AGRO

Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Adecoagro's 2026 first quarter results conference call. Today with us we have Mr. Mariano Bosch, CEO; Mr. Emilio Gnecco, CFO; Mr. Renato Junqueira Pereira, Sugar, Ethanol and Energy VP; and Mrs. Victoria Cabello, Investor Relations Officer. 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, further instructions will be given. Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of Adecoagro's management and on information currently available to the company.

They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Adecoagro and could cause results to differ materially from those expressed in such forward-looking statements. Now, I'll turn the conference over to Mr. Mariano Bosch, CEO. Mr. Bosch, you may begin your conference.

Good morning, and thank you for joining Adecoagro's first quarter 2026 results conference. Today, we are presenting the first results from the new Adecoagro, a well-diversified agro-industrial platform composed of three segments: sugar, ethanol and energy; fertilizers; and food and agriculture. The BRL 86 million adjusted EBITDA generated already reflects the change in scale and earnings potential, with further upside ahead. After the major maintenance turnaround in the fertilizer plant, we are pleased with the ramp-up of operations, with the plant operating at full capacity since then. Due to the conflict in the Middle East, urea prices have spiked and we are progressively capturing the upside, leading to an even better than expected result. In Brazil, we achieved a new first quarter crushing record, reflecting the returns on our planting expansion investments.

The high flexibility of our mills enable us to produce almost 100% ethanol, benefiting from better ethanol prices. Harvesting pace remains on track to meet our annual target, supporting further cost dilution. In food and agriculture, results reflect the end of the prior harvest season as we sold our carryover stocks. The harvest of the new crop is well advanced, presenting good productivity indicators. Margins should improve in the coming quarters as we commercialize the new crop, supported by a more efficient cost structure. Overall, higher productivity in Brazil, higher urea prices, and better margins in Argentina and Uruguay should translate into a stronger earnings performance and, most importantly, higher cash generation in 2026. This, in turn, will enable us a faster than expected deleveraging, one of our main priorities following the acquisition of the fertilizer business.

To conclude, I want to reiterate my gratitude to everyone across Adecoagro. It is thanks to their hard work that we are able to navigate different commodity cycles and continue to deliver attractive results to our shareholders. Now, I will let Emilio walk you through the numbers of the quarter.

Thank you, Mariano. Good morning, everyone. Before turning to the results of the quarter, I would like to briefly remind everyone that as part of our efforts to update and simplify how we view our operations starting in January 2026, the company now operates under three reportable segments. Number 1, the Sugar, Ethanol and Energy segment. Number 2, the Fertilizers segment, which reflects Profertil's results. Number 3, the Food and Agriculture segment, an integrated platform focused on agriculture and food production that was previously reported across three separate verticals: crops, rice, and dairy. Please now turn to page 4, where you can see our first quarterly results under this new organizational structure. Gross sales totaled $394 million in the first quarter, representing a 22% year-over-year increase.

This growth was driven primarily by a strong performance in our fertilizers business, supported by higher production volumes and slightly improved prices, together with higher ethanol and energy prices in our Sugar, Ethanol and Energy operations. These factors more than offset the lower prices across the remainder of our commodity portfolio, including sugar, peanuts and rice. Adjusted EBITDA reached $86 million, more than doubling the level reported in the prior year. In addition to higher sales, results benefited from a first quarter crushing record and our operational flexibility to produce nearly 100% ethanol throughout the period, combined with lower natural gas sourcing costs, which is the main input for urea production. Moving to the financial and operational performance of our operations, let's start with the Sugar, Ethanol, and Energy segment on slide six.

Due to the rainfall received in the final months of 2025, the cane that remained unharvested recovered meaningfully in yield and was collected during the first quarter under our continuous harvest model, one of our key competitive advantages versus other players. As a result, we achieved a new first quarter crushing record of 2.2 million tons of cane, a 49% year-over-year increase driven by higher productivity despite harvesting a smaller area. In terms of product mix, we reached a 96% ethanol mix during the quarter as ethanol prices traded substantially above global sugar prices and therefore offered superior margins. This highlights the operational flexibility of our industrial assets, even while maintenance work was being carried out.

