Mariano Bosch - Co-Founder, CEO & Director Carlos Boero Hughes - CFO Renato Pereira - Director, Sugar and Ethanol Operations Walter Sanchez - Co-Founder, Chief Commercial Officer and Director

Isabella Simonato - Bank of America Merrill Lynch Vito Pinto - BTG Gustavo Allevato - Santander Investment Securities Javier Martinez - Morgan Stanley Augusto Ensiki - HSBC João Soares - Bradesco

Good morning, and thank you for joining Adecoagro's 2018 First Quarter Results Conference. Throughout all these years, we have been investing time and money in enhancing the efficiency of our industrial operations.

We have consolidated as one of the most efficient and low-cost producers of sugar, ethanol and energy. Our current prices of sugar, where state of the art cluster in Mato Grosso do Sul, has delivered extraordinary results as we shall see during the presentation.

The same could be said about our Dairy business where we are delivering high-quality milk on a daily basis at one of the most efficient kilogram of feed to liters of milk conversion ratios in the world that allow us to have the lowest cost of production. At the same time, from an agricultural perspective, through the implementation of best practices and cutting-edge technologies, we have been able to develop a self-sustainable, diversified and high-quality productive system.

As we always stress out, this strategy has allowed us to become an efficient and low-cost producer with the ability to rapidly adapt ourselves to the market dynamics. This, in turn, is a key to generate attractive and stable returns through the different commodity cycles and weather effects.

In particular, and starting with the Sugar, Ethanol and Energy business, we were able to fully maximize ethanol production, taking the production mix during the quarter to a record of 87% in order to profit from higher relative prices. As a matter of fact, ethanol prices traded at a quarterly average of $0.19 per sugar equivalent.

That's 40% higher than sugar prices. This was only possible thanks to our continuous safra system and the flexibility of our industrial assets.

Moving to the Farming and Land Transformation business, once again, we had proved the success of our model. The advantages and benefits of our product and geography diversification, coupled with implementation of best practices, have once again paid off.

One, despite suffering one of the worst droughts in Argentina, our Crop business was not significantly affected as a result of optimum agriculture practices and higher domestic prices. Second, in our Rice business, we were reaping off the benefits from the CapEx deployed over the last couple of years.

In a sense, operations resulted in a highly efficient water management, which allowed us to offset the consequences of dry weather. This, coupled with the enhancement in our logistic operation, enabled us to deliver solid financial performances during the quarter.

And third, moving to the Land Transformation, in May, we signed the sale agreement for two farms located in western Bahia and Tocantins at a value that is 37% premium to the Cushman & Wakefield's latest independent farmland appraisal. Regarding our five-year plan, it's very important to highlight that we continue to be fully focused in execution.

Indeed, most of the investment framed in this plan were responsible for the better financial performance. All investments are well advanced and moving forward according to schedule.

Let me remind you that all these investments are marginal in nature and generate IRRs above 20%. As usual, I would like to finish by reiterating my gratitude to all the operational and management teams.

Thanks to their daily effort and hard work, we are confident that each day, we are closer to reach our ultimate goal, which is becoming the low-cost producer of food and renewable energy in the entire world while at the same time generate attractive and sustainable margins for all of our shareholders. Now, I will let Charlie walk you through the numbers of the quarter.

Thank you, Mariano. Good morning, everyone.

I would like to start on Page 4 with a brief analysis of the rains in Mato Grosso do Sul. As it can be seen in the bottom chart, the region received higher than average rainfalls during the last six months.

Consequently, affected milling days reached 39 days in the first quarter of 2018, 12% lower year-over-year. Crushing activities, however, marked a 4% increase compared to the same period of last year, mainly driven by enhanced industrial efficiencies, which resulted in a 19% increase in milling per hour.

Industrial improvements include, but are not limited to, the 17% increase in nominal crushing capacity in Angelica mill, coupled with the installation of a larger roller in the Ivinhema mill. It is important to highlight that we still have leftover cane from last year, which is scheduled to be harvested during the coming months, assuming normal weather, since we have the industrial capacity to do so.

Indeed, during April rains, we're significantly lower than the 10-year average. As a result, we crushed 1.3 million tons of sugarcane, more than doubling last year's performance.

We feel very optimistic to fulfill the 12 million tons of sugarcane milling for this year. Let's now move to Page 5, where I would like to highlight our agricultural productivity.

