Brasilagro Brazilian Agric Real Estate Co Sponsored ADR (Brazil)

Good afternoon. Welcome, everyone, to Brasilagro's second quarter 2021 results conference call. I am Ana Paula Ribeiro, Manager for Investor Relations, and I have Mr. Andre Guillaumont, CEO, and Mr. Gustavo Lopes, Administrative Officer and Investor Relations Officer. This live webcast is being recorded, and you will be in the listen mode only. Next, we will have the Q&A session exclusively for investors and analysts when further instructions will be given. The audio is being presented simultaneously on the internet, www.brasil-agro.com, where you will find the slides of the presentation that we will have today. Before proceeding, I would like to clarify concerning the declarations that may be made here during the conference concerning the business perspectives of Brasilagro, projections and operational goals. They are based on assumptions and beliefs of the board of the company. They involve risks and uncertainties. They refer to future events and therefore depend on circumstances that may or may not occur. Investors should understand that general economic conditions for industry and other factors may affect the future performance of Brasilagre and lead to results that may differ from the assumptions. Well, now, I would like to pass the floor to André, our chairman, who will begin the presentation. You have the floor, André. Thank you, Ana Paula. I would like to thank all the participants. It's a great pleasure to be here to talk about our quarter, Q2 2021. We bring here many new things, many events that happened. with us and in the market in the last few days. So let's begin the presentation and we would like to talk about the company and Q2. We will be presenting Q2 2021. And we have a lot of information to share with you to clarify many points for those who follow us, those who are analysts. And I say, it is a company that has consistently delivered solid results. And it is a company that has real estate results together with operational results. And now we are at a very good time for commodities. We will have a lot of good operational results. Well, I'd like to call your attention to the highlights of the quarter. We close with a net revenue of 348 million, net income of 52.2 million, adjusted EBITDA 116.7 million, and a new fact that we would like to inform, most of you are already aware, the capitalization that the company did recently, now, last Wednesday, And with this, we can see a very promising future concerning the liquidity of the company. We have no doubts that the consistent delivery will take price of shares to where they should be. And we had a challenge, liquidity. Well, with this capitalization, this increases our float, And this for you who are investors, you have been asking us for this. It makes sense now. We are a company with a consistent delivery of results that joins real estate with operations and now with liquidity. This was missing in our basket of products. Production of sugar cane, we closed in December. We needed the harvest from Marignan, more than 2.2 million tons. We have been growing consistently in sugarcane with very solid results in sugarcane. Well, I'd like to talk about the follow on. I always like to say to comment. We are now, we have structural issues and market issues. Now we have a combination of both. We believe that it is a very positive time for commodities. We had around talking to investors. For example, a market situation, for example, in Asia, 40% of the animals were lost. They have the largest herd of pigs. So there was a lack of animal protein on a global level with the loss of these animals. And this brought euphoria to commodities. in order to recover the inventory of animal protein around the world. Now, what are the structural changes? We have an important structural change, the migration of the model in China for a new model with more technology. And the market is showing these signs. China is a large producer of corn. We saw China importing more than 18 million tons this year of corn. And surely they will import 100 million tons of corn in the next few years. And they are the second largest producer of corn behind the U.S. China produces 260 million. These are structural changes. and no doubt this will have an impact on the price of land in the medium and long term. To give you more transparency, to be more transparent, the great opportunity we have in the market that we mapped in terms of land, we have a robust pipeline to make acquisitions of land in the near future. We have a very low interest rate in Brazil, No one wants to invest in the CDI, so we have to allocate our resources very fast after the follow on. So we have a very robust pipeline to guarantee that the allocation of these funds be made in a very concise way. Well, the consistent delivery of results that the company has done in the last five years is due to the management, work, leadership from all those involved in production and also in the decision-making of the company. This enables us here, now it's different. We had an IPO in the past. We have a solid history. And now certainly with this increase in capital, we begin to grow again, a new wave of growth, not organically, now in a more robust way, in a more robust growth. So I would like to end saying this transaction is a win-win situation because we close an important gap, which was liquidity. On the right, We had a transaction where we received proceeds, 440 million reais. Part of these resources were allocated to our operation that we are purchasing in Bolivia. I will give you more details. I am available to answer questions. Most of these resources will be used to buy property in Brazil, land in Brazil. This is the focus. At the bottom, bottom right, we see the situation with the increase in capital. Crescudy accompanies the growth. We had one shareholder for a long time and their float comes to the market. This increase in liquidity and the consistent delivery of results that we will continue generating. We have strong commitment on the part of the people here and I have no doubts that soon, soon we will be a great and large company with robust payments in dividends and high liquidity. This makes us very happy after this transaction. Now giving you more details about the acquisition in Bolivia. We gave many details during the roadshow. I would like to thank very much all those who trusted, trust and continue trusting in the company's management efforts. Those who subscribed and the new shareholders too. So