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Bioceres Crop Solutions Corp. (BIOX -1.77%)
Q3 2022 Earnings Call
May 12, 2022, 8:30 a.m. ET


  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Hello, everyone, and welcome to today's Bioceres Crop Solutions fiscal third quarter 2022 financial results conference call. My name is Emrin. I'll be coordinating your call today. [Operator instructions] I'll now pass the call over to Rodrigo Krause to begin.

Please go ahead.

Rodrigo Krause -- Head of Investor Relations

Thank you. Good morning, everyone, and thank you for joining us. Presenting during today's call will be Federico Trucco, our chief executive officer; and Enrique Lopez Lecube, our chief financial officer. Both will be available for the Q&A session.

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 as 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.

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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 Bioceres Crop investor relations site. At this time, I would like to turn the call over to our CEO, Federico Trucco.

Thank you.

Federico Trucco -- Chief Executive Officer

Thank you, Rodrigo, and thanks to everyone in the call for joining us today. Please turn to Slide 3 for a quick overview of the quarter's main highlights. Our third fiscal quarter has been historically our weakest and less eventful quarter for various reasons. Most importantly because it overlaps with the Latin American summer, not an important planting period for any one crop.

The third quarter of fiscal year 2022, which we are currently reporting, deviates from this historical role. And this is not only because of the great momentum we continue to observe in our sale with revenues increasing 72% on a completely comparable basis, but also and significantly due to the business development and regulatory milestones that were achieved during the period and subsequently thereafter. As we announced in March, we are pursuing a transformational merger with Marrone Bio Innovations to become an indisputable leader in the ag biological space. And recently in April, we have received the long awaited regulatory green light from China that allows us to move HB4 soy into its commercialization phase.

With regards to the MBI merger, we were able to file F4 documents with the SEC this -- last Monday, and we continue to be on track for our first quarter closing in fiscal 2023. That is between July and September of this year. In terms of HB4 soy, we are today providing guidance for fiscal year '25, where we expect HB4 soy to contribute between $20 million and $25 million of incremental EBITDA. We expect this contribution only after two prior commercial seasons in Latin America, as we will describe in more detail in a few minutes.

Outside from these important milestones, we're taking advantage of the current momentum with interest to advance commercial agreements for HB4 wheat within Latin America and expand outside of the region. Among these, our wheat subsidiary, Trigall Genetics, has reached a preliminary understanding with S&W Seed of Australia to acquire a majority of its wheat breeding program and assets. This agreement is reached at the time when a positive recommendations obtained from regulators in Australia regarding the use of HB4 wheat in food and feed. We'll discuss these and other HB4 wheat-related developments throughout the presentation today.

Please now turn to Slide 4 for a deeper discussion on our current HB4 soy highlights. The Chinese approval for HB4 soy does two immediate things. First, it allows for unrestricted commercialization of HB4 soy in Argentina, our most immediate market. And secondly, it releases our third-party licensees from contractual restrictions to initiate launch activities in multiple geographies.

We estimate an addressable market of approximately 35 million hectares for HB4 soy in the U.S., Brazil, and Argentina just to focus on the most important production geographies currently enabled. We believe that given the status of our pipeline and that of our licensees, we can achieve a 15% penetration of this opportunity in Argentina, 4% in Brazil, and have an initial 60,000 hectares farm in the U.S. during the 2024, '25 crop season. All combined, we estimate an incremental EBITDA contribution of $20 million to $25 million for fiscal year '25, with most of these EBITDA and associated revenues resulting from our proprietary channels.

For a more detailed overview on a year-by-year basis, please turn to Slide 5. In this slide, you can see the number of varieties expected to be launched during the next three years and how many of these varieties are being developed by us compared to our licensees. We expect each variety to cover between 100,000 and 300,000 hectares on an annual basis once introduced, so not broadly on Year 1 but most likely as of the Year 2 and forward. Finally, on HB4 soy, and turning to Slide 6.

