Brasilagro Brazilian Agric Real Estate Co Sponsored ADR (Brazil)

Hello, good afternoon. Welcome to the conference call for earnings for Q3, reminding you that our year follows the agriculture calendar. So we have the earnings for nine months ended on March 31st, 2021. We have with us Mr. André Guillemin, our chairman, Gustavo López, CFO, and... RI, this presentation is being recorded. You will be in the listen mode only. During the presentation of the company, you will be in the listen mode only. Next, we will have the Q&A session exclusively for analysts and investors. The audio is also being aired on the internet on our page and our Before continuing, I will make some clarifications, a disclaimer concerning any declarations made during this conference call concerning perspectives and operational goals. They are all based on assumptions and beliefs of the company and on information currently available. they involve risks, uncertainties, they refer to future events, and therefore they depend on circumstances that may or may not occur. The investor should understand that general economic conditions in the industry and other factors may alter the company's performance and lead to results that may differ materially from those made in these forward-looking considerations. Now I will pass the floor to Andrei, who will begin the presentation. Thank you. Good afternoon. Thank you, Ana Paula. Thank you, Gustavo, once again. And I'd like to thank you all for participating, for you have been following for many years our earnings. Good. Let's go on to the first slide, please. We're bringing you some numbers, relevant numbers. concerning Q3 2021. So I'd like to share with you what the company did in these nine months. We had a net revenue, 440.6 million. We had a net profit accumulated in nine months, 189 million, adjusted EBITDA 219. One piece of news that we bring is the second issuance of CRA. This time we did the CRA according to the stock market instructions, which gave a lot of visibility to the company and gave us an interest rate that was very competitive, very competitive rates. This brings visibility to our company and a longer debt profile. in line with our business. So this is an important event in this quarter. Now concerning the right side, we ended the harvest of more than 170,000 tons of soybean in Brazil, Paraguay, and Bolivia. I have a lot of good news. We have some bad news too, but bad news is attenuated by our geographical diversification. And we will talk about everything that happened. We finished planting corn, the second harvest of corn. Our region is privileged. Most of our corn is in the region of Xingu. It's a region of Mato Grosso that suffered less. This region suffered less. But we have a corn that is not as well positioned as we had last year. So these are the highlights. I believe that I'd like to say that we are in fact a company that has operational strategy together with real estate strategy. Commodities are booming and we're seeing the market also with better prices. So booming in terms of liquidity and prices. So We have a sale that was made last week, which is not included in the numbers. We will show this later. This sale was made last week, and it's a very interesting sale. I'd like to mention two points about this sale. We continue being a recurring seller of assets. It's a sale that brings an IR, It gives us an IRR of 20.4. So 20% in an asset that you bought, flipped, improved. And what it shows in this transaction is that everything we will see later on, the results most linked to the price of commodities, we begin to see the price of commodities also affecting the price of land. increasing the price of land. This is in Bahia, 250 hectares, worth 67 million reais and a gain of 64. So this is the great edge of the company. You can expect, Ana doesn't like because I can't give guidance. This is our business, buying and selling farms. You will see that we will be very active during this year. This is the vision we have due to the liquidity in the market due to the booming prices of commodities. I always say that in commodities, we have some structural issues. We have the price of commodities, soybean, corn, sugar cane, and cattle raising and cotton. So we also have a structural issue happening. Last year, China stopped importing grains because of the swine flu. After that, we had a trade war and this really decreased the market of commodities. If nothing had happened, China would come back. But what do we see different? There was an important change in terms of the production of food. China is migrating to new models of production. They're intensifying more sanitary control, and this will demand more grain, more commodities, more grain, especially corn and soybean. China is a great producer of corn. They produce corn. Historically, they never imported corn. This year, they're importing more than 20 million tons. In the next four years, they should get to 80, 90 million tons of imported corn. This happened to soybean. from Brazil. If you go back in history, China used to import 20, 30 million tons of soybean seven years ago. Now it's beginning in corn and this is structural for us. So the model of producing animal protein is changing in China and they will depend more on commodities. So we will bring you good results due to this increase in price, but the increase in price comes in a more structured way. Next slide. Well, here what we bring, always saying to you year after year, the company continues to grow its planted area from 2020 to 2021. We go from 153,000 hectares, now 160,000 hectares that are cultivated in the next harvest On the right, we see the most relevant cultures, soybean, corn. We have sugarcane, a lot of sugarcane. We have other cultures that have more added value. So in the last