Adecoagro (AGRO) Q4 2025 Earnings Call Transcript

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DATE

Tuesday, March 17, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Mariano Bosch
• Chief Financial Officer — Emilio Federico Gnecco
• Head of Sugar, Ethanol, and Energy — Renato Junqueira Pereira
• Operator

TAKEAWAYS

• Profertil Acquisition -- Adecoagro S.A. (NYSE:AGRO) closed the acquisition of a 90% equity interest in Profertil for $1.1 billion, paid via $400 million in cash, $400 million in new long-term debt, and $300 million in new equity.
• Revenue Growth Potential -- On a pro forma annualized basis, the company increased its revenue base from $1.5 billion to above $2.0 billion, with the potential for $700 million in EBITDA and doubled cash generation.
• Leverage -- Net debt is now $1.5 billion, with net leverage rising to 3.3x from 1.2x, attributed to the Profertil acquisition and lower annual results.
• Segment Reporting Changes -- Effective January 2026, business segments are consolidated into Sugar, Ethanol, and Energy; Fertilizers; and Food and Agriculture.
• 2025 Sales and EBITDA -- Sales decreased by 2% and adjusted EBITDA declined by 38% year over year due to lower commodity prices and higher USD-denominated costs.
• Fertilizers Segment Downtime -- Profertil experienced approximately 90 days of downtime: 54 days from a major scheduled turnaround and 31 days from disrupted gas delivery, adversely affecting financial results.
• Fertilizers Pro Forma Declines -- Assuming full-year ownership, fertilizer revenues fell 6% and adjusted EBITDA dropped 35% year over year.
• Dividend Policy -- The Board approved $35 million in cash dividends for 2026, subject to shareholder approval, to be distributed in May and November.
• Sugar, Ethanol, and Energy Segment Performance -- Adjusted EBITDA reached $292 million, below the prior year, but cane productivity increased and ethanol mix rose to 72% for the quarter and 58% for the year.
• Sugar and Ethanol Cash Cost -- Cash cost per pound remained unchanged at 12.8¢, achieved via better machinery efficiency and higher ethanol-related tax recovery.
• 2026 Crushing Outlook -- Management projects low double-digit growth in crushing volumes for the next year due to strong agricultural yields and ethanol maximization.
• Fertilizers Operating Leverage -- "Our gas contract, that is 60% of the cost of producing urea, is already fixed, and we have fueling contracts until 2027," supporting margin visibility during price upswings.
• Urea Sales Exposure -- Of 1.3 million tons annual capacity, about 1.1 million tons remain open to market-linked pricing as of late February.
• Food and Agriculture Segment Initiatives -- Area planted has been reduced by 22% via lease renegotiations to improve margins.
• Fertilizer Plant Unit Cost Guidance -- The current cash cost of urea production, at intended volume, is $180-$190 per ton, excluding SG&A.

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RISKS

• Profitability Impact -- Adjusted EBITDA declined 38% year over year, reflecting the combined effect of lower commodity prices, adverse productivity, and cost pressures.
• Fertilizers Segment Downtime -- "Fertilizers' financial results were affected by two events which resulted in approximately 90 days of downtime," contributing to annual EBITDA contraction.
• Leverage Increase -- Net leverage increased to 3.3x from 1.2x due to the Profertil acquisition and weaker business results.

SUMMARY

Adecoagro S.A. finalized the transformative acquisition of Profertil, fundamentally altering its revenue structure, scale, and segment diversification. Production downtime at the fertilizer plant constrained pro forma results, but management anticipates full operational normalization and improved EBITDA in the following period. The company implemented specific cost initiatives across all its lines, including fixed gas procurement for fertilizer, machinery efficiency upgrades, and a reduction in planted area within its Food and Agriculture segment. The dividend payout remains stable despite elevated leverage, reflecting capital allocation discipline alongside a commitment to deleveraging through earnings growth.

