Adecoagro SA (AGRO) 2021 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 2021 Results Conference Call. Today with us, we have Mr. Mariano Bosch, CEO; and Mr. Charlie Boero Hughes, CFO. We would like to inform you that this event is being recorded. (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'll turn the conference over to Mr. Mariano Bosch, CEO. Mr. Bosch, you may now begin your conference.

Good morning, and thank you for joining Adecoagro's 2021 fourth quarter results conference. Once again, in 2021, the company has delivered strong operational and financial results, as you may have seen in our report. In numbers, we made record sales in excess of $1 billion, almost $440 million in adjusted EBITDA and generated over $150 million in adjusted free cash flow from operations. Also as anticipated throughout the year, we distributed part of the results generated back in 2020 to our shareholders via our share buyback program. During 2021, we repurchased 6.2 million shares, more than 5% of the equity of the company. In 2022, as part of our distribution policy, we will distribute $35 million in dividends and continue repurchasing shares under our buyback program.

Now I would like to give you some highlights on the results of the different business segments. In our Farming business, during 2021, we produced over 1 million tons of grains that we conditioned and shipped to different customers across the world. In our daily operation, we reached a record high production of 0.5 million liters of raw milk per day that we process in our own facilities to produce high-quality value-added products, which are demanded both in the domestic and export markets. In our Sugar, Ethanol and Energy business, we achieved crushing volumes in line with the previous year. The high degree of flexibility we have in our mills to produce the product with the highest marginal contribution and the strategic decision to maintain our hedging levels low allowed us to maximize returns.

Our sustainable production model includes recycling of pipe products like the concentration of vinasse that is transformed into fertilizer, replacing approximately 35% of our needs. This had an important impact in 2021 to mitigate the overall increase in production costs, and we expect that such benefit will be much more relevant during 2022, where we are already seeing a lack of potash fertilizers in Brazil. In this sense, our sustainable production model will provide for more than 95% of our potash requirements every year. We are strongly committed to improving the efficiency and sustainability of our operations. As you may remember, 2 years ago, Adecoagro became the first company to commercialize carbon credits under the RenovaBio program. And this year, we became the first company to be certified to issue natural gas certificates. We are proud of the work on this front and of being able to monetize our sustainable production practices.

In the case of the RenovaBio program, we will produce 1 million Cbios, which under current price of $20 per CBio will generate an additional result of $20 million. Environment, social and governance awareness have always been part of our DNA. During 2021, we formally created an ESG committee that will focus on the development of all these aspects as part of the company's overall strategy. With regard to the current market outlook, we are in an excellent position to benefit from the higher prices of all the products that we produce, our harvest season is underway and the development of our crops are looking well. At the same time, more than 70% of this year's production remains unhedged and a 100% of the inputs have been purchased and applied.

In addition, in view of a potential scarcity of inputs, we have secured more than 50% of our needs for next season. As part of our strategy to become more efficient and enhance our rice operation, we encountered a very attractive opportunity to enter into the Uruguayan rice production, a country that is a historical reference in the production of high-quality rice. We signed an agreement to purchase the rice operations of Viterra. The transaction is expected to generate IRRs above 30% and over a $10 million contribution to our adjusted EBITDA. To conclude, I want to reiterate my gratitude to all our employees, contractors and stakeholders for their hard work and commitment. I am confident in the team we have and the company we built, which has proven great resiliency and capacity to generate returns.

Now I will let Charlie walk you through the numbers of the year.

Thank you, Mariano. Good morning, everyone. Let's start on Page 4 with a brief analysis on the rains in Mato Grosso do Sul. As seen on the top tables, rains in our cluster during the fourth quarter of 2021 were 4.3% lower than during the same period of last year and 15.6% below the 10-year average. After a very humid month of October, starting in November, rains in our region were lower than the average for the lease time of the year. It is worth pointing out that during March rains have returned to average levels favoring the recovery of our sugarcane plantation.

As we had anticipated, diverse weather conditions that impacted Brazil's main productive areas throughout the year, caused a reduction in sugarcane availability towards year-end, resulting in an early start of in the harvest season for all players in Brazil's sugar and ethanol industry. Thus expectations for the 2021 and '22 season point a total sugarcane production of 525 million compared to the 608 million tons in the previous harvest year. Evidently, the reduction in supply generated a positive impact in the prices of sugar and ethanol, which we were able to capture, thanks to our production flexibility and to our hedging strategy.

