Brasilagro Brazilian Agric Real Estate Co Sponsored ADR (Brazil)

Good afternoon to all. We're here once again for the Earnings of Brasil Agro Q1 2022-2023. Just to clarify, For those who are beginning to follow us, the fiscal year goes from June to June every year. So today we will be talking about the first three months of the harvest 22-23. I have here Mr. Andre Guillemin, our CEO, and Gustavo Lopez, our CFO. Okay, you have the floor, Andre. Before that, I'd like to mention concerning Q&A. If you wish to ask a question, please raise your hand and we, if you want to send in writing the questions, I will read them here. And if you want to follow in English, we have simultaneous translation in the Lincoln Interpretation. Okay, Andre, you have the floor. Thank you, Ana Paula. Thank you, Gustavo. And I'd like to thank all the participants who are always with us following the results of the company, believing in the company. So this is Q1. We hope this year will be more calm than the previous two with pandemic restrictions, higher costs. It's a year. that is we're seeing this year as very positive for agro in brazil and as anna said it's our first quarter as i always say well there's a lot to see but we already see some trends and we will clarify this during our chat today so as always feel free to ask questions to participate this forum We want it to have participation. Okay, let's go to the presentation. This is the first highlight, the first slide. And as always, we have the highlights. We have financial highlights, operational, and real estate. In terms of finance, the company closes the quarter with 299.8 million reais, net profit 42 million. adjusted a bit of 107 million later on we will give you more details we know that last year we had spectacular results in terms of operations 1.7 million tons of sugarcane we began planting soybean we have 38 percent of soybean is already planted especially in matugroso and goyas the climate has been stable and in terms of real estate like we say our companies in the market were buying and selling all the time identifying business opportunities that will bring profitability for our investor so in this quarter we'd like we had two movements and so we had a purchase and a sale we purchased Fazenda Panambi later on we will give you more details and yesterday night we announced the first sale a fraction of our operation in Paraguay Well, let's talk about Panambi. Panambi is a farm in a very productive region in Mato Grosso. It is here 10.8 thousand hectares of which 5.4 thousand hectares are agricultural land. This area in the past five ten years ago they were planted then they transformed this into pasture it wasn't their main focus their focus was cattle raising and we acquired this real estate to transform all this area which is pasture into agricultural land it is it is a very good region with large producers and we believe it has a great potential for a second crop it's in a region that is very favorable 285.6 million reais and on the right we also made the first sale in paraguay we're very happy i remember here in this forum we announced in a timid way for example jatoba farm when we came to announce that we were selling the first 600 hectares of farm that had a large agricultural land and in paraguay it's not different we have an operation we've been there for five six years producing we had spectacular years we had three years with a drought that affected production but it shows that we have potential and here i reinforce some aspects we began planting cotton also in paraguay last year 800 hectares this year we increase we will increase cotton and the whole region is planting more cotton the group was one of the first we were one of the first to plant soybean now more than 80,000 hectares there was very little cotton in the next harvest Paraguay should have 15,000 hectares of cotton it's economically feasible we see here 1.5 million dollars and here we see a TIR of 27.9% and if we analyze this in Reais 42.2% return we're selling 500 useful hectares and it still has a lot of area to be sold and some part of this to be transformed still so this shows this shows that there is liquidity in this region and it shows the company is being efficient in capturing these profitabilities with these opportunities while here this is a backdrop gustavo will be talking about this we have been showing this graph we showed this graph on a larger scale in the past and now we reduced it so we began showing a picture in the short term soybean 176 now 184 I'd like to remind you that this is corn BMF corn So we began with 101, now 89, cotton, a crop that had a strong drop due to the scenario that you know very well, the possibility of a worldwide recession, interest rates, cattle raising, a little of the effect. linked to our exports to China and also the volume we believe that there the volume would be smaller we're talking about food soybean at a high price but the number the volume of confined cattle was high ethanol when we look back in the beginning of the pandemic. Here we see the numbers then during the year, 3,000. And more recently, we had an impact due to the changes, due to tax on gasoline. This removed a little bit competitiveness of ethanol, over the price of ethanol and thus this harvest will produce more sugar than ethanol.

This product suffered and consecana, the last line, due to the same reasons.

