Slc Agricola Sa S/Adr

For those listening in English, you may mute the original audio in Portuguese by clicking Mute Original Audio. For the Q&A session, please submit 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 question live. At that point, you'll receive a prompt to enable your microphone and camera. If you prefer not to appear live, please type no mic at the end of your question so that I can read it aloud for you. We would like to remind you that the information in this presentation and any statements made during the video conference regarding our business outlook, projections and operational and financial targets are the beliefs and assumptions of the company's management and are based on information currently available. Forward-looking statements are not performance guarantees. They involve risks, uncertainties and assumptions, as they refer to future events and depend on circumstances that may or may not occur. Investors should note that general economic conditions, market factors and other operational elements may affect the company's future performance and lead to results that differ materially from those expressed here. Now, I would like to turn the floor over to our CEO, Aurélio Pavinato, to begin the presentation. Pavinato, please proceed. Thank you very much, André. Good morning. We thank everyone for joining SLC Agricola's 3Q25 Earnings Video Conference. Please let's advance to slide four to discuss the cotton market. The third quarter of 2025 was marked by stable cotton prices in both the international and Brazilian markets hovering around 68 cents per pound, reflecting global supply and demand fundamentals. According to USDA data, global cotton consumption for the 25-26 crop year is estimated at approximately 120 million bales compared with production of 118 million bales, resulting in a global supply-demand deficit of about 1 million bales. On the demand side, the spinning industry has been operating strategically inventories of raw materials and finished goods below historical averages. This behavior reduces future market liquidity and puts downward pressure on prices. The industry has scaled back amid growing risk aversion, driven by a tougher global backdrop of high interest rates, inflation, and geopolitical tension. We believe that stabilizing inflation and the interest rate cuts now underway in the United States and Europe, both which are key textile consuming regions, are fundamental steps towards improving business and consumer sentiment globally. Now let's move to slide five to discuss soybeans. Soybean prices both on the CBOT spot contract and the Paranaguá basis showed significant volatility throughout the third quarter of 2025, while in Mexico, prices remained relatively stable. One of the main factors to watch right now is the progress of the U.S. soybean harvest. The country's planted area has fallen roughly 7%, from 87 million acres to 81 million acres, and globally supply is projected to exceed demand by about 2 million tons, one of the smallest surpluses in recent years. Now moving to slide six, we'll discuss corn. Corn prices on the CBOT spot contract and in the Brazilian domestic market fluctuated in divergent ways over 3Q25. In Brazil, corn prices, in spite of some short-term declines, continued to find strong support from increasing domestic demand, fueled by the expansion of the corn ethanol industry. Globally, the corn market is currently balanced with production is now outstripping demand by only 5.7 million tons. Let's go now to slide eight to discuss our operational performance in the past crop year, 24, 25. Soybean harvest was fully completed reaching 3,960 kilograms per hectare, 21.4% above the previous year, virtually in line with budget, and 9.4% above the national average. Cotton reached an average yield of 1,845 kilograms per hectare below both the plan and the national average, mainly due to drought conditions in Bahia. Second crop corn achieved a historical record yield of 8,243 kilograms per hectare, 9.3 percent above initial projections and above the national average as well. In slide 9, we look at unit costs for the 24-25 crop year, which due to higher productivity showed a significant drop compared to 23-24. Soybean unit cost fell 27.4% in comparison to the previous crop year. Corn decreased 17.5% while cotton averaging first and second crops rose 3% due to lower yields and higher use of crop protection inputs. In slide 10, we will show you our current hedge position for the 24-25 crop year. We have further advance in our hedging positions for the 24-25 crop year for soybeans, including commitments we locked in 99.7% of production and for corn 96.4%. And for cotton, And now I'll turn it over to my colleague, Ivo Broom, to comment on our financial performance. Ivo, please continue. Good morning, everyone. Could we please turn to slide 12, which highlights a few key points in our income statement. Net income for the quarter totaled 2.1 billion, up 28% year on year, reflecting higher soybean and corn volumes sold. Year to date revenue reached 6.3 billion, up 27%, both quarterly and in the nine month totals, we marked record highs. Our adjusted EBITDA in the quarter was $531 million with a margin of 25.5%. Year-to-date