Brasilagro Cia Brasileira De Propriedades Agricolas Q4 2023 Earnings Call Transcript

Quartr
Provided by Quartr
September 6, 2023

Key Takeaways

  • The company reported BRL 1.4 billion net revenue and an adjusted EBITDA of €534 million, driven by both operational performance and significant real estate gains.
  • Real estate sales reached over 9,000 useful hectares for BRL 610 million, maintaining a 14.5 % IRR track record and exemplifying the firm’s recurring “plant‐and‐sell” model.
  • External valuations by Deloitte showed a 26 % appreciation in the land portfolio from 2021 to 2023, with a conservative internal NAV at BRL 37 per share (versus BRL 42 externally).
  • Operational margins were squeezed by elevated input costs (e.g., fertilizer, fuel) and falling commodity prices, halving soybean and sugarcane profitability and depressing cotton and winter‐crop corn returns.
  • With low net debt (BRL 60 million), BRL 700 million in receivables and a proposed BRL 320 million dividend, the company maintains strong liquidity to fund its BRL 965 million irrigation and expansion projects.
AI Generated. May Contain Errors.
Earnings Conference Call
Brasilagro Cia Brasileira De Propriedades Agricolas Q4 2023
00:00 / 00:00

There are 1 speakers on the call.

Operator

Good morning. We would like to begin our conference call for the earnings of the full year twenty twenty two-twenty twenty three, which ended on June 30. Thank you for all the participants. On our side, we have Andre Guillaumon, our Chairman and CEO Gustavo Lopez, our CFO and Investor Relations Director and I am Ana Paola Zerbinazi. I'm Head of Investor Relations and Capital Markets.

Operator

Today we began the call in at a different time. And also we have holidays tomorrow and you have access to English version. We have simultaneous translation in progress in English. Please send your questions through the Zoom or at the end. So I would like to pass the floor to Andre and we'd like to begin our conference call.

Operator

Thank you. Thank you, Anna. Thank you to all who are with us. And it's even looking like a TV show here, but excellent. It's very good to be here every quarter.

Operator

Once again we're with you. And to close the year, we will talk about the challenges we had during this year and the things that we did right, the things where we had problems. So it's good to see. So we want always to have transparency and we want to have your trust. And also here bringing, as I always say, more and more trying to give you good information about agriculture.

Operator

Now we have more companies doing a good job as we do and contributing to reduce the asymmetry in a sector that is so strong, so booming in Brazil, representing 27%, twenty eight % of the GDP of Brazil and we have less than 10 companies in the stock market listed in the stock market. So we want to take advantage of these opportunities with you. So going straight to the point, what we have in terms of highlights. First, financial highlights, the company surpassed the net revenue of BRL1.4 billion, Net profit, BRL 2 and 68,500,000,000.0. Although we will tell you that yesterday, I was talking to some people, this is the year of the X.

Operator

Why? Because where we have the cost of formation, high cost and low sale price. I even gave an example. Cost of production of soybean is like a triangle. Two, three harvests ago, it cost 3.8%, now it's 5.2% went back to 4%.

Operator

So a triangle, very high cost for soybean. So it's a year where we had results that were affected by this. We will see this in detail with Gustavo. What happened to our cost of products sold and the revenue of these products? But we have an adjusted EBITDA of €534,000,000 an expressive result.

Operator

Now in terms of operations, more than 2,300,000 tons of production and here we have grain, sugarcane. And the highlight that we have for you, we always say the company has the ability to combine operational strategies with real estate strategies. And it was a year in terms of real estate, very strong. We had already said that we should sell more than buying due to the liquidity in the market. We sold more than 9,000 useful hectares.

Operator

So we want and this is the challenge. We sell arable land and we want to continue growing. Totaling these 9,000 hectares sold BRL610 million in sales. These are expressive numbers and I believe that you who are following us, I know that you do market analysis. Always in the beginning I used to hear, oh, it's difficult to model how much you sell.

Operator

It's difficult for the NAV and more and more this is happening in a recurring way. And I want to say that everyone knows that the company sells farms every year. Okay. Next slide. Well, as we were talking about sales and here we brought all the sales during the year.

Operator

So a lot of activity this year. So we begin with a sale in Paraguay, a small sale, but I always say this is only the beginning. So we sold in Paraguay One Point Five Million Dollars Eight Sixty Eight total hectares, almost 500 useful hectares. Then we made a second sale first in Paraguay above 20%, help me with the numbers 27.9%, twenty seven point nine %. Rio de Mayo, we made a big sale and here we have a combination acquisition and sale.

Operator

We were able to have a 52.4% return expressive profit short sales, short duration sales. And we had also sales in Fazien De Jatoba One Hundred And Twenty One Million Euros Sixteen Percent. And you may say, oh, Andre, you're showing an asset of 112,000,000 But look at the generation of value for the shareholders. Fazin de Chateaubah has been with us for more than seventeen years, and it continues delivering also profit around 16%. Araucaria, we've seen partial sales.

Operator

And this year we divested totally this asset, this farm and the company's ability to do two sales. We had different environments in the farm, so we tried to accommodate to get to our price that we wanted according to the company's counsel. So we did this in two sales. A small sale, was kind of savannah with sand and another sale that sold the remaining remainder. The second was very expressive BRL410 million with an average price of seven ninety bags soon.