We are 52% done in harvesting the current season and expect close to 70% of the resulting inventories to meet initial seed quality standards. Non-performing materials and out-of-standard inventories will be commercialized as grain. We'll continue to pursue approvals in significant export markets other than China and we expect to have clearances in place in countries accounting for 75% of its soybean trade out of the Americas by fiscal year '24. Please turn now to Slide 7 for an overview of some major developments regarding HB4 wheat.

As you may know, the current conflict in the Ukraine-Russia region is significantly affecting the global wheat market. The increasing price of wheat is also translating to increased interest in wheat breeding and production solutions, and we are today benefiting from our unique technology offering for this crop. As I indicated at the beginning, the Trigall Genetics has reached a preliminary understanding with S&W Seed of Australia to create a joint entity, Trigall Australia, that will own the breeding program and assets that S&W bought from Corteva Agriscience back in 2019 and further develop until today. Under the current terms, Trigall Australia will be majority owned by Trigall Genetics or joint venture with Florimond Desprez.

We have also reached a collaboration agreement with the African Agricultural Technology Foundation based in Kenya to initiate a path for HB4 wheat into sub-Saharan Africa. We'll be initially testing HB4 performance in selected environments and initiate trait in progression into locally adoptive materials. The existing approvals for the use of HB4 wheat in Argentina and Brazil, we have added regulatory clearances or positive recommendations in Colombia, Australia, and New Zealand and expect several other positive regulatory news in the coming months and into next year. In Slide 8, you will find some additional information regarding the opportunity for HB4 wheat in Australia and the rationale for the establishment of Trigall Australia by acquiring S&W Wheat assets in this country.

To put this into perspective, Australia is a bigger wheat market than Latin American today. It is a production area that is often and severely affected by drought events and it has established an efficient endpoint royalty system that facilitates collections and quick technology adoption. All these factors make it a very logical next step in our internationalization process for this technology. For a brief update on the status of the HB4 wheat program in Latin America, please now turn to the next slide.

Wheat planting in Argentina will start in the next few weeks and we're estimating HB4 program sales of between $10 million to $12 million in the current season. We have a little over 100,000 tons of wheat that are still in inventory and we have already recovered over $4 million of working capital by selling non-seed inventories as grain. When we do this, we operate with selected processors under our identity reserve scheme to minimize interference with conventional commercial channels. Today, we're operating with 12 different processors with aggregated capacity of close to 700,000 tons, a capacity that far exceeds our remaining non-seed inventories for grain processing needs that may result from the harvest of these next crop.

Let me share with you some interesting data points. Since the approval of HB4 wheat in Argentina, 120 optical testing devices were deployed to ports and malls to detect HB4 presence at points of grain delivery. In total, over 4 million tons were tested. Despite some anecdotal false positives, no formal complaints or corroborated positive detections have been communicated to us as of today.

We continue to pursue regulatory clearances in important wheat export destinations as we further internationalize this very exciting opportunity. Finally, on my part and before turning the call over to Enrique, please turn to Slide 10 for an overview of an updated timeline regarding the merger transaction with MBI. As I indicated before, we have filed F4 documents with the SEC this past Monday, and we expect the SEC review to take between six to eight weeks. With SEC approval, we would then have four to five weeks before the MBI shareholder meeting can be convened and the transaction formally approved.

This gives us today between 10 to 13 weeks before closing, and this is consistent with our prior expectations on this matter. Let me now pass the call over to Enrique to go over the numbers for our third fiscal quarter.

Enrique Lopez Lecube -- Chief Financial Officer

Thank you very, Federico. Good morning to everyone and thank you for joining us today. Please turn to Slide 11 to get started with the financial review of the quarter. Following with our latest top line performance, we saw another very strong quarter for sales.