adjusted EBITDA reached $2 billion with a margin of 32.3%, consistent with historical performance. Net income for the quarter was a loss of $14.5 million, a decrease of $2.8 million versus the prior quarter. The variation reflected an increase of $343 million and also higher SG&A expenses and other operating items, totaling $132.4 million, of which $51 million were non-recurring, linked to the sale of Syrin's spin-off company. a negative financial result of $126.6 million and an increase of $81 million in income tax and social contribution taxes. The main factor behind the loss recognized on the sale of the Syrian spinoff was the inclusion in that spinoff of all historical development CAPEX related to those areas. Since these amounts had been incurred in private periods, they were not directly considered in the valuation of the transaction. Over the nine month period net income, reached 636 million, up 19.3% year-on-year. Cash generation was 567 million in the quarter, while nine-month cash flow was 1.5 billion, reflecting ongoing investments. Free cash flow was positive in the quarter, capturing the typical financial cycle moment between harvest cost payments and the 24-25 crop and start of the corn and cotton billings. During the quarter, we paid the first installment for the series acquisition and received proceeds from the sale of the spin-off company to Terrace, resulting in a net outflow of $268 million. For the year to date, key investments included $180 million, final payment for the Paissandu farm $229 million, BRL, final acquisition of the minority stake at SLC Landco, 361 million, Fazenda Paladino acquisition, 95 million acquisition of Fazenda Unai, 103 million minority stake in SLC Mid, 268 million First Syrians Agro Payment, net of terrorist proceeds, and 241 million relating to dividend payments for the fiscal year of 2024. On slide 13, we look at our debt position. Adjusted net debt at the end of 3Q25 stood at 6.2 billion, up 2.8 billion versus 2024. This increase is mainly due to strategic investments we made. The net debt over just a little bit of ratio closed the period at 2.34 times. On slide 14, we look at the debt profile. Well, there was an evolution compared to Q25 because our long debt share rose from 65% to 69% with an average maturity extending from 980 days to 1,168 days. On November 6th, the board approved a new share repurchase program of 10 million shares to be held in Treasury for subsequent sale or cancellation. Now I'll turn it over again to Pavinato to discuss the 2526 crop outlook. Well, let's turn to slide 16 to discuss the outlook for the 2526 crop year. Planted area for this season will total 836,000 hectares, up 13.6%, over 24, 25. Cotton area will grow 11.1%, soybeans 14.2%, and corn 29.3%. We can now go to slide 17 to talk about the planting of soybeans. Early soybean planting, which allows for subsequent cotton and second crop corn cultivation, began on September 18. And by November 4, we had planted 62% of the area, and the fields have been showing good development. On slide 18, we look at the productivity and estimated yields for 25-26. Companies' expectations for crop potential are based on historical trends and consider its historical trend and also the maturity of the fields. We now go to slide 19 to comment on costs per hectare. Total budgeted total cost per hectare stands at 7,000 82 BRL per hectare, up 9.7% from 24-25. Final cost adjustments reflect the procurement of inputs, now nearly completed. The main factors driving the increase are higher fertilizer volumes for soil nutrient replenishment and also improvements to our crop protection programs. Now, moving to slide 20, we discussed the current hedging position for 2425 and 2526. We have also made advances in the 2526 hedging. We have now 0.2% of soybean output fixed, 27.2% of cotton locked, and 18.6% of corn. On slide 21, we announce our sales forecast of seeds for 2026. Estimated seed sales to third parties Combined with internal use, total 1,800,000 bags, up 80%. 28% year-on-year. Cotton seed sales, including internal consumption, are projected at 157,000 bags, an increase of 8.3% in comparison to the previous year. On slide 27, we will revisit the irrigation project disclosed on July 9. in which we shared the company's expectations regarding the growth of the irrigated area. In the 24-25 season, the company had 16,025 hectares of irrigated area. For the current season, an additional 6,303 hectares will be implemented, totally 19,385 hectares with irrigation. The goal is to reach 53,180 hectares in coming years. Irrigation will help mitigate climate risks, maximize land use through second crop production, increase land value, and boost yields and stability in a sustainable way. Now let's turn to slide 25, in which we'll discuss the business strategy of the deal announced yesterday on a material fact, the association between SLC Agricola and the private equity investment funds managed by BTG Pactual. The objectives are to monetize farmland at market value, maximize operational efficiency through irrigation projects, and establish agricultural partnership contracts. The remuneration of the partner is 19% of our agricultural output and the term of the agreement, 18 years. which