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01/11 04:03
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call presented a mixed picture with positive elements like increased cow productivity and ethanol production mix, but also significant negative aspects including lower sales volumes, higher costs in the dairy business, and a 29% decline in gross sales. The Q&A revealed concerns about leverage, unclear guidance on future dividends and financing, and a cautious CapEx approach due to weak pricing. Despite some optimism in sugar and ethanol outlooks, the overall sentiment is negative, especially for a small-cap stock, likely resulting in a -2% to -8% stock price movement.
Consolidated adjusted EBITDA $115 million for the quarter, $206 million year-to-date. Year-over-year improvement due to better results from the Sugar, Ethanol, and Energy business.
Gross sales $323 million for the quarter, a 29% year-over-year decline due to lower volumes and prices across operations.
Crushing volume (Sugar, Ethanol, and Energy business) 4.9 million tons for the quarter, a 20% year-over-year increase due to accelerated harvesting pace and processing of frost-impacted sugarcane.
Ethanol production mix 58% ethanol mix compared to 45% the previous year, driven by better margins for ethanol over sugar.
Net sales (Sugar, Ethanol, and Energy business) $131 million for the quarter, $433 million year-to-date. Lower sales due to a decline in volumes sold despite increased ethanol production.
Adjusted EBITDA (Sugar, Ethanol, and Energy business) $120 million for the quarter, a 20% year-over-year increase due to gains in biological assets and commodity hedge positions.
Total production (Farming business) 13% year-over-year increase due to higher planted area and record productivity in rice operations.
Adjusted EBITDA (Farming business) $1 million for the quarter, $19 million year-to-date. Decline due to lower international prices and higher costs in U.S. dollars.
Cow productivity (Dairy business) 39.1 liters of milk per cow per day, a new record, driven by improved productivity.
Net debt $872 million, a 35% year-over-year increase due to lower consolidated results and advance payment for Profertil acquisition.
Ethanol Production: Achieved a 40% increase in ethanol production compared to the previous year by switching production strategy to maximize ethanol due to its premium over sugar.
Dairy Productivity: Achieved a new record in cow productivity at 39.1 liters of milk per cow per day during the quarter.
Biomethane Production: Expanded biomethane production capacity in Brazil.
Profertil Acquisition: Signed an agreement to acquire a 50% stake in Profertil, South America's largest granular urea producer, for $600 million. This acquisition aims to diversify operations and reduce result volatility.
Cost Management in Crops: Reduced leased area by 30% and adjusted crop mix to improve margins in Argentina and Uruguay.
Rice Operations: Shifted focus to premium rice varieties to offset declining global prices of long grain rice.
Sugarcane Crushing: Achieved a quarterly crushing record of 4.9 million tons in Brazil, despite earlier weather challenges.
Ethanol vs. Sugar Strategy: Shifted production strategy to prioritize ethanol over sugar due to better margins.
Capital Allocation Strategy: Plans to revise capital allocation strategy and implement cost-saving initiatives to manage increased leverage post-Profertil acquisition.
Frost Impact on Sugarcane: The frost event in June negatively impacted sugarcane yields and TRS content, leading to lower productivity and increased costs.
Challenging Price-Cost Scenario in Argentina and Uruguay: Ongoing price-cost pressures in Argentina and Uruguay are affecting margins across various business segments, including crops and rice.
Decline in Global Rice Prices: Global oversupply has led to declining rice prices, pressuring margins and necessitating a reduction in planting area and a shift in crop mix.
Lower International Crop Prices and Higher Costs: Lower global crop prices and increased costs in U.S. dollar terms are reducing profitability, particularly in peanut production.
Debt and Leverage Increase: Net debt increased by 35% year-over-year, with a net leverage ratio rising to 2.8x due to lower consolidated results and the Profertil acquisition payment.
Weather-Related Disruptions: Dry weather followed by rainy days slowed sugarcane crushing pace earlier in the year, impacting annual crushing volumes.
Regulatory and Closing Risks for Profertil Acquisition: The acquisition of Profertil is subject to YPF's right of first refusal and other closing conditions, creating uncertainty around the transaction.
Decline in Sugar and Ethanol Sales Volumes: Lower sales volumes of sugar and ethanol, despite strategic inventory management, are impacting revenue.
Higher Costs in Dairy Business: Increased costs in the dairy segment are affecting adjusted EBITDA, despite record cow productivity and higher volumes sold.
Crushing Volume: Going forward and assuming normal weather, crushing volume should improve as we have greater cane availability, leading to a greater cost dilution.
Planting Activities: In crops, we are undergoing planting activities for the new campaign, reducing approximately 30% our leased area and adjusting our crops mix to improve margins.
Rice Production: We are reducing the long grain rice and increasing the mix of premium varieties to offset lower prices.
Dairy Production: Cow productivity and processing volumes have achieved a new record. We continue to prioritize the domestic market with the production of fluid milk and value-added products.
Profertil Acquisition: Closing is expected before year-end and subject to YPF's 90-day right of refusal. The acquisition is expected to reduce volatility of results and diversify operations across other value chains.
Ethanol Production: We foresee an annual crushing volume in line with the previous year, assuming normal weather conditions until the end of the year. Ethanol production is being maximized due to better margins compared to sugar.
Debt and Leverage: Once the Profertil acquisition is concluded, the company intends to reduce its leverage ratio by implementing cost-saving initiatives, revising capital allocation strategy, and improving operational results.
2025 Shareholder Distribution: $45 million
Cash Dividends: $35 million distributed via cash dividends, with the last installment being paid on November 19, representing an annual dividend per share of $0.35 and a dividend yield of 4%.
Share Buyback Program: $10 million in shares repurchased under the buyback program, equal to 1.1% of the company's equity.
The earnings call presented a mixed picture with positive elements like increased cow productivity and ethanol production mix, but also significant negative aspects including lower sales volumes, higher costs in the dairy business, and a 29% decline in gross sales. The Q&A revealed concerns about leverage, unclear guidance on future dividends and financing, and a cautious CapEx approach due to weak pricing. Despite some optimism in sugar and ethanol outlooks, the overall sentiment is negative, especially for a small-cap stock, likely resulting in a -2% to -8% stock price movement.
The earnings call revealed mixed signals: strong revenue growth but significant EBITDA decline. The Q&A highlighted uncertainties in sugar pricing and hedging strategies, while management's unclear responses on Bitcoin mining raised concerns. Despite optimism in ethanol demand and shareholder support, flat cane crushing projections and high leverage offset positive aspects. The stock's small-cap nature suggests potential volatility, but overall, the mixed outlook and lack of decisive positive catalysts suggest a neutral stock price movement over the next two weeks.
The earnings call presents a mixed picture: strong net sales growth and a positive outlook for sugarcane yields, but significant declines in adjusted EBITDA across segments and increased net debt. The Q&A reveals optimism about growth opportunities and governance, but management's vague responses on expansion timelines and future size raise concerns. With a market cap of $1.01 billion, the stock's reaction is likely to be moderate, balancing positive sales with weak financial metrics and cautious guidance, resulting in a neutral stock price movement prediction.
The earnings report presents mixed signals: strong net sales growth and positive ethanol sales contrast with significant declines in EBITDA due to biological asset losses and lower production. The Q&A reveals optimism about future growth and improved yields but also highlights concerns over unclear timelines and increased debt. The market cap suggests moderate volatility, leading to a neutral stock price prediction as positive and negative factors balance each other out.
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