Comparable revenues for our third fiscal quarter grew 72% year over year, reaching $60.1 million a record high third quarter revenue number for us. It was not so long ago, probably two years or less, that a $60 million quarter only took place in the high season and not in a traditionally low season quarter like this one. Growth was driven by higher sales across all product categories of the crop protection segment, combined with continued momentum in our micro-beaded fertilizers business. I will provide more details on what drove growth in a minute but it is important to note that this great quarterly performance continued to build on top of what we had accomplished in the first half of our fiscal 2022.

Year to date, revenues totaled $215.2 million, a 72% increase versus the year ago period. And LTM revenues reached $287.5 million, a 63% increase compared to the LTM metric from the third quarter of fiscal 2021. No doubt an outstanding performance of our business up to this point. Let's please move on to the next slide for a more detailed look at growth drivers, comparable gross margins, and the impact of IAS 29 on reported revenues.

The crop protection segment was the biggest contributor to sales growth this quarter with an impressive 118% gain, a 16 -- sorry, a $19.4 million increase, that took comparable revenue for a segment to $35.8 million. We saw higher third party product sales in Argentina and a strong increase in sales of adjuvants across South America as many farmers decided to purchase adjuvants in advance to ensure availability in light of the current global supply chain constraints. Difficulties to ship active ingredients out of China have driven crop protection prices higher, creating a positive environment for our sales teams in this segment. Crime nutrition also had a solid performance, with revenues increasing by $5.7 million to $20.8 million, a 38% growth rate.

As I mentioned, micro-beaded fertilizers continued to push sales higher due to positive market conditions. Competing commodity fertilizers, MAP and DAP continue to experience price increases during the third quarter due to high uncertainty around supply in tiered cultural markets, which stimulated demand of our product and further enhanced the value proposition. We have taken a conservative pricing strategy by increasing prices at a slower pace than commodity phosphate in anticipation of MAP and DAP prices turning lower at some point, given that we are currently seeing historically high fertilizer prices. The seed and integrated product segments remain stable with overall comparable revenues a $3.5 million for the quarter.

Seed treatment pack sales increased in Argentina and Europe but this growth was offset by lower seed sales in Argentina due to delayed wheat planting decisions by farmers. Variances in comparable gross margins for each segments are mostly attributed to product mix rather than by a shift in profitability of the different product categories, which remained fairly stable as sales grew. Crop protection decreased from 37.7% to 35.9%, as growth in sales of lower margin seed protection and third party products outpaced growth in adjuvants during the quarter. seed and integrated products rose by 130 basis points to 52.2% on higher contribution of seed treatment packs to the mix.

And finally, crop nutrition fell slightly from 53.2% to 51.6%, given the higher growth contribution of micro-beaded fertilizers, which have lower margin than inoculants. To summarize, growth in sales was achieved on stable margins, which is something on which we always focus. Before we turn to the next slide, it is important to note that IAS 29 adjustments have become increasingly material over the last few quarters as the inflation rate in Argentina outpaced the appreciation of the local currency, generating a distortion in the financial statements of the operating subsidiaries of the country that are then consolidated into Bioceres' financials. For example, while we reported revenues in the third quarter of fiscal 2021 were only $1.2 million higher than comparable revenues, this quarter's gap from IAS 29 adjustments was more than $9 million.

Let's now please turn to Slide 13 to review gross profit for the quarter. Total comparable gross profit grew by 59% year over year, reaching $25.4 million, a record high third quarter figure and in line with our top line performance. Crop protection gross profit rose by $6.6 million, reaching $12.8 million, up 107% year over year. Crop nutrition contributed $10.7 million to comparable gross profit, increasing 34% or $2.7 million.

And seed and integrated products generated $1.8 million in gross profit, almost the same as last year. As I mentioned, individual product categories maintain stable gross margins. The overall comparable gross margin decreased from 45.6% to 42.3% as segments with lower gross margins saw greater expansion, mainly crop protection. While segment mix explains these volumes in comparable gross margin, it is important to note that in this particular quarter, IAS 29 adjustments heavily affected the reported gross margin figure.

