Brasilagro Cia Brasileira De Propriedades Agricolas Q2 2025 Earnings Call Transcript

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Provided by Quartr
February 7, 2025

Key Takeaways

  • In H1 FY2526 Zagro reported net revenue of BRL644 m with adjusted EBITDA of BRL78 m and net income of BRL77.8 m, up from BRL24 m a year earlier.
  • Sugarcane production rose 4.3% to 2.6 m tons with a 3% productivity gain, driven by a dry winter that boosted sugar content and cut processing costs.
  • Ethanol volumes benefited from Brazil’s blend shift from 27% to 30%, adding about 1.6 bn liters in demand and improving margins amid tight corn ethanol supply.
  • Soy contributions fell about 9% year-to-date and cotton margins were pressured by economic headwinds and an inverted crop cycle, while currency and commodity swings caused earnings volatility.
  • Approximately 50% of the soybean crop is hedged at ~$10.75/bu with FX at ~BRL 5.30, ~65% of ethanol at $2.07–2.20/lb and 41% of cotton at BRL 5.27/$, supporting future cash-flow visibility.
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Earnings Conference Call
Brasilagro Cia Brasileira De Propriedades Agricolas Q2 2025
00:00 / 00:00

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Moderator

Good morning, everyone. We are here for another earnings call for Zagro to disclose our second quarter of our harvest year 2526, which represents the first half of the year. If you're new around here, it's important to highlight that the Brisa Agro year goes from June July to June, and that's why we're reporting the second quarter now. Have a great call, everyone, and I will pass on the floor to Andre. Thank you so much, Ana.

Moderator

Good morning, everyone, and good to be with you all once again. I want to bring in some important news here. We're going to talk about the harvest, the climate, commodities and also major dollar variations in this quarter, which is super important to demonstrate here. And you all know that due to accounting reasons and considering the value of our stocks and assets, these variations were very important within the quarter. But overall, we would like to once again thank you for your participation and share a bit of what the company has been doing very well in the first six months of the year.

Moderator

So we would end the first six months with a net revenue of BRL644 million and then adjusted EBITDA of about BRL78 million. So these are the main numbers, and we'll see that most of the net income was affected by this main variation I mentioned. And then Gustavo would just mention that this is like occasional within our balance sheet. So on the next slide, on the next page, we can see major stability for some products. And I want to highlight some products also that have been really standing out from January all the way here.

Moderator

So we saw a reduction in soy. And once again, it's very important to highlight the company is really focusing on closing the contribution margin, not only the price itself, but the exchange ratio and our contribution margin. So we saw the soy reality in the first year from January 24, January '20 '5 dropping about 9%. And so we've also seen We can also see some important reasons for this, right? So plantation this year was really good overall in all of the Central Brazilian region, but the beginning was a little later.

Moderator

And this year, we can see that this off season harvest would move along a bit. Now that has really been leveraging the prices a bit. Now what's also influencing prices a lot is the loss in value and that makes our meat basket become cheaper and that no doubt increases the demand for the native corn internally to be able to handle this possible increase in exports. In cotton, we've seen a year with major reductions. And this is really connected to economic factors.

Moderator

And so we've also seen an inversion in this cycle. This cycle has been inverted in the second semester, and we've never seen such a high peak sixty days. So this cycle is reversed a lot, and this is important to mention that we have a cattle stock that also affects the company's results, and there was an important increment in the stock value. Then for ethanol, we had the first semester last year pretty weak. Second semester was an important recovery trend.

Moderator

And basically here, I think this is levered by two important effects. One is the modification in the shift in the ethanol percentage in gasoline. This volume went from 27 to 30, which generates additional demand of 1,500,000,000, one point six billion liters of ethanol. And so that really made the market react positively. And in parallel, the main competitor for sugarcane has been corn ethanol.

Moderator

As I mentioned, this peak in the corn costs also creates this effect. And so in sugarcane, we had some higher prices. We reached historical levels last year, and we saw a major reduction, but still really attractive prices in sugarcane. And more recently, in the last few days, we've seen a significant reduction in our production in in the production in India, which will impact us with the market having a bit more volatility in the next few months because it's almost like BRL 1,400,000 of sugarcane tons. So that would have been produced in India.

Moderator

So they're dropping to about 28,000,000 tons of sugarcane produced there. But Brazil is still strong with its numbers at about 42,000,000 tons. Now in the next page, it's important to highlight. And I believe the company has been very disciplined in this. There's a learning curve, of course, but whoever was looking at the pizza graph before on the left side for a few years, can see it was a graph that was really focused on two crops, sugarcane and soy.