Before turning to the following slide, I would like to briefly comment on our expectation going forward. Although current water conditions in our cluster are good, we foresee below average agricultural productivity indicators during the first semester of the year, given the lagging impact of 2021's adverse weather. Nevertheless, our recovery in productivity towards the second half, along with strong prices, should continue to drive solid results. We are in a good position to keep on capturing the increasing prices as 76% of our expected sugar production and 100% of ethanol production related to the '22 and '23 campaign remain unhedged.

Now let's continue with Slide 5, where I would like to discuss our sugarcane crushing strategy. In the last quarter of 2021, our crushing volume decreased by 50.4% year-over-year due to both weaker agricultural productivity indicators and lower sugarcane availability. The latter was explained by the fact that during the third quarter of 2021, we accelerate in harvesting activities as anticipating area was critical to minimize the impact of the frost in our sugarcane plantation. Therefore, despite having a continuous harvest model in place, by beginning of December of 2021, we entered into the interharvest period.

We expect to resume operations in March 2022, making this a short interharvest period compared to other players. On an annual basis, crushing volume reached 10.9 million tons, marking a slight decrease of 1.5% compared to 2020, even though agriculture productivity indicators presented a decrease of approximately 15%. Despite the challenges presented by the weather during 2021 to mitigate the damage we accelerated our harvesting pace, anticipated the purchase of 5 2-line harvesters and 3 1-line harvesters and were able to enter into 15.5% more area, thanks to our ongoing strategy of expanding our sugarcane plantation.

Please jump to Page 6, where I would like to walk you through our agricultural productivity. During the fourth quarter of 2021, yields were down 20.4% compared to the same period of last year, reaching 65 tons per hectare. Moreover, TRS per ton decreased 12.2% year-over-year to 120 kilograms per ton. The combined effect in yields and TRS content resulting in TRS production per hectare of 7.9 tons, marking a 30.1% reduction year-over-year. The lower-than-expected agricultural productivity indicators were fully explained by the adverse weather conditions as most of the harvested area was still below optimal growth stage. Looking at the full year, the year-over-year reduction of 13.3% in sugarcane yields and 15.7% in TRS per hectare is fully explained by both the third and fourth quarter dynamics. Nevertheless, the decrease in agricultural productivity indicators was almost fully offset by a 15.5% increase in harvested area, as mentioned before.

Let's move ahead to Slide 7, where I would like to discuss our production mix. Both hydrous and anhydrous ethanol traded at an average price of $0.202 and $0.222 per pound so equivalent during the fourth quarter, marking a 3.8% and 14% premium to sugar, respectively. It's worth highlighting that we have the flexibility to increase ethanol production, the product that was offering a premium as we remained at the low end of our sugar hedged throughout 2021 and thus, had low volumes committed. As a result, we diverted 93% of the TRS to ethanol to profit from higher relative prices during the fourth quarter. Out of our total ethanol production, 64% was anhydrous ethanol compared to 40% during the same period of last year. This was possibly thanks to the recent incorporation of our molecular sieve in Ivinhema, which increased our dehydration capacity in 50%.

Nevertheless, total production of both ethanol and sugar was lower compared to the fourth quarter of 2020 due to lower crushing even though this was more than offset by higher prices. Production mix for the full year favored ethanol to which we diverted 62% of TRS compared to 56% in the previous year. Thus, volumes produced for sugar decreased 15.5% on a year-over-year basis, whereas ethanol volumes increased by 6.5% compared to 2020. And hydrous ethanol during the year amounted to 45% of total ethanol production compared to 37% during the same period of last year.

In 2021, we maximized super production during the first quarter to benefit from higher relative prices and switched to ethanol during the rest of the year. The opposite was observed in 2020 when we maximized ethanol during the first quarter, then switched to sugar as ethanol prices plummeted in light of the pandemic, went back to maximizing ethanol in the third quarter and then return to sugar maximization in the fourth quarter. This high degree in flexibility constitutes one of our most important competitive advantages since it allow us to make a more efficient use of our fixed assets and profit from higher relative prices. In 2021, ethanol accounted for 62.2% of total adjusted EBITDA generation in the Sugar, Ethanol and Energy business, considering other operating income, while sugar accounted for 29.8%.