• The strategic focus for fertilizer commercialization centers on maximizing sales within Argentina at import parity pricing, backed by secure gas procurement contracts through 2027.
• Management indicated that about 1.1 million tons of annual fertilizer capacity is now directly exposed to elevated urea prices, materially influencing expected cash flow.
• Segment mix realignment positions Adecoagro S.A. with three approximately equal revenue streams, reducing earnings volatility across cycles.
• Agricultural operations will increasingly emphasize ethanol output due to favorable pricing and inventory trends, with management planning to maximize ethanol production throughout the year.
• Organic and inorganic growth opportunities are under ongoing review, particularly deeper expansion of fertilizer production leveraging Argentina's natural gas resources.
• Cost reduction in Sugar, Ethanol, and Energy is expected through 10%-15% lower unit costs attributable to volume-driven dilution, 70% fertilizer pre-purchases, and targeted agricultural process efficiencies.
• In the Food and Agriculture segment, revenue stability has been maintained through sales volume increases, but EBITDA remains pressured until cost reductions and portfolio adjustments take further effect.

INDUSTRY GLOSSARY

• Turnaround: A scheduled, comprehensive shutdown of an industrial plant for maintenance, upgrades, or repairs, typically resulting in temporary production loss.
• Continuous harvest model: An agricultural practice of harvesting sugarcane throughout the year rather than in a single season to optimize yields and process utilization.
• Import parity pricing: The practice of pricing goods, such as fertilizers, at levels equivalent to the cost of imported alternatives, regardless of local production cost.
• E30: A gasoline blend containing 30% ethanol, significant for market share and production mix decisions in ethanol-producing companies.

Full Conference Call Transcript

Mariano Bosch: Good morning, and thank you for joining Adecoagro S.A.'s 2025 Results Conference. Today, we are presenting a larger, further diversified, and more resilient Adecoagro S.A., but with the same DNA: being the lowest-cost producer. Upon acquiring Profertil, we became the largest producer of urea in South America. This new operation marked a transformation for us as it broadened our production capabilities, more than doubled our cash generation, and reduced earnings volatility by incorporating a stable, consistent, and already cash-generating business. We are adding a unique asset in Argentina to our well-diversified agro-industrial portfolio, with the capacity to expand its earnings and cash potential by leveraging Argentina's largest natural gas reserves.

As we rely on natural gas to produce urea, greater extraction will translate into further supply at more competitive prices. We also have a huge market opportunity of reaching a wider demand in South America that today must rely on imports from faraway origins such as the Middle East. Due to the ongoing international conflict, urea prices have peaked, and we are very well positioned to capture this upside, as most of our production is still open to market prices and our gas supply remains secure and at a fixed price. The acquisition of Profertil would not have been possible without the continued support of our shareholders.

We raised $300 million in new equity anchored by TGLT, our controlling shareholder, further reinforcing their commitment to the company's long-term strategy. Given this incorporation, we decided to simplify the way we view our businesses and move to three segments: the Sugar, Ethanol, and Energy business; the Fertilizers business; and the Food and Agriculture business, all of which Emilio will get into more details shortly. Now looking back to 2025, it was a challenging year for the agribusiness sector as commodity prices reached the low end of the cycle. Today's prices remain under pressure, but with a focus on efficiency and being the local producer, we will be able to continue navigating the cycle.

Higher crushing in Brazil will drive further cost dilution which will partially mitigate the lower sugar prices. In Argentina and Uruguay, better productivity will turn into margin expansion and greater results. On top of this, we expect a normalized and full year of operations from the Fertilizers business driving further cash generation. To conclude, I would like to acknowledge all the people in Adecoagro S.A. for their hard work in this tough context. I am convinced that if we remain focused on being the lowest-cost producer in each of our sustainable production models, we can further expand our earnings potential. I will now turn the call over to Emilio Federico Gnecco to walk you through the numbers of the year.

Emilio Federico Gnecco: Thank you, Mariano. Good morning, everyone. Before entering into the results of the year, I would like to make a preliminary observation with the intention to provide more clarity in the understanding of the numbers we are presenting today. Following the acquisition of Profertil on 12/18/2025, our consolidated interim financial statements incorporate Profertil's income statement only for a 13-day period under a new business unit named Fertilizers.