While IAS 29 application expanded revenues $9.4 million above the comparable figure, it had the opposite effect on gross profit, contracting the reported metric by $1.7 million versus the comparable gross profit. Importantly, adjusted EBITDA calculation is based on the reported gross profit tier affected by IAS 29. Distortion of financials from the application of IAS 29 has become increasingly significant as depreciation of the local currency in Argentina has lapped the monthly inflation rate by 41% over the last 15 months, an unusually long period of time for these two variables not to converge. Please turn to Slide 14 to take a closer look at EBITDA drivers over the quarter.

Adjusted EBITDA totaled $4.8 million in the third quarter of fiscal 2022, down from $6.9 million in the year ago quarter. I would like to call your attention to a few concepts worth keeping in mind when considering EBITDA for the quarter as it might not give you the best picture of the underlying performance of the business, which was outstanding in terms of revenue and gross profit. First, our third quarter is seasonally slow, which tends to amplify smaller items that would probably have less of an impact on high-season quarters. Furthermore, our portfolio is heavily biased toward planting activities, which many times create pacing issues by uncoupling expenses from corresponding profits.

Particularly in this quarter, freight and haulage expenses were unusually high as we made the decision to anticipate shipments of high margin products closer to end markets as a precautionary measure to address uncertainty in supply chains. Freight expenses this quarter rose $1.6 million, a 165% increase versus last year without the corresponding profits that we expect to materialize in the fourth quarter. Second, as we scale up HB4 hectares, we are incurring pre-launch expenses on ramp-up costs that were much smaller or not even present in the year-ago quarter. Particularly in the third quarter of the current fiscal year, HB4-related costs and expenses increased to $2.3 million from $0.5 million as hectares managed under the HB4 program rose almost threefold, and we recognized no profit from HB4 wheat that are expected to begin in the fourth quarter.

And lastly, the above mentioned 41% lag of the depreciation rate of the Argentine peso versus local inflation rate generated three negative effects on quarterly EBITDA. One, a $1.7 million IAS 29 negative adjustment to reported gross profit on which EBITDA calculation is based. Two, IAS 29 adjustment to expenses. And three, a nominal increase in SG&A incurred in the country, where we house our manufacturing and administrative functions.

The last two together account for $2.3 million of the total seven point million dollars -- $7.8 million in SG&A increase for the quarter. While these two [Inaudible], Argentine FX and inflation normally average out. When they don't, it creates significant headwinds as this particular quarter shows with a combined $4.1 million impact to our EBITDA. Let's please turn to Slide 15 to briefly review our financial position before turning the call back to Federico.

Total debt has been increasing in line with the growth of the business. Net debt by quarter end was $163.7 million, a 3.06 net debt to LTM adjusted EBITDA ratio. Total financial debt reached $205 million, increasing from $183.4 million in the third quarter of fiscal 2021, which explains higher LTM financial expenses on a relatively stable cost of debt. Subsequent to [Inaudible] closing, we announced the conversion of 75% of the outstanding amount of the convertible notes issued in 2019, reducing our short-term debt by approximately $37 million as we prepare for two major events, the closing of the merger agreement with MBI and the commercial launch of HB4.

Following the recent soy approval in China and progress made in expanding our wheat footprint to Australia, it is reassuring to have now set targets for HB4 wheat and soy that imply a contribution of $35 million to $45 million of additional EBITDA over the next two to three years that will build on top of a healthy and growing baseline business. This concludes my remarks for today. Federico?

Federico Trucco -- Chief Executive Officer

Thanks, Enrique. And I think we can now open up the call, operator, for Q&A.

Questions & Answers:


[Operator instructions] Our first question today comes from Ben Klieve from Lake Street Capital Markets. Please go ahead, Ben. Your line is now open.

Ben Klieve -- Lake Street Capital Markets -- Analyst

All right. Thanks for taking my questions and congratulations on all the developments here. I have a couple of questions on HB4 wheat as there's been an awful lot of news here. Regarding Australia, which is a really exciting development for a lot of reasons, I think, you mentioned you said an acquisition of S&W's wheat varieties.

