Três Tentos Agroindustrial S/A (TTEN3) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to the Conference Call to Announce Results Relative to Q4 2024 for Tres Tentos. Joining us today, Mr. Luiz Osorio Dumoncel, CEO and IRO; Joao Marcelo Dumoncel, Operational VP; Cristiano Costa, CFO; and Eduardo Motter, IR Manager. We'd like to inform you that this video conference is being recorded and will be made available at the company's IR website, where you can also find the respective slide deck. [Operator Instructions] Before moving on, we would like to state that forward-looking statements made during the company's presentation concerning the company's business outlook, operating and financial targets and projections and also the company's future growth are based on beliefs and assumptions of the part of the company's management based on information currently available. Such forward-looking statements involve risks, uncertainties and therefore, depend on circumstances that may or may not materialize. Investors should have in mind that general economic conditions, agribusiness conditions and other operating factors might affect the company's performance in the future and thus lead to results that will differ substantially from those expressed in these forward-looking statements. I'd like now to turn the floor over to Mr. Luiz Osorio Dumoncel. Please, Mr. Dumoncel, you may carry on.

Thank you. First off, I'd like to salute all of you. Good morning, everyone, and welcome to yet another earnings call for Tres Tentos. During this conference call, I'd like to recap if I may, our first balance sheet we shared with the market back in 2020. So from 2020 onwards, we're talking about 5 different years closures that we have reached out to the market to share our performance, our numbers. So the numbers you see on the screen where we highlight growth, margin and return. This is what we see in terms of trade [ stents ] and how -- that's how we see ourselves since year one. The company's solidity, robustness, it is a company that really knows the market where it operates is very close to producer, to growers and also close to suppliers, very close to consumers and customers. And, of course, gives us a very strong competitive edge when compared to our peers. And with that, we have been reaping significant results oftentimes amidst very challenging scenarios. Tres Tentos has had an attitude of them really well. Our execution capacity as we expand our operations is also worthy of note. And we understand that there might be questions on the part of the market. But internally, we know of our ability, of our potential, of our organizational capacity when we moved to Mato Grosso first to Highway 163 and now getting closer to the Araguaia Valley, and we will go into detail about that. But anyway, just important to highlight that we have a very strong execution capacity, very dedicated, a lot of hard work into it and a huge market to explore. We're talking about crop years and positions that Brazil has been reaching year-on-year-on-year with increasingly positive results. You've seen this screen before. This has been published -- this was published yesterday after the market closed for 2024 and Q4. That growth in operating -- net operating revenue across all segments of 42% that is evidenced what I just mentioned, an EBITDA of BRL 974 million on the left-hand side, a growth of 100% return on invested capital going back or resuming normal levels when we were able to manage 3 manufacturing facilities one in Mato Grosso and 2 in Rio Grande, all of them operating close to full steam combined to inputs and grains trading arm combined brings us this incredible return. An increase also in the gross margin, 17%, also very encouraging and then delivering a net income to shareholders to the company to continue to invest to the tune of 30% up from the previous year. So that first screen, we could stop here if you wanted to. That message is enough. But of course, we want to delve deeper into some of those numbers. And we can move on to Page #4, where we can see all the company segments except for financial services for now. But anyway, here, we can see Ag Inputs, maintaining growth to the tune of 20%. We are growing geographically for Ag Inputs, but also growing in share. So we have this share growth with more customers, new stores, stores which are maturating up to 5 years and the mature stores with over 5 years of operations. So we are paying very close attention to our different geographies and the pace of expansion across different geographies. And we have a whole team dedicated to taking that culture, that strategy to the front line closer to customers across Brazil. And then within the different units. Now the grains units when we talk about logistics, and we can see in Ag Inputs a margin recovery. I'm not going to repeat older times. Of course, logistics