year, the company planted beans. We had good results in beans this year. We're intensifying even more beans. We have a company that will plant more than 6,000 hectares of beans, cotton even a little less. showing to you the company, in fact, has two strategies together, operational and real estate, and we are diversified. We have many products. We should expect to intensify this, bringing more margin to our planted hectares, and consequently, this will really represent added value. Next slide is a comparison in tons. And as I said, we have always been very transparent with you. We had a drop in the total production of soybean, or the great problem in this harvest was the production in Paraguay. We had a drop in the estimated amount around 12 to 13,000 tons in Paraguay, which had an impact on these numbers. In Brazil, some units produced more than we expected, some in line, some of them very little, but in general, the production in Brazil was positive. Bolivia also brought a good result. We have two harvests in Brazil. The most important one is in winter, and now we're having the summer harvest. And this number of the estimated amount against projected, we have the number here. So we have 15,000 tons less of soybean than projected, but we have the price that is very attractive. In the case of corn, in the second harvest, we have what you are seeing, a drought in the Midwest of Brazil. And as I said, Most of our corn is in Xingu, a privileged region where we were able to plant in optimum conditions, very attractive for corn. And we have others, cotton. So in general, this is a picture showing the problem we had in Paraguay. And although the second harvest is well on its way, In the next few days, in the next release, it won't be a projection. We will begin the harvest of the second harvest. Well, in terms of cattle raising, here I say once again, you've heard me say this a thousand times, cattle raising is a transition tool for us. It's an activity that we use. to add value to our assets, increasing the areas being transformed. And we know that it's a transient activity. Cattle raising will migrate to grains. Two years ago, when we talked about cattle raising, we had cattle raising in Chateau Bas. Now, we don't have cattle raising in Chateau Bas, and we have cattle raising in Preferencia Farm and Paraguay Farm. So in Arrojadinho, we're beginning a cattle raising activity together with grains that they already have and with an area of production that is irrigated in this property. So I say cattle raising is a transition, only a transition tool, but even now with high prices, we have good results. So we give a lot of attention to GMD, average daily gain of animals, kilograms, and we had year after year an increase in the average weight of cattle. This means they are being well kept, and this, they are gaining weight. With this gain in weight, we saw an important increase in the price of beef. Last year, at this same time, in this same month, we had 180, 190 reais, and now the price doubled. So this activity, transition activity, is now becoming very important because of the higher prices of beef. Now here what I'd like to say, we are now finish, we have less than three months for our calendar, and we are looking at the margin. This soybean of 170 reais that we had in the last few weeks, most of it we're selling at these prices, but we also have the derivative account to pay. So once again, I reinforce the vision that we have in the medium and long term, we are looking at contribution margins we have a position soybean sold at 1032 if you look at the spot prices or future prices it's totally different we have a u.s currency of 5.35 reais so this is we we had an important part already sold and now we are delivering the hedge activities. So in the end, you will have 1032 and you have a combination 120 reais per bag of soybean. Different from 170, 145 of the spot price. But I say this is the way we work. We will continue working like this and when we sold this soybean in Chicago, the price was 880 and 98 and 90 in March last year. Then we made our budget was done with 930. But pandemic came. So it's important to stress that the good cycle we will see in these numbers. But I have no doubt that in the next few years, these we we will have the full effect of these numbers in the case of corn. we had a more conservative position. We know in the domestic market, you can even operate in derivative. You can have the risk of counterpart. So in the summer corn, we did nothing. We will benefit from these prices, 80, 90, 100 reais. And the second harvest, most of it is positioned in the Xingu region. We have So today, the picture of the company, we have 50% sold in corn and 50% open. Cotton, we don't have much, but in the same way, we have a price above the price in the budget, but below the market. Gustavo, you have the floor now. Thank you, Andre. Good afternoon. Now, let's try to explain what Andre said concerning the appraisal of the commodities, the higher price and how this is impacting the company's EBITDA. You will remember that we said before the pandemic with the prices we had, we expected an operational EBITDA of 130, 150 million Riyals. Now things change totally with a new price level for soybean, corn too, which had the highest price increase, and sugarcane. So let's look at the lower table. We excluded here the effect of the biological acids in sugarcane and corn, and we included the result of derivatives of products that are already sold. And we see that we have here an EBITDA for nine months, and this doesn't include the sale of the farm that Andre mentioned. So this price is having an impact on the result and should impact also the price of land in the future. Last year, 78 million reais. We have to remember that we had products that