Are you making any cash payments to S&W for this or is the implication here that S&W is going to be contributing its wheat assets to the joint venture on a non-cash basis?

Federico Trucco -- Chief Executive Officer

Hi, Ben. It's great to have you here in the call, as always. So it's a combination of cash and receivable ownership for S&W into a new entity as consideration for the assets that we are receiving.

Ben Klieve -- Lake Street Capital Markets -- Analyst

Got it. Got it. OK. Thank you.

And then my second question on HB4 wheat in Australia is has there been any work done on developing this kind of under the radar? Historically, I mean, have -- between Bioceres Florimond and S&W, have you been working on development work prior to this announcement or are these efforts really starting today?

Federico Trucco -- Chief Executive Officer

So we've been working under the radar in Australia for some time. We've done this initially with a partner helping us on the regulatory front. And when we decided that -- to move forward in this particular geography, and that was a joint decision with Florimond Desprez, our JV partner, we needed to engaged with S&W, which we knew acquired the Corteva seed assets -- wheat seed assets a few years back, and worked toward this -- that we are announcing today. It also sort of came together at the same time we received news from the New Zealand, Australia regulatory body recommending an approval for HB4 using -- in feed and food within these two countries.

So things are coming together in a nice way in a market that is, as I indicated, bigger than Latin America.

Ben Klieve -- Lake Street Capital Markets -- Analyst

Got it. Got it. That's helpful. Regarding soy, it looks like a lot of progress here.

Great to see the 75% levels, which you noted converting to inventory. The thing that was the most notable to me that you talked about expectations here for kind of a modest launch in the U.S. in 2025, which is a little earlier than I would have anticipated. Can you talk about -- can you provide just a bit of context around that? I mean, are you -- is your intention here that you think you will be a seed company selling seed in the U.S.

in 2025? You think this is going to be the royalty business, do you have kind of geographies lined up that you're going to launch? Any detail that it would be helpful.

Federico Trucco -- Chief Executive Officer

So, look, we are looking forward to the combination with our own and we do expect to have some of those capabilities become available for us to develop an organic strategy, particularly in the area where we believe HB4 to be most valuable in the U.S., which is kind of the Dakota, Minnesota, and southern Canada, central southern Canada part, where we expect that technology to deliver significant yield increases. Now we are realistic in terms of our current status in terms of germplasm assets. So what you see there under our proprietary strategy is coming together by us being able to in-license genetics from existing participants in the U.S. market.

So we're not able to disclose today, who the providers are, but we were able to secure genetics that are locally adoptive so that we can have these earlier opportunity. Now we understand that for us to be able to fully penetrate this market, we need to develop these third-party channels, like we are doing in Latin America. I mean, even though initially we take sort of the lion's share of the bigger share of the effort, we do expect third-party, well-established soybean seed companies to generate royalties for us in the medium to longer term strategy. And in the U.S.

that is critical. So we we want to be the first-to-market channel. We are incorporating third-party germplasm to be able to do so. And hopefully as we validate the U.S.

as a valid market for HB4 for soy, we will have third-party seed companies doing the work like they are in Argentina and Brazil.

Ben Klieve -- Lake Street Capital Markets -- Analyst

Got it. Got it. Very helpful. My last question, and I'll get back in queue.

Now that HB4 is here, wondering if you can help us a bit with kind of modeling the seasonality. How much revenue from wheat and soy do you expect will be concentrated in your fourth and second fiscal quarters, respectively, versus kind of being extended throughout the entire year?

Enrique Lopez Lecube -- Chief Financial Officer

Hi, Ben. This is Enrique. Good to be talking to you. Thanks for joining the call.

Look, I think that obviously be surprised that our tailored for planting. And while Argentina and Brazil remain to be an important part of the revenue stream and profits of this particular initiative of the company, I think that our fourth quarter will be probably when we recognize the revenues coming from wheat might fall -- some of that might fall into the first quarter of our fiscal and the second quarter of our fiscal when we're going to get most of the revenues coming out of soybean. And that's the summer crops planting season in Latin America. These will begin to even out when we start getting revenues from the U.S.

but I would expect our Q4 and Q2 to be where we get most of the revenues from HB4 wheat and soy correspondingly.