suffered during the pandemic. But anyway, the market has resumed some level of normalcy. And when that happened, of course, margins grow significantly. As for grains, we're talking about volume. Since 2021, and some of the investors here know that they've been with us since then. Since then, the company is no longer a state company, but we're now also present in Mato Grosso, a second state. And we are becoming a Brazilian, a nationwide company for agribusiness. It is a Brazilian national company. We know where we are and we continue to grow. That goes for grains, soybeans the highlight of course we have an operational desk, which works in total sync in tune with the rest of the company. And that, of course, has led to interesting results, a growth of 150%, close to 160% in operating revenues when compared to 2023. That's an important highlight. And I have to acknowledge the team at our Sao Paulo office and also acknowledge all our team operating out in the field. That connection, that combination helps origination and execution strong. We know how to manage our risks as well. As for wheat and corn, they have both contributed to margin improvement when we have wheat with the right quality for bakeries or for export, sometimes we can work well around those items. We are increasing our corn volumes, getting ready as we approach the area of the Araguaia Valley, and that combined also has brought more results. So we are growing 117% in gross profit for corn. That's the result of the work. And for industry, continued improvement. We try to improve every single nook of this industry. We have constant demand for meal and biodiesel. Biodiesel has changed slightly. We have lower consumption. No, we're going to have higher consumption. Even with the B14, yes, the answer is yes, we're going to be growing our volumes. Our market intelligence says that they know that in Brazil, Brazil consumed 1.9 million cubic meters of biodiesel, 1.9 million cubic meters. They surveyed the fact that if we had B15 from March to December 2025, that consumption would go up to 10.2. At the same time, if you analyze it from a macroeconomic point of view in Brazil, there's an organic growth in the consumption of diesel in Brazil, which would raise the demand for biodiesel in more than 500 million cubic meters, which would take us to 9.6 million cubic meters or 9.6 billion liters. In other words, there is demand in place. Yesterday, after the close of the market, I gave an interview and I talked about this faucet, the faucet of arbitrage. When we have more biodiesel out of the faucet it's one thing. When we have more oil, it's a different thing. We have control over that faucet, which is our arbitrage arm. And of course, expand our possibilities. We are much more than a biodiesel company, right? There is no doubt about that. An increase in the crushing margins comes from that performance and the fact that we are very close to farmers and growers. So we can get the grains, the beans at the origin, which helps build margins all the way down to the industrial product, final product, be it biodiesel or meal, soybean meal or other oils. So we have been increasing our gross income by 110% in 12 months, which is also very exciting. And when you combine gross income BRL 2.6 billion, that goes to prove that we are doing well. On the next page, Page #5, I would like to invite you to sit with us around our table to take a deep dive and get to know our adjusted EBITDA including the effect of future contracts and of the settled NDFs. I have been doing this for some time now. We have already shown in previous calls. But I'd like to ask you now to please focus on the 12 months of 2024, a revenue of BRL 12.8 billion, adjusted EBITDA of BRL 973 million, which leads to a margin of 7.6%. And then we have the effect of the futures settled NDFs at BRL 28 million, which would raise our EBITDA to BRL 1 billion. That's how we see it, a margin of 7.8%. And on the left-hand side, you will be able to see the growth that the company experienced from '23 to '24. You also have the financial result as per the hedge figures, and we wanted to show you this so that we could share this snapshot of our operating profit, the company's ability to generate cash. Our focus and I remember that sometimes I did mention that Tres Tentosis very dedicated, very austere, if you will, in terms of costs and operating expenses. And here, I'd like to call your attention to this. There is no doubt that we show how much value we place on business integration. That integration, that synergy has been bringing increasingly returns to the company as we saw in the previous slide with a 25% ROIC. So again, this is a snapshot that we share with you so that we can pour over those numbers together. I'd like to invite Cristiano now, our CFO, to continue with the presentation. Please, over to you, Cristiano.

