Good morning, everyone, and welcome to Três Tentos' Q1 2023 earnings conference. Joining us today from the Três Tentos team are CEO and IRO, Mr. Luiz Osório Dumoncel, Operations VP, Mr. João Marcelo Dumoncel, and IR Manager, Eduardo Mota. Please note that this conference is being recorded and will be available for replay on the company's IR website, where today's slide deck can also be downloaded. For those who need simultaneous translation, the service is available and can be accessed by clicking the globe-shaped icon labeled Interpretation, located at the bottom side of your screen. If you're listening to the conference in English, you can mute the original audio in Portuguese by selecting the option Mute Original Audio. During the company's presentation, all participants will be connected in listen-only mode. Following that, we will begin the Q&A session.
At that point, if you wish to ask your question live, please click on the Raise Hand button at the bottom side of your screen. To submit your questions via text, just click on the Q&A button also available at the bottom of the screen and type them in. Before we proceed, we would like to clarify that any statement made during this conference relative to Três Tentos' business prospects, projections, and operational and financial goals, as well as potential future growth, are based on its management's beliefs and expectations as well as currently available information. These statements involve risks and uncertainties and therefore rely on circumstances that may or may not materialize. Investors should understand that general economic conditions, the state of agribusiness, and other operational factors could affect Três Tentos' future performance and lead to materially different results than those expressed in said forward-looking statements.
I would like to hand over to Mr. Luiz Osório Dumoncel, who will begin the presentation. Please, Mr. Dumoncel, you may proceed.
Thank you very much. I'd like to wish everyone a good day and wish a good conference to all of us. We hope to be able to show you how Três Tentos' activities progressed over the course of these three months, and also answer any questions you may have at the end of the call. We start by talking about Três Tentos' performance in all three pillars of the company, Ag Inputs, Crop Protection, and Industry. Três Tentos has been growing significantly for some time. We are growing strongly in other areas in the state of Rio Grande do Sul and Mato Grosso, and new operations beginning.
One thing that really excites us and makes us extremely confident is the fact that to us, we established that until 3 years, we have a new operating unit. After between three and five, they are maturing, and as of five years, they are mature units. In those new units, we have higher and increasing share, and these are recurring revenues. This is recurring revenue from farmers that we have been in touch with for a long time, or some of them have been customers of our store for about two years. These are clients that have made us really happy and also energized us to move forward. This was unfortunately, another failed crop. We are all aware of that.
We still do not have the final figures for the state's grain yields, but this is already a larger crop than last year's. Going around the Três Tentos units in those states, we saw a huge difference from this same period in 2022 in that this year, the drought didn't really cover the entire state. This was actually, there were actually drought spots in the north and northeast. Unfortunately, there was a part of the region that really didn't get much rainfall. North, south, and even around the shore, we had a very good rainfall levels and significant productivity in several areas of the state. There were these differences that we identified this year, which provides better irrigation to our production and also a different level of distribution than what we had last year when everything was significantly dry.
In the state of Mato Grosso, we are seeing significant differences for Três Tentos in the sense that we are negotiating, and as we are adding Crop Protection for soybean crops in January and February, we are actually starting corn production there. Três Tentos over the course of this time in these two regions, Mato Grosso and Rio Grande do Sul, a level of distribution that we already believe will make Três Tentos this really firm partner. We will be from January the first to December thirty-first in those two states providing Ag Inputs, Crop Protection, and in the case of soybean also industrialization. We saw that those areas growing in importance, especially in this Q1 where we see high fertilizer sales.
In the state of Mato Grosso, maybe you guys have already seen pictures or even shared with friends, pictures from our plant. This is near its final building stages, but still waiting for a few licenses and authorization from the regulating agency so that it can start operating. We are confident that soon we'll be able to issue invoices and then start producing oil and meal. After a few reviews and after the oil regulating agency, we'll also be able to produce biodiesel there as well. We are absolutely optimistic about that. With that, our prospects for 2023 couldn't be brighter. We see that we are overcoming the second climate difficulty, this period of climate difficulties, as we said in the previous call.
