Slc Agricola Sa S/Adr

I'm Aurelio Pavinato, CFO and IRO, EvoBroom. It's a privilege to be here with you this morning. This video conference is being recorded and will be made available on the company's investor relations website, where you will also find the presentation. For those who need simultaneous translation, we have this feature available on Zoom. Just click on the globe icon labeled Interpretation at the bottom center of your screen. Select your preferred language, Portuguese or English. If you're listening in English, you can mute the original Portuguese audio by clicking on Mute Original Audio. For the Q&A session, Please submit your questions via the Q&A icon at the bottom of your screen. As usual, your names will be announced so that you can ask your question live. At that moment, a prompt to enable your microphone and camera will appear on your screen. If you prefer not to activate your microphone and camera, please write no mic at the end of your question. And in this case, I will read it aloud for you. We would like to remind you that the information in this presentation, as well as any forward-looking statements made during this video conference regarding SLC Agricola's business outlook, operational and financial projections and goals, represent the beliefs and assumptions of the company's management and are based on information currently available. Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties, and assumptions, as they refer to future events that may 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 Agricola's future performance and lead to results that differ materially from those expressed in the forward-looking statements. Now I would like to turn the floor over to our CEO, Aurelio Pavinato. Pavinato, please go ahead. Thank you, André. Good morning. We appreciate everyone's participation in SLC Agricultural Earnings Video Conference for the second quarter of 2025. Let's move to slide four, please, to discuss the cotton market. In the second quarter of 2025, months April to June, the cotton market showed limited fluctuations both internationally and in the Brazilian domestic market. There were some factors that put pressure on cotton prices and others that support cotton prices. For example, global cotton production for 24-25 and projections for 25-26 indicate a reduction of supply, which in theory puts downward support the prices. In the United States, expectations point to a smaller harvest which reduces supply in the global market. Even with the slowdown in May, Brazil maintained a strong export base in the 24-25 season, consolidating its position as one of the largest global suppliers of cotton. Demand for Brazilian cotton, especially from countries like China, helped support prices. In summary, The second quarter of 2025 core cotton was a period of stability. The physical market reflected caution on the side of producers and robust demand from the industry, while market player focused on long-term planning, keeping an eye on futures contracts and expectations for the next harvest. Let's please go to slide five to talk about soybeans. This quarter, soybean prices in the Brazilian domestic market followed a very stable path. In spite of fluctuations in international quotes, local premiums offset the drop in Chicago. Some factors that influence prices were as follows. In Brazil, the 24-25 harvest was strong, with record high production bringing a large volume of grain into the market. This massive supply put pressure on prices. The progress of the US harvest and favorable weather in key producing regions created expectations of increased global supply. further pressuring Chicago Board of Trade quotes and directly affecting Brazil reference prices. Globally, according to the USDA, the 25-26 supply-demand balance projects production to exceed consumption by only 1.3 million tons. which is the smallest positive balance in the last four years. Demand for soybean byproducts remained firm, particularly for crushing and biodiesel production. This was another factor supporting prices. Brazilian export volumes remained high, with China as the main destination. This shows that even with lower prices, the competitiveness and demand for Brazilian soybeans remained strong. Brazilian soy continues to be a cornerstone of global food security. Now, let's please turn to slide six for a few words about corn. In the second quarter of 2025, corn prices faced downward pressure due to a combination of factors. Brazil's second crop, Corn harvest was one of the main drivers pressuring prices. April rains favored crop development, boosting productivity projections. This increased supply generated a surplus in the market, and as the harvest advanced, prices dropped in several regions of the country. In the United States, Planted area and favorable weather conditions for the 25-26 crop season contributed to expectations of greater global supply. The outlook for a record high U.S. harvest also impacted international prices and CBOT trading, causing a direct effect on Brazil. Global corn production is projected at about 1,288,000,000 tons for the 25-26 season, while global consumption is expected to grow at a robust but slightly slower pace, reaching approximately 1,280,000,000 tons. This increase is being driven mainly by the growth in demand for animal feed, especially in Asian countries like China, and by the use of grain in biofuel production. please let's move on now to slide eight to discuss our crop performance in the 24-25 season soybeans the current status is fully harvested reaching 3960 kilograms per hectare which is 21 percent higher than last year and flat versus our budget and 11% higher than the national average. In cotton, we have harvested 50% of our crop and the forecast is to reach 1,986 kilograms per hectare of lint in line with our budget and 3.3% higher than the previous season and 5.1 higher than the national average. Second crop corn was already harvested about 90% and our projected yield per hectare is record high again, historically, in fact. We expect to obtain 8,274 kilograms per hectare. 