The increase in productivity and the shareholder’s confidence in the Company’s ability to generate long-term value positively marked Odebrecht Agroindustrial’s performance in the 2016/2017 harvest. With 28.3 million tons of ground cane, 3.3% less than in the previous harvest, we achieved significant increases in the productivity of liters of ethanol produced and of electricity exported by volume processed. We also achieved significant cost reductions in harvesting and maintenance of agricultural operation vehicles.
In addition to these gains, we concluded the restructuring of the Company’s debt in the last crop year, which extends the focus on long-term investments and increased competitiveness. With the shareholders’ financial contribution of R$ 4.6 billion, the Company’s leverage level dropped to 4.7 (a reduction of 54.6%). At the close of the 2016/2017 harvest, our net debt was R$ 8.6 billion, with 97.8% for long-term maturity (as of 2021). G4-9
In the first half of 2016, the Company received R$ 4.6 billion in financial resources. Of this amount, R$ 3.0 billion was used in the last crop year to reduce short-term debt and R$ 1.6 billion was allocated to the Odebrecht Agroindustrial cash register to maintain investments in agricultural and industrial operations. In addition, the energy generation assets previously segregated for Odebrecht Renewable Energy were reintegrated and will guarantee the generation of value through the agreements signed for the sale of electricity.
The restructuring agreement was negotiated with domestic and foreign creditors. Its conclusion demonstrates the shareholder’s confidence in the Company’s ability to generate value in the long-term by continuously increasing productivity and operating efficiency.
In comparison with the previous harvest, our net revenue grew by 20.4%, influenced by the higher volume of products sold and the favorable market price conditions. The adjusted Ebitda, which shows the generation of funds from operating activities, increased by 33.3% on the same basis of comparison. G4-9
1. Profit before interest, taxes, depreciation and amortization, without biological assets. *Considers 12 months of electric power cogeneration operation
|Distribution of Added Value (R$ K)*G4-EC1
|People and charges||785.744|
|Government and society (taxes, fees and contributions)||326.624|
|Financers (interest and leases)||2.562.568|
|Profit (Loss) in the exercise||(1.579.806)|
|*Considers 12 months of electric power cogeneration operation|
Growth in the Industry
Our ethanol production in the 2016/2017 harvest reached 1.9 billion liters. Of this total, 33.8% corresponds to the anhydrous type (mixed with gasoline), which represents the largest volume we have produced since our foundation. In sugar production, we were also record producers, with a total of 559 thousand tons – growth of 22.8% in relation to the production of the previous crop year.
The electricity export in the period reached 2.2 thousand GWh, approximately 73% of the total we generate – the rest is used for energy self-sufficiency of our Units. This result is also a record in our history.
To achieve this performance, we have made several improvements in our industrial facilities, seeking to increase the productivity of our assets. Among other actions, we have improved the preventive maintenance of the equipment in order to avoid unscheduled breaks and stops, and we have captured gains with boiler regulation and fermentation control systems.
Annually, we compare our performance with that of other industries in the sector by means of a ranking prepared by Benri, an independent company specialized in the sugar-energy segment. In the last harvest, our industrial performance received an A (the third highest), which means high operational efficiency.
Another evolutionary front that contributed to the increase of our productivity was the improvements for the monitoring of the invoicing and the dispatch of ethanol and sugar. With new tools for the daily control marketed, we obtained gains in scale and performance, guaranteeing compliance with agreements with Customers, greater control of the stock and the strengthening of the Company’s operating cash.
In the logistics area, we have achieved savings of around R$ 2.5 million with the implementation of long-term agreements for the production flow, maintaining excellence in service delivery and high standards in transportation security. Click here to learn more. Click here to know more.
In the agricultural operation, our productivity gain is attested by the income of the sugar cane harvesters. In the 2016/2017 harvest, the amount harvested by the equipment increased 32%, reaching 129 thousand tons per machine during the harvest – in Brazil, indices of 100 thousand tons/machine are already considered excellent. In the period, we planted 48.6 thousand hectares of cane plantations, a result 7% higher than the previous period.