As you can see on the top left chart, sugarcane yields in the first quarter of 2018 reached 107 tons per hectare, 14% higher year-over-year. Higher yields were primarily explained by abundant rainfalls over the last two quarters, which favored cane development.

TRS contents remained virtually flat, reaching 108 kilo per ton. The combination of these two effects resulted in TRS production per hectare of 11.6 tons, 12% higher than last year's first quarter.

Let's turn now to Slide 6, where I would like to discuss our production mix. During the first quarter of 2018, ethanol prices traded on average at a 40% premium to sugar prices, reaching peaks as high as 50%.

As a consequence, we decided to fully maximize ethanol production to profit from higher relative prices. Out of the total TRS production, 87% was planted towards ethanol, a record high.

This high flexibility puts in evidence the high quality of our mills, allowing us to rapidly shift production in response to changes in relative prices. Let's move ahead to Slide 7.

In line with what was mentioned on previous slide, ethanol production increased by 47% compared to the first quarter of 2017, reaching 89.9000 cubic meters. As for sugar, production marked a 66% decrease year-over-year, fully explained by our strategy to fully maximize ethanol production.

Energy exports reached 72,000 megawatt hour, 31% lower compared to the same period of last year. The decrease is explained by the adopted strategy to redirect steam to maximize sugarcane crushing, considering that one of our boilers was under maintenance works.

The fact that energy consumption in Angelica is now higher as a result of the increase in crushing capacity and the fact that ethanol production requires more energy. Let's please turn to Slide 8, where I would like to discuss sales.

As shown on the top left chart, ethanol sales during the first quarter of 2018 totaled 66.8000 cubic meters, 29% higher than the first quarter of 2017. Average selling prices in dollars reached $572 per cubic meter, 5% higher compared to the previous year.

Higher prices were supported by a stronger demand, coupled with higher international gasoline prices. The combination of these 2 effects resulted in a 29% higher net sales for sugar during the first quarter of 2018.

In the case of sugar, selling volumes during the first quarter of 2018 totaled 54,000 tons, 49% lower year-over-year. This is directly correlated to the decrease in sugar production for the reasons previously explained.

At the same time, average selling prices in dollars marked a 19% decrease as a consequence of lower international sugar prices. Finally, to conclude with the Sugar, Ethanol and Energy business, I would like to focus on Slide 9.

Here, we can see the overall financial performance of the business. Total net sales during the quarter reached $90 million, 14% or $14 million lower than the same period of 2017.

As explained during the previous slides, the decrease is mainly explained by lower sugar and energy selling volumes coupled with lower sugar prices. These effects were partially offset by higher ethanol selling volumes and prices.

Adjusted EBITDA in the first quarter of 2018 reached $48 million, 59% higher than the first quarter of 2017. The main factors contributing to this increase were, a 4.3% increase in sugarcane crushing; higher ethanol average selling prices and selling volumes; and a $13.2 million higher result from the mark-to-market effect of our commodity hedge position.

These positive effects were partially offset by an $11.8 million higher loss, resulting from the mark-to-market of our unharvested biological asset as a result of lower sugar prices. Let's now move to Page 11, where I would like to focus on the current status of the 2017/'18 harvest year.

As of the end of April, harvest operations for most of our crops were well underway, with 68% of total area already harvested. On a consolidated basis, yield performance has been diverse depending of the region.

Broadly speaking, early crops in southern regions of Humid Pampas were the least affected by the dry weather as a result of adequate soil moisture. On the contrary, crops in the northern regions of Argentina were severely affected by the lack of rains.

At the same time, rice yields were highly favored by the dry weather, resulting in higher yields and proving the advantages of product diversification as a strategy to mitigate weather risk. Let's move to Page 12, where I would like to walk you through the financial performance of our Farming business.

As you may see on the chart, on a quarterly basis, adjusted EBITDA for the Farming business was $18.8 million, 4% lower compared to the same period of 2017. This decrease is mainly explained by a $2.7 million loss in our Crops business, partially offset by higher margins in our Rice business.

Regarding the Crops business, lower results were explained by lower yields as a result of the drought in Argentina, coupled with a $10.4 million lower gain from the mark-to-market effect of our commodity hedge positions as a result of higher local prices for soybean and corn. As for the Rice business, higher margins were explained by the increase in productivity in our farm operations, coupled with lower cost in dollar terms as a result of the depreciation of the Argentinian peso.

