowed us to achieve high yields despite adverse weather in the year.

As you can see on the top left chart as of July 2015, the harvest of soybean first crop are fully completed. Average yields achieved were 10% higher than the previous harvest season. This allowed us to produce over 200,000 tons of soybeans. The harvest of soybeans second crop was also completed. Average yields reached 2.4 tons per hectare, 26% above the 2013 and 2014 harvest years.

High productivity was driven by executing an efficient planting schedule. In the case of the corn crop as of the end of July, total harvested area for early and late corn totaled 23,000 hectares or 74% of the total planted area. The average yields obtained so far were 6.2 tons per hectare in line with the previous season.

As you may see in the pie chart in order to diversify our coverage and water requirements, approximately 29% of the corn was planted early in September whereas the remaining 71% was planted during November and December. The harvest is expected to be completed during the third quarter of 2015 and we expect corn yields to remain in line with current levels.

Lastly in the bottom right graph, you can observe that as of the end of July the harvest of sunflower was completed producing over 20,000 tons. The average yield was 1.8 tons per hectare in line with the previous harvest year.

Let's move to page 17 where I would like to walk you through the financial performance of our farming business.

In the case of crops, adjusted EBIT has decreased by 53% to $0.2 million. The reduction is primarily explained by $7.9 million mostly unrealized loss generated by the mark to market of our commodity hedge position, the year-over-year fall in commodities and the (inaudible) Argentina that have more than offset the nominal depreciation of the Argentine peso resulting in an appreciation of the currency in real terms which increases our costs measured in dollars and putting pressure on our markets. These effects were partially offset by higher yields in most of our crops.

Regarding the rice business, the 67% fall in adjusted EBIT is mainly explained by the combination of lower yields due to adverse weather and higher costs in dollar terms driven by the appreciation of the Argentine peso in real terms. In the dairy business, we delivered solid operational performance in the quarter and were able to capitalize the benefits of the consolidation of our [three-stall] facilities reaching our target level of 35 liters per cow per day. Consequently milk production volumes increased 14% year-over-year driven by a 9% decrease in productivity and a 5% growth in our dairy cow herd. Again, strong productivity were offset by lower milk prices on higher costs measured in dollar terms resulting in an 8% decrease in adjusted EBIT.

On an aggregate basis despite higher productivity in our crops and dairy segment, consolidated EBIT decreased by 94% in the second quarter of 2015 and by 54% in the first six months of 2015 for the reasons I have just explained.

Let's turn to page 18. As previously noted, we generated a $7.9 million realized loss related to the mark to market of our soybean and corn hedge position. This was the result of the (inaudible) experienced by soybean and corn prices during the end of June. The increase in prices responded to lower than expected grain crops in the United States coupled with excess rainfalls that created uncertainty regarding planted areas and yields. As you can see in the top chart as of June 30, 165,000 tons of soybeans related to the 2015 and 2016 harvest were hedged at $10.06 per bushel. The price of soybeans July futures contract as of June 30 was $10.14 per bushel generating a mark to market loss.

In the case of corn, 141,000 tons of porn were hedged at $4.36 per bushel compared to the contract future price of $4.46 per bushel as of June 30 also generating a mark to market loss.

I would like to highlight that since mid July soybean and corn future prices have reversed and are now quoted at the same levels as before the [running] commenced. As a result the mark to market loss in the second quarter has been reversed.

Let's now turn to page 20 and show the evolution of Adecoagro's consolidated operational and financial performance. On a consolidated basis, net sales decreased year-over-year from $197.5 million in the second quarter of 2014 to $164.6 million in the second quarter of 2015. The 17% decrease is primarily the result of lower price coupled with lower selling volumes in the crop segments explained by the late corn harvest.

Adjusted EBITDA in the second quarter of 2015 totaled $39.5 million compared to the $72.8 million in the second quarter of 2014. The $33.3 million gap in the financial performance only explained by the absence of a (inaudible) sale in the current quarter compared to the $25.6 million gained last year and the $7.9 million unrealized loss booked in the second quarter of 2015 related to the mark to market of our commodity hedge position compared to the $7.7 million gain in the second quarter of 2014.

Let's move on to page 21. As you may see on the top left chart, our gross indebtedness as of June 30, 2015 stands at $785 million where net debt stands at $622 million. I would like to highlight that 71% of our debt is long-term composed mainly of loans from multi-levered banks such as the (inaudible) at very competitive rates as you can see on the bottom left chart.

Finally, let's move to page 22 where I would like to comment on CapEx. As anticipated in our first-quarter 2015 conference call, total CapEx is expected to slow down during 2016 driven by the completion of the Ivinhema mill and the consolidation of our sugarcane in Mato Gross do Sul. You can already see the downward trend reflected in the current quarter. Capital expenditures during the six-month period ending June 30, 2016 reached $96 million, 49% lower than the same period of 2014.

