Mariano Bosch - Chief Executive Officer Charlie Boero Hughes - Chief Financial Officer Marcelo Sanchez - Commercial Director Hernan Walker - Investor Relations Manager.
Thiago Duarte - BTG Antonio Barreto - Itaú BBA Rodrigo Mugaburu - Morgan Stanley Viccenzo Paternostro - Credit Suisse.
Good morning, ladies and gentlemen and thank you for waiting. At this time we would like to welcome everyone to Adecoagro's 3Q ‘15 Results Conference Call. Today, with us we have Mr. Mariano Bosch, CEO; Mr. Charlie Boero Hughes, CFO; Mr. Marcelo Sanchez, Commercial Director and Mr. Hernan Walker, Investor Relations Manager.
We would like to inform you that this event is being recorded and all participants will be in listen-only mode during the company's presentation. After the company's remarks are completed, there will be a question-and-answer section. At that time, further instructions will be given. [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 conference over to Mr. Mariano Bosch, CEO. Mr.
Bosch, you may begin your conference..
Good morning everyone and thank you for joining our call. As you all know, commodity prices have experienced a downward trend over the last couple of years. As of today, however we may be experiencing a turnaround in the economics of the environment in which we operate.
We are convinced that this positive shift in the dynamics will apply to the sugar, ethanol and energy business in Brazil, as well as the farming business in Argentina, albeit for different reasons. Regarding the sugar, ethanol and energy business we are now in process of a more favorable pricing outcome.
This is mainly driven by the global sugar requisite and by some specific measures that the Brazilian government and they took to promote the ethanol consumption. These were the price scenario would be strengthened by the impressive operational performance that we are achieving.
We are reporting a significant improvement in our agriculture industrial operations, including 33% increase in total milling; 21% increase in TRS per hectare, resulting in a 37% increase in total production of sugar and ethanol measured in TRS equivalent; and a 54% increase in exported energy implying more than 70 KWh/ton of cane crushed, by far the highest ratio in the industry.
At the same time the depreciation of the Brazilian real further dilutes our cost. It is worth noting the convenience on the timing of this positive outlook for our cash generation. As we previously stated, Adecoagro’s CapEx citing has come to end. This said, it’s the ideal conditions to reap the benefits in the short and medium term.
Moving to the farming business, the positive outlook is related to the event or change in some economic policies that the following administration will potentially address. This may include a combination of the elimination of export per quarter, the reaction of export taxes for corn, wheat and rice and the appreciation of the Argentinean peso.
These measures improved the outlook of our cash generation that is also boosted by the increase in our operating efficiency. As a matter of fact, we finished the ’14, ’15 harvest season with higher yields in most of our corps. As of today, we are fully focused on successfully completing ’15, ’16 harvest season.
The planting plan is on schedule with excellent quality, weather conditions and lower costs. In our dairy business, over the last five years we have developed a revolutionary large scale milking technology in Argentina that is delivering excellent results.
In the last quarter, we reported a record high of 37 liters per cow per day, surpassing our target for the year of 35 liters per cow per day. We are very proud of the assets and management teams that we have been able to consolidate and we are optimistic about the future.
We are confident that under our scheme of being the most efficient and low cost producer in the world in each one of the commodities we produce, we will be in the best position to capture the benefits that a more favorable scenario may imply.
Now, I would like to ask Charlie to walk you through the main operating and financial highlights of the quarter. Charlie, please go ahead..
Good morning, everyone. I would like to walk you through a few slides that reflect the main operational and financial highlights of the quarter. Let’s start on page 4, where we like to focus on sugarcane milling. During the third quarter of 2015, our mills crushed 3.2 million tons of sugarcane compared to 2.7 million tons in the third quarter of 2014.
This 15% increase mainly explained by a 22% increase in milling per day as a result of the ramp-up of capacity at the Ivinhema mill, together with the higher milling efficiencies in all of our mills. This was partially offset by a 5% decrease in total effective milling days due to higher number of rainy days in the period.
On a year-to-date basis sugarcane crushing reached 6.5 million tons, 33% higher year-over-year. In addition to the drivers I just explained for the third quarter, the cumulative growth reflects our strategy of accelerating the start of the 2015 harvest in each of our mills, in order to extend the harvest season and increase annual sugarcane crushing.
This is reflected in the 11 initial days of effective milling in the first nine months of 2015 compared to the first nine months of 2014. This strategy was made possible by our focus on minimizing the inter-harvest maintenance and most importantly, by the growth in our sugarcane plantation and annual crop treatment.