Well, one recurring question at the beginning of the war we have shown how we would deal with this issue and fertilizers were discussed in the media on television a country that has 27 percent of its gdp focused on agriculture needs fertilizer so during many calls we purchased fertilizer in advance we bought in advance the fertilizer so chloride we bought before the ukrainian war then there were the embargoes and we purchased phosphate fertilizers we bought later there was space we bought fertilizers and the price of fertilizer with phosphate continued to drop and nitrogenated you know it depends on the price of natural gas in europe's with ups and downs so when we look at the price here we see the average price So we had fertilizers at $1,350. Today, $675. And when we look at chloride, the same, $740 in the past. These historical prices normally are $390, $400. We bought at $700. We thought it was a good deal. And now we're seeing these prices dropping a lot. It's important to stress, as I said, we have a large volume of planted area. This began to be used in our areas in July when we began to use fertilizer and then plant the second crop. So we had a deadline to make decisions until July. also because of the volumes were large buyers 80 90 000 tons you can't buy this a week before so we bought in advance i would say that we made more better decisions than bad decisions there was a great uncertainty everyone bought so here you see the pie chart we have 91 already bought the inputs and we still have nine ten percent to be bought basically nitrogenated in the second campaign. When we say second campaign, we're talking about the second crop, winter crop, and also sugarcane in February, March. And the graph below shows the volume delivered. So we're considered not only with the fertilizer, but also the delivery. And more recently, delivery reached high volumes and we saw there were many problems with roads being blocked but i can tell you that 84 has been already delivered so we have no deficit in any unit all the units are planting in Shingu they finish planting the others are planting and they have their fertilizer guaranteed and it was a year with a lot of volatility and we always tried to have the best combination of revenue cost but there was this uncertainty with fertilizer well here as i always say Here we reinforce that we're diversifying this graph, shows our company geographic distribution. In agriculture, you have to diversify. This is very important. So when you have this diversity, you can attenuate also climate problems many times. We saw, for example, the costs in Mato Grosso, higher, and Maranhão, Bahia, an important advantage in terms of logistics in comparison with Mato Grosso. So, the acquisition of the new acquisition. We have some leasing contracts. The company was very efficient with its partnerships. We included areas in Xingu, Rio Preto, Regalito, 5,000 hectares. We diversified in a region in Mato Grosso to the west, Comodoro, other areas in Xingu too. so the company was very efficient as we always say the combination of our own land with leased land and the last the sale while here although in the last year you're talking about q1 but during the last year You know how the company was efficient in selling assets. So year after year, we're being able to grow the planted area. This is very important. It represents cash. stability in the operational result always trying to bring foreseeability for investors we know that this business has a lot of volatility agriculture has volatility how do we attenuate this volatility looking at the pie chart you can see the breakdown of crops where we have an enormous diversification of the portfolio soybean beans also here corn this and sugar cane and cotton so and the pie chart on the right shows our area that is cultivated with our own land leasing for our production so this balance is fundamental Our own real estate results and operational results, leased areas were always focused in being in stable areas. And the combination of these two strategies, the way we see it, is a winning strategy. Enabling important real estate gains and lowering the cost with leased land. and also giving us more stability in the results. So this strategy is strong inside the company and we're always calibrating this strategy, adapting it for it to be efficient.

Well, here a new graph. Congratulations. Here,

we're using this graph to see better where we are and what we are doing we were careful in placing the main crops beginning of the planting then harvest this helps us to see better and understand better the results from one quarter to another not only seasonality and here we have also commercial factors for example when you harvest in q3 it doesn't mean you're going to sell in q3 there is seasonality but we will explain as i said soybean we have 30 plus percent already planted We began now. We will begin next week planting corn. We're talking about the second crop, the summer corn, a little in Bahia. The beginning of the planting of beans, also cotton. This happens on two occasions. In November, we begin to plant cotton in Bahia. We continue until middle of December, and in January, we plant the second crop, cotton in Mato Grosso. so it's a very dynamic business and there's always a challenge and i always say we're always monitoring the climate because it affects us uh all year year round when we talk about the climate we have good news we mentioned this in the previous call la nia becoming weaker This is a characteristic that favors the large region that produces in Brazil. So, a weak La Nina. Well, what would be the ideal to plant under La Nina? The first semester of the calendar year. We had La Nina effect, and in the first semester of the next year, El Nino. Why? La Nina anticipates. anticipates rain so when you have el nino you have longer rainy period so the rainy season becomes larger and this always helps agriculture in brazil brazilian farmers love this so you have sugar cane harvests that develops better with this situation in April May until June so we're telling you that plantations are planting is uniform and we're also we believe we will have a more neutral year next year a more normal situation for rainfall And this is very positive for Brazilian agriculture and for us. Well, here is a summary. I always highlight that cattle raising, it's a transition for us. We transform pasture land into agricultural land. If you transform a lot of, if you transform pasture land into agricultural land, you have a lot of volatility in the first two years. So cattle raising, we use to attenuate this volatility. In the last few years with everything we have seen, apart from being an excellent activity that mitigates risk, and helps the value of the portfolio it has also been very profitable cattle raising here a little of the number of heads of cattle here pasture land because GMD is the average gain weight gain for us it's 600 grams and what we had in the first three months 350 grams this for us is very positive and i'll explain the first quarter is made up of dry months july august and september where we don't have too much pasture. So, although the graph shows an expressive difference between estimated and actual, and well, I believe here, just to reinforce again, we're always monitoring profitability the company today has a position we have receivables from farms sold this is a picture of our situation soybean 57% sold soybean Here, 555, the company was efficient in selling receivables from farms. very effective 34 percent sold with an exchange rate of 5.9 now when we look at 2022 we have already sold practically all the harvest and the second harvest we have 20 percent of the corn sold the cotton

