Brasilagro Cia Brasileira De Propriedades Agricolas Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
November 8, 2023

Key Takeaways

  • Q1 Profit Decline: Net revenue of BRL 272 million and net profit of BRL 30 million were down ~29% year-over-year, with adjusted EBITDA at BRL 23 million.
  • Crop Mix Shift: Planted area cut by 4,200 ha of corn and reallocated to 3,700 ha more soybeans and other beans to mitigate low corn prices and reduce commodity volatility.
  • Planted Area Expansion: Despite selling farms, BrasilAgro grew its total planted area by 11,000 ha via pasture‐to‐cropland conversion projects, underscoring its medium-term growth strategy.
  • Risk Management & Hedging: Approximately 50% of the upcoming soybean and corn harvests are already pre-sold at favorable prices and exchange rates, demonstrating proactive price risk mitigation.
  • Strong Balance Sheet: Low leverage with BRL 108 million net debt against BRL 399 million in cash and financing costs at 97% of CDI, supporting financial flexibility and potential land acquisitions.
AI Generated. May Contain Errors.
Earnings Conference Call
Brasilagro Cia Brasileira De Propriedades Agricolas Q1 2024
00:00 / 00:00

There are 1 speakers on the call.

Operator

We would like to begin a conference call of BrasilAgro Q1 twenty twenty four twenty twenty three, twenty twenty four reminding you that our year goes from July 1 to June 30 following the harvest year. So now we're reporting on the first three months of twenty twenty four, Q1 twenty twenty four. We're a little earlier today, but we have some information on the screen for asking questions. Those who are hearing in English, the presentation is available in chat.

Operator

And to hear simultaneous translation please click on simultaneous translation. I'd like to thank you all for your presence. Andre, Gustavo are with us once again. And I would like to pass the floor to Andre to begin. Thank you, Anna.

Operator

I'd like to thank you all for participating here and we will try to be as brief as possible in the explanations talking about the challenges we have had during the year. And we want to leave a lot of time for the Q and A session that are very good during this opportunity together. So I'll try to accelerate the presentation so we can spend time with questions. Here we have the highlights. Net revenue Q1 BRL272 million net profit BRL30 million, adjusted EBITDA BRL23 million.

Operator

Later on we will see that there was a drop in net profit in relation to Q1 last year approximately 29%. When we look at the estimates, we have the same estimates 2,600,000.0 tons with grains, cotton, sugarcane, a small reduction in the planted area. We will give you more details. And this reduction comes because we stopped planting corn in some units where we saw that productivity is risky and due to the current production costs we're being very strict in choosing the highest productivity levels because the price of corn is low. Dividends, we approved this during the last meeting.

Operator

The company once again is paying dividends. We know that this is very important for many investors. And here we are sure that having flexibility, we can be more aggressive. I said this many times, if we have projects we will hold on. And the fourth year, very important the planted area, the growth of planted area by 11,000 hectares in an independent of the reduction in the planted area of corn.

Operator

Well, to talk about this growth, the growth in the last three years and you follow us you know that the company was a great seller of farms. So to maintain the planted area as at the same time as you are selling farms land. So we're accelerating transformation. We accelerated new projects to transform pasture land into cultivated area. And we have sold we know we have sold farms.

Operator

This is very positive when we look at this in the medium and long term, the company growing. And below that here we have some details of the reduction in the our intended to plant 186,000 hectares and this is what we reduced. We reduced 4,200 hectares of corn, 5,000, hectares of winter crop corn and 3.5 other crops. And some areas were excluded especially for and some were substituted by different crops. So we have soybean increasing, an increase in soy 3,700 hectares and beans also.

Operator

Here the company is not inventing the wheel. We have been planting beans for a long time. We developed this market. We developed export markets for beans and also the internal market for beans. We made partnerships with cold storage because you have seasonality here and you have to wait.

Operator

So we have cold storage to wait for better prices. And this graph on the right, the breakdown of crops is very interesting. When you look at the medium and long term, this shows how the company is preparing itself. It is diversifying itself Every time you have a greater diversification of crops, what do we want? We want to attenuate volatility of commodities.

Operator

If you looked at this graph five years ago, it was a pie chart that was half and half, sugarcane and soybean. And the company has been working to manage and with growth of other crops that will give us better added value. And there is a learning curve also here. And the other graph, land ownership, we see the cultivated areas. I always say this, this combination is the winning combination, a combination of our own land with leased land where our own land allows us to have a more efficient use of capital and leased land to mitigate the volatility of operational results because we're leasing areas in places where there is more stability of production allowing the company to accelerate its growth and development of new airs.