Please turn to Slide 8 where I would like to comment on our energy production strategy. As you know, Brazil's energy metrics is heavily reliant on hydroelectric energy due to the prolonged period of dry well in the Central South region of Brazil, the average level of water and reserves for 2021 ended 33.3% lower compared to last year. Thus average spot prices increased from BRL 117 per megawatt hour in 2020 to BRL 220 per megawatt hour in 2021. To profit from this situation, we increased our energy production by burning bagasse, both owned as well as purchased from third parties, wood chips purchased from third parties and sugarcane straw collected from the field. Our higher energy production enabled us to participate in high-margin operations as well as we'll see next. As a result, exported energy totaled 731,000 megawatt hour, marking a 1.8% increase compared to 2020, whereas our cogen efficiency ratio was 3.3% higher.

Let's please turn to Slide 9, where I would like to discuss annual sales. As you can see on the right chart, net ethanol sales from the full year amounted $272 million, marking a 50.4% increase year-over-year. This was mostly explained by a 46.1% increase in average selling prices despite the 3.3% drop in ethanol volumes compared to 2020. Looking at the fourth quarter, ethanol net sales increased 18.2% on a year-over-year basis to $18 million, driven by a 76.4% increase in average selling prices measured in U.S. dollars, mainly led by anhydrous ethanol. This was partially offset by a 33% year-over-year decrease in ethanol selling volumes due to lower crushing, which resulted in lower ethanol production despite full maximization combined with a 55.6% increase in our inventory levels to benefit from higher expected prices.

A brief comment on Cbios. Due to the efficiency and sustainability in our operations ranked among the highest in the industry, we have the right to issue carbon credits every time we sell ethanol. During 2021, we sold 53,500 Cbios under RenovaBio program at an average price of BRL 41.2 per CBio, approximately $7 per CBio. In the case of energy, net sales amounted to $43 million, 17.3% higher compared to 2020. This was fully attributable to an 18.5% increase in average selling prices measured in U.S. dollars, standing at $46 per megawatt hour. Driven by the low levels of water in the reservoirs during most of the year, energy spot prices increased, especially during the third quarter of 2021. And by increasing our energy production, we were able to capture the upside.

The Brazilian government created a program called Portaria 17, through which companies that generated more energy than they did in the previous year could make a price offer. This enabled us to sell 15,321 megawatt hour at an average price of BRL 1,659 per megawatt hour, approximately $300 per megawatt hour. Lastly, net sales of sugar during the full year reached $207 million, 23.1% higher year-over-year. Positive results were driven by a 46.8% increase in average selling prices measured in U.S. dollars, which stood at $0.174 per pound. Higher average selling prices were partially offset by a 16.2% reduction in selling volumes, explained by lower sugar production on account of full ethanol maximization along with an increase in inventory levels in line with our commercial strategy to carry over stock in order to profit from higher expected prices. On a quarterly basis, sugar sales decreased 10.7% to $64 million on lower selling volumes due to the same dynamics of the full year.

Let's move to Slide 10, where I would like to explain our total cost of production. Total cost of production describes, on a cash basis, how much it costs us to produce 1 pound of sugar and ethanol, in sugar equivalent. Maintenance CapEx is included in the calculation since it is a recurring investment, necessary to maintain the productivity of the sugarcane plantation. As we are calculating sugar and ethanol cost, energy is deemed a byproduct and thus, deducted from total costs. As for the tax recovery line, it includes the ICMS tax incentive that the state of Mato Grosso do Sul granted us until 2032. As shown in the table, total cash cost on a per unit basis in 2021 increased by 33.4% compared to the previous year, reaching $0.105 per pound of sugar equivalent.

Higher cost per unit is explained by a 44.8% increase in total production costs due to a 15.5% increase in harvested area, an increase in agricultural partnership costs driven by an increase in Consecana prices and increasing the cost of inputs, higher costs of idle capacity due to the early start of interharvest season and lower dilution of fixed cost on lower productivity. Moreover, there was an increase of 25.6% in maintenance costs related to higher replanting costs as a consequence of the frost and the anticipation of the purchase of equipment to accelerate harvesting activities. On the other hand, these negative effects were partially offset by 36.4% higher tax recovery on account of higher ethanol sales and a 32.8% higher energy cogeneration. It's important to point out that since we own 95% of the cane we crush, every time Consecana's prices increase, our agricultural margin also increases. Regarding the hike in fertilizer costs, our exposure to potash fertilizers marginally as we replace it with concentrated vinasse generated in our own operations.