Moderator

And then we've seen a diversification in the planted area in the company with this less learning curve process, but also all of the agriculture projects, which bring in more diversity to the product basket. And once again, I always say diversifying is fundamental. We're in this production, which is an open air industry, and you can reduce the climate change risks. And so that also affects the real estate risks, right? We see demand or markets that from a real estate perspective are really connected to diversified crops, right?

Moderator

So on the right side map, you can see a bit of how we see the rain volume this year. And so when we started the year, we had all of the discussion in the intensity of the La Nina. So it was La Nina that was not too strong, pretty moderate or neutral, but we've seen this move with this Lania phenomenon throughout the year. And that brought in important stability. So as I mentioned, it took a little longer to start with a rain period.

Moderator

But ever since they began, it was a really good year from a productive perspective. So it's important to mention also and I love using this example, which is last year in the company, we had replanting. There was about 8,000 hectares, and this year, less than 600. So it just demonstrates that we were able to plant with the ideal humidity periods and not too many disturbances. And everyone knows that for a good harvest, we need to have stability.

Moderator

So everything we do after the plantation is just to keep the productive potential. So that's where we consider the choice of the seeds and the soil management as well the quality of the plantation. And so then all of the other processes are factors that help avoid the productive potential dropping. So that's a summary in the beginning of this. And then rains were kind of accompanying this.

Moderator

So December was really rainy and like Maranhao, Piaowi and Bahia, which is always an important caution point, especially Bahia with more climb volatility with January going above average and that's where January even gets in the way a bit. So then soon after we'll highlight this a bit, Then we can already start the plantation of the cotton. And so the rain in January kinda gets in the way, but no one can complain about the lack of rain. We have to try to be more efficient. Right?

Moderator

So that's just an overall panorama. From then on, we've had pretty good rain, and we're still having rain conditions and so conditions that are pretty good. And we start off with February with soil humidity that's really interesting and pretty stable. That allows us to also start having some conclusions about how soy in the first cycle has already pretty moved along accordingly. Then soon after, here we have more of a educational approach of where we're at this moment.

Moderator

So our plantation is a little more extensive. We also consider Paraguay as well, and that's little different. So Paraguay starts this in the beginning of summer, goes to mid January. And then as you mentioned, you have the plantations of of cotton with the off season harvest as well. And we were able to plant all of the cotton and off season harvest before January 30, which really gives this cotton a very good level of productivity.

Moderator

And so from the productive perspective, the summary is pretty good with crops performing very well, very low rates of replantations, which means we have good levels of productivity and good crop installation rates. And Paraguay also, we've finished And we had rains following this until January. So the critical period for us is the month of March, just as in Bahia Mariam, POE is February and March. For Paraguay, it's more about March. But we have good expectations.

Moderator

And the expectations for February in Brazil was a possibility of some impacts in them at Itobah region. But the we'll have February a little drier, which is actually pretty good because the crops also need some sun and light, but that won't in any way impact at this moment the state of these crops and harvest. So here you can see the the amount of what was estimated versus what was actual, and that's due to the births that start happening in December, normally around January and February. So this number is gonna be recovering considering the amounts of animals and and the amounts of cattle, and estimating about 510 grams of GYMD, and we already have 310. So here you can see that there's a bit of influence with this from the delay of this beginning of the rain period and that also delayed a bit of the scenario with the pastures, we think we'll be able to really achieve our five ten kilos of beef that's budgeted.

Moderator

So just about sugarcane, which is so important, the company ended the harvest with approximately 2,600,000 of sugarcane, an increment of 4.3%. What's important to highlight here is a growth of 3% in sugarcane and the productivity. And there was also due to everything you guys have seen, we had a pretty dry winter and that makes sugarcane accumulate a bit more sugar, which also helps us with an important gains. Right? So when you increase the TCH and the TR rates, that means that that's just pure EBITDA because the sugarcane was already gonna be transported and you're transporting sugarcane that's a lot richer in sacroses.

Moderator

So it's not only about the 3% of ATR gains, but you also reduce some costs in the c t CCT phase. So this is a photograph of sugarcane and how it looks. Then we'll show you a bit of volatility and how we've been positioning ourselves. So Anna provide us provided us with this briefing. It starts off in the July 1, and we worked on this budget in the end of the month of May, meeting of June.

Moderator

And the expectation we had was that when you look at the FACU estimates, we're considering a dollar at $5.30. And now we considered this, of course, for our budget, and so it was a little higher as well. So that's the photograph of soy at the company now. So it has already been lower now. We're talking about soy at about ten seventy, ten eighty.