Operator

So this slide shows very well how the company is going, how it's preparing itself and how it is evolving. Well, here a little more detail. You calculate EBITDA we know. So here a summary of what we will have, our projections for soybean, corn, also winter crop and beans in thousands of tons 250,000 tons of soybean. We're talking about 100,000 tons of corn.

Operator

We're talking about more than 10,000 tons of beans, a lot of beans and cotton and also winter crop for cotton. This shows the company is diversified, the change in mix that we're proposing and we have been doing. This is not only for one year. We're building this during the last few years. Next, here the new participants, I will talk about the status.

Operator

Everyone followed the planting. We had some problems in planting, but basically we have areas in the Araguaia Valley, 1 Hundred Percent of the land planted in this region, Mato Grosso doing very well. At the October, beginning of November, we began to plant in Mapito Bay. So we already began planting in the state of Bahia irrigated. This is now the irrigated crops have been already planted some time ago.

Operator

And we're accelerating the planting in Bahia and Piaui since Mato Grosso. Are only in the new areas we are finishing the planting. Beginning of the planting beans begins now this week to plant beans. And beans here we're talking about beans. It is in new areas.

Operator

It's not in old areas. And cotton too here apart from the window there are demands. We're projecting cotton for example on November 20, these are the areas in Bahia. We'd like to remind you that in cotton we have three types of crops. We have the summer cotton.

Operator

Then in the January, we begin to plant the winter crop as we call it. And then in January, we also begin to plant cotton in irrigated areas. In Bahia, Last year we have a beautiful productivity above four ten, four 20 bushels per hectare showing that the company is doing its homework. We're learning this culture and we begin we believe it adds a lot of value to us. Cattle raising, as I always say, it's a transitional activity.

Operator

We have in Paraguay Two units in Bahia, Arajadinho Preferisi. And here we had a marginal also marginal operation with cattle that we are dismantling now. But basically when we look at GMD, GMD gain average gain in weight this quarter is not a good quarter for this. We're within the projections. We're doing this.

Operator

We're looking at the KPIs. But this quarter is the most affected because there is a drought. So we're looking at the drought months, July, August and September, which have a drought wherein you have a lower average gain of weight. Even in December, we're talking about two sixty grams only. So this was we had this projection.

Operator

The way we do this curve, it begins with 150, two hundred grams of average weight gain. Then there is a peak in January and February '8 '50 grams per month and then it begins to drop. In February, it's still high March, it drops April, it begins to drop. And then why? This curve follows the availability of food and all and food depends on rainfall.

Operator

So in Q1, there is a problem because of drought. Sugarcane, we are finalizing the harvest, the volume, an increase in TCH. You have all followed this increase in TCH in the sector as a whole. We have a lot to improve here in sugarcane. I'm sure we want to improve this even more the productivity since and we're making heavy investments in irrigation in our unit with sugarcane in the state of Maranhao.

Operator

So we're going to increase this TCH in the next few years. Here, I don't know if I'm going too quickly. I'm trying to accelerate. So Anna is looking at me. She tries to rush me.

Operator

Well, here hedge, here final this is the final situation. You have some product sold in the quarter. In the next, we will erase 23 and we will have only 24. This is the this shows the management of the company. Soybean when we talk about the harvest twenty twenty two-twenty twenty three, we had basically a sale of at $14.5 per bushel.

Operator

Let me see here. Okay. I had it here. So we have the dollar with $5.47 exchange rates, which was a good combination. We can also show to you what hurt us.

Operator

You have Chicago, but due to a super harvest in Brazil historically, the whole sector had been projecting positive premiums. We have positive premiums for a long time. And this year with the super harvest, there's this brought very negative premiums, which had an impact on price. We will the harvest twenty twenty three, twenty four, we can see soybean 50% sold, practically 50% sold. We began to do this in the past when we began to buy fertilizer.

Operator

So we have a harvest sold at 13.12 and $1 at $5.37 exchange rate. When we go to corn, we're looking at $23.24 40 5 percent sold, 47.2%. Cotton, we accelerate a lot. This is traditional to do this in the market to accelerate the sale due to some operations and due to the purchase of agrochemicals 72 sold, sold at 82.5 per bushel and dollar at 5.53 exchange rate. So the company has tried to do its best to have efficiency in the sale.