later can be renewed every three years. Finally, we go to slide 26 in which we'll take a look at the structure of this deal. Special purpose entities will be created with SLC Agricola holding 50.01% and the private equity investment funds FIPS managed by Banco PTG Pactual with 49.99%. SLC Agricola will contribute Fazenda Pinatini and its irrigation infrastructure at market value. The funds will invest 1 billion 33 million BRL, of which 914 million will be paid upfront at the closing and R$ 119 million upon completion of the Piratini's Irrigation Project, expected for the second half of 2026. Using these proceeds, the SPEs will acquire Fazenda Paladino from SLC Agricola, for $723 million, paying $361 million upfront and $361 million in March 2026. Besides that, the SPEs will also purchase irrigation infrastructure at Piratini and Paladino for $86 million and $27 million respectively. remaining funds will go forward project implementation at the SPEs. The land-owning SPEs will sign rural partnership agreements with SLC Agrícola for grain and fiber cultivation with sharing of production outcomes. SP remuneration will be equivalent to around 19% of agricultural output from the partner areas. The initial contract term is 18 years, automatically renewable every three years. On the next slide, slide 27, we look at the irrigation project and farm locations in this deal. Fazenda Piratini is located in Jaborandi and Fazenda Paladino is located in São Desiderio, both in the state of Bahia. The two farms together have a first crop area of 39,523 hectares with plans to irrigate 27,934. hectares. Adding both will reach 67,457 hectares of planted area with a growth of 71%, an expansion of 71% in our irrigated area. Projects include monitoring of the Urukuya aquifer the use of artesian wells and efficient pumping systems to reduce losses and increase efficiency. Thank you very much and now we'll open our Q&A. We will now begin the Q&A session. Please send your questions in writing all at once and wait for the company's reply. To submit questions, please use the Q&A icon at the bottom of your screen. As usual, your name will be announced so that you can ask your question live. At that point, you'll receive a request to enable your microphone and camera. If you prefer not to appear live, please type no microphone, no camera at the end of your question. And in this case, I will read it aloud. So here's our first question from Mr. Lucas Ferreira. Lucas? Please go ahead, please enable your microphone and camera. He's from JP Morgan. Hello, can you hear me? Yes, we hear you just fine, Lucas. My apologies, my camera is off, but thank you for entertaining our questions. I have questions about this transaction announced yesterday with the FIPS, with the private equity investment funds. I would like to understand if this transaction is just something for, you know, used for leveraging your balance sheet, or if there is room for a larger partnership in the future. it's clear that you want to accelerate your irrigation project. And the second question is really, well, since this is quite a complex deal, part of the production will be with the FIPS later, with the funds later. Did you Did you consider piratini based on your annual valuation? And what can you share in relation to the implicit cost of this deal with the sharing of volumes later down the road? Thank you very much, Lucas, for this question. Yes, Lucas, let me try to give you more details on the deal. So we have contributed the Piratini farm at the appraisal value. So this is what we contributed in addition to the irrigation systems we had implemented as late as last year. So now the SPEs will own the land, they will own the infrastructure and also the irrigation system. and SLC Agricola will run the two farms. With the funding we have obtained, we are going to acquire the Paladino farm. So when we consolidate both of them, we'll have 50% and the funds will have 50%. So as if we had sold half of each farm. So we'll continue to own 50% of Piratini and 50% of the Palladino farm. This is the rationale, right? Our contribution is the Piratini farm. And the investors contribution is the money, the money we'll use to buy Palladino that we had acquired from Mitsu just a couple of months ago. So we're we are incorporating it in the deal. And the SBEs will be doing additional investments in irrigation. So with this, we can accelerate our irrigation project and also accelerate value creation in the farms. They are now, of course, going to start producing irrigated crops, We're going to have two crops a year instead of one like today with much more stability. So in our understanding, we will add value without contributing any funding. So this is the mathematical equation. behind this deal. We are unlocking value from our real estate assets. We're using our real estate to unlock value and accelerate irrigation investment, adding value to our agricultural output. And the 19%, this is the rationale in which we'll have adequate return for both investors and ourselves. Thank you. Very clear, Pavinato. Thank you, Lucas. Now let's continue with Isabella Simonato, Bank of America. Isabella, could you please enable your camera and microphone and ask your question? Isabella, are