Mariano Bosch - Chief Executive Officer Charlie Boero Hughes - Chief Financial Officer Renato Pereira - Director, Sugar and Ethanol Operations.

Danniela Eiger - Bank of America Merrill Lynch Gustavo Allevato - Banco Santander Lucas Ferreira - JP Morgan Antonio Barreto - Itaú BBA Roberto Browne - Morgan Stanley.

Good morning, ladies and gentlemen. And thank you for waiting. At this time, we would like to welcome everyone to Adecoagro’s Third Quarter 2018 Results Conference Call. Today with us, we have Mr. Mariano Bosch, CEO; and Mr. Charlie Boero Hughes, CFO; and Mr. Juan Ignacio Galleano, Investor Relations Manager.

We would like to inform you that this event is being recorded and that 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 the 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 will turn the conference over to Mr. Mariano Bosch, CEO. Mr.

Bosch, you may begin your conference..

Good morning. And thank you for joining Adecoagro’s 2018 third quarter results conference. As you have seen in our release, we are having a very strong year both from a financial and operational perspective.

Once again, we are convinced that this was mainly achieved by the content enhancement of our agriculture, our industrial operations, resulting in higher productivity and consequently reducing unitary production cost. At the same time, we cannot disregard the good work of our logistics and commercial teams allowing us to capture above average prices.

Starting with Sugar, Ethanol & Energy business, rains have made us reduce the leading phase when compared to last year. However, this represents only performance of crushing activity since higher rains favor cane development, reason why we expect yield to increase. In addition, this enables us to secure cane availability.

Moving now to the economic performance, we continue maximizing the production of ethanol in order to profit from higher ethanol relative prices. On a year-to-date basis, 72% of the TRS produced went to ethanol, making us the producers with highest degree of flexibility in the production mix.

Considering that, during 2018, ethanol traded at 30% average premium to sugar, this represents a clear competitive advantage, compared to other players, as we are making a more efficient use of our fixed assets. At the same time, total cost for production marked an 18% reduction year-over-year further contributing to the recent profitability.

As for our expansion project, sugarcane availability is the critical factor, especially for our continuous harvest season. We have successfully secured 70% of the total hectares needed to fully supply the 3 million tons growth of crushing capacity. More importantly, terms and conditions were maintained, in some cases even improved.

Moving to our Farming and Land Transformation business. All of our teams are fully focused on the planting of the 2018, 2019 harvest year. Crops are developing in excellent conditions. However, we are entering into the months were yield [ph] for most of our crops are refined. We are in the dairy business.

We continue delivering strong operational results. Cow productivity continues with extremely high productivity, even factoring for the new operational challenges that arise as we populate our third free-stall facility. At the same time, we are advancing well in the acquisition of the two strategically [ph] located dairy processing facility.

As we have highlighted, they will synergize with our assisting operations allowing us to diversify sales into both, local and export market, maximizing margin contribution. We are on the right track to conclude another solid fiscal year generating good returns and cash flows. As always, we remain focused in execution to further enhance efficiencies.

And I would like to finish by reiterating my gratitude to all the operational and management teams. After all, it is thanks to their daily efforts and hard work that we have become one of the low-cost producers of food and renewable energy. Now, I will let Charlie walk you through the numbers of the quarter..

enhanced agricultural efficiencies that contributed to reduce harvest costs, lower sugar prices, which resulted in a reduction in Consecana price and thus, in our agricultural partnership costs; and a reduction in the share of third-party cane. Unit costs, measured in U.S.

dollars, were further reduced by the year-over-year depreciation of the Brazilian Real. Finally, to conclude with the Sugar, Ethanol & Energy business, please turn to Slide 11 where I would like to discuss financial performance. Adjusted EBITDA for the nine-month period of 2018 reached 193 million, 16% higher, compared to the last year same period.

The main drivers for the increase are explained by high reduction in cost of production, coupled with an increase of other operating income. These positive effects were partially offset by a decrease in sales.

It's worth to notice note that adjusted EBITDA margin net of third-party consolidation went from 36.1% in the first nine months of 2017 to 58.6% in the first nine months of 2018. On a quarterly basis, our adjusted EBITDA in the third quarter of 2018 was $64 million or 2% lower, compared to the third quarter of 2017.