Good morning, everyone. Thank you, Luiz. Well, all that growth and operating results, they also come along with cash generation, financial security, which led to a final net debt level of BRL 224 million at the end of '24. Even in a year where we invested heavily, we have maintained our net debt at a very balanced level, 0.17x the company's annual EBITDA. The increase in the company's indebtedness had been forecast in our growth plan and the strategy for the company has allowed us to maintain an important proportion in terms of long-term financing lines. On the next slide, we can see a breakdown of that debt throughout the year. So for our activities, we had a working capital need of about BRL 405 million, including inventories, clients. In addition to that, we executed a CapEx to the tune of BRL 749 million, also in line with our growth plan, BRL 381 million for the new Porto Alegre do Norte industry, BRL 145 million in new and mature stores and BRL 168 million for the other manufacturing facilities. Those operations were financed by cash generation, most part. We are able to provide traction to all those investments, all those needs through cash generation. That's why our net debt grew just slightly. And to talk about those investments, about our new project at Porto Alegre do Norte, this new step, the new moment the company is going through, I'd like to turn the floor over to our COO, Joao Marcelo Dumoncel, who will be addressing those issues. Over to you, Joao.

Good morning, everyone. Porto Alegre do Norte is always nice and good to talk about this. We've been doing this for the past earnings calls, sharing more information about our investment plan and have been sharing this with the market with a lot of satisfaction since the beginning of 2024, when we launched the plan, we talked about it extensively on our 3tentos Day last year. And so this is an update of all of that. As for the corn ethanol industry in Mato Grosso in the Araguaia Valley, total investment is expected to be BRL 1.16 billion. That is an ongoing work. On the left-hand side, the larger picture is a picture taken a few days ago. So the execution is within the time line predicted. We are keeping pace -- and we -- as of today we maintain our expectation as for the go-live of the company for early 2026. As I said, construction works are within schedule, over 1,100 people working there on site, our own personnel, third-party contractors, civil construction, equipment, assemblage, all working to put this huge industry together. Last week, we had the first part of the facilities delivered the bins, the silos, which will be used to originate the grains, those metallic bins that we can see on the left-hand side of the larger picture. We have already started the receival of soybeans, soybeans being harvested right now in the region that soybeans already being received. The first load of soybeans was received last week, which has allowed Tres Tentos to participate even as a first step to participate in this market. Of course, it gives us the opportunity to make all the final tests and adjustments around all those structures. Getting everything ready for next year when everything is up and running, and the structure will include dryers and also the storage ready to receive corn in early May. So the structure is moving forward. The corn will be received as raw materials feedstock for 2026 when we will be up and running for the new crop year, the crop year of May 2026. So it's not only Vera -- not only in Porto Alegre rather, he correct himself. I just wanted to give you an overall perspective for outlook for 2025. We continue to focus, as I mentioned, completing our ethanol facility, but we're also focused on our other plans, as we have shared about the opening of new stores, both in Mato Grosso and Rio Grande do Sul. And the execution of industrial expansions, which were also announced are also going forward gradually, slowly but surely. Those expansion works are happening across the 3 industries, Vera, Cruz Alta, also, those expansion works happen across different spaces so that we do not waste any time. As we expand, we connect the different parts, the new additions but as I said, always trying to the minimum downtime across all those manufacturing facilities. So both the 3 locations are moving forward, as I said and it's part of our plan that they will be completed throughout the year 2025. So the 3 of them will be concluded and delivered by the end of this year. Also important to note as an outlook for 2025 new feedstocks, especially canola in Rio Grande do Sul. We will be planting canola as of April now. So Tres Tentos already has several contracted acreages, well advanced in terms of training, training of our own personnel to provide support to growers and also providing training for the growers so that this newish crop becomes an integral part of this market operations for customers and for us at Tres Tentos. So this project is in full steam as well. And also the planting of sorghum Mato Grosso, which is also important for ethanol production along with corn. Sorghum is important, and they're now planting sorghum and Tres Tentos is also working closely to farmers to foster that crop in the Araguaia region, also with an eye at having that feedstock for our ethanol plant. All of that is in line with all our plans with all we believe in, as it was said before by Luiz Osorio, we're talking about a growth company, which is result driven. This is what we think from the door in. But when you look from the door out and you look at the Brazilian crop, especially for the grains crop, the expectations are really, really positive. Brazil is harvesting a record crop of soybeans. There are one-off issues here or there, especially in Rio Grande do Sul, where we are located, as you know. But the impacts are not -- is not as relevant. As I said, they are very regional one-off issues. In an event an overall picture is of a very positive expectation. So Brazil will have a very interesting crop. Mato Grosso will harvest its largest crop in history with very high averages because of the use of technology and the whole bundle, the whole package that growers have been embracing. So once again, also a very good expectation for the second crop for corn being planted now. We are now above our historical leverage in terms of harvested areas in Brazil. And as we plant the second crop corn, especially where we operate, planting has already been completed, which gives us a very interesting planting window for the second crop corn, which raises our expectations for volumes for corn as well. We also expect a very good corn crop going forward. So when you combine all of that, I can say the company continues to move forward at a strong pace. I remain optimistic. I continue to invest. I continue to believe in the Brazilian agribusiness scenario space. And I also believe strongly in our ecosystem, in our business model, in our ability to execute, as Luiz mentioned, so that we can continue to deliver those positive results to our shareholders in terms of yields, technology and also to our customers. And of course, that includes all our stakeholders, society as a whole, communities and Brazil. So Brazil can continue to grow. We have a lot to talk about. We have separated some time for Q&A. I'd like to turn the floor now to Eduardo, who will facilitate the Q&A session, which will start now. Thank you for your attention so far.

[Operator Instructions] Our first question comes from Gustavo Troyano, sell-side analyst from Itau.