you there? Now I am. Can you hear me? Yes, we hear you. Good morning, Pavinato, Ivo and André. I apologize for my camera being off. Well, I would like to know about the COD and cost performance in the 24-25 crop here. There was a revision of realized costs. So could you please shed some light on the drivers behind this performance? And if you could also give us some flavor on the 24-25 crop that is still to be sold in the 26 fiscal year, I think that this will give us a clear understanding of the picture. Can I answer? Isabella, in fact, the cost of the 24-25 crop year was under the impact of the climate issues in Bahia, and we applied more crop protection inputs. Of course, this raised costs. When we analyze costs, it's important to compare the cost with the budgeted dollar exchange rate at the time. so part of the inputs were more expensive but at the same time we had an offset with revenue this you know actually balance of our hedging there was no no loss of margin so we have to factor the the exchange rate variation as well. This is what explains the difference in costs. And by the way, Isabella, that's why our realized cost, 24, 25, was above budget. And when we look at the budget, we see an increase of 9.7 in comparison to the budget. But in comparison to the realized, it's a much lower increase. So we are delivering the results in 24 and 25. So the increase in cost is 9.7 for us, but in comparison with the actual this year, it's a much lower difference, 4%, not 9% of increased costs in the comparison between those two years. And also in terms of volume, we want to deliver at least 45% of the volume produced 24-25 until the end of the year. The harvest was completed in August. We started processing, so the volume carried over in this quarter is not significant. Most of the volume will be recorded in the fourth quarter, in fact. Very clear. Thank you so much. Thank you, Isabella. Now, our next question from Mr. Henrique Bradesco, BBI. Please ask your question, Henrique. Henrique, are you with us? Yes, I am. Good morning. Good morning, everyone. Thank you for taking my question. There are two areas I would like to explore. Firstly, on the deal, the first point is how easy it is to replicate this model in the future, creating partnerships to finance expansion and also the installation of irrigation systems. And also with the $836 million for SLC, What changes in the way we consider your capital allocation strategy from now on? The reason I'm asking is because you were incorporating the transactions to deleverage, but this gives you some room in the balance sheet to expand acreage and also to implement irrigation systems. So should we consider this? Also in relation to cotton this quarter, when we look at the cotton margin, unit margin, where there was a 3% increase and the unit cost also changed. How recurring, is there a recurrent effect on the margin for cotton? like this quarter, I know that was a mix of farms that could be the reason, but how representative it is as a recurring factor from now on. Thank you. Thank you very much, Henrique. Let me talk about the deal and expansion. Well, we were really, we had a long negotiation and uh well the future is yet to come nobody knows what could happen but the model uh we created is a first a first for us so if it's uh you know if it's successful it will open doors uh for rolling out uh the replication of this deal this deal that we uh created uh with the funds Okay, Ivo, would you like to discuss capital allocation? Yes, it's just like you said, Henrique, this created an important opportunity to continue growing if opportunities arise. We won't buy as many assets. We'll focus on leases. There is a working capital and capex and also machinery. There are some constraints, but this positions us on a good platform for growth. Now, speaking of cotton, we had loss of margin in cotton this quarter. resulting from, well, of course, the mix of farms. In this quarter specifically, we harvested in Bahia and Bahia, of course, we had an early harvest in August and the margin specifically for Bahia was smaller because we didn't have as big as an output. And so there is an expectation that margins will improve improve because we'll have now Mato Grosso harvesting. So we should not consider this margin as the average for the entire harvest this quarter. Thank you very much, Henrique. Thank you very much, Henrique. Now our next question is from Matheus Enfeld, UBS. Matheus, please open your camera or activate your camera, please. Mateus, are you with us? Hello. Good morning. Good morning, everyone. Thank you very much. Well, my first question is about the soybean productivity and the 25-26 harvest. We are tracking rainfall on your farms, and it seems that in October, rainfall was a little below expectations. and also quite below the historical record, which was last year. So did your yield consider this? Did you consider the effect of climate for this year? Or is there any reason to be concerned in relation to rainfall? And also the second question on cotton pavinato, Could you give us some insight on the potential for Brazil to continue adding cotton acreage? Well, some analysts are saying that cotton acreage will reduce next year. Do you