Adecoagro (AGRO) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Nov. 12, 2026

CALL PARTICIPANTS

• Chief Executive Officer - Mariano Bosch
• Chief Financial Officer - Emilio Gnecco
• Sugar, Ethanol and Energy Vice President - Renato Junqueira Pereira
• Investor Relations Officer - Victoria Cabello

TAKEAWAYS

• 9-Month Adjusted EBITDA -- $471.8 million, representing a 24.8% increase and an all-time high for a 9-month period.
• Q3 Gross Sales -- $590.9 million, growing 7.4% year over year driven by the performance of the fertilizers operations.
• 9-Month Gross Sales -- $1.5 billion, reflecting a 2.2% increase as fertilizer sales offset lower sugar revenues.
• Net Debt -- $1.8 billion, a 7.2% increase compared to the previous quarter due to the cash payment for the Caarap3 acquisition.
• Net Leverage -- 3.2x on a pro forma basis, with management expecting a decline to approximately 2.5x by the end of 2026.
• Caarap3 Mill Acquisition -- $136 million paid in cash, implying a purchase price of approximately $39 per ton of cane crushed.
• Urea Realized Price -- $561 per ton for the first 9 months, an increase of $81 per ton versus the same period last year.
• 9-Month Urea Sales -- 873,000 tons, up 10.2% year over year due to strengthening demand ahead of the planting season.
• 9-Month Urea Production -- 960,000 tons, growing 11.4% driven by higher plant utilization rates and monthly records.
• Sugar, Ethanol and Energy Crushing -- 10.4 million tons year to date, a 5.9% increase despite a 5.1% decline in the third quarter.
• TRS per Hectare -- 31% growth in the third quarter and 24% year to date, reflecting favorable growing conditions and productivity gains.
• Sugar Hedge 2026 -- 100% of production hedged at an average price of 16.5 cents per pound.
• Sugar Hedge 2027 -- 41% of production hedged at an average price of 18.3 cents per pound.
• Expansion CapEx -- $602.4 million year to date, primarily including the Profertil final payment and the Caarap3 acquisition.
• Urea Production Cost -- $237 per ton for the first 9 months, a 10% decrease driven by improved gas pricing and logistics.
• Dairy Productivity -- 41 liters per cow per day in October, setting an all-time monthly record for the company.
• 9-Month Adjusted Net Income -- $32.6 million, down 56.6% year over year reflecting higher interest expenses and income taxes.
• Ethanol Average Selling Price -- $503 per cubic meter in the third quarter, as the company prioritized sales during a favorable pricing window.
• Energy Exported -- 582,255 MWh year to date, up 14.5% year over year supported by higher crushing and stored bagasse use.
• Planted Area Forecast -- 245,400 hectares for the 2026/27 season, up 2.9% with increases focused on rice and peanuts.
• Q3 Fertilizers Adjusted EBITDA -- $109.3 million, up 7.4% year over year on a pro forma basis due to increased sales volumes.
• Q3 Food and Agriculture Adjusted EBITDA -- $12.6 million, compared to $1.5 million last year, reflecting a rebound in dairy performance.

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RISKS

• Emilio Gnecco stated that net income decreased "mainly due to higher interest expenses, reflecting the additional debt incurred to finance the acquisition of the Fertilizers business," impacting bottom-line results.
• Emilio Gnecco indicated that "above-average rainfall in September reduced effective milling days," which caused a 5.1% year-over-year decline in quarterly crushing volumes.

SUMMARY

Adecoagro S.A. (NYSE:AGRO) achieved a record 9-month Adjusted EBITDA of $471.8 million, driven by the integration of its fertilizers business and operational improvements in its dairy operations. Management stated that the company successfully integrated the Caarap3 mill into its Mato Grosso do Sul cluster, expanding its total industrial capacity. The company reported that it is prioritizing ethanol sales to capture high domestic prices while maintaining a 100% hedge on its 2026 sugar production. CFO Emilio Gnecco indicated that the company is on track to reach its year-end net leverage target of 2.5x as seasonal working capital requirements reverse in the fourth quarter. Management indicated that the fertilizers segment reached new production records for urea and ammonia, supported by the completion of a scheduled maintenance turnaround in late 2025.

• Renato Pereira noted that ethanol inventories are currently "14% lower than the same period of last year," which supports a tight supply scenario and high prices through early 2027.
• CEO Mariano Bosch stated the company expects "to reach the FID that we hope to reach to it within next year" for the potential more than duplicating of the urea plant capacity.
• The company reported that shipping urea to regional markets such as Brazil is cost-competitive, with the Paranagu1 port often serving as a more efficient destination than domestic ports.
• Management stated that the newly acquired Caarap3 mill will transition to a continuous harvest model, which is expected to increase effective milling hours and align with existing cluster efficiency.
• Renato Pereira noted that the company is maximizing hydrous ethanol production to take advantage of government subsidies available through Dec. 9, 2026.
• The company reported that its dairy business is seeing significant productivity gains, with cow productivity at its free-stalls reaching a record 41 liters per cow per day in October.

