Brasilagro Brazilian Agric Real Estate Co Sponsored ADR (Brazil)

Good afternoon. Welcome, everyone, to Brazil Agro's first quarter 2020 results conference call. Today with us we have Mr. André Guilmon, CEO, and Mr. Gustavo Lopes, Administrative Officer, Investor Relations Officer. Today's live webcast and presentation may be accessed through Brazil Agro's website at www.brasilagro.com. We would like to inform you that this event is recorded and all participants will be in a listen-only mode during the company's presentation. After Brazil Agro's remarks, there will be a question and answer session for analysts only. At that time, further instructions will be given. Should any participant need assistance during this call, please press star zero to reach the operator. Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of Brazil Agromanagement and on information currently available to the company. They involve risks and uncertainties because they relate to future events and therefore depend on circumstances that may or may not occur. Investors should understand that conditions related to macroeconomic scenario, industry and other factors could also cause results to differ materially from those expressed in such forward-looking statements. Now I will turn the floor over to Mr. André Guillaumont, Chief Executive Officer, will make the presentation. Sir, you may begin. Good afternoon, everyone. Once again, it's a pleasure to have you all here at this moment to share our results of the first quarter that starts this year, starting now. We are in a difficult time in terms of market and weather, so it's good to share our expectations with us and talk about our results in this first quarter. And we are always available to answer your questions. So I would like to start by saying that on page two, we have a summary of our performance in this first quarter. It has been a robust quarter and we'll compare it to the first quarter of last year. Let's start by highlighting that we had a net revenue of $185 million in the first quarter and a net income of $40.6 million, the adjusted EBITDA of $57.4 million. The revenue from sales of farms amounted to $28.7 million and once again It has shown a good result at the end of the year, has had robust dividends for the market. We have approved in the company's shareholders meeting payment of dividends in 50 million reais of approximately 93 cents of real per share. So once again, it's a quarter that we start combining operational and real estate results. the sales from properties result is a more seasonal one, whereas the operational result is distributed throughout the year. And we have as an assumption, the combined result from both. This is the strategy that we believe strengthens our business model. Now on page three, I would like to explain the two transactions that happen in this quarter. A total sales in the quarter of 1,219 hectares of land amounting to 28.7 million reais. We separated two operations, one with the IIR of 21.4 and the other 14.7. Taquari Farm was bought in 2007. We made a small sale, and now this is the second sale in October. It's land with a small area, a farm with a small area of land, 1,100 bags of hectare as a nominal sale value, and the accounting gain was 4.3 million, and an IR of approximately 21.4%. This farm had an issue to be overcome regarding registration and payments that was overcome long after we purchased the farm. So the IRR was impacted with this payment that was a bit longer terms whereas compared to Araquaria that is in the same area. In this first sale That is the first sale. And the second sale was the sale that happened in September, the first one of another part of Jatoba Farm. We have constantly shown that the assets in Bahia are worth having. Bahia has good conditions, a good productivity, not excellent, which brought a lot of liquidity to the area. So we managed to make another important sale in this quarter of the year on a sale of 22.7 million reais, a total of 1,134 hectares, 893 hectares of arable land, which an accounting gain of 16.6 million and an IRR of 14.7%, which was a pleasant surprise for this asset. Now moving on to page four. This is important to comment on what has happened in the harvest year 2019-2020. Brazil had a position when compared to other years of delayed planting more in some regions than others. In Mato Grosso, we are in advance of we are quite advanced when compared to the rest of the state. In other areas, in other regions, we're a bit delayed regarding the stabilization because of the stabilization of the rainfall volume. As you may know, the weather has been quite erratic in the beginning of summer season with rainfall that... after a cold front comes covering a certain region. So that allows one farm to plant, another farm not to plant, whereas part of the farm can plant and the other cannot. So we are expecting the final rainfall regime for the year, but so far it has been a very challenging year because we don't know exactly when the rainfall season will start. And in Mato Gros, we have advanced with the planting season. In our Xingu operation, we have more than 19,000 hectares planted of a total of 20. So one or two more days of planting will be done with that. Taquari, we're also advanced in the planting of soybeans. And we have started planting the northeast region at Chapahal Farm. We have planted one surface there. We had one week of drought, and then this week we had a pleasant surprise of rain coming back again. So we'll resume planting soon. And this is a summary chart of all the planting areas. Soybean, a year-on-year growth from 51.8 to 54. Corn, first crop has remained stable. Corn, second crop shows an important gain, and it's worth highlighting. Here, as you may recall, the planted surface for last year, we have mentioned that Shingu operation was an area that was starting its operation, and because we were cautious, we started playing soy with longer intervals, which led to a better position for second crop planting. Today, the operation is doing fine, working well. smoothly, and we have 100% of it in operation within schedule, which is to finish the second crop until the end of October. We have even exceeded our expectations, planted more area. So we will see an important growth in the second crop corn, 11.3, and most of it comes from Shingu operation. In sugar cane, the areas have remained stable, with the small changes due to the expectation in production, the idea to renew the