were sold at 1,200, 1,300 a ton, and today we're selling at 2,500 per ton, this soybean. And here, when we see the effect, here we have part of the, we are recognizing the biological assets, we have an inventory, 95,000 tons, 70,000 that Andrei mentioned that we will harvest, and the effect of price, especially in this inventory that we're harvesting, and we have begun to sell 35,000 tons of this campaign. We also see that the price of sugarcane during this quarter, the adjustment in relation to last year brought us a price adjustment that is very important, between 15 and 18 million reais. And these are the main effects that we see here. Now, next slide, please. Here we see that of those 219 million Reais, 213 are operational. We had only the sale of a small farm. We had sold a small farm, 130 hectares, a farm that we had finished transforming for grain production. So you see this small amount of real estate, but the whole effect comes mainly from the operational side, planting and harvesting. When we compare both periods, we're talking about a sale of 90,000 tons of soybean. We're talking about 4 million tons of sugarcane. And during this year, We had an important increase in corn because of the second harvest that we planted in Xingu. But the great impact, most of the recognition of the difference comes from the sale of soybean, 33% higher than the previous year. In the case of corn, 40% higher. Sugar cane, 20% higher. So all the products had a price increase and are helping to increase the EBITDA. And we explain this with the tonnage of corn sold. On the right, you see the breakdown of each one. These prices, sugar cane, as I mentioned, the price increased by 20%. The other products increased even more. And this is what begins to bring us results that are very different. Grains become grain. is now very strong and we're less dependent on sugarcane. Normally sugarcane for the company since it's a mature area 190 million and here we see that we will have a promising report for June 30 here We haven't recognized neither corn nor the sale of the farm. But the results for nine months show a great impact of price. And this increases the gross profit of the company, 370 million reais. But it's important. within the financial results, we have 250 million Reais of derivative results, negative. So to understand the real results of the operational part, we have to consider these two effects. Next. Here, income statement, two large effects, two large events, follow on, which increases the company's capital, and this is part of of the company's cash and also used for investments in the farms in Bolivia. The property here we have at the situation of the company. Another important event is what we mentioned, the impact of the price of soybean and you see this in the company's inventory and in the receivables from the sale of the farm we have 450 million from the sale of farms and these credits are indexed to soybean bags and this also will bring us an appraisal in derivatives we have a credit and we have other liability when we have this so you we you can see the effect 150 million as i said 119 million reais but Here it's important to mention the credit for the sale of farm is 450 million. And on Friday, we announced issuance of 240 million reais in CRA. And we will use this money to transform the portfolio. We still have 40% of the company waiting to be transformed. to begin to plant. And the company can lengthen the time and profile of its debt. We mentioned this in previous presentations. And here we see on this graph, because here the CRA is not included, we have a debt that is very concentrated in the next few years and these 240 million we will pay in the 5th, 6th and after 5, 6 and 7 years therefore we will be able to have a longer debt and the cost of the company the cost of financing is low and we believe this is an important strategy to have net assets and good evaluations, because in some cases we use this as a guarantee. Properties of the companies on June 30, 1.9 billion Reais, This appraisal was done with the price of soybean bags at 80 only. And today, we understand that it's better to wait for to have an independent evaluation. And in the next quarter, which will be the end of the year for the company, we will show you the net of the company with new prices of land. Finally, we'd like to show the evolution The price of the shares in the follow-on, we were trading two, three million reais per day in the stock market during the follow-on, 100, and now between 26 and 30 million reais per day. So we're very happy. with this result and we will continue working to discount the net asset value here. Well, thank you very much. And now we'd like to begin the Q&A session. Thank you, Gustavo. Thank you, Andre. Well, now the Q&A session only for investors and analysts for subscription. Okay, Damien, our good companion shareholder, thank you for the question. We made this communication because we received from some communications from the shareholders about the bonus so that's why we made this communication to the market but answering your question this bonus for a subscription that exist before the IPO, when the company was founded, it is equivalent to 20% of the company's capital. So until the 15th of the month, we make the correction. We don't have the IPCA, but we have an approximation for May. We will use this calculation. For us, it's important. It's money that goes into the company's cash. It will be transformed into the acquisition of farms. It is money. that has this objective and certainly we will use very well this money and also the rest of the follow-on in new acquisitions in the pipeline that we're considering very actively in the last few months. The next question, Tiago Duarte, BTC. Can we talk about the use report in June 