Cresud S.A.C.I.F. y A.

Good morning, everyone. I'm Santiago Donato, Investor Relations Officer of Cresut, and I welcome you to the third quarter of fiscal year 2023 results conference call. First of all, I would like to remind you that both audio and slideshow may be accessed through the company's investor relations website at www.cresut.com.ar by clicking on the banner webcast link. The following presentation and the earnest release are also available for download on the company website. After management remarks, there will be a question and answer session for analysts and investors. If you want to make a question, please click the button labeled Raise Hand or use the chat. Before we begin, I would like to remind you that this call is being recorded, and the information discussed today may include overlooking statements regarding the company's financial and operating performance. All projections are subject to risk and uncertainties, and actual results may differ materially. Please refer to the detailed note in the company's earnings release regarding forward-looking statements. I will now turn the call over to Mr. Alejandro Elstein, CEO. Please go ahead, sir.

Thank you very much, Santi. We are beginning now the third quarter results, and you can see in the page number two, that the company's record-planted area in the region, combining the four countries, combining between the ones that we own, the ones that we lease, and the ones that we lease to third-party tools, and in there we have like $28,000, like 10% of the funds that we rent, Generally with the mission of bringing clients, giving some stability at the beginning of development of farms and bringing clients to the selling to the real estate part of the company. Related to the campaign progress, we have this year more mixed conditions than last year. Last year was a big increase of the prices, and some good deals, but this year there is a crisis. We could say that they are sustained, and all of them, soybeans, corn, and some of the sugar came. But the high cost pressure that we suffered from the very beginning, mainly explained by the fertilizers and some other input costs, made margins to decrease. And finally, the adverse climate conditions is affecting the yields on the region, mainly Argentina. The one more affected is Argentina for sure, and we are going to show you a little later. This is a very drought in Argentina. biggest of the, I think, in my history, more than 30 years of crescent, but it's really, to see something like this is long-term in Argentina, is impacting the crop yields, but not only winter crops, they got with the wheat and barley, later came to soybeans and corn, affecting a lot the yields of the country and some of crescent. In the case of Argentina, there is a recovery that is going to come in the future because there's a new announcement of the government about the new soybean, the third soybean of the country at a different price. So, some of the drought effect on soybeans is going to be compensated because of that effect that will be reflected on the fourth. Now, in this one, this one is not reflected, but in the fourth will be reflected the yield of the soybean, but with a new price because of the new effects. There is lower productive too, but some farmland cells. This year probably will be very relevant in farmland cells, mainly in Brazil, some in Paraguay too, and one in Argentina that is going to come, so we are expecting. So we have a lot of activity in the farmland cells, and this is a, We are going to show you one big transaction that is not reflecting on today's balance sheet that Matias will explain. It's going to be in the fourth quarter. Related to the investments in IRSA, we have an increase of 3% on the shares of IRSA. And in IRSA, we are recovering a lot of the risk of the past and the leveraging process of the company. We received a huge amount of dividends from IRSA, from Brasilaro and Futuris Opciones, $125 million. And in the case of dividends, we will have to pay again. Recently, last week and this week, we were paying 6% dividend yield. And on top of that, we were giving to shareholders 2.2% of the capital stock on shares distributions. Related to prices, we can see that after the pandemic, there was a big increase of the prices, achieving more than $600 per ton. But later, this price went to the 500 level, and we are seeing that price decrease on the futures too, so some less pressure on the prices of commodities, if they do, soybeans and corn. We are in this record area, 208, 84 between the four countries, 2% increase last year comparison, and being mainly soybean, corn, and sugarcane, the three main between the four countries. About drought of Argentina, we can see in this graph where Pergamino district shows, Pergamino is in the middle of Corn Belt of Argentina, probably it's one of the more famous areas of the Corn Belt of Argentina, and the drought made it to have a rain in the total year of 336 millimeters, comparing to the normality that Argentina has many regions of 1,000. So the proportion of these droughts affected so big proportion of Argentina, and made mainly the of the country a big decrease on the yields. Here we can see in the other graph in the right, the production current forecast, where Argentina is expecting, because really it's not finished, it's under process today. The harvest is today on the farms. Soybeans, the country is expecting 47% drop compared to the first year that was done at the beginning of the campaign. So almost half of what Argentina was expecting, but there are some analysts talking about more than half drop for soybeans in Argentina. In the case of corn, the expectation is 28% below, and in the week that it was finished in December, it was 40%. Here we are seeing some of the forecast of Cresut, and here we can see on the map where the farms of Cresut are. The globes are old farms, and the small points are the released farms. So we can see that our areas are not exactly the corn belt, and we have the this year Salta province that represents almost a third of Cresut. really explain a big recovery of the, not loss, not recovery, but our loss in soybeans is the 26th compared to the 47th. So this represents the difference of areas that presume that the drought is there, it's really that it's not raining as normal, but really not so dramatic like the convent of Argentina. So, the map of Argentina shows in red the bad areas of April, and the road is