We have experienced significant reductions in operations costs, such as the reduction of approximately 4% in Cutting, Loading and Transportation (CCT) costs in relation to the previous harvest.
In the area of Automotive Maintenance, our costs fell 9%, due to the progress of the Qualimetry Program in our workshops. Based on this methodology, developed by the Odebrecht Group, we conducted four evaluations per year in the Units and structured the areas according to such criteria as organization, cleaning, security, service execution services, among others. Thereby, we focus our efforts in defining and implementing improvement plans, thus achieving continuous developments in the evaluated indicators.
The Total Recoverable Sugar (ATR) per ton of crushed sugarcane was 2% higher than that of the previous harvest, but the accumulated yield of the harvested area fell by 9.6% on the same basis of comparison. In the 2017/2018 harvest, our goal is to take advantage of the opportunities that exist to improve our agricultural operation performance, which will result in higher quantities of quality raw material to be converted into products.
Among the possibilities for improvement is the expansion of the use of by-products that strengthen the cane field, such as the application of vinasse and filter cake (learn more here). In addition, we intend to improve the techniques of planting planning, causing the design of the sugarcane yield efficiency gains in the harvest.
Technology increases crop productivity
The Harvest Single Queue (FUT or HSQ), a technology allocated to the harvesters and transshipment tractors at the Rio Claro Unit (Polo Goiás), is an example of technology adopted with a focus on productivity. The pilot project brought cost savings and also a consumption of natural resources. With an investment of R$ 247 thousand, we have installed five radiocommunication towers and 62 on-board computers that inform the operators, through a digital panel, the best way to be followed within the cane field, focusing on the optimization of the agricultural operation. With this, we have obtained a reduction in the time of harvesters stop, waiting for the transshipment tractor, which transports the harvested sugarcane to the truck responsible for loading to the Industrial Unit. It was also possible to reduce the number of tractors used in the operation and the diesel consumption. Our goal is to implement innovation in the other Units in a gradual way over the next three years.
The formation of partnerships with agricultural producers to supply sugar cane is strategic in our business model, as it amplifies the generation of value in a sustainable way to the audiences involved in our entire production chain. With this form of operation, partners find opportunities to expand their operations with profitability in new frontiers for the sugar-energy sector; the local communities are positively impacted by the generation of jobs and by the increase of the economy in the municipalities; and the Company obtains an increase in the supply of quality raw material.
Over the last year, in addition to our focus on improving operational performance, we are working to broaden our commitment to sustainable practices throughout the production chain. Hence, we structured the Stronger Partners Program, which promotes the alignment of these companies with our Sustainability Guideline, launched in the 2015/2016 harvest. At the end of the 2016/2017 harvest, the Program had 36 Partners. G4-13
For the development of the program, in each Productive Pole, we bring together operational and administrative teams to discuss and standardize the procedures to be adopted in the process of verification and evaluation of Agricultural Partners, regarding the application of good practices defined by our Guideline.
In this process, more than 40 Members were engaged and we created a new area focused on Partner development management. The evaluations of the socio-environmental aspects began in the last harvest, under the coordination of the productive Units themselves, and will be reinforced in the coming years, with the technical support of the corporate team and with the accompanying action plans for improvements.
In order to promote the engagement of the Agricultural Partners, we have elaborated the “Commitment towards Sustainability in the Sugarcane Chain”, a document in which Suppliers undertake to prove that their practices comply with our guidelines and the 10 Principles of the Global Pact.
In the 2016/2017 harvest, the terms of the Commitment were presented and discussed at an event that brought together all our Agricultural Partners. In the second semester, we will hold Encounters with the Agricultural Partners, which will aim to recognize the good practices adopted by the companies and promote the exchange of knowledge and experiences.
Our goal is to make the Agricultural Partners responsible in the mid-term for the supply of 40% of the milling volume that we make each harvest. In order to guarantee this growth in a sustainable manner, we have consolidated the processes and mechanisms for managing these agreements, which have a long-term duration (at least seven years) in the 2016/2017 harvest.