Operator

So we had areas with more than 1,200 bags per harvest and areas with 900. So this reinforces our ability to make good capital allocations. So in total we sold more than 12,000 hectares, 9,000 useful for BRL $610,000,004. In the last five years, you always hear me, in the last five years, we have had an average price of BRL $269,000,000 in sales. So around 14.5% of TIR.

Operator

So this shows the company's track record and the company's ability to say that, yes, we have this joint model in fact of planting and also sale of plots of land. Well, here we have information for you. First on the right, the graph at the top 3.444, this was an external evaluation. You know that we this is the value of our land. We use Deloitte as an outside company to evaluate.

Operator

So we're comparing the valuation made by Deloitte of our land in 2021 and the valuation of Deloitte now. So 3,444,000 and the current devaluation by Deloitte once again euros 563,000,000 here. But what happened in the meantime? In 2020, the portfolio is the same from 2021, '20 '20 '3. So we had sale of farms.

Operator

So how did we make a good evaluation? We excluded from €3,444,000 the sales that happened from 2021 until now at this value, not at the sale value. So the valuation, the several when we divested $897,000,000 these are the sales. When you consider the value BRL1.341 billion. So we sell in installments.

Operator

There's the duration of the operation. But fundamentally, once again I say we have been selling in a recurring way above the evaluation prices. When I say evaluation, we're very safe about what we're saying. Now when we look at this new portfolio 3,560 excluding $8.97 and adding the purchase of Panam B Farm, we have a variation of 26%. So this is we see that our land appreciated.

Operator

So looking at 2021 and 2023, we see the land appreciated. It is worth more. At the bottom, I always say that being transparent with you, no one here is paid for appraising or we are evaluated by the results. So we have a lot of accuracy in the evaluations. And the graph at the bottom shows the green and yellow, Deloitte and our evaluation, the land evaluated by Deloitte and evaluated by us.

Operator

We are always conservative and this makes sense. You as an investor, you have to see a conservative evaluation is much better. So here we have been conservative when we look at our evaluation versus the one by Deloitte ten percent our evaluation is 10% lower. And the graph actually the bubble on the left here in a conservative way, we do this NAV with our internal evaluation of the shares. So it's good business for us and excellent to use evaluations from outside.

Operator

So you would have to add another million between both of them, which is almost another BRL5 per share. So we're talking in a conservative way, a share being worth BRL37. And if you consider the shares evaluated by outside, you would have BRL42 per share. Well, we add value by transforming land into arable land. And we have been telling you what the company is doing in terms of new projects, especially involving technology.

Operator

We'd like to celebrate that we have some farms that are connected, 100 connected with four gs technology. In partnership with telcos, we installed in some farms, especially in this one Sao Jose one hundred percent connected. So we are sure this will bring a great gain in efficiency for the whole sector. Ambrapa, the research company says that connectivity can really increase our agricultural GDP by 10%. Now in terms of infrastructure number two, we have made progress.

Operator

I have mentioned to you an important project of irrigation in the state of Bahia where we believe we can increase the multiples in some areas where we have climate risks. So we're intensifying especially in Arrozhadinho this project involving irrigation. We put into operation the seed production unit in Chaparral Farm this unit And I believe that it will continue with this focus for the demand we have for seeds. We know that seeds is one of the inputs that had the highest increases in price. So we're looking we have also BioPharm.

Operator

So we said maybe here we can have something that can help us in the results, the production of our own seeds. There is a challenge. You're producing seeds in Bahia and being consumed in another state. But since we have close to it irrigation fields, we can have this flexibility of producing materials for the state of Mato Grosso. We have seeds planted in Bahia, but there's this possibility, this synergy between irrigated projects and seeds.

Operator

This allows us to have materials to be planted in another state, Mato Grosso. Transformation of area was a core. We have a picture. We're including another 3,800 hectares in Bahia and also 7,900 hectares being developed to arable land in the state of Mato Grosso. Well, here we have the challenge that I mentioned, the challenge of growing in area and at the same time selling farms.

Operator

So here we have our projection of the harvest twenty twenty three, twenty twenty four, although the company did during this year more than 9,000 hectares of land that were sold. Even with this, we see growth in the operation. And the graph on the side shows it shows how the company is diversified looking at different crops to add more value. So five years ago, if you looked at this, it was almost one crop. You had two colors.

Operator

You had only sugarcane and soybean. And today, we begin to see a graph that is totally different. We still have a lot of sugarcane and soybean, but we begin to see highlights of other crops. And the graph on this side, what is the objective? The company wants to mine we want to be always in commodities, but we also want to take advantage of opportunities of different crops that may give us more margin or may supplement the use of that soil.

Operator

I'll give you an example so you can understand. You plant soybean in Mato Grosso. Soybean in Mato Grosso you plant in September. You begin to harvest in January. The first harvest in Mato Grosso will then we plant cotton.

Operator

If you plant cotton until January 20, this is ideal for cotton in the winter crop. Then we begin to invert and plant corn. Corn, we also have a restricted window. The ideal would be to plant until February 20. But what happens if you can't plant?

Operator

So then we have some special crops. So in the areas where you planted soybean, in the winter crop cotton and corn, you still have some time around 20%, twenty five % of the service where we're using these areas with beans and other crops. And I would like to show to you this vision of using the land as best we can. And the graph on the side is where we have the distribution of our land and our land and rented land. And the rented land gives us a stability in results in our own land allows us to be more efficient in the cost of capital.