Wheat performed really well last year and allowed us the possibility to mitigate and dilute the losses that we had on the soybean side. Corn helped us in terms of advancing our bills and also to buy more inputs. We are now about to plant another crop, which at the end of May and beginning of June will start, and by the end of June, everything will be planted, and in October, the corn will be being harvested. At that point, we will be planting corn and soybean here and corn and soybean in the state of Mato Grosso. Very bright prospects. We cannot never be sure about the weather, El Niño is coming along, and with that, Brazil will have the possibility to harvest another record yielding crop and really seizing its full potential.
In the next slide, we highlight a few of our financial figures. I will not go into detail here, but on the revenue side, despite the drought, even though this was a year when prices were trending down, already in Q1, going down both in Ag Inputs and in Grains, we saw our revenue continuing to grow, especially in net operating revenue. That's because of what I said earlier, which is the Três Tentos teams operations in our new stores, in our maturing stores, and in our already mature stores to elevate the ecosystem and also great acceptance from farmers. Seeing that he has been reaping the benefits of all of that, which is a real defining factor of Três Tentos.
Following that, the most significant highlight here is net profit of 82%, which really makes us really excited. We will remain focused on the same sort of management and execution so that we can continue to derive better and better results. Moving on to the next slide, I'd like to invite João Marcelo to go over the financial highlights.
Good morning, everyone. Along the same lines as Luiz had been following, of course, there are reasons behind our financials, and here we shed some light on some of our operating financials in the Q1 of the year. As you can see, we traded record volumes in 3 products: corn, wheat, and biodiesel. We reported very strong figures for them in the Q1 .
Naturally, in this case, we're considering volume, that also was mirrored by our results. Both our plant in Ijuí and the plant in Cruz Alta had a quarter where they operated at very much a very high capacity levels. Both plants ran at nearly full capacity throughout the quarter, that led to the processing of nearly 300 tons of soybean, which is a significant increase versus the Q1 of last year, looking at our Industry when it comes to volume. The state of Mato Grosso is another operating highlight. Which in this quarter accounted for 20% of our Ag Inputs sales, which goes back to what we had already mentioned when we presented our figures for Q4, 2022. I know many of you remember that. We now have the final figures for 2022.
Mato Grosso ended the year at 13%, and now their share came to 20%, which reinforces and makes it really clear that growth in this region will help us boost the company in at large and reach higher levels of sales volume and also revenue and sales overall. Obviously these stores in the state of Mato Grosso are already selling inputs to both soybean and wheat, but also as was said before corn, which was the first crop, the first corn crop, where Três Tentos operated more engaged with. With a more engaged team, with a better trained team, and more prepared to work there. We continue to focus on our expansion as we will detail more further. This team will continue to deliver better results.
In the following slide, we have a more detailed breakdown by the company segments. As we've said before, this is definitely a challenging environment, both economically and in agribusiness itself. That has been even starker here in the state of Rio Grande do Sul because of the drought, which as we said before, was not as strong at or as severe as we had in 2022. Still, we did not have a crop yield that was what we would consider normal. Even more recently, there was also the issue of commodity prices, which had been moving the scenario into a more challenging territory.
Against this background, earlier I talked a little bit more about the operating side and the volumes which were significant highlights, even though we were in a scenario of slightly lower prices, or at least lower for the main items that make up Três Tentos' balance sheet, we also saw an increase in net revenue for all 3 business segments. All the three reported a higher net revenue. In Ag Inputs, growth came mostly from fertilizers. There was an increase in our fertilizer sales, especially in the state of Mato Grosso, and especially because of our competitiveness. Our inventory levels have been very well adjusted, fulfilling all our customers' needs, and that made us really competitive at a time when most of the market was seeing higher unsold inventories.
The fact that our inventory levels were low for fertilizers allowed us to respond a little bit better and operate a lot more competitively when prices dropped. We also saw an impact on Crop Protection products because of the drought. This is true especially in Q1 when the use of these products is more intense. In grain production, the highlights that we pointed out before, which were very good origination for corn here in the state of Rio Grande do Sul, even somewhat offsetting the drought, the effects of the drought, but also our gain in market share and the fact that we have new production units also played a part. Also, what we already mentioned, which was the fact that the weather troubles were not even, but rather spotted across different regions.