Dry weather, coupled with a longer exposure to solar radiation, allowed the rice to properly develop, resulting in a 16% higher yield compared to the previous harvest. Once again, this evidences the benefit derived from product diversification.

Please turn to Slide 14. As you may see on the top left chart, our gross indebtedness as of March 31, 2018, stands at $808 - $829 million, while net debt stands at $645 million.

I'd like to mention that our debt is very well structured in the long run with an average maturity of over eight years. We believe we have a strong and healthy balance sheet, putting us in a good position to consolidate ourselves and pursue any expansion activity.

Last but not least, let's move to Page 15. As previously announced, there are several organic businesses expansion projects that we are currently undertaking.

These projects, framed in our strategic five-year plan, are expected to increase EBITDA by 50% and also contribute to free cash flow generation. Execution risk, in turn, is negligible as we are investing in businesses where we already operate and proved to be highly efficient.

At the same time, it is worth mentioning that we are not relying on a rising commodity price scenario. Starting with sugar and ethanol, the cluster expansion project is moving forward according to budget and schedule.

Investments in Angelica are already complete, increasing crushing capacity from 900 to 1,050 tons per hour. We expect to conclude investments in Ivinhema by the next quarter.

Moving to Dairy business, the construction of free stall #3 is almost fully complete, and we expect to start populating the facility by June 2018. By the end of the year, the operation will be running at a 45% of total capacity.

Industrial investments in our Rice business are expected to be completed during the next quarter. This will contribute to enhanced margins, as it will allow us to improve rice processing and distribution while at the same time, increase the value of our main by-products.

Overall, we are very enthusiastic on all these projects, as we do believe they will contribute to EBITDA and cash generation. Thank you very much for your time.

We are now open to questions.

I have two questions. First of all, on sugar and ethanol, we saw a big increase - a bigger shift in the mix towards ethanol.

I understand that it's also because of the seasonality. But how are you looking for the mix for the entire 2018, '19 season given the big price differential between both products?

And also, you mentioned in the release that you see a little bit of downside risk to soybean yields. And we have been reading articles also that there is an excessive rains in the last couple of months after the drought.

So if you could just give us a little bit more color for the remaining soybean that needs to be harvested? What sort of yields are we looking at?

Thank you, Isabella, for your question. I will ask Renato to answer the first part of the question on how we see the mix for the whole year and how we see that we are improving so much this flexibility capacity.

Renato, do you want to answer the first question please?

[Indiscernible].

Okay. Sorry, we are not getting Renato on the speaker line.

So I'm going to answer that question. I think this 87% ethanol mix that we've been able to do this first quarter, of course, it's not something that we can do all the year round because during the months where we start crushing full capacity and the TRS content of the cane increases, then we don't have that much flexibility.

So for the whole year, we are expecting mere 70% of ethanol as the whole year. This is a lot more than what we were projecting or what we were thinking we were going to be able to do.

This is the first time that we pushed as much as possible into the ethanol production and because of the differential margin that we have, especially in Mato Grosso that are even higher than in the Center itself, that's why we are being so aggressive, and we are making some changes in the industry. We are increasing the syrup that is being sent to the tanks of fermentation.

So because of that, we are incrementing the alcoholic content on those tanks. And because of that, is that we are being happy, surprised by these additional potential increase that we are getting today.

So that's why, we are expecting to reach near 70% in the whole year if we continue maximizing and we continue seeing these differential on prices that we expect to continue to see during the year. And then on the soybean yields that was the second part of your question, Isabella.

We don't expect more downside risk on the soybean that hasn't been harvested yet. We are almost finished.

We only still have 20% of - to be harvested. And then the yield - the drought has already been closed.

So for the following year - for the following part of the year, we do have moisture. We do have enough moisture now, so the farms should be okay from now on regarding this drought.

So we could say that the drought is over, and we don't expect more yields going down on our soybean that we are finishing harvesting now.

Just a follow-up on Isabella's question. I would like to hear from you, what is your expectation for sugar and ethanol prices for the year.

And my second question is on SanCor. Could you provide us more details regarding the closing of the deal?

And how you expect to fund it? I mean, it would be great to hear from you what you're expecting in terms of funding cost for this transaction.

Okay. Vito, thank you for your question.

I'm going to ask Marcelo Sanchez, our Commercial Director to answer your question regarding our view on prices, and then I will take the question on SanCor.

Thank you, Vito. As you might be following the market, the global on sugar scenario for 2017, '18 is looking to allow surplus.