Operator

You know very well about the exchange rate. The exchange rate now is different from what you see here, but we're always alert to capture these numbers. Now ethanol, this market we have a lot of derivatives here not as much as we would like to because it's not such a net market as others, but we did 23% of sale derivatives. And when we talk about 23%, twenty four % sugarcane, sugarcane is harvested in April next year, 4% is sold. One extremely important factor and is very important to follow are receivables from farms.

Operator

You know that we sell farms always, always to receive in bags by bags of, based on bags of soybean. So we monitor this P and L of receivables. So we have an important volume. When you look at the top, the volume is large of what we have to sell in soybean in terms of receivables from the sale of farms. This is to illustrate as we always do we see a descending curve in the price of some commodities.

Operator

Some are more stable like cotton, soybean after it stabilized cattle raising began to react then stopped. And we have the great challenge which has been ethanol. We are a large producer of sugarcane, but it's for mills that produce biofuels. And this is the result of the price policy of biofuels from Petrobras. We're suffering this impact biofuels, especially ethanol.

Operator

So it's a great challenge we have for next year. We are looking to expand sugarcane in units that have production not only biofuels, but also sugar mills that produce. So at the top, we see ethanol at the bottom sugar. I don't remember, I've been working in this area for thirty years. I never saw sugar with the prices we have today.

Operator

And no doubt this has paid well. This has been good for the mills price of sugar. Here we see the costs. Today there's an article that came out and they use the letter X. And what is the X that I'm talking about?

Operator

We saw prices which dropped and also costs. So we had a cost of product that is high because you can see here fertilizer from $950,000,000 that we paid in the last harvest Now urea $6.50. And today, you see new levels, new price levels. The harvest '23, '20 '4, buying urea below 400. Chloride, we bought earlier.

Operator

There's also the issue to buy. It made sense at the time and also interesting exchange rates. So and map, you can see here we were able to close with lower prices. You can also see on the right percentage of coverage. Here you can see NPK.

Operator

These percentages are not 100 reminding you we have an important part of sugarcane winter crops and irrigated areas where we don't have the costs yet. Well, now I'd like to pass the floor to Gustavo, so I show the scenario now the numbers. Thank you, Andre. Well made my job easier showing the impact. First of all, I'd like to thank all those participating in our call.

Operator

And as Ana said in the beginning of this conference call, it's important to highlight that we're beginning a new year Q1 twenty twenty three-twenty twenty four showing a net profit BRL30 million, here 11 adjusted EBITDA $23,400,000 with a different from the same period last year and with a net revenue of BRL272 million with a total mix that is higher than the previous quarter. This drop in net profit in relation to the same period last year from 42 to 30 is due to the drop in prices that Andre mentioned in commodities, especially sugarcane, soybean and corn. Although the company has been effective in doing hedge, we didn't imagine that this we would have this impact in the premium and the basis and this how this told us that we had to sell the soybean close to the costs we had. The costs were very high and they affected the operating margins. This impact that you can see here was partially compensated by receivables of real estate, receivables from the sale of farms and real estate.

Operator

Here we see the EBITDA margin 90% historically was 30%, thirty five % shows the scenario that the business is going through this the impact of this super harvest with soybean put pressure on the premiums and also affected the price of corn and sugar too sugarcane too. So the company has to choose what kind of product it will plant and we don't see reasons that could really bring a recovery of prices. So we had to sell with tight margins, especially in the case of corn. That's why we looked at our strategy and we're changing our mix, product mix for 2023, '20 '20 '4 planting less corn. So we're mitigating we're trying to mitigate these operational losses and we're decreasing the planted areas of corns by 1,000 hectares.

Operator

Also during this whole period, we delivered 1,000,000 tons of sugarcane, very good harvest. When we look at our indicators, the productivity is much better than last year. This confirms that the market in Brazil is increasing the productivity. And let's see how this impact of price and higher costs, price of fertilizer from the previous year. This is having an impact this year and it provokes a drop in margins.

Operator

Well next slide. Let's see here the main numbers, the highlights. Here we see all the products. It's important to highlight the impact on soybean, corn and sugarcane, this drop in the price of commodities. Also, we had a worse exchange rate.

Operator

The exchange rate we used was worse. We used to sell at BRL900 per ton. Now it's BRL850, almost 30% less and the cost goes up due to the cost per ton I'm saying, due to the impact of fertilizers and agrochemicals. The results we have six fifty per ton, although we have more tons sold. We can also see in the case of corn, normally there is a correlation.