Also the wheat crop that was harvested last year, this was an exceptional, exceptionally positive crop yield in Rio Grande do Sul. This, these results do not come during the time of harvest. These are very important months for sales, and we should continue to see sales over the course of the year of last year's crop, which it has been stored and is being sold as we negotiate with farmers. On the Industry side, our sales revenue more than doubled. Again, there are significant operating factors playing into this, but also the increased volume and our increased capacity, and also the margins for soybean meal. Really allowed us to continue to support the company's revenue level here at Três Tentos. I think we can move on to the next slide now.
I think this is when I come back, right, João Marcelo. EBITDA is another focus for the company. We are also obviously being impacted by how the industry is performing. When we compare to Q1 last year, we see that increase in absolute terms. We moved from BRL 96 million to BRL 108 million. There was a decrease in our margin. We realize where that's taking place, and we are paying very close attention. We know where non-recurring expenses are taking place, which are a result of the company's expansion efforts, both in Rio Grande do Sul and Mato Grosso. We have been working constantly alongside our team for greater efficiency. We know that our market is increasingly competitive.
When you see different waves, such as a drought time or a downtrend in prices, we need to work going in the same direction as the market, you know, working on our prices and our inventories, but we can't really step out of that. We are analyzing our efficiency levels. When we look at our gross profit that decreased by 2% over the previous year and a 1.8% EBITDA, we can here identify improved performance and more efficiency being delivered by Três Tentos. We are convinced that this will continue and more and more so. We are focusing on our SG&A, and our sales expenses were because of this expansion. We know that we are spending this way so that we can deliver work that's better and better.
In the next slide, we see the strength of our business model. Increased working capital is always required in Q1 during the summer crop for better sales results. This year, because of late planting and consequently later harvests, purchases have been sort of stacked up more than before. Even because farmers begin to look at Ag Inputs and Grains, and when they consider this replacement relationship or exchange relationship so that they will either purchase their grain or purchase their Crop Protection product, they will find the balance that they believe to be more appropriate. Our PR team and our sales team is always providing the information, the final decision is always made by the farmer themselves. Especially soybean brand, that brings the Industry the outlook of, or a recovery in Q2 and Q4.
In the slide that João Marcelo was mentioning, even though the improved margins of Industry versus Q1 2022, Q2 2023 will already be better than Q2 and Q3 2022. We are already seeing margin improvements. These are the cycles within agribusiness that Três Tentos needs to navigate, which are all of them. We know how to navigate them really well. What I would like to talk about on this slide is that prices have been going down and Industry, in my understanding, continue to be a critical part of this ecosystem. The Industry segment allows us continuity, allows us stability, which is something a company like Três Tentos needs. It will be operating from January to December, naturally following these production supply and demand cycles.
I'd also like to point out our cash generation ability, which is something we talk about virtually every conference, every meeting that we have with investors and shareholders. This year, even with the vesting of shares, our net debt calculation stands at this level, which again, makes us really confident. I'd like to reinforce that this is about management. This is no coincidence. It's about dedication and efficiency. Otherwise, the numbers wouldn't be what they are.
Here, I'd like to talk about the investments we've made. I think that as Luiz talked about in terms of working capital, which was one reason for our indebtedness, we can see in this chart, all our CapEx investments. I'd like to say that the picture is for the Vera plant in Mato Grosso.
Its operating sites or its operating facilities are already working, and we are just waiting for the licenses to really ramp up and be able to operate at full steam. This is a construction that started less than 24 months ago. I would say 19 to 20 months. This was absolutely a greenfield, and now we have the entire complex already up and running. This is really exciting and gives us very good prospects and a lot of comfort in terms of volumes and especially in terms of results. You can also see our CapEx curve since our IPO within the business plan that we had established at the time, which was to build our plant and open new stores in Mato Grosso and Rio Grande do Sul.
I think that it's important to see all of these deliveries taking place and taking place within schedule, sometimes even earlier than expected. I like to point out in Mato Grosso, actually, where we expected to have eight stores by the end of 2025. It seems that by the end of 2023, we should have all of these stores up and running. They're at later construction stages, as our warehouse, which should receive, in Alta Floresta and Porto Alegre do Norte. Other stores in final stages of construction. Absolutely, we have been delivering as expected. In Rio Grande do Sul also, all of these new stores are all operating, all receiving new soybean from the finishing stages that are in the final stages of harvest.