9.7% above our initial forecast, 16.7% higher than last year, and 35.6% above the national average. Now, turning to slide nine. We show our hedging position for the 24-25 season. We have advanced in our commitments. In soybean, adding all of the commitments, we have reached 95% of soybean production. In corn, 70% of our production has been sold. and in cotton, 56.2% of our production. I will now hand it over to my colleague, Ivo Brun, who will discuss our financial performance. Thank you very much, Pavinato. Could we please turn to slide 11, in which we discuss some of our highlights. Firstly, our net revenue totaled 1.9 billion, up 37.8% in the comparison with the previous period last year. This result shows higher billings of soybean and corn as a result of the higher yield and higher billed prices. In the semester, net revenue reached 4.2 billion, growing 26.7%, a record high volume and revenue built both in the quarter and the semester. Our adjusted EBITDA reached 456.6 million with a margin of 29.9%. In the semester, adjusted EBITDA reached 1.5 billion with a margin of 35.8%. This growth shows our ability to generate operational Our net income was 139.9 million, down 56.5% in comparison with the previous quarter. This decrease was due to a lower posting of biologic exits owing to the smaller marked area for lint and cotton pits. which is, of course, due to the cycle of development. We close the quarter with just 76% recorded, and last year we had already recorded 100%. For the semester, net income reached 650.6 million BRL, an evolution of 18.2% in the comparison with the previous year's same quarter. cash generation in the quarter was $626 million negative, and in the semester, $2.1 billion, reflecting the investment. In this quarter, we also paid for leases and acquisition of inputs. We also disbursed 100 points $103 million, respective to the minority stake on SLC-MIT. In addition to the disbursements, we also made some strategic investments, such as paying off $180 million for the last installment of the Paissandu farm. and 361 million relative to the acquisition of the Paladino farm and 95 million of the Unai farm in MG, Minas Gerais. We also made the payment for the acquisition of the minority stake of SLC Landco in an amount of 280.9 million. In slide 12, we discussed our debt position. Net, adjusted net debt closed the first semester of 2025 in 6 billion BRL, up 2.3 billion in the comparison with 2024. This increase in net debt is related to the payments for the crop season and investments that were made. The net debt over adjusted EBITDA ratio closed the period in 2.3 times. The structure of the debt was very balanced, concentrated in the long term. Today, our debt profile is 35% in the short term and 65% in the long term, with a duration of 980 days. We are working to lengthen the debt profile to ensure an amortization schedule that's adequate to our operations. In slide 13, we talk about the distribution of the net income of the controlling company. On May 15, we paid out 241 million of dividends to shareholders with a payout of 50% in the last five years. We distributed 1.9 billion with an average dividend yield of 4.9%. On slide 14, we talk about our land valuation. In early July, we announced the valuation of the land of the company that was carried out by Deloitte. The land was assessed at 13.4 billion BRL, an appreciation of 15.6% in our portfolio. In the comparison with 2024, at the value of acquisition, the appreciation reached 7.1% in the total land portfolio. And the current value of the average hectare is 58%. After this evaluation, the net value of the assets increased to 14.1 billion, and the net equity per share reached 31.90 in this quarter. above the amount of 28.50 that was posted in December 24. Now turning to Aurelio Pavinata. Now on slide 16, we'll talk about the prospects for the 25-26 season. Well, we'll start planting for the 25-26 in September 25, and we continue to buy inputs. 95% of phosphates were acquired, 100% of potassium, 60% of nitrogen, and 91% of our crop protection. We enjoyed the opportunities that were presented in the market. Currently, the fertilizer market has an upward trend, especially considering some specific inputs. The company is watching closely geopolitical factors and global demands to close its fertilizer and crop protection package. The inputs that are still missing will be used for the second crops that will be needed as of February 2026, and they have less exposure to the geopolitical risk scenarios. On slide 17, we talk about our hedging for the 25-26 crop season. We have also made advances in the hedging positions for 2025-26. We have locked 56.7% of soybeans, adding all of the commitments, and we locked 25% of corn, of rather cotton. In corn, we fixed 7.3% of our production for 2026. Can we please now move to slide 18, in which we would like to discuss the current expectations of acreage for 2025-2026, after the recent acquisitions of Sirens Agro-Brazil, and we'll also discuss our expectations in relation to irrigation. With the acquisition of Sirens Brazil, The company expects to plant around 830,000 hectares in the 25-26 crop season, up 12.9% versus 24-25. In early July, we published a memorandum about the acquisition and we also announced a contract for quota acquisitions and other agreements with Taras SA. That is, we sold 115 million for the