Earnings Call Transcript - LND Q3 2021

Operator, Operator

Hello. Good afternoon. Welcome to the Conference Call for Earnings for Q3. Reminding you that our year follows the Agriculture Calendar. So, we have the earnings for nine months ended on March 31st, 2021. We have with us Mr. Andre Guillaumon, Chairman; Gustavo Lopez, CFO and RI. This presentation is being recorded. You will be in listen-mode only. During the presentation of the company, you will be in listen-mode only. Next, we will have the Q&A session exclusively for analysts and investors. The audio is also being aired on the Internet on our page and our YouTube channel. Before continuing, I will make some clarifications, a disclaimer concerning any declarations made during this conference call concerning perspectives and operational goals. They are all based on assumptions and beliefs of the company and on information currently available. They involve risks and uncertainties; they refer to future events and therefore they depend on circumstances that may or may not occur.

Andre Guillaumon, Chairman

Good afternoon. Thank you, Ana. Thank you, Gustavo, once again. I would like to thank you all for participating, for you have been following our earnings for many years. Good. Let's go on to the first slide, please. We're bringing you some relevant numbers concerning Q3, 2021. So, I'd like to share with you what the company did in these nine months. We had a net revenue of R$440.6 million. We had a net profit accumulated in nine months of R$189 million, adjusted EBITDA of R$219 million. One piece of news that we bring is of the second issuance of CRA. This time we did the CRA according to the stock market instructions, which gave a lot of visibility to the company and gave us an interest rate that was very competitive. This brings visibility to our company and a longer debt profile in line with our business. So, this is an important event in this quarter. Now concerning the right side, we ended the harvest of more than 170,000 tons of soybean in Brazil, Paraguay and Bolivia. There I have a lot of good news, we have some bad news too. But the bad news is attenuated by our geographical diversification, and we will talk about everything that happened. We finished planting corn; the second harvest of corn. Our region is privileged; most of our corn is in the region of Xingu, a region of Mato Grosso that suffered less. However, our corn is not as well-positioned as we had last year. So, these are the highlights. I believe that I'd like to say that we are in fact a company that has an operational strategy together with a real estate strategy. Commodities are booming, and we're seeing the market with better prices; both booming in terms of liquidity and prices. So, we have a sale that was made last week which is not included in the numbers, we will show this later. This sale was made last week and it's a very interesting sale. I'd like to mention two points about this sale. We continue being a recurring seller of assets. It's a sale that gives us an IRR of 20.4%. So, 20% in an asset that you bought, flipped, improved and what it shows in this transaction is that everything we will see later on the results is mostly linked to the price of commodities. We begin to see the price of commodities also affecting the price of land, increasing the price of land. This is by year 250 hectares worth R$67 million and a gain of 64. So, this is the great edge of the company you can expect. Ana doesn't like this because I can't give guidance. This is our business: buying and selling farms. You will see that we will be very active during this year. This is the vision we have due to the liquidity in the market brought about by the booming prices of commodities.

Gustavo Lopez, CFO

Thank you, Andre. Good afternoon. Now let's try to explain what Andre said concerning the appraisal of the commodities, the higher price and how this is impacting the company's EBITDA. You will remember that we said before the pandemic where the prices we had were expecting an operational EBITDA of R$130 million to R$150 million. Now things have changed with a new price level for soybean, corn, which have the highest price increase, and sugarcane. So, let's look at the lower table. We excluded the biological assets' effect in sugarcane and corn and we included the result of derivatives of products that we have already sold. We see that we have here an EBITDA for nine months and this doesn't include the sale of the farm that Andre mentioned. So, these prices are having an impact on the result and should also impact the price of land in the future. Last year we saw R$78 million; we have to remember that we had products that were sold at R$1,200, R$1,300 a ton and today we're selling at R$2,500 per ton for this soybean. And here when we see the effect, we are recognizing the biological assets; we have an inventory of 95,000 tons, 70,000 that Andre mentioned that we will harvest and the price effect especially in this inventory that we are harvesting. We have begun to sell 35,000 tons of this campaign.

Operator, Operator

Thank you, Gustavo. Thank you, Andre. Well, now the Q&A session only for Investors and Analysts for subscription.

Unidentified Analyst, Analyst

Okay, do you mean, our good companion shareholder?