see an opportunity for expanding cotton acreage in Brazil? And also there was an expectation of conversion of additional areas to cotton in future years. Are you thinking of following up on this plan, increasing cotton, especially considering the price levels we are witnessing today? Thank you very much, Matheus. Matheus, in Mato Grosso this year, well, you know, in September it rained above the historical average, so it was very good. Rainfall at just the right time. In October, we didn't get much rain in Mato Grosso. So there are some farms that were under some rain deficit and others not. So when we look at the overall picture in Mato Grosso, it's fine. We have some farms with great potential and some fields, no more than 5 to 10%. that suffered with the rainfall deficit in October. So in November, the rain cycle resumed as normal. So it will depend in on November and December if it rains as expected. We are looking at very good yields in Mato Grosso. So this is the summary, right? So the Mato Grosso farms are going well and in the other farms, Maranhão and Bahia, it's now raining. So we are expecting that our project will be met. This is a Laninha year, very similar to last year. So we expect normal rains in coming month in the Northeast with a very good crop. About cotton now. In recent years, Brazil has really secured a strong foothold in this market. Brazil today is responsible for 14% of the world's output. We represent 30% of the exports, something that 30 years ago, well, we used to import cotton and we were completely irrelevant in this market, in cotton market. And in the In the interval, consumption really didn't change much. So in fact, we were occupying the position of other players. And why? Because Brazil is very competitive. Our yields in Brazil in cotton is the best in the world. So when we think of Brazil, we are really a strong player. So the price levels today are low. They are not really encouraging the expansion of planted areas. So we are seeing some downward revisions in planted areas, especially among the new entrants. They are now suffering more. Now, those who have stable operations will maintain their planted area, but in the average, we'll see a reduction in the planted area in Brazil, which is convenient, especially considering the slowdown in demand. Well, demand is growing very slowly. It's really inching little by little. We are now going to reach 169 million bales of consumptions. So when prices are lower like they are now, this encourages uh uh you know some pickup in demand so at slc we analyze the data really farm by farm to see where what what crop is more profitable in each farm but at this price level we we probably won't be stepping up on the gas in terms of new projects we are going to wait for the price moves to really make our decisions. We want to maximize the use of the assets we have today. Cotton is a long cycle crop with a long financial cycle as well. So with high interest rates, you shouldn't really allocate much capital in capex and working capital, which is something cotton is very demanding about. So you have to think of how much we're going to gross in one year and a half. So this is our vision on the expansion of the cotton area. Now, the irrigation project in Bahia is aimed at planting first crop soybeans and cotton and three fourth of the area for the second crop. So we're going to expand in Bahia, cotton as second crop, which is the cheaper and the more efficient cotton. And that's why we see now the second crop in Mato Grosso for cotton expanding and now, and also in Bahia, but supported by irrigation. Just a quick follow up, Pavinato, if I may, this idea of waiting a little bit for the cotton expansion, does it also apply to the searance areas that you had been planning to start planting cotton on in two or three years. In fact, we now have three farms. We have one farm where we are building, you know, a cotton farm right beside it. So we're going to have, and the other farm has a great potential for soybean and second crop corn. So we'll calculate, make the, crunch the data And probably in this case, we're going to delay the investment in cotton in the second Maranhão farm. As for the Pará farm, we never thought of planting cotton there, just soybean and corn. This combination of high interest rates and low prices is discouraging. Now, if interest rates go down, then maybe it will make sense to plant cotton because to invest paying 15% a year in interest rate is a weighty consideration in any investment. Thank you. Thank you, Matheus. Our next question is from Gabriel Barra City. Gabriel, please, you may proceed. Is Gabriel still with us? Hello, can you hear me now? Yes, we do hear you. Thank you. Pavinato, Ivo, and André, thank you very much for this opportunity to ask my questions. In fact, I have a question and a follow-up. When we think that, you know, the buyback program, the share buyback program you have just approved, I would like to give it more of a framework. When we consider the liability of the company, we see that the amortization cycle from now on, well, we'll still have a very comfortable position in terms of of income and the net, however, is a little higher than expected. And so I would like to combine