INDUSTRY GLOSSARY

• TRS (Total Recoverable Sugar): A metric used to measure the amount of sugar that can be commercially extracted from a given amount of sugarcane.
• Consecana: A Brazilian index that determines the price paid for sugarcane based on the quality of the cane and the market price of sugar and ethanol.
• UHT (Ultra-High Temperature) Milk: Milk that has been sterilized at high heat, allowing for a longer shelf life without refrigeration.
• Hydrous Ethanol: Ethanol that contains approximately 5% water, commonly used as fuel for flex-fuel vehicles in Brazil.
• Anhydrous Ethanol: Nearly pure ethanol used for blending with gasoline.
• Free-stall: A dairy housing system where cows are free to move and choose their own resting areas.
• TRS per Hectare: A productivity metric combining sugarcane tonnage per hectare and the sugar content within that cane.

Full Conference Call Transcript

Operator: Good afternoon, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Adecoagro's 2026 Third 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. [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 the future events and therefore, depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Adecoagro and could cause results to differ materially from those expressed in such forward-looking statements. Now I will turn the conference over to Mr. Mariano Bosch, CEO. Mr. Bosch, you may begin your conference.

Mariano Bosch: Good afternoon, and thank you for joining Adecoagro's 9 Months 2026 Results Conference. Consolidated 9 months adjusted EBITDA reached an all-time high of $472 million. This is almost $100 million more than our previous record for this period. A year ago, we announced the acquisition of South America's largest urea plant. Today, it is fully integrated to our operations and continues to set production records. Consistent gains in efficiency, competitiveness and operational excellence, combined with our team's knowledge are generating these greater results. In Brazil, cane productivity continues to improve month-over-month. We are maximizing crushing across all our mills while capturing better sugar and ethanol prices.

With Caarapó mill now integrated into our cluster in Mato Grosso do Sul, we have additional industrial capacity and together with our continuous harvest model, it will enable us to crush excess cane and keep growing in volumes. By applying our know-how and best practices in the region, we are becoming the largest sugar and ethanol cluster in Brazil, and we believe the lowest cost producers, too. In Food and Agriculture, crop productivity reached a new quarterly record followed by an all-time high in October. Strong operational performance and better commercial results mainly from our dairy consumer goods drove the improvement in the earnings.

We are now in the middle of the planting season with very good conditions and favorable forecast pointing to good crop development. Following the strategic opportunity that we got with the Caarapó mill, we still remain committed to achieving our year-end target in terms of deleveraging the company. To conclude, I would like to thank everyone at Adecoagro. These achievements are the results of their daily commitment, hard work and constant drive to do better. Thanks also to our shareholders for their continued trust and support. Now I will let Emilio walk you through the numbers of this period.

Emilio Gnecco: Thank you, Mariano. Good afternoon, everyone. Let's turn to Slide 4, which presents a summary of our consolidated financial results. As a reminder, we are presenting our numbers on a pro forma basis, assuming our fertilizers business had been part of Adecoagro since the beginning of 2025. We believe this provides a more meaningful year-over-year comparison. Gross sales totaled $591 million in the third quarter and $1.5 billion year-to-date. The year-over-year increase during both periods was mainly driven by a stronger performance in our fertilizers operations, which more than offset the lower revenues in Sugar, Ethanol and Energy due to lower sugar prices and sales volumes.

While quarterly adjusted EBITDA remained in line with the prior year, the 9-month result reached a new all-time high, approaching the company's full year record. Strong urea sales drove the year-over-year growth in the fertilizers business, while improved domestic dairy performance supported a significant rebound in Food and Agriculture results. This performance, in turn, more than offset the softer results in Sugar, Ethanol and Energy, which I will discuss in a moment. Let's move to Slide 6 to review the financial and operational performance of the Sugar, Ethanol and Energy segment. First, I would like to remind you that we completed the acquisition of the Caarapó mill on September 1, 2026.

Since then, the mill has been fully integrated into our operations and consolidated into our results. Turning to our operational performance. We crushed 4.6 million tons of sugarcane during the quarter, slightly below the prior year as above-average rainfall in September reduced effective milling days. Cane productivity improved significantly with TRS per hectare increasing 31% during the quarter and 24% year-to-date, supported by favorable growing conditions. As a result, year-to-date crushing volumes reached 10.4 million tons, remaining above the prior year level and sustaining the growth trend observed since the beginning of 2026. Regarding our production mix, we continue to maximize crushing volumes while giving priority to the product offering the highest marginal contribution at any given time.

