Brasilagro Brazilian Agric Real Estate Co Sponsored ADR (Brazil)

Good morning, everyone. We are here once again to disclose our earnings for Brasagra. Today we're going to talk about the closing of our period from 31st of March 2025, the nine months accumulated for our harvest year 24-25. Good morning, everyone. Today I have André, our CEO, and Gustavo Lopes, our CFO. For those listening in English, we have the presentation available on the chat in the English version. And at the end, we'll also open up to Q&A. I'll turn it over to André and have a great call. Good morning, everyone. Thank you, Ana Paula. Thank you, everyone, once again for being with us, listening to the results. I'm going to tell you how we've been performing in the third quarter. Everyone knows this is a year with a lot of volatility. especially volatility in the currency. And we're going to share a bit of the strategies in the company and how the company has been able to really deliver the expected results to our shareholders. So the highlights, as we always start off with them, they're 870 million of net revenue in the first nine months, 195 in adjusted EBITDA, a year of a lot of volatility. and 76 million in net income. Basically, we'll get into this soon. Then after, it's good to always remember a bit of the history. When we defined the budget back then, we had at that moment a dollar of 490, 480. Then we were very aggressive because we look at the focus... news estimates, and they were talking about 520, 530 by the end of the year, and we thought it would not be possible to have such a difference in value, and we budgeted 530. The campaign we're working on, we considered a $530 in the beginning of the year. We had a challenge to reach 530, and then for 490, we reached 640 and went back to 570. So a lot of volatility, and the company was really keeping their eye open to not hinder the results operationally in the company. And the company a little more up ahead will provide more details. But despite this currency volatility we went through during this period, we also had the new American management come along with all of the tariffs. And then it's also worth mentioning later that we really believe that marginally Brazil could be benefited from this discussion and has already benefited. I'm going to give you some details. For soy, for example, we were also there. We had pricing reduction expectations due to the supply and demand, and we saw in the last few months that there was a recovery in the premiums, and then we're going to detail the strategy of the company a little more to capture this possibility even more with premiums that we expect up ahead. But for corn, this is a crop that has been really standing out in Brazil. We've started to produce corn ethanol as well in Brazil, which has brought a lot of stability in the price of corn. Then you have some markets that stand out, for example, some new units that are being opened. And this has helped us have stable prices, especially for Maranhão. and the unit there in Balsas where we've been able to anticipate the sales of corn, which is something we didn't have in the past. You would produce corn, it would go to the internal market or the expert's market, depending on where this production was concentrated. But now we start seeing the possibility of locking this in a bit better. Cotton is a commodity that went sideways a lot. And later we'll discuss this. Then we also talked about the cycle. of animal protein and cattle. And we have important recovery due to the price of cattle as well. And ethanol also has an intrinsic connection with petroleum, and we've been really monitoring this. And you guys have also been considering looking at the possibility of this Reduction as well.

This possibility of production compared to the previous harvest.

This harvest, the sector had an expectation of 610, 620, and now this is being reviewed to 580 million tons, which is what really has been sustaining the price of the ethanol and sugarcane. is also at about 17. Next, please. Well, I think that once again, it's worth mentioning, we've been always monitoring the margins, contribution margins, and we are finishing the harvest for summer, and we're already positioning ourselves for the next harvest.

We've already locked in part of the inputs, especially the fertilizers.

And a big challenge this year is that the game in soy was always currency and Chicago. And now you have this other component, which is the base, is the premium. And that's where you have a disadvantage, which is a component you can't lock in way before to establish these exchange rate relationships. So It's a big challenge still, and that's why it advanced a bit in the commercialization. And the inputs on fertilizers, but you have a derivative, let's say, which is the contribution margin and the sales price that also are impacted. So we see what had to go up is going up, of course. But one important highlight is fertilizers have two moments for consumption in the world. where the northern hemisphere is planting and when the southern hemisphere is planting. So we're leaving the peak of demand in the northern hemisphere. The Americans, US and Europe and the entire northern hemisphere have finished their plantation. Now in the month of May, most of this is happening in April and this made prices accelerate a bit. And now we expect things to kind of move sideways due to the demand in the southern hemisphere.

We'll be covering around September, October.