this question with the following. So how do you view the buyback program in view of the deleveraging process of the company, especially now that this program has been approved? And the second point on capital allocation, in the rolling of debt. Ivo has just talked about interest rates in Brazil and your debt still is correlated with the BRL and CDIs. So are you thinking of having issuance of a paper overseas? We see that the credit markets are a little more stressed out. So what's your view on your liability management program? And at the risk of sounding repetitive in relation to the deal, a very interesting point for me is the remuneration of SP, you know, which is different from the sale, leaseback and bags of soybean. So if I understood it correctly, there is also an upside in terms of productivity and yield. So it's a win-win. So my question is, what do you expect in yield by implementing irrigation in both farms? Do you have an estimate? What could we expect in terms of increase of yield after irrigation? About the share buyback program, Gabriel, I think that what's important in this deal is that we're going to bring the company to a leverage level we feel more comfortable with. Our board discourages from going over two times, and we're now at 2.3 times. So it's really our objective in deleveraging. And of course, we could go back to using other leases, but in terms of share buyback, since the shares are being traded at a very low price, it doesn't make sense to buy more land. So if we had, for example, an opportunity emerging of buying more land, we know that SLC is the best investment for our shareholders. So we want to grow leases instead of owned land. So this is what the Share Buy Back program indicates. About issuance of a paper, well, We've been thinking of taking debt in USD. You'll see at the balance sheet that we have now some debt coming in dollars now related to the Syrians acquisition. And we of course have to adjust this with our hedge accounting policy. And we think of taking short-term loans in dollars because long-term the dollar debt is more difficult to manage, but this is what we're considering in terms of exposure to dollar. Okay, what about yield? Pavinato, you go. So what is the rationale when we create a business plan thinking in the long term like this? If you look at our history, we have an EBITDA margin, a net margin, And this is the result of commodity price, production cost, exchange rate, and yield. Those are the four variables that define this. And a long time, the productivity gains, the yield gains, a generated value, added value to whom? They add value to the entire chain. well, Brazil has increased yields more than competitors. So we are capturing some of this value and applying this to our operations in 15 years time, yields will be even more higher than the yields we have today, of course. But as a consequence, production costs will be higher in 15 years time, will our EBITDA margins be higher than now? No, we don't believe so. We'll be more competitive in the international markets, but our EBITDA margin will be similar to the one we have today, depending on how efficiently the operations are managed. So the partner the partner will participate in the revenue, but not in the costs. So maybe this is the bottom line of your question. We're going to transfer a percentage of the EBITDA margin to this part of the SPs. And in the SPs, we hold 50%, a 50% stake. So it actually goes back to us. This is the rationale. In fact, agricultural partnerships for us as agriculture operators is the sharing of the proceeds, but in a much more resilient way, because we know that there are some years in which we experience crop failures with low yields and who suffers? The operator, the land owner will get just as much. But now when we have a real partnership, like in this case, if there is a climate event leading to crop failure, the partner shares the losses too. So considering the long-term plan to grow our least areas, this agricultural partnership mitigates risks in fact because I will never pay in a lease a higher percentage than that, even in years when the output's not so good. So in fact, the partner is now going to be exposed to both variables, not only to price. Today, lease when we lease based on bags per hectare, the partner is only exposed to price, not on anything else. So this is what we believe will add value in a very fair way to both partners. I'm sorry, I think maybe I wasn't clear. It was about the upside and downside. know with high yields your partners will also get more so i would like to know how much you can generate in terms of additional uh yield thanks to irrigation this was the focus of my question okay let me complement that uh i well you know today we have one one culture that uh sometimes you know, has good yield and so sometimes 70 to 80% of the potential and the productivity of this farm is just at 90% of the potential. Now with irrigation, my yield will rise to 110%. So I'm not going to lose any, any yield. So in terms of revenue, If today I get 100 in revenue, this will go to 220, you know, with irrigation. 