Moderator

And the company has practically 50%, and we have currency at about $5.33. So what's And so a currency at about $5.30. Then we also had an important recovery, which is maybe a little different than what we expected. And we're going to show you this later on. Well, this is a photograph of the soybean we're going to be harvesting.

Moderator

So remember in the last earnings call, we were saying we were going to ensure part of the harvest in the campaign in the past campaign to sell in the second semester because we believed in the recovery of these and this was assertive, generated important impact. And now we can also see a trend with the recovery of this due to this turbulent scenario. Right? So we have that at $51.80 and ethanol here on these two columns, you can see the column with the closing in the last harvest and this harvest. Today, the levels of pricing are about $2.07 50, dollars 2 20.

Moderator

And we're also increasing this position of what's sold. And this is the hedge position at February 7, and we've already advanced a little more. With our ethanol sales, prices are a little higher, the $2.07 50 to $2.07 20. And in cotton, we just bring in the two harvests still because that's where we really consider CTZ December and the harvest in 2324, we ended at five twenty seven. And so now we have 41% of our cotton closed, and we were able to really block this pretty well.

Moderator

It was positive. But as you all know, we have a mismatch policy. We also had to block the dollar there, and that was at $5.27. But this combination of cents, pounds and dollars are still providing continent BRL 136 per banal, and that's a bit higher than what was budgeted. Then we have the receivables, which is also in our p and l and the farms.

Moderator

So where we can see soy closed at $10.53. And we've also started off with this volatility in the dollar rates. And we started selling soy at 26 also for receivables. And sorry. We sold dollar for the receivable at 26 and the blocked rate at $5.26.

Moderator

And so that's an overview of how our commodities are, and we'll be able to have major insights as well in the next slide. So on the next page, we also bring in a bit of the vision in regards to costs. So you'll see a reduction in our costs that's maybe not that significant, but a reduction that we also consider impacted the results of the company very well. We saw the MAP stability in prices. And we also had an opportunity to have prices that are even a little better in certain inputs.

Moderator

We were also able to confirm some Sorry, the harvest of 2526 with chloride. And we've seen petroleum kind of moving sideways, but what we can see in the area is that it's pretty stable. And so the exchange ratios are a little better, but they've been they were better in the past actually, but they're pretty stable. And we're talking about chloride at about thirteen, thirteen point five. So the position upon the cost was already pretty much blocked to all of the fertilizers in this current harvest and also for the defenses.

Moderator

So now I'll pass the phone to Gustavo after providing this overview, and we'll look at the numbers in this quarter and semester. Thank you, Andre. Good morning, everyone, and thank you for keeping up with our earnings call for the first half of the year. We're going to start talking about the 12/31/2024, where the company has been disclosing this total net income BRL 77,800,000.0 were in the same period last year in the previous year. The net income was BRL24 million.

Moderator

So these main variations are represented here on the graph above on the right upper side. And you can see that all of the expressions of soy, corn and sugarcane as well as the volume in soy and sugarcane. And so you can see how this reflected in the net revenue and $478,000,000 in 2025. And we've also seen revenue. The accounting of the sale, we had the real estate sale for total amount in the factory in the farm in Saquadi.

Moderator

And we also had some hectares like 200 hectares, I think, that would add up in by year. And we had also registered a revenue from these sales of BRL129 million when we discounted the taxes and other acquisition costs, etcetera, we had an EBITDA of BRL 107,000,000. In the previous year, in the same period, we also had a small sale performed, which was about approximately BRL 5,000,000, and that was in this segment. As you can see in the upper graph, you have the BRL103 million that are varying due to the real estate and property sales we had in this period. In 2025, the EBITDA margin adjusted EBITDA margin was this 31%.

Moderator

And you can see about 31% and for an EBITDA of BRL200 million, which is very different than what we saw in the previous year. And in this graph, as you can see here at the center, we see the main variations in soy, corn, sugarcane. And we also have the sale of real estate. And so the margins got a lot better because of pricing issues and also volumes. And in some crops, we've also had a savings in our costs.

Moderator

So we're gonna also show you some crops like beans and cotton where we intend to incorporate this in the basket. There's still small volumes, but we're not being compensated as we had estimated because the productivity is still not that positive. So when we see the profit in the period, which are the million dollars Andre mentioned, and that's why we're bringing in this last chart here with the financial results, you can see a very relevant impact when comparing periods. So in the previous years, in the first six months of twenty twenty four, we saw that the revenue from financial investments that were leading to R19 million dollars in interest. And now we see there's R11 million dollars because we reduced about the amount of cash that we're carrying.