Year-to-date, our production mix was 35% sugar and 65% ethanol. Production costs were negatively affected by the appreciation of the Brazilian real. Excluding this foreign exchange impact, year-to-date production costs in local currency remained in line with the prior year. Sales declined both during the quarter and year-to-date, primarily reflecting lower sugar prices and volumes, which more than offset higher ethanol volumes. During the third quarter, we accelerated ethanol sales to capitalize on the significant recovery in prices. This improvement was supported by tighter domestic supply and demand conditions and government measures that strengthened ethanol's competitiveness relative to gasoline. This was consistent with the strategy we implemented during the first half of the year.

We sold ethanol inventories and daily production at peak prices ahead of the new harvest and subsequently rebuilt inventories to capture more favorable pricing opportunities later in the year. Overall, adjusted EBITDA totaled $101 million for the quarter and $120 million (sic) [ $195 million ] year-to-date. The year-over-year decline primarily reflected lower sales and the impact of lower Consecana prices on the mark-to-market valuation of our biological assets, particularly harvested sugarcane. Looking ahead, we continue to expect mid-teens growth in crushing volumes, supported by greater cane availability. Our continuous harvest model allows us to process any sugarcane left unharvested at year-end beginning in January.

This positions us to benefit from strong yields and potential increases in sugar and ethanol prices during Brazil's traditional interharvest period. Let's now turn to Slide 8 to discuss our fertilizers operations. We delivered another strong quarter, supported by solid operational execution and commercial performance. The plant continued to operate at high utilization rate, achieving a new monthly urea production record in August and new ammonia production records in both August and September. As a result, urea production increased 4% year-over-year during the quarter and 11% year-to-date, supporting further cost dilution. On the commercial front, urea demand strengthened ahead of the 2026/'27 planting season, supported by normal seasonality and lower prices following the peak recorded between March and May.

Despite the sequential price decline, our average realized price for the first 9 months reached $561 per ton, that is $81 per ton above the same period of last year. This performance generated adjusted EBITDA of $109 million for the quarter, up 7% year-over-year and $283 million year-to-date, 65% above the first 9 months of 2025. Higher production volumes and operating efficiencies also contributed to a meaningful expansion in margins. In 2026, we expect the business to outperform prior years, supported by higher production, including new monthly records for both urea and ammonia in October and the higher prices captured during the first half of the year.

Please turn to Slide 10 to review the performance of our Food and Agriculture segment. We completed the 2025/'26 harvest season with better-than-expected yields, producing more than 1.2 million tons of agricultural products. In dairy, productivity at our free-stalls reached a new quarterly record, while milk processing volumes also increased. On the commercial front, our consumer brands continue to perform strongly in the domestic market, particularly in UHT milk. We also accelerated white rice sales as prices gradually recovered, contributing to higher sales during the quarter. Together, these operational and commercial improvements drove a significant recovery in Food and Agriculture results. Turning to the 2026/'27 season, planting is progressing with 57% of the planted area already seeded.

We are increasing planted area by 3% year-over-year, mainly in rice and peanuts. We expect yields to be in line with or slightly above historical averages, supported by above-average rainfall during crop development and El Niño conditions expected to persist through the first quarter of 2027. In dairy, we expect milk processing volumes to continue growing, supported by new product launches across our consumer brands. Productivity at our free-stalls also continues to improve, reaching an all-time monthly record of 41 liters per cow per day in October. Let's move to Slide 12 to review our capital allocation strategy. During the quarter, we completed the acquisition of Caarapó mill for approximately $136 million paid in cash at closing.

Caarapó has been fully integrated into our Sugar, Ethanol and Energy cluster in Mato Grosso do Sul and is already proving accretive by processing surplus cane from Angelica and Ivinhema. This should enable the mill to operate above its historical crushing levels from its first year under our ownership. We are also applying our operational best practices and gradually introducing our continuous harvest model to improve efficiency. Because Caarapó is located in the same microregion as Angelica and Ivinhema, it benefits from the same competitive advantages. As we transition to this model, we expect to progressively increase effective milling hours. Including the acquisition, year-to-date, expansion CapEx totaled $602 million.

The final payment for Profertil completed in the first quarter of 2026 remains our largest capital deployment. We also continue to invest in attractive organic growth opportunities across our businesses, including biomethane production in Brazil. Now let's turn to Slide 13 to review our debt profile. Net debt totaled $1.8 billion at the end of the quarter, while our pro forma net leverage ratio stood at 3.2x. The quarter-over-quarter increase in net debt was entirely attributable to the Caarapó acquisition. Our debt levels also reflect seasonal working capital requirements and higher readily marketable inventories, consistent with the seasonality of our operations. Excluding these effects, net leverage would already be below the levels recorded in previous quarters.