220, 230, this is the potential value generation with irrigation. Thank you, Pavinato. That's very clear. Thank you, Barra. Our next question is from Thiago Duarte, BTG. Could you please activate your camera and microphone? Hello, good morning. I have a question about the gains to be obtained with irrigation, but from a different angle. Pavinato, what's the you know, what's the cost associated with the building of infrastructure for irrigating one hectare, right? Especially considering what this, you know, the comparison between the irrigated land and the dry farmed area. I would like to know what would be the return considering the market conditions of today. Let me answer this question, please, Thiago. Well, including all of the infrastructure that you need, electrical, fitting, et cetera, 25,000 BRL per hectare, this is the cost. Okay, for you to generate this additional revenue. Actually, I would even think that it's, you know, I think that the gains will be even higher because it's cotton second crop, right? So with even higher unit revenue. Yes, yes, you're right. In fact, Tiago, if you consider only yield, it's 230. But if you consider uh cotton yeah because i have one year so i've been one year cotton in two years weight thousand and twenty thousand with uh cotton so thirty thousand in a two-year period but now the 30,000 will be generated in addition to the higher yield per year. So in the same year, both crops with much higher yields. And in the case of cotton in Bahia, cotton with irrigation, well, it's been very good and really surprisingly good. And with lower risk, because there won't be any crop failure You become the rainmaker. Yes, perfect. This is very clear. And now my second question. This has been already discussed, right? The project and the budgeted costs for next year growth of 9.7% or 4%. if we consider the effective cost for 24-25. Could you please explain more about the increased costs? You know, really trying to break down what is volume and what is cost, because I am under the impression that part of the cost hike is associated with, you know, the need for greater soil correction. So is this, part of the picture, this one-off effect with the land that you're adding, especially when we consider the costing base for next year. Perfect. Tiago, in fact, our budget for 24-25 was defined, but we had to use more crop protection, especially in cotton and some of the varieties, and we ended up spending more than expected. Now in 25-26 crop protection, again, we have prepared the budget, adding additional products, and we have now a package of crop protection for 25-26. As for fertilizers, we are applying fertilizer in a more efficient way and this not only in the newly added land. In this scenario where fertilizer prices, for example, phosphorus and potash we bought more cheaply than last year and our fertilizer package didn't really see any increase in costs. A very small variation of 2 to 3% in dollar. In BRL, the prices didn't go up. We made, you know, good purchases for 25, 26, so we were we planned our fertilization program in a more efficient way. So we really were trying to find out why the cost. It's really our planning that is leading to this increase, especially in the dollar-based accounts, which are the inputs. In BRL line items, we have inflation, and services. This is what also drives costs up. So this is the summary. This is what justifies the increase of costs in a 25-26 crop year versus 24-25. We are compensating this with higher yields, actually outstripping the target for this year, and And there's an offset also because the prices in PRL, we have some hedging in that are favorable to us. So we will be able to deliver higher profitability rates at, you know, this will also depend on the yield. Yield will be the determining factor in the 25, 26 crop year. Okay, but this, you said that it's actually more volume per hectare than price that is causing the impact, right? And is this volume a one-off thing or is it something different? I would like to understand how recurrent this effect is. I'll answer. If prices continue low, volume will go down in the following crop year. If prices rebound, maybe it won't go down. So it's correlated with commodity prices and how much we invest. Okay, thank you. Thank you, Thiago. Our next question is from Mr. Leonardo Alencar from XP. Leonardo, you're on. Please activate your camera. Good morning, Pavinato, Ivo and André. Congratulations on the results. And by the way, I would like to go back to the deal, if I may. Pavinato, you said that this is something that was an elaborated deal. It took a long time to to prepare, but well, considering that part of the attractiveness of this deal lies on the fact that you had recently acquired some land that required irrigation. But if we think of other occasions that could lead to this unlocking of the land value at the appraisal level, Would it make sense for you to think of different sharing schemes? Because you mentioned that this model, you could have another lease model where the leasing partner would also share the risks. So do you think that, does it make sense to you? And in addition to this, a quick follow-up in SG&A, where there was an increase, you talked about the freight for corn because of syrinx. Is this a one-off thing or will there be more impacts coming in the future? Thank