Thereby, we will seek to increase the number of producers included in the Stronger Partners Program. This expansion will be carried out in a coordinated way with the evaluation and selection of lands close to our Units, involving the rural owners of Goiás, Mato Grosso, Mato Grosso do Sul and São Paulo and ensuring the competitiveness of production costs.
One of our strategies in this sense is to work closely with grain producers in the region, demonstrating the advantages of diversifying agricultural production and the benefits of sugarcane cultivation to reduce the economic and financial risks of operations.
In the relationship with the Agricultural Partners, we also seek to share the good practices, knowledge and learning obtained in our own operations. The exchange of information and experience covers all stages of the production chain, such as variety management, planting and harvesting techniques, compliance with legislation, maintenance and safety.
All Partners are evaluated in the selection process and during the term of the agreements, by obtaining information and visits to their operations, in which we periodically monitor Safety, Health and Environment (HSE) practices, respect for human rights and compliance with current legislation, using the same criteria and commitments adopted in the management of our sugarcane plantations. G4-EN32G4-LA14
In the relationship with our materials, equipment and services Suppliers, we continue to evolve processes and control and management processes with the objective of boosting compliance and alignment with our principles of sustainability. In the last year, we increased from 2.9% to 42.1% the number of Partners selected and approved in the system that we built in the 2015/2016 harvest, to monitor compliance with legal requirements and social-environmental performance management practices.G4-EN32G4-LA14
Our target for the period was to reach 100% of the contracted companies, but it was not possible to reach the maximum rate because of older agreements that had already been signed. The expectation is to have the entire Suppliers base included in the system by the end of the 2017/2018 harvest. That same year, we will review the evaluation questionnaire with the inclusion of questions related to the Company’s Compliance Program.
The prior approval process includes the response to a socio-environmental self-assessment questionnaire, which allows identifying risks and points of attention related to local impacts and to the environment.
After hiring, the Odebrecht Agroindustrial Leaders responsible for agreements management evaluate suppliers’ performance, considering aspects such as safety and health practices, environmental management, compliance with labor legislation, quality of service, among other items. This evaluation is used to compose the Supplier Performance Ratio (IDF), a tool that supports the supply teams in the quotation and purchase processes.
In the last harvest, together with the extension of the Supplier approval process, we have developed the Critical Matrix of our supply chain, with the objective of identifying risks to which our businesses may be exposed. In addition, we seek to identify and take advantage of the opportunities for value creation that may exist within our five material themes, developing action plans for the main socio-environmental impacts.
As a first step in the development of the Critical Matrix, we classify our Suppliers into 187 different categories, considering their activities and types of products and services provided. Then, we involve Members from different areas of the Company in two workshops to evaluate the relevance to the Business and the potential impacts of each type of category.
At the end of the evaluation, we identified that 12% of the categories are highly important for the continuity of our operations and, at the same time, they present greater potential to generate relevant socioenvironmental impacts. In the last year, these categories accounted for more than 66% of total expenditure but concentrated only 5% of hiring.
In the 2017/2018 harvest, our objective is to elaborate differentiated mechanisms to follow the socio-environmental performance of Suppliers, considering the degree of criticality of each category. This process includes the development of stricter requirements for the approval process and other forms of control for the categories with the greatest potential for impact, such as transport service providers and fuels and chemicals suppliers.
In the 2016/2017 harvest, we started the development of the Purchasing Center, an area that will unify and standardize material acquisitions and service hiring for the Units and corporate offices. With this new structure, we can achieve financial and productivity gains, as there will be more scale for the quotation of products and services and contract management, with greater process control.
In the Units, we will continue to count on supply areas, responsible for procurement requisitions based on inventory planning and management, and contract administration, which will support local managers and the development of scope for the elaboration of service provision agreements. By March 2018, all Productive Poles will be integrated into the Purchasing Center.