sugarcane plantation. This year we had some areas that we were pleasantly surprised because the production was higher. For pasture, we remain with the same figures, except for Jatoba. We... increase where we increase the crops and cotton we have a planted area in a farm that we believe there are important margins to capture so year on year we have a growth of 5.4 percent but it's important to highlight that this 5.4 percent growth in planted service we have to to remove the farms that were sold. So we had an important growth in the company despite the massive sale that is aligned with our business strategy in terms of farm sales. So this is the capacity we have to show you that we have to combine both results. So despite selling a lot of land that had generated good economic result, we do have potential to cause transformation and grow the planted area, even in the year of divestiture. Now moving on to page 15, as I have mentioned, the grains and cotton. Soybean, we had an important growth from last crop to this one due to the adjustment of packages. And this chart grows a lot based on my previous comments. for the first and second corn, first and second crop. And then for cotton, we have an expectation of production is a bit better than last year. So overall, for those of you that are looking at our figures all the time, we had an increase in tons of 298,000 tons, which accounts for 28% of increase in volume production volume when compared to last year. Page six, now we have an overview of our cattle raising. It's always good to remind you that cattle raising is a driver for transformation for the company. It's something we decided to do three years ago, and we had very pleasant surprise last year. And even more so now, that the commodities market for beef has had a high increase in prices and will capture that result as we've seen in price increases in the last months. In the initial months of this year, we still don't have a large number of heads killed because most of the heads are killed the final months of rainfall then the prices will be different and this is the adg the pasture areas remain stable the number of has remained stable close there has been an increase of 800 heads and the adg we have extensive cattle raising some units we decided to produce more beef and less confined beef but it's important to highlight that 0.47 with almost 500 grams a day is among it's a good production level because large cattle raisers produce 500 something per month, almost 600. So for us, it's a transformation tool. We calculate the pasture area according to a planting area. So it's a temporary activity for us. But we've had excellent results. And we'll see the tails of the figures later. On page 7, You can see the year-on-year figures for sugarcane harvested area. Here we see the number that's not completely final. There's still some volume to be realized and we'll be close to the production of last season, last crop. But there has been an increase in productivity. We always talk about this in the calls, that Maranhão was a challenge, but we took over the unit with 57 tons of sugarcane per hectare, and at the end, we have year-to-date 80 tons of sugarcane. So in two and a half years, we had a unit that went from 57 tons per hectare up to 75, 80, an important growth. This year will overcome 1,200,000 tons and next year even will grow even more. And this has been a result of technologies adopted and introduced year on year, releasing more areas for the production of grains. So it's important to show how we can improve results with technology in sugar. We have had two main moments, and I would separate in two areas. In the Midwest area, we had interesting sugar ratios, 146 average APL. We closed Morro Vermelho as well. And now we're completing Maranhão. Maranhão is still below. We still have time to increase the concentration of sugar there. Currently it's at 132, 133. So this figure of 142 that we show you is the estimated figure considering the Midwest and Maranhão areas. But it's important to highlight that even when we do this, the criteria that we ask for our managers to produce is not tons of sugarcane per hectare, is TTH, is the ton of sugar per hectare, TPH. So our units in the Midwest have reached more than 14,000 kilos of TPH per hectare. In Maranhão, we expect to reach that as well. And that's an important factor for us. Now moving on to the next page, as you may know from observing the market, we've started the year with a lot of volatility in terms of price increases. The commercial war between the United States and China remains. It was supposed to end or have some conclusion in the event in Chile, a COP 20, but it was postponed. And that generates a lot of uncertainty. So as I always say, we want to increase the margin of the company. So whenever there is an opportunity to sell and combine results, we make decisions. Today, we have 44% of the next soybean crop sold at that price of $9.33 million. We took this position back in May when we still had the soybean at $8.99. We have been taking these positions, and today we have a mismatch rule. If we sell soybean in the future, we also close on the exchange rate, and the average dollar is $4.04 for this volume. And we always try to capture some mismatch and improve this, There is some expectation of prices for this year. And those who keep track of the soy market, the trend of Chicago is an uptrend, either because of China or because the U.S. production year on year has dropped from 120 million tons approximately to 95 million tons, given the delay in starting planting that they had. The planting was good, but it also changed the maturing window of soybeans in the north and Midwest of the U.S. These are important facts. The USDA official figures, 95 is 90 tons, where the people talk about 95,000 tons, or 84 against 95, but there's still room for this market to grow. In terms of our discussion about the freight table, the base has never been so misaligned. In other years, we had a projection for base. The companies were able to talk about base projections for the beginning of the harvest season. But today, because of this freight table, the future bases are very low. The spot base is like we had last year. Chicago went down. This year we don't have 250 points, but the base would be around 100, 120 points. The spot base oscillates a lot, and the other one is 140 points. So this is the main driver, and we have to trade very closely to obtain significant results.