The company has also hedge.

Here we have with this distribution of rain, we made some changes in Mato Grosso. Cotton sold at a price of 88.98 and percentage of hedge 45.94%. it's a crop that suffered a lot but we have an effective hedge position in cotton in the case of ethanol a new product and we have been hedging for ethanol 33 38 sold at an average price that you can see here when you look at the spot price 2700 the cubic meter of ethanol and the company has almost 40 percent sold at a higher price well now I'd like to pass the floor to Gustavo he will explain the revenue Okay, Gustavo, you have the floor. Thank you, Andrei. Thank you. I'd like to thank all those participating. This is the Q1. We always said that last year was a spectacular year in terms of cost and price. And now we will explain this effect. André mentioned during this quarter, we had the following in the company, the harvest of sugar cane. When you compare a quarter with another, the production of sugar cane was similar, sales were similar, and now we will see margin. Last year, when we sold sugar cane we had an average of 1.3 reais per kilogram entering this border as you know the government policy they gave tax exemptions icms and this made ethanol a little less competitive and with this we sold at one real and 10 cents so we had an impact on the price on the other hand andre mentioned we are working with a fertilizer that is more expensive cct also is more relevant so all of this provokes a drop in the margins later we will try to show that the margins continue being very good when we compare with historical averages the second effect that we will see here during the first quarter in 2022 we had 70 000 tons of soybean and 40,000 tons of corn. And this year we tried a different strategy. We tried to sell most of the soybean and corn in the first semester of this year. And we had 25,000 tons of soybean and 60,000 tons of corn. so we can look at net revenue of the company 378 million reais first three months of last year then we will show the tons and prices here we have a summary And we see the impact of 21%, a drop of 21% when we compare with last year. We will see that we have a sale of soybean that is a little less, a little more of cotton. When we look at June, we're talking about 50 million reais difference between between price and quantity and on the other hand sugarcane that i mentioned that we were selling 16 percent 16 less there will be an impact of 95 million reais When we look at the company's EBITDA, last year we had 120 million reais. This year we're talking about 106 million reais. And the 223 million reais of last year, 80 million of this EBITDA comes due to this sale of soybean that I mentioned. 60,000 tons that we sold of soybean and the corn that we sold. on the other hand we were we had an ebita of 140 million reais from sugar cane for this tonnage that we sold we harvested and sold and we made a sale at a hundred 185 reais per ton and 85 reais of cost so the margin was a hundred reais when we translate this in reais per hectare we're talking about nine thousand reais per hectare profit this year we had a smaller amount to we sold less grains and this million tons that we had last year we sold roughly 159 per ton the cost is 95 and the margin now is 60 reais per ton so when we compare a year with the other we have 50 percent difference in the margin in sugarcane and the rest also is seasonal it depends on the amount of product that we carry when we look at the company's profit net profit last year 107 million this year 42 million reais profit on the next page here we explain this difference soybean last year during the quarter we sold 60 000 tons this year we're talking about 19 000 tons and when we look at the price per per ton it was better but this the volume is smaller there is a drop in the volume and this has an impact on the results corn we we sold more tons but it didn't compensate the variation in soybean due to the price. In sugarcane, as I mentioned last year, we sold... The tonnage was very similar, but the price... Last year was 175, 185, sorry. And this year, 159 reais, a drop in the price. These three products had an impact on net revenue here. And when we look, we see here net revenue, 378,000 last year. year this year 299 000 and here we see the EBITDA which reached 50 percent so we begin to see a drop in this quarter especially because it's the only product that we're producing but we should expect during this year to have And it beat the margin of 60% of what we had last year. In soybean, last year, we had a margin of 1,000 reais per ton, 4,500 per hectare. And today, what we're expecting is 600 reais per ton and 2,800 per ton. So, a drop. in sugarcane too same thing last year we had 600 we had a cost of 85 per ton for sugarcane when we convert this 9 000 reais per hectare and this year for this harvest we're expecting The cost 95, we're talking about a margin of 60 reais. When you talk about hectares, 4,500 profit. So the margin will have a drop. There will be an impact on margin due to higher costs. Soybean and corn, it's the cost that went up. So there is, we have 30% more cost due to fertilizer. So when we see this adjusted EBITDA, once again, 223 adjusted EBITDA, 223,000 Reais versus 107, this includes sugar cane. And for Q1, here this includes sugarcane and the difference is the inventory that we already sold okay well here this shows once again the impact of the main crops here we see 823 million reais From the net profit, we deduct depreciation, amortization, taxes, and then we add fair price of assets that were produced but not sold, derivatives, and we get to $220 million last year. 60% is sugarcane and the rest is soybean. 60,000 tons that we had last year. A little less corn this year. A bit that dropped. And the participation of sugarcane continues to be relevant. These are the two main crops, sugarcane and soybean. We began the year now. I believe that during the next quarter, we will harvest more sugarcane. We will have everything planted. And for Q3, Q4, we will begin to suffer the impact of soybean and corn. We're optimistic to have a positive operational result. but once again we were not able to get the margins that we had in the previous year because the cost for corn sugarcane and soybean had an increase the cost went up when we compare on the next slide we will show here the company's numbers we didn't have great changes we will have cash and equivalent cash which is very similar and investments went up we included panambi farm that were that was bought these two were recorded at cost the receivables for the sale of farms we have part of this in the short term part in the long term 480 million rise and here too a farm that we sold and will deliver alto taquari we have to record this in 2024 we will record the sale we see the loans We're paying for some loans and the liability, this farm part of it, we paid with receivables and operational cash from the farm that we sold and part will remain as a debt. And we call this acquisition to be paid. Well, the company's numbers are very healthy.