Everything that's going on in petroleum, we imagine that nitrogen and subproducts will come down a bit as well. Here on this graph, we also have our position. We closed 45% phosphate 50% chloride, and we are also advancing discussions on defensives, which is a discussion that's a little more delayed, but we've been able to also pressure these negotiations a lot to have a reduction in the dollarized price. So if we consider dollar by dollar, the price would be a lot tighter comparing to the 530 last year. But if you look at the graph on the bottom, you also see the exchange ratios and they're kind of operating in a linear manner. We already had some exchange ratios in phosphate products that were better. Then in urea, that's also quite similar. And if we look at the inflationary correction in this period, these are products where we think there's not too much room for drops. and phosphite products. I think we're at this year that's not less trivial, which is the cost of capital, right? So anticipating purchases considers having capital beforehand with the cost of capital that's very expensive. So no doubt at all, the company's cash is allocated with very high interest and we pressure, we have commercial pressure that should be better than what we allocate cash for or possible rates that producers would consider for debt taking. This is going to kind of strangle the market a bit until you have demand coming around. Big companies can't wait to buy lunch to dinner, but we are here to really come back to have a good business and a better harvest as well. Then a quick summary here of the production in the company.

I want to highlight a few things.

We need to talk about the good news and the bad news, but especially the highlights that have been taking place. The company in the last two years incorporated over 20,000 hectares of plantations, especially in Mato Grosso region, mostly three units in Mato Grosso, Panambi, and units that we leased, and that incremented the surface a lot. But, of course, you know our business model. is always looking at non-mature areas and making them become more mature, which brings in a little bit of volatility to our results. We had a lot of soy in the first year in this harvest in Mato Grosso, in areas that sell pastures. We had areas that did really well. So we considered about four units, two in Mato Grosso and one in Maranhão. Sorry, one in Piauí and one in Bahia that produced a little bit below what we had budgeted. and in exchange of these 16 production units. The others are a little bit above, but it's important to highlight that the company in the previous harvest is 300,000 tons.

And when we consider estimates for soy,

It can say what was the reduction in the area, which is really connected to the corn, the off-season harvest, etc. And also the effects of the productivity.

And then 28 due to the four units, Mato Grosso,

which had a unit with a lot of rain problems in the Chigu Valley, significant excessive rain, a unit there with over 3,000 millimeters of rain, and that was the main issue in Mato Grosso. And then in Bahia, Bahia was spectacular until February, but then in February we had a 35-day unexpected summer period, And the later ones had a bigger impact for corn. This was adequate and adjusted accordingly. The contribution margin in our first exercise was really bad, but that was adapted. And in the corn harvest, you don't have much sugars to mess with, but then you have this off-season or second harvest corn, and that's where we were able to reduce the cotton off-season yield area as well, and we increased the corn, which was an excellent decision, very precise, when we looked at the contribution margin production and profitability of the crops. So the cost of capital is super important, and when we consider cotton, we're considering a crop with costs of about 12,000 to 14,000 reais, depending on the unit.

But it's a very important crop for capital allocation.

And when you look at the ROIC, we were able to reduce this area significantly for the harvest of corn. In the next graph, I talked about the volatility in the year, and here you can see the numbers we're closing with. Soy, we had a more aggressive budget, but when we look at the actual prices per sack, We'll be able to deliver 2% above in the reais per sac. Of course, due to the dollar that was not locked in. Then the currency, once again, we've been locking this in ever since the beginning. So this started off in April, May from last year. And we had this rush of the dollar. And we had a lot being sold already. It's worth mentioning we had a budget of a dollar that was 530. We were locking in the margins and the contribution costs At that moment, you had a dollar screen of 490. So we're locking in what we could do there. And then we were able to close SOI at about 1090. It's better than what we see on the screen today. Currency is 540, worse than what it was now. Back then, we had to take on a stance to be able to lock in the prices. But after all, we had good recovery. We were able to take on significant recovery when it comes to price levels.

Corn as well.

For corn, we locked in about 60% with prices that are almost on average in the company at about 8 or 9 reais more expensive. And for cotton, I think we were very fortunate in locking in the price of the pound per price. And so the harvest that we're ending at 24, 25, we have cotton of 77.30. Next harvest, we've also taken on some positions due to the currency. So you can see we've closed cotton at 69, but the currency at 64. So that allows us to have good value per sack. Another line that also impacts our results are the receivables from farms. So here we're also taking on our position. We just brought in details for 26, but then we'll also take advantage of the volatility and the type of currency locking in a bit more than 20% with the currency at 624. So this is a photograph of our harvest. And so the summary of these numbers are the numbers Gustavo will be presenting now. Thank you so much, everyone.

Well, thank you, Andrea.