Let’s move to page five where I would like to highlight our agricultural productivity. As you can see in the top charts, our sugarcane yields in the third quarter of 2015 reached 86 tons per hectare, 11% higher than last year. In addition our TRS content increased 3% reaching a 141 kilos per ton of sugarcane.
As a result of these two factors, sugarcane production per hectare increased 14% for the third quarter of 2015 compared to the third quarter of 2014. As you can see on the bottom charts year-to-date productivity improvements are even more remarkable. TRS per hectare has increased 21% year-over-year.
As explained in previous quarters, these productivity gains are a result of our focus on improving our agricultural operations. Some examples of efficiency enhancements include effective implantation of pest controls, selection of specific cane varieties for the region.
Extension of the sugarcane growth cycle and implementation of GPS controlled planters and combines among others. Let’s now turn to slide six. Sugar and ethanol production increased during the quarter driven by the increase in sugarcane milling and higher TRS content.
As you may see in the top chart, sugar production reached 187,000 tons, marking a 12% increase over the third quarter of 2014. Regarding ethanol, production stood at 146,000 cubic meters, 27% higher year-over-year. Measured in TRS equivalent, production increased 20% in the third quarter of 2015 compared to the third quarter of 2014.
On a year-to-date basis production measured in TRS equivalent has increased 37% year-over-year. Turning to slide seven, I would like to comment on cogeneration. In the top chart, we see that exported energy or in other words the energy which is sold to the grid, increased by 40% year-over-year and by 54% on a year-to-date basis.
The growth in cogeneration is explained by the increase in sugarcane milling, but most importantly by higher cogeneration efficiencies. As you may see in the bottom chart, cogeneration exports reached a record of 72 KWh/ton of sugarcane crushed in the third quarter of 2015, 22% higher than the third quarter of 2014.
On a year-to-date basis this ratio stands at 67 KWh/ton, 16% higher year-over-year. It is worth noting that this represents one of the highest cogeneration ratios in the industry and we believe there is still upside for improvement. Now let’s please turn to slide eight, where I would like to discuss our sugar sales.
If you take a look at the graph on the left, you may see that our sugar sales volumes during the third quarter of 2015 total 196,000 tons, marking a 12% increase compared to the third quarter of 2014. As you may see in the chart in the middle, the increase in volumes was partially offset by lower sugar prices.
As a result of the global sugar supply and the weak sugar cycle, our realized sugar prices in the third quarter of 2015 were in average 27% lower than prices in the third quarter of 2014. This resulted in an 18% decrease in total sales.
Nevertheless, as you can see on the chart on the right, as of September 30 we had 120,000 tons of sugar in our inventory, 83% more compared to the last year. This sugar volumes have been scheduled and committed for delivery during the fourth quarter, which will allow us to capture more attractive prices.
If you could please turn to slide nine, I would like to walk you through our strategy Ethanol Carry. Due to production seasonality and the fact that mills are maximizing ethanol production and saying that they produce in order to generate cash, hydrous and anhydrous ethanol prices have been trading at weak levers between May and August.
Prices reached the low $17 during this month. We decided to minimize our sales volumes and start to fill up our ethanol tanks at our cluster in Mato Grosso Do Sul. The yellow bar in the chart shows the growth in our ethanol stock pile.
As you may see in the chart, ethanol prices began a very steep rising during October, driven by strong consumption growth coupled with a 6% increase in gasoline prices announced by Petrobras on September 30. Up until November 6 hydrous ethanol prices have increased over 31%.
We expect prices to remain at effected levels during November through March as mining season comes to an end reducing supply. But at the same time consumption is expected to pick up during the summer months. This strategy has resulted in a postponement of sales from the third quarter to the fourth quarter.
As of September 30 we held 136,000 cubic meters of ethanol in our storage tanks, 25% higher year-over-year, which we expect to sell during the fourth quarter. This is expected to boost our ethanol sales and profitability. Let’s move to page 10.
As you may see in this left chart, despite the implementation of Adecoagro’s strategy, ethanol sales volume increased by 30,000 cubic meters, driven by the growth in production. Nonetheless, as you may see in the chart in the middle, ethanol sales have remained virtually flat year-over-year.
This is explained by a 41% decrease in realized ethanol price during the third quarter of 2015 compared to the third quarter of 2014. The low price is measured in Brazilian real; it only fell 5% during this period.