Finally, to conclude with the Sugar, Ethanol and Energy business, please turn to Slide 11, where I would like to discuss financial performance. During the quarter, adjusted EBITDA amounted to $65 million, marking a 19.8% decrease compared to the same period of last year. The main driver behind EBITDA decline was an increase in costs, mostly driven by fertilizers, fuels and lubricants in addition to higher costs associated with idle capacity in our mills due to low sugarcane availability during the quarter. However, adjusted EBITDA for the full year marked a new record at $335 million, 31% higher than during the same period of last year. Higher results were explained by a 38.7% increase in net sales, coupled with a $38.3 million gain derived from the mark-to-market of our harvested cane due to higher Consecana prices. This was partially offset by an increasing cost combined with a loss in our commodity hedge position and a $7.3 million increase in selling expenses.

I would now like to move on to the Farming business. Please direct your attention to Slide 13. We ended our 2021 harvest season with over 1 million tons of agriculture products harvested and transported across 10 provinces in Argentina and in Uruguay. For this new campaign that we are currently engaged in, we have increased our total planted area by 8.1% compared to the previous harvest season to over 280,000 hectares. The increase is driven by a greater leased area.

In most of our regions, abandon reinforce was registered, favoring planting activities and crop development. However, other regions experienced very well throughout December until mid-January, which coupled with high temperatures caused a minor delay in the completion of planting activities across a few hectares. Since then, precipitations have increased. Nevertheless, we are following closely the water requirements as we are going through the critical phase in the development of most of the crops.

Let's move to Page 14, where I would like to walk you through the financial performance of our Farming and Land Transformation businesses. Adjusted EBITDA in the Farming and Land Transformation business amounted to $124 million for the full year, marking a 15.8% year-over-year increase. The increase is mostly explained by an overperformance of our Farming business. In the case of land transformation, we have not conducted any farm sales throughout the year. Starting with our crop business. Adjusted EBITDA for the full year amounted to $52 million, marking a 48.9% year-over-year increase.

The main drivers towards this growth were a $59 million increase in gross sales $25 million year-over-year gain related to the mark-to-market of our biological assets, giving an increase in hectares, yield and prices and $9 million year-over-year gain driven by our commodity hedge position. This was partially offset by an increase in costs due to inflation in U.S. dollar terms. In our Rice business, adjusted EBITDA reached $41 million, a 19.5% increase compared to 2020. The increase is mainly explained by an increase in sales led by higher yields, which reached a record high of 7.8 tons per hectare along with an increase in area and prices and an $18 million year-over-year gain in the value of our biological asset and agricultural produce. Positive results were partially offset by greater costs related to inflation in U.S. dollar terms.

Moving on to the Dairy business. Adjusted EBITDA marked a year-over-year increase of 26.2% to $23 million for the full year. Higher results were explained by an increase in both volumes and average prices and our continuous focus on achieving efficiencies in our vertically integrated operations, together with increasing our productivity levels in every stage of the value chain. On the other hand, results were partially offset by higher costs due to inflation in U.S. dollar terms. Although no farm sales were conducted during 2021, the Land Transformation business reported an adjusted EBITDA of $7 million. The positive result reflects the mark-to-market of an account receivable corresponding to the latest sale of farms in Brazil, which tracks the evolution of soybean prices.

Let's now turn to Page 16, which shows the evolution of Adecoagro's consolidated operational and financial performance. During the year, our operations delivered a new record in gross sales, which exceeded $1 billion and in adjusted EBITDA, which amounted $437 million, marking a 27.8% increase compared to the previous year. At the same time, 2021 marked the last year of our 5-year plan, in which we invested in expanding our business lines in order to integrate vertically our operations, improve efficiencies and enhance our competitive advantages. Thus, our operations delivered $152 million of adjusted free cash flow from operations during 2021 compared to the $109 million generated in the prior year.

This amounts to a minimum distribution of $61 million to be paid during 2022 through dividends and buyback. $35 million will be paid via dividend into installments of $17.5 million each in May and November. The balance will be distributed via share repurchase under our existing program, as the case may be. Year-to-date, we have already repurchased $10.6 million insurance. From an operational point of view, we are continuously increasing our planted area each year while enhancing our efficiencies at the farm and industry level. Thus our production of crops and rice increased 8.2% year-over-year, whereas a greater area planted in the Sugar, Ethanol and Energy business allowed us to mitigate the impact related to the frost and ran weather during 2021 at the industry level.

To conclude, please turn to Slide 17 to take a look at our net debt position. As of December 31, 2021, net debt amounted to $618 million, marking $107 million or 14.8% decrease compared to the previous quarter. Lower debt levels from our farming business, along with a 5.3% quarter-over-quarter increase in our cash position were the main drivers towards debt reduction. Cash generation was driven by greater collections throughout the quarter, whereas positive free cash flow allowed us to pay down debt at the farming level. On the other hand, net debt decreased by 2.7% on a year-over-year basis due to the higher cash, which enabled us to pay down debt as well as distributing it with shareholders. However, cash and equivalents dropped 40.6% compared to the previous year mostly explained by an increase in marketable inventories of $16 million in order to benefit from higher expected prices.