not finished. It's not done, and some effects of this are probably coming to wheat. If the rain doesn't come to the country, wheat is going to be affected for next year, too. So, really, the situation of farmers of the country was very bad, and this year, In the past, Argentina brought the prices recovered a lot, but this year, because of return yields, mainly explained by Brazil, made that the loss of the 25 million tons of Argentina were more than compensated by the yields of Brazil, that grew like 30 million tons year to year. So really, there was not any main effect on prices. So the part that is coming is because the government helping some of the situation of the farmers of the country. If we move to the next page, in page number five, we can see that the harvest progress in soybeans, Argentina is close to 42 percent, Bolivia is done, Brazil is close to finish, and Paraguay is zero. Paraguay is going to begin these days, so the total ratio is 71. Case of corn, the majority of the corn is safrinha in Brazil, Late corn in Argentina, the combination of the two makes like 7% advanced area for harvesting of corn for the region. So, all our projections, but we are optimistic that the effect of the bad climate of the region, in cases made of Argentina, affected, but not so much like the rest of the country. We can now move to page number six, and we can see here we are expecting like a drop year to year of 4% in yields, so the 798,000 tons to the 765,000 tons. for the whole region, so that the main effect is Argentina, but the rest is not so affected, so the total growth is not so relevant. But the operational margins are there, are worse than last year, because what I explained at the beginning, the effect of higher cost, The prices last year made a very big rebound and really there was a big effect of increase on the prices that this year is not the opposite. It's even below the price of the budget. So really the effect of prices of this year is not helping like last year. So no yields, no prices and costs going higher. So that is why today nine months reflecting some of those effects is really comparing last year so different. Sugarcane is a little lower, but not so important. We can see the yields of the region that they're stable when we compare the corn at 5.6 tons or soybeans at 2.6 tons. So really, the effect of having that in the region made us more stable than having only one region. In the meat, nothing is special to compare. 78,000 heads of cattle, 7 million kilotons of meat in the company. About real estate, up to now, the explanation of the nine months, there were two small farms, one in Paraguay and one in Brazil. There is a subsequent sale that is not reflected on balance that made the relevant part later. That was done, I think, in April. And here there was a big sale in a total valuation of 409 million . And comparing to the purchase price and capex of close to 60 million Reais, so really a big gain that is going to come on the fourth quarter. We needed two power sources. One was 360 hectares of total area and the other 5,000 hectares of total, 5.2 thousand hectares of total area. The combination of the two makes a total sale of 407 million Reais, really a big gain. It's going to be like 260, 270 billion reais that are going to come on the fourth quarter. So, related to the operational business, there are two big effects. Real estate has, in the fourth, a lot of activity, and in the operational, like the soybean price is going to come on the fourth quarter. If we move to now to the page of our service part, not the operational, not the real estate, service area, the two companies that we ran, CEO, almost 50% of the shares, we see the evolution, long-term evolution of traded tons of these companies that last year in a normal campaign, not very good, but normal campaign, of this 6.6 million tons, and last year did an EBIT of $28 million. This year, because of drought, the campaign of Argentina is much lower, so the company is only intending to increase the market share to Argentina, but not increasing the tons comparing year to year, because Argentina will be close to half of the campaign of company last year so that the company is very positive it's going to keep making a lot of money having lower volume because argentina evolution and this year deal another bond 20 million new bonds again at zero interest rate for three years this company is growing not only argentina giving service to partners in inputs in outputs in consultancy and in futures and options, but now it's doing this process in Brazil, too, through a company that is launching recently called . And related to Agrofiber, Presul owns . This is a marketplace for agriculture. The company's stable in revenues this year is not growing because of the effect of drought in Argentina, and this effect is having the company and the decision of the company in this environment today. companies, the high-tech companies, is to decrease the burn rate to keep the sales stable and to look for the break-even. The company is on that mission to increase some of the number of employees to have this situation, understanding the change on the timing, on the, we think and we have keep thinking that this is going to happen. The marketplace for agriculture is coming. Probably this delays a little, so we have decided to burn the money of the company to arrive to the break-even point with the cash the company raised in the past. And these are the map where the farm, where the, our locations are in South America. The is the marketplace of agriculture for the region. Now I will introduce Mr. Mattias Zajewielski that will begin speaking about IRSA. Thank you, Alejandro. Good afternoon, everybody. Going to the results of IRSA first, as Alejandro mentioned, results during the quarter increased by 3% stake in IRSA. So today, we control IRSA with 56.8% of the shares. IRSA has, during the quarter, very good results. The nine-month period, we saw an excellent performance all in the operational and the financial results. Tenant sales are growing. Higher occupancy has reached historical levels again after the pandemic that went down to levels of 89. Now it's again at levels of 87%. The offices as well, 100% occupancy in the AAA buildings. We finished the occupation of the La Paulera building. We also sold a lot. We sold seven floors of the La Paulera building at very good prices. And there was a revaluation of the remaining four meters of the building because