Prices measured in dollar terms were negatively affected by the 56% depreciation of the Brazilian real, the flip side to the impact of the evaluation on our ethanol sales in dollar terms that our cost of production are also diluted. Now let’s please turn to slide 11, where I would like to discuss energy sales.
As you may see in the top left chart, despite water levels at hydroelectric dams remain at five year lows, energy spot prices have been highly volatile during the third quarter of 2015 that we had excess rains and lower electricity consumption. The prices fluctuated between 240 and 145 reals per megawatt hour.
In addition I like to remind you that on November 25, 2014 the Brazilian National Energy Agency decided to lower the selling price of energy from 822 reals to 388 reals per megawatt hour, which explains most of the decrease year-over-year. As you will see in the chart below, despite that 73% growth in volumes sold, net sales fell by 22%.
In addition to lower market prices in reals, our realized price in dollars were also affected by the devaluation of the Brazilian real. Year-over-year realized prices in dollars decreased 55% from $117 per megawatt hour to $53. Let’s move to Slide 12. Here we can see the overall financial performance of the sugar, ethanol and energy business.
Total net sales during the quarter reached $94.5 million, 15% lower than the same period of 2014. Likewise adjusted EBITDA during the period decreased 14% from $55 million in the third quarter of 2014 to $47 million in the third quarter of 2015.
As explained on the previous slide, the reduction in revenues and EBITDA is mainly a result of lower price coupled with our postponement of sugar and ethanol sales from the third quarter to the fourth quarter. On the left, adjusted EBITDA margins in the same period increased from 49% to 50%.
This growth is explained by higher agricultural productivity and operational leverage, which has resulted in dilution of our fixed cost. Now let’s turn to slide 13 to get an overview of our sugar hedge position. As part of our risk and commercial strategy, we mitigate price volatility by hedging our crops in the derivative markets.
Despite the weak commodity price environment, our commercial team has been able to hedge prices above current market prices, protecting the company’s cash flows and margins. As of September 30, 2015 we had 477,000 tons of sugar from the 2015 and ’16 harvest, hedged at $14.4 cents per pound.
Futures contracts at that time were trading at $12.4 cents per pound. Therefore the mark-to-market of the position generated a gain of $12.7 million, which is mostly realized. Related to the 2016 and ‘17 harvest season, as of September 30 we had 211,000 tons of sugar hedged at $13.6 cents per pound.
Futures contracts at the time were trading at $12.8 cents per pound, thus generating an unrealized gain on deposition of $4 million, which is mostly unrealized. In September 30 sugar prices have rallied to over $14.0 cents per pound; its only 37% of our estimated production hedge.
This price rally would allow us to increase our hedging volumes on higher price levels and increase our margins. I would now like to move on to the framing business. Please direct your attention to slide 15, where we discuss the farming production. As of September 30, 2015 we have formally completed the 2014 and ’15 harvest year.
A total of 224,300 hectares were harvested, reducing a total of 803,500 tons of diversified crops. The implementation of sustainable production models together with best practices such as crop rotation and no till among others, coupled with excellence in execution, have allowed us to achieve high yields despite average weather during the year.
As you may see in the charts, soybean and soybean double crop years were 10% and 26% higher than the previous harvest season respectively. Corn yields were 2% higher year-over-year, while sunflower yields remained flat. Turning to page 16, I will briefly discuss the planting plan for the 2015 and ’16 harvest season.
We are successfully undertaking the planting plan on schedule and with good weather conditions, intended [ph] to see the total of 221,000 hectares in line with the previous harvest season. Nonetheless we have made some adjustments to the production mix based on changes in prices and relative margins through the different crops.
As you may see in the chart, we have decided to increase our soybean crop planted area up by 3%, corn planted area is expected to increase by 8% compared to the previous harvest season. To the contrary, sunflower areas have been reduced by 13% and 21% respectively.
Finally, our rice area will be expanding by 2%, as a result of our land transformation activities. As of September a total of 77,600 hectares or 35% of total area have been successfully planted. Weather conditions have been good and crops are developing as expected.
Let’s move to page 17 where I would like to walk you through the financial performance of our farming business. In the case of crops, adjusted EBIT has decreased by 61% to $6.9 million.
The reduction is primarily explained by the year-over-year fall in commodity prices and the rising inflation in Argentina and has more than offset the nominal depreciation of the Argentinean peso, resulting in an appreciation of the currency in real terms, which increases our cost mentioned in dollars and reduces our margins.