On the cost side, production costs were negatively impacted by the appreciation of the Brazilian real and by the acceleration of certain agricultural expenses that were typically concentrated later in the year, which more than offset the cost dilution from higher crushing. Although we maximized ethanol production and executed sales at higher prices than in the prior year, quarterly sales were below last year, mainly due to lower sugar sales reflecting weaker global prices and lower volumes sold. Overall, adjusted EBITDA for the period reached $41 million, exceeding the performance reported in the previous year. As of today, our crushing pace remains on track to meet our full year target. Accordingly, we expect low double-digit growth in crushing volumes driven by greater cane availability, and we anticipate a full year of ethanol maximization given the current price scenario. On page 8, we present the fertilizer segment.

The year-over-year increase in urea production was primarily driven by a higher number of operational days compared to the same period last year. As mentioned in our previous call, the fertilizer plant experienced 19 days of downtime during the first quarter of 2025, mainly due to adverse weather conditions that disrupted gas supply. This quarter, we recorded only 10 days of downtime as we ramped up operations following the major maintenance turnaround executed at year-end. As of today, the plant is operating continuously at full capacity. In terms of sales, the 68% year-over-year increase was mainly driven by a 16% improvement in urea prices. Following the escalation of the conflict in the Middle East, a region that accounts for approximately 30% of global urea trade, prices began rising sharply in early March, which only a partial impact reflected in this quarter results.

As a result, adjusted EBITDA showed a strong year-over-year recovery, reaching $53 million. In addition to higher sales, performance also benefited from greater cost dilution due to the increase in production and lower gas sourcing costs as we leveraged contractual flexibility to secure a portion of our gas supply at more competitive prices. Looking ahead, we expect adjusted EBITDA in 2026 to be stronger than previously anticipated, potentially exceeding prior year levels supported by a favorable market price outlook. Please move to page 10. In our Food & Agriculture segment, first quarter results were impacted by lower commodity prices, mainly in peanuts and rice, as well as by higher costs in US dollar terms as we finalized the sale of carry-over inventories from the previous harvest season.

Regarding the 2025/2026 campaign, we are currently in the harvesting phase, which we expect to complete over the coming months. As of today, more than half of the planted area has been harvested, resulting in over 700,000 tons of agricultural products. In our dairy operations, processing volumes increased year-over-year, driven by higher raw milk production at our free-stall facilities, reflecting improved cow productivity. We expect margins to improve over the coming quarters as the new crop is harvested and commercialized, reflecting the cost initiatives implemented. In dairy, we also anticipate further growth in processed milk volumes supported by the launch of new products under our retail brands. Please turn to page 12 of the presentation, where we outline our capital allocation strategy, starting with our CapEx program.

During the first quarter of 2026, we paid the final installment related to the acquisition of a 90% equity stake in Profertil. As a reminder, the $1.1 billion transaction was financed through a combination of $400 million in cash on hand, $400 million in new long-term debt facilities, and $300 million in equity proceeds. On the following page 13, we present our debt profile. Our net debt increased to $1.6 billion in the first quarter of 2026, reflecting the seasonal working capital requirements associated with planting and harvesting activities in our food and agriculture business. Excluding this seasonal effect, net debt would have already declined compared to the fourth quarter of 2025. On a pro forma basis, net leverage stood at 3.2 times, consistent with our ongoing deleveraging path supported by improved operating results despite the seasonality in cash needs.

Looking ahead, we expect this metric to continue to decline, driven by higher adjusted EBITDA generation, primarily from our fertilizers segment. It is also worth noting the company's strong liquidity position and full capacity to repay short-term debt. The majority of our indebtedness is in long term, and its currency composition is well aligned with our revenue mix, mitigating currency risk. Finally, regarding shareholder returns, a cash dividend of $35 million was approved. The first installment of $17.5 million will be paid on May the 19th, with the second installment payable in November in an equal amount. Before concluding, I would like to share a brief closing remark. These are the first quarterly results we present under the new corporate structure, representing an important milestone for the company. The performance already reflects a stronger and more resilient platform, supported by increased diversification and a more robust earnings profile.