Now moving on.

I think I end now, and I'll pass the floor to Gustavo, and then I'll be available for the Q&A session. Thank you. Thank you very much. Thank you all that are attending this call.

As of July this year.

And here, we're going to show the financial performance. On page 9, we have EBITDA. Then we have the net income minus interest, taxes, and depreciation.

But you always accompany the characteristics of our business. Because here we exclude the assets.

In the first quarter of this year, we've had adjusted a bid of 57.9 reais. And for this year, we had a combination of operations and real estate. Last year, we had a significant sale of most of Jatoba, a large number of hectares, which allowed us to have some gain in rates. there's two sales that Andrea had mentioned in the beginning of presentations, and we have books, one of them, which is the other part of Jacoba, that has given us gains, and the other sale that we had commented on, is the one that we're going to record or book in the next quarter. On the next page, we are removing this result from real estate sales or property sales. And here we see that we have $40 million of adjusted income versus $5 million compared to last year. And here you have a sugar cane with an increase as well as the price is 9 cents better than last year. And we have agreement in sugar cane. We sowed an inventory of soybeans and corn especially as a result of the sale of farms. And so since the incorporation of new leased areas, the company had a real estate or property result that is higher than in Last year, now we have an operating result, the cash generation, an opportunity to work better with our assets. Now on page 11, you can see on revenues, the revenues from sales of the farms is $123 million, which is a growing value.

And this year, it's $18.8 million. And we look at all the revenues.

Sugarcane has caused the main impact over revenues given the increase in production in this quarter. And we were able to harvest and fill $90 million. And in the previous year, it's $760 million. Soybeans also in the previous year, this year were 45,000 tons. Corn, 3,800 tons. This year, 4,000 tons. So the productivity gains, this is not due to price, because in the previous year, The soybean price averaged 71 reais per bag, whereas this year it's 69 reais per bag. So last year, we had to pay a lot to remove the soybeans from Brazil. And this year, we achieved the best price we had budgeted for, and we are at the same level of last year. So we have 184 million reais of net revenue, a revenue with a gross income of 69 million reais, sales expenses that increase according to the volume, and then we get to the financial results. Then we have a debt almost $4 million in the quarter of financial expenses and the cost of death. And then we have some amount that's not invested and some other effects that we must include in soybeans bags. Because when you do the exchange rate for soybeans, that also has an effect on the results. And the net income of 40.5 million reais.

When we look at the same period for last year, it beat us, the 60 million reais that comes from the farm.

and the restroom operations. And the financial result was positive because we had many amounts to receive in terms of soybean bags. And that was a function of dollar. as well as the soybean price.

