Bioceres Crop Solutions Corp. (BIOX) CEO Federico Trucco on Q3 2021 Earnings Call Transcript

Nov. 10, 2021 3:33 PM ETBioceres Crop Solutions Corp. (BIOX)1 Like
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Bioceres Crop Solutions Corp. (NASDAQ:BIOX) Q3 2021 Earnings Conference Call November 10, 2021 8:30 AM ET

Company Participants

Rodrigo Krause - Head, IR

Federico Trucco - CEO

Enrique López Lecube - CFO

Conference Call Participants

Ben Klieve - Lake Street Capital Market

Brian Wright - ROTH Capital Partners

Steven Ralston - Zacks Research

Kemp Dolliver - Brookline Capital Markets

Operator

Hello and welcome to the Bioceres Crop Solutions Fiscal First Quarter 2022 Financial Results Conference Call. My name is Laurent and I will be coordinating your call today. [Operator Instructions]

I would now hand you over to your host, the conference over to Rodrigo Krause, Head of Investor Relations to begin. Rodrigo, please go ahead.

Rodrigo Krause

Good day, everyone and thank you for joining us. Presenting during today's call will be Federico Trucco, our Chief Executive Officer; and Enrique López Lecube, our Chief Financial Officer. Both will be available for the Q&A session.

I would like to take a comment to inform you that Máximo Goya, Head of Investor Relations is leaving Bioceres to pursue and reaching personal and academic venue. I, Rodrigo Krause, have joined the company to takeover Máximo's responsibilities and want to thank him for his support. Everyone at Bioceres, including management, would like to thank Máximo for his excellent work and wish him success in his new endeavors.

Back to our presentation and before we proceed, I would like to make the following Safe Harbor statement. Today's call will contain forward-looking statements and I refer you to the forward-looking statements section of today's earnings release and presentation as well in our recent filings with the SEC. We assume no obligation to update or revise any forward-looking statements to reflect new or changed events or circumstances.

Also, please note that for comparison purposes and a better understanding of our company's underlying performance, and in addition to discussing as reported results during our presentation today, we will discuss comparable results, which exclude the impact of hyperinflation accounting in Argentina. Additional information in connection with the application of the rule IAS 29 can be found in our earnings report.

Finally, this conference call is being webcast. The webcast link is available at the biocerescrops.com Investor Relations site.

At this time, I would like to turn the call over to our CEO, Federico Trucco. Thank you.

Federico Trucco

Thanks Rodrigo and welcome to Bioceres team. Welcome, of course, investors and analysts joining us today as we report we believe to be a very good quarter for the financial performance perspective.

Please turn to slide three for a brief overview of the business and financial highlights we will discuss in today's call. We are thrilled to report the first quarter financial performance and show that the positive momentum observed in the last few quarters have further accelerated in the reporting period.

Fiscal first quarter comparable revenues were up 54% over a year, consolidating and adjusted EBITDA of $50 million on an LTM basis. I will provide a high level overview and Enrique will expand on financial performance during his section of the presentation.

As we have done in past call, we will provide a brief update on the HB4 rollout and regulatory processes. We will also take a minute to introduce a new level of ESG reporting on HB4 inventories that will help us measure environmental exposure to our chemicals and promote reduced chemical footprints in our seed and grain production systems.

Last but not least, we'll report on the completion of the selectors, $16 million public offering of Series 6 corporate bonds throughout quarter. The capital raise adds to the financial strength required to support working capital needs in the coming quarters.

Please now turn to slide four for a quick review of a strong self-momentum growth throughout the last three quarters. Confirming LTM revenues reached $222 million, up 24% from the same period last year on an LTM metric. The absurd topline double-digit growth trajectory results from the effective implementation of new strategies in the Crop Protection and Nutrition segments with revenue growth accelerating from 35% to 40% level in the first half of the calendar year to over 50% in the current period.

