Adecoagro S.A. Q1 2026 earnings call

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

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

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

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

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

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

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

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

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

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

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

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

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