Operator

So the company is not only a company that leases land, but the combination of our own land and leased land helps us similar to the one. And the leased land in our own land is a win win solution. And the gains also come in efficient more efficiency in our own land with a lower cost. Well here we have the numbers of the year soybean estimated between estimated and actual 218,000 tons, actual 204,000 tons with a variance of 6% less. We had farms with a production higher than estimated, but we were penalized in one business unit which is big which is the Chaparral Farm.

Operator

This year in Bahia we had adverse conditions in some regions not all of them, but we had a drought in Chaparral Farm. Corn very close between estimate and actual. Winter crop corn had an impact. You all followed that the harvest planting had difficulties, the planting phase. And also the winter crop when you have 20 in a winter crop where you have this window, beans also we've had fluctuations because it comes after corn.

Operator

Cotton, a challenge. As a company, we have to improve cotton in our estimates and in the production. There's a learning curve also. The company is learning to plant cotton and also the winter crop for cotton. So 9% below in total 9% below estimate and cotton was affected as soybean was affected in Chaparral areas, a very large company, a very large farm.

Operator

And we have cotton that was affected a lot in Chaparral Farm. Well, here we have a little about sugarcane and other activity. Sugarcane, we have been telling you about this, a drop in productivity, especially in the region of Marinao in the North Of Brazil. Last year we had fire in a business unit. Fire doesn't destroy sugarcane, but you have to change many things.

Operator

You have to use it in a different way. So we had a drop in sugarcane. Tch of 84 instead of 84 went down to 74 of the sugar index. Okay. Well, here the harvest is over, harvest 2223.

Operator

We closed with average currency of $5.47 Chicago price of $14.5 And what we have ahead of us? We have the harvest 2324. Here I'd like to make a comment. We have part of this already sold at $12.91 We're always selling when at the same time as we buy inputs like fertilizer and we have some operations through an accumulating operation. We have our feet on the ground.

Operator

We're very cautious what we accumulated until now. So when you look at this, when you look at this number in the company, you have 25% of soybean sold. But when we use the accumulation, we're over 50 of soybean sold. Corn, an enormous challenge this year. The companies, the producers will regulate the winter crop.

Operator

The margins are very tight now. This is going to be a great challenge. This year sugarcane, we are making progress with the harvest. There was a delay one semester in relation to the other. We had a delay in general.

Operator

The other line that is important for us receivables from farms, We monitor this and we have some details of how we're selling and the exchange rates and Chicago price. Well here, we have experts here. Here we show the new normal. We've seen this important drop in the price of commodities. Then we will see we had also a drop in costs.

Operator

And those who work with agro and have never seen this, those who were in this business for thirty, forty years knows that this is always happening highs and lows in terms of prices. And the great challenge of the company is to be more efficient than the average because efficient companies will have more success. Well, as I said, we have a scenario of commodities with lower prices, but we saw also the cost also going down. And here I can say that I never saw this at this price drop at this speed. We had a peak because of the Ukraine price of fertilizer began with sanctions to Byelorussia and then we began to have price increases in fertilizers.

Operator

And then we had the Ukraine war. The company bought the whole sector paid more. So we had a map of 900,000,000 and now we're talking now of 500,000,000 So there was a price in the drop. Chloride also 1,200,000,000 We didn't buy at the peak, but we paid 700,000,000 for chloride. Today it's already 600,000,000 And nitrogen with its ups and downs.

Operator

And the graph on the right, how the company is positioned in nitrogen here, it's not NPK. So this nitrogen is for the winter crop in cotton. Phosphate, we have bought almost everything. Chloride almost purchases done. And below that you see the exchange.

Operator

Well, Gustavo you have the floor to go into numbers and then we will be back for the Q and A session. Thank you. Thank you, Andre. Thank you very much to all those who are participating in our conference call. Let's see the main numbers.

Operator

I believe it's we'd like to remind you what Andre showed in the last two slides. This drop of prices drop in prices, we'd like to highlight that in our case with sugarcane, we supply to the mills who work with ethanol. Ethanol the price was influenced by government policies with ethanol that is sold in gas stations. So we will show the impact that we had with a higher price of seeds, fuel and fertilizer. So let's begin with the consolidated results of the quarter and twelve months, reminding you that we go from June 1 to July 30.

Operator

The Q4, we're not going to go into too much detail, especially the results as a result of the sale of farms that Andre showed. And the last two that we sold and we recorded in this quarter are having an impact on the results of this quarter. But looking at the main numbers in the twelve months, we can see here a net revenue combined net revenue, real estate and operations, sale of farm and operations BRL1.3 billion, 9 percent less than in the previous year. This net operational net revenue of BRL93 million, we see 23%. This lower revenue is influenced by more soybean.

Operator

It's this is a strategy that we had adopted in 2022 to accelerate the sale of soybean. So on June 30, we're expecting to have higher prices. Prices and exchange rate are influencing the price of soybean and also in decreasing the revenue from sugarcane due to the drop. Last year we sold at BRL1.40. This year on average we sold at BRL1.16.

Operator

And the market sees in the last two, three months they were selling even below BRL1 the sugarcane. So a drop in the price of sugarcane and the impact of the quantity as Andre mentioned, we have 18% sugarcane harvested, 18% less this year in sugarcane harvest and this represented 120,000 tons, 8% or 9% of this value of this amount is due to delays in the harvest due to rain. We had excessive rainfall. It began in May. Normally, we begin on April, we had to begin in May to harvest sugarcane because of rainfall.