We expect leverage to decline as EBITDA generation increases, enabling us to reach our year-end target of approximately 2.5x. During and after the third quarter, we completed several liability management initiatives, including the redemption of our 2027 global notes in late October, further strengthening our debt profile. Following these transactions, long-term debt represents 78% of total debt and average maturity has been extended to 4.2 years. The currency composition of our debt remains closely aligned with our cash generation profile, helping to mitigate foreign exchange risk. We remain focused on deleveraging while maintaining a balanced debt structure and extending maturities.

Finally, on November 19, we will pay the second $17.5 million installment of our annual cash dividend, equivalent to $0.12 per share. This payment will complete our 2026 shareholder distribution program. Thank you very much for your time. We will now open the call to questions.

Operator: [Operator Instructions] Our first question comes from Gustavo Troyano with Itaú BBA.

Gustavo Troyano: My first question is on Caarapó mill. And now that it's already part of your portfolio, just wanted to have a clear road map for the ramp-up of the asset. You have discussed the 4.5 million tons of crushing for 2027 and potentially higher volumes over time. I just wanted to understand a little bit more the ramp-up curve for this asset and how quickly could Caarapó converge towards the operational KPIs of your existing cluster? And also to understand a little bit more if the carryover impact of the crushing ramp-up throughout 2027 would automatically imply more volumes for 2028 onwards. That's my first question.

And on the second one, still in the sugar and ethanol space and with the above-average rainfall levels that we're seeing recently in the Brazilian Center-South that is likely to postpone industry sugar crushing towards next year. I just wanted to have an updated view on the commodity prices going forward for 2027, basically to understand if you understand that we are heading towards a more challenging year in terms of commodity prices.

Mariano Bosch: Gustavo, thank you for your question. Before passing the word to Renato that will answer in detail, I would like to point out this Caarapó mill. I think that the Caarapó mill acquisition was something very important for us. It was a very attractive opportunity. We acquired a mill very near within our own plantations being really part of the cluster. And this mill has the capacity to mill between 5 million to 7 million tons that is similar to what we already mill in Ivinhema. It even has more capacity on some parts of the system. So it is something really attractive for us.

So if we only assume that we acquire this mill where we can mill 5 million tons with no problem at all with the cane that we already have in the cluster, we have excess cane in the cluster because this excess of rains that we have, and we have a very high productivity this year. So we are having excess of cane that we couldn't have milled. So we acquired this mill, if we assume 5 million tons, is less than $30 per ton, this is something impressive in terms of the quality of the mill that we acquired for such a low price that includes everything. So we are really happy with this transaction.

We think this was a great opportunity, and we are very comfortable that we will start showing the results as soon as we continue to mill. So after making this quick clarification that I wanted to point out because it's something an extraordinary opportunity that presented in front of us this quarter, we couldn't have been so clear in our previous call. So that's why we wanted to point it out this time this great opportunity that we had by acquiring the Caarapó mill. So making this quick clarification, I will ask Renato to go in detail to your question.

Renato Pereira: Okay. So as Mariano mentioned, Caarapó is in the same microregion as Angelica and Ivinhema. So it's part of the same cluster. So we see Caarapó almost as an organic growth of the cluster. So we're going to adopt the same operational model that we have in Angelica and Ivinhema. The equipment of Caarapó have a lot of potential. The milling system is exactly the same as Ivinhema, which is crushing 6.5 million to 7 million tons. The sugar factory is the same size as Ivinhema and the distillery is even higher than -- bigger than Ivinhema. The steam generation is also bigger than Ivinhema. So we think that Caarapó has a lot of potential.

Also, we think that we can adopt the best practices that we are -- that we have in our cluster to improve some important KPIs of Caarapó. For example, the industrial efficiency, which is basically the sugar input and the sugar output transformed in either sugar or ethanol. We think that we can improve this KPI, which is very important. Also the use of time, we think that there is a lot of potential to improve the use of time. In other words, we think that we can have less mechanical problems in Caarapó and crush more hours during the year. Also the energy consumption in Caarapó is higher than in our cluster.

And we think that with small adjustments, we can put it in the same level. And finally, in the agriculture area, we think that we can improve the sugar or the TRS per hectare of Caarapó adopting the same way that we are doing in our cluster. Also, the Caarapó team is very good. I think the integration was very, very good. It seems that they are working with us for a longer period of time. So we are very, very happy overall. And regarding our second part of the question, I think it's important to talk about 2026 before to get into 2027. I think the scenario is very positive, especially for ethanol.