Operator

We see historical correlation. One bag of soybean represents 2.4 bags of corn. We have this correlation with it now it's above it's in excess of three. So we see reasons to believe the price will go up. So we believe it's better to sell than to wait for higher prices.

Operator

And here we see that the contribution is negative in corn. Sugarcane, we see here the price dropping 22 per ton, 15% less due to the drop. Last year, we sold at $0.5 and in this quarter we sold at $0.90 We have a drop. And the cost per ton went up 22% with a gross result. There's a drop here, a difference of BRL45 per ton.

Operator

When we consider BRL20 per ton versus BRL8990, we see that we have a march of 1,800 per hectare when historically it used to be 2,800, three thousand five hundred. So you see the drop, the impact that Andre mentioned and the variance in some costs, especially last year higher costs gave us a margin of 15%. Historically, it was 30%. Here we can see the EBITDA adjusted EBITDA. Here we always calculate excluding biological assets and also adjusted by derivatives during this period.

Operator

And we added here all the expenses, depreciations and amortizations. For Q1 twenty twenty four adjusted EBITDA, BRL23 million last line, approximately 20,000,000 from sugarcane and 3,000,000 net from the sale of the inventories of soybean. Those grains that were harvested last year, when we see twenty twenty three first quarter, this adjusted EBITDA was BRL106 million. In 2023, million came from sugarcane, 950,000 tons delivered and 44,000,000 were from the inventory of soybean and corn. We had BRL21 million in soybean and the rest in corn.

Operator

On the right, you see a breakdown as we mentioned this operational adjusted EBITDA is recurring during this quarter sugarcane that is more relevant And during Q3, Q4, when the corn and soybean and cotton are harvested, you they begin to be harvested and sold, It is around 40% for soybean, 40% sugarcane and the rest 20%. On the next slide, here we have our debt net debt of the company. We have here a short term debt BRL208 million. We have BRL750 million in working capital that we need to plant these 80,000 hectares. So 30% of this working capital we work with third parties and the rest with our own capital.

Operator

And as we always say, the company has very little leverage BRL554 million. In cash, we have BRL399 million. Net debt BRL108 million. On the right, you see, we have a debt below the interest rate we pay is 97 of the CDI index. So we're we have low we pay low interest rates.

Operator

We have here the tons that we have, the amount of soybean we have from the sale of farms. Our company has a very comfortable position in terms of debt. Here to show to you the value of our shares in the stock market and in The U. S. Here we see a graph that we show the evolution.

Operator

Here you can see we will pay dividends now and the share is discounted. We trust that we will have a good harvest soybean and corn. And with the adjustments we made we will mitigate the climate risks and the possibility of selling farms continues. We continue selling farms. We will continue to deliver positive results.

Operator

So thank you very much. And now we'd like to begin the Q and A session. Thank you, Gustavo. Thank you, Andre. Well, this is an invitation, a reminder.

Operator

We will have our BrasilAgro Day on December 1. After some years of the pandemic. We will open this year for also investors, individuals also. We have limited entries. Please tell us if you're interested in our Agro Day.

Operator

It's going to be very good. We will have the presence of our executives, Andre and but we will also bring our Operations Director and all our team of managers, strategy, legal, new business, purchasing, environment and we will be there to make this event even better. Well, I will pass the floor to Thiago Duarte from BTG. Okay. Thank you, Ana.

Operator

Good morning, Andre, Gustavo. It's a pleasure to talk to you. I'd like to focus on two questions. The first The first, we see a change in mix in the mix and the reasons Andre talked a lot about this. But when we look at area crops and volume produced, we see a drop in the yield in the productivity expected especially for grains, especially soybean, because it seems early.

Operator

There's a lot of discussion in the last few weeks about late planting of soybean. What are the reasons? Why are there so many problems in planting? Maybe not that much in Mato Grosso, but also in others or I'd like to know if there are other reasons for this for delayed planting? The second question in the last call you mentioned you discussed expectations of margins for soybean for this harvest.

Operator

You talked about 1,702,500 per hectare. And now your current expectations, does it make sense to continue with this profitability expected in soybean for the harvest that is beginning now? Thank you. Thiago, as always we like very much your questions, intelligent questions. Thank you.

Operator

First question, there is a drop. I will explain. It's not due to the climate yet. The company in the last year I mentioned that the company has been growing. We're growing 11,000 hectares in planted area year after year even with the sale of farms.