To start, I'd like to go back to a point which was mentioned before when we talked about biodiesel. You mentioned a growing demand. We did not really see an increase for the B15. But still, I'd like to hear from you if you could give us some color on the growth in demand vis-a-vis what you see in terms of capacity for the industry so that we can draw some conclusion in terms of pricing and margins for biodiesel, given this, if you will, newish condition from B14 to B15. So that could be interesting if you could shed some light on the margin dynamics. And also a second question in terms of freight costs. I'd like to hear from you what do you see going forward in terms of freight negotiations given that there was a significant increase in freight prices. So what do you expect to see happen, especially in terms of logistics expenses as we move into 2025?

Thank you, Gustavo, for your questions. I'm going to be talking about the outlook for this organic growth in demand for biodiesel. And then I'll turn it over to Marcelo to add to my comments. Of course, we need to work with a different model, our model provides us security and safety for our business. The idea is to have positive margins across our business, of course. Anyway, let's go next, the consultancy company did a survey on how the organic growth for diesel demand in Brazil will unfold, especially focused on biodiesel. So that showed that we would move from 9.1 million tons in 2024 -- by the end of 2025, if we keep the same pace with B14, 9.6% only with the growth in the organic demand and using several macroeconomic indicators to reach those conclusions. That also includes consumption in agriculture and so on. That body of work, which is, I think, is available -- publicly available that we could share. They also talk about the acreage planted area and what they expect to be the surplus consumption for soybeans. It's a very well-detailed work done by this market intelligence company. And we see that under very reassuring lenses because that allows us to make all the expansions that Marcelo mentioned so that we can also be comfortable in terms of producing oil. Whatever happens with biodiesels, we'll have a position to be able to conduct arbitrage actions to always go for the higher margin. Thank you for the question. Marcelo, can you continue, please?

Gustavo, as for freight, we are having a higher crop, especially in the Midwestern part of Brazil when compared to last year's crop, which was a weaker crop in the same geography. So there was an increased pressure. Soybeans were slightly late going to the field. We managed to catch up in terms of the harvest. Freight saw a price peak of about 20% up from last year, 20%, 25%, but they are already receding. So the peak of the crop has passed and freight costs are now coming down at a faster pace than expected actually. And we see that as linked to the increase of flows in the north part of the country, which is cheaper. That's a second option of flowing our grains and that has brought freight prices down. Especially thinking about Tres Tentos, we continue to use different modes of transportation. We are an intense users of railway in Rio Grande do Sul, all our meal exports flow out by rail. The same goes for our Midwestern operations and for the North Arc as we call it, the northern part of Brazil, we go by rail by road and then we use the northern waterways. We have also invested in our own river port in a partnership with Caramuru. And we have created a company called Via Maris to operate this new port to provide more competitiveness to this transportation mode that we used in the Northern Arc, which has been or has become an important regulator of freight costs in Mato Grosso.

Our next question comes from Thiago Duarte from BTG Pactual.

I'd like to touch upon a couple of questions. I'd like to hear from you first about the performance of the Mato Grosso stores, stores which were opened recently. And I ask that because when we look at the share of those new stores and the sales of Ag Inputs for 2024, 2023, we saw a relatively small growth. There was an expansion, of course, before that there is a maturation process, which happens. But I'd like to hear from you if that slight increase in sales has been unexpected. We know this was a complex year for the input retail network. Anything you could tell us in terms of why that growth was not as large. Now also, when you look at some of the volumes, the sales of meal or soybean trading, those volumes were relatively high when you look at the whole year. They came on much stronger than the guidance you had updated back in November. So the sale of meal, you reached a level close to your 2025 guidance. So can we become even more optimistic? In other words, can we expect even higher volumes when compared to the guidance or was it enough -- was just a volume change for the year, a one-off situation that happened or is it a trend? And lastly, when you talk about biodiesel and the replacement with degum oil, can you talk a little bit about the difference in the crushing margins that you would get if you were to replace a bit of the biodiesel by oil. Of course, biodiesel has been a cash call, cash cow. But if there is a significant difference if you were to reduce your biodiesel mix and include degum oil when you think of your crushing margin, which is at a really good level. Those are my questions.