As shown in the top right pie chart, our revenue base is now more diversified than in the past. This evolution enhances our ability to deliver consistent performance across different cycles, while improving the stability and sustainability of our cash generation. Over the years, we have demonstrated a strong track record of consistent results and cash flow generation, despite commodity price volatility and adverse weather conditions. Today, the company is particularly well-positioned to benefit from upside in fertilizer prices, which could translate into stronger than anticipated results, while we continue to scale up platform and reinforce our strategic relevance within the sector. Thank you very much for your time. We will now open the call to questions.

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

Morning. Thank you, Mariano, Emilio, Victoria, Renato. Thank you for your time. My first question on capital allocation midterm, how you think Profertil is, you mentioned that one of the avenues for future growth could be the expansion of the fertilizer capacity from Profertil. Now, how do you think that would be the best path moving forward? I'm thinking particularly whether it would make sense to perhaps find a partner for this in order to accelerate a potential FID. If you could take advantage of investment programs in Argentina in the near term and sort of perhaps take advantage of higher fertilizer prices for longer, if you think a partnership could make sense for that and how to do that.

My second question also on the fertilizer business is sort of trying to understand how the pricing of urea is undergoing in Argentina. Previous comments mentioned pricing at import parity. How are the consumers of your fertilizers really taking this impact in higher urea prices, and how the contracts work, if you set prices at some advanced in time, what's the timeline for that? When do you expect to set prices for the remaining sales for the year? Those are my two questions. Thank you.

Hi, Mateus. Thank you very much for your question. I'm gonna start for your second question, then I would like to re-ask about the first one because some part of it, we couldn't understand.

Going to the fertilizer business and how prices are generated. You mentioned about the import parity, and the import parity in Argentina is because Argentina consumes 2.4 million tons of urea and only produces 1.3, that is 100% produced by Profertil. There's always a need of importing urea. That's why it's clear that there's always gonna be an import parity pricing. The reduction on potential uses of urea are at the most a 10% reduction, we are far away to becoming a net exporter. We'll always be a net importer at this level of production, and the capacity is only that one. That is absolutely clear.

When that urea is needed and when are the needs in Argentina is for wheat and corn, mainly for those 2 crops, then for rice and many other crops. The main drivers are wheat and corn. For wheat, the needs are July, June/July onwards. The need of the usage of fertilizers are starting now or in the following 2 months. In the next 2 months is where the need for wheat are gonna be delivered. During September, October and November is mainly for corn. Those are the 2 moments where the consumption of fertilizer is higher within Argentina. That is how urea is gonna be priced domestically.

Going to the first part of your question, there were some noises, so we couldn't hear you clearly.

Yeah

can you repeat that? Yeah.

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

Okay. Clear. Thank you, Mateus. In any case, constructing a urea plant needs 4 years. The total timing in general are 5-7 years. In this case, it's difficult to go below 4 years. Taking that into account, the increase in fertilizer prices as of today, we are not expecting that to influence our decision on making a urea plant. Having said this, of course, we are interested on expanding the plant because we do believe on the, being the low-cost producer of urea in that specific area. We do believe that Argentina will be a net exporter of natural gas for many, many years going forward.

There are many projects being developed in the whole gas productions, including Vaca Muerta is the main leading area where the gas is increasing. We do see that happening in Argentina. There are transportations being built and there are more transportations going through Bahía Blanca. That is where we have this port. We do see a great opportunity to expand this plant, so we do believe that makes sense. We also do believe that the region is a net importer of urea. Even in situations like this where the urea price goes up, the region, including Brazil, will import around 10 million tons of urea, and the region only produces 2.5 at the most. There's still a lot of space to be a producer of urea.

This is a project that we are studying in details and we are working on it, but we still don't see exactly when and how we will start to make it happen.

Thank you.

there are several ways of financing, including partners, et cetera, et cetera.

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

Hi. Good morning, everyone. Thank you for the call. I have 2 questions still on the fertilizer business. When we look at the average prices that you guys had in Q1, it looks quite similar to Europe, urea prices in Brazil, right? My question is can we assume that that trend continues into Q2? I mean, when we look at April and May, can we see a high correlation of the prices you've been selling to the prices in Brazil? To that point, can you comment a little bit on how volumes are being sold, I mean, the pace of them. Are you seeing the farmers taking a step back in this moment and trying to delay it a little bit, purchases or not? Just to have a sense of the overall environment.