First fiscal quarter expansion was driven primarily by the combination of the new commercial strategies recently mentioned. New product launches and generally positive sector dynamics in Latin America. The rising trend in microbial fertilizer sales continues for the third consecutive quarter with Nutrition segment explaining 44% of the growth in the period. And with capacity increased 48%, up 60% from the year ago period.

The negative buyer Nutrition products launched ahead of the summer crop planting season also showed solid performance during the quarter. We started arrow Microstar Bio, and Microstar EV Bio already represents close to 10% of the segment sales.

The Crop Protection segment benefited from the impacts of salesforce and channel organization, with each segment explaining close to 55% of the growth observed in the period.

Finally, we expect to see similar growth in the Seed and Integrated Products segments in the upcoming quarters. Primarily, I think before inventories have no longer contributed, but are sold as C or grade and also as a result of an ongoing -- process within the segment materializes. Growth in the Seed and Integrated Products segments should help us keep the current momentum towards fourth quarter of the current fiscal year.

Please turn to slide five for an update on the ongoing HB4 initiatives. HB4 inventory ramp up processes are moving forward as discussed in our previous earnings call. Early season HB4 soy plantings were completed, while late season planting which represents the majority of the target factors is about to start in the coming days.

HB4 wheat harvest started and is currently at about 10%, mainly in the northern regions of Argentina, where we -- which [indiscernible] earlier. Operational methods will be updated in the upcoming quarters at the end of HB4 targets and a HB4 soy planting features.

From the regulatory terms, no original information has been requested since our September report by Chinese regulatory authorities regarding HB4 soy, nor by the second regarding their ongoing evolution of HB4 wheat .

As we said before, we need both regulators should be able to resolve approval requests in their upcoming meetings and look forward to communicating your findings as they are informed to us.

As you all know [indiscernible] factoring is a central feature of our company and is consider abroad across the board approach is the entity aspect -- as we generate information and design that gives consumers and growers to talk to each other.

In slide six, you will find a snapshot of different forms within our HB4 fulfillment process where data collected. We have dedicated significant time and resources to integrate different technologies into a comprehensive traceability platform, including the use of blockchain ledger to bolster transparency and credibility to all stakeholders.

A tangible solution in like for these efforts are the ESG reports which aim to keep track of farmers' performance, comprehend fir achievement with solid traceable, ESG and grain scoring.

We're taking this opportunity to announce the addition of ecotoxicological indexes to our ESG reporting process for HB4 inventories, which you will see in slide seven. We have decided to produce [indiscernible] ecotoxicological score combining ORCTs environmental impact portions with the retest dependent pesticide risk approach.

These measurements consider factors such as thermal toxicity, toxicity to birds, leaves, and beneficial reports, soil half-life, surface potential, land surface half-life, seed density, meeting potential, among other factors affecting farm workers, environment, and consumers, which are estimated for the most frequently used pesticide.

We believe this report will set a new industry standard understanding environmental impact of exposure to different activity rates. The carbon intensity of production processes and the water footprint of agricultural ecosystems are all key elements in designing and promoting a 21st century regenerative agriculture.

This concludes my prepared remarks, I will now turn the call over to our CFO, Enrique López Lecube to discuss our fiscal first quarter financial performance. Enrique?

Enrique López Lecube

Thanks Federico. Good day to everyone and thank you for joining us today. Moving over to financial, please turn to slide eight as we frame the impact of our quarterly performance on an LTM basis.

As Federico outlined a few minutes ago, we had a strong first quarter performance at the run up of the high season of sales in key markets across South America. With comparable revenues rising 54%, roughly $65 million.

Now, for a third consecutive quarter, our topline has outperformed the previous fiscal year period, clearly offsetting the blowback in the second quarter of the previous fiscal year, which had been negatively affected by severe droughts in South America.

As a result, LTM comparable revenues were up 24% to $270 million, even as the LCM metric of this year's seed counts for that second quarter. Execution during the quarter consolidated the successful outcome from the initiatives taken in the second half of fiscal 2021 to reignite growth in our Crop Protection and Nutrition, business sectors.