We are moving to the end or to the conclusion of this cycle that we expected and that we set out to achieve back when we had our IPO with a team that's very engaged and working very diligently. Once all our units are operational, we should be delivering somewhat earlier than we expected originally when we planned for them. I think we can move on to the next slide. Luiz.
Very well. This is a slide where I think really represents the possibilities that we have as Três Tentos with the work that we do, which is very integrated, where we create synergies across industries, across segments, across our staff and with clients. We ultimately have very significant returns. We are at a time of high investments, especially because of our plant in Mato Grosso.
This is a time when we can already begin to glimpse into our future. Well, we have the figures on the slide. Everyone can see, I would like to point out the company's focus. This is a growth-focused company. A company focused in margins and efficiency. We are working very strongly in how we communicate our culture to executives, to administrative staff and operating staff. This strategy that we set up is being developed by the entire company until it comes to the consultant expert who will be at the farm or receiving a farmer at one of Três Tentos' units or stores. We are aware of the importance of seizing or realizing synergies. We have very several touch points with our customers. At each touch point, we derive value for them.
At every stage, that increases their confidence and strengthens the bond between company and client. The synergies that we are able to seize within the company always has and will continue to generate better results. I will be focusing on these two indicators for us to analyze every month, but the ROE has a very great possibility of going up, and that's our focus, to be a company that derives value for clients. We will definitely be part of the food production chain, which never stops and cannot stop. It may change, it may drift to one side or another, but it never stops. Três Tentos is an updated company, a company that's eager to innovate. A company that's always seeking to be more agile.
This makes us very confident because we are focusing on two of these segments in a world where there's an energy transition going on, and a transition that will not take place overnight. It will take a long time. Over time, we will be changing our sources of energy to more sustainable ones, and it's a constant and growing demand, sometimes with curves which can be sharper or flatter. We, as members of this team, have the mission of still being conservative and focused without ever moving our gaze away from the future. We'll continue to focus on growing our margins, on better management, obviously, always increasing our efficiencies. These were the comments that we had for you. We have our last slide for our prospects.
We are very confident for 2023 in all of the company's three segments: Ag Inputs, Grains, and Industry. We have stores that we will be opening in Rio Grande do Sul and Mato Grosso, continuing the IPO plan, which we believe we will deliver very soon, contributing with financial and digital services. In Grains, focused very sharply, not only in building the new units, but João Marcelo, I mean, I constantly see him managing all the maintenance and taking very good care of all Três Tentos units so that storage, control, thermometrics, all of that is better every day so that we have better products being made available to our industry, whether that's in farms or the industry or wheat farms. We are moving toward an industry toward an increase in processing of over 65% for soybeans.
This will be a major milestone for all of us who are here at the company. Thank you very much.
We will now begin our Q&A session. If you wish to ask your question live, please click on the Raise Hand icon located at the bottom side of your screen. Once you do so, a request to activate your microphone will pop up on your screen. To submit your question via text, just click on the Q&A button also available at the bottom side of your screen and type in your question. Our first question comes from Henrique Brustolin, a sell-side analyst with BTG Pactual. Henrique, we will now release your microphone so you can ask your question. Please proceed.
Good morning, Luis. Good morning, João. Well, I'd like to go into two points. First of all, your margins in retail.
When we look at the pressured margins, because of your Crop Protection inventory, can you talk about those BRL 460 million? How much can they continue to reflect that impact over the next few quarters? I'm trying to understand how this carryover, because of market movements, can still affect your bottom line. Also, still talking about your margins, considering the assortment of products, how are your margins in Mato Grosso progressing compared to other states and the overall industry? Maybe competition could be before or could be behind that pressure in margins. Also with regard to the plant in Mato Grosso or with regard to industry in Mato Grosso, we saw with the entry of a record-breaking grain harvest, an increase in prices versus the international benchmark.
I think it would be interesting to hear from you what's grain origination like in Mato Grosso and also your prospects for the origination at lower prices. How do you see origination there and as it compares to other places in the country? I think João Marcelo could take both questions, right?