It's worth to mention that our cash position for the fourth quarter of 2020 reflects the short-term working capital lines we raised throughout the year in light of the COVID-19 pandemic as part of our risk management program. We believe that our balance sheet is in a healthy position, not only based on the adequate overall debt levels, but also on the term of our indebtedness, one of which is long term. Our net debt ratio went down to 1.4x in this quarter compared to the 1.6x and 1.9x seen in the previous quarter and last year, respectively. At the same time, our liquidity ratio, which is calculated as cash and equivalents plus marketable inventories divided by short-term debt, reached 3x 50.3% above last quarter's ratio of 2x and 14.6% higher than the same period of last year, which reached 2.6x. This clearly shows the full capacity of the company to repay short-term debt with cash balance without raising (inaudible) capital. Thank you very much for your time. We are now open to questions.

(Operator Instructions) Today's first question comes from Isabella Simonato with Bank of America.

I have 2 questions. First of all, on sugar and ethanol. More on the cost side, we saw a big increase last year, which I understand has a combination of various factors, including the area extension, right? Could you give us some color, what do you expect in terms of area growth in the 2022-2023 season? And on your unit basis, right, how much cost should increase in the next crop season as well, just to understand how this cost base will continue moving forward? And the second question on the farming side. I think you provided some color, right, about the weather impacts in la Nina. And at this point, the planting is pretty much concluded and harvesting is beginning. Is it possible to quantify any potential downside in terms of yields or can we assume something similar this season compared to the last one?

I'm going to ask Renato to give you more color on the crop on the sugar and ethanol and what are our plans and the area growth. So Renato, can you give more color there?

Okay. Thank you, Isabella, for question. As was mentioned by Charlie and Mariano, we will have a first semester very challenging in terms of sugarcane yields because of the frost last year, but our sugarcane is looking very well for next year. We don't have any (inaudible) problems, snowflakes, the sugarcane fields are very well -- the nutrition of the sugarcane fields are very good. We have planted a lot of sugarcane that's going to be harvest in the second semester. So it should be a lot of sugarcane to be harvested in the second semester. So we think that it is going to be more than sufficient to compensate this lower productivity in the first semester, and we were going to end up crushing is slightly higher this year compared to last year.

Regarding the increase in the area, we are going to increase approximately 9,000 hectares, which was the expansion planting that we did last year, but we don't think that we will have a cost increase in those areas because we expect that our yield this year is going to be slightly higher than last year. So we think that's the other look of our sugarcane situation. The second semester probably we will catch up the gap that we have in the first semester because we are starting the production season now in March. We have already started in Angelica and we will start in in Ivinhema in few days.

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

Exactly. Yes, that's exactly because we are going to have a higher yield this year compared to last year, and we don't expect the same amount of increases in agricultural inputs that we had last year. And I think, as Mariano mentioned before, we had some advantage in terms of cost. I think the concentrated vinasse, which is our bio fertilizer, which is -- we have a plant in Ivinhema and Angelica that is able to produce all the potassium fertilizer that we consume. It represents a saving of approximately BRL 1,000 per hectare.

So it's a lot of savings that you have in the fertilizer line. Also, we have other things that is going to help a lot as the increase in our (inaudible) MPB planting. Actually, we have a biofactory in Angelica, that we can produce 26 million seeds of MPB, which is enough to plant between 15,000 and 20,000 hectares with a much lower cost than a traditional plan. So we are confident that we are not going to have increase in costs as we had last year.

Thank you, Renato. Isabella to answer the second part of your question regarding the weather in Argentina and Uruguay, and how the crops are looking. I would say that we are in the middle of the season. So we have already planted 100%, and we have already planted with an excellent situation. So the planting is all very well done with all the fertilizer, all the chemicals, everything has been applied on time. And so the crops, I would say, that are looking very well. Of course, there are different climatic situations all over our very well diversified crop situation. And within this very well diversified crop situation, I would say that in general, we expect to be within the average of the year.

So we are continuing towards an average year. Within this average year, I would say that rice would probably be some way below the -- what happened last year, maybe corn and soybean may be a little bit higher than what happened last year. So in general, I would say, average is the answer, and we are still in the middle of the process. We just started harvesting all the harvesting that we started in rice and flour, et cetera, are doing well. But I would summarize on this situation where we are average as we are starting the harvest.