The following page, we have the balance sheet on page 12. Here, there is a new rule that's effective as of January 1 this year.

that all the contracts that have an amount in prices at a fixed price must be accounted for in liabilities as well in the assets. So there are some agreements that have a period that's longer than 15 years with a variable price. This is not booked. But there is another one with a partnership that has to do with the soybean bag that is fixed or that has a part that is fixed and a part that is variable. So the fixed part is booked. So the sum of all leasing agreements we have account for 79 million reais that is being booked. And the same amount is in the liability as a financial leasing. In addition, there are other operating agreements. And this change in the operating and financial figures are booked according to the same criteria. Now looking at the assets, on September 30, 2009, we have cash and cash equivalents. which also includes current assets and securities, for example. It's important to highlight that we have 156 million reais in trade receivables, short-term and long-term, of which 200 million reais account for the sale of the funds It's also important to highlight that the 500 million reais is regarded as the farm, only the part of Paraguay that we had to recognize as fair value. But this amount that was booked, the market value, continues to increase. This is the consolidated figure between Brazil and Paraguay. It's close to 1,500,000 reais. As for liabilities, 98 million reais as suppliers. That's the amount that we'll pay. The loans and financing will continue. On the next page, we'll continue to talk about that. The current and non-current liabilities, when compared to the current and non-current assets, are very equalized. It's important to highlight that the company has treasury stocks. in our repurchase agreement, 35 million riyals. At the purchase price, approximately 11 riyals per share. We still have a reserve of surplus reserve of 14 million riyals. On page 13, you see the debt of the company. The total debt that we have on September 30 is 57, or rather 257. When we look at the cash, that's net debt, 128 million reais. And when we look on June 30, 2019, we had 131 million reais. So in this quarter, there were payments made of debt plus interest of 46 million reais. We also paid financing for costing expenses of sugar cane. All of the debts we have are in reais. And it's important to highlight something I had mentioned.

The net debt, adjusted net debt, you can see the amount.

And there is an amount there as the sale of the farm. And on the right chart, you can see the assets. We continue to increase the payment firms, the maturity of our debt, our financial debt, which account to costing. It's also important to see how we can match that to the transactions in the sale of the farm. And the average cost of debt, which is at 6.2%, page 14, 50 million in dividends that will be paid. It is our commitment to our shareholders to pay dividends constantly. We understand that 50 million with a yield of 5.6% is a return rate that we would like to have. It's good to find out that it's almost 2 reais per share, or $0.93 per share. OK, on page 15, we aim to show that this is an excellent investment opportunity. net asset value of the company is shares are being traded almost at their book value. And this market value of the properties, we see a potential to gain value of 90%. So we understand that that's an excellent security to purchase. And finally, on page 16, there is a chart or a graph showing the security or the share Agro3 and L&D and Bovespa index, showing that we've had a good appreciation recently There is a discount of one real per share that is discounted because of the payment of dividends. So the share has had a good view from the market, as well as the valuation of the company, helped us. so that the entire industry is more closely observed. And we'll make everything possible to continue with this valuation process. Thank you very much. Now let's go on to the Q&A session. Thank you. We'll now start the Q&A session. For investors and analysts only, if you have a question, please press star 1. If your question has been answered, you may remove yourself from the queue by pressing star 2. Questions will be answered in the order they are asked and received. We ask you to please remove your phone from the hook when you ask your question to achieve optimum sound quality. Please wait while we collect the questions. Our first question comes from Luciana Carvalho from Banco do Brasil. Miss Luciana, please. Good afternoon, everyone. André, Gustavo, thank you for the opportunity. My question is that Bahia has improved in terms of liquidity. Would you give us an overview of the main areas, the main regions where you operate? How do you see this increase? increase in productivity and liquidity, and what do you expect for the year in terms of real estate performance? Thank you. Luciana, that's an excellent question. I would like to give you our view in terms of real estate and property deals for you. Every month we at the company have a very aggressive goal in terms of sales of portfolio. When everybody wants to buy, we want to sell. So we have to be against the market trend, right? This is a huge challenge. We have to act in an anti-cyclical way. But being very specific about your question, in the region where we operate. I didn't talk about Bahia because, except for last year and the second crop, but speaking since 2013 to 2017 crops, Bahia had very hard crops in terms of productivity. We know that buyers of farms in Brazil are the farmers themselves. So when they have profitability Even due to a tax issue, the best way is to purchase more land. So Bahia had a very low liquidity period in three or four years of uncertainty in productivity. So the demand was suppressed. And now the demand went back to levels that we considered normal. this demand for liquidity comes in terms of a ramp-up. So it's starting to go up. If we have two or three more productive years in Brazil, the market will increase even more there in terms of demand. So other regions, such as Mato Grosso, in which we have pumps, these are areas with a lot of stability in production. We have had work in sales, according to what's happening in the area. Other regions, such as Maranhão and Piauí, where we also operate, are areas that have large clients, and liquidity is where you have large properties in the frontier areas, in which foreign capital plays a a heavier role. But it is to expect that the liquidity in selling farms is closely associated to the profitability of the agribusiness. When we see grains keeping a good margin, a stable margin in terms of production, and sugarcane also paying well, we can expect an increase in the production of soybeans, than the contribution margin. It will be very similar to last year in terms of soybeans. On the other hand, corn has a much better production margin. This will increase liquidity. So the overview for 2019 is with higher liquidity for farmers than 2018. The regions that had In fact, the productivity are improving in other areas and other drivers. So we could say that Mato Grosso has an important driver in cotton. But the planted area of cotton, although it's huge, it is a small portion of Mato Grosso. Most of Mato Grosso, we have soybeans and corn. So I would say, and why am I saying this? Because cotton is the only crop in which there has been a reduction in the contribution margin year on year. Some regions are highly dependent on cotton, except for Bahia, that Bahia is also dependent on cotton, but it had a suppressed liquidity. But in the areas where we have the effects of other grains, corn, and sugar canes, the liquidity will be higher in the year. Excellent.