Segregation of commercial teams and enough salesforce power, allowing the implementation of a more customized market approach. With a product-centered strategy for high technology categories, such as likely fertilizers versus an opportunistic and market-driven approach for third-party products.

Crop Nutrition was the segment that benefited the most from the doubling sales versus the year ago quarter. In particular, we saw a twofold growth in micro-beaded fertilizer volumes as a result of the combination of increased salesforce focus and market conditions.

Growing sales of product lines that [indiscernible] externalities from farming activities continues to be a key element of our basic difference. And these quarters performance, you can certainly do that.

Moving on to slide nine compared LTM EBITDA of September 2021 with LTM EBITDA in September 2020. Growth and profitability was more modest than topline growth as this year's LTM EBITDA metrics truly account for $3.4 million in pre-operational expenses related to the rollout of the HB4 program, that did not exceed the previous fiscal year LTM EBITDA.

Profitability from our baseline business is currently supporting expenses related to Q4 that still have no counterpart in reported revenues and gross profit. It is important though to note that the inventory ramp up process that is being executed is generating deferred revenue profitability from contributing goods that will be recognized in a timely fashion once inventories are sold as seed or grain.

Furthermore, the LTM EBITDA metric for this year also accounts for the drawback in the second quarter of fiscal 2021 and have been hit by dry weather as mentioned before, as well as some favorable dynamics from negotiation of local currency in Argentina, where we hold most of our manufacturing support functions.

Having our LTM EBITDA stand at over $50 million and slightly increase, even as we account for this elements that have no impact in the previous fiscal year is a proof of the strength and resiliency of our [indiscernible] business and we saw great confidence as we move forward.

Let's please move to slide 10 for breakdown of first quarter revenues for business segments. The $22.6 million increase in comparable revenue was driven by an almost even contribution from Crop Protection and Crop Nutrition. We'll see the integrated thoughts almost flat versus the previous quarter.

Crop protection sales were up 58% using $34.3 million. Crop Protection global supply chain conditions provide a tailwind of current shortages, flow prices higher in South America. It was further enforced by sustainable cultural commodity prices.

As I mentioned earlier, the reorganization of the commercial teams in the segment favored an opportunistic approach to leverage market momentum with higher sales of third-party products, mainly in Argentina. On the flip side, as explained during the quarter drove adjuvant volumes down compared to the year ago quarter, a situation we could have normalized during the current quarter.

The average gross margin for the segment declined from 38.6% to 33%, primarily due to the increase in sales of lower margin third-party products detrimental to sales contribution from higher margin adjuvant.

Crop Nutritional segment grew an impressive 83% to almost $22 million. The expansion in the segment was mainly explained by micro-beaded fertilizer sales that benefited from a combination of factors.

First, increased focus on commercial teams with expertise in conducting sales based on product attributes rather than market conditions alone. This was possible thanks to the incorporation of new salespeople who are focused on lower margin and more opportunity sales.

Secondly, the commodity fertilizers market macro conditions also provided an opportunity to run volumes up in healthy margins. Commodity fertilizer supply shortages resulting from China's energy crisis and global logistic challenges low prices higher, which favors market penetration and adoption of high tech specialty fertilizers.

Throughout the quarter, 30 distributors have incorporated using print presentations of Intrastat [ph], our main brand for micro-beaded fertilizers to our product offering, as Federico previously mentioned.

Sales were also higher during the quarter despite volumes remaining flat. This was due to a shift in the product mix from conventional inoculants to higher value inoculants in particular, to [indiscernible] LLI, a proprietary technology. LLI have been gaining popularity among growers because of the higher microorganism survival rates and greater lobular dry mass.

The overall gross margin for the segment's increased slightly to 51% despite higher sales completion from micro-beaded fertilizer, which have lower margins than inoculant.