Moderator

And we consider that the interest is also starting to be recovered now in the last two months. But we have a variation because of this, Then you also have the passive interest, which are the BRL26 million and BRL38 million this year, which are the interest that we pay due to our debts, right? So the BRL26 million represented an impact of low interest with a debt stock that's also a little smaller and in exchange what's happening in these six months in twenty twenty five. However, some updates in fair value. Here you can see we always talk about how we have a major stock in amounts receivable.

Moderator

And every quarter, we have to mark this as its indexed, and we have to consider the dollars and the premiums and freight, etcetera. So all of this leads to what would be the current value of these receivables. And also last year, we had variation that was higher than what we saw this semester because of this reduction. And so last year, we were valuing about this at $12.8 and now we're talking about on the December 31, this level was about $10.2 per share. And the main important point here that Andres mentioned is the derivative.

Moderator

So this year, we are demonstrating this. And of course, this will only take place at the moment where we sell the actual product and establish the final price for the company. The company has been working towards this, considering the position for the purchase of these inputs, considering the margins per hectare. And with that, what we what I mentioned were maybe a little above this value that we had considered with this margin. And when you consider SOI about 2,000 per hectare.

Moderator

And what happened in the December 31, we had to consider about $75,000,000 that we had sold. And we also had the receivables for the sale of the farm and soy, which generated an average price of about BRL $5.45 45. And that led to an impact of about BRL 65,000,000. So this photography, if we consider this price from yesterday, we consider the result of BRL 30,000,000 positive and this value, if we were to consider that with the market value yesterday, we're talking about BRL 32,000,000. Just to show you the volatility.

Moderator

So we're gonna mark this once we sell this. We'll be considering the market value and the revenue value. And so once you perform these until you have the amount or value, which is about per sack. So the market's at about BRL124, BRL125. So if you consider this difference with the 300,000 tons with the values and tons to be sold for production about we'll be able to reach this value that we're presenting here.

Moderator

In the next just to show you what Andre was mentioning. So we always say that soy and sugarcane? And so you can see So when you add that, it's about over 75% of the revenue and the gross results in the company. And so what's positive about all of this that we were discussing in the last two calls is that when we had seen this last year, we'd always considered that we had the the crocodile effect of the costs and revenue, where we had some margins that were contribution margins that were way below the historical average. And so we can see that during this last quarter, they were able to reach these levels, right?

Moderator

So you have this BRL 48,800,000.0. As I mentioned, margins at about 29. That's the historical average. And with the price per ton at We started the period in July. These values were at about BRL 400 below.

Moderator

And that was the impact of these premiums, right, that generated this improvement in pricing. And so also the main factor responsible for the cost reduction, it was BRL per ton, which was because of the better costs we had already discussed. And so we could say understood that it was really important with this bigger amount. And So when we consider the sugarcane, we can see that the margins are even higher than the 30% historically and the increment in the margin led to a very positive impact, right, considering the increase of this price in the TR and the reference term. And we also see this increase and that's the photo we worked on and then the high levels of sugarcane of sugar also that levered this price even more.

Moderator

So we can see that these are excellent prices, very different than what was being practiced in the last two years. And the increase in the costs as well this year was also at about 3%. So very controlled, but that's something that increased a lot with increased contribution margin a lot. So then you can see a reduction in the amounts that are commercialized at about 70,000 tons, 42,000 were twenty twenty five and one hundred and thirteen thousand tons last year. And this was a bit of a consequence from a decision the company had made of not Well, because the previous margins due to agronomic issues really, we had considered the portfolio.

Moderator

We had made the decision to continue. But prices being recovered, I think the 14% approximately between 657 hundred and 45 reais But say, I'm getting back to levels of prices that are really profitable, but our costs had suffered an increase because we had lost this in the Mato Grosso region where we had a very we had some impacts with pork and swine and that led to lower productivity with a higher cost per ton. For beans volumes are pretty low still and for sugarcane, we would also like to increase and expand this portfolio and have a higher contribution of this crop. But we're still having some variations.

Moderator

So we understand that the deployment of irrigation in the Bahia region and also with some diversification that we are trying to implement in certain regions in Mato Grosso should lead us to this positive result. On the next page, we also have the level of debt in the company and the cash position December 31 where we have the biggest volume, where you have all the incurred costs, and we're still lacking all of the revenue and production and considering the commercialization of products as well, then the debt of BRL $798,000,000 with a cost that's an excellent cost for this funding, 93.4 percent CDI and a net debt. On the right side, you can see the schedule for the amortization of this debt. The working capital as well and BRL516 million, reaching two to five years. And it's also important an amount to be considered also due to the sale of this farm.