Operator

When we look at adjusted EBITDA, net revenue from real estate here, here we have the sale of Rio de Mayo Farm, Alto Taquari Farm, Kage and Jabbourandi, all the sales that Andre mentioned. So adjusted EBITDA totaled million in 2023, margin 39, a loss BRL 77,000,000. Within the year, we will show you some numbers that affect temporarily the results, financial expenses. So when we see we look at the managerial EBITDA, we make adjustments and this corrects the vision of the company's operational results. Total net profit here you can see 48% less than the gross margin of last year.

Operator

But when we look at the two years, we had a combination of this. In 2022 we had good results in real estate, but spectacular operational results too. So the combination of very high prices for sale and a low cost. And this year we had an excellent performance in terms of sale of farms, but operations were influenced by higher cost, higher and lower prices and this explains the difference between one year and the other. Now going on to the next page.

Operator

Here I'd like to show the main numbers of some crops. We always say that we have two main products sugarcane and soybean. These are the engine of the generation of EBITDA of the results. But twenty twenty two, twenty twenty three harvest had this drop in price of commodities and premiums in the case of soybean and climate problems that affected soybean and cotton, plus the high cost that we mentioned, price increases in fertilizer and seeds. So this combination of factors when we compare one year with the other, the impact on margin is very great, very high.

Operator

In soybean, we see a price that drops BRL200 per ton, drop in price. Cost per ton increased by BRL400 and a smaller quantity sold. So last year we accelerated sales. This year we're holding on a little and you can see how the margins have dropped practically by half in soybean. When we compare one year with the other of the billion of EBITDA generated last year, so we see that most of this was soybean and today the impact was especially in soybean.

Operator

Another important point we can mention is sugarcane. The price we saw that it is dropping BRL40 per ton, 22% less. As I mentioned, the price of sugarcane that we had last year 40 and this year 16. And the cost per ton went up due to two factors. First, the price increase in fuel.

Operator

Fuel is very important in terms of cost, price increases in fertilizer. And here, while you produce more tons, you can dilute this cost. Since production dropped, this also had an impact increasing the price by almost BRL40 per ton. So we see this drop. We're explaining why this happened, these two effects.

Operator

Other crops corn is very similar. We had an important drop. We had also an impairment. We have prices dropped as I said in the last three, four months, but everything that was done was similar to last year. Although we had higher costs as you can see in reais per ton and caught in the great challenge last year.

Operator

We had planted with a good combination of prices, good and reasonable productivity. And this year in the state of Bahia, we had an impact due to a drought in February and this gave us a negative result. We have the winter crop that we will harvest in Q1 next year, but we're not expecting to recover the negative results. Next. Let me see.

Operator

Okay. There it is. Well, as I said, we see net profit with the sale of farms BRL77 million and adding interest, financial results, income tax, depreciation, which is embedded in results. So excluding all the biological effects and also the land that is being transformed that is under transformation and we include here some derivatives in the financial results and an adjusted EBIT of BRL187 million last year BRL437 last year BRL437 million and together with real estate we have BRL533 million last year we had BRL689000 the last line adjusted EBITDA total. So here we see the contribution of each activity.

Operator

Sugarcane as we showed had BRL47 million very similar to this. We have to include depreciation, but we see that normally it was 4544%, forty five % between soybean and sugarcane. This year sugarcane with this combination less productivity and lower price and higher costs also had a smaller contribution in generating EBITDA for the company. On the next page here, the company continues with a very healthy financial condition. We have debts BRL554000.

Operator

The company is in a very healthy financial condition. We have a debt of BRL453000. Net debt BRL60 million. When you have you see here the leverage very low and net asset value of the company. Value of the properties we're talking about 2% when we believe that we could have up to 30%.

Operator

The debt is as low as a low price debt 92.6% of the CDI. We're very comfortable with the interest and also the maturity of the loans. We're working now with new financing for an important project that we want to continue and conclude with irrigation BRL965 million and we have receivables from farms present value BRL700 million and 1.2 bags of soybean from Alto Taquari according as we transfer the property. We announced a sale last year and we will deliver and receive in installments. So in terms of debt and cash, we're very comfortable in a very comfortable position.

Operator

On the next page, we see this is an excellent piece of news. We always say to our investors, especially in the long term, we have investors that are we have investors who did not receive dividends during some years. We were reinvesting the dividends to build the company with more than BRL700 million now in receivables from sale of farms. And after deciding what we will invest, We have €140,000,000 to invest this year. So we understood that we should continue paying good dividends.

Operator

So we are now using BRL320 million. We're awaiting approval from our council in October, our assembly in October. So we're giving a very, very, very good return. If we look at the last five, six years, almost 9% return every year average. So we try to do this on a recurring basis.

Operator

Our business model shows that we had a different we had a difficult year in operations. But we had the sale of farms and this allowed us to continue being constant in paying dividends. On the next page, here we see capital stock market. Here we see market cap €2,500,000,000 and L and D $4,900,000,000 share price $24 in The U. S.

Operator

Dollars Four Point Nine Five. And as we see an excellent investment, it's an excellent time for more investments. Andre mentioned that we are we include the sale of farms here in this. We understand that it makes sense to sell and this amount BRL24 per share, it has a great potential to rise. Thank you.