Adjusted EBITDA was positively affected by 18% reduction in total production costs on a per unit basis as a result of enhanced agricultural and industrial efficiencies, coupled with the depreciation of the Brazilian Real, 14.2 million higher gain derived from the mark-to-market of our commodity hedge position.

These positive effects were offset by lower sales coupled with 16.2 million loss from differed value of our unaudited gains. I would now like to move on to the farming business. Please direct your attention to Slide 13. At the end of the third quarter of 2018, Adecoagro began its planting activities for the 2018 and 2019 harvest year.

We expect to plant 237,000 hectares, 1.9% higher than the previous harvest season. This increase is expected to come primarily from a greater leased area, partially offset by an 8.4% decrease in owned land as a result of the sale of Rio de Janeiro and Conquista farms during the second quarter of 2018.

As of the end of October of 2018, a total of 79.2 thousand hectares or 33.4% of the target area has been seeded. We expect to continue planting rice until mid-November, and corn and soybean until early January. The wheat crop has developed as expected and we are preparing for the start of harvest.

Let’s move to Page 14 where I would like to walk you through the financial performance of our Farming & Land Transformation business. As you might see on the chart on a year-to-date basis, adjusted EBITDA for the farming business totaled 100 million, marking 167% increase year-over-year.

The result is mainly explained by the performance of our crops and rice businesses coupled with the sale of Rio de Janeiro and Conquista farms. Higher margin recognition as a result of higher commodity prices in the local market, coupled with a reduction in production costs explains the 13.9 million increase in our crops business.

As for our Rice business, we registered our 14.3 million increase, as a result of a 17% increase in agricultural yields, coupled with lower production costs, measured in U.S dollar. The sale of Rio de Janeiro and Conquista farms during the second quarter of 2018, in turn, contributed with 36.2 million in capital gains.

Let’s now turn to Page 16, which shows the evolution of Adecoagro’s consolidated operational and financial performance. On a consolidated basis, net sales in the first nine months of 2018 reached 557 million, 13% lower year-over-year.

This, as we have already seen is mainly explained by the combination of lower sugar and energy selling volumes, coupled with lower sugar and ethanol prices measured in U.S. dollars. Adjusted EBITDA in turn totaled 279 million, marking a 49% increase, compared to same period of last year. Positive results were achieved in all of our businesses.

As previously explained, the good performance of our crops and rice businesses were primarily the result of enhanced agricultural and industrial efficiencies, coupled with lower production costs, measured in U.S. dollars.

As for our Sugar, Ethanol & Energy business, positive results were driven by higher production volumes, which allowed us to dilute fixed costs coupled with the gain derived from the mark-to-market of our commodity hedge positions. To conclude, pleased turn to Slide 17 to take a look at our net position.

As you may see in the left chart, our gross indebtedness as of September 30, 2018 stands at 815 million, while net debt stands at 634 million, 5% lower quarter-over-quarter, and 8.3% higher year-over-year. The increase in net debt from a yearly perspective is primarily explained by our investment program.

It’s important to highlight that due to the growth in adjusted EBITDA, however, net debt ration reached 1.73x 11.3% lower year-over-year. I’d like to mention that our debt is very well structured in the long run, with an average maturity of over six years. Thank you very much for your time. We are now open to questions..

Thank you. [Operator Instructions] And our first question comes from Danniela Eiger with Bank of America Merrill Lynch. Please go ahead with your question. .

Hi, good morning Mariano, Charlie, and Juan. Thanks for taking my question. I have two questions on sugar and ethanol. The first one is, regarding ethanol prices outlook, we are seeing all big players in the industry here in Brazil carry inventories to the inter-harvest season in the hopes of selling it at higher prices due to seasonality.

And although ethanol demand remains at peak levels, we are seeing continuous cuts on gasoline prices by Petrobras, which are still not reflected at pump prices, right? So, how are you seeing these risks in terms of profitability for the sugar and ethanol division? And my second question is, on your announcement on the investment of additional ethanol storage capacity, can we understand that we will lead you to continue increasing your production mix towards ethanol in the next season and if so, do you need to make any additional investments to increase your flexibility or you still have some extra room to expand it? Thank you..