The micro-beaded fertilizer margins remain pretty sales driven by economies of scale as volume increase, as well as favorable market conditions. Inoculants margins improved as a response of the shift to LLI from conventional inoculants.

Finally, integrated cost from revenues in the first quarter of fiscal 2022 stood at $8.7 million, flat compared to the first quarter of fiscal 2021. Seed pack volumes remained flat in the first quarter of the high season for treatment solutions in South America begins.

Margins in the segment dropped to almost 63% due to unfavorable cost dynamics in Argentina or seed treatment packs are manufactured. Although it was a great quarter for doubling growth, let's please move on to slide 11 where I look at how these translating to gross profit contributions.

Total comparable gross profit for the quarter grew to roughly $28 million, almost 40% more compared to the year ago quarter, driven by expansion of our topline was done profitably.

Crop Nutrition contributed roughly two-thirds of the growth of quarter as sales grew with gross margin expansion. In spite contributing roughly half of the growth in revenue, Crop Protection only contributed one-third of the growth in gross profit as expansion in sales was driven by lower margin third-party products.

Overall, gross margin in sales was up 37.5% to 43.1%, explained by the product mix shifts and [indiscernible] but also unfavorable cost comparison versus the prior year. Of course, goods sold in this year's quarter have been negatively impacted by inflation and effects dynamics in Argentina. For the last 12 months, inflation in the country has outpaced depreciation of the local currency, which has a negative effect on dollar-linked businesses like ours. Situation we believe should be normalized sometime in the near future based on past experience.

Let's now please turn to slide 12 for a review on EBITDA performance for the quarter. Adjusted EBITDA increased 18% totaling $12.4 million in the first quarter of fiscal 2020. Reported gross profit rose by $9.8 million, a growth of $7.9 million increase in comparable gross profit and $1.9 million as a nine -- positive adjustment.

Operating expenses and other income and expenses collectively increased by $7.5 million, partially offsetting growth in gross profit. Importantly, and as discussed at the beginning of the presentation, this $7.5 million increase includes $1.9 million into operational expenses during the quarter in Q4; $1.1 million accounted for SG&A and $4.8 million accounted for in other income and expenses. These pre-operational expenses are fully accounted for in our adjusted EBITDA and therefore, supported by our very strong business.

I will take a minute to further discuss SG&A, which totaled $16.2 million in the first quarter of fiscal 2022 compared to $10.1 million in the first quarter of fiscal 2021. Increase is mainly explained the combination of [indiscernible] and semi fixed expenses.

Sales related tax and logistics expenses grew by $2.7 million, in line with growth in revenues and improved freight expenses and global trade challenges. Employee, salaries, and social security of semi fixed expense increased by $1.7 billion, including resources [indiscernible].

Finally, cost of goods sold effect inflation dynamics in Argentina also played a negative role on operating expenses. Despite the year-over-year increase, total SG&A expenses remind almost flat as a percentage of revenue at 24.2%.

Turn to slide 13 to address our debt evolution and position before turning it over to Federico. Total financial debt by quarter end was roughly $180 million, of which approximately 63% consisted of long-term obligations, including foreign, cash equivalents and short term investments up $42 million represented approximately 63% of the current portion of that debt. The total financial debt increased by $6 million from the fourth quarter of fiscal 2021, despite the increase in total financial debt, LTM financial expenses decreased by 7% from $14.6 million to $13.5 billion.

Net debt by quarter end was $137.6 million a 2.7 ratio of net debt to LTM adjusted EBITDA. Sequential increasing the net financial debt is explained by a slight increase in total debt and increase the cash proficient as we enter high season with the market and working capital requirements.

This concludes my remarks for today. Federico?

Federico Trucco

Thanks, Enrique. I will now open up the floor for questions, before concluding remarks.

Question-and-Answer Session

Operator

Of course. [Operator Instructions] Our first question comes from the Ben Klieve from Lake Street Capital Market. Ben, please proceed.