Gustavo Lopez, CFO

Thank you for the question. We made this communication because we received communications from some shareholders about the bonus. So, that's why we made this communication to the market. But answering your question, this bonus for subscription that existed before the IPO when the company was founded, it is equivalent to 20% of the company's capital. So, until the 15th of the month, we make the correction. We don't have the IPCA but we have an approximation for May, and we will use this calculation. For us, it's important; it's money that goes into the company's cash. It will be transformed into the acquisition of farms. This is money that has this objective and certainly we will use it very well in this process, and the rest of the follow-on in new acquisitions considering very actively in the last few months.

Operator, Operator

The next question, Thiago Duarte with BTG Pactual.

Thiago Duarte, Analyst

Can we talk about the use report on June 30 with the new appraisal of the land? We know that if you do this, you have internal studies to know the value. Is it possible to give us the potential for appraisal that you have in the portfolio?

Andre Guillaumon, Chairman

Well, Thiago, good. It's good to hear you, to have you with us. Two excellent questions. The second if I give you the price, Ana Paula will kill me. So, let's begin with this second. I believe that the good thing I always say is to look at what we do, look at the delivery and you will have an idea. If I were to give you a number, I would say analyze the sales that we made recently, the sale made last week and look at the market, look at the price we sold for. So, initially, Thiago, we're not having the correction of the multiple. This will come in years with profitable margins, just high profitability. We also believe there will be a correction of the multiples. Today, what's happening is a correction due to the price of soybean bag. So, the same sale we made last year, we made today. It's the same soybean we had last year at R$89, R$90; today it's being priced in the next few years at totally different prices. So, the same thing happened to the land; this is what you can expect from the land. And now concerning acquisitions, I never had such an active agenda. The company's acquisition agenda was stronger before the IPO, but today we're still very active. We have meetings with the internal teams two or three times a week; we're looking at many things. I always say that right now, Thiago, we will continue guaranteeing to the shareholders that we will make good positions in Brazil and involve an enormous amount of work. We are very careful with due diligence and also there are assets that you can close more quickly. Once signed, the purchase takes between 60 days to 90 days to be able to finalize. So, I have no doubt that the company will be able to allocate this cash in an efficient way. We're very focused on pasture land, and this can tell you about the region. We're looking at many things in Mato Grosso, South of Para, and there are things in other states, including Maranhão. This is where we should make the next acquisitions for the company.

Operator, Operator

Well, the next question, Philippi.

Unidentified Analyst, Analyst

We see a lot of droughts there. Could this affect the demand and offer of grains and could this increase the price even more?

Andre Guillaumon, Chairman

Good afternoon, Philippi. Gustavo will address the first part. He has the relevant numbers. I'll take the second part. Philippi?

Gustavo Lopez, CFO

Sorry. As I mentioned, we have a plan to sell 95,000 tons in this sale of soybean. It's important to mention we are supplying already sugarcane. The price is R$1 per kilogram. This will give us R$40 million to R$50 million in billing and also corn. With these good prices, we believe that most of the domestic market we will have to sell during this quarter. That summarizes what we have for the next quarter. Just supplementing, we left most of the bags. We have made a reduction; we believe it's going to be; we brought this projection to 89 bags. I remind you that maybe the reduction we had is not the same as the reduction in Brazil, but the rest of the country may have a stronger reduction. If you look at the data from EMEA, a study from EMEA of the planting of the winter harvest, it's around 163, and you will see that Xingu was the region that planted in the best conditions.

Andre Guillaumon, Chairman

And the picture of the Midwest and South is compromised. Everyone travels here. Goiás is a state that will suffer a lot, Mato Grosso too will suffer. Reminding you that this is a gain that we Brazilians always wanted. Corn is the second harvest we have. So, soybean is in the summer with more stability. Brazil produces 75% of the corn in the winter harvest; it has more volatility. Now, international prices are rising, they're very high. I would say to you that in the case of Brazil, lag with a reduction in productivity is the reduction in revenue per productivity is still much less than the increase in price in our case. In the case of Brazil, I can't say the same thing but I believe farmers will also have less corn in the market.

Unidentified Analyst, Analyst

Thank you, Andre.

Operator, Operator

Next question. Now this one, he's an investor in the company through Easy Invest.