Operator

So if we add the acquisitions and leasings, for example, Regalito farm six thousand hectares Sao Domingos Farm 3 Thousand. Panambi Farm, 5 Thousand 7 Hundred hectares. Included in the last harvest, we included one and now we're including the rest, plus developed plants. So when you look at the dilution of yield, I have good news for you Thiago. It's not El Nino.

Operator

It's because we're adding a lot of new land. And you know very well these new areas have a lower productivity. So when you look at yield, it's not the company making a decision. It's the opposite. In mature areas, we're being very aggressive looking for this high productivity.

Operator

But the fundamental thing and this difference, we have almost 15,000 hectares when we include Chaparral and some areas in Paraguay. We have more than 15,000 hectares of land in the first year first in their first year. Everything was well done. Most of these areas we developed. So it's their first year now.

Operator

So in these areas, we will not have more than 50 bags of productivity. So this is what is happening with productivity, new areas being added. The second question margin is very good. We have been confirming the cost of production even with some drops better than where we expected drops in cost. So our cost of production is BRL4000 per hectare, our expectation.

Operator

And we said in the past, soybean should be BRL124 depending on the units. So when you look at the average productivity, we will have 1,700 to 2,500. 17 hundred, lower productivity 2,500, higher productivity and also units where you have higher freight costs and lower. Mato Grosso, for example, in Bahia, we have a better price because of better logistics, better freight prices. So that's our answer, Thiago.

Operator

Also are you worried about the evolution of the due to the problems with sowing soybean planting soybean? I know it's a difficult question because we're talking about probabilities. Time will tell us, but just to try to measure your concern with this discussion which has become important in the last two, three weeks. Well, where we are more concerned in the especially we're concerned with Mato Grosso, why? Because Mato Grosso, you have to you have a window to plant to be able to plant corn also.

Operator

Fortunately, why fortunately? Today, we have three positions. We're in the South Alto Taquari, Vale Do Araguay, Xingu and we have now positions in the West Of Mato Grosso, Vale Do Guapore. I will show you how it works. Vale Do Guapore, new area, low expectations, very little in winter crop, less pressure.

Operator

Xingu and Taquari, the planting is fast. We have winter crop and corn. When you look at Mato Grosso, the rain, this year, we were able to plant in a very fast way in Xingu, the fastest planting. This is when we were able to plant very rapidly. It's not only climate.

Operator

We worked with machines, service companies and we planted Xingu very rapidly. So we began planting Xingu, the best year in history. We began to plant on September 27. This year, we used to plant on September 27. This year, September 22, all of Xingu, most of it before October.

Operator

And we had something very good in Xingu. One thing is planting before October, but so we planted in a well distributed way. Well, this is when we look at Matagos. When we look at Bahia, what is the concern? The first El Nino.

Operator

So we readjusted. We began to plant in Bahia, in the state of Bahia, early. We have three people who are specialists. Our forecast is not to have lack of rain. Possibly, we will have difficulties in planting due to excess rain.

Operator

So we prepared ourselves to plant as quickly as possibly, worried with excess rainfall. After the fifteenth, things will change. We will have a lot of rain and we're concerned with the excess rain because we have to plant in a fast way until November 15. So in a certain way, the vision for soybean is we're doing well. And for example, if we had a lot of winter crop in Guapurre Valley, we would have a problem.

Operator

In Mato Grosso, we're late Sao Domingos. There we don't have pressure from winter crops. It's first year, first year. There will be no winter crop. But this Guapure region has is very similar to Tanganyarae.

Operator

So we're looking at it. But since we don't have a winter crop, it's we're planting, but we're okay because we won't have it's a new area. We won't have a winter crop there. Excellent answer. Thank you, Andre.

Operator

Next question. Pedro Fonseca, XP, what are your expectations for the price of soybean and corn? Over the next weeks, do you see any risk of a drop in prices in Chicago if the climate maps in December get better? UNIDENTIFIED Miguel, that's a million dollar question. Okay.

Operator

I always say that when we have these questions, we have to look at structural issues and others. I'll try I will try to answer. Corn. Let's begin with corn. Like Thiago just asked, we saw some regions in Mato Grosso with difficulties in planting soybean.