The second question is on the sugar and ethanol side. You mentioned, right, that costs move up because of effects, but also on some agricultural costs. I assume that since you're crushing more, right, for this year, you have more cane availability, better productivity. I mean, can we think about some normalization or some decline in unitary costs going forward? Thank you.

Hi, Isabella. Thank you for your question. I'm going to address the first one, and then I will ask Renato to take the second one. On the first one, the answer is yes. The urea price is very correlated to the CFR Brazil. The main market of urea is CFR Brazil, that's how we all price urea in the region. You will see a correlation there, and it's easy to look at it. The urea price is always a spot price, and this CFR reflects the spot price of urea. Regarding the pace, as I mentioned before, June, July, and August is where the needs of fertilizers start in Argentina. We don't see that need being reduced.

The most that can be reduced is 10%, we don't even see that reduction happening. We do continue to see producers, and we as producers are using the urea because it is where you see the most or the higher reaction on your productivity at the farms. The higher impact in productivity within fertilizers in general is urea, that's why we continue applying it, we don't see that as a relevant reduction. Going to your second question regarding the sugar and ethanol cost and our expectation for this year, Renato can be more clear here.

Hi, Isabella. We expect a cost reduction in BRL. The reduction is going to be between 10%-15%. I think the mainly factors that will reduce the cost is the volume, as you said, so we are going to have more cost dilution and some efficiency gains that we are having in our operation and also a lower Consecana price. Those facts are more than enough to offset some pressure in costs in fertilizer and diesel costs.

The cost in the quarter is just an anticipation of some agriculture operation that we did because of the weather was in a good conditions to do it, especially weed control and plague control, but this is just the cost that we have in the first quarter, we are not going to have in the future. That's the reason we think it's difficult to measure costs of production by quarter. It makes more sense to see it annually.

Thank you.

Super clear. Thank you very much.

Once again, if you have a question, please write it down in the Q&A section or click on raise hand for audio questions. Our next question comes from Gabriel Barra with Citi.

Hi, everyone. Thanks for taking my questions. I have 2 here. One, I want try and change gears here and understand a little bit better the scenario for the crop season this year. I remember in the last conference call we have talked a little bit about the mix for this crop season. As you have discussed, it seems that the strategy to focus on ethanol, it's up and running. We are seeing ethanol price driving to lower levels in the beginning of the crop given this higher supply. So my question here is trying to understand the company strategy for the mix from now on, given this lower ethanol price and this, let's say, weak sugar price that we are seeing in the market today.

I want to try to understand here, the strategy of the company and the commercialization strategy here for this crop season. The second point, it's, we are seeing this quite strong market for fertilizers. And at the end of the day, we still see the company, given the recent acquisition with net debt to EBITDA close to 3.2 times above, let's say, the comfortable zone that I think that is the, let's say, the sweet spot here for the company in terms of capital structure. How are we should we think about the company, the leverage path, to reach the 2 times net debt EBITDA in the following quarters or even months, given this better scenario for fertilizers?

Do you think that it's feasible to think that we are going to reach this number in the end of the year? Is this the focus of the company right now? How should we think about the capital structure of the company at this point, given the current scenario for commodities? Those are my two questions. Thank you.

Okay. Thank you, Gabriel, for your question. Renato is going to answer your first question regarding the mix and the crop season.

Hi, Gabriel. The year start with a tight ethanol inventory and high prices. That's why we took advantage of this scenario to sell almost our whole production of first quarter and all the carryover until the end of April with prices close to $0.20 per pound equivalent. Since then, with the beginning of the new sugarcane season, ethanol prices have fallen about 20%. This was passed to the pump. The parity rate at the pump today is close to 60%.

We think that this 60% at the pump, it's enough to absorb the ethanol surplus from one year to the other, for the demand of ethanol is going to increase and the hydrous ethanol can reach about 30% of market share. In our case specifically, the 60% of parity rate at the pump is still an ethanol equivalent close to $0.17 per pound. That's why we are still maximizing the ethanol production and we think we are going to keep maximizing maybe for the whole year. At this point, we have stopped selling our ethanol and we are filling our tanks to sell the ethanol in the last part of the year.