Today, the supply of ethanol is smaller than everybody was thinking as a consequence of the rains that the whole Center-South region is receiving. So the delay in crushing and also the lower TRS content decreased the ethanol output. On the other hand, the demand of ethanol is very high. Actually, the higher demand since 2019. The hydrous demand per month is more than 2 billion -- 2.3 billion liters of ethanol. The parity at the pump is still in São Paulo, 62% so favoring ethanol consumption. If you take the inventories now, it is 14% lower than the same period of last year.

So we think that the scenario is very tight, and prices should be high until -- at least until -- to finish the first quarter of next year. We are taking advantage of this scenario. The price is very good. And also, we are taking advantage of the subsidies that the government is giving. The subsidy is in the hydrous ethanol and is based in the sales of ethanol that we have during the period, and we are taking advantage of that. I think it's very important to mention that we don't have any commitment of anhydrous with contracts of anhydrous. So we are maximizing hydrous now to get all this benefit.

So we believe that the beginning of next year, the scenario for ethanol is going to be really good. Once the season starts, we think that the ethanol supply is going to increase. But although the amount of the sugarcane probably is going to be very high, that sugarcane first has to be crushed. I think Brazil has crushed 655 million just 1 year in the history in 2023. So it's not easy to crush all that cane. Also, we believe that the mix is going to be more sugar oriented. This year probably is going to finish around 46%. And next year, probably is going to be close to 50%.

So part of the ethanol is going to be transformed in sugar. But the corn ethanol is going to increase. But if you put all those variables into equation, we think that the ethanol supply is going to increase around 3% only. We think that 3% more ethanol can be easily absorbed by the flex-fuel cars. We could see this year how responsive the demand is to the parity of the rate -- the parity at the pump. So this ethanol, the excess of ethanol is going to be absorbed. In the case of sugar, we think that Brazil is the same situation of ethanol.

So the 40 million tons that everybody was talking at the beginning of the season today is difficult to reach 37 million, 38 million tons. So the amount of sugar that Brazil is going to produce is lower. Also, this El Niño effect is causing a dry weather in other producer countries, especially in India. So India probably is going to produce less than it consumes this year. And for the next year, probably India is not going to increase the production because of the planting period that was very dry. So we think that the scenario is good for sugar as well.

Operator: The next question comes from Matheus Enfeldt from UBS.

Matheus Enfeldt: My first question on Profertil -- rather my 2 questions on Profertil, but the first one on the potential expansion of the urea plant. So any updates around that on potential timeline for an FID? That's sort of the first point. But I also want to get your sense on how do you think that once your project potentially is running and then the other competitor is also producing urea in Argentina and Argentina becomes a net exporter of urea. I know that Brazil may be a target for sales, but price will need to absorb freight costs to Brazil.

So I'm just curious on how you think that the outlook for urea production expansion looks in Argentina and how that could negatively impact prices, particularly domestic even if you have to export to Brazil. That's my first question. And then the second one is on Profertil costs. It looks to us, if we're not seeing the wrong number here, that OpEx per ton for urea production is up 16% year-on-year. And then when I look into natural gas prices in Argentina, again, might be seeing the wrong reference here, but we see them up 5% in the same period. So the question is, what's driving this increase in urea production cost?

And if you could just help us sort of understand what's the outlook from here and normalization from here just because we're seeing about $270 per ton cash cost per ton of urea for this quarter. And at this level, it looks like the normalized EBITDA for Profertil will be slightly below what we were previously discussing once the acquisition was concluded. So just to get a sense of really how to think total cost for the urea plant there. Those are my 2 questions.

Mariano Bosch: Okay. Thank you, Matheus for your question. I'm going to address first your second question, just to clarify in terms of cost of production of urea that there were some misunderstandings here. Number 1, it is important to look at it on an annual basis or at least on the 9-month basis because when we talk about quarter-by-quarter, sometimes there are some small specifications. So going specifically for the 9 months, we have 9 months '25, $262 per ton, while in 9 months '26, we have $237. So this is a 10% decrease in terms of cost of production. So we are having a lower cost of production this year than in the pro forma of the previous year.

And this is around 10% lower cost of production. This also includes some additional expenses. So in reality, it's even lower than this number of $237 because we are including the sales of some other products on top of urea and that's the cost of production of all that when you make that type of calculation that includes ammonia, Proaire and N+. So that is a small change that has to be adjusted. And then we are also including in the $237 some growth and maintenance CapEx that are marginally contributing today to an increase in production. So -- and also some of the expenses that may be related to this potential expansion that is what you were also asking.

So all in this, we are around 15% lower costs comparing to the previous year. This means some improvements in terms of gas prices, some improvements on logistics. So there are several improvements that are being happening during this year that makes this improvement in terms of the total cost of production up to now. Then going to your first question related to the expansion of the plant or this possibility of more than duplicating today's Profertil plant and the other projects that are here.