Moderator

And so as I mentioned, we had about 8,400,000 sacks we had received. And this variation was kinda like what I mentioned about the impact we bring with the financial results as well. Next page, please. Well, here, what we would like is that we would like to invite you all to review our sustainability reports and that we just disclosed and also a bit of how we communicate about this commitment towards value creation in a sustainable way. And here, we're going to show you also how what types of investments and actions and social environmental impacts that we've been working on during this harvest of the 06/01/2023.

Moderator

And it's important to mention that we had also created all of this considering the principles in IR and ZASB that guarantee the transparency and that demonstrate that we follow international standards for communication. And here, you'll see about four groups. And so also the social environmental and governance issues as well to strengthen the company at the moment where we should consider this stock exchange here in The U. S. Where we need to be very careful with this as well and adhere and install the policies and we also have some premiums and some awards we've been conquering as well.

Moderator

And so we'd ask you to please review this report with everything the company has been performing in a very maybe silent but consistent way, let's say. Anyways, here, we can go into Q and A now. Thank you so much. And so thank you all, Gustavo and Andre. We'll pass the word on to Pedro Fonseca in XP for his first question, Please?

Moderator

Well, good morning, Andre, Gustavo and Ana. You so much for taking my I had two here, and I wanted to get more information from you guys to understand your our understanding, because of course, we had viewed a better share for margins and not considering the loss in the ideal window for the off season harvest of cotton considering the ideal window, but I just wanted to confirm this understanding. And so I remember the last time we spoke, we were talking about a margin of about 110 to a thousand 200 reais per hectare for the off season harvest. And I wanted to confirm if that still makes sense when it comes to price. So then I also wanted to know what you guys are understanding as sugarcane productivity as well.

Moderator

So the rain in the Southeast the southern region of the Midwest area as well. And I want to understand what you guys are imagining when it comes to results and productivity. These are the points I had to share. Thank you so much. Great.

Moderator

Thank you. Pedro, very good questions as always and provocative questions, of course. And so I'm going to start off with the first one, which is you were very assertive. It's not like there was a reduction in the off season harvest. We were able to plant it all in the ideal window.

Moderator

But of course, there was an improvement in the prices of corn that started happening from October, November and December. And then, of course, trying to increment this a bit more because there was, of course, a recovery of the margins. But I just want to give you a classic example. The harvest maybe we grew even more because when we were preparing our budget in May and June, we were talking about this margin of about BRL400, BRL500, BRL600, right? And so we consider our first projection in the results now and we decided to improve this as corn started getting better in the second half.

Moderator

And so we had significant recovery in the margins of the corn and that helped us increase our corn harvest and also contributed to search for ways to have a bit more of this office and harvest. And of course, you'll see the company grew in this area in Mato Grosso in the next few years, because we'll have major operations in Mato Grosso starting. And the first year is we're always very careful, especially with the off season harvest of corn, where we work with soy and then weeds, soy and weeds, soy and weeds, and then after we add corn to the system. So we'd expect that this also happened, of course, this year. Some farms that had the second year of soy and then weeds.

Moderator

Then this year, the farms had soy and corn. So this combination and the planting combination also improved performance. That's where we can see this recovery, right? So then we see the company here where you have the earnings call and you can see we're not here to promise. We're here to really just fulfill whatever we've promised.

Moderator

And the company has been growing in sugarcane as you've seen. You saw us talking about this in the past, we need to increase sugarcane and we need to have more. We have to increase productivity of sugarcane as well. We're working on many investments. And this year, we're also working on plantation.

Moderator

We're also planting more sugarcane. And so we're also investing a lot more in irrigation. We had been working on more water storage tanks, and we've been really implementing major efforts to increase productivity and you'll have very positive surprises in with San Jose in the next exercise. Now when we look at the Brazil version vision, you can see the company is productivity year over year and also the volume of sugarcane in the next harvest. So then when we look at year over year, we can see this amount.

Moderator

And it's worth mentioning that the beginning of the rains were a little delayed. And we know it's fundamental because you have the cut. And then in September, October, November, if you already have rain, you have great results. It's wonderful. But you can see we don't go back to this kind of perspective with the 640 in the next harvest due to this delay in the rains in September and October.

Moderator

So this delay in the rains is a reflex of the price coffee, how the prices of coffee here go up so much. The lack of rain in September, October is impacting the prices of coffee in Brazil now. So you can see how this impacts the price of coffee as we're all seeing. Anyways, I think in the southern part of the Midwest, there was a bit of difficulty with this delay in the beginning of the rain period and that impacts the overall results, right? But in sugarcane, Pedro, even when you extend up until where would you extend the volume?