And our next question today comes from Thiago Duarte with Banco BTG Pactual.

Yes 2 questions on our side here. The first one is actually a follow-up on with Renato on the discussion regarding sugar and ethanol -- sugarcane yields actually. Renato, can you quantify a little bit more to us on the yield improvement that you expect for the year? I understand that you still expect below average yields for the first half of 2022 on the back of the lingering effects from last year's drought with an improvement in the second half of the year. But can you give us a sense of how much of an improvement, if you think of the balance of the year you're looking for?

When you think of the Center-South, we are hearing improvements from 5% to 10% in yields across the Center-South of Brazil. So just wanted to position where you expect to be within or outside this range, it would be nice to have. And the second question, also going back into farming, particularly in Argentina. I just wanted to hear your thoughts on -- there was this news this week regarding bans on exports of soybean and oil. And just -- so just wanted to hear from you whether you think this could sort of anticipate higher export taxes or retentions on soybean for the coming crop would be nice to hear as well.

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

Thiago, thank you for your question. I think we are in the same line as the Center-South. We are expecting to have an increase in yields between 5% and 10%. And I think all the efficiency that we have in the sugarcane supply and also at our mills will be enough to crush more sugarcane in a shorter period of time. So we're going to crush more -- slightly more this year than last year. But regarding the yields, we are in line with the rest of the Center-South.

Thank you, Renato. And regarding your second question on Argentina and these export taxes or potentially increasing export taxes, that's something that is a discussion that starts because of this huge increase in the commodity prices, and that's something that usually happens, the discussion about this. The reality is that the government can only increase 3% of the export taxes without going to Congress. So the possibility is only 3% and what we hear yesterday from the government officials that they are not going to increase this 3% that they could do. So we really don't know what's going to happen, of course but if it happens, it's only a 3% increase. And it's a 3% increase in these export taxes on soy, corn and with the maximum potential that that means around 10% of our total sales and of which 30% have already been sold or hedged. So the impact in our particular P&A is relatively low if that happens, but I would say that, of course, there is a possibility. I personally probably don't think that will happen in the 3 products.

Ladies and gentlemen, our next question today comes from Lucas Ferreira with JPMorgan.

So my first question, Charlie, is on the distribution policy. So you're committing with that 40% but my question is simple is when do you guys analyze like a further room in the balance sheet, given the free cash flow generation you should be generating in 2022, I guess should be a strong one. When do you analyze that the potential for increasing that amount over the year? Can you remind us if it could be like extraordinary payments throughout this year? That's my first question.

And the second question, it's one I don't ask much on you guys about this one, but on rice, what -- do you think that what's going on with overall agricultural prices with the especially wheat, soybeans and corn could also push rice prices up? I think we haven't seen such an important move in the prices, but if you can update on that one, we should expect on the back of overall higher costs and higher grain prices, if price prices should also be -- should be benefiting from that environment?

Thank you, Lucas, for your questions. Regarding our distribution policy, as you said, it's very clear that it's at least 40% and we have this capital allocation strategy where we are very comfortable now that we have this sustainable cash flows and that we are having enough free cash from operations to always comply this policy and also continue to pursue some growing opportunities that are synergizing what we are currently having. So as you can see during last year, we distribute 50% of the net cash from operations. This year, we are talking about at least 40%. Of course, this could potentially be higher, but that will depend on the different opportunities, on the different prices of the shares and what would be going on during the year.

So our compromise is very clear and will be maintained. And that is something that we've been talking about since we announced our 5-year plan. That was back in 2017. And so from -- in 2017, we mentioned very clearly that 2021 was the first year where we were going to start distributing to start distributing to our shareholders. And in 2021, we distributed more than 5% of the equity of the company through our share buyback program. So this year, we are very confident that we will continue with the same line and increase.

Then going back to the second part of your question regarding rice and potential increase in price, in general, rice, peanuts, sometimes sunflower, sunflower in this particular year has grown a lot more because of what's going on one of the regions that are the main producers of sunflower. But in general, they take more time to increase and decrease than the products that are more liquid like corn and wheat, as you were mentioning. So today, we are already seeing an increase in prices of rice, in general, and that's something that is happening as we speak when we started the year, and we saw an increase in wheat. Rice was not increasing yet and now rice is already increasing. So we would expect that the rise and peanuts will also increase in line with what's going on with the rest of the commodities.

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

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

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