Absolutely. Henrique, about our retail margins. There's definitely an impact in those items that you mentioned. The 2 percentage point decrease is connected with our mix of products. We saw an increase in the share of fertilizers and Ag Inputs. Fertilizers are in and of themselves a product with narrower margins when you think about production and also seeds. These are the two that essentially make up most of the Ag Input package.
To some extent, they do reflect the decrease in prices. Items that had already been purchased saw prices go down, and naturally, we had to make adjustments and bring prices of our inventory that had been purchased at slightly higher prices to the average. We have always worked by definition with inventories that are not so high. Much of our inventories have already been sold. These are much more logistics inventories that really transition between purchase and delivery. Our portfolio between future sale and purchase and future demand, the figure that we had in March 28 was BRL 280 million between what we had in stock and what's purchased. These inventories cover that gap.
Of course, at some points, we may have products that are in inventories that were purchased at a higher price. I think that this adjustment via reduced inventory price was most significant now during Q1. This was probably the quarter when that effect or that impact was most noticeable. About your second question, of course, once Mato Grosso increases its share of our revenue in Ag Inputs, that will bring with it wider margins than what we have in Rio Grande do Sul. Since the beginning of our plan, that's something that we had already penciled in. Of course, because of the way producers operate and because of a competitive market on several levels. Obviously, just talking about what the scenario is within a structure adjustment circumstance.
We have structures that are much more productive, which allows for a narrower gross margin. Combined with sales expenses, it seems closer, almost the same as what we see in Rio Grande do Sul. Along these two lines, I think the highlights are the fact that our inventories are within control. The impacts on our margins probably have already taken place now in Q1. Most of our inventories, essentially, virtually all of our inventory has already been sold, so this is not a situation that will continue to have consequences throughout the year to any measure. With regard to the mix of products, there was an increase in fertilizers. With the growth in Mato Grosso, that is intensified.
In spite of all of that, I think that we were still able to preserve our margins at a very interesting level. If you look at the balance sheet for other players, this looks really robust. Ours looks really robust. To your third point, origination has been really significant for this crop in Mato Grosso. Our static capacity is full, so we have all the spaces that we had for storage are already being originated by farmers. This decrease in price really includes aspects of a raw material that's potentially more affordable. Even though the complex has its impacts, this is still more competitive and provides more opportunities.
Origination here in Rio Grande do Sul, despite the drought, and as we said earlier, and it's important to say we are operating at very comfortable origination levels via farmer, and we saw significant market share gains in several regions and units where we were able to penetrate with also a significant market share considering it's our 1st year in operation. We believe that we are on the right path.
That was very clear, João. Thank you.
Our next question comes from Isabella Simonato, sell-side analyst with UBS. We will now release your microphone so you can ask your question. Isabella, you may proceed.
Good morning, Luiz. Good morning, João Marcelo. Thank you for your presentation. My two questions. The 1st one is about your expansion plan.
It seems that especially in Mato Grosso, that the business ramp-up and even your store opening plan has provided some positive surprises to you? What details can you give us in terms of your next steps? Or in other words, what have been these sources of positive surprises in Mato Grosso, and what could lead to changes in your pace of growth in the region? That's my first question. The second, looking at your SG&A line, we sense there's an increase during this business growth process that you have underway, and it takes a while for things to balance out, look with from a more long-term perspective, what do you see coming up in SG&A? Thank you.
Yeah, I think I can take these two. Right, João Marcelo. How are you, Isabella? Thank you for your questions.
It's very good to be here talking to you. On the topic of expansion, there's some level of surprise there. We were really confident that this would be the case. Perhaps not in such an accelerated pace as what we're seeing, but at a good pace, looking from a farmer's perspective, because we know the industry, we know Ribeirão Preto do Sul. Our family has been in the region since 1982, even owning property, pieces of property there, as we've mentioned before. We knew that Três Tentos would be able to contribute with different activities, with products, with its attitude that were different, that had a better fit with farmers in that area. We continue to make plans for the continuity of our expansion.