Thank you for your answer. Next question is from Francisco Alves .

Good afternoon. I have a question about the payment of dividends on the 14th. It's based on the share positions on what day? Well, this is the question everybody's asking, right? The good news is that we're paying dividends before the holiday. So the holiday is on November 15th, and the 14th we're paying, so you all have your pockets full of money. But since we had the shareholders meeting on October 16th, the shareholding positions for each shareholder on the date of the shareholders meeting, which is October 16, which is 0.93 cents, will be distributed or be paid to the holders of shares on the date of the shareholders meeting, October 16. OK. The next question comes from . Good afternoon. I know you talk about the sale of business. Would you give us another driver in terms of rise for this year, next year? And how will you distribute these funds that will be collected, entering dividends, repurchase shares? Okay, that's an excellent question. First, if I give you too much guidance, the people from investor relations kill me later on, but every month we at the company have a very aggressive goal in terms of selling funds. So if you stop and look historically, what we could have in the medium term? We can't look at real estate sales on a single year. If you look at the horizon of three years in the company, we should be selling between 8% to 10% of our asset value per year. So in a year, when you have a much better result, you will have more sales deficits that are more significant in years, and that varies year on year. We always say that the share is a good share in terms of return when you look at the medium-term horizon. You can't look at a single moment. The real estate driver works with peaks. When you look at two or three years, you can look at the sale moment and the purchase moment. If you take a picture of a single period, that may be not representative of of the average. But this wouldn't be a guidance, a reality. At the budget level, we try to get at least $70 million in results from sales of funds. But $70 million, how much land will it sell? That depends on the prices. In our business model, in our proposal, proposed budget for the year, we propose an income from sales of $300 million. This is what we're going to work in order to achieve $70 million in results with sales. I'm sorry. And that's the operating income we're talking about. In the first quarter, we In the first half of the year, we were very profitable due to the sugarcane price, and we're also optimistic for the year end and next year. How will you use those funds? Will you repurchase shares? Will you pay special dividends? Buy more farms? OK. There is recurring dividends. That's important to generate to investors of a certainty that dividends will pay on a recurring basis. Payment of dividends or payment distribution of income will be higher when you have less projects to invest on. When we understand that we have good projects with a good profitability and projects we must invest in, then we'll allot a good part of our income to those projects. When we understand that these profitability is smaller due to some reasons, then we can pay higher dividends. I would say that we'll use those dividends, the income will be distributed in three pillars. One pillar is new investments, new acquisitions. We must continue to buy. Like I always say, supermarkets need to be supplied with products in our shelves, which are our farms. We'll also invest in transformation. So part of our results from sales, we accelerate sales. new operations with increasing return for our investors. And the third driver is you're asking dividends. So the combination of the three pillars or drivers. I cannot tell exactly how much for each. If we think that there is an asset with a high profitability for the coming years, we'll invest part of our income in that. If we don't think it's going to be so profitable, then we invest somewhere else. So overall, the idea is to pay 25. So from our income, if you want to make a calculation, this is a good guidance, 70 million reais. And then you can calculate what we have delivered so far. But our obligation is to pay 25% of our net income in dividends, as it is mandatory. Our obligation and willingness is to increasingly overcome the 25% level that is a requirement by law and CDM. But it's like I told you, a combination of three pillars, dividends, profitability of new assets, pricing, and transformation and opening of new areas. OK, great. Thank you very much. The next question comes from from . Good morning, or good afternoon, actually. I have three questions. First one is about soybean productivity. The productivity is even dropping a bit from 60 to 49 bags per hectare. On the other hand, you had an effect of, say, of land. Maybe the new leased lands that are coming and the mature lands that were sold maybe had an impact on productivity. If you could give us some guidance about mature land, that would be helpful. Also, In general, you had a cost increase of 6% to 7% in the second crop. What was the driver of this cost increase? Was that an