Slc Agricola Sa S/Adr

Rodrigo Gelein, financial manager and investor relations. Here with me, our CEO, Aurélio Pavinato, and our CFO and IRO, Ivo Brun. It's a privilege to be with you this morning. Informamos que esta videoconferência está sendo gravada e será disponibilizada no site GR da companhia, onde você encontra... ...IR website, together with the presentation.

I'd like to point out that simultaneous translation is available for those who need it. You can access this tool on Zoom... by clicking on the globe icon, Lake Boat Interpretation. Once selected, choose your preferred language, Portuguese or English. For those listening in English, there is an option to mute the original Portuguese audio by clicking Mute Original Audio. For the Q&A session, we encourage you to send your questions using the Q&A icon at the bottom of your screen. As usual, your names will be announced so that you can ask your questions live. At that point, a prompt will appear on your screen asking you to activate your microphone and camera. If you prefer not to open your microphone and camera live, please write no mic at the end of your question, and I will read it aloud. Please note that the information provided in this presentation and any forward-looking statements made during the video conference Regarding SLC Agricola's business prospects, projections, and operating and financial targets are based on the company's current beliefs and assumptions, as well as information available at this time. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties, and assumptions. as they pertain to future events, and therefore depend on circumstances that may or may not occur. Investors should understand that general economic conditions, market conditions, and other operational factors may affect SLC Agricultural's future performance, leading to results that differ materially from those expressed in such forward-looking statements. Now, I would like to hand over to our CEO, Aurelio Pavinato, to begin our presentation. Pavinato, please proceed. Good morning. Good morning. Thank you very much for participating in our second quarter 2024 earnings conference call. Let's move, please, to slide four, where we'll discuss the evolution of the Brazilian cotton market. To begin, we highlight a historic milestone reached by Brazil in the 22-23 season, becoming the world's leading cotton exporter, surpassing the United States. Brazil produced 3.2 million tons and exported 2.7 million tons by July. Our primary markets are in Asia, with exports going to countries such as Vietnam, China, Bangladesh and Indonesia, from where textile products are distributed worldwide. This positions Brazil as a strategic supplier of cotton globally, with a sustainable, increasingly modern and efficient production process. Now, moving on to slide five, let's say a few words about market scenario and current prices. During the quarter, international cotton prices declined due to global production outpacing consumption. However, demand for clothing and textiles remains strong. According to Bloomberg and U.S. Census Bureau data, as of June 2024, U.S. clothing and textile accessory sales reached $143 billion, which a 3% increase compared to the same period in 2023. China, a key cotton consumer, continues to import volumes exceeding those of the past five years, according to Chinese trade balance data. On the consumption side, Asia's textile industry has remained resilient and steady, with production rates holding at consistent levels in recent months, according to private market surveys. The USDA estimates global cotton The USDA estimates global cotton production at 113.6 million bales, with consumption projected at 112.4 million bales, leading to a surplus of 1.2 million bales for the 2023-2024 season. We believe that the spinning industry is operating strategically, carrying raw material and finished product investories below the historical average, thereby reducing future market liquidity and putting downward pressure on prices. For the 23-24 season, U.S. cotton production is at its lowest in 14 years, reaching around 12.1 million bales, according to the USDA. Looking ahead to the 24-24 season, the USDA projects global cotton consumption at 116.2 million bales, up by 3.9 million bales from the previous season. Production is expected to reach 107. resulting in a global supply-demand surplus of 1.4 million bales. Now let's move to slide 6 to discuss soybeans. In the United States, the 2023-24 season ended with a production of 113 million tons, which is about 9.4 million tons less than the USDA's initial estimates. In Brazil, the impact of the El Nino prompted Conab to revise its production estimate downward by 8% from an initial estimate of 160 million tons to the current 147.3 million tons. Brazilian soybeans continue to be highly competitive, leading to record exports of 75.4 million tons by July 2024, with 55.5 million tons shipped to China, highlighting the sustained and robust demand from the Asian nation. Argentina's soybean harvest is estimated at 50.5 million tons, 500,000 tons less than previously forecast according to the Buenos Aires Grain Exchange. Despite successive downward production revisions in major producing countries, the 23-24 season is expected to produce a surplus of approximately 12.1 million tons over consumption. For the 24-25 season in the United States, weather conditions have been favorable, with current expectations of 125 million tons, a 10% increase over the previous year's production. Moving to slide 7, please. Prices for Brazilian soybeans at the Paranaguá base have remained steady, giving support between 130 BRL to 140 BRL per sec from May to August 2024. This stability persisted despite A drop in the CBO teeth amounting to almost 15.3%. The decline was largely offset by a rise in premiums at Paranaguá, which increased by over $1.2 per bushel and a 10% depreciation in the Brazilian BRL, with the exchange rate moving from BRL 5.10 to BRL 5.50, helping to maintain soybean prices in Brazil. Now, let's talk about corn. For the 2023-2024 season, global production is expected to surpass consumption by about 18 million tons. The 2023-2024 season in the United States has ended. In Brazil, CONAB forecasts 50%. Total corn production at 115.6 million tons. In Argentina, the Buenos Aires Grain Exchange estimates that corn production has been cut by around 18% from initial forecasts. due to pests. The original estimate of 56.5 million tons has been revised down to 46.5 million tons. The revision in Argentina's corn production affects the global export balance given that Argentina