Operator

And now we'd like to begin the Q and A session. Thank you, Gustavo, Andre. Now I'd like to pass the floor to Pedro Fonseca from XP. Good morning Andre, Gustavo, Ana. Thank you for the opportunity.

Operator

I'd like to ask two questions. First an update in the case of hedging. If Andre can explain more the point that he mentioned. So in terms of accumulation, you already sold 50% of the soybean. Can you give us more details about the sale and whether the rest because in hedging you had 25% sold at 12.7%.

Operator

In the other 25% was the price similar €25.7 And what can we expect in terms of the hedging for the next quarters? And another point that I'd like to ask when you said when you told us about margin per crop, you had many nonrecurring facts, both positive and negative. What can we expect? Do you believe things will go back to normal? What is the company's target for the main crops in terms of gross margin?

Operator

Pedro, as always very good questions. Well, first, the first question hedging. So an enormous challenge in the year, a lot of instability. We see a market that dropped, but we saw for example, we had a drought in The U. S.

Operator

And prices went up. So what do we feel about this? The market is very tight. Any piece of news positive or negative will cause great movements in these markets. So what did we do in the past?

Operator

We sold because we had to buy inputs. So we made these sales at 12.7%. The market was 11.8 So we used some sales strategies. Then we saw that the market was stagnated. So we began to accumulate 12.

Operator

This is an operation that can double if you are selling above the ideal range. We're considering here this if it doubles we would get to these numbers. So when we accumulate every day we look at the contracts and we're selling at 12.75. So at 12.75 we're selling part of this and we still have a large part at the same time as we accumulate. And also some sales, we're trying to capture our vision in terms of the challenge more than capturing Chicago at a good rate, although it's difficult.

Operator

We have two great challenges in the sector this year. The exchange rate dollars, you know that this affects a lot. The company has an average dollar of BRL5.40, BRL5.50 to $1 but the future is showing a drop in the exchange rate. We're seeing a lower exchange rate And the great challenge for agriculture is basis. Last year, the sale happened during the harvest and the discounts were high.

Operator

So we have to look also at structural changes. So one thing is looking at last year. So soybean went down to 130,000,000 people didn't want to sell. And so there was this discount. And structurally, we're in South America producing 200,000,000 tons and North America producing at 120,000,000 So we believe there will be a change in basis.

Operator

We had positive basis and I see a timid recovery in comparison with last year. So we will have a negative basis in South America as a whole. So that's the situation. Margin, we believe that when stability comes back, it will go back to 2,500 as an average. You have more mature areas with margins around three and newer areas below 2,500.

Operator

We're working with this expectation of 2,500 reais per hectare, which is a little above historical averages. If we use 4.9 as an exchange rate, dollars $5.20 in margin, which is still a good margin. So this is in the case of soybean. In the case of sugarcane, there's a little more uncertainty because we work with mills that produce ethanol. We don't sell for sugar.

Operator

We're seeing sugar prices $26 yesterday $26.47 in New York. So these prices of sugar will decrease the production of ethanol. And on the other hand, we see the conflict putting a lot of pressure on oil prices. I would wait for the second semester to see the prices of ethanol as a fuel and this will may help us to go back to 4,000 per hectare. Perfect Andre.

Operator

What we're estimating, 2,500 per hectare of soybean. As you mentioned, our challenge simulating different scenarios between BRL 1,700 and BRL 2,500 per hectare And sugarcane, we're thinking we're working with an estimate of BRL 4,000 per hector. And the great challenge is corn, especially winter crop corn. With the uncertainty in the window for planting, we're seeing that today for exports, we have BRL 30 five, 30 eight per bag. And if we estimate 110 bags, 100 bags, we're talking about BRL 3,500, 3 thousand 6 hundred per hectare.

Operator

And today the cost of planting, especially nitrogen, is above this value. So if everything goes right, you would lose a little bit of money. We will replant. We will try to understand the impact of the winter crop with corn. We have some uncertainties, but soybean and sugarcane, we're working with these margins.

Operator

Thank you. Very clear. Thank you. When we look at the purchase of nitrogen based fertilizer, it's a little lower. Andre mentioned this.

Operator

And recently we saw a great spike in nitrogen. Do you see any risk with this input? Well, so well, I talked about fertilizer. Nitrogen based has its ups and downs, ups and downs linked to the price of oil and nitrogen, nitrogenated products. They are linked.

Operator

The price is linked to the winter in the Northern Hemisphere. When you have a cold winter, you consume a lot of natural gas and you produce very little ammonia, so to produce nitrogenated products. So we have to understand all these changes that we're following. The price of nitrogenated price apart from being linked to oil, it's also linked to the consumption of natural gas in the Northern Hemisphere. If you have a less severe winter, there is more gas left over for ammonia.

Operator

And talking about climate, from now to January, it's difficult. We know that the forecasts have an accuracy of fifteen days. So said correctly, it's fundamental for companies like ours. We capture real estate and operations results. We have to be able of course, we're going to plan because changes in corn seeds, but we haven't seen the other costs yet.

Operator

So we're always working with winter crop that represents little in the company's results, but we're alert to try to capture and see when it makes sense today. It doesn't make sense to buy nitrogen fertilizer for winter crop. If we don't buy nitrogen, production will drop in the corn winter corn and so you can also buy and not have a higher price. So we're trying to understand what will happen. Thank you, Andrei, Gustavo.