Okay. Thank you, Danniela, thank you for your questions. Very interesting one. I’m going to ask Renato, that is our Head of Sugar, Ethanol and Energy Business to answer both of your questions, and I will add something if needed.

So, Renato do you want to take that question please?.

Okay. Thank you for the question. First, regarding the ethanol price, ethanol markets have been under pressure due to weaker gasoline price at their refineries.

However, we keep a positive view, as lower gasoline price at their refineries were not [indiscernible] contributing to my actual maintaining ethanol competitiveness and [indiscernible] close to 63%. Also, hydros demand continues to reach the record highs as shown by [indiscernible] last year reports.

And also, longer intercrop periods and the lack of left-over sugarcane should lead to a tighter market, especially in the Q1. For other reasons, we believe that even [indiscernible] outlook ethanol price have a room to improve and to lead them to close to 70%.

It is important to highlight that despite the drop-in ethanol hydros in Mato Grosso do Sul it is still above $0.15 per pound and then hydros $0.16 per pound in sugar equivalents. Regarding the second part of your question, which is related to the ethanol tanker [ph] investments, seems to have achieved such a high ethanol mix higher than expected.

We plan to finish this year with a mix close to 75%, our [indiscernible] decreased, so in order to avoid selling it on the peak of this season, we have been building four new tanks, which will increase our storage capacity in about 43%.

In regarding ethanol mix for next year, we have been doing some small adjustments in [indiscernible] that we believe that we will increase the mix to close to 8%, but of course it depends on the weather and the DIS content of the sugarcane. The investments to increase the mix is very – is more or like adjustments in our own process..

Very clear Renato, I have nothing to add Danniela..

No, that’s perfectly clear. Thank you..

And our next question comes from Gustavo Allevato with Banco Santander. Please go ahead with your question..

Hi, guys. Good afternoon. So, I had three questions regarding capital allocation.

The first one, regarding dairy business, how much would it be, like the strategies to specific assets that the company is seeking in Argentina? Second point here is, how much you did the investments, the CapEx for [indiscernible] storage production by 33%, again not to mention the previous question? And the third and the last question is regarding dividend.

So, I know the company doesn’t have dividend policy, but when can – when investors are going to expect to receive a dividend given the company [indiscernible] quite stable and the investment probably has reached more than 50%.

So, going forward the company should generate a lot of cash and so when can you expect a dividend for your shareholders? Thank you..

Okay, Gustavo, thank you for your questions. I’m going to go by business. On the dairy investment, this is two plants – two branches, as we have already informed. We have done an offer of 45 million for these two plants, but gladly say two brands. These are strategic for us to enhance all our dairy production as of today.

So, this will allow us to either sell in the domestic market or in the export market. And will also give us this flexibility that is needed in a business like this in Argentina.

So that’s why we think this is a very attractive investment opportunity and it is well in-line with our five-year plan that we have already shared in our Investor Day two months ago, and that we’ve been sharing since some time now. So, that is answering your first question.

Then on the ethanol capacity, as we, I think, reported is BRL23 million is the cost of all these tons, and are already in process, and we will be ready to be used in the peak of next season as Renato was explaining.

And because of this huge increase in our ethanol mix is that we needed as Renato just explained by this BRL23 million is the only CapEx needed for the ethanol capacity increase. And as Renato also mentioned, there is no investment cap investment for continue increasing the ethanol mix.

And then going to the third part of your question, regarding dividend policy and capital allocation, we have been showing and specifically we dedicated lot of time during our Adecoagro Day in New York that we have this five-year plan and we are in the middle of the investment cycle of this five-year plan, and it’s clear that we will be generating free cash flow from 2020 onwards and it’s going to be relevant free cash flow from that time onwards.

So, that’s why we are currently now, we just started our discussions regarding this dividend policy. So, this is a discussion that is going on within senior management, within the board, and of course we will define a strategy for the dividend policy that we will have to revisit as our current dividend policies that we’re not giving dividend.

So, that’s why 2019 will be the year where we will be sharing our new or revisited dividend policies..