Good morning, everyone. We want to thank you all for your presence and monitoring and watching our presentation of these first nine months for 24-25. To highlight here the exercise that you can see on the left side here of the period for our financial year, you have a result of, as you can see, a net income where in the previous period we had reached 5.9 million reais. On the right side, you can see that the main variations in this period went from the 5.9 million reais expected. How did we reach the 76 million reais in this period of nine months of 25? Our best prices, especially for sugarcane and corn, caused a positive variation of about 47 million reais, approximately, as well as a bigger volume sold of soy and sugar cane, with a positive variation of 20.6 million reais. The price and volume are a reflex of this increase in the net revenue, operational net revenue, which we believe is a variation of about 20%. There are 540 million in the same period the previous year. Then the sale of the farm at the Cotari, and that's what we had already considered in the previous semester, and that explains the positive variation. And on the other side, we also see the financial results, considering the volatility that I mentioned, especially with the Chicago prices and Real prices. all the way to the interest and the increment, also the SELIC rate. So they present a big variation when you compare from one year to the other. And the bottom right side here, considering the financial results, and we can see how there's a reduction of the revenue in the financial investments and applications, which was proportional also to the volume in the cash, Last year, we operated with a cash of about 330 million reais. This year, 146 million reais, because there is also a bit of a big investment in these areas that André mentioned that we incorporated gradually. So then you have the update of the fair value for leases, which also impacts about 32 million reais.

We have some new contracts and renewals.

The increase in the silica also impacts this.

PVC also is part of these leases.

We have the obligation to deliver the sugar cane at a negative variation in the price, which has positively benefited these leases in this year as we are having an increment in prices has also helped to worsen this line a bit. Then, updating the fair value of the receivables, we have about 7.8 million sacks of soy. To receive it last year, they had registered a positive result of about 31 million reais because there is a price of soy from Chicago that was a lot higher.

About $12.5.

And the CDI was also about 10%. So in 2025, the results were true at about $4.7 million.

Had a dollar that was a lot better.

And a CDI of about $14.25. So we could say that this also impacted And last year, we also had some benefits in the financial results. Anyways, I just want to remind you that these are non-actual results, right? So what actually has a cash effect would be the first line where you have the revenues from investments and you have the derivatives, of course, as long as they're actual, right? And the interest also on the financing that is normally paid off during a certain period so as you can see in the previous period we had profit of 41.9 million reais and this year we had a positive effect in commodities and a negative impact of 31 million reais which would be 14 negative But as André mentioned, we had a type of currency of about 5.45, 5.48, and the dollar reached levels of 6.20, which is what we had considered also.

And the increase of the interest

Also consider an average volume of about 650 million reais. And this increment and this leak rate of 13.5% year over year also generates a result that's greater. And finally, the last line considers the currency variations. And considering the moment someone pays this, of the financial results as well, this generated most of the results that impacted things differently when we compare one exercise and the other. So another line that I also want to highlight are the 195 million reais And the margin of 10% last year, this amount was about 16 million reais. And last year, remember, it was that year where we had a very high cost composition and price of commodities that dropped also. And the value of the real that also gained a lot of value. But when you consider the central part here, With the adjusted EBITDA, we can explain why there's not this variation of 16.4 to the 295 million reais. And as we can see, who most contributed with the sugarcane operation, 48 million reais, soy, 21 million reais, and especially the sale of the farm with the 103 million reais. On the next page, we have the gross results for each crop. And here it's important to mention that all of these crops, except for soy, are related to the stock we sold in the previous harvest. And when it comes to corn, we had mentioned when we compare one period with the other, there was a very significant reduction in the amount produced and commercialized because we understood it wouldn't be a good moment and the margins didn't really keep up with this. But due to agricultural issues, we sometimes need this for preserving the soil quality and the beans we also finished selling. Sugarcane also, we had already mentioned, 1.3 million.

Tons for the sugarcane.

The price is a lot better with the cost. We had also added on to part of our leases being in tons of sugarcane. And the impact of pricing also impacts us, but with margins of 33%. And our expectation for corn and for sugarcane is to keep the contribution margin. And for corn, where we had a contribution margin that was negative, with the impact of price and the internal demand, And also considering the productivity, and we consider we have very positive margins in corn in the pre-second harvest. Then cotton is also a crop we're incorporating. We're working to be able to consolidate this in the basket of products in the company. As Andres also mentioned, I think our expectation for this harvest is generally, when you consider the harvest and second harvest, they're very positive. We have a lot of areas that are in areas that are irrigated, which gives us more comfort and safety. But we understand that the margins here in this case are going to be very close to what we expect for the previous harvest. I think we also have some more... do with the commercialization and the way we take care of the quality of this product to be able to have a balance in this subproduct. And then the soy, which we left for last.

During this quarter, we had the main activity... ...

