Cresud SACIF y A (CRESY) 2005 Q1 法說會逐字稿

Good morning, ladies and gentlemen. And welcome to the Cresud conference call, hosted by Mr. Alejandro Elsztain, CEO, and Gabriel Blasi, CFO. [OPERATOR INSTRUCTIONS]. It is now my pleasure to turn the floor over to your host, Alejandro Elsztain. Sir, you may begin.

Thank you very much and very good morning everybody. We are going to announce the results for the first quarter of fiscal year 2005 that ended on September 30, 2004.

The net profit for the first quarter amounted ARS1m, reversing the loss of last year. And this year began, but I would say that not in a very positive mood because the collapse of the very big drop in the prices on the commodities. We saw how soybeans and corn and wheat mainly [grew, went] 50% down from [its peaks]. And that was driven because of the harvest that the United States had. And that put a lot of pressure on the prices, and that punished our balance sheet too. And that is [influence done] - that it's changing the mood of the agro of the world. And that is making a negative balance sheet for Cresud in the first quarter, and it's making uncertainty in the commodities for next quarters.

In our view, this was big. Volatility was high. Volatility of last year, we saw in the commodities, and we today think that there was a big estimation of production that is reverting so much the price. But today we are more positive than negative in prices because they went -- to give you an idea, 50% down in the case of soybeans. That is supposing that the harvest in Latin America will be very big. And adding what happened in the last year in the [wheat] harvest in the United States, it's a big, very big harvest. But that is, in our view, over-valuating the production, and maybe because of conditions of production in South America, but up to now they're good. I think Argentina, they are good. And we are going to talk about our strong area that went very good.

In the case of the wheat we have sown 100% and there is optimal yield coming. In the case of the corn we did 90%, and again it's in a very good shape, because in the Pampa it's raining and that's good. And in the soybean we did 60% and it's still in good shape. So that’s what-- The market today is considering is a very good harvest in Latin America. But today we are beginning to see many details in the market about the disease in the soybean for next soya campaign in the United States that has put pressure on the prices of soybean because will be more expensive to sow soybeans in the United States [who will use] the problem of that disease.

So, we think that the volatility we saw of last year was dramatic, and we are more optimistic than negative in the prices on the grains, for next year. But in the first quarter they have pushed -– they are pushing us down, and they are taking – affecting us in losses.

If we talk about other things in Cresud, we are optimistic in the Dairy, and that is pushing up to make an opportunity in other areas. In the farm we purchased last year, El Tigre, and that is [just] a farm of 8,000 hectares. And we're going to use 1500 of those hectares to put under [the sole] production, and to produce -– and to put a dairy --. Will be the state-of-the-art dairy, probably the best of Argentina. Will be 80-positions dairy that will be launched in April 2005. And that will make us to grow from like 1,000 cows under production to like 3,000 cows under milking. That will be like tripling our possibility of milk production in the Company, and that today is a very positive number per hectare. That is pushing up to make that investment.

We are doing the process of Los Pozos. We are finishing the [first end]. We talked about the 18,000 hectares. We're going to finish this the beginning of 2005, and now we're presenting a new [closet] to make 10,000 hectares more next year. So we are planning to continue growing stables like 10,000 per [year] because it's the more positive operational business of Cresud in the Cattle. It's 10% of high – or higher return in dollars in the [out ratio] in this, when the price of the beef is at 70 cents per kilogram. That is 36% higher in Uruguay that today opened the rest of the market, so what we are betting is Argentina won't be at the levels of the best countries of the more developed countries like the States that are more than $1.80 per kilogram. But not at 70 cents like today is. So, that is pushing us to develop more land, to put more beef on that, and mainly in the Los Pozos case, that I told you we are finishing what we did – the 18,000 project. And we are announcing 10,000 projects for 2005.

We finished the Agro Riego San Luis project and all of the hectares are under production for this campaign. And that is part of the explanation and why we're growing in the sown area. The Company today is at 35 – 35,000 hectares of crop for next campaign, and at levels of 80 – of 90,000 heads under production of cattle. And growing in Dairy too.

So, we are optimistic in the hour. [aparta] could happen in this last 3, 4 months in the Grain. We think that this, the commodities will go up again and Cresud, having the largest land reserve in the country, can take this potential in numbers.

Talking about the sale of the 2 farms. We sold produce very high, and those stakes of $250 per ton of soybean, we could sell these 2 farms that will be replacing the gains of this $7m the third and the fourth quarter of this year. And they are not reflected in the balance sheets that we are closing now. But this will receive in 1 case 30% payment, and in the other case we will see like 25% repayment. So, the rest will come on the sale of course, so that will allow us to put the gain - that is $7m gain – in the total sale of $10.5. So [David], can you explain about that situation?