Okay Thiago. Marcelo can also talk about the performance of our new stores because he's closer to our commercial team to address that. As for the trading of soybean meal and vis-a-vis the guidance we announced last year and the difference of margin between biodiesel and oil, I'll address that. The soybean meal trading desk has really increased. Soybeans 158%, as we saw on the slide and our net operating revenue also going up. We are ready for that expansion. I wouldn't touch the guidance right now. We were going to maintain the guidance. And Thiago, you know as much as I do, maybe even more, you know that agribusiness is characterized by uncertainty. So we prefer to be more cautious. But those volumes have grown, especially driven by different originators who are located in the countryside of Brazil, especially Mato Grosso and Rio Grande. And we have an export desk in Sao Paulo, and that combination was really, really successful. We have discovered destinations that we did not have before. So that combination led Tres Tentos to become increasingly more prepared for that increase in destinations. So our trading desk started working in September 2022, 2023, the whole year, 2024, the whole year. That maturity has been reached just now. And of course, we continue to grow and this will bring us more volumes. As for the biodiesel margins vis-a-vis the oil margins, it's difficult to tell you now. Difficult to tell you how much they would account for. The difference is, of course, biodiesel adds value, but the crushing margins for the past years, 2022, '23 and '24, crushing margins have been growing. So for 2022, we delivered 12%; 2023, 13%. And this year, 2024, of course, 19% biodiesel, 19%. So those avenues have taken the company to a secure place. We are totally reassured that if we do not have biodiesel, if we were not to have biodiesel, if we were have to use degum oil for exports, that margin would drop slightly, but it's very dependent on different moments where the basis points are, where Chicago is, where FX is. So it depends on the moment. And our competitive edge lies on our origination capabilities. We originate well and we execute really well. And whenever possible, 2024 oil was totally allocated to biodiesel. So we can expect slightly higher margins. As for the store performance in Mato Grosso, I turn it over to Joao Marcelo, please.

Good morning Thiago. I'll just contribute on the biodiesel question. Demand for biodiesel has not dropped. As Luiz has already mentioned, the demand continues the same and growing along with the Brazilian economy in terms of the use of biodiesel. A 5% growth is expected, the consumption of diesel and of course, biodiesel even with the B14. In addition to have this expectation that the B15 might come in -- come to us sooner than later. That's what Congress is signaling right now. And a lot has happened as well as Luiz said, the crushing margins, pure without biodiesel has also been increasing -- a lot of increase in demand. As for the stores, Mato Grosso, Thiago, 22% for 2023 -- for '22 to '23 might not seem that relevant, just 1 percentage point, but there are 2 drivers which are important. #1, we continue to grow the number of stores in Rio Grande do Sul. Rio Grande has many more stores, many of which are still growing market share because of their maturation phase. And a second factor is that the fact that Rio Grande do Sul in 2023, we had that drought issue, which was quite serious back then. So in addition to a growth in the number of stores, market share issue, we also saw a growth in volumes in Rio Grande do Sul because of a crop year, which was slightly more normal. So that, of course, affected the growth of stores in Mato Grosso. We had a significant growth in volume, as I said. So Ag Inputs grew by more than 20% in volume, only 11% in revenue that more than offset the drop -- the unit drop. So we saw a growth in revenue because of that.

Our next question comes from Gabriel Barra from Citi.

Congratulations on your numbers, yet another strong quarter for the company. Very interesting to see the journey you've been treading. And that's in line with my question. We have been provoking you, if you will, since the company's IPO in terms of growth. I think the company for the past 30 years have had a CAGR of high percentage. I also see when you look at the balance sheet the balance sheet is quite reassuring to support that growth. Even with the high investments, we see a leverage level, which is quite reassuring, very comfortable, if you will. So my point is, when we look forward, what can we expect in terms of growth? We have a market today, which has suffered significantly for the past 2 years, several players going through difficulties, filing for Chapter 11, especially for the Ag Input space. What do you see? How can we strike a balance between a comfortable balance sheet with a more complex investment scenario, higher interest rates, but also with very good opportunities going forward? So I'd like to hear from you what strategy do you have in mind? Also, question I have is about the industry margins. We saw a positive number coming from soybeans, an increase in soybeans as of recent. I'd like to understand from you how much does that impact the industry margins, the inventory dynamics, if you will. There's breakdown between origination and industry so that we can have a better idea of how margins will behave going forward. Those are my 2 questions.