It was about 150,000, 160,000 pens. And the strategy of the company was to shift more of this product to the second semester to be able to have an improvement in the premiums. But the challenge we had in some farms in Mato Grosso do Sul with the rain issue made most of the production which was impacted with costs due to lower productivity gave us very tight margins but the expectation for the other 150,000 tons we have to commercialize is that these were all harvested with excellent quality considering the farms that had really high productivity with costs per ton being a lot better than what we're presenting here. And the prices, of course, will be because they didn't have discounts as we suffered in this first quarter. Well, on our next slide here, we can see our debt in the company at the moment. The total debt level as of 31 March with a cash of 105 million reais, 779 million reais of the adjusted net debt. And you can consider that the interest and the cost of our debt is a very low cost of debt. We were able to combine a series of instruments with different types of indexes that allow the company to have very low costs. However, the Selic rate is at about 14 with a perspective about 15%. And as Andres mentioned also, this is a concern we have, especially considering some crops where you have a return or contribution margin is very good, such as the cotton case, but you have a very high plantation cost. And when we consider that this should be performed through part of the financing costs, the returns are very low. So now we're going to have an exercise

to rethink the budget and the way we're going to fund.

So we were working with about 1 billion reais of working capital, and this year we had considered about 30%, but there was an expectation that we had a year ago was that the interest would be headed towards 9%, and the scenario changed completely. And that's going to lead to us having to rethink how we're going to work on this. And so it's important to mention this debt is very balanced if you consider this working capital. Then you have 500 million reais which are going to be maturing in two to five years.

And

about 37 million reais above five years. And another point that we always consider in our calculations, which has a cash effect, are the receivables for the sale of the farms. And so to receive this up ahead, and with this we're really comfortable considering the company's leverage. And I think here we're wrapping up. Now we're going to start with our Q&A. Thank you, André and Gustavo. We have two live questions here. Please, we can open up Pedro Fonseca's audio from XP for his live question. Pedro, you're on mute. Hi, can you hear me? Sorry, guys. Good morning, everyone. Good morning, André, Gustavo, Ana. It's great to speak with you. Thanks for taking my question. I actually have two here. First, about the purchase of land. André has been talking about this quite a bit, and I even saw an article where you were talking about the regions of Maranhão and Piauí, and I wanted to understand a bit of why the company considers this to be the most attractive regions. What's the profile of this land? What do you guys consider about pricing? Is there something we should expect to come in the short term? And so my first question is more about this purchase of land. And the second question is about the trade war issues, right? So what have you guys been able to capture as opportunities in the trade war or even as risks when you consider this from a cost perspective and what you guys think are going to be considered for soy next year? Thanks, guys. Pedro, as always, your questions are very intelligent and provocative. So the first ones here we could spend a long time answering, but Just to take advantage of what you mentioned on the article you read about what I said, there's a fundamental here issue, which is we always say the company needs to buy land when everyone wants to sell and sell land when everyone wants to buy. And we need to be a company that takes on this approach. When I highlighted this region, Maranhão Piauí, we were considering, I remember perfectly that the reporter was asking me like, Where do you see more opportunities? And that's due to everything we were talking about, high cost of capital, etc. And the opportunities always come out initially where you had more leverage in the last few years.

So in regions like Maranhão and Piauí, these were regions that had important expansions, mostly with

own capital and some with third-party capital.

This is where we have opportunities.

We're not talking about farmers that need to equate things. They were doing things really well. They had great margins. We know we are going to be in a commodity cycle that's going to be a little tighter in the next few years due to the supply and demand. It's important to highlight that this is a bet based on fundamental issues. So you could have a tough drought period where you have a reversal in the supply and then you have an interesting curve for commodities once again. But when you consider the fundamentals, we had a transitional stock of soil that's high and for corn that's low. So focusing especially in the regions that had high leverage. in their land. And we also talked about expansion in cattle raising areas. This is going to continue to happen in Brazil. Farmers learned that it's more worth it to have an agricultural acre than a cattle acre, but we've seen important recovery in cattle in the last year and a half. And we had a perfect storm in the last years before because you had low price of cattle and good commodities and everyone was kind of stepping on the accelerator to transform cattle raising areas. But now we're going to balance this out. We'll still see a lot of investments in this and that's where we see opportunities. So yes, there are many opportunities and we're working on these. It's difficult with the interest rates we have today because just the walk is growing a lot and the projects we were searching for returns that we expect for our cash or that we would be able to apply to this. So it's a moment where you have an inflection point and we start noticing some opportunities. And then once again, I mentioned the companies that manage their cash position.

And then about the trade war. It's a chapter apart.