Ben Klieve -- Lake Street Capital Markets -- Analyst

OK. Very good. All right. Thank you both for taking my questions.

Congratulations again on all the exciting news and I'll get back in queue.


Thank you, Ben. Our next question today comes from Brian Wright from ROTH Capital Partners. Please go ahead, Brian. Your line is open.

Brian Wright -- ROTH Capital Partners -- Analyst

Thanks. Good morning. Congrats on all the progress. I wanted to just get a sense.

Did you speak about the revenue basis for the EBITDA for HB4 soy in 2025?

Federico Trucco -- Chief Executive Officer

So a few things to consider there. Obviously, the revenue from licenses or royalties coming from third parties would tend to be small, but with a high gross margin contribution because, obviously, there's no cost of goods or relatively small cost of goods to that revenue compared to the proprietary revenue, where we are selling the fully integrated seed product and there and we will be operating on the gross margins you've been seeing from the HB4 program already. I will let Enrique complete the answer in terms of what to expect on a per hectare basis perhaps, which is, I think, probably the best way to model total revenues for fiscal year '25.

Enrique Lopez Lecube -- Chief Financial Officer

Hey, Brian. Good to have you on the call. So that is a good question. That's why on the presentation we provided our overview of what we think will be the split between proprietary channel and nonproprietary channels.

So I think that for what it's worth, the back of the envelope calculation that you can do is that a nonproprietary channel sale would bring probably a third of the revenues that a nonproprietary channel would bring. But as Federico said with a much higher margin as we are only accounting for royalties, so costs of goods sold would be rather low. So I think that one-third of our revenue for nonproprietary channel versus proprietary channels is a good back of the envelope or a rule of thumb to use.

Brian Wright -- ROTH Capital Partners -- Analyst

Great. I just want to make sure I understand that. So one third of -- if it were proprietary or split among the the two buckets. So let me put it in numbers.

So if we are pricing a bag of soybeans up $30 to $35, then that would mean that on a nonproprietary channel, we would be charging about $10.

Perfect. OK. Thank you so much. Thank you.

Got it. Got it. And then, if I could just -- one real quick detail follow up. Could you give us the exact percentage on the Trigall ownership for Australia?

Federico Trucco -- Chief Executive Officer

So, obviously, that is still to be finalized, but we will have a controlling interest of 60% on Day 1 jointly with Florimond Desprez and the ability to increase that up to 80% according to the current terms.

Brian Wright -- ROTH Capital Partners -- Analyst

OK. Great. Thank you so much.


Thank you, Brian. [Operator instructions] Our next question comes from Kemp Dolliver from Brookline Capital Markets. Please go ahead, Kemp. Your line is now open.

Hi, Kemp. Your line is now open. Please proceed.

Kemp Dolliver -- Brookline Capital Markets -- Analyst

Thank you. First question, just continue with Australia, S&W reports that Australia represents about $24 million in annual revenue, but I'm pretty sure that includes pieces of the business that will not be in the JV. So first question is, can you roughly size the revenue -- incremental revenue coming in from the joint venture?

Federico Trucco -- Chief Executive Officer

Sure, Kemp. Thanks for joining the call. Those revenues reported out of Australia are probably mostly from pastures and sorghum and other crops. Wheat revenues, if I recall correctly, are less than a million from their existing operation.

So they're not too significant initially but, obviously, that will give us locally adoptive germplasm among which we can breed HB4 right away and have that technology become available in the next few years. We believe that by fiscal year '25, we are likely to get cultivation clearance and probably thereafter be able to launch that commercially in-country. So not meaningful Day 1 from a revenue perspective from the commercial business that currently exists.