Thank you for your compliments. That growth of 30% year-on-year is really, really exciting, no doubt, encouraging. And at the same time, it's also challenging, right, fuels us with more responsibility, if you will. So I'll address some of the points, Ag Inputs will be addressed by Joao Marcelo, if I may. As for the financial question, the balance sheet observation, cash generation and also the opportunities that we have to grow, we will continue, no doubt. We continue to grow. Joao Marcelo did mention during his presentation that we have a positive expectation for 2025. So Brazil, we will harvest as recent numbers, Brazil, we will harvest 172 million tons of soybeans, 172 million. That's a lot of soybeans, a lot of beans and Tres Tentos will continue to grow across its different pillars, financial services, grains, industry, Ag Inputs, we will grow across the board, but always with caution, dedication without risking the profile of our operations in terms of financial security. So that financial solidity that we have been able to maintain is our main driver here. And that's how we're going to be working. And we know we have opportunities coming up every day. We won't be, if you will, affected by inconsequential attitudes. Now we are working to have our governance increasingly stronger. We want to strengthen our culture at the front line across every store, every industry, every action we put in place we will be looking at that head on. So we work with 30,000 shareholders, 25,000 customers, hundreds of customers and suppliers. That's a huge responsibility. So we will make the most of our opportunities. We have been growing organically, as you know. And we'll do it, as I said, in a cautious manner to preserve our financial solidity. Maybe Cristiano would like to add something. Over to you, Cristiano.

Yes, Luiz, it's important to highlight Barra that even though we see many of those opportunities coming up, the company remains faithful to its plan, which was presented last year, January, which is already challenging in itself. We have still a high CapEx to execute going forward until 2030. As Joao Marcelo said, we have expansion projects for all our industries. We have the industry arm and projects to access other markets for Inputs within a set of strategies using market intelligence and accessing the best logistics opportunities as it was highlighted in the previous answer. So all those elements combined to offer different choices for the company. And going forward, we have at least until 2026 we have a macroeconomic scenario, which is very challenging in terms of interest rates. So the company has been trying to find strategies to maintain high levels of cash of having important financing levers to provide interest rates, which would be below CDI so that we can have long-term financing lines so that we can down the road when new opportunities arise for growth and after our ethanol -- corn ethanol plant is up and running, when all of that is ready, when we have all our operating and financial indicators in place in 2026, we will be able to continue to work on the plan. And then we reach 2030 within plan in terms of number of stores and access to new markets. Now that's a key point. Today, we have a very well-defined plan, which was thought up before loss that emerged since then and before changes that happened throughout 2024. It was a well-defined, well thought up plan, and we'll continue to follow it to the latter through 2029, 2030. And then for the Ag Inputs question, I'll turn it over to Joao Marcelo also talk about the crushing margins. Crushing margins remain positive. The price of beans saw an increase in the past days, right, December, early January especially because of a change in foreign exchange rates. We are also always well hedged. So things have already resumed previous levels. And soybeans are always correlated to the whole complex. You cannot look at the grain of soybean without considering oil and meal. It's a whole complex, a combination of things we have to look at. So when you correlate the soybean complex, as I call it, with the price of beans and as we've been working and we could see that at the crop show last week and we have reached all our targets for barter numbers. Tres Tentos works so that growers have at least their cost hedged in terms of soybean sacks. And of course, we look at foreign exchange rates in Chicago. So we take care of everything so that we can identify early on the margins that we have for the coming crop in this case, 2025, 2026. But that appreciation for the soybean grains that you mentioned, we were able to pass that on to maintain our crushing margins, once again, working within this larger complex, oil, meal and the grains. Joao Marcelo, if you could add?

Yes, yes, good morning. Yes, sure. Opportunities, as we said, are many and varied. But what we have here within the company is a very strict discipline that we try to follow. We have a plan for the new growth cycle, which was launched early in 2024. As we said, that's ongoing. We are on schedule, no delays. We are on track. Other things we have reported in previous calls. And I also mentioned our industrial expansions, the ethanol plant the number of stores which are being now opened. We have the maturity phase of existing stores. If we were not to open new stores, we would still see a growth in market share with existing stores as they grow their share. So once again, we're looking at everything. The huge opportunity, I think, is already here is within where we already operate. So that's where we need to be ready to explore having better trained teams, looking at other crops such as sorghum and canola to provide better opportunities, better offerings. And then we will grow as a consequence of all of that.

Our next question is from Leonardo Alencar from XP.

I'd like to go back to the Ag Inputs question. Luiz mentioned the margin dynamics, which is expected to be normal. But you did mention issues with credit in your release, other points of attention. There is a recurring discussion about the volume of Chapter 11 filings going up in the second half, nothing systemic, but a point of attention. You recently saw this noise about the Safra plan being frozen by the government. Maybe this is not as critical at this point. But anyway, there was this noise in the media. But this message of a more expensive credit is circulating the market. Well, you had a very strong market in terms of margins. What do you expect for 2025 despite all those challenges? And if you expect those margins to normalize within the 2025 crop year. Perhaps smaller players decreased their prices to increase their working capital. That was a negative factor for the area. But you also have better margins for the growers, right, this year. So if you could give us some color on that dynamics. And also for clarity's sake, you talked about selling expenses and we saw G&A going up this quarter significantly. What may have driven that, if you will?