I think we benefit from this. And here I'm just talking about how we must be balanced with the size of the benefit, right? You see, oh, Chinese just go and buy soy in Brazil, but that's not going to happen because soy has an intrinsic beauty. Soy is a commodity that in the last 15 or 20 years had half of its production in the northern hemisphere and half in the southern hemisphere. This is wonderful for who's the custom commodity, because imagine, I can supply my industry part of the year from the northern hemisphere and part of the year from the southern hemisphere. If I have the contrary, and you imagine, well, oh, now the trade war is going to send all of the Chinese, all the soy from China is going to come from Brazil. then Chinese are going to definitely have to invest in stocking up there. We want, of course, to have everything set at once. And so the beauty of the soy complex around the world is that you have a balanced production between the Northern Hemisphere and the Southern Hemisphere. And in the last few years, the Southern Hemisphere was standing out. Of course, we're producing more than the Northern Hemisphere, but that's what happens. But in some way, We saw Chinese growing to like 105 million tons of imports, and Brazil growing its exports from 55 to 70. So we benefited from this in the last few years. But there's no reason to think that you're going to take all of the production in the southern hemisphere, because That would require a need to stock and have logistical structures set up during the rest of the six months of the year. And that's not good for industry. And everyone knows this. And besides this, when you start thinking in the following way, we experience maybe the last 15 years differently than what we're going to experience in the last 10 or 15 years in the cost of capital.

The last 10 or 15 years, we had low interest rates.

In the next 10 to 15 years, they're going to have higher interest rates. That's the economic world telling us that. And this is a pushback when it comes to stocking up. When you have interest rates that are high, you have to work with smaller volumes, right? But I think marginally in the soy complexes exists, but I think that you may have a little more benefit When we talk about beef, we're talking about pork, chicken, poultry, and cattle. And pork and poultry is just corn and soy, right? And so we're probably going to have an important lever due to the trade war abroad. The challenges that Brazil should continue to position itself in a very peaceful way, in a structured way, People say when you have a war among the big dogs, you really can want to be part of this, right? So if we can keep a balanced position and a peaceful approach, we'll be able to benefit marginally from this, okay? Thank you, Pedro, for the question. That's clear, André. Thank you for your answer. And just one last point about the baseline, just to make sure. Things are not too crazy. We saw an important displacement in the base curve. So when we were looking in February, we were considering minus 30 for April. And that was a screen for the bases that we finished April with 40 positive. So our sensitivity, Pedro, is that it will be around 60 or 70, which should be the bases in this scenario. So it's not that kind of trade where you're going to remember. The first one we had with 240 points, then you had a price of soy, and I believe we'll get back to having positive bases. But everything was headed towards an excessive production of soy in Brazil and the southern hemisphere, that we would have to get back to the negative bases as we were in the beginning. But this indicates that we'll have positive bases, even with a big supply in the southern hemisphere. Very clear.

Thank you, André.

And just one last point here. What could we expect when it comes to the price of acquisition of the land? Is it possible to give us a number? Or still a lot of discussions left on this? Well, Pedro... As you all know, we love simple things that are easy to explain and complex to execute. We're looking at return rates. On Pepper 2, you have about 9-10%. But on the other hand, we have guys that are even more intelligent with the calculations there, but then you can reach this. And I think there are some components that are going to help. I see methanol may be With the second harvest, we already had a lot of help from the off-season harvest. Not as much in the last two years, but with the corn ethanol and this expectation, this should probably get back to being a positive factor that also helps with the composition of the price of land. And so I would say that I don't see land prices having new peaks as we had in the last few years, but I also don't see It's a very significant reduction if you harvest it nominally in regards to the sacks of soy. If you look at this nominally, you reduce the sacks of soy. Perfect. Thank you very much, André. Well, now we're going to listen to Guilherme's question from BTG Pactual. Hi, guys. How's it going? André, Gustavo, Ana, good morning. If I could just bring in two questions that are very quick on our side. Take advantage of part of your previous answer about logistics. Brazil really has a logistic issue for grains, and part of this is the storage, right? I remember in the last Investor Day, you guys mentioned that you were interested in looking at the segment a little more. Is this something you're still looking at, just to get a feel? And then, shifting topics a bit, I want to understand what you guys expect for the sugarcane harvest, please. Thank you, Guilherme. Great. Two questions that are excellent. Logistics are always going to be on the table.

A continental country with so many terrain differences.