Operator

Thank you. Thank you, Pedro. Now Enrique, BTG Pactual. Good morning, Andre and Gustavo. Thank you for the questions.

Operator

I have two questions. The first, I'd like to explore the guidance for 2023, '20 '20 '4, the yields. You see a recovery of productivity similar to the guidance of the previous year. And since it's an El Nino year, how are you calculating this risk in productivity in your guidance? For example, how do you see this?

Operator

What are your plans for next year? And the second question concerning the price of land. Andre mentioned that you have been a seller of land in the last few years and the results of the two previous years make this clear. I'd like to hear how you see this market, the price of land. We see that we had an appraisal, liquidity begins to drop in the sale of land and the company is deleveraged allowing the company and the drop in fertilizer prices too.

Operator

So how do you believe you will position yourselves in the next cycle and maybe buy land? Thank you. You. Two questions. We could talk about this two hours.

Operator

Well, first question based on, I would say, the following. The company in producing its budgets, we use some criteria. I won't say that we're conservative, but we try to be on the safe side. First, the best sensitivity, we analyze the portfolio of the lands being planted, maturity of these areas, maturity time and we prepare a curve. With this, I'm saying Chaparral that I mentioned suffered a lot in this harvest, Chaparral Farm.

Operator

The numbers are impacting the projection, the estimates of production for the next harvest. So answering your question, the way we analyze production model, the land and the averages in the last few years include a downside in the guidance for productivity. Your second question, the price of land. We saw stabilization. Prices stabilized when we look at because you the price of land depends on the number of bags of soybean that you produce per hectare.

Operator

For example, piece of land that was worth 1,000 bags of soybean, soybeans were so the price today has dropped the price of soybean. So when we sell and when we buy, we're using a curve that is projected for the price of soybean. So imagine a farmer that sold at 1,000 bags, but it's not but it's always in installments. And the way we capture these highs and lows is using a curve of prices in the future. Soybean was 180, but we did not use this price.

Operator

We put 180 at the sale? Yes. When I can sell at this price. In the others, it converges to a curve, which is in our case is $12 a bushel. So I see a stabilization in the price of land.

Operator

And for companies like ours, it's almost a synonym of opportunity because we have capital to buy farm. So we have to make good deals as we have done. So this is an opportunity to buy land. But I say we still have an agricultural sector that has high liquidity. And this high liquidity, as I said, you need four, five years to see a drop.

Operator

So all tax issues, all of this helps Brazil to have an important liquidity. We should continue taking advantage of this liquidity and thinking of opportunities to buy. The year before last, we were able to buy, sell, lease. This year, we were not able to buy, but we sold. So as I say, we try to be an anticyclical company taking advantage of opportunities.

Operator

Everything is very dynamic. So we have to be able to look at the details and capture opportunities. This is what we do. Very clear. Thank you.

Operator

Thank you Enrique. Now we have some questions in writing. I'll try to consolidate some. Some Andre already answered with Pedro and Enrique's questions. We could talk more about the cost of fertilizer with impact on margins.

Operator

And the other question, the impact of productivity El Nino, you just mentioned that and how this can impact in the results of next year concerning price of fertilizer next year. Well, as we mentioned, we had an expressive drop. So let's calculate. We were talking about MAP. We're talking about MAP that the company bought.

Operator

The company bought at $950 So today the company is buying at $550 So $400 in drop of the price of We're talking about a product that on average, sometimes you spend more, sometimes less, but on average, in the case of MAP, 200 kilograms per hectare fertilizer. So 400 times 0.2, 80 drop. When we look at chloride, very similar, 800 and a drop to 503 hundred dollars and roughly 200, two 30 kilograms. If I put 200 times 300, 60 plus 10%, sixty five. So the drop in the case of fertilizer, in the case of soybean, a drop of $80 per hectare in phosphate.

Operator

So you have a reduction in the total cost of $145 per hectare. Dollars $145.45, let's say, almost BRL 800 in margin recovery. That's the picture of next year. So we have BRL 800 less to pay for fertilizer per hectare. So obviously, some crops which are more intensive, the savings can be higher.

Operator

Cotton where apart from phosphates, potassium and nitrogen or sugarcane where you work with more fertilizer, the drops become even more important. So we had reductions in general BRL600 to BRL800 per hectare and some others even drop in fertilizer cost. In this line in relation to the cost, there's a question from Guillermo and Thiago concerning the cultures that we intend to introduce with higher margins in the harvest. And Guilherme wants to know in relation to mitigating costs nitrogen whether, for example, would it make sense for us to start also having chicken, raising chickens? First question.

Operator

This is a question that we also ask the managers of the units. We are always looking to see how we can improve margins per hectare. It's very important to know that we need different crops. For this, we have to create also sale chance. Example, if you put 100,000 tons soybean, it's okay.

Operator

Now when you begin to look at other crops, beans, the company has been planting almost 5,000 hectares of beans. If you put 10,000 hectares, you're going to have problems with the price and you need distribution channels. So answering your question, this includes a learning curve, not only the best way to produce, but there's a learning curve in opening channels for the sale. You have to open a channel, you need to be constant. This is a great problem in Brazil.