Operator

So this brings a pushback in the production of corn because to give an idea of the importance of the window for planting corn. In our data, one week of delay, you have the possibility of a 15% drop in production. The corn planted on January 15 produces 15% more than the corn planted on January 22 and corn planted on January 22 produces 15% more than corn planted on January 29. You may have a year when you have longer rainfall. So structurally, we have this problem of planting that is delayed in Mato Grosso delayed planting.

Operator

The second point, which is what I mentioned why we reduced why we had a drop in the planting of corn. We had to decide. When you look at the winter crop, producer had 110 bags. When they have 110 bags in the winter crop, they began collecting corn at 140 and ended at seventy, eighty. So what did we do this year?

Operator

We said, oh, let's stop. What is the corn at seventy, eighty? That's corn you plant in February. You get only you have a drop seventy, eighty bags per hectare. So we purged an important area where we used to have corn.

Operator

We're not what we do, the whole sector does. So in a certain way, producers did the same, everyone did the same. So this difficulty in planting, cost of production, all these problems with a higher breakeven, The only factor we cannot measure yet which is structural, the level of adoption of technology. All grains C4 plants are dependent on nitrogenated products and the market reduced. So when you have the planting window, when you have a drop in productivity, then you will have less productivity because of late planting.

Operator

And the third point, which is technological package. These are the three drivers that can push the corn up and down. These three are pointing in the same direction, a drop in production. So we hope that there will be a drop and a correction, especially soybean and corn. So we're looking at 2.3, two point five.

Operator

It went up to 3.6, came back. So in the case of corn, we may have in the next harvest recovery in price. When you see look at demand, I'm optimistic too for some reasons. We see we saw a small recovery in beef. We know that beef is the engine of all the types of meat, we see a small recovery and the experts are saying there will be a recovery in cattle raising in 2024, '20 '20 '5 and this may affect corn.

Operator

And the main issue is how much will be sent to China, whether we will export the 35,000,000 tons to China. So that's the picture for corn. I'm optimistic concerning the price of corn due to the points I mentioned soybean. Brazil with everything we mentioned, everything we saw, the added areas. So we haven't seen what may happen.

Operator

We have El Nino in the South. We had this intense rain. And for example, in the South of the country, Rio Grande do Sul and Parnadis are the third largest producers of soybean. So there's a lot of uncertainty in soybean to be conservative. I believe that the third point I'd like to mention about soybean.

Operator

We have a great political geo tension, geopolitical tension. And I believe that any further increase in the tension may affect soybean. Let's hope this will not happen. Let's hope we will have peace, but there's a great geopolitical tension. And we know that this brings demands for soft commodities and the conflict we're seeing in the last few months if it continues or if there is an increase in.

Operator

In terms of Chicago, we believe that without these issues, we trust in these levels we have. We believe it will be a difficult basis difficult year for basis, maybe better than last year. And farmers also learned. Farmers learned that in the case of soybean, I'm more optimistic with corn than soybean. I believe soybean will continue with these prices especially due to these, geopolitical tensions.

Operator

Another question from Pedro. How do we see the purchase of land after the rising prices? What are we seeing in relation to the purchase of land? And supplementing, we have a question from Evaldo Batista, real estate whether we can buy land now. I said yesterday, this is the good thing about BrasilAgro.

Operator

We can join the two strategies selling land, selling real estate and operations. I like to see the full glass, a difficult sector, drop in some margins. There's an important liquidity. We continue with good liquidity. We had seven, eight years of very high margins.

Operator

Farmers are still capitalized. They have money. So I believe that we will continue having liquidity. We're working. We're a thermometer.

Operator

People come to us to buy and sell. And I can say that there are many people looking at our assets, wanting to buy our assets. So in the next conference calls, I hope to give you good news about real estate. As I said, we have a lot of things happening. So the market continues buying land.

Operator

There's a lot of interest in buying land. We have to look at everything structurally. This business will continue being very good. The world needs more food and this is where we can increase. And we have here in Brazil we have winter crops.

Operator

When you look at the return rates, we're conservative because the price of sale of our assets will be the market. The price of purchase of what we buy, we decide. So the challenge, the greatest challenge, you have to make a projection for the exchange rate and the price of soybean. So we see with these prices in Chicago, it's not the price of the past, but prices are attractive due to our exchange rate in dollars. Like I said, I like to see the glass full of water.

Operator

We see some opportunities already of financial stress. You know this very well. We bought land bank, land for transformation, but also stress. So we see high interest rates in Brazil in the last few years, high interest rates. The market isn't showing and the market isn't showing a recovery.