exchange rate? Maybe did you see prices increasing in dollars? And the last question is about the acquisition of Agro5. We took a look at their website. Their focus seems to be on the sale of machines and tools. What was the rationale? behind these acquisitions? Do you have a plan of entering the marketplace of selling agricultural products? What are the next steps and the rationale behind that sale? Thank you. Victor, as usual, tons of information coming from you. Great. Well, the good news is that we just finished the planting and you're invited to come visit us. Well, first question about productivity. It's important to highlight that there has been a reduction from 50 to 49, and that's an important driver. This is the average productivity of the company. We have first year, second year, and third year areas. And year on year, there is a divestment in some areas. So from these 14,000 Hectors that were sold and left production had the highest productivity. Those are the areas that were mature, and we are divesting. But I would tell you that the mature areas have a productivity between 57 and 60 bags, some areas even higher than that. But overall, when I say mature, it's the five-year areas, not 35 to 40 years. It's an area that's above five years. When we break down this figure, there are several parts of that land that produce over 60. I came from Paraguay yesterday. We had a meeting with a team from Paraguay. There were areas there that had a productivity of 78 bags per hectare. So it's a combination. The 50 is a combination. In mature areas, the productivity is higher. And among those 50, we had first-year areas in Bahia that, due to some stress in January, these areas produced much less, 28 to 30 bags per hectare. So it's a combination of several areas. The second question is important, cost. Especially in corn, you saw that. So there are two main reasons for that. One was the exchange rate, which had a strong impact. So year on year, fertilizers had an increased cost. Another cost of corn was impacted, especially in the second crop. When we started last year with Xingu operation, we did it technical. planting that was very defensive. It was our first year, and the budget productivity was very conservative in terms of bags per hectare. And now this year, we increased productivity of the second crop highly. So we doubled the fertilizers because we increased the package of nitrogen content fertilizers for those areas in Xingu. So the value per ton was higher due to the exchange rate, the dollar, and also an increase in the productivity in the second crop corn. And that will be seen this year because we improved the technological packs. And more than 50% of the second crop area has been planted in this window of October. So these are the two main explanations that explain the cost. Increase of the technology package with higher content of fertilizers, and also the exchange rate impacting the price of fertilizers. Agro-Fi. We believe that Agro-Fi will, there will be a consolidation of operations. This is a company that has grown a lot. We already own a share in it, and we saw a lot of synergy in terms of benchmarking. So Agrofy's platform is based on the sale of machines, but we understand that the platform can sell several other things. And the idea of this investment, it was a small investment, but that it will allow us as a shareholder and always having this interest in the company to have access of a series of market information in terms of commodities, in input prices, fertilizers, whatever. So we understand that an investment in Agri-Fi brings to us innovation because These people that work with startups are much faster thinking than the agronomists, such as the farmers, people who study agronomy, like myself, for example. So we will learn a lot from their digital platforms. So we're doing a lot of things in the digital area, but we want to enter the market place and be in the vanguard of things to try to understand how the new technologies work for our business. So overall, this is the idea. This is a company we believe in. We are certain that it will be an Amazon in the agribusiness, and we want to be part of that business. Much more to have benchmarks, strengths, and to work in the digital agriculture. When you are part of a platform with a lot of young people participating and a lot of things going on, that's a big push to digitizing the company, bringing the company to the digital era. So $4 million is a small amount of money for us. We're not expecting the appreciation of AgroFi share that will happen in the future, but we want to be closer to technology and have a faster benchmark and have access to high-end technology. We're also in this internal process in terms of technology, increasing the use of technology. But we are treating this as a consolidation for operations. In Agro5, they have 20 years of experience. They're not starting in this business now. They are extremely knowledgeable, and that, for us, gives us a huge possibility of learning. In the area of new business, for example, they have a company that has 20 years in brokerage in Argentina and a company in Rosario.