30 with the new appraisal of the land? We know that you do this, you have internal studies to know the value. Is it possible to give us the potential for appraisal that you have in the portfolio? Well, Tiago, good. It's good to hear you, to have you with us. Two excellent questions. The second, if I give you the price on Apollo will kill me. But let's begin with the second. I believe that the good thing, I always say, look at what we do. Look at the delivery. you will have an idea. If I were to give you a number, I would say analyze the sales that we made recently, a sale made last week, and look at the market, look at the price we sold for. So initially, Tiago, we're not having the correction of the multiple. This will come in years with profitable margins, high profitability. We also believe there will be a correction of the multiples. Today what's happening, it's a correction due to the price of soybean bag. So the same sale we made last year, we made today. It's the same. same soybean we had last year at 89.90 today is being priced in the next few years at totally different prices so the same thing happened to the land this is what you can expect from the land now concerning acquisition I never had such an active agenda. The company's acquisition agenda was stronger before the IPO. But today, we're still very active. We have meetings with the internal teams two, three times a week. We're looking at many things. I always say that right now, Tiago, we will continue guaranteeing to the shareholders that we will make good acquisitions in Brazil involve an enormous amount of work. We are very careful from due diligence and also there are assets that you can close more quickly. Others, once signed, The purchase entails it takes between 60 to 90 days to be able to continue. So I have no doubt that the company will be able to allocate this cash in an efficient way, always looking at what we do. We buy pasture land. We're very focused on pasture land. This can tell you about the region. We're looking at many things in Mato Grosso, south of Pará, pasture areas. There are things in other states. There are things in Tocantins and Maranhão, but mainly in this area, south of Pará, north of Mato Grosso, and then Tocantins and Maranhão. This is where we should make the next acquisitions for the company. Well, the next question, Felipe, you see a lot of drought there. Could this affect the demand and offer of grains? And could this increase the price even more? Well, Filipe, good afternoon. Gustavo will answer the first part. He has these numbers on his spreadsheet. And the second, I will answer. His microphone is off. Filipe. Sorry. As I mentioned, we have a plan to sell 95,000 this sale of soybean. It's important to mention we are supplying already sugar cane. The price is one real per kilogram. This will give us 40-50 million real and also corn with these good prices. We believe that most of the domestic market we will be selling during this quarter. That's a summary of what we have for the next quarter. Just supplementing, we left most of the bags. We have made a reduction. We believe it's going to be we brought this projection to 89 bags. And I remind you, so that maybe the reduction we had is not the same as the reduction in Brazil. The rest of the country may have a stronger reduction. If you look at the data from EMEA, a study from EMEA of the planting of the winter harvest in Rondolópez around 163, Road 163, Valley do Guaporé, Xingu, you will see that Xingu was the region that planted, that was able to plant in best conditions and the better conditions. And the picture of the Midwest and South is compromised. Everyone travels here. Goiás is a state that will suffer a lot. Mato Grosso do Sul will suffer. Reminding you that this is a game that we Brazilians always wanted. Corn is the second harvest we have. So soybean is in summer with more stability. Brazil, 75% of the production of corn is in the winter harvest. It has more volatility. Now international prices are rising. They are very high. I would say to you, in the case of Brasilago, the reduction in productivity is the reduction in revenue per productivity is still much less than the increase in the price in our case. In the case of Brazil, I can't say the same thing, but I believe farmers also will be less corn in the market. Thank you, Andre. Next question, Naudisson. He's an investor in the company through Easy Invest. He believes that Agro3 is an excellent opportunity for investment. What is the message you can give to individuals who want to invest in your shares, Agro3? Not so. I'm very happy. I would like to share with you something. This great increase in the liquidity that we had in our shares are from investors like you. We saw in the investor base an enormous growth of individuals Investing in Agro3. I believe that for you investor, for all the investors investing in our shares, I always say that we are the right company at the right time at the right place. So the right company because it is a structural thing. I have no doubt I graduated almost 30 years ago. Brazil produced 68 million tons now, 260, and I want to see Brazil producing 500 million tons. And to get there, it'll be faster than it took to get here. So we're at the in the right place. Brazil giving you other numbers Brazil today farming Brazil produces grains on 66 million hectares and in cattle raising we have 190 million hectares. Of these 45, 60 million have potential for agriculture. So, we will soon have another Brazil without increasing area or invading other lands. So, to everyone, We are doing this, we're talking to civil society, and these things will converge, and companies like ours will be in the people's radars, responsible people, people that have the SED. For us, SED was born with Brasilagro.