All clear Mariano, thanks for your interest [ph]..

And our next question comes from Lucas Ferreira with JP Morgan. Please go ahead with your question..

Hi, guys good morning.

So, still on the capital allocation topic, I was just wondering if you, how do you see this situation in Argentina with the hyperinflation and if you are seeing some impact already of that situation in the consumption of milk for instance, because I’m asking if – to see if the company would be willing to kind of even increasing the bet on the domestic market taking profit or probably assets that are on sale right now, and if so, how could you fund this potential acquisitions and expansion in Argentina? You felt through land sale for instance, if you wouldn’t increase the speed of, let’s say a land of divestments.

And if you can comment quickly on the liquidity of the land market in Argentina these days that would be helpful? And probably also commenting on the decision of market-to-market the land prices in your book value that you started doing this quarter. Is it – that has something to do with the liquidity of the land market? Thank you..

Okay, we will answer the capital allocation first and this general question about Argentina and the domestic markets and the opportunities. We have a clear view that we will invest within our five-year plan as we have expressed before.

This opportunity that we are taking today of these two plants are well above the price of building them or what the market price would be, is an opportunity that we are taking today, but we are only taking this opportunity because it was in the five-year plan that we decided two years ago that while we were investing in producing more mix because of the natural conditions and natural competitiveness that didn't have to produce more milk, is that we are taking advantage of this opportunity.

It is because it is in line with what we’ve been projecting. And the opportunity is to also to export and we will have the opportunity to export. We are looking more on how competitive Argentina is to produce and export milk rather than looking at the domestic market as a general thing.

Of course, if the domestic market pays more, we can also use domestic market. So, we are not doing it because of the situation of Argentina. We are doing it because it is strategically in-line with our five-year plan. So that’s regarding the capital allocation as of today.

Then on the liquidity of the land marketing in Argentina, if we can comment clearly the profitability of the land is higher now than three crisis of Argentina or this current situation of Argentina because the evaluation have more than offset the negative of the new export taxes.

So, in the overall business today, the land profitability has increased, compared to a year ago. We don't see that increasing in land prices, and we don't see a lot of liquidity in land prices because of all the situation in Argentina. So, I would say that the liquidity land prices in Argentina is not high today. I would say that is are relatively low.

And regarding why is it that we included in the balance sheet the evaluation of our farms, I’m going to ask Charlie to answer that part of the question..

Hi, Lucas. Morning. You know that our functional currency in Argentina is the peso. Every time we bought farms, we booked that farms at cost in Argentina pesos, and kept fixed.

As time passed by, the evaluation of the local currency when we made the translation that made in dollar terms the farmland to decrease its book value and we got to a stage where the evaluation of the farmer was ridiculous.

Actually, at the end of the second quarter, farmland valuation was $70 million and if we continue with that criteria at the end of the third quarter, it was going to be even lower. So, taking advantage of our Cushman & Wakefield independent valuation that we disclosed every third quarter.

We took the decision to change the criteria and to take the valuation coming from Cushman & Wakefield as a fair value. Although we’ve been selling most of the farms that we sold in the last 15 years have been sold at a higher price than Cushman.

We understood the thing that it’s a bit independent and the price is a good value to be considered to revalue our farmland in our balance sheets. That’s why these, now you would see that the book value of the farmland in our balance sheet is close to $800 million.

And one clarification is that, as this is a non-cash revaluation although this shows and captures all the efforts on transforming land that we’ve been doing for the last year and some land appreciation that we got since we acquired the farms, we have changed the definition of our adjusted EBITDA in order to be conservative and not to include the gains coming from the revaluation of our farmland..

Okay. Thanks Charlie. Mariano, if I may just do a follow-up on the previous question and regarding the 5-year plan.

If you can remind me, what does the plan say about your, let's say, potential diversification in Argentina? Remember, a couple of years ago, you considered diversifying, actually going a bit more vertical into even maybe like [indiscernible] or getting even closer to find a consumer.

If that's still the case, if you would consider getting to propane for instance?.

Yes. I’m getting your point. I think we are clearly prioritizing within the 5-year plan, but of course sometimes we can look at things, but I don't expect something relevant going out of the 5-year plan. I think we are very focused on what we are doing today within the 5-year plan..