here There is a strong trust we will continue delivering our good results. The Bolivia operation involves the purchase of 9,900 hectares, 7,900 arable hectares. These pictures are from Bolivia, from the properties. We are buying 100% developed properties without any need for CAPEX, 2,200 millimeters of rainfall per year. So it is similar to Mato Grosso in Bolivia. So why Bolivia? In Mato Grosso, for example, the land for which we paid $3,000 would be worth $10,000, $12,000. So the country risk is priced. What I would like to tell you is that an operation that doesn't need CAPEX, with cash flow, with important cash flow. And with this value, $3,000 per hectare, they are generating 300, $400 of results per hectare. A return on investment, a profitability around 12 to 13%. So a very profitable operation in Bolivia. The guarantee of liquidity is guarantee of a profitable operation. The second point, it is located in the core region of Bolivia, as if it were Mato Grosso or Ribeirão Preto in Brazil, regions, very good regions, where we can have a first crop and a second crop, a winter crop to a very good level. plot of land and the idea of the company is to intensify the production of sugar cane to take all our know-how to Bolivia, our know-how for sugarcane, expand sugarcane plantations we have in Bolivia. And as we show on number three, we bought this land at a discount, an AV of more than 34%. So the idea, those areas where we can plant sugarcane, we intensify and where we have grains, since we have the discount, the idea is to really sell. So, These are details of the transaction. A transaction, we did this with total transparency. The independent counselors of the company approved unanimously, unanimous approval in the shareholders meeting. So we approved this in the shareholders assembly record quorum. 73% of the shareholders of the company voted unanimously for this project. And with the trust that you have in us and the consistent delivery of results, We did not have a single vote against. 73% were there and approved unanimously. This is very important, more than saying what we will do in Bolivia. We have to show the transparency. There was transparency. And the discount, 34%. This was done by Deloitte. Deloitte has been appraising our lands for many years. We trust in this number that we bring to you. Well, from now on, we will talk about the numbers, the harvest, and here. Bolivia is not included in these numbers from now on. We will see Certainly in the next quarter, we will have Bolivia included because the transaction was made in February. And these are the results of December 31st. So on the first graph, we have a growth of the planted area around 7% a year. Year after year, we see a decline. a small growth but it's important to mention one fact the company even selling a lot of land we're growing year after year even with the the sales so we combine very well these strategies the graph what we bring shows with soybean we have a small reduction in the second crop for corn. And this is not, this is focused in some least areas that left the portfolio, small areas, but they left our portfolio. An important growth in beans, We've done a beautiful job, very good job in terms of profitability, going after new markets, being a company to produce food with responsibility. It's a new crop, new for analysts, but it has been a profitable crop. Sugarcane. you know this is where we have the greatest expertise or greatest profitability. Therefore, we are planting sugarcane in very good lands. We have an evolution in area, but we'd like to remind you that we've had an increase in productivity. So we're decreasing the area. As you follow us, when we bought Saint-Joseph Farm, we said this was for grains only. with a winter crop plus sugarcane. So we're obtaining very high productivity in sugarcane and we have, thus we have include, we have liberated more land for, So the more efficient it becomes, the more areas we use to have other crops and automatically to have liquidity. This is fundamental. We have delivered this consistently. Pasture land, a reduction. We converted some lands in Jatoba Farm. Cotton, almost the same. And others, you know that we have some areas that are in production that are leased. with the following objective to have liquidity and so most of our lessees will be the natural purchasers of these assets in the future. We believe this strategy is very good. Well, here a small increase when we talk about harvest year, tons. an increase of 1.9. Part of this increase is due basically to the increase in corn and an increase also in the winter crop for beans. These have called the attention. the second crop of beans. So here in this graph, it's important to see how we see things, the status of our production. So we ended the planting season in January. We have operations in Paraguay. So Paraguay, we know that has a different window. We ended in January. All the planted areas were stabilized. You saw the beginning. There was some uncertainty in the beginning. I was in a call talking to you about Mato Grosso, but in the region where we have important operations in Xingu and in the south, close to Rondonopolis and Taquari, we had good success. A very small part had to be replanted. And we have seen a good stabilization of rainfall from mid-December onwards. So the difficulty that all farmers had in October, beginning of November, then stabilized. In December, we had a good distribution of rainfall. Then came January. you know that it's a very important month because of the operations in the Northeast, January and February. In January, we had a few days of drought, which is normal in Bahia, around 10 to 15 days in a period with no impact on production. And since then, rainfall has normalized and has been very good. with good estimates, with good perspectives for February. So we're almost in the middle of the month of February, and we have rainfall in all the units during the last weekend. So I believe that February is okay. So the way we see things, yes, we will have a consistent delivery. We have begun, I would like to highlight that we began harvesting in some units, especially in Mato Grosso. Until now, we know that the soybean that was planted first was the one that suffered the most, but it has positive estimates for productivity and also very close to success. to our assumptions and forecasts. We had some difficulties in installation during the first 25 days of October, but we're having a positive result. We know that soybean in these regions still