I'll start with some comments about our view vis-a-vis growers. Of course, growers in Rio Grande do Sul have been suffering for the past 4 years. We had 2 years of severe drought, '22 and '23 -- sorry, '21 and '22. The '23, '24 crop was good. We harvested 21 million tons of soybean. So growers managed to readjust their operations. And the next crop 2024 and 2025 has already seen an important failure. I'm not going to give you any numbers because there are variations across the state. But when I talked about margins being okay that they were going back to a normal level, I said after a breakage in logistics chains coming from the pandemic and all of that, and drop in prices and mismatch sales and purchases. It was not the case with us, but we didn't have to dilute a more expensive inventory, especially in the first quarter of last year. As for the Safra plan, we saw that they have interrupted the plan for 2024, 2025, which doesn't really change a lot. We have our winter crops, barley, oats and wheat, which are crops which are not controlled in terms of resources. So the message is around what may happen going forward in 2025, '26, which will be announced in July. But as we see it, the government did it to work with Congress and to discuss that at a deeper level. Credit is more restricted, as you said Tres Tentos is very much focused on growers, as you know, farmers, those who have a partnership with us. The grower journey starts inside Tres Tentos and our journey is on the commercial front as well. So we assess our partnerships. And for those growers, we can offer real guarantees, they have an ability to refinance their debt. We have been working close with them. We are not, of course, blind to the situation in Brazil. You know that Mato Grosso has recovered almost fully, but Rio Grande do Sul will need more -- a bit more time to recover. But we see local growers planting wheat in the winter. They also plant rice in the southern half of the state. So this year, when the situation got worse in the southern part, we see growers resorting to other crops such as rice, as I said. Even livestock is also important to provide support to those growers so they can diversify their revenue streams. They are not dependent only on soybeans. We have fostered that. As Joao Marcelo said before, Tres Tentos is working now with canola, as said. And the idea behind that is to diversify even further so that growers are not dependent on wheat alone. So they can increase canola so they can have yet another winter crop. We see that under very good lenses, and I think this will help us rebalance funding lines or financing lines. And Tres Tentos knows where we operate. And we know our partner growers, our team is well prepared. Our credit area is well-prepared and quite strict in terms of assessing or vetting documents and credit histories. So the most important step is to know who you are sitting across the table when you sit down to negotiate a deal so that relationships can grow stronger and positive for both sides. Joao Marcelo can perhaps add to my comments.

Good morning Leonardo. Just to add to what Luiz said it is a challenging scenario. There's no doubt. It's not a very liquid scenario in terms of interest rates for any economic activity to be sure. The lack of subsidized credit is also an issue that might make it even worse. But when you do things well in a careful manner, it will generate opportunities. I think growers want to work with partners that provide security, the same goals for suppliers, the same goals for customers. The consumer market, buyers also want that security, reassurance. And within this context, I think we are in a position to occupy that space well and have important results and more challenging scenario. And that's why we offer this complete suite of solutions. As for the SG&A question, I'm going to ask Cristiano to go a bit deeper. Our focus today and we know that for the logistics expenses, that's the most important component of our expenses. And sometimes the number is slightly higher, but we always focus on the gross income. We are quite focused on being increasingly more efficient around that line. Our logistics area in Sao Paulo, our logistics area is better structured. And I believe that Cristiano will go a bit deeper on that. Okay Cristiano, if you will?

Good morning Leonardo. I think you were talking about the line of G&A only, right, G&A. Admin expenses, right? Yes, yes, exactly. In terms of increase as of last year, a bit of nonrecurring expenses, consultancy expenses for some areas of the company, efficiency gains, tax gains, financial gains and also [indiscernible] expenses, other expenses across the company and other operating but controlled expenses. But it's important Leo to say that when you look at the whole year, our G&A is within the same level that we saw last year. So sometimes, you need to look at the picture of the whole year. We have some seasonality quarter-on-quarter. So some things are nonrecurring, but others are linked to this transition from a quarter to another, but no major change or changing levels, no. We see that quarter-on-quarter. We are able to reduce G&A expenses.

Our next question comes from Henrique from Bradesco.

I'd like to go back to the industry margin and the trade margin. When we think about the gross margins of those areas, they, of course, have a cyclical or seasonal component, which is important, but they also have a geographic component, which is important, especially as you move towards Mato Grosso with a higher margin, but also higher logistics expenses. For EBIT margin, that, of course, reaches a balance. But my question is, when you look at your margin for 2024 for industry and trading and that when you think about operating profit, EBIT per ton, if you can help us think what level of mismatch was there from a historical level the company experienced and based on what you expect to be a recurrent level so that we can better understand how those components connect. That's my question, both for industry and trading.