Thank you..

And our next question comes from Antonio Barreto with Itaú BBA. Please go ahead with your question..

Good afternoon Charlie and Mariano. Just one clarification on that point about the investment plan. When you look at your AGRO Day presentation, if I'm not mistaken that very investment that you had planned over the next years was $7 million.

So, when we think about the 44 million that you guys are talking about to invest on the two plants by [indiscernible], we should add those 44 million to the 7 that you mentioned on the AGRO Day, or is it a part of the 70 million?.

Thank you very much for your question. This is – and the 70 million is already included. This is part of the 70 million, the 45 that we are talking now. On top of the 45, we may invest some additional CapEx or working capital that we think at the 70 million is today a conservative number because we took advantage of this opportunity..

Alright. Thank you that’s clear. And my second question about the sugar and ethanol business.

We have seen and you guys reported all the rains in the third quarter of the year, I would like to know if you had an update up until the quarter to date up, up until the middle of November, how have the rains been and if you guys have any expectation that could change the crushing guidance? If I'm not mistaken, in the AGRO Day you mentioned 12 million tons for this year, so judging by the rain that you have seen up until November, is there a risk that this number will be lower in this year and you’re going to have more leftover kind of [indiscernible] for 2019 to increase the crushing in 2019.

So, how do you guys see this breakdown between crushing and 2018 and 2019, given all the rains that you guys have seen up until the middle of November?.

Antonio, very good question. Thank you for it. Renato can you go in detail on that and answer please..

Okay. Thank you, Antonio. As Charlie mentioned, it rained more that the average in August, September, and October that are usually drier months. Other result, we had a crushing delay and it should be crushing approximately 5% [indiscernible] initially planned.

However, it is important to highlight that the final production should be above 10% more than the [indiscernible] crushed last year, and after the weather improved the future sugarcane outlook. Especially, for the first quarter of 2019 when you would be crushing as part of our continuous harvesting model. So, we're going to decrease 5%.

The number that you mentioned approximately, depending on the weather now on. And increased a little bit in the crushing for next year..

So, if I do the math on that, it is something close to 500,000 to 600,000 tons that you should – had not crushed this year, but should crush in the next.

So, is that how it works or whatever this 5% number would subtract from 2018, but we add to 2019 or there is some loss in the middle?.

Yes, you simply track the numbers, so the math is right for this year. And you add, I would say 90% of this number for the next season..

Very clear. Thank you..

Just to add Antonio, always taking to account that we are subject to daily rain, so it will depend always on the climate from now till the end of the year and that is always [indiscernible] there..

Yes, of course, thank you..

[Operator Instructions] And our next question comes from Roberto Browne with Morgan Stanley. Please go ahead with your question..

Hi, good morning. Thank you for taking my question.

When you came up with your five-year investment plan, the Argentine Peso was at the different level, and the possibility in the fuel was also different, now that you were able to improve and you were able to see this in the quarter, does it change the opportunity that you see for the crops there, in other words is the new opportunity level bringing also new opportunities besides the one you already have there on your operations?.

Thank you, Roberto, a good comment. Yes. There may be within the crops business. Some additional opportunities, and within the crop business we have soy, corn, wheat, sunflower and peanuts.

So, within these five different crops there may be especially if the opportunity is like increasing area in peanuts, like increasing some areas on some specific sunflower or wheat or something, but we are in the middle of the planting season. So, there is a little bit for this year, and maybe something for the following year.

That is included in the concept of this five-year plan where we will be growing the crops and we think that there is an opportunity there..

Great. Thank you, Mariano..

And this concludes our question-and-answer section. At this time, I’d like to turn the floor back over to Mr. Bosch for any closing remarks..

Well, okay, thank you everyone for the call today. Thank you for participating and to finish, I would like to reiterate my gratitude to all of our people. It depends on their daily effort with difficult climate, with cold weather, rainy seasons that they are working every day at the fields, and those are our most important people.

So, thanks to them and to their daily effort is that we are becoming the lowest cost producers in each of our businesses. So, I would like to reiterate our gratitude to all of them. So, thank you all for coming..

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