Operator

Interest rates are still very high. Let's hope interest rates will drop to 8%, nine % which are still high for those who had a lot of leverage. So I believe there's still opportunity and we will begin to have some opportunities of financial stress or people rebalancing their portfolio, businessmen who because the price of land went up a lot in the last seven years. I'm optimistic. We begin to see also liquidity, greater liquidity in Paraguay.

Operator

We're having a liquidity in Paraguay that is very high. Things that we didn't see in the past, we're beginning to see. So we will continue doing our homework. We will be continue buying. We will continue selling land.

Operator

And sometimes you sell more, sometimes you buy more. In the last few years, in the last calls, in the last 10 calls, I'm saying that we were selling more. Now there is a balance. There will be sale? Yes.

Operator

Will there be purchase? Yes. And we're beginning to see some opportunities. The next question is from Renato Santos. He wants to know about the dividend policy.

Operator

Will it continue in 2024? Will there be other payments of dividends? And when will these dividends that have been approved, when will they be paid? Hi Renato. Well, let's begin payments.

Operator

Our payment is for November 24, '30 days after the general assembly. So payment will be made November 24. Now concerning next year, we will work so the company can continue with operations and the sale of land. In operations, we see a drop in price. In the last year we saw this in sugarcane.

Operator

And now how sugarcane will behave? Actually ethanol. Ethanol can put pressure raising or decreasing dividends last year. So ethanol can affect this. So we hope to have the next harvest with better prices.

Operator

So the company has tried to be a good payer of dividends. When you look at our average, you will see that in the last few years dividend yield has been one of the best in the market and our objective is to continue to be a company that has a good dividend yield. When you have a lot of opportunities, sometimes we have to pay less and our return on investment has been five times. So when we say, wait, we have an opportunity to buy something, then later this will also bring dividends. Now in the medium long term, we want to be a company that is an important payer of dividends.

Operator

This helped the company to have a lot of liquidity in our shares. We know the importance of liquidity for our shares, and this helps us to always pay dividends. And let's hope it's the this is the first quarter we're in Q1. Let's hope with the whole team to have a positive result, so we can continue being a strong company in the payment of dividends. Thank you, Andre.

Operator

Just supplementing the answer. We don't have a dividend policy that is pre established. So the company, the rule is to pay at least 25% of the profit in dividends and the difference, the additional dividends, we don't have a policy. We have these assumptions that Andre imagined that the management follows to define how much and whether we will pay additional dividends. Now continuing the next question, Reynaldo Verissimo.

Operator

He says congratulations for the results. And he wants to know about El Nino. Are there crops that can be affected? Example, cotton in Bahia, can it be affected? Hi, Reynaldo.

Operator

Well, Reynaldo knows a lot about the state of Bahia. What did we do in the company? We have increased the planted area with cotton, but most of it has been in irrigated land, most of the cotton. Foreseeing the possibility of El Nino, we had a drop in the non irrigated cotton in Bayonne. So we have irrigation in Atrocchatino.

Operator

They just implemented another 600 hectares of irrigated land and this includes cotton in the next cycle. So we're alert. The concern with El Nino is Bahia, state of Bahia, but I would say that more important than total volumes is the distribution. I'll give you a number. You look at last year.

Operator

Last year was a year when we had a lot of frustration with the climate in Chaparral. And last year, we had 1,300 millimeters, 1,300 millimeters last year difficulties in production. If we look at the best year in the best year when Chaparral produced since 02/2008, it was a year when we had nine eighty millimeters of rain. So what is fundamental? Because El Nino affects volumes.

Operator

Now for us distribution, if 500,000,000 if you have rainfall of 500,000,000, the plant will use 100,000,000, the rest goes away the rain. We want to know the distribution. Of course, there are statistical issues, greater probability, but we had years with El Nino with 900 millimeters of rain with excellent productivity in Bahia. So the attention now is to and the decisive rain is after January 20 to February 20. In this period, January 20, February '20, if we have one or two rains, well distributed rains, we'll have a good year even with the probability of El Nino bringing less rainfall.

Operator

So especially cotton and the crops in Bahia affected by El Nino. In parallel, not only BrasilAgro but the whole sector, the company has been working a lot in Bayea to increase our coverage. If you go to a farm in Bahia, we have a three year plan to plant sorghum and other crops to cover the land and to avoid volatility. When the soil is well covered, now if you have an El Nino with a lot of stress, if you have thirty five days without rain, no coverage will last. But in Bahia, since this plan has been put into effect for more than three years, We have tried to have a better stability even in years with El Nino because you have the soil is covered.