Ben Klieve

All right. Thanks for taking my questions. And congratulations on a really good quarter here. Got a question for probably Enrique here on the breakdown of FGA that you talked about, I appreciate the breakdown of HB4 pre-operational expense, especially but I'll say it's kind of unclear to me why this number is coming up now that can't really tell what -- what has really changed within HB4 this quarter versus prior quarters? So can you help me kind of understand, what these expenses are? Confirm that these are, in fact, new expenses, realize this quarter. And then talk about kind of what your outlook is for that -- throughout the next few quarters?

Enrique López Lecube

Hi, Ben. Thanks for your question and just hanging in the call. Thanks for joining. So the key operational expenses that were recorded during the quarter have the bucket of different things. So it's a new question. So there's a piece of that -- that has to be the data acquisition costs. That is the nature of valuable expense,, because it relates directly to how many bonds we are acquiring from farmers -- I should say, have been contracted with farmers.

So by nature, it's a variable expense, and depends on when farmers decide to price their significant location services that they are providing to us, for which we are paying [indiscernible]. So the banks -- value added five depends on the timing of that expense depends on the wind farmers who tries to get service. About two-thirds of the SG&A costs related to HB4 has to do with data acquisition costs, and one-third fixed XMI fixed expense capacity to -- with support sanctions HB4 platform. So is that answer your question Ben or -- do you need further expansion or any aspect?

Ben Klieve

No. That's a helpful start. I guess. I guess my follow-up question to that is collectively that I forget what it was like, one billion, something like that in the in the first quarter. Is that kind of a good run rate that you expect going forward? Do you expect that that's going to pick up in coming quarters? What -- what's your -- what's your outlook for that line item, here down the road?

Enrique López Lecube

Well, again, it's difficult to what the runway is going to be because that depends on when farmers choose to price, the service that they provided, what I can tell you is that we call in this quarter has a substantial portion of the services that we had constructed to make a great science.

So there's a big portion of the soiling of your beliefs under the tree for growing, and last season, and has been already rising. So this number in this quarter has the low -- and service and the data acquisition, we needed to see some maturity. Now going forward that it's going to depend on young farmers who flies to the service that they're providing are estimated by the 55,000 hectares that they're supporting the fact that has been already fertilized, about a third of that is going to happen in second quarter and third quarter. But there's feel like there needs to be good too. So it's hard for us to projected one way where I can tell you that most soybeans from the last season have already been blamed on the data acquisition related to that.

Ben Klieve

Got it. Okay. Great, thanks. A couple other questions that you talked about the difficulties in your second quarter of last year given, given weather conditions, it appears from my vantage point that conditions here are much more favorable this year. I'm wondering if you can just kind of provide a quick beat on the ground update of growing conditions this year, and especially relative to last year?

Federico Trucco

Hi, Ben. This is Federico. Thanks for joining us today. I learned this is illegal. And thanks for joining us today. We were having normal conditions in Latin America for this year. So we don't expect to see the same weather effect that we saw last year. So we hope to be able to keep the current momentum on the second quarter. And that's probably as far as I would like to go today in terms of guiding towards second quarter outlook.

Ben Klieve

Okay. No, that that's, that's helpful and understood. Last question for me, and then we'll get back in queue. You talked about the challenges around kind of transportation, logistics, et cetera, that everybody seems to have right now. Things are that you guys are have been able to weather that pretty well. Can you talk about the -- the conditions in Argentina and throughout your supply chain? And the, how problematic, these transportation issues really are and to the extent to which it's really impacted your ability to, get your -- you'll get your product to customers? And that'll do it for me.

Federico Trucco

That's an excellent question. I think when we talk about transportation and logistical complications, we're mostly focusing on international logistics, within the country logistics are somewhat normal, and we are not having major difficulties there is in terms of sourcing some raw material for Agilent, that we have to take anticipatory moves. If we do that to pay out, as you can see -- we did see some incremental costs, but nowhere close to a magnitude, but other industry participants have observed. So and likewise, in terms of our international business, where we source products, for instance, from our manufacturing facilities in Argentina, the big inventories, way ahead of what we used to, to make sure that farmers have what are accessing the shelf when they need them. And we do recognize that gaining customers, it's not always easy when you're sort of playing internationally.