As of today no major growth projects have been committed for 2016 and forward. Therefore, we expect CapEx to consist primarily of maintenance related to the sugar and ethanol business. This includes advancing of sugarcane to renew our implementations and the (inaudible) and agricultural equipment. We expect CapEx to range between $140 million and $160 million in 2015 and between $70 million and $80 million in 2016.

The combination of decreasing CapEx and increasing cash generation, we allow our (inaudible) to become cash flow positive by year-end and start generating attractive areas of cash flows starting in 2016.

Thank you very much for your time. We are now open for questions.

(Operator Instructions). Thiago Duarte, BTG.

Thank you very much. Good afternoon or good morning, everybody. I have two questions. The first one in Argentina, I would love if you could share your thoughts on the upcoming elections and what kind of impact that you believe -- of course depending on the results -- but what kind of impact you believe that could have in your business going forward? And still on Argentina, any update on land monetization if you have seen any change in the land market in terms of liquidity or prices or anything that you believe might change the base in which you have been monetizing land over the last years? That would be the first question.

The second one is based on your very last comment regarding cash generation and leverage. Can you share with us a little bit on your thoughts of how much cash you expect to be able to generate under the current price environment for this year, next year and what your leverage target is right now considering the current environment in terms of net debt to EBITDA? Thank you very much.

This is Mariano. I am going to take the first part of the question regarding Argentine election and the impact on our business. Simply taking into account what all the candidates are saying, it is clear that for our specific business any candidate should be better than what we have. So it should be beneficial for the business in which we are in. So that is the first part of your first question.

Then on the second part regarding the land sales and what we expect to do in this current year, I would say that we continue to focus on potential sales on the already developed farms so that is something we are currently marketing. And depending on the specific opportunities if there is a potential buyer that is willing to pay a price at which the future cash flows would not be attractive enough for us, in that case we are sellers. Because a return of that asset is not good enough and we will be able to reallocate that money into something more attractive.

So we continue to expect a sale as we have been doing in the last 10 years. We see the market in a very similar situation that it has been in the last three, four years so we don't expect changes regarding what we have been doing in the past.

So that is for all the Argentine parts of your question.

Then regarding the cash generation and our expected debt, Charlie, would you like to take that part of the question?

Sure. As we have already said, we are finishing our CapEx plan for this year and now commissioning our CapEx for 2016. Having said this, we are expecting to generate cash as we continue with our efficiencies and milling of the fuel and ethanol business so by the end of the year we are expecting to finish the year with a net debt EBITDA ratio around 2.7. Obviously this will depend on our current strategy and some other things.

In terms of cash generation for 2016 if we consider the consensus, the EBITDA by the end of this -- minus the taxes and CapEx and interest that we are expecting to spend in 2016, we are estimating to generate a free cash flow after CapEx in a range of $90 million to $120 million for next year.

Thank you very much. Just two follow up questions on your comments. First, on the economics of the business in Argentina, of the farming business in Argentina right now, what do you see as the economics of that business? You mentioned that you would go for further land sales if you think that the economics is not making much more sense or anything like that. What do you think of the economics given how depressed prices for most of your commodities are right now? That would be the first follow-up question.

The second one is basically on this cash flow and you mentioned the consensus figures for the year, how challenging or comfortable are you with those estimates right now for cash flow for this year and next year based on the consensus figure that you mentioned? Thank you.

Taking the first part of your question, we expect margins for next year improving compared to this current year compared to what we are harvesting right now and that will depend on how much we can adjust costs of the planting that is where we are right now with that situation.

As an example, the cost of glyphosate is being 20% lower than last year at the same time in dollar terms. So we are reducing 20% price in that specific input. And in planting for example that more (inaudible) and part of the problem is that the Argentine peso is too strong. We are also reducing in dollar terms between 12% to 20%. So in every single line of our cost lines we are reducing this plating season compared to last year's planting season so that is why we are optimistic on margins for the following year even at this level of commodity prices.

On top of that if you assume any kind of devaluation in Argentina, that will of course benefit that in a much more extreme numbers than I was just mentioning. So that is the first part of your question.

Going to the second part on the cash flow generation and how comfortable we are, basically of course you have to consider whether on prices but on the variables that we do control looking at what we have done and the achievements that we have done, it is very comfortable on the efficiencies and productivity. So I would say that in terms of (inaudible) and cash generation for both 2015 and 2016 we feel very comfortable.

Thank you very much to both of you.

(Operator Instructions). (inaudible), EMS Capital.

It is Edmond Safra from EMS Capital. I was just wondering how the recent floods in Argentina may have affected production in general and the [progress] specific?

Thank you for your question. According to where we have the farms and where floodings have occurred, we are almost not affected by the flooding. It is only 1% of the area of all our planted and future planted area that has been affected. So I would say that we are not affected in terms of the flooding.

The positive thing here is that we started the season with all the moisture of the soil full of moisture so we are in a situation where we can expect a good year because of having the soil full of the moisture and water.

Okay, great. Thank you.

Viccenzo Paternostro, Credit Suisse.