the price now is higher than what used to be in our books. Hotels as well are performing very, very well. There is a huge recovery after the pandemic with probably for our portfolio and very good occupancy. IRSA keep deleveraging during the three-month period. Remember, that was a big challenge of cancellation of debt during March. IRSA paid 100% of the debt, so now there is no more challenges regarding the central bank regulation. And also, IRSA paid a very high dividend during the last month or the last days. It was a 13% dividend yield. that Chris should collect part of that. If we saw the graph, we can see the EBITDA, the last four months EBITDA of the rental segment increasing and surpassing pre-pandemic levels reaching $162 million. So if you move to our financial results, first it's important to understand on the macro side what happened with the different drivers, FX and the inflation generating important results in our results. First of all, to understand that the inflation was 74% during the nine-month period against an evaluation on the official exchange rate of 67%, and on the blue chips of... 59%, that means that in real terms, we have an appreciation of the best of the official exchange rate of 4%, and in the contado con liquidación or blue chips of 8%. That will have different impacts in our results. So going to the page 12, On the operational side, as Alejandro mentioned, this is a very challenging year to compare one year to the other. Now, the last year was a record campaign, excellent results in Brazil and Argentina, excellent production prices, costs that were much lower than this year. And this year, when we compare, we have many effects on the negative side of the drug in Argentina, higher costs in Brazil, over production that is generating that the comparison, you can see this drop of 89%. Here we don't have many results that will be recognized in the next quarter. We will have a different exchange rate for our production in Argentina for the soybean that in March We haven't, so it's not recognized yet. The farm that we sold in Brazil that is not recognized in this nine-month period will be recognized next quarter. So probably this picture is not the best picture to analyze what will be our results in the 12-month period. But of course, this year is worse than the previous one, no? In terms of our forecast and our budget, we are more or less in line on what we forecast this year. But of course, compared with the previous year, it's lower. If we go to the next page, on the operating income, including IRSA, the previous one was just the farming activity, including IRSA, we see a drop of 59.2% compared with the previous year. Mostly is the agricultural part better results on the previous year. Other important driver or line in our balance sheet, is the change in the fair value of investment properties is 100% or almost all related to IRSA that we are posting a loss of 34.8 billion pesos. The same, again, a loss as well in the last year of 20 million pesos. This is more related to what I said at the beginning, the drivers between inflation and devaluation. In dollar terms, the investment properties are increasing slightly. Shopping malls remain stable. The offices will increase a little because of the devaluation of the 200 de la Pobrena building. And the land reserves remain stable in dollar terms. We convert that in real pesos that generate that loss. Regarding the net financial results, we can see a gain of 16.4 billion pesos, was a higher gain last year of 34.5 billion pesos. If you see in the table below, you can see in the first line the net that last year was a gain of 40 billion pesos. That is related to the appreciation of the pesos. Here we convert the dollar denominated debt into pesos, real pesos, and the appreciation of the pesos generate this gain. This year is lower than the previous year, but it's a gain. In the net interest, we can see an increase, slight increase in the net interest this year compared with the previous one. This is more related to the composition of the net. Crescent has a little more debt in pesos term that generates an accrual of higher interest in that line, but then there is compensated because of the revaluation. and the dilution of the peso debt, but it's recognized in the first line in the net final effects results. So trying to understand the net income, all these drivers have some effect on the net income line, but finally we posted a gain of 36 billion pesos. attributable to the controlling interest is 20.4 billion pesos compared with, again, last year of 64.7 and controlling interest of 40 billion pesos. If we see the evolution of our debt, during February, we canceled the remaining part of the bond that we have to refinance because of the central bank regulations, and we canceled that. Also, in April, we issued two new notes, one in dollar link that we issued $30 million at an interest rate of zero that will expire in the next three years. And also, we raised money in peso terms for one year and a half. We raised $20 million plus three. One good news here is the credit rating upgrade, which increased our rating from AA to AA+. Regarding the dividend, we announced and paid a dividend for 9.5 billion pesos, that is, 16.52 pesos per share or 165.2 pesos per ADR. This is 6% dividend yield. We already paid in pesos, and we are in the process to pay to our ADR holders in dollars. Also, we decided to distribute the shares that we bought from our buyback program. that we at the same time that we distributed those shares, so that was already distributed. Regarding our buyback program, we decided to extend the timing for our buyback program. program. The original expiration was this week, and we decided to extend that up to for the next 180 days. From our program, we already bought almost 80 percent, so there is a remaining of 20 percent, more or less 800 million pesos. And we also assessed the price in pesos turned to 425, and in dollars, still 8.5 dollars per area. I think with this, we finished the formal presentation. Now, we open the line to receive your questions. Well, now is the time for the Q&A session. If you have a question, please click the bottom labeled Raise Hands. I remind you that questions will be taken in the order we receive them, as we always do. Here we have some questions from . The Argentina Corn Belt land price chart that you used to show your presentation earlier was used on official FX rate or parallel FX rates?