What we believe and we believe since the very beginning when we analyzed this business and when we acquired this Profertil business, we were always thinking on this increase of the plant of this project or potentially more than duplicating because what we see is that we can be the lowest cost producers in terms of urea to export within the region. We are going to be very competitive to go to Paranaguá. Going to Paranaguá is even cheaper than going to Rosario ports within Argentina. So once Argentina completes its normalizations in terms of imports and exports, it's going to be equally cheaper or even cheaper going to Paranaguá port in Brazil than to Rosario port.

So for us, we are not looking at the plant in Argentina as only for the domestic market. Argentina has a possibility to sell within the region. The region still imports more than 8 million tons. And so it's 9 million tons what the region is importing today and the ability to make these 2 projects will only add 3.5 million tons. So they are still more than double to be a net importer in the region that is how we really look at this potential business. So we don't see any risk if the 2 projects are being completed. We think that we can continue to deliver the kind of results that we are delivering today.

That's why we are so optimistic. And we are working hard on developing all the engineering and all the necessary needs to reach the FID that we hope to reach to it within next year or some point of next year. But we are working hard on that to happen.

Matheus Enfeldt: Okay. And just 1 clarification on the urea cost. Back in December, I think we were discussing normalized mid-cycle EBITDA for Profertil of around $300 million per year. Do you think that's still reasonable compared to what you're seeing today? I know that prices can move, urea prices can move, but in general, that's the mid-cycle EBITDA that you can expect for Profertil.

Mariano Bosch: Yes. And as I was mentioning before, we are finding more and more opportunities to continue improving. So we can even have better numbers than that. We are certainly going to close this year on a higher number. This is affected by only 2 months of higher prices than normal because March, April and a portion of May were -- when the prices of urea were out of the historical numbers. Then the rest of the year -- then during the rest of the year, we had historical numbers when you look at the CFR urea price in Brazil.

Operator: [Operator Instructions] Our next question comes from Guilherme Palhares from Santander.

Guilherme Palhares: Just a follow-up on Matheus' question. Of course, you have a great opportunity there on the fertilizer market in Brazil and the Argentina consumption. I just want to try to drill down a bit on the costs between natural gas and other costs. And if you could just explain a bit on a high level, you mentioned a bit the benefits that you guys are seeing because you are reaching the record production levels. So which of the lines and fixed costs are you being able to...

Mariano Bosch: Guilherme, we lost you.

Guilherme Palhares: I just want to understand, you mentioned that you guys are putting out record production numbers for the fertilizer business. I'm just trying to understand a bit how much is fixed versus variable cost there and how we can model a bit the cost curve going forward as you guys continue to deliver those lower costs year-over-year? And what is the level that we should be looking at long term?

Mariano Bosch: Okay. In terms of fixed cost or variable cost, probably 70% to 75% are variable costs. But within the variable cost, you can also work on them. The gas is the #1 variable cost, and there are some opportunities to continue improving this gas pricing and especially gas pricing at the level of the plant, including all the transportation of that. So that is something that we do expect to continue to improve. And then on the logistics in general, have been improved and there is still some room for improvement while Argentina continues to normalize.

Guilherme Palhares: That makes sense. But just drilling down a bit on that, if you could just share with this such high level of production, how much of the gas today is coming from the fixed cost that you guys have and how much is variable? And have you already been able to manage a bit those spot prices of natural gas and how are they doing now?

Mariano Bosch: Yes, sure. Around 80% or 85% is a fixed price. And then there is still a 20% to 15% variable price that you can take opportunity of cheaper gas prices at these moments of the year.

Operator: The next question comes from Gabriel Barra from Citi.

Gabriel Coelho Barra: I have 2 from my end here. The first one, the discussion about ethanol is quite interesting at this point, right? You have the subsidy that should be renewed by next month. We are seeing the anhydrous ethanol in a really tight market today when you take a look at the inventory levels, demand is peaking on the hydrous. So my question is how do you operate this market, right, in terms of -- mainly in terms of the commercialization strategy here from now on until next crop season. I want to hear a little bit more about in terms of mix.

You mentioned that you don't have contracts on anhydrous, but on the other side, we are seeing a more tight market on this side. So you have oil price decreasing and crack spread normalizing. So it's an interesting moment to understand a little bit more on the commercialization side from you guys. The second one, back to Caarapó discussion in the end of this crop season, we still see some challenges here in order to crush the rest of the sugarcane. We understand that you have this continuity on the crushing process during the end of the year. And you have this spare capacity on Caarapó, right?

So given the fact that you have more sugarcane and you have, I would say, if you correct right here, you are reaching the maximum capacity of the legacy plants that you have, Caarapó could be one of the ways to debottleneck this higher productivity and high production of sugarcane. So if you could give us more color about that. And in terms of cost, if this should be a net positive or a net negative in a cost perspective for the average cost for the company, this could help us a lot here to understand the trend of the cost and the crushing dynamic.