ranks among the top corn suppliers worldwide, alongside Brazil, the United States and Ukraine. In the United States, the 24-25 corn planting area totaled 90.7 million acres, down 4% from the previous season. Currently, the global supply and demand balance for the 2024-2025 season is projected to show a production surplus of around 7.3 million tons over consumption, a significant drop from the previous season. Now, let's move to slide 10 to discuss our operational performance results. in the 23-24 season. The 23-24 season was characterized by the El Niño, which primarily impacted western Mato Grosso, a region that experienced a significant reduction in rainfall during October, November, and December. This affected soybean yield potential. the the harvest has been completed reaching 200 2017 down in relation to budget and still above 17 percent carbon is 57.6 percent harvested and our forecast is to reach 1977 kilos per hectare of lint, 1.1% above projections and 5.7% above the national average. Second crop corn has been harvested almost completely and our current estimate is 7,046 kilos per hectare, 7% below the initial project and 26.5% above the national average. The growing period was marked by irregular rainfall distribution and heat waves, which affected crop development, particularly in the state of Maranhão. On slide 11, we present the costs and hedging position of the company. Per hectare costs for the 2023-2024 season were 10% lower than the 22-23 season, even with investments in fertilizers back to normal. Regarding hedging, we've advanced our 23-24 position. In soybean, if we... At all commitments, 92% of production has been hedged, and in corn, 69%, and in cotton, 59% has been hedged. I'll now hand it over to my colleague, Ivo Broom, to comment on our financial performance. Ivo, please proceed. Thank you very much, Pavinato. Good morning. Please advance to slide 13 to discuss our financial results. Net revenue for the first quarter ended at nearly 1.4 billion reais, reflecting a decrease due to lower prices and reduced soybean sales volume during the period. Conversely, there was a 73% increase in cotton revenue. Net income was also affected by soybean results we reached $321 million, and $550 million for the half-year. Adjusted EBITDA for the semester was $962 million, with a margin of 29.1% cash flow for the quarter, was negative 5%. 543 million BRL mainly due to reduced soybean production payments for crop inputs and also the machinery and other implements payments. Now let's move to slide 14 where we show the company's debt position. Adjusted net debt ended the quarter at 4.2 billion BRL with a net debt over adjusted EBITDA ratio of 1.99 times. We have almost 100% of the costs for the 23-24 season paid off and all the cotton and corn from the season are yet to be built. Next, on slide 15, we summarize the issuance of CRA On July, we executed the fourth CRA issuance, Agribusiness Receivable Certificate. We raised just over one billion BRL through three series with maturities of up to seven years. The main goal of this operation was to extend the company's debt profile. On the next slide, we present the land valuation. In June, we conducted a valuation of the company's land carried out by Deloitte. The land was valued at 11.5 billion, reflecting 6% increase in the adjusted portfolio. The current average value per hectare is 57,500 BRL. I'll now turn it over to Pavinato, who will present information on the outlook for the 24-25 crop. Please let's move to slide 18 where we present the outlook for the 24-25 crop season. And we begin with an update on input purchases. For the 2024-25 season that will start in September 2024, we have continued to purchase inputs. We have acquired 92% of phosphates, 100% of the potash, 97% of the nitrogen, and 85% of the pesticides, taking advantage of market opportunities. Let's proceed now to slide 19, where we show the current hedging position for the 24-25 crop. We have continued to sell and hedge soybeans, reaching... 61.3% of hedging of the estimated production. We have hedged 9.4% of the cotton production, but we have not yet progressed with corn hedging. Additionally, we have locked in currency rates for our crops during periods of favorable dollar rates. Now let's move to slide 20. As announced on April 29, we have expanded our joint venture with AgroPenido, Fazenda Pionera, by adding 18,700 hectares with a planting potential of 30,734 hectares, including second crops. On slide 25, we provide a summary of the new joint venture. The company has entered into a partnership agreement with Agropecuaria Rica, part of the RISAC group, to create a joint venture named Fazenda Preciosa and Premedimentos Agrícolas. This venture aims to jointly develop agricultural production in the state of Mato Grosso, with SLC Agricola holding a 55% stake and Agropecuária Rica holding 45%. The joint venture will manage 11,282 hectares with a total potential of 21,000 hectares considering second crop planting. This new joint venture will begin operations in the 24-25 season and is located in Cerencia, Mato Grosso do Sul. We will produce soybean segment crop corn and plan to produce cotton in the future as the farm is mature and the soil highly fertile. Now we'll move to slide 22. where we will discuss the recent relevant facts regarding a new area leased. The new lease covers a total of 14,572 hectares that are cultivable, located in the state of Piauí. Due to its proximity, this area will integrate Fazenda Parnaguá. The new area will be starting in 24-25 season and will produce first crop soybeans and cotton. The area is mature, the soil is fertile, and the leaves... Contract is for 15 years. To conclude this session, we can move to slide 24. Combining the three operations, we are increasing our planted area potential by approximately 60,000 hectares for the 2024-2025 season. Thank you very much. And now we will open the floor for questions and answers. Thank you, Pavinato. Let's begin now the Q&A session. Please submit your questions in writing all at once and wait for the company's response. Remember, questions should be sent via the Q&A icon located at the bottom of the screen. As usual, your name will be announced so that you can ask your question live. And at that moment, a request to activate your microphone and camera will appear on your screen. If you don't wish to open your camera and microphone, please say no microphone and I will read your question aloud. Our first question is from Gabriel Barra, Citibank. Good morning, Gabriel. Would you please activate your microphone and camera?

Good morning, everyone.