Operator

So there's the climate issue and also what we have done to mitigate these effects. The next question from Rafael Flores, probably for Gustavo. What justifies the cost of sale? And as we saw there 29% because in this quarter the relationship is 0.52%. Why the cost of sale is so high in 2023?

Operator

Okay, Rafael, thank you for the question. We for sale, when we sell a farm, we look at the surface and we have an estimate of the land and the number of bags of soybean, 1,000 hectares at 300 bags of soybean. What we have seen in our history, when you do the final measurement, we always have a difference of 2.5% up or down. So when we sell these 1,000 hectares, we record only 97.5% and the other 2.5 we wait for the final measurements. What happens is that it's above or below this percentage and this creates a distortion between cost and sale.

Operator

Normally, we do this when we deliver the land, we do. When we transfer the land to the new owner, we make this adjustment. You will see that once a year we have this variance. Thank you, Gustavo. The next question, Joelito Silva.

Operator

Andre will probably answer this. Andre will need a few hours to answer. What were the reasons for the good results in 2023, '20 '20 '4? How do you intend to use this in the future? Our year is beginning now.

Operator

I don't know if he means January, December or our year. And the second question for 2024, what were the reasons for success? Can you give us more information about this sustainability and social responsibility of the company? Brazil and Andre loves these topics. Okay.

Operator

Andre? Thank you. Excellent question. Yes. Let's begin with the first great investments we have done in technology, in biotechnology and bio inputs And we are investing also digitalization investments in digitalization.

Operator

One is connection of the fields. We have partnership with telcos. And I believe this will be an important driver for future results. So bio inputs, biotechnology, connectivity and new management online systems. New online management systems, we're changing an important tool we have for production management.

Operator

The technician can do everything nowadays with his cell phone. So these are three important pillars that will bring us results. And we have some projects to have administrative efficiencies. This is being done by Gustavo. We have many things so we can be more agile in accounting and do more with less to be more efficient.

Operator

And supplementing this the challenge we have to bring new crops and stability in crops. And also people management. The company has spent a lot of time with management tools, courses, online platforms, training. So we're preparing a solid base in the company. So the results will not be based on luck.

Operator

The results have to be based on good planning and not luck. So the company is preparing itself. When we talk about ESG, as Ana said, yes, I'm passionate about this area. Governance, we made many changes in the last although we have shares in the stock market, we opened the capital in The U. S.

Operator

And all the issues with the SEC. In The U. S, We had to be prepared. More recently in the last year we have an auditing committee. We implemented an auditing committee policies that were intensified.

Operator

So I believe in terms of governance, the company has been very agile in terms of social issues. Ana Paole is Director of the BrasilAgro Institute. This is something that we love. Last year, we had 17 projects. We helped more than 21,000 people.

Operator

What are we doing next year? We approved in our last meeting an important budget for BrasilAgro Institute BRL3 million for BrasilAgro Institute. This is always linked to results. So we have a lot of projects and focusing on education. I invite you, I know that you like this, spend some time with us, come here and we'll talk about the institute.

Operator

You will see what we have done in education. In terms of the environment, we have two great challenges. The measuring of greenhouse effect gases. We're measuring. We're doing this for three crops already.

Operator

And we have an important work, which will be ready, carbon credits, the areas where we avoided deforestation. So we have great projects in this area. This is very important for us. I always say that ESG is becoming important. It's our MD and A.

Operator

We always transform land and we're always present with environmental authorities. We're always building schools. And now I we used to do this social issues. We cannot forget. We have the we have internal and outside social.

Operator

External, we created the institute. Now social internally, I would say, we have great policies for equity, many things we're working on and developing. So we would love to have more women, but we need infrastructure. So when we look at, for example, gender in the units, when you have a good structure, we're one of the best in the market. Now when you have a new unit where you have lack of structure, so we have to work on structure.

Operator

So we have spent a lot of time on this. We could spend all afternoon talking about this. I tried to summarize environmental, social and governance what we have time and also your first question the challenges not for twenty twenty four Joselito, the company in the next five to ten years. Excellent. Well, let's close.

Operator

I'd like to thank the presence of Andre Gustavo for their time to be with us in this conference call. I'd like to thank the participants. We had an excellent number of participants. The year is beginning, a lot of challenges, but also many good things happening. Thank you very much and we wish you a good day.

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