Moderator

And so if the rain is coming in earlier this impact and if it comes in later, we have more TCH and less rain. So initially, Pedro, we have three meteorologists that work with us, three main companies in meteorology. And we've actually seen a bit of a positive perspective with an extension of the rain system in the summer period. So we'd expect that there would be March is still quite rainy March, and April would also be very rainy and that we would be able to have the May as well with rain. That really makes a huge difference in TCH, and that can help recover so that we cannot close the EUR $614,000,000 at this harvest and try to have a bit more in the next harvest.

Moderator

So that's the overall vision for Brazil. The beginning of the rain period really impacted us in the initially. And now we're understanding how long this period will extend for. So if it's made, and we'd imagine it will recover a bit, right? But also in exchange in the Midwest region, as we're considering in Sao Paulo, it's really important.

Moderator

It's just like following the temperature, right? If you have a rain, but you have a low temperature, then you stop vegetating the sugarcane and you start accumulating actual sclerosis. But initially, we're not seeing this in the May and the April. We're seeing this extension in the rain period, but we're still not seeing the possibility for anticipated cold weather. So very clear, Andre.

Moderator

Thank you so much. So now I'm gonna open up the audio here for Bruno. So thank you so much, Andre, Gustavo and Ana. Excellent Panorama as always. And I just wanted to try to bring in this discussion of everything we had discussed so far with opportunities for for M and As in 2025, right?

Moderator

We see it's a year with higher interest rates, the cost of capital is higher, and we should have more decision making in a careful way, right? But in exchange, higher interest rate maybe have some impact for that kind of public that's a little less capitalized, let's say. So let's consider all of the factors we're seeing along with the case of higher interest rates and understand what we would expect from the market this year. And then if you could also compare the scenario considering the counterparties in the market now with other points in the past or even at this moment. Well, thank you so much, Bruno.

Moderator

As always, it's a pleasure and great questions you have here. No doubt at all. The high interest rates And then, of course, the overall market suffers, but it's not the overall agribusiness photo photography. Right? So that's not the total photograph, right?

Moderator

But I think no doubt at all, the abundance in the last few years really made the leverage in the sector go up a lot. Overall, the leverage levels were really high, and we don't think we'll have a market of low interest rates in such a short period of time. So no doubt at all that company and group that had this leverage level and cost of capital that were like CDI plus something. We're considering CDI that could reach maybe even 14%, fourteen point five %. But we're talking about 1718% interest rate.

Moderator

And this activity would not tolerate this cost of capital. So that's quite clear. And just to answer in a very clear manner, we saw some very occasional points, Rob. But we also see liquidity. And when I'm talking about diversification here, it's really interesting because we diversify considering the productive risk and also logistics.

Moderator

And so we're seeing some regions in Brazil that are more stuck and other regions in Brazil that are pretty heated, right, which is the case of Bahia due to irrigation projects and new agribusiness factories in the state. And so in Bahia, I see a lot of current liquidity. And what I'm saying here is, well, you can buy in other regions, but you can also sell in Bahia, it's great. And so we need to buy in other regions as well. Right?

Moderator

And so for us, this dual duality in the liquidity could not be better than it is already. Right? And so it's quite reasonable to understand why. Gustavo just talked about the soy of a hundred and ten, hundred and '12, and we see Bahia pretty heated. So what I always say is that here, we provide some guidance and then no doubt at all.

Moderator

The company is seeing major opportunities, and that's the year where we need to search for some opportunities, some occasional acquisitions. It's not something general, but we can still have some leaps in all of this. But we definitely see a scenario that's more of a buyer and also more of a also, say, opportunities due to irrigation projects, agribusiness, and other projects in the state where we see some recurrent liquidity in Bahia. And then I think we think that here in this market for us, it's going to generate this kind of opportunity. And that also eliminates a bit of the appetite, let's say, and with agricultural funds, buying properties, etcetera.

Moderator

And so shareholders in Fare del Lima are going to be moving towards high interest rates and the prices still weren't accommodated for this, right? But as we are looking at these projects in perpetuity and operational perpetuity, this is maybe a little different in our case. Great. Thank you so much, guys. I think we also have Thiago here with another question.

Moderator

Please, you can open up his audio. Well, good morning, guys. Andre Gustav Buena. If in this discussion So we wanted to discuss the long term projects and all of the history with transforming the land and all the real estate value as well. In the last few years, this discussion migrated to a discussion where we consider the purchase and transformation of raw land or the brown soil to discussion that I believe is gonna be really focused new generation here, which is converting pastures into farming regions.

Moderator

Right? And that's something that has been intensified in Brazil over time. So you guys have already started some recent movements and trends towards this. Right? And I just wanted to hear y'all and understand if you guys consider that this thesis is sustained based on the experience that's pretty small for your size.