now we will see some details of the company's debt we have a debt of 400 million reais with a cost 93 of the cdi index we have a third with ipca

here we have some prefixed loans too and now we have we have we have a debt of 150 million to pay for the next harvest but the situation is very comfortable reminding you that we have receivables from the sale of farms that are not included here 150 million and the rest in the next year here the company's dividend we said we want to be we want to pay dividends in a recurring way on october 27 we approved 300 million reais to be paid as dividends on november 16th and we will continue working so next year by selling farms and operational results we want to continue paying dividends this is also important to highlight during this semester with the administration council alejandro alejandro isabella saboya eliane luftosa mariana director of the company they work during this semester for us to really adapt the company to the rules of the sec we created an audit committee soon we will mention and communicating the members and we approved also policies for transactions compensation also for the auditing committee and with this we conclude many changes and adaptations that we made and the tax committee the fiscal committee that continues we continue to work with the audit committee and fiscal council and we understand that with this once again we reinforce our commitment in terms of looking for better policies for governance and transparency on the last graph this shows the evolution of our shares agro 3 we continue to work to have a better price for our shares we understand that we have a discounted price the combination of operations and sale of real estate we will continue saying that we want everyone to know our business well and we invite potential investors to invest in the company because we understand that we have a very good position thank you and now we'd like to begin the q a session thank you andre thank you gustavo we have here pedro from xp and enrique from btg to ask questions yes good morning andre gustavo thank you for the opportunity my first question is about the allocation of capital considering this outlook more difficulty in buying farms and as you mentioned results should continue to be above historical levels talk to us about allocation of capital dividends can we expect a dividend yield more in line with history six seven percent or can we expect something in line with the last year close to ten percent that's my first question and the second point whether you could give us more details about the sale of the farm it was it had an attractive yield But it seemed very small, a small sale. Can you explain the strategy of the company behind this sale? Wouldn't it make sense to sell more? Or can we expect more sales of this size later on?

Thank you. Pedro, thank you for the questions.