Additionally, in an effort to update and simplify the way we view our business units, from January 2026 the company will change the business segment reporting structure as follows: segment number one, Sugar, Ethanol, and Energy business as previously known; segment number two, the Fertilizers business, which includes the manufacturing and commercialization of fertilizers; and lastly, segment number three, Food and Agriculture business, which reflects an integrated business focused on agriculture and food production that in the past were presented through three separate verticals, Crops, Rice, and Dairy. Please turn to page four where you can see how the acquisition of Profertil supports our scale.

On a pro forma annualized basis, consolidating the 2024 and 2025 results of our Fertilizers business, Adecoagro S.A. increased its size from a base of $1.5 billion in recurring revenues and a mid-cycle adjusted EBITDA of more than $400 million and cash generation of $150 million to above the $2.0 billion sales threshold with the potential to generate $700 million in EBITDA and to double its cash generation. In addition, the acquisition further diversifies our portfolio as illustrated in the pie chart at the top right, thereby strengthening the company's ability to perform across cycles. Please turn to page five of the presentation.

As we have been anticipating over the previous quarters, 2025 was a challenging year marked by lower commodity prices, mixed productivity, and higher costs in U.S. dollars, which resulted in a year-over-year decrease of 2% in sales and 38% in adjusted EBITDA. On top of that, Fertilizers' financial results were affected by two events which resulted in approximately 90 days of downtime. First, Profertil carried out the largest scheduled turnaround of its plant, resulting in a full shutdown of 54 days starting on October 16 and ending on December 8, shortly before our acquisition of the company. And second, a 31-day downtime due to the flooding of a third-party gas distributor that interrupted delivery of gas to the plant.

As a result, again on a pro forma basis, assuming full-year results of our Fertilizers business for both 2025 and 2024, revenues were down 6% compared to the prior year, whereas adjusted EBITDA generation declined by 35% year over year. We expect a full recovery in the Fertilizers business' adjusted EBITDA as operations return to normalized levels. At Adecoagro S.A., we have always leveraged low-cost production and product and geographic diversification to mitigate commodity price volatility and adverse weather events, two inherent risks within the agribusiness segment.

With the incorporation of the Fertilizers segment, we have moved to three equal-size revenue streams and a more diversified and less volatile cash generation across our geographies and products as shown in the pie charts at the bottom of the slide. Regarding the acquisition of Profertil, we would like to make now a brief summary. Please move to page six of the presentation. We closed the transaction during mid-December for a total consideration of $1.1 billion for the 90% equity interest. From this amount, $676 million had already been paid by December 31, with the remaining balance to be paid during 2026.

As of today, the outstanding balance is approximately $50 million that will be settled before the end of this month. The transaction was financed through a combination of cash balances in the amount of $400 million, approximately, two new long-term debt facilities of $200 million each with a seven-year tenure, two-year grace period, at attractive rates, and an equity issuance of $300 million, marking Adecoagro S.A.'s return to the public markets since its IPO in 2011. At the same time, we continue to invest in organic growth projects throughout our operations as outlined in the box on the right-hand side of the slide. Please direct your attention to page seven where we present our debt profile.

Our net debt and net leverage ratio increased compared to prior periods, explained mainly by the financing of the acquisition of Profertil and the lower results of the year. On a pro forma basis, net debt reached $1.5 billion, whereas our net leverage increased to 3.3x compared to 1.2x in 2024. Despite this, it is worth noting the company's full capacity to repay short-term debt with its cash balance. Most of our indebtedness is in the long term, and its currency breakdown matches that of our revenues, mitigating currency risk. Going forward, we intend to reduce our leverage ratio through higher expected adjusted EBITDA generation, mainly from our Fertilizers business, together with a revision of our capital allocation strategy.

In this sense, we have reviewed our shareholder distribution program in light of our capital allocation priorities and the lower results generated. Accordingly, our Board of Directors approved the distribution of $35 million in cash dividends for 2026, subject to approval at our Annual General Shareholders' Meeting. Moving to the financial and operational performance of our business units, let us start with the Sugar, Ethanol, and Energy business on slide nine. The weather during 2025 was characterized by above-average rainfall which reduced the amount of effective milling days and therefore limited our ability to reach a crushing volume in line with 2024.

