Cresud SACIF y A (CRESY) 2009 Q3 法說會逐字稿

Good afternoon. My name is Phyllis, and I will be your conference operator today. At this time I would like to welcome everyone to the Cresud earnings release third quarter fiscal year 2009 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question-and-answer session. (Operator Instructions).

I would now like to turn the conference over to Alejandro Elsztain, CEO; and Gabriel Blasi, CFO; and David Perednik, CAO. You may begin your conference.

Good afternoon everybody. Welcome to our conference call of third quarter fiscal year 2009. In Cresud we have consolidated of IRSA, and -- which we held in this case 54% at 31st of March. And in the case of IRSA revenues and cost in this consolidated income statement account only for the activity recorded during the six-month period from October to March of this year. IRSA's results originating before that period are reflected in Results from Interests in Related Companies.

For the first nine-month period of fiscal 2009, Cresud posted ARS4.7 million net income, in contrast to the ARS27.6 million of last year. And this was mainly affected by the financial effect of global crisis and the impact of the adverse weather conditions that affected Argentina mainly and some parts of Brazil.

The operating income of Cresud's agribusiness segments dropped comparing to the recorded in the first nine months of last year because of the decrease in agribusiness yields caused by adverse weather conditions, the drop in the prices of the commodities -- which have lately started to show signs of recovery -- and the absence of results from land sales.

Last year we were selling some of the farms (inaudible). So we had that very bad combination of lowering yield, drop in prices, and no results from the assets.

In the case of the assets I think we are going to see some of them in the near future. In the case of the yield we were harvesting more, and the reality of the country is a very distraught agriculture. Thank you.

As Alejandro was mentioning the result of real estate (inaudible) is some activity in the country. It's very important (inaudible) that in the period the Company has increased significantly the hectares of agriculture by 87%, that we have also continued our share repurchase plans. We are going to review those figures.

We have increased the stake in BrasilAgro, reaching over 18% with net result in the previous for the Company 2.5 times higher than the same period of last year. Also we have increased activity in Bolivia and Paraguay, harvesting approximately 10,000 hectares in Bolivia.

And as we have already mentioned, in IRSA our businesses are showing a good cash generation. We have completed the construction of the new office building, on (inaudible). And we have newly opened a new shopping center which is the biggest shopping center in Buenos Aires City.

In page three we see the land under management, and the land at Cresud today is running -- is passing 1 million hectares. We see Argentina represents 69%, 710,000 hectares. Brazil through BrasilAgro is 158,000 hectares. Paraguay, when we consider the total farms and with options would be 142,000 hectares; and Bolivia 12,000 hectares.

And we see the ownership in Argentina we have 710,000, and this 710,000 64% is owned, 92,000 are leased lands, and the long-term leased land in the north represents 23%, it is the Salta, (inaudible) Agropecuaria Cervera, 162,000 hectares. This is a long-term six-year lease.

In the case of owned land we divided that into reserves -- that represents 48%; and under production 52%. And when we see under production, that's increased part of the [leases] for agriculture. We are running 338,000 hectares, 100,000 for sheep, 120,000 for beef, and 104,000 for crops, having only 4,000 hectares for milk.

And distribution of the business environment, we've seen the very severe increase in the CDS price of Argentina showing the risk, the risk evolution for the country. And also regarding our share price we begin to see a strong recovery, including some bigger [buyers] against the MERVAL together [comparative] with the recovery on the prices of the commodities.

In page five we can see some about the agricultural conditions in the country this year, and one of these maps is January 2009 and the second is April, shows how strong and how dramatic was the situation for the whole country.

In Argentina this year the combination of [growth] and severe drought that was worst I think in 70 years made some big change that made the crops growing from -- in the crops and mainly for the companies (inaudible) but it's largest in volume and in money from 46 million tons that were budget at the beginning of the harvest, the USDA this week projects 34 million tons and they are still a bit concerned about this 34 million tons that represents the 26% drop.

Many are thinking on periodic drops (inaudible) so it is making the whole country to suffer a lot, and that is affecting not only grains, but beef and milk. So the whole sector is today in a situation that almost all producers are losing money. And the conditions for next campaigns are very uncertain. They are finishing the harvest. And there is a big lack of working capital for planting for next year that is probably affecting. And up to now the market is very, very unstable.