As we said before, growing is part of our focus, so we are about growth and margins and really deriving value for our customers. If you still look at this business: water, energy and food. We will continue, and we will make different moves in areas that we know, looking for situations that will allow us more opportunity to continue on this path that we are just taking the first steps on in the state of Mato Grosso. We will continue to grow. At this point, unfortunately, we can't tell you really the options, but we have been working with some very important lines of growth. As for SG&A, we ended 2022 with 8.3%, if I'm not mistaken, as a ratio of our net operating revenue, and our target is 7%.
We have, you know, been at a level that's even lower than that. This is going to be what we will pursue as an indicator. More importantly, in order for that figure to come about, in order for us to reach it, we will need to continue to rely on a team with everyone that's coming in that's very, well trained and very, well adjusted to Três Tentos' culture, to what we want and why we want it. This has been productive. We're seeing the results. We know that this is the time to make these investments, especially when it comes to having a sound and robust sales structure so that we can impact our revenue and now to work on these adjustments so that our efficiency also increases.
That was extremely clear. Thank you.
Thank you, Isabella.
Our next question comes from Mateus Shimasaki, sell-side analyst with UBS. Mateus, we will now release your microphone so you can ask your question. You may now please proceed.
Good morning, everyone. Thank you for taking my questions. Well, first of all, I just wanted to understand a little bit more your update in terms of 340 tons for Mato Grosso this year. If you could give us a little bit more color in terms of what changed from your previous forecast of 303 tons. Looking at the plan now in the near term, How's the early operations going, if you already have contracts being closed in the area? If those contract conditions are the same as we see in Rio Grande do Sul .
If I could pick up on Isabella's question, I understand that you're thinking about new avenues for growth or continuing the plan that you've already drew up, but what steps can we expect from now on? Does the company expect the ongoing investments to mature before announcing a new wave of investments? I know that your leverage is not at a high level, but do you want that to decrease even more? What will be the triggers for new announcements in that sense?
I will provide some information, João Marcelo, and then you can jump in and add anything you believe I may have forgotten.
500,000, 600,000, that's been our core for some time, and we expect to have that volume between 500 and 600 tons until the end of the year. The 600,000 tons, sorry. We know that we have a few weeks or months to prepare. The TRO Rondonópolis and from Rondonópolis via train to the meal way and also to the terminals in Santos, so that we can have distribution underway. We already have been assigned the vessels, one smaller for June and then others for October, November, and December.
Mateus, our plans are not just about the availability of soybean. It's end-to-end so that we are confident enough until that vessel carries our product to its final destination with the expected quality, that we can have our reputation being built more and more around the world. As for biodiesel, the plant is virtually ready. It's even more going faster than crunch. Everything's already in place. The licenses, from our experience, Marcelo can add to that if he wants, they take a little bit longer. These are more technical licenses because we work with two different ministries, the Ministry of Mines and Energy and the Ministry of Agriculture when you talk about crushing. The Ministry of Mines and Energy, because we're talking about flammable products, these are licenses that take a little bit longer to be granted.
Right now, we are focusing on the operating side of crushes, and when it's ready, we will move forward with the biodiesel licenses. Our sales will rely on the direct relationship that we have with distributors. There's no bi-monthly contract. I mean, bi-monthly contracts are not a thing in the market. Maybe June, or November, December, Três Tentos, Mato Grosso probably will be seeing those volumes. If licenses are granted earlier than we expect, we may also be operating with oil sales so that the crunch doesn't stop. As for new investments, one thing that we look at is, well, the high interest rate. This is something that really makes us stop and think twice in parallel with the opportunities that we see, and they are myriad and seem to be increasing by the day.
We are very cautious in our analysis of these opportunities to decide where and when we will make a move. With Cristiano, the new CFO that's being onboarded, he should be with us in our next call. Yesterday, we sat down and talked about some of the opportunities that we see within a structure where we could maybe distribute our sources and think about where these sources would be because there are many investments where we could rely on incentives which would bring interest rates down. There are several different scenarios that we are observing, and there are many opportunities in terms of obtaining funding and also actual business opportunities. I'm talking here about both companies that would like to merge or sell their operations or even greenfield operations.
We are analyzing all of these opportunities so that when we do decide to make a move after we've delivered the IPO plan or once we are at its final stages, we'll be actually celebrating this new milestone that Três Tentos will achieve the next round. Anything to add, Luiz?