Mariano Bosch: Thank you, Gabriel, for your color. In a quick answer, we are selling as much ethanol as possible. We are selling all our ethanol during this period of time. And also, the second question is a clear net positive. Then Renato can give you some more color on these 2 questions. Renato?

Renato Pereira: Okay. So regarding the ethanol question, we are producing hydrous ethanol now to take advantage of the subsidy. And we think that in the first quarter of next year that we're going to be crushing in our continuous harvest model, we're going to be producing anhydrous. We have the equipment to produce anhydrous in all our mills. So we are ready to change the mix to anhydrous and to capture this price. We think that the hydrous is going to increase also because the gasoline consumption is going to increase because hydrous ethanol is going to move towards the 7% (sic) parity.

Regarding the second part of your question, I think it's important to mention that Caarapó, we are going to have 2 months of interharvest because Caarapó is not ready to do the continuous harvest. So we are going to start crushing in Caarapó in March 1. And that's why we are considering that Caarapó is going to crush between 4 million and 5 million tons of sugarcane. In our continuous harvest model, we don't see those cane as a kind of cana bisada. So in this model, at some moments when the weather is wet and it's rainy and we are delayed in the crushing, we end up crushing that sugarcane with more months.

But in other moments, when the weather is drier, we anticipate the crushing of those sugarcane, sometimes with less than 12 months. So we expect at some time during the year, the weather is going to give a chance to put the sugarcane in the right age to be crushed.

Gabriel Coelho Barra: I’m going to follow up here. I don't know if you could comment on that, but what's your base case in terms of the subsidy? You guys are working with the subsidy being postponed for some months here? Or do you think that's going to end by December? How are you guys working with this base case at this point?

Renato Pereira: We also don't know. We are selling as much as we can. Today, the hydrous equivalent is $0.21 per pound in Mato Grosso do Sul. And we know that the subsidy is going to be in place until December 9. After this date, we don't know what's going to happen.

Operator: The next question comes from Thiago Duarte from BTG Pactual.

Thiago Duarte: Two questions on my side. First one, following up on Renato's previous comments on the market outlook and very detailed color that I appreciate very much. And so a follow-up on that, Renato, particularly with regards to ethanol market, right? So I get your optimism regarding prices for the coming months, especially towards the beginning of 2027. But as you mentioned, there is like a mounting supplies coming from -- especially from corn ethanol. So my question to you is really where you think the demand is going to have to come from?

Do you think it's just a matter of hydrous ethanol becoming more affordable and then gaining share against gasoline, so it will be a price mechanism and/or how optimistic or confident you are that other routes for ethanol will deploy such as SAF and bunker and other different sources of demand that might absorb this mounting supply of ethanol. So that would be the first question. And the second question, I appreciate the target leverage for the end of the year, 2.5x, as you put in the presentation.

So the question is how -- where do you expect or where do you want to see the net leverage ratio getting before you can start thinking about new uses of capital, either speeding up dividends or new M&A in the front that you have today? These are my questions.

Mariano Bosch: Okay. Thank you, Thiago, for your question. I will ask Renato to answer your first question and then Emilio, your second question. Renato?

Renato Pereira: Thiago, as I mentioned, we think that for next year, there are 2 variables that we don't know what's going to happen. First is the amount of the sugarcane that's going to be crushed. I think it's difficult to crush 650 million tons. And even if it's crushed, I think the mix is going to be more sugar oriented. So it's going to decrease the mix -- the ethanol mix in the sugarcane ethanol. And the excess of ethanol that we are going to have, even considering those variables that I mentioned, we think in the short term is going to be absorbed by the hydrous market share as we saw this year happening.

If you think in the mid-, long term, and then we think there are other sources of demand as the agricultural machines, bio-bunker, SAF. But in the short term, I think it's going to be the hydrous market share.

Mariano Bosch: Okay. Thank you, Renato. Then Emilio, can you take the question on the leverage?

Emilio Gnecco: Sure. First, and I will use this opportunity to reiterate that as we do from time to time, our businesses are best evaluated on an annual basis. Accordingly, the results of any single quarter are not necessarily representative of the full year performance of each business. As we showed in the presentation and you just mentioned, we are anticipating that we will be -- or we will fall to 2.5x our net debt-to-EBITDA ratio by December 31. But this is after doing certain liability management that allow us to extend the maturity of our debt for more than 4 years. And most importantly, with a cost below 7%.

Now specifically to your question, we always said that something between 2x and 2.5x where we would feel comfortable to be. And if you look at our history, we've been below that threshold. And that is when we took the opportunity of increasing our leverage when we saw very accretive opportunities such as Profertil. And to the extent we reach that level, which hopefully, we can be there by 2027, well, we are going to be in a position to rethink.