Nevertheless, the cane left unharvested at year-end benefited from these favorable rains, showing excellent yields, and is currently being harvested under our continuous harvest model while maximizing ethanol production. Cane productivity recovered significantly during 2025 as seen on the graph at the top left of the slide, positively impacting the mark-to-market of our biological assets on greater expected yields for the upcoming quarters. In terms of mix, we achieved a 72% ethanol mix during the quarter and a 58% mix for the full year as ethanol prices substantially improved during 2025, becoming the product with a better margin.

Although we maximized ethanol and largely increased the amount of volume sold at greater prices, annual sales remained below the prior year on lower global sugar prices and volumes sold. Despite the declining milling, our cash cost, which reflects how much it costs us to produce one pound of sugar and ethanol in sugar equivalent, remained unchanged at 12.8¢ per pound. This is explained by a more efficient upgrade of our machinery which in turn reduced our annual maintenance CapEx, together with an increase in tax recovery given higher ethanol sales. Overall, adjusted EBITDA for the year ended at $292 million, below 2024's performance.

Looking at 2026, we foresee a low double-digit growth in our crushing volumes due to better productivity and a full year of ethanol maximization given the current price scenario. On the following page, 11, we present for the first time the Fertilizers business. As previously mentioned, the acquisition was concluded in mid-December, and therefore our financial statements only include Profertil's income statement for a 13-day period. For comparison purposes, we present Profertil's full-year results and its main drivers. In 2025, as we described earlier today, the fertilizer plant experienced two major stoppages resulting in 90 days of downtime, which adversely affected results.

Net sales and adjusted EBITDA declined year over year as fewer operating days throughout the year reduced production volumes despite higher prices for both urea and ammonia. For 2026, we expect a full recovery in adjusted EBITDA generation driven by normalized operations compared to the prior year and a positive market price outlook. In the case of our farming business, now Food and Agriculture business, 2025 results were pressured by a combination of lower commodity prices, mainly in rice and peanut, uneven yields, and higher costs in U.S. dollar terms. The top line of this business remained in line versus the previous year due to higher volumes sold, which in turn partially offset declining prices, as seen on slide 13.

Nevertheless, adjusted EBITDA was negatively impacted by the increase in costs and an uneven performance at the farm level. Looking ahead, we have implemented cost initiatives to improve margins, including a 22% reduction in total planted area through the renegotiation of our lease agreements. We have also increased the share of rice varieties due to more resilient prices while also leveraging our production flexibility to produce dairy products for the domestic and export market based on marginal contribution. Before concluding this presentation, I would like to share a few brief closing remarks. Over the years, Adecoagro S.A. has demonstrated a strong track record of delivering consistent results and generating cash flow notwithstanding commodity price cycles and adverse weather events.

With the incorporation of the Fertilizers business, we have effectively doubled the size of the company, further enhanced the severity and visibility of our cash generation, and positioned Adecoagro S.A. in a new league in terms of scale and relevance. We acquired a state-of-the-art asset and a cash-generating business with immediate earnings contribution and limited execution risk. As a result, we are today a significantly stronger and more resilient company with enhanced diversification and a more robust earnings profile. We are very enthusiastic about the company we are building and the long-term view that this transformation is expected to deliver for all of our stakeholders. Thank you very much for your time. We will now open the call to questions.

Operator: 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 Guillermo Gutia with BTG Pactual. Your microphone is open.

Guillermo Gutia: Hi, Mariano. Good morning. So two questions from our side here, please. The first one is on Fertilizers. So you are now starting to operate Profertil at a time when urea prices are actually soaring. So we just want to see or to hear a review a bit on the fertilizer market today. So how are you seeing it? If you expect these higher prices to boost the industry volumes in a meaningful way, or we may actually see this price increase to maybe flow more directly to Profertil margins. So that is the first. And the second one is on the Sugar and Ethanol business.

You guys are now estimating a double-digit growth in sugarcane crushing for this crop year, something that should be largely helped by agricultural yields. So we just want to know how you guys see the unitary cost going forward, especially since you are going to have a higher dilution from the stronger volumes, but fertilizer prices are also increasing. So those are the two ones, please.