No, just talking about the early guidance, it's gone up to 500,000 tons. As we go closer to starting operations, we grow more confident as to how we will operate closer to what we can see, you know, in the market. That's just because we are coming closer to the start of operations.
I just wanted to say that crush will start now, and we expect biodiesel production to start in 60 days because we need the first license so that we can move on with the second and third licenses. biodiesel involves different steps, additional steps to what we have with crushing, which is why we have these 30 to 60 days until its final license production license is granted. Until then, we will be selling via oil.
That was perfect. Thank you.
Our next question comes from Pedro Luis Fonseca, sell-side analyst with XP. Pedro, we will now release your microphone so you can ask your question Now you may please proceed. Please, Pedro, you may now proceed.
Can everyone hear me?
Yes, we can hear you.
I'm sorry, I was having problems with my earpiece. Good morning, guys, and congratulations on your results. First of all, I'd like to follow up on Henrique's question. When we think about the Industry segment, the origination side seems to be on much healthier dynamics with lower costs. I also wanted to understand how these dynamics relate to the decrease in prices of by-products and oil, you know, lower meal prices, and how we can see the margins for crushing in the next few quarters. Do you already see? We can already see interesting momentum looking at Q1. Can we expect for the next few quarters a sharper recovery? Or maybe these dynamics and by-products could have an impact on that? That's my first question. Second, I wanted to understand your margin for Grains in Q2.
When we look at the makeup of the top line for grain, the mix was a little bit better with wheat and corn, but the margin was essentially flat year-over-year. I just wanted to understand and get a little more color on what the dynamics on your margins looked like during this quarter. If the lack of increase in margins was because of prices, or was there any other factor affecting that? If we could understand that those dynamics a little bit better, that would be great. Thank you.
Would you like to start, João Marcelo? Would you like me to go?
No, you can take it.
Well, first of all, Pedro, with regard to the margins that you mentioned for wheat and corn and the grain mix, I think that's very closely connected to the decrease in prices, which had an impact on soybean sales most importantly. We are very optimistic that, as I said before, wheat sales are still significant, so we will continue to be selling wheat in the next few quarters. Corn, where we sold corn via Rio Grande do Sul, but we will now be selling corn in Mato Grosso, and significantly so.
We understand that the grain segment should report strong earnings, and the margin dynamics should be sustained by this balance, this change in the mix of products, always with wheat and corn appearing to some degree in the mix of products that we sell. As to soybean brand, I think there's a lot to say, but essentially what's playing into our margins is the situation in Argentina. I think that's the headline, and it should be a reality throughout the year. The pressure on meal sales that will definitely provide significant profitability in the mix for crushing. I think that continuing on the what you mentioned about the industry that you talked really well, the failure in Argentina, I've heard in the last few weeks that they reduced to, I think, 23 tons.
This is a significant crop failure not only for them, but for everyone, and it will really impact exports. We are the world's third-largest soybean farmer. We know the impact of harvesting 43,000 tons, sometimes even more, and they are the world's largest exporter of meal. There's a continued customer that is supplied by Argentina. The United States are number one, Brazil number two, and Argentina the third, but they are still major exporters. We have some advantage compared to Paraguay because of the compost. Of course, Rio Grande, Paraguay, and any other ports, but because of how close Rio Grande do Sul is to Argentina, it's only natural that vessels leave Argentina with some of their cargo in the Plata Basin to Rio Grande and refill that load and then continue their trip.
We know that this is already affecting premiums. That this tends to continue over the next few months. This is the current picture, and we are already seeing improvements in the soybean complex margins, especially because of soybean meal. As for oil, here in Rio Grande do Sul, we are seeing virtually 100% of our oil sold as biodiesel. Essentially, Três Tentos sells its oil as biodiesel and adding some just a narrow margin over that. It's still very narrow that we can add the margins that we can add to our oil sales, but this has been helping us to really expand our margins, which we have been able to do. Our prospects are really bright. Essentially, we had only the month of April with B12. We are now going to the second month with 12% with biodiesel.