have a production status that is good. So we're very optimistic with the productivity of this year in terms of soybean. Since we began harvesting soybean, we're planting the winter crop for corn. It's developing. We're doing a follow-up closely. So with this, we have a guarantee of production for the winter crop of corn. Some regions, we began to plant the winter crop for beans. So in terms of operations, okay, let's talk about sugarcane too. In October, November, these problems slowed down growth, but then things became more normal. This happened more in the Midwest and South. The Midwest actually suffered less, and in the Northeast, we had a lot of rainfall where we have a lot of sugarcane. We have more than 15,000 hectares of sugarcane in the state of Marignan, and we have good rainfall in October and November. So without doubt, we will have good surprises in sugarcane in the Marignan. And in the Midwest, it's stabilizing. The volume stabilized as of December. And I'm sure that we have productivity that is very close to this year. Cotton, too, is planted. Cotton is going well. And pasture. Pasture, all our production... We will give you more details about pasture in the next slides. Well, here some numbers. When we show this, the main focus is to show the evolution of the herd and we're capturing good gains. So with price of commodities, especially animal protein, Yes, we should take advantage of the good situation. This because of the price. Everyone retaining the females. We've seen the price of beef going up. So we reduced the inventory to capture the high prices, pasture. is roughly the same and since we had october and november with irregular rain we had a delay in the installation of pasture now it's normal as of mid-december it became stabilized and GMT of 0.56, which was expected due to the drought, then rain, and now we're seeing an important recovery. Here, one point I would like to mention, in Paraguay, we reached in January, it's not included in this result, we're talking about December, we had the highest GMT of history, more than 1.1 kilogram per hectare, so we believe that all the numbers we promised will be delivered. So this is an idea of the crops. If we had to alert you, we would have done this, but the way we're seeing things in the last few months, the distribution of rainfall, planting, everything else, we see we will have a good harvest Well, hear a little about sugarcane. What we see here, once again, this is, we see 25,000 hectares, no change. Production, important increase. When we talk about harvesting in the same area and an increase of 20,000 tons. And what is good here, we had a TCH, which is very solid. The TCH in 2020, very close to our estimates. We had estimated this. So in all our units, we closed at 89 TCH. Here I'd like to clarify and highlight, since we are large producers, there's always a premium based on the volume delivered. And this premium fluctuates in other places. It's fixed, but I would like to say that it's around 20% in Sao Paulo. So this, together with this productivity and also a premium of 20%, makes the sugarcane operation a very profitable operation for the company, and you will see the robust results in the second quarter of our fiscal year. Next, I believe here we showed how the company is doing, growth, new opportunities, work. Let's talk a little about sales, the commercial point of view. You know that since the soybean that is being harvested, We have been selling it since the beginning of last year, always looking at contribution margin, always looking at profitability. So what is sold already? When soybean, when we felt the rise in price, which was a great surprise for all the market, when everyone prepared the budgets, we had a soybean of $9 a bushel. And now, at $13 a bushel. This was a surprise for the market. We had sold a lot of soybean. We reduced some of these operations. We have 63% hedged. 40% is open and we will capture these interesting prices. So the dollar position in the case of soybean, every dollar sold, 75% and here I'd like to stay on the budget. You have an upside with the increase in production. We have sold at $5.44. In the case of corn, we were more optimistic because of animal protein. So we have 39% of corn of the volume of corn closed and with a currency of 536 and in the case of cotton the last one it's small but we have 79 percent of cotton already sold at the price of 64.41 dollars per bushel so giving you an overview so we have these prices that we show to you And what is open will be sold at market price. We have an important increase in the receivables from soybean. We sell grains. So most of the receivables we're having... We're having gains in production of commodities, and now we have the receivables. Well, this is production. Now I'd like to pass the floor to Gustavo, and he will concentrate on the numbers, financial numbers of the company. Thank you. Thank you, Andrei. Good afternoon. Let's continue here. Now we'll focus on EBITDA and adjusted EBITDA. And we have been following the results.

And we have here

the EBITDA Q2 2021 including and excluding also results from derivatives. Here we can see that in the quarter we have an EBITDA 48.156 and We have also, this reflects the increase in the price of commodities. We began with, we can see the inventory of corn. And until by December, we had sold this inventory. Then we see a positive result here, and also consistent results with sugarcane too. In November, 2 million tons, and also an increase in price. Here we see 62.65 cents. This brought a good impact. We see here 70 million reais. You can see here last year and In the previous year, we had 52,000. This year, we see the difference of 100 million reais here. This gives us good expectations, positive expectations for June 30. We understand the market is seeing a good harvest and I will repeat, this is very positive for the results of the company. On the next page, during the previous year, we had operational results, 70 and 100 million Reais. And here we see that We see the harvest six months of 2020, six months of 2021. We see EBITDA much higher, and this is due to corn and soybean. But here, The impact is here. We have good expectations this year. Here I'd like to mention two sugar cane. We were not that optimistic when the pandemic began. We thought that demand could be affected due to the pandemic. And we're closing this semester with good productivity, prices too, firm prices, and in terms of margin too, good expectations. We can see this in the graph.