That has been pushing the prices down. And we think that prices will be - continue to be under pressure within the next coming months.

That is regarding our sugar view, and that's the reason why we've been accelerating since the first Q of 2017. We've been accelerating our price in sugar, as you might be seeing in the results that we are almost 90% hedged already with our sugar production standing at 16.70, our average.

That is roughly 400 points above today's price. Contemplating 2019 prices, we are also - with an average of 70% ethanol production, we have for 2019 already 25% hedged at 15.28, as you might be seeing in the report.

Regarding ethanol, even though that - we are seeing an incremental in the shift towards ethanol in Brazil within the next coming months, given the ethanol is paying much better compared to sugar, these exceeding production will be offset by really a high demand that we are seeing in the coming months. Therefore, we are pretty positive in pricing for the next coming months in ethanol.

Okay. Thank you, Marcelo.

Then on SanCor and closing and funding, I would say that as we informed previously, we made this investment proposal but it's subject to a number of conditions. So today, we are currently performing a full due diligence and outline what would be a sustainable company on SanCor, what's a company that we can imagine that is the real sustainable company.

So all those condition presents have to happen in order for a potential closing. Regarding timing, there are many things that are not under our control, so they depend on judicial issues, on renegotiation of debts, on many different things that are not under our control.

So regarding timing, there is not much that we can see - that we can say other than we are going through this due diligence and trying to outline what's the sustainable company that we can get into. Then regarding potential leverage and funding, all this is in a function of the restructuring of the assets and the liabilities, and that's part of what's currently undergoing.

So it's difficult to be more clear now on where we are there.

I have two questions. First one, regarding the weather conditions in Brazil, how is the weather conditions in Mato Grosso so far year-to-date?

And the second question is regarding the commercialization strategy for ethanol in Brazil? So we recently saw a drop in prices.

Will the company build inventories just out for the mid to the end of the crop season? Or we wait for like - or the company will sell on average the same quantity per quarter?

Thank you, Gustavo. Regarding the weather in Mato Grosso, I think Renato's line is okay now.

Renato, can you answer that part of the question regarding the weather in Mato Grosso and how sugarcane's looking?

Okay. Thank you for the question.

[Indiscernible] water sugarcane areas in Brazil, we have the rains above historical average in the last quarter of '17 and the first quarter of '18. As a result, our yields were not affected by the drought.

In fact, we have achieved 107 tons per hectare in the first quarter, which is a very good number. It's also important to highlight that even with more rains than usual in the first quarter, we have crushed more sugarcane than the same period of last year as a consequence of the higher crushing per hour.

Also, as already mentioned, we have been crushing very well in the second quarter, taking advantage of drier weather.

Okay. Thank you, Renato.

And on the commercialization of the ethanol, I'm going to ask Marcelo Sanchez to comment on that.

Thank you. Ethanol prices have recovered from the lows and returned to the levels of $0.15 per ton in Mato Grosso do Sul.

And given the level of demand that was mentioned before, we are serving Brazil and Cuban oil prices, we believe that there's a high potential of appetite. And our strategy is to maximize our results and sell in the pieces of higher prices that are going to be further down the curve at the end of the year - I mean, the curve for the second half, just to be more precisely.

That's basically what we see in the ethanol and our strategy.

It will link some part of the ethanol.

Mariano, I would like to ask you something about SanCor. The price that has been suggested by the press, had a component of debt from the company in equity, any of those you've seen in Argentinian pesos or those are in dollars?

Good question. As I mentioned before, this is part of all this condition present.

And part of those considerations present is that most of the debt that remains in the company will be kept in pesos, and that's how it has been discussed until now. And it's part of this process that we are under due diligence.

Sorry, I hopped on late. So if this was already discussed, I apologize.

Could you just talk a little bit about what the peso deval means for you guys? How much of your production in Argentina is export versus local consumption?

And if the changes in interest rate affect any of your debt? I don't know that you have too much of local debt.

And secondly, a little bit of how weather conditions have restored or not for your farming operations?

Okay, on your second part of the question, I have already mentioned that the weather conditions or the drought is already over in Argentina. So we are now starting from in - as a normal year on all our crops.

And Renato had just commented on Mato Grosso do Sul. So in weather terms, I would say that today, we are very well positioned.

And regarding your first part of the question on how the deval affects us, Charlie can be more specific there on the answer.

