Brasilagro Brazilian Agric Real Estate Co Sponsored ADR (Brazil)

Good morning, everyone. We are here once again in our earnings call at Brazil Agro. Today we're going to be presenting our earnings for the second quarter of the harvest of 2526. For those of you who are watching in English, the presentation is available on the chat. Now I'll pass the floor on to André Guillemot, our CEO, to begin.

Thank you so much, Ana Paula. Thank you, everyone.

Once again, it's a great pleasure to be with you here. And I think this call has been disruptive, right? This call is done directly from a farm. We had agenda challenges here at Chaparral, and I hope the Internet has no issues. We have everyone hoping for the best here. Let's hope the provider is good, but I am sure it's going to work well. and we're connected with telemetrics, and we hope things work well. And if this works well, I'm going to do all of my calls from the farm, because then I won't be stuck in Sao Paulo, I'll just be straight from my operations. But anyways, once again, thank you for being with us today. We're going to be disclosing our earnings for the semester. Before we talk about the semester, we saw that we had included the slides up ahead of the climate conditions, but I'm going to give you a quick overview. I believe that overall you've seen this, and it was a year with a bit more of irregular rain conditions, but our replanting needs were very low, and we had good efficiency in choosing when to plant the right crops, and we've been working on development ever since then. That's been very positive. In Mato Grosso, with rains, that are good and not getting in the way so much as what happened in the last harvest. The harvest last year, the last harvest was really difficult, but now so far we're doing really well. We have a lot of units as well. doing well in Mato Grosso and Bahia in here, and it's always a huge challenge. The plantations are doing really well, spectacular. We had the last rain five days ago in the farm. We're expecting another rain period this week. So this is an overall panorama. Sugarcane has been recovering a lot as well. I came from the San José farm yesterday. I was in many different sugarcane areas there, and the sugarcane is doing really well. They're sprouting well with replantation rates. That's very good. We accelerated the plantation of sugarcane. We planted a bit more sugarcane now during summer even to give us a bit more time as well. We're doing really well overall in all of the crops. A big challenge is, and I think it's worth mentioning, was the implementation of telemetrics in all of our operational units in the company. We've implemented this in, right now we're just waiting on Bolivia to have the full telemetrics. All of our units in Brazil are 100%. covered by telemetric monitoring and we have a lot of efficiency when we add these technologies and we can improve systems a lot. So the application of defensives are all connected as well in all of our 16 units we operate. So we're really happy with this challenge we overcome, and the team was able to deliver, and now we want to improve more and more of the accuracy and telemetrics. So we also opened up a core in Palmas that's doing really well, and there we've also been monitoring all of the operations in the company. So we'll talk about the first six months in the company. We had a revenue of 470 million reais, and adjusted EBITDA of 71.3 million. and this loss of 61.8 we're going to get more details into this soon but six months are going to be really tough because you don't have the classification of some of the assets yet you have all of the incurred expenses into the cost base so it's a huge challenge this semester but we're going to get into more details in a bit and the company will also show us how they're working and what they've been doing so one more slide please Well, this has been the biggest challenge for the entire agricultural sector. The supply of soy has been a surplus in the supply. We see the stocks a lot higher than they were a few years ago. We reached stocks that are over 50 million tons. And Brazil is once again heading to a super harvest. A few houses are talking about 179, 182 million tons. And as things are moving, that's really the reality. Soy here and in Maranhão, Paranhão and Piauí have been going around. The soy plantations are really spectacular. A lot of the soy have been above 65, 70 sacks. So this number that was an uncertainty in the market in the past two weeks really has been demonstrating more signs of confirmation. And this has impacted prices, but also premium perspectives. Then corn has a very regional specificity. The ethanol plants are changing all of this logistical network. It was a cereal that used to have a big significance in the logistics, and when it's a low added value product, logistics makes a huge difference. So the distribution of the ethanol plants we'll see that we're being able to sell corn with a premium in some markets, and this has been very interesting. We've also seen when we look at our historical relationship and the process of soy and corn, which is 2.3, but it's a lot more favorable. compared with the corn, and the positive ratio is a lot better for corn. So when we see cotton, it's moving sideways around 66, 67, even 68. And then cattle is a recovery that took place in the beginning of last year. with a perspective that's been very positive. This week we've had news all over of Trump advisers saying they're going to pressure to lower costs of beef in the U.S., but the biggest issue is we had scarce supply of beef, and so we're really optimistic at the prices in this sector. And for ethanol, on the end of last harvest, was very positive, went up significantly, and that helped offset the bottom graph, which was sugar, sugar cane. And we left those prices that were those high prices, 22, 23 cents, started the harvest with 17, and we wrapped up with almost 15 cents of a pound. And a lot of the plants have the capacity to modify the mix at a certain proportion. No one can modify the mix entirely, right? But this is a photograph or a panorama of the commodities. It's very important to always look at this and see that the company, besides being an agricultural production company, it's a company that's involved in the development and commercialization of properties. So there are some things that are really bad for the production that could generate opportunities for the company. So we always keep our eyes open to all of these movements in pricing, and we're going to provide more details about how the strategy has been commercially in the company. Next. Well, now when things are tough, prices are tough, and you can't do much, you have to work in-house, right? So my friend, who's traveling, been around for 20 years, and he said, costs are just like nails. We have to cut them every week, right? And trying to find the best way to allocate our resources, right? And so on this graph here, we show you basically the moment where we had We're talking about the current harvest that's currently underway, and the moment when we took on the position of the purchases of these inputs. So the first graph shows MAPI, where you can see where we were at this moment and how we were buying MAP at $640 a ton. There was a peak, and then it went back, and now it's again starting to drop. uh go