We could spend a long time talking about these two questions. Okay, let me try. First, our challenge is to be an anti-cyclic company. We have to sell farms when everyone is buying and buy farms when everyone is selling. This is the magic of our business. It's simple but difficult to execute. We love these simple things that are easy. complex in their execution. You are right in saying that, and I've been reinforcing this, we should sell more because of the liquidity in the market. The company will continue being a seller and a buying company when we see good opportunities to generate value for the shareholders. In a certain way we will continue uh with turning the portfolio we have an amount that we believe it's important to sell every year and this brings stability of of results so going back a little we didn't talk about this number the 520 million in profit that we had in the middle of the year 300 million comes from operations and 240 comes from real estate sale and this is what we intend to do we're balancing operational results with the sale of real estate if this happens and this is what we want the company will The company continues being an important payer of dividends. In terms of policy, we're in the Novo Mercado distribution of 25% of the net profit to shareholders. But in a recurring way, we have been paying more. And I have no doubt that the day we need to buy large assets, we will say, okay, let's invest because shareholders know our capacity to generate value for them so i believe this is a point that i'd like to stress and clarify the point concerning dividends the second point a very good quest very good question why did you sell a small amount of land it's small linked to a leasing operation for the buyer we believe that this sale will not stop here we will continue selling with other fractions like this one these are new regions pedro when you have a large company producing in the region they say oh it's because oh it's because it's a large company if you why small when you have small farmers producing it's because good some people say oh it produced the production is good because it's a large company well this fraction a small amount of land is aims at bringing new entrepreneurs to the region when i talked about this sale i talked about the sale of shatoba very similar both sales in the shatoba farm we sold initially 600 hectares then So also very important, a sale that shows that the assets appreciated and the company's capacity to generate value. A sale, like you said, a small sale, but with a return rate that is high. Andrea, why didn't we sell more? This is a driver that doesn't depend on us. We work actively to send, but whether it's going to be a small amount or a big amount, we sell. We're analyzing proposals of larger sales, and the focus is to reach 3,000, 3,500 sales. per hectare remember that we paid 280 dollars for this land and today we're selling at 600 603 000 so i'm not i'm not worried because it's small but the company had the right strategy This asset has liquidity. And even more, when you have liquidity for small, you have liquidity for the large. The opposite is not true. When you have liquidity only for large clients, due to logistics, efficiency, and other things, you don't have efficiency to sell to small farmers. So selling to small farmers doesn't worry me. Selling only to large farmers... worries me so i believe that the second point we're very optimistic with cotton in chaco it will be an important crop because it it is it has high fertility so and cotton a cotton crop to be consolidated in a region it generates real estate value. So adding up everything, a small sale, but this doesn't worry us because when you have small sales, you also have large. The opposite, no. Did I answer your question?

Thank you. Well, answering Pedro,

andre answered two questions that came in writing concerning dividends since our results was smaller than expected so we have answered the question on dividends there's another question whether we will have a distribution of dividends this year because of the sale so now i'll pass the floor to enrique from btg for his question good afternoon andre gustavo and anna my question it's a follow-up in terms of capital allocation i'd like you to focus on growth we saw the company in the last few years consolidate its business model and now with strong numbers when we have the impression that the space for appraisal of nav seems slower now that commodities stabilize so i'd like to hear from you what are the main opportunities and priorities of the company for growth in the next few years and buying more land what is the strategy or leasing lands or verticalizing so what are the main priorities from now on well a good question enrique thank you once again for participating i will begin talking about where we're looking what you said makes sense there's a stability in the price of commodities but you should remember that the company has part of its portfolio in the case of paraguay we have transformation this will attach value to the land when we look at brazil you have few assets to be transformed but we still have the ramp up the growth in yield of areas that were transformed in Fazenda Bom Jardim, Chaparral, Rio do Meio. And I would say to you, even if you stabilize the price of commodities, you have an important value For example, when you have an area in the Savannah, it's worth 100 bags. The next year, it's going to be worth the cost of capex plus year. Then cost of capex and two premiums until it stabilizes and it gets to 350 bags, like in Bahia, 350, 400 bags. So this is important. in spite of the speed of transformation being slower because most areas were already transformed there is still a large part of the portfolio appreciating in value this is important to highlight now where are we headed more and more we're showing the company being having recurring results we, as I mentioned about this harvest, we added 10,000 hectares that were leased. Only 1,000 are being included in this harvest. So 8,000, 9,000 will be included in the next harvest in regions where we have a giant potential to have a second crop. So What do we have? We have value generation in the appreciation of the portfolio. We have also new areas with leasing that we leased and we will continue working by balancing crops. We grew a lot in grains this year. Let's see. if we can diversify more have a better mix the company continues to grow so when we put acquisition of panambi plus leasing more than 25 000 hectares that will be in operation in the next few years this is very good 25 000 hectares is an expressive amount the third driver of results is in verticalization of some production units. I mentioned here irrigation projects in Bahia that are being implemented. We already have part being implemented. Yesterday, we discussed with the teams and people from outside these projects. We discussed them. So we have a third driver for value generation, diversification and intensifying production in some units in bayern so when you look in the short term i'm looking at the next three years not ten the company will continue to grow transforming areas that were bought and in a certain way you are right with a lower risk you have a great appreciation of the multiples the land transformed in the last three four five years so the the growth of least area there this is the challenge we have to have a third crop or irrigated land especially in bayou we have projects to expand irrigation for sugar cane it should require results but will give us good results especially in marignon we have a project to for expansion for irrigation in marignon increasing even more the profitability from these areas so in three minutes i tried to say yes there is value to be generated by the portfolio there is value in the leased land diversification of portfolio and the company is looking at all these opportunities perfect andre thank you well now we have some questions in writing the first

Damon, concerning a point that Gustavo mentioned.

