Slc Agricola Sa S/Adr

Welcome to SLC Agricola's third quarter 2024 earnings webcast. My name is Rodrigo Gelain, Financial and Investor Relations Manager. Joining me today are our CEO, Aurélio Pavinato, and our CFO and IRO, Ivo Brum. Thank you all for being here this morning. Please note that this webcast is being recorded and will be available on our IR website, along with the presentation. If you would like to listen to the simultaneous translation, you can find this tool on Zoom under the interpretation icon at the bottom of your screen. You can choose your preferred language, either Portuguese or English. And for English listeners, you have the option to mute the original Portuguese audio. And in this case, you will hear only the translator's voice. For the Q&A session, Please submit your questions via the Q&A icon at the bottom of your screen. For easier interaction, we will announce names so attendees can ask questions live. At that time, a prompt will appear on your screen to enable your microphone and camera. If you prefer not to go live, please write no mic at the end of your question and I will read it aloud. We would like to emphasize that the information presented here, as well as any statements made during the webcast regarding SLC Agricola's business outlook, projections and operational and financial goals, reflect the beliefs and assumptions of the company's management, as well as information currently available. Forward-looking statements are not performance guarantees. They involve risks, uncertainties and assumptions, as they relate to future events, depending on circumstances that may or may not materialize. Investors should understand that general economic conditions, market conditions and other operational factors may in fact impact SoC Agricola's future performance potentially leading to results that differ materially from those expressed in forward-looking statements. I will now turn the floor over to our CEO, Aurélio Pavinato, to begin the presentation. Please proceed, Pavinato. Thank you very much, Elaine. Good morning, everyone. We appreciate your participation in today's earnings webcast for Q3 2024. Moving to slide 4, let's discuss the cotton market. During the quarter, cotton prices remained stable at around US$0.70 per pound. The global balance, according to USDA data, shows a positive balance of 1 million bales. Spinning mills are managing inventory levels of raw materials and finished goods below historical averages, which has reduced future market liquidity and helped to moderate prices. This conservative, retracting approach in the industry reflects increased risk aversion amid a challenging global environment with high interest rates, inflation, geopolitical tensions and ongoing conflicts. We believe that stabilizing inflation in major cotton consuming markets such as the United States and Europe could make market flows rebound again. The USDA projects U.S. cotton production for the 2024-25 crop year at 14.2 million bales, higher than 23-24, while Brazil's output is forecast to reach 16.8 million bales, maintaining Brazil's position as the world's largest cotton exporter. On slide 5, we look at the soybean market. The CPoT spot soybean contract and the Paranaguá-Cepéia basis showed significant volatility in Q3 2024 due to expectations of a global supply increase. The USDA projects U.S. soybean production for the 2024-25 cycle at 121.4 million tons, with Brazil expected to produce 166 million tons as per CONAB. Global production is forecast to increase exceed demand by approximately 23 million tons, applying pressure on prices. Turning to slide six, let's discuss corn. Corn prices in the CBOT spot contract and Brazil's domestic market showed positive fluctuations during Q3 2024. This was driven by delays in soybean planting and higher premiums. The USDA projects U.S. corn production for 2024-25 at around 385 million tons, slightly lower than last year. CONAB expects Brazilian production to reach 120 million tons, up 3.5% from 2023-2024. Argentina's planted area is estimated to shrink by 20.3% with output dropping by 2.5 million tons according to the Bolsa de Cereales and Ukrainian production may also fluctuate due to weather factors with expected production of 26 million tons. Global output for 2024-25 is anticipated to be about 4 million tons short of consumption, with a stock-to-consumption ratio moving from 25.8% to 24.9%, which could support and sustain prices. Moving to slide 8, let's say a few words about our operational performance for 23-24 crop year. The 23-24 harvest is complete. Corn yields were affected by irregular rainfall and heat waves, particularly in the state of Maranhão. Cotton harvest productivity met our projections, reaching a record milestone at the Pamplona farm with 164 arrobas per hectare. over 8 400 hectares final yields compared to the national average were as follows soybeans 3 276 kilos per hectare 17 percent below budget but still 2.3 percent above the national average cotton 1942 kilos per hectare in line with projections and 2.9 percent above the national average second crop corn 7,081 kilos per hectare, 6.7% below initial expectations, but 29% higher than the national average. On slide nine, we outline hedging for the 2023 24 crop for soybeans well we've sold 99.6 percent at 12.34 dollars per bushel for cotton we have sold 85.8 percent at 82.06 per pound, and for corn, 96.4% was sold at 48.30 BRL per bag. Now I'll turn the floor over to our CFO and IRO, Ivo Brum, to discuss our financial performance. Thank you very much. On slide 11, we highlight our income statement. Net revenue in the quarter remained stable, supported by higher volumes of cotton and soybean sales, offset partially by lower volumes and prices of the crops. Net income was affected by a decline in gross