So we don't want the knockoff of inventory to be an issue. And in that sense, there are ongoing difficulties in the sector, but we have taken anticipatory measures to try to minimize disruption. And there are central incremental costs I think Enrique can comment on that, but nothing to be concerned about.

Enrique López Lecube

Yes. Federico, thanks. It's basically shipping in more expensive, more IPCPR and that can happen for takes place in Northland parting thoughts. So we tend to, we tend to match this depending on marginal, so lower margin broadcast, by 30%. In terms of inputs, we need to take some precautions, we're adding one important silicon from outside of Argentina. We have the manufacturing facilities. Remember that biologicals, don't have anyone raw materials appeals for outside of Argentina, again, we manufacture. And then for fertilizers where we use PAP and MAT gas one or two years, both grown to supply chain has not been as disrupted. So that continues to flow pretty nicely for the quarter and continues to sooner.

Ben Klieve

Got it. That's all very helpful. Thank you for that context. Congrats on -- again on a really good quarter here. And I'll get back in queue.

Operator

Our next question comes from the line of Brian Wright from ROTH Capital Partners. Brian, please go ahead.

Brian Wright

Okay. Good morning. And just real quick question. Can you give us some -- how much the market for the micro-beaded fertilizers are growing, just want to get a sense of market share gains?

Federico Trucco

Hi, Brian. Really happy to have you on the call. Thanks for joining. So if I understood correctly, you’re referring to market share gain in micro-beaded fertilizers, that is a great question. Bear in mind that the main competitor for micro-beaded fertilizers today are basically commodities fertilizer. So we are replacing old technologies with the higher technology fertilizer, specialty fertilizer. So our main challenge is to get farmers to adopt new technologies, while competing with other companies.

There are obviously other players that are like similar fertilizers like ours in Southern America mainly, but we have a competitive advantage that we are the only provider of effective fertilizers that is manufacturing in country. So both in terms of gaining market share versus commodity fertilizers and also competing with other providers of specialty fertilizers interesting every quarter.

For starters, because the uprise in commodity fertilizer prices allowed us enable a more deceptive market of hi-tech products. And the other one is that in terms of the challenges of logistics, that but then alluded into the questions, we have a competitive advantage of manufacturing in country, and therefore making sure that we have a steady supply of fixed cost.

Brian Wright

Great. An interesting sites, given what in the futures market for the commodity pricing. So it seems like this tailwind should last quite some time?

Federico Trucco

Yes, I'm here, I'm really, collectively referred to the commodity – the agriculture commodity prices. So, what we've seen also is that throughout this quarter, state commodity price, and more than anything, produced corn and wheat provided a very healthy for the profitability environment for farmers, which is a metric where we keep an eye considering that that is upsetting in acquiring hi-tech products when they want to re-commercialized.

In particular, I think that from local clients to one that it's more exposed to these dynamics organic fertilizers just because fertilizers represent a big portion of the farmers spending every year. Having said that, we tend to see that there's a correlation of crisis between agricultural commodities, and [indiscernible] that raw materials to us and our main competing products for the micro-beaded fertilizer.

So moving on cultural commodity prices, fertilizers tend to adjust with the lag, but they tend to adjust and that has happened now. What we are seeing now is that commodity prices are a little bit softer. But it seems like they need farmer sentiment and thinking around that. So as long as prices stay where they are in terms of commodity fertilizers and cultural commodities, I think that this is a nice setup.

Brian Wright

Great. Thank you.

Operator

[Operator Instructions] Our next question comes from the line of Steven Ralston from Zacks Research. Steven, please go ahead.

Steven Ralston

Good morning, and congratulations on the successful execution of your two strategies in crop nutrition, and crop protection. Can you hear me?