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

Hello, Gabriel. Thank you for your question. Well, as you may have seen during the presentation of our quarterly results, we are already showing a reduction in our net debt and even taking into consideration some seasonality of our working capital during the first semester of each year. Now, when we think about our net debt on an annual basis and giving the current scenario for all of the prices of all the commodities that we produce, including the fertilizers, what we thought would be a reduction or bringing down the net debt levels to 2% in the following one or two years, we probably gonna see it by the end of this year.

Hopefully by the end of 2026, we'll be in the levels of 2 times EBITDA on an asset replacement basis.

Thank you.

Very clear. Thank you.

Our next question comes from Bruno Tomazetto with Itaú BBA.

Hey, good morning. Thank you for taking our questions. The first one is regarding your view on El Niño, right? Recent study suggests a stronger event in this year, and we would like to hear more about what you guys are anticipating in both terms of sugar and ethanol segments. Maybe more focused on sugar price and the pace of your heads moving forward, but also for Food and Agri segments, right? You mentioned in the earnings release an average yield expected for crops in 2026. Just wondering what could change in a scenario of a stronger El Niño which arises in the upcoming months. The second one is on Food and Agriculture division.

Just wondering how you guys are looking for the segment in the medium and long terms and considering the lower relevance of results for the consolidated company. Also assuming that the company's already consolidating several operations into a single business unit, just if there could be any opportunity of M&As or divestments more specifically that could make sense, especially now that fertilizers unit has gained a lot of relevance for Adecoagro. That's it. Thank you.

Thank you, Bruno, for your question. Regarding El Niño, there are several aspects that can affect if we have an El Niño year. The main aspect is in terms of prices of the different commodities that we produce. As you know, this can affect positively in terms of sugar prices. If we do have El Niño year, the northern hemisphere can have some less production and that can improve the prices of sugar, basically. That's probably where the higher impact is. In terms of our own productivity, we are not that affected in the sugarcane area. Mato Grosso do Sul is not affected in terms of production by El Niño or La Niña because it is in a neutral area.

In general, that El Niño would mean more rains, and more rains would mean more uses of fertilizer. That can be positive for the fertilizer business as a global comment. That is quickly on El Niño or La Niña, and this apparently looks like an El Niño year that, of course, would potentially be positive. Regarding your question on Food & Agriculture, as we mentioned several times during last year, last year was probably the more difficult year for Food & Agriculture. Food & Agriculture in general, we're having a huge reduction in prices of most of the commodities that we were producing. We're bringing cost of the previous campaign where the cost was higher.

Today we are harvesting, we are in the middle of the harvest of this new campaign where the prices have already gone down. We do expect that going forward in the following quarters, the Food and Agriculture will start generating more relevant results than what you've seen in this quarter, of course. Having said this, we do expect that to continue to improve, and we do like the different businesses that we have. In all of them, we believe we are the low-cost producers. We went through this difficult time and now we are in a good position to take advantage of being the low-cost producers of these different products that we are doing in the whole Food and Agriculture business.

Super clear. Thank you.

Next question from Thiago Duarte.

Hi. Hello, everybody. Thanks for the opportunity. It's just one question here, on, you know, circling back to the discussion about the deleveraging and the confidence of the company into going back to your leverage target by the end of this year instead of a few years ahead, given the positive outlook for some of your businesses. The question is really into what to expect next in terms of in terms of capital allocation, either in terms of speeding up, you know, dividend and share buybacks or eventually thinking about new growth opportunities. Just how you're thinking about it given that you know, the deleveraging might happen sooner than expected. Thank you.

Hi, Thiago. Thank you for your question. Of course, the first focus is on deleveraging. As you've heard us before, we've been always looking to be disciplined. We also do have several projects in each one of our existing businesses that have potential for growth. We were talking about the one particular one that is regarding this expansion of the fertilizer business. There are many interesting projects within our sugar and ethanol business, as you've seen with the biogas and several things that are growing and doing pretty well. We do continue to see interesting projects.

The returns of those projects, we are asking higher returns in order to maintain this level of debt and to continue with our distribution policy or with our dividend policy as we have already mentioned before.

Thank you, Mariano.

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

Thank you all for participating in our call. We are very happy with how the company's going with this new renovated Adecoagro. We hope to see you in our new coming event.

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