Adecoagro SA’s 2025 Q4 Earnings Call: Fertilizer Pricing and Capital Spending Plans Contradict Earlier Guidance

Date of Call: Mar 17, 2026

Financials Results

• Revenue: Overall sales decreased 2% YOY. Pro forma fertilizer revenue down 6% YOY.
• EPS: Not explicitly stated.
• Gross Margin: Not explicitly stated.
• Operating Margin: Adjusted EBITDA decreased 38% YOY for the company. Pro forma fertilizer adjusted EBITDA down 35% YOY.

Guidance:

• Sugar, ethanol & energy: Expect low double-digit growth in crushing volumes for 2026 due to better productivity and full-year ethanol maximization.
• Fertilizers: Expect full recovery in adjusted EBITDA generation driven by normalized operations and positive market price outlook.
• Food & agriculture: Implemented cost initiatives to improve margins, including a 22% reduction in planted area.

Business Commentary:

Fertilizer Business Expansion:

• Adecoagro acquired Profertil, becoming the largest urea producer in South America, with pro forma annualized revenues exceeding $2 billion and potential adjusted EBITDA of $700 million.
• The acquisition was driven by the strategic goal to broaden production capabilities, double cash generation, and reduce earnings volatility.

Sugar, Ethanol, and Energy Segment Performance:

• Despite challenging conditions, including lower commodity prices, the segment achieved a 72% ethanol mix in the last quarter, with an annual mix of 58%.
• The shift towards ethanol production was a response to improved ethanol prices in the second half of 2025, optimizing margins amidst lower sugar prices.

Financial Impact of Fertilizer Downtime:

• Profertil's financial results were affected by approximately 90 days of downtime due to a scheduled plant turnaround and third-party gas distributor flooding.
• This resulted in a 6% decline in revenues and a 35% drop in adjusted EBITDA year-over-year for the fertilizers business.

Debt and Leverage Strategy:

• Following the acquisition, Adecoagro's net leverage increased to 3.3 times compared to 1.2 times in 2024, with a plan to reduce it back to around 2 times adjusted EBITDA.
• The increased leverage was primarily due to the financing of the Profertil acquisition, and the company plans to achieve this reduction through higher adjusted EBITDA generation and a revised capital allocation strategy.

Argentina's Agricultural Outlook:

• The new administration in Argentina is expected to lower export taxes, which is anticipated to improve conditions for Adecoagro's food and agriculture business.
• The company is optimistic about domestic and export market competition, viewing a positive outlook for its agricultural operations in Argentina and Uruguay.

Sentiment Analysis:

Overall Tone: Positive

• Management expresses enthusiasm about the transformational acquisition of Profertil, stating 'we are today a significantly stronger and more resilient company.' They highlight being 'very well positioned' to capture high urea prices and are 'very optimistic' about cost reductions and ethanol prices. The tone centers on strategic growth and resilience despite a challenging market.

Q&A:

• Question from Guilherme Guttilla (BTG Pactual): How are you seeing the fertilizer market today, and how might higher urea prices affect industry volumes and Profertil margins? Also, how are you seeing unit costs for the sugar and ethanol business going forward?
  Response: Higher urea prices directly boost margins as gas costs are fixed; ~1.1 million tons of 2026 production is exposed to these prices. For sugar/ethanol, costs are expected to reduce 10-15% due to dilution, fixed fertilizer costs, and operational efficiencies.

• Question from Gabriel Barra (Citi): What is the commercialization strategy for the fertilizer business given the high price scenario, and for ethanol given current gasoline/diesel price trends?
  Response: Fertilizer strategy is to sell domestically in Argentina at import parity prices, focusing on storage to meet seasonal demand peaks. For ethanol, they are optimistic prices will improve as gasoline prices rise, and they will maximize ethanol production for the entire season.

• Question from Isabella Simonato (Bank of America): How should we think about CapEx for 2026 and cash returned to shareholders given the new capital structure?
  Response: The company remains disciplined on capital allocation, aiming to return to a target leverage of around 2x EBITDA. They will continue their dividend policy ($35M in cash dividends for 2026) and evaluate organic and inorganic growth opportunities.

• Question from Matheus Enfeldt (UBS): What are the next growth avenues after deleveraging, and how does the food & agriculture segment fit into the midterm portfolio?
  Response: Growth avenues include organic expansion in sugar/ethanol and potentially building a new urea plant in Argentina. The food & agriculture business is seen as a cash-generating asset with margin improvement opportunities, not requiring strategic partnerships.