Mariano Bosch: Thank you, Guillermo, for your question. Number one, I am going to take the question on the Fertilizers business, and then Renato will take the specifics of Sugar and Ethanol. On the Fertilizers business, of course, today the level of prices has increased because of the conflict, and that increase is between 30% to 40%. But before that, fertilizer prices were also good prices for us and for our business model. And today, how these higher prices on urea transform into higher margins for us, that difference goes directly to the final number, to the EBITDA number or to our cash generation, because all our costs are fixed.

Our gas contract, that is 60% of the cost of producing urea, is already fixed, and we have fueling contracts until 2027. So that is pretty easy to calculate and to understand what is the impact on that increase in prices. Having said this, we produce per year, or we should be producing on average, 1,300,000 tons per year. From this 1,300,000 tons, we have already produced and sold during January and February around 200,000 tons, so 1.1 million tons are still open to this increase in prices. And we sell almost every month the amount that we are producing. There are some months that we sell some more because of the cyclical acquisition from the farmers.

So during July, August, September, we sell more than during February and March. So if the prices continue at this level, that 1,100,000 tons that are still available for sale will be impacting directly on our final results. So that is basically how we see this. And we see Fertilizers for this year at relatively high prices. We have this view that even with the conflict finalizing, price of fertilizer will be impacted for the whole year with the most probability. And then going to your second question on the Sugar and Ethanol business, I will ask Renato to answer that question. Renato?

Renato Junqueira Pereira: Hi, Guillermo. We think that our cost can be reduced in approximately 10% to 15%. I think one of the points you just mentioned is the dilution factor. As was mentioned, we had a lot of rains in the last quarter of last year, which improved a lot the outlook for the sugarcane for this year. That is why we are having a very intense first quarter in terms of crushing, producing only ethanol at high prices. So that is the dilution factor. Then if you go to other points that impact our cost, we think that labor should increase close to the inflation.

Fertilizer, we have already fixed and bought 70% of our annual need, so we do not see impact until at least the mid of the year. And diesel, of course, depends on the increase of price of Petrobras. But we have the benefits of the increase of price of gasoline. Also, leasing cost should be lower because of the consequent prices. And more important, we have been working a lot in adjusting our efficiencies, especially in the agriculture part. We have been very disciplined in measuring the efficiency of each machine in the field.

So we have reduced the number of equipment to harvest the sugarcane and to plant the sugarcane, so we are doing the same thing with less equipment, which represents less cost. So we are very optimistic we are going to have a good year in terms of cost.

Guillermo Gutia: Very clear. Thank you very much, guys.

Operator: Our next question comes from Gabriel Baga with Citi. Your microphone is open.

Gabriel Baga: Hi, the Adecoagro S.A. team. Thanks for taking my questions. I have two. Mostly, it is a kind of a follow-up from the last question. The first one is about the Fertilizers business. When you think about this new scenario for urea and ammonia price, given the fact that you guys have a really interesting position in the gas price, and I think China, how should we think about the commercialization strategy for the year, given this much better scenario, but the level of certainty that you have at this point makes this kind of decision more, let us say, challenging in this context, right? So I would like to understand this strategy for the year.

The second point is about another commercialization strategy, but in Sugar and Ethanol. Right? The same case here. Right? You see a really tough situation right now for gas and the price for diesel price in the country. You are seeing even that Petrobras has not changed the gasoline price, we are seeing gasoline price increasing in the last two weeks, which means that it seems to be more supportive for ethanol price during this next crop season for the year. So to take advantage of this kind of stronger scenario for ethanol price, how should we think about the mix and the commercialization strategy for ethanol going forward, in your point of view? So those are the two questions.

Thank you.

Mariano Bosch: Hi, Gabriel. Thank you for asking your question. Renato, do you want to answer the second question on the gasoline prices, etc.?

Renato Junqueira Pereira: Okay. So we are more optimist about the ethanol situation now, that the gasoline price will have to increase. Actually, it is already increasing. In the short term, the prices are very good because the level of inventories is very low. Actually, it is 25% lower than a year ago. That is why, under our continuous harvest model, we are crushing a lot in the first quarter and only producing ethanol. So we are selling ethanol right now close to 20¢ per pound equivalent in Mato Grosso do Sul. When the season really starts, which is mid-April, we believe that the supply of ethanol will increase something between 3 and 4 billion liters.