In the U.S., we plant soy in the lowlands, right? And so you have a different structure for transportation that's more standardized, that generates important savings for transportation due to the fuel costs. When you look at Brazil, Brazil is the country with higher lands, right? So you have productions in higher and lower lands. And so you have a terrain profile that's more expensive for logistics. So everyone's going to have to look at logistics one way or the other. Because we can't change the terrain in the country, right? So we have to look at logistics, no doubt, always. And we'll continue to look at this. And we're also considering that when we consider storage, storage is in our vision. You need to capture some gains, right? The main gain we have in storage is what we consider the internal freight, right? So that's where you have the harvest and the city today. And when you have the storage, And when you consider the trading, you're going to consider this from the farm to the port, and then the difference is very small, right? That's where you have the biggest difference in the storage plants, right? You have qualitative aspects, the quality of the grains as well, as I mentioned. We had a complex unit with three millimeters of rain, but I can't project results. from a silo plant with a business plan the year like this, right? So the biggest impact is due to this. And the trade-off of this, Guilherme, is the cost of capital. So if you ask what the trade-off is, it's the cost of capital. Although you, of course, we had the storage, we covered this in the first harvest, yeah, we last year. We have other storages under discussion as well with the factories. But we have a big challenge now, which is the trade-off of the lines for this type of investment. The last investment we had was at about, bending with fixed rates about 8.5%. No doubt, 8.5%. I'm a... natural builder, right, for silo plants. But with the interest rates we're seeing now, we have to reconsider this. This is a problem that's going to continue to exist. We have a harvest of 320 million and a capacity for storage of a little less than 200. But the beauty is that you have 130 million, which is the second harvest. And you have this moment where both meet, and that's where we're definitely going to keep looking at this. So we do should work to increase.

So, also the qualitative aspect as well. And so, then we have the sugarcane harvest.

And we are like talking about this always, right? Brazil Agro here is kind of like, since we're not benefited from the others, in this one we are, right? So, When Bahia is frustrating us, then Bahia is not capable of adjusting the soy in Brazil. So we have a big concentration of these areas in Bahia. And when you have a frustration in Bahia, you don't necessarily consider the national price of soy. In sugarcane, it's the opposite. In sugarcane, when you have a frustration in the harvest, you switch the price of the sugarcane and the ethanol, then you have another point of disputing. beautiful, which is the concentration of sugarcane in regions that are less reliant of the Midwest and the South. So we have a lot of sugarcane in Maranhão, Mato Grosso, Cuiás, and we also have sugarcane in São Paulo, which is the Midwest here. And so this is a parenthesis here that I like highlighting. Brazil Agro, in this scenario, with the sugarcane and productivity in the central region, and so in the north of Paraná and the north Minas region is benefited due to the fact that this is concentrated in other regions, but our operation in Maranhão, which is almost 17,000 hectares of sugarcane, has the capacity to irrigate, right? So you have, once again, this production that can also benefit us in this scenario. But when you look at this from the Brazil level, what are we expecting? Well, I'm going to say, André, what do you consider for production? Well, I have a proxy that's very good, which is our sugarcane production in the state of Sao Paulo. We already started, all of our units already started the sugarcane harvest, and we see that sugarcane in Sao Paulo is a little shorter, right? If you consider year over year, we see a reduction of productivity.

There's a lot of rain now. We had the month of January and February.

And then we had March and April.

Now the trade-off is we have the humidity in the soil.

And so we can recover part of this lower productivity caused by the month of January and February. And why am I talking about recovering part of this? And so like, oh, sugarcane is like grass, right? It's the best for growth, right? So you have waters, light, and salt, right? And so we're probably going to have winter that's a little more rainy. And so, great, we solved the water, so we're not going to have such a rupture.

But we have another factor. Well, the other factor is temperature.

And so how is that going to behave in winter? Because if the temperature drops drastically, then the sugarcane, which is the physiology of the plant, right? So even if you have humidity, it's going to help you a little bit because you won't have so many issues in the end of the cycle, but you don't have much growth in the sugarcane, right?

So...

consider all of this and give us a number. Well, everyone was expecting in the sector about 610, 620 million. And we, um, believe that even if we are betting on a harvest about 580, 590. So that's our vision for the sugarcane harvest. And, um, 70% of our sugarcane is not in this region that's hindered, right? Okay, perfect, André. Thank you.

Thank you, Guilherme.

Now we're going to have a question from Bruno Tomazetto. As you mentioned, now to position ourselves contrary to the cycle. and also being careful with the cash position in the company. I want to hear your mindset on... So what... Has the reality been in the market, et cetera, and if at least to be able to plant this based on a producer with less efficiency to deliver this for you to operate? Or even...

And at this moment, they're maybe a little more strangled with the capital.

And how could you make this possible for producers? I think that's a modality that we explore a little less.

I think this could be an interesting discussion.