When we see some statistics we can see hectares on the crop production how we grew this year compared to last year. But we were very affected. Here we can see some of the output in wheat, corn, sunflower, and soybean that in the case of wheat and in the case of sunflower were -- finished the harvest of the whole crop.

In the case of corn, and sun -- and soybean we -- at the 31 of March we have lot to be harvested, and we were growing in volumes, but we had growth of losses having this reduction in prices and reduction in yield. The combination of both is going to affect -- is affecting the 31st of March, and will affect the 30th of June also.

And it's affecting dairy and beef [business] this year but growing in volumes. We grew in number of cows in the case of dairy; we grew in number of heads in the case of beef. But in both, you -- when you see the production you'll see a drop, and this is the adverse of the drought in the production cycle. And this is much worse [in the] margin when you imagine that the cost of production in a drought make it much more expensive.

When we go to page seven we can see some of those BrasilAgro's situations. Today our stake in the Company increased to 18.12% coming from an original of 7.3%. BrasilAgro posted ARS4.5 million net income for the third quarter. The revenues increased 159%. The assets of the company are almost at ARS700 million; from those, ARS254 are in cash and equivalents waiting to be invested. And we are near to buy some more new farms.

We planted 22,000 -- we had 22,500 hectares of summer crops. And we are planting 4,600 hectares of winter crops. And we now have planted 4,300 of sugarcane.

Apart of that, in Bolivia in January we finished the purchase of Las Londras, and we achieved 12,100 hectares in Bolivia in the region of Santa Cruz de la Sierra. Today 80% and 90% of soybean -- 80% of corn and 90% (sic - see Press Release) of soybean are harvested in 10,500 hectares.

In Paraguay, the signed deed for 21,000 hectares and we began the development, and -- of that, we are beginning to (inaudible) transformation of the land. And so that will be planted in 2009-2010, [next] balance sheet; we are beginning to make agriculture on that part in Paraguay too.

On the next page, on page eight we have the breakdown of the production revenue. As Alejandro has explained the situation of the price situation and the impact of the drought has affected our ability to increase our cash generation from the crops. In spite of the big increase in the surface the amount of revenues coming from the crops is almost the same than in the previous year. Also price situation and the impact of the crop has affected the beef cattle revenue. In the milk business the effect -- especially the price effect has not been so consistent. And the results coming from other segments has not been affecting [at all].

On the production results we see there the impact of what Alejandro has explained in terms of the significant affection that our production has received from the [loss].

With respect to the income statement as for the 31st of March, 2009 we can see that the net income dropped by 83.1% from ARS27.6 million of last year to ARS4.7 million as of 2009.

With respect to the gross profit, the gross profit increased over 800% from ARS40.7 million gain as of 2008 to ARS366 million gain due to the consolidation of IRSA's operations in the balance sheet of Cresud in the second quarter of this fiscal period.

When we see the results from sale of farms this year we haven't -- as Alejandro also mentioned this year we haven't sold any farms compared to a profit of ARS2.7 million -- sorry of ARS3.3 million last year from the sale of [Los Pozos and La Esmeralda]. And as I already mentioned, we received ARS356.5 million gain resulting from real estate business of IRSA.

With respect to the operating income it increased 222.5% from ARS33.8 million gained last year compared to ARS108.9 million for the nine-month period as of 2009 due to the consolidation of the business of real estate of IRSA.

The -- if we go to the financial results here we can see that we had almost no variation. Our net financial result was ARS27.3 million loss last year, compared to ARS25.5 million loss this year. But with a different competition because this year we have generated ARS137.5 million profit from the repurchase of bonds, our old bonds of IRSA and Alto Palermo, our related companies.

We also had a ARS32. -- (technical difficulty) million gain generated by the coverage of our financial instruments during the year. We have a higher loss of ARS26.7 million in our financial interests between both periods. That is due to the fact that we have consolidated the IRSA shares. And we have the also higher loss of [ARS35 million] generated by financial operations, the (inaudible) the amount of also [ARS51.1] million generated by foreign exchange, net (inaudible) the debt of also IRSA and Alto Palermo.

And with respect to the income from related companies we had results decrease 448.6% from ARS20 million gain for the nine-month period of 2008 to ARS70 million loss. This was due to the consolidation of IRSA, an increase of [51% in operations loss] in our investment in IRSA. We also had a ARS24 million loss generated from the consolidation of related companies of IRSA mainly due to the (inaudible) stake in IRSA.