But part of this is going to be consumed by the lower stocks that I just mentioned. The other part is going to be consumed by the fact that E30 is going to be effective since day one, different from last year. And the other part of the volume is going to be absorbed by a higher market share of hydrous ethanol. If you consider a parity at the pump at 60%, it is still an ethanol equivalent to 16.5¢ per pound in Mato Grosso do Sul, which is still better than sugar now.

So that is why we think that we will be maximizing ethanol the whole year and, of course, with a better price because of the situation of gasoline that you asked.

Emilio Federico Gnecco: Thank you, Renato.

Mariano Bosch: Gabriel, and on the Fertilizers business and our strategy on commercialization, in this case, you have to take into account that we always follow international prices. South America, this region, imports millions of tons of urea per year, and the region only produces 1.5 to 1.7 million tons per year. So the net imports are huge. So always the price is determined by international prices. Having said this, most of our strategy is selling domestically within Argentina because Argentina in particular also imports half of the needs that it has per year. So our strategy is to maximize the sales within Argentina, but always pricing at import parity.

So that is the concept on how we price and all our strategy. And then, as we are producing every month more or less the same amount, and the needs of urea are different in the year—there is a peak in May and another peak in August, September, October of the need that the urea has in the fields or in the farms—part of the commercialization strategy includes delivering into the storage capacity in the interior of the different places in order to have this urea ready to be used, strategically. So that is basically how we sell the urea that we are producing all year round.

Gabriel Baga: Thank you, team. Very clear.

Operator: Our next question comes from Isabella Simonato with Bank of America. Your microphone is open.

Isabella Simonato: Thank you. Good morning. Thank you. My question is a little bit on the use of capital. Right? As you said, you are much more levered, right, than a year ago, and we had a very different cash flow stream profile, and I understand that this higher urea price should accelerate that. So I was wondering how first we should think about CapEx for 2026 and also cash being returned to shareholders. Thank you.

Mariano Bosch: Thank you, Isabella. As you know, we have been always very disciplined on this allocation strategy. So with the acquisition of the Fertilizers business, we have higher leverage to what we have always expressed that is our ideal leverage in terms of times EBITDA. So around 2x is where we would like to be and where we are working to be.

But having said this, when there is something very specific, very attractive as it was the acquisition of the Fertilizers business, and we get into and we can move into this level as we are today, we are very confident that we are going to be able to go to the leverage where we feel comfortable pretty quick, and that is what we are working on. But as Emilio explained, we are continuing with our dividend policy, so we are continuing distributing in cash dividends $35 million that will be distributed equally in May and November as we have been doing in the past three or four years. And also, we are analyzing interesting growth projects.

Each one of these three lines of business has very attractive and specific growth opportunities, most of them organic growth opportunities and some of them inorganic. But we are always analyzing that. But we will continue to be very disciplined with this general concept of the capital allocation where some is for returning to shareholders, some to continue to grow, and also to go to the levels of debt of 2x or around 2x. That is where we feel more comfortable.

Isabella Simonato: Thank you very much.

Operator: Our next question comes from Matheus Enfeldt with UBS. Your microphone is open.

Matheus Enfeldt: Hi, everyone. Thank you for the time and taking my question. My first question is sort of a follow-up from the previous question, which is I understand that the near focus is on the deleveraging story, which might be relatively quick given what we are seeing in urea and ethanol prices, right? So thinking once you do deleverage in two, three years, what is the next growth avenue that you really view from here? Is it expand more sugarcane crush? Is that a possibility? Or potentially expand more the capacity in Profertil? And also, if there could be M&A in the pipeline once leverage really drops? So that is my first question.

And then the second question is, I understand that there is a change in the Food and Agriculture segment on how you perceive the business. It is going to be, I do not know, 30% of your revenues, but a relatively small contribution to the overall business, but with a lot of complexity. I think 10 different commodities that you need to follow. So I am just wondering how do you think that these assets fit into Adecoagro S.A.'s mid-term portfolio. If there are ways to potentially monetize better the asset, or if you have the appropriate scale in the farming business to really run, or if you could think of JVs or some partnerships.