profit from corn and a negative adjustment in the biological asset value, and net realizable stock value, though this was partially offset by tax credits for ICMS exemptions and other tax recognitions applicable by a court decision. Adjusted EBITDA reached 463 million reais, a margin of 28.4%, reflecting lower gross margins across crops. Cash generation for the quarter was positive at 147.5 million reais, driven by the end of payments for inputs and the start of cotton and corn sales. On slide 12. we reviewed the company's debt position. Adjusted net debt closed the quarter at 4.2 billion BRL with a net debt adjusted EBITDA ratio of two times. This position covers the 23-24 crop costs. investments for the 24-25 growth projects that are realized and a significant portion of the 23-24 crops sales still pending invoicing. On slide 13, we discuss our acquisition of SLC land coasts. We have acquired in October the minority interest of SLC Lancus for 525 million BRL. This acquisition enhances flexibility in our asset strategies and expands SLC's agricultural operations. I'll now hand it back to Pavinato to discuss the 2024 and 2025-26 crop outlook. On slide 15, we show planted area for the 2024-25 season. Totaling 734,000 hectares, an 11% increase in comparison to 23-24. Cotton area will expand by 1.8%, soybeans by 18.2% and corn by 25.9%. On slide 16, we summarize our recent deals supporting this area increase for 24-25. We have expanded our successful joint venture with AgroPenido Pionera Farm by adding 18,700 hectares with a planting potential, considering double cropping, of 30,000 hectares. We established a new JV with Fazenda Preciosa Empreendimentos Agrícola, SLC, with a stake of 55% and 45% with Agropecuária Rica SA. This will add 11,680 hectares with the potential to double this area if you consider double cropping. We also signed a lease in POE adding a total area of 14,572 hectares where we'll plant soybean and first crop cotton. And this will be incorporated to the Paranaguá farm to explore synergies. Combined, the three deals add over 60,000 hectares for the 24-25 season, 11% growth in planted area. On slide 17, we present the outlook for the 24-25 crop. soybean planted started at the end of september currently approximately 80 percent of planting has been completed with conditions now back to normal and crops developing soundly. We will now move on to slide 18, where we will discuss cost per hectare. The company has already purchased 100% of the fertilizers, 96% of the crop protection products for 2024-2025. The total budgeted cost per hectare is 6,666 reais per hectare, which represents a 5.2% decrease compared to 2023-2024. As we can observe in the first chart, the cost per hectare has been decreasing over the last two harvests. Our successful strategy in acquiring key inputs and the return of prices to levels near historical averages have contributed to this reduction. In the second chart, the 24-25 season, we present our budget for the cost per hectare by crop. Our estimate is that there will be a decrease of two points in cotton soybeans by 8.3% and corn by 7.8%. Let's move now to slide 19, where we discuss the current hedge positions for 24-25 and 25-26. We have continued the sales for the 24-25 soybean harvest. With the current commitments, we have reached 63.6% of the estimated production. We have locked in 44% of the cotton production and 18% of the corn. Additionally, we have taken advantage of favorable exchange rate fluctuations to lock in the sale of crops for the 25-26 harvest. We have started purchasing fertilizers having acquired 80% of potassium chloride and simultaneously we have sold 33% of the soybeans at US$11.33 per bushel. On slide 20, we show our seed sales forecast For 2025, our estimated sales of soybean seeds for third parties plus internal consumption now stand at 1,400,000 sacks, a 12% increase compared to the previous year. For cotton seeds, the sales target for third parties plus internal consumption is now 1%. 145,000 bags, a 1.2% increase compared to the previous year. Now let's turn to slide 22 to highlight some of our achievements and awards in ESG. We have once again received the Gold Seal from the Brazilian GHG Protocol Program. This is the highest level of recognition granted to companies that fully inventory their emissions and have their data verified by a third party. We have received the MASC award for the third time, an important recognition granted by the MASC Institute. Best Companies in Customer Satisfaction. This is for the sales business. Finally, we were honored for the sixth time with the Transparency Trophy from ANIFAC, the National Association of Finance Administration and Accounting Executives, recognizing our transparency and the quality of our financial statements. Thank you. And now we will open the floor for the Q&A session. Gelaim? We will now begin the Q&A session. We kindly ask you to submit your questions in writing all at once and to wait for the company's response. Please remember to send your questions by using the Q&A icon located at the bottom of your screen. As usual, your names will be announced so that you can ask your question live. At that time, a prompt will appear on your screen asking you to activate your microphone and camera. If you wish not to activate your microphone and camera, please write no microphone, no camera, so that I can read it aloud. Our first question is from Pedro Fonseca, XP. Good morning, Pedro. Please open your microphone and carry on with your question.

Good morning, good morning.

Thank you very much. Could you please activate your microphone and camera? Can you hear me? Hello, can you hear me? I'll call you back, Pedro. Let's go on with the questions. From Henrique Bustolin Bradesco, please ask your question. Good morning, can you hear me?