And with respect to the income tax we had a variation of -- from -- ARS7.6 million [carryover] that we made last year compared to a loss of ARS32.5 million. And this is mainly due to the [first] income tax that is coming from the profits that (inaudible) by the repurchase of IRSA and Alto Palermo bonds.

Going to the next page, page 10, the total debt of the Company, as you can see here, Cresud debt is in the range of $70 million. We have there a (inaudible) Bolivia farms $16 million. The production financing is $20 million, [loss of refinance FX cost] and short-term financing of $30 million.

With a cash position of $10 million we got, at Cresud level, a net debt of $58 million. On a consolidated view adding there the debt of IRSA and Alto Palermo, that goes up to $428 million with $40 million of cash. But if you deduct from there the acquisition of bonds of IRSA and Alto Palermo the net debt after bond purchasing of Cresud is $371 million, [in terms] of various acquisition of bonds that took place after the end of March of [$50] million of [Alto Palermo] bonds and almost $12 million of Alto Palermo bonds.

If we move to -- second series. If we move to page 11, regarding our share buyback program under consideration Cresud has a (inaudible) cumulative investment of $19 million buying back 5.6% of the Company, reaching 28 million of common shares as of May 12th of this year.

We invite investors to make questions now. Please, Operator.

(Operator Instructions) Your question comes from the line of [Peter Dupont], private investor.

Good afternoon. I've got two questions. Firstly, just in terms of the moisture content for the upcoming planting season, what's the situation regarding that?

And secondly, in terms of the operations in Bolivia and Paraguay, and also Brazil, what is going to be the mechanism by which you extract the cash from those operations? Will you intend to pay a dividend, or will it be a management fee, or how will it be done?

[As understood], well, the first question in terms of moisture and the country in Argentina is still in a drought. Yes, there was some rain, but just a level of 10 millimeters and no more than that. And that is mainly affecting wheat, and cattle, and milk (inaudible), not the other summer crops.

The summer crops are going to decide our [stake] in September or our spring. The drought in crops is affecting very hardly the winter crops, mainly wheat. And there are forecasts on the wheat production that they are talking about the country growing to self-consumption production. So a country that counts for very huge amounts of tons for export wheat next year is forecasting to be near domestic consumption.

The others, rain can come, there is a lot of time. So that is the assumption. That was not decided up to now.

In the case of Brazil, Bolivia, Paraguay, the way of bringing the cash to the Company will be through dividends. And now we are in a building portfolio, we are thinking of purchasing more bonds in the three of them. So the cash we are making and the case of Bolivia [represents] is going to be reinvested to pay part of the installments we have to pay in the case of Bolivia, because we bought it on installment payment and to buy more land in that country. So that in the future will be mainly through dividends.

Okay, fine. Just a follow-up in terms of Bolivia and Paraguay, there has been a lot of concern about the questions of land title in those countries. What's the situation regarding your properties there vis-a-vis title?

We made a very strong and deep research in the case of the two farms we purchased, the one in Bolivia and the one in Paraguay. And the titles that were not perfect we didn't buy. We receive more offers, but we treat them as -- the ones we understood the titles were perfect, the others we rejected. So it's true that the Company had that, but the Company is very strong in the moment of the deciding (technical difficulty). So we -- the Company doesn't buy and (inaudible).

Okay, fine. Thanks.

(Operator Instructions) At this time there are no further questions. Are there any closing remarks?

As you saw in the presentation the Company is financially very [bright]. We have a very strong balance sheet. The portfolio of assets -- the diversification in the portfolio made up to avoid big losses, and made the balance -- stable balance sheet and stable results in this case.

The results in Argentina and Brazil are [affected by] the prices, and there was a big rebound on prices after the close of this balance sheet. To give you an idea, at the end of March, the price of holdings increased by 20% or more, because of this lack of crops in this region. And so the world is showing higher price to help the farmers of the world to reach their volumes, and this is because consumption keeps very strong and very [thin], and the world is eating, and the population is asking for the products.

So we are using our cash of the Company to [rekindle] the region, to purchase more land, and we're going to keep doing that. We think it's an opportunity and Cresud is going to take it up.

So thank you very much, and have a very good day. Bye.

This concludes today's conference. You many now disconnect.