Federico Trucco

Thank you, Steven. Yes. Thank you, Steven. It's great to have you here in the call.

Steven Ralston

Could you help me understand what management's expectations are on the mix shifts that are occurring in your three segments? It seems like each segment has a very targeted strategy in crop protection. With your pricing strategy, even though you're compressing the margins, sales are growing very nicely in nutrition, sales are even growing faster and the margin is expanding. And this has caused some compression in the corporate margin. But it seems like when HB4 technology really gained some traction, which is a very high margin segment that that would drive the corporate margin higher, is that the way management is looking at it or could you just help me understand that?

Enrique López Lecube

Hi, Steven. This is Enrique. It's great to have you on the call and thanks for joining. So I think that however, you are thinking correctly, so that we are seeing the collection itself -- some of the compression that may be the aspect. Bear in mind that we are also working on growing our baseline business in the field where we invest in expanding our manufacturing capabilities. That is clearly a category that has the higher margin for protection, but then something that we take some time so we will be building that activity throughout the next 12 months slowly, but I don't see the trend is not in compression perfection that there are some seasonal in constrictions on our life. We expanded sales and margin, lucky expanded. I think that -- which is also kind of like steady state for the margins considering that we have the fertilizers significantly and have been able to maintaining the margin for the segments.

And the corporate margin, in the long run, as you correctly mentioned before, HB4 is high-tech primary products. So when those wearing something on profits, sheet in P&L, that should be something that allows us to get adjusted EBITDA margin to lead us to senior level profitability, we have seen the past and could operate at some point between 25% to 30%, that value can understand when we are able to get those profits to keep up our P&L. And that is some more long-term view of the growing [indiscernible] bring HB4 to market.

Steven Ralston

Thank you. Could you clarify the dynamics that are occurring in the distribution channel in crop nutrition? You mentioned that you have 30 new distributors that incorporated Microstar. Clarification of that, are these -- are they adopting Microstar for the very first time? Or are they -- do you already have a relationship with these distributors? And they're just extending it to Microstar?

Enrique López Lecube

So, it’s a very good questions, Steven, so these were trading distributors, but -- and incorporating new presentations Microstar. So we want to market with more conventional presentation, if you will, or less technology. And we have been working on new presentations and new technologies Microstar, after many branding to migrate fertilizers, so a lot of border study existing to that incorporate new presentations of Microstar.

Steven Ralston

So you expanded the relationship with these distributors. I think a couple of years ago, you put out a chart of all your distributors in Argentina, which is impressive. How much more potential is there to broaden your Microstar into other distributors that you're already having relationships with?

Federico Trucco

Hi, Steven. This is fairly, but I think there's tremendous potential, I mean, probably will not expand beyond all points of sale for our volumes to so they are in excess of 700 in Argentina, but they are the -- they're -- these new presentations that Enrique alluded to, that were sold by a very small group or sub segment of the six distributors that are likely to be adopted by the majority of them.

And by them, I mean, sort of the bio version of Microstar that has microorganism in it, so you're not only providing the formulation advantage, where you want to order or application rate or make the nutrients themselves more readily available, sort of microbials are added to the formulation. And today, you will see that close to 10% of the second revenues unexplained by these new product launches. Now, they are in a sub production or a smooth fraction of the 700 sale points that we currently have with 30 that were added in the last quarter. And we believe that throughout the year, we should get the majority of his participants and not beyond the distribution footprint that we currently have for those who like [Indiscernible].

Steven Ralston

Thank you for taking my questions.

Operator

Our next question comes from Kemp Dolliver from Brookline Capital Markets. Kemp, please proceed.

Kemp Dolliver

Great. Thank you, and good morning. Apologies, if you had covered this earlier, but CTNBio is meeting I think today and tomorrow and Echo wheat is on the agenda. Can you talk about what we should expect, if they approve your application, when we would see an announcement or is there -- and is there anything left with regard -- are there any other steps in the approval process between their vote at this meeting and then final approval? Thank you.