you. Thank you, Leonardo, for your question. I'll start with the answer, with the second one. Well, in fact, we've... Well, we've created this deal, it's a structure that worked, but rolling out more deals like this will depend on opportunities that emerge. We were able to create this, and we think that expectations were met both on our side and the investor side, and this is not going to be automatically replicated. We need this good fit in terms of the value of the land, the value potential of the operation so that we can really create more similar deals. There's always potential to do more, but something that we have to think about in the long term. Well, let me just explore that for a moment. If there is another partner on the table, do they share any other strategic value or is there demand from other partners that seek this type of deal or this is something, you know, something that's very new and people prefer the traditional lease deals. Well, think of an eight year agreement. Nobody who is, you know, thinking of the short term and short term results would engage in something like this. So this is the profile of the investor looking at deals like this. And that's why, you know, there's always a rationale and a strategy behind each deal. and it takes proper analysis and the commitment of long-term investors really to work out. What about SG&A? Well, there's an important difference in the way Syrians would sell, would trade their commodities. They deliver at the port corn as well. So there is a freight cost that could be better, we need to factor in. There was also, you know, a super production of corn. This increased our storage costs and had an impact in our SG&A. And in administration, we had significant expenses related to the sea rents deal. that was also reported under this line. And yesterday, the deal also, you know, we had to use, you know, auditors, consultants, attorneys, all of this adds to the expenses, but they are one-off expenses. They're not recurring in any way. Thank you, Alencar. Now let's continue with Gustavo Troiano, Itaú PBA. Gustavo, Please go ahead. Can you hear me? Yes, we hear you. Good morning and thank you very much. Two points I would like to discuss with you. Firstly, we've talked about the SPEs and potential return, but what about the timing of these irrigation investments specifically? You said that Paladino would be from 28 to 2030, but what is the step-by-step process to get there? Once approved, you know, in terms of water intake and electrical fitting, Is this CAS, CAPEX going to be dispersed all at once to understand what the curve looks like? And the second question about capital allocation. Can you tell us a little bit about future opportunities? We have talked about expansion in leases, expansion in irrigation, and I would love to hear from you Especially considering the growth of corn-based ethanol in Brazil, can you ride this wave either through a partnership with an industrial operator? We saw some of these deals taking place in Brazil. And in the relation between lease, irrigation, and potential of corn-based ethanol, what Would you give priority to that? Because of course there are, you know, lots of projects and limited capital, but I would like to know what's in your mind. Thank you very much Gustavo for this question. The investment in irrigation in this project that we announced yesterday at Piratini, well, we have the water intake facilities and the power is already established. So we are starting with the investment in 2026. So cash generation and the creation of the SPS. In Paladino, we have said from 28 to 2030, we have most of the water needed and all the licenses will probably get obtained very soon, but we don't have yet the electrical fittings. So that's why we consider that the investment will run as of 2028. And in the SB cash generation, we'll have the funding for those investments in three years or in two years. It depends on the decisions taken at the specific time. So we're feeling comfortable with the design for this project and the meeting of the of the deadlines about capital allocation. When you have several options to allocate your capital, it's always a good thing. You're not forced to choose just one way, right? And it really depends on the cost of capital. Right now, cost of capital is very expensive. So we really have to think it over. And as we said before, irrigation, well, we're going to allocate the capital because it makes sense. It is strategic because it will increase output, will increase yield, it will add stability and helps mitigate risks for the company. So there's no doubt in our mind. And as for the other possibilities you've mentioned, well, they are possibilities. So we're going to decide how to allocate So maybe considering, you know, the share buyback program, maybe this is the best way to go. And especially because as the company grows and we start deleveraging below a level of two times. then we'll be able to invest or make other investments. But buyback is always a good option, especially now that SLC is being traded at 50% of our NV. But thinking of the long term, am I going to grow? Am I going to add value? Or am I going to buy my shares back? All of this has to be factored in.