Hello, everyone. Thanks for the questions. My first question is regarding the sugar and ethanol business in Brazil. We have seen low ethanol price and actually also low sugar pricing in the international markets. I don't know whether you can comment on what is your view on profitability in the short term and medium term when do we expect any sugar price recovery or more specifically on volumes, when do you expect (inaudible) to get back to full production activity? So my first questions are related to the sugar and ethanol business.

My second question is regarding the potential impact of the El Nino. So I don't know if you have any view on what could be the impact of El Nino on yield or for the (inaudible) both in Brazil in the sugar and ethanol in also in Argentina for grain? So that would be my two questions. Thank you.

Thank you for your two questions. Regarding your first questions on sugar and ethanol and the difficult price scenario that the industry is having, we are very convinced on our strategy of being low-cost producers. And as Charlie mentioned in detail in each one of our operational metrics, we are doing within the best in each one of these environments so that is why we are convinced that even though the industry is going through a very difficult situation, we are doing very well in terms of cash flow that we were projecting. So that is why we are so committed to our ethanol industry and how well we are performing there.

On top of that, the current devaluation that happened in Brazil is helping us in all our cost of the commodities that we are producing from the sugarcane. So that is why we are convinced we will be able to generate what we are projecting.

And regarding the full capacity of Ivinhema, we are currently almost there so with all the CapEx to produce in an hourly basis so next year we feel very comfortable that we should be there in terms of full capacity. That is regarding sugar and ethanol.

Going to your second question on El Nino, the effect on our Company of El Nino, if El Nino is [coming] and occurs, we would have higher yields or better yields in terms of sugarcane production but we could potentially have more difficulties in terms of crashing all that capacity because of the more rainy days. That is why we started earlier in the season and that is why we are lengthening our harvesting season. So that is El Nino for our sugarcane production.

El Nino for crops in Argentina I would say that in general terms has happened in the past, more moisture in the humid (inaudible) on our productive areas of soy and corn are positive in terms of yields. So that the complete effect on El Nino in our Company.

Perfect. Thank you.

Rodrigo Mugaburu, Morgan Stanley.

Thank you. Good morning. One follow-up question on the weather. The recent rains in Argentina, did they affect the planted wheat, the current 2015, 2016 planted wheat?

And then the second question also related to wheat. If I will see the hedged volumes that you have of the 2014, 2015 season roughly 30,000 tons out of a production of around 84,000, 85,000 tons. So if I am right there is a 50,000 tons missing or not sold yet. That is because of the difficulties to fill the wheat in Argentina or you are just holding and waiting for the changing government. I wanted to understand a little bit better the strategy there? Thanks.

Rodrigo, one question. Regarding the wheat, the moisture in Argentina and the floods in Argentina regarding wheat are you asking about the market or are you asking about us in particular?

No, the area that has been already planted.

Now in the areas I mentioned before in the area of (inaudible) is less 1% that has been affected and if wheat is within the same, only 1%. So I would say it is not affected at all and all the areas of wheat are with very good moisture so we should expect a good yield in terms of wheat. So that is particular for (inaudible).

Then for the market and how we are hedged and how this affected the price of the wheat, I would ask Marcelo Sanchez, our Commercial Director, to answer that part of your question.

Regarding the remaining wheat that we do have still on hedge is part of our strategy of having it segregated as per quality. That is not something that we are playing with the government or any changes in the government allowance structured for exports.

And regarding the impact of the flooding and the overall wheat area in Argentina, we have received the (inaudible) report with the expectation of the planting is below last year in an average of 28%, 29% below last year planting and the effect on the flooding as per some of the guys that we have been talking to is something around 200,000 hectares in total in the Buenos Aires province.

Okay, thanks, Marcelo and Mariano.

(Operator Instructions). Showing no additional questions, 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.

We do have an additional question come in so we will take that from (inaudible) EBS Capital.

^

Edmond Safra again. I wanted to know if you have any acquisition plans in Brazil given the distress of many other producers and the fact that you are going to become cash flow positive very soon?

As we always say, we always say analyzing potential opportunities and we do have a pipeline of things that we are analyzing. But we are always focused on the return on investment that we can achieve from there and with the positive cash flows that we will be generating, we are going to be always analyzing the best return on investment and we are going to maintain our strategy of looking for the best return on investment that we can achieve and that includes analyzing all the different options within these potential opportunities in the different current businesses that we have including giving back the money to the shareholder.

So those are the different ways on how we analyze what we are going to be doing with future cash flows that we will be generating.

Okay, thank you.

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

Thank you everyone for joining the call on our sugar and ethanol business. We are in the middle of the harvest and it is very important for us to continue to be focused on all the efficiencies that Charlie just mentioned so we are committed to be the low-cost producers of these three commodities we are producing there.

Regarding the farming business, again, we are starting our planting season and it is very important for us to negotiate every cent that we will be investing in our new crops. So we will maintain our commitment to be again the low-cost producers in these commodities.

So thank you for turning the call and hope to see you in our next event on the IR calendar.

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