So,

We have SAP running on the farms. So we had to audit our numbers. We did this. We're also doing a lot in the social area. And Ana Paula is with us recently. She became a director of the Brasilia. we give one and a half, one to one and a half percent of our profit to social issues. So now, we would also like to mention the team. What we do here, I always say that a successful company is the company that has a clear strategy where it wants to get, and this strategy should be spread in the whole company. We have robust processes to guarantee trust, credibility, from people like you invest in us, and we're a company that invests in people. invest a lot in people. So we believe the company's success is the people's success. So the company in three years achieved this certificate, great place to work. And so the leader who doesn't spend time with the employees is not a leader. So when we look at this, we can, in a transparent way, say that this is a company that will be successful in the medium and long term due to these reasons that I just mentioned. Thank you for your investment.

We have another piece.

Beans. how we began in beans we acquired Agrifirma in January 2020 and with Agrifirma came three units three operational units and two already had beans planted and beans were through a producer and a seller. If I were to say five serious people in beans, they are among these five. So this gave us we trust. It doesn't have the liquidity on the other side that allows you. Why? Beans have seasonality in prices. So with our partner, they have a cold chamber. When beans are cheap, we store the beans in cold storage, and then we sell when prices go up. This is how we regulate production in the domestic market. In parallel, we saw that it could bring us good margin, so we looked after markets outside Brazil. In the acquisition of Sinagro, they work with a company in India, and they import beans from Brazil. And we said, gee, let's ask what was sent to India. This year we did the same. So when the company Gabriela we have two destinations part of our beans which goes to this storage cold storage which is sold in the northeast and most of the beans produced in Mato Grosso these go directly to India it's exported and we it leaves packed in 50 kilogram 50 kilogram bags and it goes to india we signed this an opportunity to have a product with morad did value low risk international markets you can guarantee So our beans, I don't have the numbers here, but I should say that what we harvested, the company understands that in our business strategy, it's important to have, we want 10% with Other grains, we already have beans. We haven't brought you the number, but I will say that we are a great producer of corn for popcorn. Yes, corn for popcorn. We planted 1,800 hectares of popcorn corn. and so we're looking at this where we can find margin so we're going after these products and including them thus attenuating the volatility of the price of commodities. Well before passing to Andre for final count. I will send the message from Nautilus. He said he believes a lot in Brasilago. He's very proud of being an investor, and he's telling us that we have to spread this, publish this, Well, thank you to all who were with us during this hour. And I always highlight the commitment for the consistent delivery of results. We will continue doing this. Great gaps that we had, we solved. when we decided to do the follow-on. We were criticized for the price, but the investors who followed us are very happy, very satisfied, and it was met. So, we already had recurrent results, and we wanted to increase the liquidity. Today, we're a company that has liquidity for the shares for small medium and large investors more than 100 million being traded in the stock market so count on the dedication and the commitment of our team and certainly the these shares will results and share this with you so count on the debt dedication, and also the work of all of us here. Thank you.