As for Trading, we had about 10%. And as for industry, 19%, 1-9, 19%. So those were the margins that we have achieved. Anyway, thank you for your question. And with those margins, if we go back in time, go back to 2023 we had 13.3% in industry in 2022, 11.9%. Now we have 19%. I'm not really sure what else we could say about that in terms of looking at the future. Well, my question, Henrique is when you look at the gross margin, it is clear. You can see the growth. But there is a geographic component. Mato Grosso has a higher gross margins, of course, but it does have higher logistic expenses. When you have the contribution margin after logistics expenses, 2024 vis-a-vis the company's historical level, what kind of mismatch do we have or is it in line with the historical levels of the company in terms of margins? I wouldn't know -- I can -- we can reconnect offline and give you the number offline. Eduardo, would you have anything on that, those numbers?

If you look at the numbers for 2024 vis-a-vis 2023, we saw a margin gain both for grains and for industry. Of course, there is a regional component. When you look with grains or even with meal in Mato Grosso vis-a-vis Rio Grande do Sul, we have logistics embedded there, of course, embedded in the price when we buy grains in the interior. And of course, logistics are also part of the SG&A. When we add the result of gross income for grains and industry in 2023 and 2024, and we discount or exclude logistics, we see an operating gain. That's an exercise. We do not have that number here to publicly announce. We have a breakdown of the results, gross margin per segment and the logistics expenses is under SG&A, but we saw a 2024, which was better when compared to 2023. Of course, we spent the year 2023 when we started operations in Mato Grosso, a year in which until the end of the year 2023 and 2024, we worked around increasing efficiency. And of course, that contributed to a better result in terms of gross margin after freight. Looking forward, it's difficult to say, of course, because it will depend on the distribution of those 2 regions in terms of products, grains and the industry. It will depend on that breakdown. But we are working around margins at good levels in historical terms. But to give you a number, a fine number, we wouldn't be able to do that now to share with you now, okay, just to be sure.

Okay, great. Your answer has already helped me. I just wanted to understand what level of contribution in historical terms, it helped.

This concludes our Q&A session. I'd like to turn the floor back over to Mr. Luiz Dumoncel for his final remarks. You may carry on, sir.

I'd like to take a couple of minutes of your time to thank you. Thank you. This earnings call for us is always a very good moment. This one specifically as we celebrated our 30th Anniversary, Feb 4, the first load of corn on Feb 4, 30 years. And from then on, as we mentioned, the company has seen incredible growth, close to 30% a year. So 30 years of exceptional deliverables, 30 years of hard work, 30 years of working with a highly focused team. Our outlook for the future is very positive. We live in a continental country, and we hope to be able to use better improved technologies to improve results for growers and for the whole chain, and that's where we are focused right now. Growth for 2024 reached 42%, BRL 12.8 billion, a growth that at the IPO time was a BRL 3.1 billion company. We moved to a company of BRL 12.8 billion. So it's a continuous growth, but a well-structured growth journey, well thought of, well assessed. We grow with a lot of caution. We are operating in 2 states, Rio Grande do Sul and Mato Grosso. That has helped us mitigate climate risks. For us, it's amazing to see a company keeping up its growth pace despite climate issues that might emerge. We know how to do what we do. Tres Tentos today is focused on people. That's why we talk -- we say that we're a company, which is a growth company based on results provided by people. We are constantly training people. As we speak, we have professionals in classrooms being trained to work with us. And we do that to appreciate and help the synergy across our businesses. So that's what we continue to do, and that's how Tres Tentos will move forward. Honest work, close to growers, suppliers and consumers in 2025. 2025 is the first of the next 30 years for us. We are being reborn. And I have to leave my word of thank you to shareholders listening to us, who believe in us. We are together in this. And thank also the IB market, thank the analysts, sell-side, buy-side analysts, everyone. But I'd like to give a special word of thanks to our team, our Tres Tentos team. Tres Tentos team is different. It's a team with a purpose, a purpose of a company that has very strong roots and a company that will continue to fight to move forward to bring more new things to the agribusiness space with security, safety, reassurance and growing. Thank you once again, and have a nice day, everyone.

Tres Tentos' earnings call for Q4 2024 is now over. The company's IR team remains available for questions or comments you may still have. Thank you for joining us today, and have a nice day, everyone.