This effect was partially offset by higher yields in most of our crops. Regarding the rice business, the fall in adjusted EBIT is mainly explained by the combination of lower yields due to adverse weather and higher costs in dollar terms bringing the appreciation of the Argentinean peso in real terms.
In the dairy business we delivered solid operational performance in the quarter. We were able to capitalize the benefits of the consolidation of our pre-installed facilities, reaching our target level of 37.6 liters per cow per day.
Consequently milk financial volumes increased 13.4% year-over-year, driven by a 10% increase in productivity and a 3% growth in our dairy cow herd. The gains from productivity were offset by lower milk prices and higher costs measured in dollar terms, resulting in a 53% decrease in adjusted EBIT.
On an aggregate basis, despite higher productivity in our crops and dairy segments, consolidated EBIT decreased by 64% in the third quarter of 2015 and by 57% in the first nine months of 2015 for the reasons I just explained. Let’s turn to page 18.
We generated a $13.2 million gain related to the mark-to-market of our soybean, corn and wheat hedge position. It’s worth noting that these gains are mostly realized and already captured in our P&L. As we can see in the top chart, as of September 30, 148,000 tons of soybeans related to the 2015 and ’16 harvest were hedged at $1,014 cents per bushel.
The July futures contract as of September 30 was trading at $904 cents per bushel, generating a mark-to-market gain. In the case of corn, we hedged 125,000 tons of corn at $452 cents per bushel. As of September 30 the corn futures compared was priced at $411 cents per bushel, therefore we generated a mark-to-market gain.
Let’s now turn to page 20, which shows the evolution of Adecoagro's consolidated operational and financial performance.
On a consolidated basis net sales decreased year-over-year from $196.7 million in the third quarter of 2014 to $165 million in the third quarter of 2015, while consolidated adjusted EBITDA decreased from $70.3 million in the third quarter of 2014 to $49.7 million in the third quarter of 2015.
The gap in revenues and adjusted EBITDA is explained by our sugar and ethanol carry strategy which has performed sales and profit from the third quarter to the fourth quarter, lower selling prices in dollar terms for most of the commodities we produce, and higher production costs in the farming business because due the appreciation of the Argentinean peso in real terms.
Moving to page 21, we can see that despite very high price volatility for most of the commodities we produced over the last five years, we have managed to keep our adjusted EBITDA margins relatively stable over the same period.
Margins have traded between 24% to 31%, which is a direct result of our strategy of being the lowest cost per uses for each of the commodities we produce and I will focus on operational efficiency. In addition, our geographic and product diversification also allow us to mitigate yields and price volatility, providing stable cash flows and margins.
This strategy will allow Adecoagro to gain a positive cash flow throughout the commodity cycle. Let’s move on to page 22. As you may seen on the top left chart, our gross indebtness as of September 30, 2015 stands at $809 million, while net debt stands at $585 million.
I would like to highlight that our net debt has decreased by $37 million compared to the second quarter of 2015. I like to mention that 70% of our debt remains in the long term, including multilateral banks such as the BNDES and IDB at very competitive rates as you can see on the bottom left chart.
Finally, let's move to page 23 where I would like to comment on CapEx. As anticipated in previous quarters, total CapEx is expected to slow down during 2015, driven by the completion of the Ivinhema mill and the consolidation of our sugarcane cluster in Mato Grosso Do Sul. We can already see the downward trend reflected in the current quarter.
Capital expenditures during the quarter reached $24 million, 70% lower than the same period of 2014. The same trend can be identified for the accumulated nine months, where total CapEx stood at $132 million, marking a 54% decline over the first nine months of 2014.
As of today, no major growth project has been committed for 2016 and forward, therefore we expect CapEx to consist primarily of maintenance related to the sugar and ethanol business. This includes the financing of sugarcane to renew our plantations and the inter-harvest maintenance of milling and agricultural equipment.
We expect CapEx to range between $140 million and $150 million in 2015 and between $70 million and $90 million in 2016. The combination of decreasing CapEx and increasing cash generation will allow Adecoagro to become cash flow positive by year-end and start generating attractive levels of free cash flow starting in 2016.
Thank you very much for your time. We are now open to questions..
Thank you [Operator Instructions]. Our first question comes from Thiago Duarte of BTG. Please go ahead. .