This is probably when we show that those are real dollars.

When we show the price of Argentina land of around $14,000 or $15,000, the hectares is always on real dollars, but it's far more in dollars. in Argentina, that is the Corn Belt.

You know, Cresud owns farms across Argentina and goes to marginal areas in the north. So in general, marginal areas follows the Corn Belt in terms of prices. Yeah, like real dollars. Yeah, like all real estate and farming, real estate in Argentina, everything is sold in real dollars. And people could pay pesos, but you always fix prices thinking in real dollars. And he asked as well, most of your farmland sales were in Brazil. If you can indicate an outlook for Argentina farmland prices and possible sales in the near future. Yes, there are some possibilities of transactions in Argentina. Prices are not decreasing so much as we would be thinking because of the exchange rate difference between the blue and the official. From the top prices of the corn bed in the few years ago, that was at 18,000. Today you are talking about 14, 15,000 dollars. So there was a drop to the peak. What happened in the land of Argentina was didn't follow the trend that US and Brazil and other areas of the world increased dramatically these years. So, but still they are not big drops to the highest price prices few years ago. And what we expect is probably next government. I'm not sure what will be the election, who will be the candidate, but how will be the measures related to dollars and taxes and exports. We are expecting some decrease of the gap of the two dollars and maybe the decrease in time in the taxes and exports too. We expect as farmers this is different to the farmers of US and Brazil are really damaging a lot farmers of Argentina. And so we are expecting that to be And if that is the case, prices of the land of Argentina will grow a lot because today the gap between prices of Argentina to the other areas is dramatic, highest of the history. Thank you. We have next questions come from . When can ADR investors expect to receive the cash and stock dividends? Well, we already are working with the Bank of New York as a trustee of our ADR program. We hope at least that will take 10 days, so since Bank of New York fixed the record today, the payment will be 10 days later. So we expect that the Bank of New York will fix the date probably next week. So we are working with them, and the idea is to do it as fast as possible. There is a new question on forecast for rainings in the next coming 12 months, and the next campaign, what we can expect. Up to now, every specialist on climate was speaking about the changes from Niña to Niño, and that was representing that in February the rain would come, and some came, but really not the one we expected, so there is I would say delay of the changes from the Niña to Niño. If Niño comes, that will make the normalization of rains in Argentina that have three years of very bad climate. This year is worse, but the three were bad. So, and if Niño comes, it's going to have more than 1,000 in the corn red of Argentina. That's what we are expecting. So, but today, it's not. And today, what I said at the beginning, the wheat, if it doesn't rain the next 30 days, it's going to be strongly affected. So, we are waiting for those rains. There is one more from George . There is plans on lifting FIO, brokerage company, any time on an exchange. We don't know, really. This company today has plenty of cash and is making really big benefits and giving good dividends. Maybe with this company, we'll need some cash or some more if the strategy we are beginning to think and developing in Brazil will need. So maybe yes. For Argentina, I would say no. But maybe for expansion of the strategy for Brazil, the company could be thinking on raising capital because the size and the working capital the country in Brazil needs on that business probably will need that. If you like these minutes more, if there's any additional questions, you can use the chat or raise hands. Here, a new one. Are you seeing any reduction in fertilizer costs? Yes. It was a big drop comparing last year to this year. like 30% of drop prices comparing year to year in dollar terms. So that is helping some on the margins for next campaign because drop of prices by drop of inputs is going to have, I would say, like same margins as the last year forecast, as the last year budget. So really, the impact of these inputs is going to be for the next campaign. The one that is probably more affected because of use of fertilizers is Brazil, more than Argentina. But really, cost of inputs is going down because of margins of farmers, no? This is the case. Well, we can conclude the Q&A session and the presentation. We thank you all, and I will turn back to Alejandro for his closing remarks. We are finishing the campaign. This next quarter will be the last one. We spoke about the operational. I think the result finally between the combination of our three steps in the agriculture and the real estate operational and services is going to be close to budget. Really, we are lucky compared to the situation of other farmers of the region. So we are expecting next campaign with this condition of a little lower prices for the next campaign, but a lot of liquidity in the real estate. Not in Argentina, because of the situation in Argentina, but the rest of the region is really much more liquid, so we could be making more results in that portion of the company. So we are very optimistic in agriculture in the region, and Cresud intends to keep growing from the 280,000 hectares to keep growing in surface in the region. So thank you very much, and we'll see you next quarter in five minutes.