Well, Bruno, you have to come and have coffee here with us. You need to come visit our new office. But anyways, let's start. Just to give you bit of this discussion it was a great question here uh no doubt at all we're looking at this um we had some recent board meetings and we took some proposals here but the challenge is as gustavo mentioned uh we're gonna have opportunities and the expansion that we had in the last few years was very leveraged and so when it comes to pricing We needed to accommodate the pricing, and I'd say that they had a slight setback, very slight setback, but that before the guy would spend like a month, he had 12 sacks of leasing, and then three months later he had 18, and then he already had like 20 sacks leased. I'm not talking about where you have just soy and cotton, right? I'm talking about like harvest and off-season harvests of soy and corn. And then you can't have 20 sacks, right? They're not going to be just killing yourself for the landlord. But we had a slight recovery here. But it's important to mention what Gustavo said, right?

We're going to... But with that discipline.

And our appetite is to not go over 50-50, right? Especially in a moment where You have high cost of capital. It's important to have the 50-50 to be able to benefit from this. As Gustavo just mentioned, the company has... We see everyone's funding this at CDI plus four, plus five.

And so I think this is an important benefit.

And I think this can also lead to some positionings, right? But with a lot of caution. This was done two or three years ago. You had to lease out a lot of areas to transform them. And now the reading is that you are searching for things that are more transformed to cover those. That paid for high fees, but we're kind of covering a different profile, right? And then we'll have the area where you have half-half, and you already have the mature area, the area that's going to be transformed. And so we're keeping our eyes open on this, and it's a very interesting question. Players that are capitalized will focus on the sector now. We know that we have space for everyone, so we do expect that we'll have growth in mature areas.

Okay, thank you.

We'll definitely schedule that coffee. Okay, great. Well, I have some other questions I'm going to read, but I think most of them were already... So I'm going to switch topics a bit. And shift to Gustavo. But... If you guys could please talk about the level of confidence of the management on the dividends and extraordinary impacts in the closing in 24 and 25. And about this situation with the dividends, I'm also going to add on this other question from Tiago Lima, the same question. It's probable that the company is getting to this new cycle of more acquisitions of farms. and also a smaller distribution of dividends considering to this. And I think we can explore this and then get into the dividends a bit as well.

Thank you for the question.

We have to consider that in 31 of March, we had practically 100% of the costs and with the cash exit. And from now on, what we're going to see is practically 900 million reais of receivables for all of the crops with the sugarcane and over 200 million reais of soy and the off-season harvest as well. What we can see is we had a discussion here with the financial committee as well to understand if it was worth it to maybe and a positive impact as well in the premiums and if we could capture this difference considerably or maybe the renewal of some other loans also to carry on this difference so these are very complicated moments here but we understand that the impact of these 300 million reais that was you can imagine with like 600 or 700 million reais 150 and all of the with the capital financed as well you're going to end up working for the banks and you have this big change and this happened in 8 months 9 months so Normally, you have the habit of speaking with chief economists and banks to establish an opinion and to maybe even consider this in the financial committee and our position as well. And to be honest, the scenario changed completely. So we understand that it's a moment where we should rethink all of our investments and and consider this and analyze the returns for each of these crops, as I mentioned. You can see the crops also have a contribution margin that is very attractive if you consider the reais per hectare. But when you see the returns due to the capital that they need to deploy this, then you start really understanding that it doesn't make that much sense. I believe that when we speak about this after the shift and the expectations for the interest rate and considering that the situation is mid-term, we're talking about two years and with this level of interest, so we're not concerned because we know we have all of this big stock of receivables from this level of fund and we know that this could lead to any possibility to continue to pay dividends. But we understand that we'll have to reconsider part of this to understand the level of dividends that we're going to distribute.

So at least 25% mandatory.

we're going to pay, but I think that our mindset is how we're going to face this in this next period of October, November, and that's going to depend on a bit more of this. So if you consider also all of the Trump measures as well, We have expectations that these are premiums that are going to be positive, but they could be even more positive even, and this could change a lot of the scenario. I think we're in a moment with a lot of uncertainties. We still don't have all of the – I think we're going to have to analyze this carefully and understand how to apply these resources.

Thank you, Gustavo.

I think still on this topic with the allocation, we have a question from Evaldo Batista about the stock prices versus the value of our assets. And if you consider the assessment of the land in the portfolio, wouldn't it make sense to have a buyback program for stock cheaper

I have to agree with you that today our land is the cheapest we have.

