Adecoagro S.A. (AGRO)
Q2 2012 Earnings Call
August 15, 2012, 11:00 a.m. ET
Hernan Walker – Investor Relations Manager
Mariano Bosch – CEO
Charlie. Boero Hughes – CFO
Walter Marcelo Sanchez - CCO
Isabella Simonato – BofA/Merrill Lynch
Giovana Araujo – Itau BBA
Alessandro Baldoni – Deutsche Bank
Rodrigo Mugaburu – Morgan Stanley
Martin Garzaron – City of London Investment Management
[Inaudible] – HSBC Securities
Thiago C. L. Duarte – BTG Pactual
Pedro Richards – Raymond James
China Marine Food Group's CEO Discusses Q2 Results - Earnings Call Transcript
» Flowers Foods' CEO Discusses Q2 2012 Results - Earnings Call Transcript
» Steven Madden's CEO Presents at Canaccord Genuity 32nd Annual Growth Conference (Transcript)
Good morning ladies and gentlemen and thank you for waiting. At this time we would like to welcome everyone to Adecoagro’s second quarter 2012 results conference call. Today with us we have Mr. Mariano Bosch, CEO, Mr. Charlie Boero Hughes, CFO and Mr. Hernan Walker, Investor Relations Manager. (Operator Instructions)
Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of Adecoagro’s management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events, and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Adecoagro and could cause results to differ materially from those expressed in such forward-looking statements. Now I’ll turn the call over to Mr. Mariano Bosch, CEO. Mr. Bosch, you may begin your conference.
Good morning everyone, and thank you for joining Adecoagro’s second quarter ending results call. During this quarter, we started [inaudible] season. We finished [inaudible] of main annual crops, and we are preparing the company for our next agricultural season. On the sugar and ethanol business, because of the high amount of rainfall, we have not been able to crush the amount of cane we expected during this period. Nevertheless, the cane is still in our fields waiting to be harvested. Under normal weather conditions, we should [inaudible] our remaining season, compensating the lower volumes crushed during the second quarter.
On the farming business, we have almost completed the harvest of 2011-2012 crops, and as anticipated in our previous calls, adverse weather has impacted significant parts of our production, reducing our yield, but mitigated by benefits of our geographic diversification and best practices applied in our farms. During the month of June, we started with planting activities for 2012-13 harvest year under very good conditions. We have already assembled all our contractor teams, and we completed the planting of wheat. In addition, we have already purchased our most important imports for the summer crops, minimizing our exposure to the fluctuation of our costs.
As you may know, the main productive regions of the United States have suffered from one of the most severe droughts of the last 20 years, and production forecasts have dropped significantly. This situation has driven commodity pressure to reach record levels, which we believe South American producers will be able to capture in the next harvest year. Also, we sold San Jose farm in Argentina at a 31% premium [inaudible] independent appraisal. We continue to be fully committed to our discipline of monetizing the value creating off our land transformation activities, and we allocate our capital in investments that provide more effective returns.
I would also like to make the following remarks with regards to our [inaudible] project. The construction of Ivinhema, our [inaudible] mill, is developing according to [inaudible]. The mill’s suspected to commence test runs during November, 2012, and start commercial operations during 2013. At the same time, we have advanced steadily with the planting of sugarcane in our fields, and during the first semester of 2012, we have almost doubled the amount of hectares planted when compared to the same period of the previous year. This is very important in order to assure the supplying of cane of our mills, which constitutes a key component of the recent [inaudible].
Second, the construction of our second free stall dairy facility is completed and we are ready to start milking. We also started processing rice in the new plant in Franck, and also continue transforming land, increasing the total area of owned croppable land. Finally, I would like to highlight the achievement of our team that obtained the Bonsucro certification for our sugarcane collector, which confirms our commitment to the sustainable production model without losing focus on profitability. Having said this, I will ask Charlie to present the update of the quarter. Charlie, please go ahead.
Charlie Boero Hughes
Thank you, Mariano. Good morning everyone. I would like to walk you through a few slides that reflect the main operational and financial highlights of the quarter. As you may see on page two of the presentation, as of June the 30
of 2012, 206,000 hectares were successfully harvested. The harvest of wheat and sunflower had been completed and reported during the first quarter of 2012.
During the second quarter, we continued with the harvest of soybean, corn, cotton, rice and coffee. The harvest of the soybean crop was substantially complete by the end of the second quarter. Average yields were in line with the last year, but below our expectations, primarily as a result of the summer drought experienced in the humid Pampas region during November, 2011 through early January, 2012, coupled with the lack of rain that the northwest of Argentina experienced during the months of March and April of 2012.
In the case of soybean second crop, the lack of moisture in the soil prevented the timely planting of the crop, which follows immediately after the wheat crop harvest during December, 2011 and early January. Although the crop experienced adequate rains during the growth cycle, the late planting reduced the yield potential. In addition, the drought suffered in the northwest of Argentina during March and April, 2012 also had an adverse effect on the crops’ development. Despite these adverse conditions, the average soybean yield was slightly below last year.