So concerning the creation of our auditing committee, he wants to know if this will have any impact. Is there any impact with creating the audit committee? well you know me i am an agronomist but i learned quickly too let me tell you about the committee the committee is something that the sec in brazil asked us so we prepared the committee initially we had a feeling that the audit committee would substitute of the attributes of the fiscal council but we maintained the fiscal council with its attributes and now we have an audit committee made up of independents and counselors of the company that will follow with a difference they will act differently from the council the fiscal council so i'd like to share with you the council is analyzing if the numbers are well calculated the auditing committee goes further to see if the process is performing well this is i see that this can help the company it will It shows that we're in tune with the capital markets, and we were always this way. We were the first to participate. Every time we have a transaction, we have an assembly. I learned a phrase from a lawyer, and he said, it's not enough to be, you have to show that you are. So this will show transparency, governance, and the zeal we have with small investors, minority investors. It shouldn't change the company's life because the company's life is to identify assets, buy assets, invest, and then sell. So they will be reviewing things to guarantee that we're efficient with no risks. generating transparency and the governance for all investors in the company so it's the the sec the our our cbm demands this and i believe it will improve things just to supplement the company have the fiscal council we we had a fiscal council they had the same attributes as the auditing committee the main difference between the fiscal committee and the auditing committee is in internal controls the depart we have this department in the company and they report not to the management so this is the main change that we see so we understood that the fiscal council we it was kind of the fiscal council was temporary it was requested by the minority shareholders so now the fiscal council will analyze the company's accounts the numbers and they will collaborate with the hiring of auditors also approving and reviewing the increase in capital and the auditing committee begins to look at internal controls so that's

the idea that's the change we have rodrigo asking a question rodrigo okay hi anna gustavo andre a follow-up question

on irrigation andre does it make sense to buy the equipment or to rent the irrigation equipment before andre answers i'll include a question from antonio araujo to talk more about the new irrigated areas Brazil and Cozum are becoming very strong in irrigation. So he'd like to hear more about this. Well, I'll begin with the second question. It's important for us to separate. I saw that our colleague mentioned Cozum. We're talking about two large irrigation projects. We have an important irrigation project in sugarcane. And this one in Bahia, which is more focused. It is focused on the production of grains and cotton. Okay. In the case of sugarcane, We're in regions that are marginal and not Corn Belt. And even in the regions that we follow, the Mid-South, it has gone through instabilities in terms of drought. The logic that everyone is looking at for irrigation is to have more stability yesterday i was in a chat session and people were talking about an increase in the last few years in the productivity of soybean cotton corn and in sugar cane our production we got to 600 million tons 530 if this year is good it'll be 570 580 so the sugar cane sector with more credibility and we have this and more foreseeability with the demand of biofuels and the price of sugar which seems that it changed the sector is trying to increase productivity and this productivity goes through attenuating the lack of rainfall you must attenuate the lack of rainfall the first question thank you rodrigo good question we're always looking at these aspects initially we made very good operation we leased irrigation equipment so we always look the operator who is offering leasing we analyze if it's worth the cost and we look at the cost we know that subsidized lines are few so we always have to compare when you look at leasing it's very advantages it's a great advantage the company supplies equipment and we pay an amount per millimeter irrigated there's a minimum amount we adopted this we have one unit that is that is leased we have others that are different more more capital incentive more dynamic than you do mail larger too and yesterday in the chat we talked about leasing or using our own capital in general lines what's why leasing was so important you had a low interest rates in the us and these irrigation companies have access to capital outside so they would they would they would take out the money abroad and finance farmers with higher interest rates outside brazil these credit lines decreased or became more expensive today with the picture today analyzing the economic cost of doing it internally with our own money, it's feasible. In the medium-term and long-term irrigation projects, we have more production stability, better yield. I'll give you an example. We ended the harvest of Fazenda Rio do Meio, a new region, a new farm, And we had irrigation. We had irrigation with 217 bags in general, if you ask me. But what is the logic? This land, when it's mature, it's worth 350, 400 bags. How much is in the land that can generate a cotton harvest of 350? plus 217 for court. I repeat, we're always saying that the land is worth a multiple of the bid they generate. So we have this verticalization changing the multiples of the land. Or, for example, how much am I spending to change this multiple? But the numbers are very good. If you want to go into the numbers, we're available.