In April, we already felt the market and distributors, which prepared throughout January, February, and March with high inventories and now are selling more in April and May. The demand is a lot stronger than it was in previous quarter or even in the previous quarter when it was at 10% essentially throughout the year. We're sure that we should see 13% next year and then 14 and 15 and so on and so forth.
That was perfect, guys. Thank you.
Thank you for your question.
Our next question comes from Daniel Sasson, sell-side analyst with Itaú BBA. Daniel, we will now release your microphone so you can ask your question. You may please proceed now.
Hi, João and Luiz. Thank you for the opportunity, and congratulations on your results.
I wanted to hear first about your working capital release, which was strong this quarter at about BRL 120 million. We saw a significant increase in the supplier's account with a lower level of grain fixation on the producer side. Which makes sense seeing as sales this season are a bit lower. Could you please talk about this scenario and how we could think about your working capital moving forward in the next few quarters? My second question, still about the slower sales. One of the main points we talk about with investors is the distribution of your production and a potential overlap between soybean, sugar, and now corn, or double crop corn.
If you could talk a little bit about how you have been able to handle the logistics of that, and if there's anything you can do to maybe mitigate the risks of potential delays and lower volumes, that would be great for us. Thank you.
Excellent, Daniel. Thank you for your question. I think we will have to split the answer in two so that we don't forget to mention anything. With regard to working capital, you're absolutely correct. We are ready for the beginning of this season. Farmers have been late in their sales operations, and I will give you my perspective. We talked about this, Marcelo and I.
I think it was yesterday or two days ago, and I said this, which is there should not be peaks in production because the sales peak for farmers would be now. This is a time when either with bank financing or because they're exchanging soybean for wheat or corn, they're moving forward with their activities, and they sort of preserve their, the soybean that they had. Keeping it in store maybe to continue to sustain their own activity and also to maybe as a complement to the next season.
What I see is a dilution of farmer sales throughout 2023 because, first of all, of the drought, which was not even throughout the state, but affected significant parts of it, and also the expectation of farmers for better price positions, whether in dollar or any other currency. When we talk about suppliers, we have soybean farmers increasing their origination with farmers and increasing them significantly. Obviously, that will drive the figure up, which is why we reported that high figure, but I still believe that that will be diluted over the course of the year. The answer is essentially the same. Origination is in line with what we have in the market. About distribution, this is a concern for the industry and has been for a long time.
We've talked with different governments, I need to say governments because it's not just one administration, but ever since I started working, we've sat down and talked about the storage deficit in Brazil, the challenges with a lack of infrastructure with different administrations. For Brazil in the agribusiness, we've seen only marginal improvements in spite of all the demand that we have. What Três Tentos tries to do is to do its best to invest as much as it can, to expand, to store its product the best way it can, so that in some way, we can help to reduce these bottlenecks. We are paying attention to that, both here in Rio Grande do Sul with our two plants. Both of them have railways servicing them.
We have significant part of our production being distributed via rail, we continue the same way in Mato Grosso, working on logistics, working with rails and being more competitive because of it, which obviously allows us better results in the end. We have invested a lot in that. In Mato Grosso, we also invested in the Norte-Sul roads or highways. We are also looking for partners to work in the Arco Norte, depending on where we will be distributing from, whether it's Rondonópolis or Santos.
That was perfect. Thank you.
Thank you, Daniel.
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To submit your question via text, just click on the Q&A button also available at the bottom side of your screen and type in your question. With no further questions, we now conclude our question-and-answer session. I will now turn the conference back to Mr. Luis for his final remarks.
Thank you very much. I'd only like to say once again what you know very well, which is Três Tentos is very passionate about agri-agro. Our dedication and our acknowledgement, because of all our history so far to our team. We are over 2,000 people working diligently with the same focus, knowing what it means to produce food, to be in the farms with farmers, and also working to provide renewable energy.
Every quarter, we have the opportunity to acknowledge and to lift up our Três Tentos team and this universe of Brazilian farmers who develop wonderful work. To tell you how proud it is for Três Tentos to be here sharing all of this information and talking to our shareholders. It's very good to be together, strengthening our bonds and strengthening this activity more and more every day. Thank you.
Três Tentos' Q1 2023 earnings conference is now closed. The company's investor relations department is available to answer any additional question. Thank you all for joining us, and have a great day.