Good morning to everybody. With respect of the financial statements of Cresud, we improve our results from last year from 2 -– is ARS1.97m loss, to ARS1.03m in this first quarter of 2004. If we begin to explain each line of business.

In the Crop segment the Company sold more grain from 12,000 tons last year to 19,000 tons this year. But the problem that we had is higher costs due to the decrease – to the dramatic decrease in the commodities in the first quarter that Alejandro explained before. It was the highest volatility market in the last 10 years. So we lost in that line ARS1.8m.

With respect to the Beef-cattle, we also increased the sales deal to the fact that we sold a farm, [called] Nacurutu, after the end of last year, and we had to move 10,000 herd of cattle. And most of the cattle were finished with grain in their feed lot that this system of feeding had higher costs that increased our -– that, sorry that decreased our result in 1.1m this year compared to the gain of [field] on 9m last year. And we also sold more cattle than last year. We sold 14,000 cattle this first quarter compared to 7,200 cattle last year.

With respect to the Milk line, we see that we have improved our margin from ARS254,000 to ARS291,000. And indeed it was due to the grass-feeding system that has decreased our costs. [Then] we see the holding [couple] results, the prices of the Cattle increased in the first quarter of this year, generating 6m – ARS6.3m gain to the Company, compared to ARS0.8m that we had in gain last year.

In the line of other income line, uncertainties that we have, 1.7m loss. This is the tax that the Government put on the shareholders of the Company, and our Shareholder's meeting held in October decided that the Company was going to pay the shareholder [stock fish]. That impacting ARS1.7m in the Company.

With respect to the related results, the 4.6m compared to the loss of 2.8 of last year, is due to the fact that the Company has increased the participation in [IRSA] from 25.7% to 80 -– to 28.3%, and has [IRSA] had the result of ARS17m we received ARS4.6b in our financial statement.

Gabriel, if you want to talk about [inaudible] --

I want to [indiscernible] on October 22, the Ordinary and Extraordinary Shareholder Meeting, approved of a solution of a cash deal of ARS3m which will be affecting us of November 17.

During the current quarter, the Company develops an external financial strategy of its working capital for the productive season. The very low interest rates untouched [works] for financing – which allowed us to develop the new business segment, optimizing the risk. That means that on the -– presently Cresud has a debt of $10m, half of it nominated in pesos at a fixed rate of 7% on a year base. Half of it in US dollars at a fixed rate of 4%. That is our [asturn] of 180 days after 1 year's [teno]. As I said, the road to the supported the working capital for the productive season.

[The subithank to exercise] 5m of [Il savoro], as David --

Ladies and gentlemen, we would like to apologize for the momentary delay. Please remain on the line. The conference call will resume momentarily. Thank you --. Thank you for your patience. Your teleconference will resume momentarily. Thank you --. [OPERATOR INSTRUCTIONS] --. Sir, you may proceed.

Yes, we continue. We hope we didn't lose a lot and we are going -– I'm sorry because of the music, Gabriel was explaining about the ratios of the Company. So please Gabriel.

Okay regarding the conversion. Cresud exercised 5m of [IRSA word], amounting a total of US$6m. That in the [inaudible] off a third party comparisons. And increased their share in the Company, as David has already described.

So the Company today is in November 22, Eduardo Elsztain the Chairman of Cresud, will participate in NASDAQ and we are going to be in a short Roadshow in New York city, explaining to investors the [suit] situation. We would think that Cresud can today have big opportunity. We don't have a lot of money and cash, have near 0 debt, with $10m but have like 7m of credits to come because of the sales of farms. And so we think that Cresud can be purchasing more land and that is what it's doing today, starting in all the regions where to invest, we are expecting prices going a little lower to buy. And that's what we're trying to do. And -– but there -– we think there will -– this part of the Company is researching in the whole region. And we think that we are going to see a set of purchases in the part – in this part of this year.

In the second [lot seat, lot], we are announcing that project. We are waiting for the comments of for our partners [word to lounge]. We are discussing if doing Argentina, or in the region [the say con filop], and that is the discussion the Company's having today. So we think that Cresud can continue transforming the land reserve it has, and trying to purchase more land to make again the factor of appreciation like we did. And we showed this here of 75% gain instead of $10m.

So Cresud is -– likes the kind of volatility the market has. It's the kind of best environment that we can have to buy and sell land, but it's [through] our main assets, and main results. And meantimes, operationally, trying to be very positive to pay the costs of capital of the shareholders.

So thank you very much for being in this conference and we wait for your questions. Thank you. Operator.

Thank you. [OPERATOR INSTRUCTIONS]. Gentlemen I'm showing no questions from the phone lines at this time.

Okay, thank you very much, and we'll see you next quarter. Thank you gentlemen. Bye.

Thank you. [OPERATOR INSTRUCTIONS]