operation in Piauí for strategic reasons. Now let's talk about our irrigation project. In July 9, we announced the expectations of growth for irrigated land in 2025-26. Irrigation is aimed at mitigating climate risks and maximizing the use of land. for the production of second crop and also will increase yield and give more stability to our production. Bahia and the state of Goiás have proven potential for irrigation. They are national leaders in the expansion of irrigated agriculture. The use of watering in those states have revolutionized yield with more safety in crops and even enabling two crops in the same year. In the 25-26 season, we will implement irrigation in 3.3 thousand hectares. Currently we have 6,000 hectares with irrigation and our intention is to reach 53,000 hectares irrigated in our portfolio. Thank you very much. And now we'll begin our Q&A. I'll turn it over now to André. Thank you very much, Favinato. We'll begin now our Q&A. We kindly ask you to submit your questions in writing all at once and to wait for the company's answer. Remember that to ask questions, you have to press the Q&A icon at the bottom of your screen. As usual, your names will be announced so that you can ask your question live. And at that time, a prompt to activate your microphone and camera will appear on your screen. If you prefer not to activate your microphone or camera, please write no microphone, no camera at the end of the question, and I'll read it aloud. Our first question is from Barra from Citibank. Barra, please proceed. You can activate your camera and ask your question. Can you all hear me?

Yes, we can. Hello, Ivo.

Hello, Pavinato. I have two questions, if you don't mind. First of all, congratulations on your operational performance. It shows that you're really ahead of the curve in terms of costs. Now, my first question, it's about your capital structure. We see that, you know, SLC is a little bit more leveraged than recently. And also... because of the expansion in land and the investments that were made recently. My first question is, when you look at the portfolio, could we think of any optimization of your portfolio, maybe even a sales leaseback of areas that don't have much potential for appreciation? and the purchase of areas with higher potential of appreciation, you know, in terms of performing areas and non-performing areas. Is there a discussion in that sense? Also, how should we envision the deleveraging process? It seems that in this crop season, yields are high. but what should we expect in terms of the leverage cycle? And also going back to the 25-26 crop season, what can we expect in relation to the mix of crops? You have already closed, you know, much of the hedging, but it seems that you are, you know, really you know, we have a plan for the next crop season, so if you could say a few words about the crop mix, it would be helpful for us to crunch the numbers here on our side. Thank you very much, Gabriel, for this question. Well, leverage. Gabriel, in this moment of the cycle, Well, we have now closed. We have the forecast for all costs for the 25-26 crop season. Now we'll have the cotton and corn harvest. So the second semester is going to be a selling semester. So this quarter, in fact, is the peak of that. Next semester, this will drop because we'll start billing and shipping. So the new payment period will be only in 2026. That's the only time in which we'll start paying our suppliers again. About the deleveraging cycle, we made some very important acquisitions. And this is, of course, you know, this is a process, you know, that takes a little time when you buy land. But in our understanding, in the next three to four years, leverage will come down because we have good cash generation. and deleveraging is not going to be done. We're going to continue maintaining the payout level we have now. So it's going to be a gradual process, and this doesn't bother us because we understand that 2.3 times ratio is very acceptable, very reasonable, in fact. Thank you, Gabriel. I would like just to go back to the portfolio. and lease-back program. Today we have 38% of our operations in owned land and 62% in leased land. And we are moving towards one-third, two-thirds. So there's always this option of increasing leased land or rather, you know, having them in a lower proportion than on land. So we are trying to maximize return on invested capital. And we know that return on investment when you own the land is very appealing, but very appealing when you include land appreciation. That's why we don't sell this land and the return doesn't come to the cash and we don't see so this balance between Leased land and owned land is what's going to give a better return on investment to our shareholders. In relation to the 25-26 mix, well, the three farms we have recently announced we acquired, we're going to plant soybean and corn. So the cotton adjustment will depend. on the area of each farm, the areas where we already plant cotton in those farms. And in the current crop season, we are now building a new gin in Paranaguá farm. So this is going to help us adjust the area. So probably in October, we'll have the decision, but growth is going to be based on corn and soybean, and in cotton, we'll make adjustments depending on profitability and the contribution margin of each of the farms in which we already plant. Thank you very much. Well, and we'll continue to grow our seed business as well, as soybeans and corn seeds. Yes, we shouldn't forget that we have also the seed business that's growing, and it's going very well. And also livestock. We are now with a greater number of head of cattle. So these are, you know, two other projects in addition to the three traditional ones.