Moderator

But based on the experiences you've already had with converting pasture into harvest areas and farming areas. And I'm saying all of this considering the and no one has seen the Aruba prices go up as much. So, of course, this would impact the equation a bit. Right? So I wanna understand if this come generational conversion in the overall real estate gains is already supported or not sustained.

Moderator

Well, hi, Thiago. Pleasure to speak with you. And your question was almost the thesis we believe in. Right? And that's where we're gonna generate opportunities.

Moderator

And so occasionally is you could consider the price of the Aruba, of course, no doubt. It could be more valued. But when we look at if we consider the price of this land that has the cattle and when we perform the IRR in the perpetuity of this operation, it's about 2.5% to 3%. So when you look at the conversion of this land and you consider this agricultural project, it's about an IRR of 7%, eight % or 9%. So there's a difference that's very important.

Moderator

If you consider this at 330, 3 hundred and 40 reais per amount per bundle, we're talking about profitability about a thousand 100, a thousand 200 per hectare. That's what gives you this kind of result with a 330 reais. And so when you consider the system, we're not gonna consider the well, we're gonna look at our history and what the market believes in. Right? So if you consider 1,200, two thousand and you consider a off season harvest, then you shouldn't consider this of 1,500, you should consider it of a 1,000.

Moderator

And so we're considering R3,000 dollars And it's still really a better advantage at the end of the day. And the biggest discussion here is really that people always provoke me and they say, is Brazil going to continue to grow with its production of soy while income around the world grows? Yes. The challenge we have considering the international demand as well. And so if income continues to be incremented And so this fundamental point in this thesis, of course, we've already discussed this many times, is that this land matures a lot quicker, right?

Moderator

So if we have some well, you can have really good levels of productivity. So we we have this new operation in the in the Guapara Valley, and it's really impressive to see the results we're having there. Right? It's not about productivity in the farm, but last year, it produced about 54 so it's pretty significant if you consider the first year, right, for pasture. This year, the farm's moving towards its second year.

Moderator

And I'm not saying this because of the farm, but we have many areas that have above 65 tax rate. So when you consider this and you see that there's a bit of limitation, it's not an area where you're have 80 or 70%, but you're gonna have 34 five or 40% of this. So if consider the profitability of this soy and 30 or 40%, it's gonna be a lot higher than harvest itself. And so more and more, Brazil is not stopping this production, just intensifying this model. And that's gonna make major, major sense.

Moderator

Well, that's great. Thank you, Andre. You, then the next question here I'm gonna be reading is from, and it says the drop in the dollar, could that be an opportunity for the acquisition of fertilizers? Well, if you consider the rain period, is there any farm that's been calling your attention due to a drought or an excessive rain? Well, thank you so much for that question.

Moderator

Anyways, the dollar and this accommodation of the dollar at $6.20 to maybe $5.70 or $5.80 still makes us have a fertilizer cost. When you think about reals, it's higher than the previous harvest, right? So we have our eyes open. And I think that in this decision, when we decide about acquiring fertilizers, we need to consider the exchange ratio between the inputs and products. So we have our eyes open.

Moderator

And we considered about and for MAP, we still haven't made a decision about this. We're looking at the ratio, the exchange ratio. And unfortunately, with this increase, we went from a level of like $5.35 20 with the dollar that was $5.75 80. And now we're talking about a product that's a lot more expensive. And so the Northern Hemisphere and The US and part of Asia starting to plant now in April and May.

Moderator

We've already started to plant this and the Northern Hemisphere is going have to make more precise decisions now as well to start planting from April and May when we start this plantation in the hemisphere. So we are going to be really monitoring this, the fifty the forty or fifty days where the market historically always finds the bottom of the well, let's say. And so when it comes to rain, it's as I mentioned in the beginning, right, This has been doing pretty well and something's concern us. Not the lack of rain, but the excessive amount of rain. So the soy in the beginning of this harvest amount to grow soon.

Moderator

We had some reductions in productivity due to the fact that we started to have the situation with the grains. In these cases, it's where you see that it's really started breathing and that's where you lose volume. Go the soy has two or 3% of this problem in the grains, but it's not only just got two or 3%. But when you start this process, this grain starts breeding and consuming its own mass. So it's more than just the discount of the grains that have visible damage.

Moderator

Right? But that was just the beginning of our harvest. We were able to have a bit more humidity in certain units, but we see we're in a better situation. So what's important here is the concentration of the harvest amount to grow. So that starts off now in the first fifteen days of February.