Just on how you think that this fits into your portfolio mid-term. Those are my questions. Thank you.

Mariano Bosch: Thank you, Matheus, for your question. I am going to start with the second one and go into the first one. We feel very comfortable with the three business lines that we have today. We think that the Food and Agriculture business is something that has, as you mentioned, sales in that level, and we see a lot of opportunities to continue improving there. And when we think on the margins in terms of EBITDA, that is directly to the cash generation. So we feel very comfortable and enthusiastic on how that business is being transformed into a more cash-generating business. So we do not see anything strategic there on a partnership or anything specific.

We continue to see a lot of advantages in the domestic consumption business, etc., that are improving and is working very well. There are some new products that are adding value and that is very compelling in terms of what is going on there. But having said this, and going to the first part of your question on what is within the most attractive growth avenues that we are seeing today, the Sugar and Ethanol has always been very consistent, and we have this organic growth that we have been talking about and that we have been always analyzing, and we expect that to continue to be there as the returns or the marginal returns are continuing to be attractive.

But when we explained to the market, and when we were so enthusiastic on our Fertilizers business, it is because we are seeing strategically in South America a huge opportunity in terms of urea production. Argentina has one of the largest gas basins in the world and will become a very important exporter of gas. So one of the big opportunities that we see is to become a larger producer of urea. So of course, we are analyzing that opportunity of building a new plant, duplicating the plant, what are the growth avenues that we are looking at there in the Fertilizers business.

These are investments that are huge in terms of the amount of capital required and are also very relevant in terms of the engineering of that plant. The time that it takes to build it, it is a three-year project to build a plant like we have today at the minimum, and when you include everything, it is always more of four or sometimes it is a five-year project to build a plant like what we have today. So that is a huge project, very relevant. We have nothing to announce today rather than that we are very enthusiastic on analyzing deeper the project, the location, the amount of gas, and what is the exact amount of gas, etc., etc.

So we can also think about this RIG that Argentina has, this special program with some benefits for large investments like this one. So these are the type of potential projects that could appear in the next year or so.

Matheus Enfeldt: That is super clear. Thank you.

Operator: Our next question comes from Lucas Ferreira with J.P. Morgan. Your microphone is open.

Lucas Ferreira: Hi, guys. Two questions. On the Fertilizers business, how to think about the production cost per ton of urea and ammonia this year? Since last year, given the stoppage, I think not only you lost the volumes, but maybe fixed cost dilution was impacted, right? So assuming the plant running full-year and the gas prices you have fixed, what is the cost per ton, more or less, that you imagine for this business? And then in the long term, how to think about this business? Right now, you have fixed costs. Obviously, this is a great thing because prices are going up, but it could have gone the other way, right?

So my question is how to think about this business. Is this a business we should see as a very high operating leverage business? So you work with fixed prices. Is that going to be the business model going forward, or when the contract expires, would you be more spot? Just to understand how to model this long term. And if I may, on the farming business, maybe if you can quickly comment on the outlook for next season. I know it is maybe too early to say, but any improvements you are seeing for the business? And I think you are being close to the administration, Argentina administration.

Any views on any clue you have on if Argentina, with all the reforms passing, will be able to lower further the export taxes? How to think about that? Thank you.

Mariano Bosch: Thank you, Lucas, for your question. On the second question in terms of the farming business, in Argentina, with this new administration, everything is improving. We are very optimistic on that, and that is why we feel comfortable that with this Food and Agriculture business in general, being able to compete domestically and in the export market also, will be very positive. The taxes are being reduced. So that is a very relevant improvement that is going on within Argentina and that will certainly help this business to continue to improve. And that is why I mentioned before that we are still optimistic on this farming and agriculture business for Argentina and Uruguay in the coming future.

Going to the first question and regarding the Fertilizers and the urea and how we think about the prices, again, this is a very long-term view. This is within our DNA, as we were saying at the beginning. We believe we are the lowest-cost producers in the region of urea. When we think on replacing all this import of 10 million tons of urea that are happening every year in South America, we feel very comfortable that we are within the lower-cost producers, and we have analyzed all over the world the different plants that are producing urea, the different prices of gas, etc. And we are very confident on being the lowest-cost producer.