Operator

You begin to export a different crop when the price is good, everyone plants produce. When the price is bad, no one produces that crop. And the people abroad who said who thought they had a supplier, they lose a supplier. And these special crops is for this. So we're exporting beans.

Operator

We're selling beans also to the domestic market. We have a partnership in Sesame. And so the crops, the special crops have a challenge, which is the sale. Now the second question, raising, for example, not only chickens, it's having the capacity to enrich, for example, the product. You were talking about manure from chickens, fertilizer from chickens.

Operator

So yes, it's a very good idea. But you have a logistics issue, organo mineral fertilizers. Like I said, we spend 400 kilograms of fertilizer when you use chemical when you use organic fertilizer, will use four, five times this. So the trend is to increase this type of fertilizer, but you have to be close. The great challenge is that normally the production from chicken are sold close to the production centers.

Operator

So normally, it's close to the large centers, which is so organo mineral fertilizers are depend on logistics. And maybe in your question, you could say, Andre, do you intend to work with this type of fertilizer? Yes, some people are specialized in this. If we have the opportunity looking at logistics to use this, we will do it. But it's not our core business.

Operator

It's a totally different market. We don't have expertise in this market and it would be very expensive to learn how to work with poultry. Gustavo, the impact caused by the fair value of biological input prices and their effect on the sale of land because we had a strong impact on the prices. Well, I will try to comment three effects. This should the effect is BRL150 million, the inventory of sugarcane that is growing.

Operator

So what is the rule? You invest and on June 30, we had to estimate in the future how many tons we would produce. The price we had to estimate that we would have in the future and bring this to present value. So what would be the objective? If I were to sell the company?

Operator

How much would they pay me to deliver this inventory that is growing, sugarcane that is growing? So on June 30, we had part of the cost of fertilizer and we had the price of fuel that was high, but we didn't know the price of sugarcane, it would be around 2,900 per cubic meter. September, the taxes go down, new policy for the price of fuel in the country. So what happened on June 30, The value we had was 2,300 per cubic meter, 30% below the price. When you look forward, this difference between these estimates generated BRL65 million.

Operator

If you wish to have more details, you can talk to Anna. So we have BRL65 million expense and affecting our result. Every June 30, you have to take everything in inventory and you have to put this at the market value at that time. If this value is lower than the value you have recorded, you have to make an impairment. If next month it goes up once again, you will record at market value.

Operator

This effect, especially in corn, was million and you can see this in the accounting. So there is no cash effect. These are estimates. So what happens to receivables from the sale of farms? We have all the receivables coming from the sale of farms and they are all indexed to the production of bags.

Operator

So we have to look at the soybean, the production and see at the market value. If I had to sell it to a bank, how much would they pay? And you they everyone uses the exchange rates, the soybean to estimate the premium freight and based on this will give you the market price. So what happened between last year, this since the market was up, Thank you, Gustavo. So there is a question from Julia from MyCap concerning total hectares sold.

Operator

How much is productive land and the percentage of the portfolio? Well, as I say, we have some questions that we have to calculate on the spot. I will calculate this rapidly. Approximately, this sale represents 5% of the area in portfolio and it represents 20% to 25% in the value of the portfolio. So I'd like to highlight that these sales, most of them were made in the Midwest where we have land that has appraised.

Operator

We can't say, Oh, you sold five. No, we also sold farms that have higher or lower sales. The farms sold in general are worth more than the portfolio. So rounding off 5% of the volume in area and five percent of the portfolio. Remember that we said excluding the evaluation 897,000 and in sales we sold $1.03 $41,000,000,000 So there is a difference with the duration and the price of the land.

Operator

Thank you, Andre. Question from Douglas and for Gustavo. Why do you do the impairment in AgroPlanet and the amount of the impairment represents 100% of the company's share in the company? The reason for the impairment, it's a technology company that is preoperational and we would not be able to maintain this amount invested. I believe it was $1,000,000 1 hundred percent of impairment like we had in the previous case.

Operator

When we have business plans and indicators, these expenses in technology, We use indicators, access, but we were not able to defend this and we thought we had to be conservative. But this doesn't stop because if it becomes an operational company, we will return with these investments. Matteo Staixeira Kugumbel, why are you proposing dividends higher than the profits to keep on paying the amount last year? Wouldn't that be more conservative or repurchase of shares considering the NAV? Okay.

Operator

Dividends first. The number €320,000,000 last year we had $520,000,000 because we had extraordinary results. So the number is €200,000,000 less than last year. So how apart from the profit, the company has accumulated results. So when we you can see this.

Operator

When we add the profit of this year plus accumulated results, we have €621,000,000 in accumulated profits that could be distributed. So what did we do here? Gustavo mentioned this. We analyzed our flow to avoid hurting the company's capacity to invest. So some people don't see this receivables from the sale of farm.

Operator

We have more than 700,000,000 as receivables from the sale of land. And in the next year, we should have around BRL €200,000,000 being paid from receivables. So cash has another €200,000,000 to receive. There are new sales. We will continue to make new sales when we sell.

Operator

It's not always 100% cash. It's we begin with 15%, twenty % as cash. Soon, we decided to pay more to shareholders because one thing is giving the money back to shareholders with dividends when interest rates are high. The difficult is to pay €500,000,000 and the interest rate is too. So today, with interest rates in the market, the shareholders who want to reinvest in the company to continue buying shares of the company.