Thank you. Okay, we have a question from Felipe.

Okay, Felipe, I will read your question next time, please. We want you to say the question. Since you have a more challenging climate in Argentina, will grains really benefit in the short term? How do you see the climate in Paraguay? after a challenging year? I will correct after a few challenging years in Paraguay. And the third, which regions are the focus for acquisition? I mentioned on the border, but is there any region where you are more interested?

Felipe, thank you. Yes. Grains? Yes.

As I always say, we will see many things. We do a follow-up. We have the Argentine market and we look at the climate in Argentina. Yes, your question is very pertinent. There is, yes. We are worried. The plantation of the first crop in Argentina is late. This changed and affects the choice of crops. But as I said, if we have a La Nina reinforcing or losing strength, it's better. This will improve things in the south and in Argentina. So what is happening is we have worse, the situation is worse in Argentina in relation to Brazil. We know that most of the productivity, Felipe, or the potential of production happens when you have a good installation. When you have lack of rainfall and variances this will cause a drop and this may affect productivity in the future now it's like we say the game com begins in day zero paraguay we believe it improved a lot when we look at forecasts we have two metrologists that follow us plus the climate company three media meteorologists writing reports all the time we it's good to remind you when we talk about long term these are mathematical models but there was a forecast of a small summer in january february and this is decreasing it hasn't disappeared but when you look initially oh 35 days with with uh summer today 20. well we know that with the fertility of the soil in paraguay this facilitates things a lot

Third question, Paraguay grains. Okay, regions. Which regions will we focus on?

Well, regions where there is value. Normally on the border, but we already bought areas in the beginning. We bought areas that were not near the border well situation was different we had a decapitalized agriculture and with more leverage so we have focused a lot on these regions we talked about pasture we're trying to balance more the productivity in paraguay through leases and in more stable areas like we did in bolivia last year with new leasing operations we leased land so we're looking at this we're looking at the geographic diversity and the also the balance between your land and leased land so we have so we our focus is areas where we can unleash value luciano magnus what is the forecast for next year in terms of cash investments and sales well i will begin gustavo can help me in terms of sale i mentioned this the company has a goal for us to sell a part of the portfolio every year so when people ask me i say we will try if you say i want to foresee look at the results of the last five years we will try to do something similar of course we're understanding that We are more sellers. We can be more aggressive in sales. And if you sell an area that is appreciated, we sold some areas and we substituted them for new areas, Panambia and other operations. So in the end, the company grew in production land. so the company grew this is what we're always looking at if you look at the average in the last five years it'll give you a good idea we look at these opportunities all the time investments let's talk about investments now investment we have approved by the administration council this includes everything new areas in some regions transformation of soil investments in irrigation investments in technology investments in geoprocessing we have dedicated a lot of time for this costa was leading connectivity projects in some of our units to have 100 internet we have internet of things at the farms this has been important so this year we should have a capex with structuring restructuring of areas transformation from pasture land to grains increase in fertility to buy cotton smaller projects with irrigation so we have approximately 100,000 rising cupcakes so sale same average capex 100 million reais approximately and cash flow I gave you the number sale less capex and operational result you know how our cash will behave. Gustavo, would you like to comment? I believe that it's important to share how we think. We work with a budget, operational budget, as Andre mentioned.

So we sell farms and we save.

34 34 percent goes to our partner the government 85 percent for shareholders and 35 30 percent we save for investment a gray mansion restructuring of areas planting sugar cane infrastructure and as i mentioned during the presentation of the results last year we had in a bit of 400 million reais today 60 of this value and this is these are our expectations for cash generation so normally We make a payment equivalent to 35% down payment. And this year, we have 140, 150 million reais to receive from the sale of farms. So we're going to have a positive cash generation year. And the amount approved was 130 million. part has irrigation, part does not have. So, in general terms, in terms of cash flow, we're very positive.

Well, a last question to close.