• Question from Lucas Ferreira (J.P. Morgan): What is the production cost per ton of urea/ammonia this year, and how should we model the business long-term? Also, what is the outlook for the farming business and potential export tax changes in Argentina?
  Response: Cash cost to produce urea is stable at $180-$190 per ton; the business model leverages low-cost production. For farming, they are optimistic due to a new Argentine administration reducing export taxes, which should help the business.

• Question from Julia Rizzo (Morgan Stanley): What are the global urea supply dynamics given Middle East tensions, and why are sugar prices under pressure despite strong fundamentals?
  Response: Urea supply disruptions from the Middle East could cause a lasting shortage, supporting prices. Sugar prices are pressured as Brazil maximizes ethanol, but they expect prices to rebound in the medium term as supply decreases and production costs are not met.

Contradiction Point 1

Fertilizer Market Strategy and Pricing

Contradiction on pricing strategy and market influence for Profertil's sales.

Gabriel Barra (Citi) - Gabriel Barra (Citi)

2025Q4: Prices are set by international markets... Strategy is to sell domestically in Argentina at import parity pricing. - [Mariano Bosch](CEO)

What is the company's commercialization strategy for the year given the strong urea prices and existing uncertainties? - Julia Rizzo (Morgan Stanley)

2025Q3: The Profertil acquisition is attractive and accretive. Financing is fully in place at long-term, good rates. - [Mariano Bosch](CEO)

Contradiction Point 2

Capital Expenditure Outlook

Contradiction on the direction and scale of future capital investments.

Isabella Simonato (Bank of America) - Isabella Simonato (Bank of America)

2025Q4: Capital allocation remains disciplined: ... Prioritize returning capital to shareholders, growing the business, and reducing debt. - [Mariano Bosch](CEO)

How should we think about 2026 CapEx and shareholder returns given the new capital structure with higher leverage and improved cash flow? - Matheus Enfeldt (UBS Investment Bank)

2025Q3: On CapEx, due to compressed EBITDA and margins, we are revising all CapEx across segments and reducing it to the maximum level. - [Mariano Bosch](CEO)

Contradiction Point 3

Crop Area Strategy and Flexibility

Contradiction regarding the ease of reversing crop area reductions in the future.

Matheus Enfeldt (UBS) - Matheus Enfeldt (UBS)

2025Q4: Comfortable with the three business lines. Segment has growth opportunities... - [Mariano Bosch](CEO)

How does the new food & agriculture segment fit into the portfolio, including any plans for partnerships or monetization? - Isabella Simonato (BofA Securities)

2025Q3: There is no problem increasing leased area in future seasons. The key focus is on efficiency and return; we will adjust area based on the return we require. - [Mariano Bosch](CEO)

Contradiction Point 4

Sugar & Ethanol Cost Outlook

Contradiction on the primary driver of unit cost changes for the sugar/ethanol business.

Gabriel Barra (Citi) - Gabriel Barra (Citi)

2025Q4: Sugar and ethanol costs should decrease 10%-15% due to: Crushing volume dilution from higher yields and Q4 2025 rains. - [Renato Junqueira Pereira](VP, Sugar, Ethanol, and Energy)

How will rising gasoline and diesel prices impact the commercialization mix strategy for ethanol? - Matheus Enfeldt (UBS Investment Bank)

2025Q2: The most significant pressure is from crops... where the company is reducing leased area by ~30% and lowering planted area by 20,000 hectares to improve margins. - [Mariano Bosch](CEO)

Contradiction Point 5

Capital Allocation and Dividend Policy

Statements on maintaining dividend policy conflict with later plans to potentially adjust it.

Isabella Simonato (Bank of America) - Isabella Simonato (Bank of America)

2025Q4: Aim for leverage around 2x EBITDA... Continue dividend policy: $35M in cash dividends to be paid in May and November 2026. - [Mariano Bosch](CEO)

How will the new capital structure with higher leverage and improved cash flow impact 2026 CapEx and shareholder returns? - Julia Rizzo (Morgan Stanley)

2025Q1: The 2025 dividend policy is approved and unchanged. The group plans to use cash flow to continue dividends, repurchase shares, and pursue acquisitions... - [Juan José Sartori Piñeyro](CFO)