What is this cash cost of producing urea today, with this level of 1,300,000 tons to be produced in the plant that is what we think that we can produce stabilized, is within $180 to $190 per ton of urea. And as you have seen, the prices are much higher, and we do not think that level of price is possible in order to compete with urea in this region. So we are very confident to be the local producer in terms of producing urea. That is why we got involved. We were not seeing that the price was going to be at this level of price as we are today.

We were always thinking on this long-term view that we have when we get involved into a business.

Lucas Ferreira: Perfect. And just to follow up, the $180 to $190 includes SG&A as well, so is it kind of EBITDA cost?

Mariano Bosch: No. No. I am talking about the cost of product. I am talking about the cash cost.

Lucas Ferreira: Okay.

Operator: Our next question comes from Julia Rizzo with Morgan Stanley. Your microphone is open.

Julia Rizzo: Hi. Good morning. Thank you for picking up my question. I would like to hear your thoughts on what you know about, within the global fertilizer, especially the urea production, the dynamics within supply cuts around the key regions close to the Middle East. If you know about anything about supply cuts or supply reduction, and how that can affect or last in the market. And derivative to that is, as the planting season starts in the Northern Hemisphere, especially Europe and India, and I think less likely the U.S., do we know if they have enough urea supplies for this season?

Can you give us a sense of the supply-demand disruption that we could be seeing now in urea given the war and Strait of Hormuz situation.

Mariano Bosch: Hi, Julia. Thank you for your question. Of course, we are following this very closely. There is a lack of urea that is very relevant. Thirty percent of what comes into South America comes from the Middle East and through the Hormuz Strait. So there will be a lack of supply, and that can impact even further what has already been impacted. But also, there is a time needed in order for that to reach—the 60 days at least since you ask for the urea until it comes to be used. So, yes, it is going to be difficult to supply the whole needs for South America and for the Americas in general. The Americas are importers of urea globally.

Julia Rizzo: So you are saying that it could be a supply shock? Even current inventory levels in the ground, I do not know how much the industry holds inventory for the next season.

Mariano Bosch: Inventories are very low. The inventories are very low.

Julia Rizzo: In South America, but in the Northern Hemisphere, do they already have enough? Northern Hemisphere, let us say.

Mariano Bosch: The Northern Hemisphere is also under pressure in terms of being importers of urea. I do not remember exactly how much they import, but they import like 5 million tons.

Renato Junqueira Pereira: Yes.

Julia Rizzo: And usually, they do not have enough inventories like a three-month, four-month inventory. I do not know what is the level of inventories in the chain. What usually works.

Mariano Bosch: No. In China, it is relatively low.

Julia Rizzo: Okay. Interesting. So, yeah, that could mean that prices will stay higher for longer, right, until supply gets back on track, right?

Mariano Bosch: Of course, we do not know, but that is a clear possibility.

Julia Rizzo: Okay. I have another question on sugar. If you could help me, I would like to hear your thoughts. Recently, we saw a decline in or a revision lower from the Asian harvest. We have Brazil, of course, naturally going max ethanol. We have oil prices reaching over $100, actually futures even higher. Why do you think sugar prices are under pressure compared to other commodities? And even a strength in the fundamentals. And what do you see that turning?

Mariano Bosch: That is a good question, Julia. We also do not clearly understand. Renato just explained, the sugar production in Brazil, that is one of the main producers worldwide, is going to be maximizing ethanol. So we expect that to be also transferring to sugar prices in the medium term, but we are not seeing that yet. Renato, can you add something else to this?

Renato Junqueira Pereira: Well, I think it is exactly that. Once the market realizes that Brazil is maximizing ethanol, it is going to have less margin to switch the mix towards sugar, and then the market is going to be more balanced. Then we think there is a potential to increase the price of sugar in the second semester. And if you think in the mid-term, we think that the supply is going to decrease because today the sugar price is below most countries' production costs, including most players in Brazil.

So we think that it is going to have an impact in the supply, so price should react next year, and then probably the low price is not going to last that long.

Julia Rizzo: Okay. Thank you.

Operator: 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.

Mariano Bosch: Thank you all for participating today, and we hope to see you in our next conferences.

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

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