Unidentified Analyst, Analyst

He believes that AGRO3 is an excellent investment opportunity. What message can you give to individuals who want to invest in your shares, AGRO3?

Andre Guillaumon, Chairman

Now it's on. I'm very happy. I would like to share with you the great increase in the liquidity that we had in our shares from investors like you. We saw in the investor base an enormous growth of individuals investing in AGRO3. I believe that for you investors for all the investors investing in our shares, I always say that we are the right company at the right time in the right place. So, the right company is a structural thing. I have no doubt; I graduated almost 30 years ago. Brazil produced 68 million tons; now 260, and I want to see Brazil producing 500 million tons. And to get there, it'll be faster than it took to get here. So, we are at the right place. Brazil, giving you other numbers: today, a farming Brazil produces grains on 66 million hectares and in cattle raising we have 190 million hectares. Of these, 45 million to 60 million have potential for agriculture. So, we will soon have another Brazil without increasing area or invading other lands. We are doing this; we're talking to civil society and these things will converge, and companies like ours will be on the radars of responsible people that have the SCD. For us, the SID was born with BrasilAgro. We have SAP running on the farms. We had to audit our numbers, we did this, and we're also doing a lot in the social area. Ana Paula is with us recently. She became a Director of the Brazilian Agri Institute. We give 1% to 1.5% of our profit to social issues. So, I would also like to mention the team. What we do here, I always say a successful company is one that has a clear strategy. Once you get this strategy should be spread throughout the whole company. We have robust processes to guarantee trust, credibility from people like you investing in us and we're a company that invests in people. We invest a lot in people; we believe the company's success is the people's success. So, the company in three years achieved this certificate of a great place to work, and so the leader who doesn't spend time with the employees is not a leader. So, when we look at this, we can, in a transparent way, say that this is a company that will be successful in the medium and long term due to these reasons that I just mentioned. Thank you for your investment.

Unidentified Analyst, Analyst

We have another question about beans. How did we get started in beans?

Andre Guillaumon, Chairman

We acquired Agrifirma in January 2020. And with Agrifirma came three units; two already had beans planted. Beans were handled through a producer and a seller. If I were to say the five serious players in beans, they are among these five. So, this gave us trust. It doesn't have the liquidity other sides that allows you. Why? Beans have seasonality in prices. So, with our partner, they have a cold chamber. When beans are cheap, we store them in cold storage and then we sell when prices go up. This is how we regulate production in the domestic market. In parallel, we saw that it could bring us a good margin. So, we looked after markets outside Brazil and in the acquisition Sinagro, they work with a company named UPL and they import beans from Brazil. We said let's and sent to India; this year we did the same. So, the company Gabriela has two destinations for our beans: part of our beans which goes to this storage for cold storage which is sold in the northeast and most of the beans produced in Mato Grosso go directly to India. They are exported and leave packed in 50-kilogram bags to India. We saw in this an opportunity to have a product with more added value and low risk; international markets you can guarantee. So, our beans I don't have the numbers here but I should say that what we harvested, the company understands that in our business strategy it's important to have a good balance. We want 10% with other grains; we already have baked beans. We haven't brought you the number but I will say that we are a great producer of corn for popcorn. Yes, corn for popcorn. We planted 1,800 hectares of popcorn corn, and so we're looking at this where we can find margin. So, we're pursuing these products and including them, thus attenuating the volatility of the price of commodities.

Operator, Operator

Well, before handing it over to Andre for final comments, I want to share a message from someone who believes strongly in BrasilAgro and takes pride in being an investor. He emphasizes that we need to promote and share this information.

Andre Guillaumon, Chairman

Well, thank you to all who are with us during this hour. I always highlight the commitment to the consistent delivery of results. We will continue doing this. The great gaps that we had, we solved. When we decided to do the follow-on, we were criticized for the price. But the investors who followed us are very happy, very satisfied. And so, we have already had recurrent results. We wanted to increase the liquidity. Today, we're a company that has liquidity for the shares for small, medium, and large investors, with more than 100 million being traded in the stock market. So, count on the dedication and the commitment of our team and surely the shares will reflect its results, and I will share this with you. So, count on the dedication and also the work of all of us here. Thank you.

Operator, Operator

Thank you. Please disconnect your lines.