Moderator

And the expectations are that there would be a little less volume of rains now. And we're looking into a bunch of different measures to be able to harvest as much soy within this window. And that's where you can see a major surface to be harvested. And so in the other states, as we can see, rains coming along pretty well. And we had a possibility for this off season summer.

Moderator

And we start February with our box full, let's say. So now if we have ten or fifteen days of drought, from now on, you're still gonna have a lot of humidity in the soil. So I don't think this is a warning point. I think we have good distribution for this region in the area. So in paragraph, the critical period is normally not February.

Moderator

It's like the February till the March. And so when we look at the numbers in Brazil, just to show you Brazil, I just saw this number yesterday. There was about in the last harvest 14% of this area harvested. So we had a delay of 6%. And yesterday on the February 6, we had 14% soy harvested in this area of 8% on the February 14.

Moderator

So this no doubt, Hinaldo is a reflex of this intensity in the rain in the month of January. So now the next question is from Crescent Quintana, investor. And the hedge policy in the company was not allowing us to confirm more sales when the dollar reached $6.30, or was it a strategic vision when the dollar that the dollar would go up more? Do you think you'll see me tell the economy? So they'd say that the economist cemetery is the type of currency.

Moderator

Right? And so well, when the dollar started going up, and I think it's really important that I always talk about this, right? We need to look back and reflect and understand what was done, etcetera. So And so you can see the hedge policy that really has this crucial objective. And so there's actually an objective reducing risks, right?

Moderator

And the company's policies are that up until plantation you have 50% sale potential. And after plantation, you can start taking on this position. Right? So what we reached here was in the beginning of the plantation process, we'd already advanced at about 41, 40 two percent. And then we started selling a bit more.

Moderator

We were able to sell a bit more. But in exchange, we operated a bit more in the higher rate. And now we have 50% of the soy sold, right? So when we had 41%, we had almost 60%, and we had a mismeasures a bit higher authorized by the company's board, and that made sense because there's a lot of volatility. So we weren't gonna sell dollar, take advantage of this moment without selling Chicago.

Moderator

And at that moment, Chicago dropped. And so what happened is when the dollar reached $6.49 at that day, basically, Chicago is about close to 10, right? So when you combine that, it wasn't that interesting, right? And you didn't have the basis we have today. So we considered a base of minus 35 or minus 40.

Moderator

So I'd say that even if the dollar goes back, Chicago went from $10.2 to $10.8 and the basis went from minus $35 to plus $30 30 dollars So I think it was very precise and assertive. At that moment, we already had sales that are pretty well positioned. And so we started this and what we did at this moment was that soy has three components, Chicago Dollar and premium, right? So we started blocking our physical position. And when the premiums started to react, we started to block this physical position.

Moderator

And then we also started blocking the logistics. Right? Because the peak in the dollar impacted this. When the dollar started going up a lot, what happened with the Brazilian logistics is that they got cheaper. Then we made the decision to sell physical to be able to block in the logistics.

Moderator

Right? So when we consider the rush for the dollar, we already had maybe 40 some percent sold. Right? And that's we had about 15% or 18%. And what happened is we would be able to have physical really close to the derivative, where we kind of block in the fobs and cheaper logistics.

Moderator

So that's kind of what we took advantage in this rush for the dollar. Right? And we consider this combination $5.85 70 with this positive premium and Chicago also from $10.20 to $10.80. Right? So we're really equivalent to that dollar of $6.20 back there.

Moderator

Well, have one last question here from Saul. He's also an investor. And considering the low value of the stock in the company, do you guys plan to buy a buyback to start a buyback program? Well, It's always a very tempting provocation. We consider this at all moments and we don't want to in any way lose this liquidity.

Moderator

We have no buyback program that's authorized yet at this moment. But if we start seeing this frequent delivery in the results as we expect this year again, And at this price, well, may a big part of this is you have the effects of the Brazilian stock exchange. Right? So although your company is doing well and you have consistent results, if the equity market is low, it's going to be difficult for you to overcome this. So that's why we have kept our eyes open and we don't have anything planned for the next few days, but it's something that we revisit at all moments.

Moderator

And so I think it's fundamental. And this question is added on in the following manner. If we are able to buy assets at this moment of stress and with the levels of discounts that are similar with what we have on paper, we would not we shouldn't be really buying this. But if we don't understand that she has we have these levels of assets with the level that allow this, and who knows, maybe we can discuss this with the Board and the company. But I think we've gone over time.

Moderator

And I just want end by thanking everyone for their presence, Andre, Gustavo, and I think we're really excited for what's coming ahead. And if anyone has any outstanding questions, me and all of my team in the IR department are available. Thank you all so much, and see you all in the next quarter.

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