Hello, Mariano; hello Carlos. Good afternoon everyone. I have two questions on the sugar and ethanol business. The first one you mentioned that you engaged in commercializing sugar from third parties during the quarter.
Is that an ongoing strategy, something that you should do every once in a while and that we should expect and if that’s the case, I wonder how much you expect to be able to commercialize from third quarter sugar, that would be the first question.
And the second quarter, if you look at your agricultural indicators in the sugar and ethanol division, you pretty much differ from what we’ve been seeing in the Center-South region of Brazil this year, especially with regards to TRS content per ton of cane.
So just wondering why do you see that? What was different in terms of let’s say weather and some other factors? And now that you are stabilizing or reaching kind of full capacity in that cluster, what kind of agricultural yield and TRS per ton you expect to have on a more normalized and ongoing basis, that would be very helpful. Thank you. .
Hello. .
Yes, hello Thiago, thank you for your question. I’m going to ask Marcelo Sanchez to answer the first part of your question regarding the commercialization of sugar. .
Hi Thiago, how are you? The reason why we are being engaged in third party commercialization is because we are always opportunistic in terms of taking advantage and serving positive arbitrage that the market is giving us. And I think that going forward, of course we will be in the market for taking those possibilities into our favor.
It’s not going to be an important portion of our sales of course; I mean that’s it. .
I will take the second part of your question regarding the productivity and the yields of the sugarcane that we are having in our regain compared to last year and compared to other regions.
Since we decided to – since we choose this place to produce sugarcane, that the agro economic conditions of this area to produce sugarcane was key, this area has a very good range and straight out all around the year, so that’s the main difference compared to the traditional or more tradition regions for sugarcane.
So in this case we do expect yields to be more consistent and to be high yields in terms of sugarcane per hectare and we also expect the TRS to be more similar all over the year. So we don’t expect a huge change in TRS all over the year. So we do expect that TRS, that will be consistent in line with what we’ve been having this year, all over the year.
Basically we were always thinking on 85 to 90 tons of sugarcane per hectare and TRS between 133 and 140, so that’s the average that we’ve been always looking for and/or targeting and this year we are clearly achieving this.
Because of all these things that Charlie explained in detail, there is this implementation of the pest controls, the selections of the right varieties and the selection of the right varieties and harvesting them at the right timing of the year is key. So those are all the things that we’ve been able to execute in order to finally make this happen..
Okay.
So if you allow me a follow-up question on the margin side, I mean excluding the third party sugar sales, the EBITDA of 58% in the quarter, of course this might be a little bit volatile throughout the year, but on a full year basis and knowing that prices have recovered recently for both sugar and ethanol, is it fair to assume a similar level of margin, again excluding third party commercialization going forward.
.
Yes, I think it’s a fair assessment and should be in line with what you’re seeing or talking about. .
Okay, thank you Mariano. .
Our next question comes from Antonio Barreto of Itaú BBA. Please go ahead. .
Hi guys, good afternoon. My first question is about your strategy or growth strategy. You guys are reaching a tipping point, I would say not only in the terms of the companies past years growth which has been very much focused on growing the sugar and ethanol assets, but also when I look at the market, sugar and ethanol price is better.
We look at the elections in Argentina and their prospects for lower export taxes and evaluation. So where do you guys see the growth of the company coming from considering those two scenarios.
Are you going to see more investments in sugar and ethanol or are you going to see more investments in Argentina, considering that you guys are going to deleverage over the coming three years..
Hi Antonio, thank you for your question. This is a question we’ve been receiving since there is a clarity that we are going to start being cash flow positive. So we are always thinking the same way. We analyze all the different opportunities that we have as a growth plan.
So we have an interesting pipeline of alternatives that each one of them will depend on the return on invested capital that we expect for each one of them and that’s what we’ve been, we are going to be prioritizing.
But within the different alternatives we also include paying back debt and we also include giving back the money to the shareholders, including through buyback or dividends. So there are three different alternatives are always in our place, a growth project, giving back the money to shareholders or reducing debt.
So we’ve been always focused and very disciplined on this return on invested capital and we will continue with the same strategy. .
Okay, thank you. And my second question is about the environment for the farming in Argentina after the elections. We know that both candidates talk about structural differences in terms of on the weighted effects, in terms of lower export taxes.
I was wondering if could walk us through the current export tax structure for the industry? What is the tax rate for each crop and if you guys have heard anything more specific in the local press, what the two candidates say about the timeline of, let’s say a decrease in the export taxes, one would grow faster than the other.