Federico Trucco

So, thank you Kemp for your question. We have not discussed that earlier in the call, but I think we should know the outcome of the current meeting tomorrow, I believe on 11. And the two potential outcomes in our view. One is that the community in our way approves the technology. And that is it for the current evaluation or that new questions are requested by committee members, not by evaluators that have not submitted any questions since our last filing. And that was done ahead of the October meeting as they did not have enough time to report on that the October meeting. So the evaluators themselves believe not to be generating questions, but the committee may request to ask additional aspects, in which case we will know tomorrow. But I think those are two possible outcomes on the 11, if there are more questions, we'll try to sort of reply to them quickly, so that we can have -- we'll see consider again in December meeting. And -- but we are anxiously waiting for tomorrow's results.

Kemp Dolliver

That's great. And just to clarify, if they approve, does that complete the process and you will be able to effectively move you're literally standing material steps in the process are done and you'll be able to move forward with launch?

Federico Trucco

So, I think, if they approve, that will be a huge milestone. Remember, we indicated five conditions for us to relaunch. And this is one of them, we have also done filings in other minor export destinations for Argentine wheat, that I believe are below 5% level anything above the 5% level, we have that as a requirement for lawn for a serious problem today, one country where we consistently now if you do like a five year average of a session that explains more than 5% on the margin wheat exports. And the approval that will likely be granted after the current evaluation is for -- so that I think will free up the ability of local meals to export with flour to Brazil with grained approval on -- stage and I think that will probably be much too in country production in Brazil, which is something we're currently pursuing and there'll be a subsequent filing to unrest that in the coming quarters, but I think it will be huge and it will significantly improve our ability to roll HB4 contributing into running.

Kemp Dolliver

Great. Thank you. And my last question is as I look at the balance sheet, biological assets have increased substantially and one what accounts for the increase since June and secondly, how should we -- what should we expect for changes in biological assets looking ahead?

Enrique López Lecube

Hi, Kemp. This is Enrique. Thanks for joining good to have you in the call. So, biological assets mainly comprise arranging for inventories. So the reason that has come out after June is basically because we are accounting for all of the aging for solid inventories that were produced in the last harvest season in Argentina in May, June and July. So, that is the reason why biological assets have gone up. If we decide to keep all of that grain for future or if we decide to discuss some of those varieties that are the two variables that affect biological assets. Going forward we remind, we will also incorporate into that wheat production in the field that will be harvested in December and January, in Argentina. So the trend in biological assets an upward trend with seasonality considering them in harvest -- and then the outflow of that assets is basically when we decide to discard that I think not see correction -- and see temptation for the future. So that -- it's basically the dynamics and there is always be an upward trend as to be loving them.

Kemp Dolliver

Okay, super. So really this is just an inventory -- for inventory line items for here?

Federico Trucco

Yes, it is a as well as it is not converted into [Indiscernible] when we convert grain, we basically process that grain into a final seed HD4 that is converted into move into inventory line. But as long as seeds are screen for a profit has been planted on the field, it says biological assets.

Kemp Dolliver

Great. Thank you.

Operator

We currently have no further questions. I will now hand back over to Federico and Enrique for closing remarks.

Federico Trucco

So not much more to add other than we are very happy and satisfied with performance we're showing you today. I think this is something to congratulate the operations team at Bioceres Crop in terms of different strategies that were implemented and we believe that towards the next few quarters and probably more importantly towards the second half of the fiscal year a similar trend will be seen in the Seed and Integrated Products segments, which is where we are still slightly flat today. And that will materialize primarily as HB4 continue to become reported as revenues and cannot lower continuously notable terrain. So we have a strategy that is moving forward as projected and we are very satisfied with that. We remain fully available to address any additional questions that you might have. And hope and wish everyone a great rest of the day.

Operator

This concludes the call. Thank you for joining and I hope you have a lovely rest of your day. You may now disconnect your lines.

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