Kemp Dolliver -- Brookline Capital Markets -- Analyst

Super. Thank you. And you've made a couple of important moves in the last few months that expand your footprint for essentially distribution and marketing purposes. Are there any other markets of consequence on your radar screen that you would like to enter in a similar fashion?

Federico Trucco -- Chief Executive Officer

Look, obviously, Australia is -- from wheat perspective is a very logical next step for us. In terms of business opportunity for wheat, the U.S. is one that we would like to put online sooner rather than later for wheat. And I think we're likely to do something similar to what we are doing in Australia at a second stage and that would be our sort of highest priority outside of what we are currently announcing today.

Kemp Dolliver -- Brookline Capital Markets -- Analyst

OK. I'll ask about one market in particular. So in addition to approving HB4 soy for import in the last couple of months, food security has become a high priority for the Chinese government. They've started to loosen their GMO rules for domestic production.

You have a partner there at least who has helped you through the regulatory process. Do you see opportunity in China in the next couple of years for domestic growers for HB4 soy and possibly wheat, but I think soy is the bigger concern to them.

Federico Trucco -- Chief Executive Officer

Yeah, definitely. I think even though that's been kind of not -- it's something that is not in our immediate plans. I think that the current situation in China, the recent approval of HB4 for feed and food and importation and the growth that we're seeing in our Chinese partner, that is becoming a significant player in the biotech sphere within the country, I think allow us to be more optimistic about the possibility of bringing this technology into China. And I think that you will probably see that materializing in the form of a joint agreement or with a local partner of significance, and not something that we are likely to ourselves on a stand-alone basis.

Kemp Dolliver -- Brookline Capital Markets -- Analyst

Super. And my last question is, in the past, you've given capacity utilization data for the micro-beaded repeated fertilizer plants. Do you have an update on that?

Enrique Lopez Lecube -- Chief Financial Officer

Hey, Kemp. This is Enrique. Good to have you on the call. So, yes, we are -- as we measure use of fiscal capacity, we are today at roughly 65%.

Now, you need to bear in mind that that's considered sort of like the annual capacity of a plant when you go into high season like now, what I can tell you is that we are running at full capacity today because we are building inventories for the high season in the summer, crops planting in Latin America and also for winter crops planting now. So today we're running at full capacity. If you annualize that, it's around 65% but that 65% doesn't sell a reality because it spreads out capacity throughout the year.

Kemp Dolliver -- Brookline Capital Markets -- Analyst

Super. Thank you so much.


We have no further questions. I'd like to hand the call back for closing remarks.

Federico Trucco -- Chief Executive Officer

Thank you, operator. Well, I mean, I think that it's very rewarding for us to see that the momentum that we've been reporting in the last few quarters continues throughout the current quarter. And we are moving forward into closing a fiscal year that I believe will be record setting in many ways and not only sort of reporting these good numbers, but also finally having all these regulatory clearances that were pending materialize. So we achieved that Brazil approval last year that basically enabled us to launch HB4 wheat in Argentina.

Earlier today, we got news that the Ministry of Agriculture here has fully released the commercialization of the first HB4 variety so that there no doubts as to what the Brazil approval means in terms of us being able to bring this forward and materialize the revenues that we are estimating today in the call. And also China that's being long awaited. Took us more than six years to get to where we are today. So like someone said, nothing is fast in agriculture, but we are today monetizing or capitalizing or showing some of the results of the investment and decisions we took many years back.

And we are very proud of where we are. We are very happy with where we are going and hopefully, once we get done with the merger with MBI, all of these will become even clearer to investors in the space. So no more than this and I hope everyone can have a great week and looking forward to staying connected as needed.

Duration: 47 minutes

Call participants:

Rodrigo Krause -- Head of Investor Relations

Federico Trucco -- Chief Executive Officer

Enrique Lopez Lecube -- Chief Financial Officer

Ben Klieve -- Lake Street Capital Markets -- Analyst

Brian Wright -- ROTH Capital Partners -- Analyst

Kemp Dolliver -- Brookline Capital Markets -- Analyst

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