What kind of decrease would you expect? What they are talking to the local press, if you could walk us through that, it would be great? Thank you. .
Okay, thank you Antonio. The current export taxes are soybean 35%, corn 20%, wheat 23% and rice 5%. On top of that, there are export quotas for corn and wheat that in general also reduces prices; that’s the current situation.
Regarding what the two candidates are saying, both of them are saying clearly that they are going to reduce export taxes and both of them are talking about some kind of not using their quotas anymore, and both of them are saying that there will be some kind of evaluation.
We know nothing else on what is being said in the press and what’s publicly said by both the candidates. Of course we talk with a group of people that is working with them on implementing specific policies, but there is nothing else to say than what they say publicly. So I think we need to wait for the elections and finally what they will implement.
All of them are very positive measures for our cash generation. .
Okay, thank you..
[Operator Instructions]. Our next question comes from Rodrigo Mugaburu of Morgan Stanley. Please go ahead. .
Hi, thank you. Hi Mariano and Carlos. My question is also related to Argentina. Corn prices in Argentina are starting to move up. Pricing means some kind changes in the short term. So my question is, given this improved prices, could we see some increase in corn planted area now in December or the planted will be sensitive if they have no changes.
And then a follow-up on the other one is, we went through that you have a wheat, corn and also soybeans. Should we expect them to be sold 100% until the end of the year or you might try to speculate a little bit about the outcome of the elections and potentially benefiting from our weaker currency or your tax change. Thanks. .
Hi Rodrigo, yes I see clearly your point. As I always say we do follow a sustainable production model. This sustainable production model includes crop rotation within the different farms, but there is some flexibility.
In the last two months we’ve been increasing the area of corn that we are planting this year and on top of what is included in this report, we are also increasing like additional 5% to 10% the hectares of corn, but we are switching from soybean second crop to corn or late corn. .
Great, thanks. Regarding inventories, should we expect them to be sold, flowing that money into the fiscal year ’15 or something could go through in the next year..
Sorry, on the inventories on which crop..
Wheat, corn and also I see on the report, the inventory for soybeans. .
Yes, so those are all flows that you will start seeing in the following months. .
Okay, thanks. .
[Operator Instructions]. Our next question comes from Viccenzo Paternostro of Credit Suisse. Please go ahead. .
Hello everyone. Thanks for the questions. My first question is regarding the FX risks. I mean, it seems you managed the company in dollar terms, report is in dollar term and your debt is in dollars, but most of your EBITDA is in Brazil real and we had this huge depreciation of the currencies.
So how do you access the risk of further depreciation? How could this affect your deleveraging problems? So that would be my first question. My second question is regarding sugar price. I mean you mentioned during the presentation that you would take the opportunity that the sugar price increased recently to increase the hedging.
So I would like to know what’s your view, what’s the level. Do you think it makes sense to increase the leverage or how is your view on further sugar price hike. Thank you. .
Hello Viccenzo. I’m going to ask Charlie to answer the FX question that you asked. Charlie..
Yes. Hi, referring our debt structure that we do have in Brazil, I would say that 40% is real denominated. That’s what, the most is mainly the debt that we got from the BNDES long term and 60% in dollar terms. The question is more related on the payback, on the way to payback.
That’s matched to the inflows of dollars that we get from our export from sugar. So we always look at having more inflow of dollars compared to the debt that we have to pay in dollar terms. So our objective is always to be squared or matched in order to avoid any risk on the FX. .
Hi, so this is Mariano. I’m going to tackle your question regarding sugar prices.
In our – at the end of the 3Q we ended up with a 37% cash position for the 2015, 2016 sugar production and as you know, our strategy was to carry current sugar and of course this is a positive view that we have for next year and that’s the reason why our increase in sugarcane went up to a little bit above 50% for this year as of today.
And we are of course, we’ve been constructive in prices and the market has been showing that we are in the right direction, but of course it’s a long way to go, there are certain possibilities for prices moving down. But I think that with a 60% hedge it’s going to be our target for the next year by the year end. .
Okay, thank you. .
This concludes the question-and-answer session. I would like to turn the floor back over to Mr. Bosch for any closing remarks. .
Thank you everyone for participating on the call. We’ll continue committed to be the low cost producers in each one of the commodities that we produce and we hope to see you soon in our upcoming IR meetings. Bye. .
Thank you. This does conclude today’s presentation. You may disconnect your line at this time and have a nice day..