up a bit more then uh we also um had a very effective purchase at about 308 dollars and there's a lot of volatility as well right so we've always been monitoring this currency situation and when we had the budget we had a projection and a budgeted amount of six, and for inputs of 590, and we've been monitoring this. With the reduction, we were able to lock this in a bit more and get the right higher prices, and now at this low bottom level, we've been able to lock it in the opposite right we pay a lot of what we had in dollars as inputs to get lower prices and this has been leading to significant savings in defenses and some inputs about seven eight percent which is a lot if you talk about commodities on the right side we can basically see the position uh taken with everything and what's missing is basically just something related to trigger pain let's say and then we show the exchange ratio that's already been worse, it got better, and now it gets back to showing some signs of a peak, but not such a significant peak. And as you have, I always tell the team, when we have a lot of turbulence between the price and sale, dollar and other variations, we're always looking at the exchange ratio to try to find the best moment. and this is where we can see this graph, and I think it's worth mentioning the decision-making process of the company at the right moment. Sorry, one more. In cattle raising, we've had significant reduction in the volume of production. which is normally due to the sale of the the farm and i'm really humble in saying that when at the company we think we should have a basket of products we're really focusing on reducing volatility operationally protect your volatility and the volatility especially of prices in this basket of products but we were keeping our eyes open that much to having different crops that could maybe generate better liquidity to the sale of land of course we knew land with cotton is worth more we always tried to add value but here's a classic example of this when we saw we were selling always the grain farms but when we saw but there is a recovery in the prices of cattle and beef. That started heating up the market, and President de Preferencia was in our portfolio for 15 years, but we were able to complete a sale that was very significant for the company in the middle of last year. And this brought in important results in a unit where we had very limited expectations to implement grains and other crops. It was really a cattle raising area. So we can show you here the harvest and a bit of the reflex here. As I mentioned, we talked about the harvest that started in a bit of a turbulent scenario when it comes to rain distribution, right? And that brought in two factors. Pastures were delayed in growth and sprouting. And that also, this delay in the pastures growing, which generally led to volumes of rain that were also very low. in these areas where we have cattle raising activities. So, but then after, from 15th of January on, it kind of got stabilized, but this reflects the overall scenario of the quarter. So, that's why the photograph in cattle raising is limited. Of course, we were still quite optimistic, which we want 470 grams of daily weight gains. And we're looking at a photograph of the drought period, right? But we're looking at this scenario of July, which is already the drought season, limited offering of pastures. And then in December, you have the soleil, the beginning of the rains in October. So in the quarter, that already kind of compromises this a bit. But nothing is too concerning. We're going to reach the numbers because of the What happens and helps a lot is the production of small calves that are gaining weight, and so that's advancing really well. Now we're going to move on to a photograph here that we say we have to show good news and bad news. This is a photograph of the sugarcane year over year. And I think this is a huge challenge. Last year we had two significant events take place, especially the ice period in the southeast of the state of Sao Paulo, which affected some of our sugarcane plantations. with this frost and ice, and also we had a situation of fire in San Jose where we had a big plantation of sugarcane that burnt. When it burns, you have to harvest it beforehand. So some sugarcane has a later average cycle. You have to cut that down right over there. You don't lose all of your sugarcane, but it won't complete its full cycle. And this leads to two impacts. First, the maturity, right, the level of ATR. and there's a lower impact in TCH, but the biggest impact is in the maturity level. You have to harvest sugar cane that hasn't reached 70% of dry material, and so it's almost like the fruit's not ripe enough, right? It hasn't concentrated all of its sugar yet, to simplify things here. But this led to an effect in productivity, but as I mentioned, We've been keeping up good productivity in the sugar cane plantations this year. It's a lot better than last. Next. Here we can see a photograph that we like sharing a lot, which is the company's capacity to work in the real estate pillar and operational pillar in a very effective way, right? So on the left side, pizza, you can see. that we've been keeping up our productive area in the company, despite the fact that in the last few years, we had to take advantage of commodity prices that were very positive. It's a company that sold a lot of areas and land, had a significant amount of sales in the last four or five years, taking advantage of the cycle, and I always say we must be a cyclical company that captures moments of opportunity of the commodity prices, and that's a good effect in the land prices as well. So one thing that's very different as well is that the company, when you look at this graph for quite a while in our presentations, you can see that there's a real high concentration of sugarcane, and soy, and a company in this important strategy for diversification and mitigation of the risks, searching for better results. The pizza graph has been improving more and more, and it starts becoming more significant with other crops. On the right side, you have the two other graphs that also indicate, and we're showing you a bit of the breakdown of our properties, which are our own land and also leased land. And here, there's no magic number. We've always mentioned that the leasing needs to bring operational results and stabilizer results. And our own land should be efficient to allocate capital. So our own land allows us to have a cost of capital that's cheaper. And so this combination between leased and properties and our own properties is something we closely watch so that we can always be around 50% or 55% or 52%. because that's where we understand is our main formula to have cheap cost of capital and really consider the results of the operational stability. And especially where you have a lot of volatility in these open areas in the company, so when you consider leasing in more premium areas, especially in Mato Grosso where we had a lot of leases there, and there's still some work to be done as well. Nothing's ready yet, but we understand that this company will be stabilized in a very productive manner. So, next. Here, I've already got over this a bit, but here you can show a summary of what we've been talking about. Harvest plantations complete and in good conditions.