Operator

We believe it's good business. When you ask me the second question, why we do repurchase of shares, one thing we have done all the time with you is to change the liquidity of the company. In the last few years, we changed the liquidity of the company in an enormous way. We three, four years ago, we had between 15,000, 20 thousand shareholders with and now more than 125,000 shareholders, one hundred and 20 seven thousand shareholders. So this gives us a lot of liquidity.

Operator

This gives us a great capacity to make to take out loans. So the way we can give back to the shareholder, we have a comfortable cash position. We have a lot of receivables. We are a company that should sell more. But if we have an opportunity, I will be the first to buy.

Operator

We're not going to lose an opportunity to buy. Oh, but the money that you have in cash is not enough for a large farm. The difference of €50,000,000 more or less won't make a difference, I can tell you. So a large operation, we will go to the market and I'm sure that you will allow us if we need more money for a big acquisition. So that's the idea.

Operator

To distribute right now what we have in a company that is a seller more that is selling more than buying and this is true. So we hope that we will continue with this situation, maybe a better situation in the market to make new purchases. But this will not stop us from large purchases. And if we have this opportunity, we're going to use it. Okay.

Operator

A question from Eduardo. We're running out of time. He asks about the sale of including the installments of land sold in the next semester. So Gustavo, you should clarify that we still have a sale to be recorded in accounting, But maybe you can talk about these receivables, how they are accounted for. Okay.

Operator

Some sales that we are still we will still recognize, 1,200,000 bags, hectares, the second part in Takwari Farm, the second sale. So how is this done? When we deliver, they will give us they will pay an installment 25%. At that time, we price these 1,100,000 bags of soybean. We look at the price at the time and all the installments due we bring to present value with the price of market, market price for soybean, Chicago in dollars, premiums and freight.

Operator

So all of this we calculate and we look at the cost and we recognize the results in the sale. After that, we will have the other installments. And every quarter, we receive installments. And once again, we will calculate these prices and the variance will be in the financial result. So today, it's difficult to estimate this value, the results we will have.

Operator

And the second point, it all depends on the delivery. We understand that part of it will be transferred until June 30, the last quarter of the next year and another part most of it during 2024 and some in the next two years. Very clear. Adding to your answer. With the exception of the last sale, all the others have already been calculated.

Operator

We already recognized the gains. And today, they are at market value in our accounting. Now a challenge, the last question for Andre. Otherwise, we could stay all afternoon talking about this. Matteo Skaitano, Warri Corretoire and also Thiago Lima, I'd like to understand more about possible future sales, which farms could be sold?

Operator

And how do you see the market looking at current prices of commodities? And Thiago, how do we see the price of commodities in the future? The million dollar question. Okay. I don't have a crystal ball, but okay, let's answer.

Operator

First, Matteo's sale. I always say all our farms are for sale. So everything is for sale. Our decision is based when we begin to understand that the profitability of this asset is dropping not because of inefficiency but due to land prices. You have a farm that became very expensive.

Operator

And even if you produce 65 bags of soybean and also 100 bags of corn. So when the prices drop, we divest, we sell. So we monitor profitability. If the ROA is high, if we know that it can go up, we wait. So this is the way we look and how we divest.

Operator

Now price of commodities is linked. We see a market that is under stress. We see the harvest in South America. There are uncertainties. El Nino, we've seen this year rainfall being different.

Operator

So this is very positive for sugarcane. It's positive to begin to prepare the fertilizers and also to dilute the fertilizer. But you also have sometimes other problems. For example, when you have when rain comes before, you have some pests. So the numbers, the initial numbers, we are working with 155,000,000, one hundred and 60 million tons of soybean.

Operator

The company will grow more than this because we have 10,000 hectares that we're going to begin to plant, land that was transformed and the productivity is higher in the beginning. So I believe we will have a stabilization in global inventories. The cost of capital is high. This should stabilize some prices. So it's a market that is under pressure on both sides and also with geopolitical issues.

Operator

So a year of a lot of tension and we monitor this both in operations and also in the sale of farms. So if it makes sense, we do it. Thank you. Thank you for participating. We had a record number of participants.

Operator

Shares are going up. Let's see if we have another 10% in the appraisal of the shares. Thank you, Andre, Gustavo. If there are more questions, myself and Camilla Daisy are available to clarify any points. Thank you.

Operator

And I'm going to pass the floor to Andre for his final comments and then we close. Well, once again, you. We know you trust in the company's management. You trust in the challenges we have ahead of us. I'd like to thank you.

Operator

The results are not the result of Andre or Gustavo or Anne. Its teamwork begins with strategy, approval from the council, everyone's work, dedication and more and more. I believe we're preparing a company to continue successful. We don't we look at sustainability. We take care of this how we should do it.

Operator

Once again, I last year, we received great place to work, one of the five best companies in agro to work. For me, this is sustainability. Sustainability of people is the company's capacity to retain talent. And this is a constant challenge in companies right now. So this reinforces our commitments as managers that we're trying to do our best and continue with sustainability.

Operator

Thank you very much. Let's hope El Nino will come in a more attenuated way to avoid hurting the Northeast of the country and to bring us an excellent harvest. So count on our good work, our support. If you have any clarifications, if you need clarifications, talk to our Investor Relations department. We wish you a good weekend, a long weekend because of the holiday.

Operator

So let's all rest and let's come back on September 11 because we have a year with many challenges ahead of us. Thank you.

Powered by Quartr