From Douglas Ribeiro, please comment on the difference between book value and internal evaluations of the same assets and price discovery of sales hi douglas good afternoon andre okay we have worked a lot on this we work every year on this how we evaluate every two years we use outside outside auditors and every year internal evaluation this is an internal evaluation we look at the multiples when we look at the price attributed to our property we always do the following the assets you don't sell it or better the best way to sell assets is in installments that's when we capture the best profitability when you sell any installments and the market for land in brazil is always in installments Those who pay cash will get an important discount. If they get an important discount, we don't want to be the sellers. We have agricultural land where the payment is made in installments. This is important. When we evaluate all our areas, we analyze maturity and multiples. For example, soybean. When we talk about the central area in Brazil, we have a multiple of bags per hectare if you look at our evaluation year after year you will see an appreciation you will see x million and then next year more bags of soybean i was talking the other day with investors if we have a vision that is more optimistic or pessimistic for a commodity, we will attribute more or less value to the portfolio. Because as I say, you pay, and then if you have a more optimistic vision for a soybean, you will have a larger flow. And when you bring it to present value, it'll generate more value. So the logic is where you place soybean, where I would even like to have a price of $14 in the next five years. No one here can validate or believe in something like this. So we have a vision of medium and long-term for commodities. We convert soybean 235 reais what is 135 reais it's a dollar rate and we convert to soybean 100 pounds weight now if you look at soybean today we sold soybean at 170 reais we sold it today If you take this price and perpetuate this in the model, you will generate an extra $1 billion in the company's portfolio. No one here, neither manager nor the company, no one, we make money by delivering results. Why? When we look at sales and looking at your question in a recurring way, we sold between 6, 10, 12% above the outside evaluation. So I'm talking about external evaluation. When you look at the company's numbers, when you look at the sale, for example, how much was this portfolio worth? And we sold this part in a certain way. I believe that it's between 8, 10, 12, maximum 15% of extra value. In a certain way, I believe this doesn't compromise the manager's work or the risk of purchase or sale, but it brings a realistic definition. So, if you look at this year versus last year, we had an appraisal of 200 million reais, but I'd like to remind you that we also sold, so we lost. So, we had a real gain year after year of 15-16%, but I say once again, everything follows the assumption of what we believe in, and what we believe will be the price of soybean if we believe that soybean will continue at high prices the asset is worth a lot now if you think it'll go back to a reasonable area the portfolio would be will be adjusted and since we're talking about these are not cash sales so this is good because first The valuation is not in the company's numbers. So according to our logic, we try to be more realistic because we have already made 16 transactions involving sale of land and they were all in this range. five ten percent above the evaluation price that's what we sold it for and we're looking at the market buying and selling i believe that the evaluation methodology is a comparative one we have a picture of our currency that is gen i'm receiving offers for our assets and also to buy assets so we have a great accuracy in the price of land we had our in our database more than the majority being land in brazil so we created intelligence in this area And if you ask me, are you conservative? No, we're realistic. We're a realistic company. We don't sell dreams. And we want to develop in a recurring way to the investors. And, Gray, just to supplement the property, we have a possibility to opt between the cost and market value. And in the past, when we began this discussion internally, this was a point that we considered to make this decision, especially because there's a great subjectivity in terms of how you price the soybean in the future. So today, what should we do internally or externally to understand if we need an impairment? the value is lower than our cost then we should recognize this loss but it's difficult normally our portfolio includes farms that we bought at 1200 1500 per hectare the transformation cost to 2500 on average and there is No farm that is sold below this amount. So the best way to price recognize result is when we sell. Because an investor could question, we could distribute dividends. because of this result due to the variance in the price of land. We thought the best way would be to record the cost and recognize the gains, the profit, when we sell. Andre mentioned all the farms were booked in this way. Well, thank you, Andre, Gustavo, for your time. we had a little more than an hour and a half the year is beginning a very good audience thank you to all who participated ask questions we're making progress with more transparency and it's important to have your questions your feedback i will pass the floor to andre and we want to close and we will meet again in the next results thank you anna thank you for the team daisy camilla and thank you to all the participants we have to thank this beautiful public these people who trust in the company's management and here we are committed we have worked more and more on this and i say once again so we we work on people sustainability in the near term and long term the company this year was won a prize one of the five best companies to work in agro business in our segment mid-sized companies this shows that we're on the right track working with the right people and with this engagement for a consistent delivery of results as anna said the year is beginning it seems that that we will have a better climate than last year especially in paraguay in the middle of brazil too sugar cane with more rain this will help the production of sugar cane so farmers or businessmen are always optimists but we're realistic because we're always looking at processes strategies and people working on these pillars all the time this is our commitment Not only my, but all the managers and also you who trust in us in managing your resources. Thank you very much. The questions we were not able to answer, please get in touch with Anna in investor relations and we will answer them. And if you want to talk to us, we're available. Thank you.