But as always, and what happened in the past, if there's an opportunity that meets our thresholds and the repayment is clear going forward, we might take that chance and always with the support of our shareholders that has been there in recent acquisitions.

Operator: The next question comes from Julia Rizzo from Morgan Stanley.

Julia Rizzo: I think I have 2 questions, maybe a third. I know you have already discussed a lot about the ethanol and commercialization. But if you could be a little bit more specific of how much we are already in November, how much was already sold and the price improvement that you're seeing in the fourth quarter versus the third? And I'm saying that the direction is important to us because it was quite confusing the third quarter analysis because of the subsidies, and that will be helpful to know a little bit of the direction here in the commercialization pace.

Also, if you could give us some clarity of how much cane do you expect to crush in 2026 and the leftovers, if any, for 2027? And the third and the final one is the running rate of Profertil EBITDA, the $110 million that you did on the third quarter. Is that a good running rate that we can assume in the next couple of quarters?

Mariano Bosch: Julia, I'm going to get your last question on the EBITDA Profertil. As I mentioned before, somewhere above the $300 million is okay. So $110 million is a little bit higher per quarter than what we would expect per quarter. This quarter, we sold some more urea from the previous quarter, as we explained before in our previous call. That's why you are seeing this. And again, it is important to see it on an annual basis as we were explaining before also. So we will always expect to sell almost 100% of what we produce.

And if we don't sell 100%, it's because we have a specific strategic view of putting a little bit more urea from 1 quarter to the other or from 1 year to the other. So all what we produce is being sold because it is a commodity. And as I explained before, the whole region imports a lot more than what is being produced here. So making that clarification, I will ask Renato to answer your questions on the ethanol specifics.

Renato Pereira: Julia, in the last quarter, we believe that we are going to sell 200,000 cubic meters more ethanol than in the third quarter with a price approximately 25% higher than in the third quarter, already including the subsidy. And regarding the crushing, we believe we are going to crush about 15% more than we crushed last year, including Caarapó crushing.

Julia Rizzo: Leftover for the next one, Renato, sorry to interrupt.

Renato Pereira: The leftover, as I mentioned, we have the continuous harvest model. So we don't consider that cana bisada. So it's a cane that is with age in months higher than usual. So we are going to be crushing in the first quarter. And at some point, when the weather gets drier, the age of the sugarcane is going to be more close to 12 to 13 months, which is the normal age of the sugarcane.

Operator: The next question comes from Lucas Ferreira from JPMorgan.

Lucas Ferreira: Two questions, 1 to Renato. Renato, what's your forecast for sort of the unitary cost of production this season? And how this number should compare like now in the second half of the season versus the first half? I would imagine that some of these effects of El Niño end up impacting a bit the pace of crushing and could have some issues there. But I wanted to ask if you see an increase in the unitary cost now in the end of the season versus the first half and how the full year looks like? And then on the farming and rice business, pretty much how do you guys are seeing productivity?

I think they have been much better and then boosting your results. But wondering if you have any views now into the summer season coming in, in terms of how to think about the productivity in each of the crops, so we better understand what's coming next in terms of margins and especially that prices have been a bit better for most of the products, right?

Mariano Bosch: Okay. Thank you, Lucas, for your question. Renato, do you want to answer the cost of production on the sugar and ethanol.

Renato Pereira: Okay. So Lucas, we think that the cost of production just makes sense to look at the annual basis. So if you take the annual base, we think that our cost of production is going to be similar to slightly lower than last year in reais terms. In dollar terms, even though the real has depreciated now, the average of the year, the real is stronger than last year. So the cost should be around 5% higher than last year. And I think the reason for this increase in cost is the cost dilution that is lower now.

We are going to crush less sugarcane than initially thought because of the rains and also the TRS content, which is lower also because of the rains.

Mariano Bosch: Thank you, Renato. And then answering your question on Food and Agriculture business, that is a business that we've been suffering in the last 1.5 years -- from now onwards, we are in a very good situation. All our production costs are doing very well because they were all adjusted accordingly. And also, we are having an excellent planting season. We are just finishing or in the end of the planting season. All our plantations are in excellent conditions. As was expressed before, the productivity is also getting records and all the sales in the domestic market is also doing great and the export market also doing great.

So we are in a very good situation going forward, especially because of the price recovery coming from the rice and the peanuts that are the 2 products that substantially changed prices, reaching the bottom of prices -- historical bottom of prices around 6 months ago. So we are well positioned, and we should continue to see this somewhere above 10% EBITDA sales, more than 10% of EBITDA over the sales. So that's what we should expect going forward.

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 in this conference, and we hope to see you in our upcoming call.

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

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