Augusto, the devaluation in Argentina that we've seen in the last three weeks, considering that most of our revenues are dollar-linked, as 85% of the products that we produce are exported directly or indirectly. And considering our cost structure, which is approximately 50% in local Argentinian pesos and 50% in dollars, every time we have a devaluation that we witness the peso, impacts positively as we have our cost being diluted.

So this means that our margins are better, and our cash flows enhanced. Taking advantage of your question, I also wanted to say that the devaluation in Brazil that we are seeing, actually, the real was trading today at levels of 3.63.

It's also good for our P&L and bottom line, as I would say, most of the costs that we do have in Brazil, our operational cost and maintenance costs are in reals. So this means that these costs are being diluted, and this helped us to gain competitiveness in our costs.

And on the other hand, since the last six months, everybody knows that Petrobras has this formula that takes the domestic industrial oil price with the international oil prices and the effects. So every time that we have a stronger dollar, a weaker real in Brazil, we see an enhancement in ethanol prices in reals, which impacts positively our margins as well.

Perfect. And how about your land portfolio, does that get affected at all?

Okay. Thank you.

Regarding the land portfolio, it's always traded in dollars in Argentina. In Brazil, the land portfolio, in general, is traded in reals or in soybean box that are - that is more related to the dollar or is linked to the dollar.

But in Argentina, it's always traded directly in dollars, and the cash flow generation of a farm is higher with the deval because of what Charlie just explained. So in theory, prices should go up because of deval.

My first question is with regards to leverage and M&A. Assuming that SanCor goes well, you guys concluded the transaction, your balance sheet is going to be a little bit more heavy.

So I imagine that, that's going to limit your M&A strategy or anything that you have planned up. And also on M&A, I realized that Odebrecht has plans in Mato Grosso do Sul that are very close to yours, if I'm not mistaken.

And so I don't know if those assets have come up to mind. And the second question is in regards to carry, I think it's more for Renato.

If you could talk a little bit more at the current haggler's prices, what will be your sugar equivalent, taking into equation your working capital and all other adjustments into the formula?

Sorry. Again, the second part of your question, can you clarify, João, please?

Yes, just concerning the current ethanol prices, of course, you have the pharma with - usually with the TRS, and we can reach a current sugar price. But with regards to your operation, I mean, I realize that there are some specific industry efficiencies and working capital that you are operating the market.

I mean, you live a little far off from the port. So I imagine that plays out into the carry.

But I mean, if you would choose to, we could follow up later.

Okay. Good question on the second part.

I want to ask Renato to answer your question, and then if I have something to add, I'll do it. Renato, can you answer the second part of the question, please?

Today, the equivalent for hydros in Mato Grosso do Sul is $0.15 per pound. And then on hydros, it's close to $0.16 per pound, considering all the details of our operation.

Okay. Regarding the first part of your question, first, regarding this mill that Odebrecht has near our mill, this two mills Odebrecht has near our mills.

Of course, these are types of discussions we've been always having with the company and our neighbors and so we have a very close relationship regarding that, that they have a much bigger issue that they want to solve as a whole. They don't want to sell specific assets, and we've never heard from them that they would be willing to sell a specific asset.

So depending on what happens there, we could be part of the solution or not. So that's always open.

And if it is accretive and makes sense for us, we would explore something that is accretive for us. Do we have a balance sheet for something like that or not?

Of course, depending on relative values, we think that our balance sheet is very well structured. The length of the debt is in an average of eight years.

Our cash generation is improving every year. And according to our five-year plan, we will be very well positioned in three, four years from now regarding this cash generation.

So we think that we do have room for some activity on these very specific M&A opportunities that, of course, always have to be accretive to our current shareholders. So that has been our approach in the analysis, and we continue to be there.

So that's basically for that specific case and more globally also.

Okay. Mariano, just to try to understand a little bit more.

Post-acquisition of SanCor, what - do you have any targets of leverage that you have on your mind at the end of the year? At the end of 2019?

We've been always talking to the market that we feel comfortable on around these 2x net debt-to-EBITDA margin - net debt-to-EBITDA ratio. That's something where we feel comfortable, and that's the place where we want to be.

Of course, if there is one very specific transaction on the M&A side that is really accretive, we can go higher from - for a period but where we could have a very clear plan to go back to these 2x net debt-EBITDA ratio. That has always been our target and continues to be the target.

These, as I mentioned, having eight years of average life allows us to potentially increase on a very short period of time.