Because our agro has the cheapest land, of course. But, André, we'll talk about this a bit and what we consider as our vision to complement Gustavo's question and answer about the distribution of the proceeds in the year. Well, thank you all, everyone. This is just reinforcing that our stock price is very low and cheap, so you can buy, you're going to make a lot of money off it in the mid to long term, I'm sure. No doubt, buy company stock. If you look at historical curve, a company of ours that has projects with returns of six or seven years, no one can look at it in a small vision. So my provocation is look at our historical series of dividends paid out, and you'll be able to see how this changes a lot. Another At Dago, I was monitoring a report from the bank and showing the profitability at Brizago in the stock and the dividends paid. And ever since our follow-on, it's one of the best profitabilities in the market. So look at our photograph in the company. And this is the type of investor as well that we like. The investors that really believe in the projects and they know the duration of these projects are long. We're buying farms to sell in six, seven, eight years. So At this moment, we have to be very efficient, as Gustavo mentioned, with the capital allocation, and we can't stop doing what we've always done, combining strategy of the company. So that's the center. We're not going to lose off track. When it comes to buying back stock specifically, this is something that I discuss. It's a little bell that rings whenever we see these kind of things going on. we see there's a big challenge here also because we need to bring to our investors and it's worth mentioning that when we took on the direct management of the company in 2016 all of the investors were saying hey we like the company we like the thesis but we like management we like everything but we don't like the liquidity of your stock so the only trade-off we see today and this is a concern Because, of course, in some way, the liquidity of all of the stock, not only Brazil Agro, is really related to the interest rate. So we have to be very cautious at this moment so that we don't impact the liquidity even more. That was already an issue for the company. It's not such an intense problem anymore. It's becoming a bigger problem due to the market situation, and I can't act due to the market situation, right? And We are, of course, looking at this so we don't cut down on liquidity. So that's the negative trade-off. So does it make sense to buy back? Yes. But we don't have this concern, which is a concern that really changed the company's vision in the last few years. So this is the only point we weigh in. But you can be sure that if this is the best decision, we'll present this to our board. And so to wrap up here, we have a last question that we didn't cover, which is Reinaldo Veríssimo, also an individual investor, in regards to the non-definitions in the SAFR plan and if they in some way impacted Brazil agronegatively. A lot of people have talked about all-time high harvests on media and how this has been for the company when it comes to cost of capital. Well, I think the cost of capital is the point that Gustavo already mentioned, but I'm going to now just think about the sector as a whole and not just Brazil Agro, right? But we know what's going on in the monetary situation in the country, and we know that the Safra plan has an amount of resources to balance out the interest rate. So what happened in the last few years, and especially in the last year, the central bank Basically, destined to this line, 20 billion reais. When you look at 20 billion reais, what is this? Well, interest for the small producers are those 7.5 to 8, and for the big producers, the 10.5. And CDI back there, when the government balanced this out, we're talking about a CDI like 11, 11.25. I'm not sure exactly. It was around 11. We had to balance this difference out of a spread between 10.5 and a difference of a spread of 8.5 to 11. And so that helped to give us that number we all know, the 400 billion reais that were used for the Safra plan. But what happened in our vision? Due to the monetary tightening, we hope that the government the associations are working on this to try to increase the amount for trading this but this is not going to be eight and a half to fourteen because if you do that uh eight and a half to fourteen or ten and a half to fourteen the resources are not going to irrigate the system so for sure the government will increase this the interest rates and that are subsidized that these resources adopted for subvention don't have such a negative impact. So this is our challenge and we want to bring in other components and that the government can understand the efficiency of the allocation of these resources and trying along with the associations and the work the FPA has been doing to have more of a budget for this. So in the case of the company, we have 30% of our resources coming from this, and 70% come from our own capital. So the 30%, how did this impact our results? Well, if we had 300 million and we had an interest rate of 10.5%, if this business goes to 11.5% or 12%, then you have 1.5% or 2% more. 1.5% or 2% more from 300 would be an amount that's significant if you look at this year over year. And we went from a line of maybe subsidized resources that had an expense of about 20, 20 million to almost 45 million of current resources, right? So then you have long term. And here I'm just talking about the working capital. So this is the effect. But this effect is for everyone, right? So we have to be a lot better than the average. And this is an effect that is here for the entire supply chain, right? So just as it brings challenges, it also brings opportunities. And then also when you consider a bit of the question from Pedro on acquisition, et cetera. So we really have been very cautious about this. And this is a moment where the company continues to grow, but keeps an eye open on cash, debt, and opportunities and capturing the best opportunities. for the investors in the company. Excellent. Thank you once again, everyone, for participating. Thank you, Gustavo and André, for your participation. If you still have questions, me and my team at IR will be available to clarify any other questions. So feel free to contact us and send any other questions. Have a great day and see you next quarter.