And we see potential to establish some synergy. And we also take this opportunity to be more efficient. This is something we've been working on for a while now.

Next quarter, when we have all the details and 100% of our interest will be included in all the paper signs and everything, then we'll have more information to give you. OK, one more question. We saw all the development of the cotton area. So the guidance is that you will pay slightly over 2,000 hectares. Maybe the drop in cotton prices has reduced the contribution margin and maybe changed their plans. But the price of cotton as it is now, should we see the company growing 500 hectares per year? Or do you plan on growing more in cotton specifically? Excellent question. Let me give you some examples. view on the market. What we see in the cotton prices is a reflex of increasing production. The war of prices in China, China imported more than 420 tons of cotton. You know a lot about the cotton planters, growers in Mato Grosso. 2,300,000, and now we are closing 2,830,000 tons of cotton in this crop. So it's a very significant growth in the last two years. There was an increase in the production of 40% to 50% in two years, and the domestic market, which is In the domestic market, we continue strong. We continue flat. It's been the same amount for five years of these 2.8 million. 70 stays rear, and 2.1 goes to the international market. Last year, from 2.3, only 1.6 went to the international market. So... the amount that stays domestically is the same. So we see an important reduction in the margins. It's important to say that we're not a large cotton player, but we see a lot of value in the other things that are generated. In addition to being a profitable crop, it brings stability. It's... It is to be expected that we make more investments in cotton, looking at it indirect. It provides an important liquidity for acid. It's good for soybean. Part of soybean has a lower production cost than would be planted in the cotton area. So yes, you should expect us to grow the cotton crop We understand that a mature land to produce cotton is a land that has already experienced that ramp-up curve, and we should sell it. So why are we planting cotton? Because as I mentioned to Luciana, we had a suppressed liquidity in Bahia. Our land became mature, and we're trying to bring liquidity and margin. But it is also to be expected that when we start growing some products, we must understand the product better and then grow in leased areas. We have leased areas in which we could plant cotton and increase the growing of capital. I'm sorry, planting more cotton.

We should be

very transparent with you that part of a land that we are transforming, we don't have to wait eight to ten years to plant cotton. We want to sell them before that. But when you have a suppressed demand for liquidity, such as in Bahia, or a larger portfolio of leased areas, then cotton is good for profitable performance in such assets.

Thank you. If you want to ask a question, please press star 1. Since there are no further questions, I turn the floor over to Mr. Andre Gamon for his final remarks. Thank you all very much.

It was great to have you. I'm very happy when you have a call with so many questions All the managers and officers of the company are highly committed to this higher purpose, which is to produce food with responsibility. We've been working on that. We're active with that purpose, the purpose of responsibility, which means taking care of food with responsibility and also acting responsibly. It is to expect that the company will continue to grow, consolidating its results, and acting strongly on our purpose to produce food in a sustainable way in coming years. Thank you all very much, and have a good day. The conference call of Gazil Agro has now ended. We thank you all for attending, and have a good afternoon.