Cresud SACIF y A (CRESY) 2010 Q1 法說會逐字稿

Good morning. My name is Pamela, and I will be your conference operator today. At this time, I would like to welcome everyone to the Cresud Earnings Release First Quarter Fiscal Year 2010. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

(Operator Instructions)

Now I would like to turn the call over to Gabriel Blasi, CFO, and David Perednik, CAO. You may begin your conference.

Thank you for siting through the call. We are starting for the first quarter of 2010. Remember that always first quarter in Cresud, due to the seasonality of the business, is not a strong quarter. The net income for this period amounted ARS61.8 million, compared to a loss of ARS37.4 million of last year, mainly attributable to the result of IRSA real estate business and the income in Banco Hipotecario.

The operating income reached ARS90.3 million compared to ARS110 million, derived from the consolidation of IRSA segment and ARS19.7 million loss for Cresud agribusiness segment, compared to the ARS8 million loss in the same period of last year. Production areas -- we have devoted to production 111,00 hectares of land, increasing by more than 70% the concession devoted to agriculture in our own pieces of land. The short-term leases were decreased 35%.

The development of land reserve continues significantly. We are located to beef cattle production in Los Pozos in 50,000 hectares of land and agriculture 7,000 hectares of land. In Agropecuaria Anta, we reached 10,000 hectares of land under production.

BrasilAgro -- we increased our interest in the Company to 23%. And the Company plans to increase its production area by 44%. We also issued a note in the local capital market that we are going to describe later. And regarding IRSA segment, we have a very strong contribution of the business to Cresud balance sheet.

Going to page three, you see there a pie chart of the land under control for Cresud, 1 million hectares. Half of the land is owned. We have option in Paraguay for 100,000 hectares, land under long-term concession 132,000 hectares, 14% of the portfolio; short-term lease 68,000 hectares; the Paraguay partner interest [21,000] hectares; and BrasilAgro 166,000 hectares of land.

Below that, we have the split of our hectares, meaning that land reserve reached approximately 46% of our own portfolio. You have under production 54%, 261,000 of our own hectares. The land under production is devoted 32% to beef, 5% to milk production, 26% to sheep, and to crop 40%. And finally, considering the geographic location, we have approximately 67% of the portfolio in Argentina, 1% in Bolivia, 15% in Paraguay, and 17% in Brazil through BrasilAgro.

We move to next page in page four. We have the hectares allocated to cattle, where we see the amount improvement from fiscal year 2005 up to this quarter in 2010. The last five years, we grew in 28% compound rate of growth and in the last three years 16%, reaching 50,000 hectares of development land in Los Pozos for the cattle beef.

The current allocation of hectares in the property is land reserves 74%, in crops 3%. As you remember, the last part of the cycle of transformation, the land that we are devoting to agriculture, the cattle 50,000 hectares, 21%, and also 2% of sown grassland. In Anta, the land concession -- long-term land concession that we have, we increase our use of land under production 45% rate of growth from 5,000 hectares in the first quarter 2008 to 10,000 hectares in the first quarter of 2009.

Now Alejandro Bartolome, Manager of Pursuit Argentina, will comment on the weather situation and the production and statistics of the Company.

Yes, talking about -- something about the weather, as you see in the page, and the last year was very dry, as everybody knows here in Argentina. And the problem was that weather was very -- the drought was all along the whole country; it was not just in one part of the country.

As you see the production in the last year in Argentina, talking about wheat, you can see that the estimations for this year are going to be 8 million tons compared with the last year of 8.4 million. But the case is that in wheat, we have a decrease in hectares of 35%.

In corn, the case is more or less the same. The production is going to be -- the estimations are 11% more, but with 20% less excess than the last year. And in soybean -- all these hectares go to soybean in fact. And as you see, the production estimation is 53 million tons, but the increase in hectares is just 5%. And the production's going to be 66% more.

And going to the next page, if you -- making some history in the compound average growth in the upper part of the graph, you will see that in 2006 we were talking about crop production in 45,000 tons. And we will reach -- hectares, sorry -- and we will reach this year [116] hectares. The growth -- the compound growth, is 81%. As you can see there that we have under concession 8,000 hectares, leased land 60,000, and owned land nearly 50,000 hectares.

Going in the lower part, the daily production, you can see that making, again, some history. The four bars at the left, you will see that we went from 14 million liters of production in the whole year and more than 20 million liters the whole year with 3,300 cows as an average the whole year. And in the first quarter, we suffered a little bit the lack of water that we brought from the last year. And the number of cows are a little bit less, 3,100. And the millions of production is 4% less than the same quarter of the last year.

And in going to beef production, if you see in 2006, we were in 80,000 -- the amount of animals were 80,000 and the production was 9.8 million -- sorry, 9.8 million kilograms of meat, of beef. And due to the lack of water, we reached 7.1 million the last year. But we are improving. We're receiving some rain now. So we estimate that the production as you see in the first quarter at the right, the production was this year now 6% more. And we estimate that we are -- we will compensate some production in the next few months.

Going to our subsidiary BrasilAgro, we have increased our stake from 7.3%, which was our original investment in the Company, reaching 22.81% of the total interest of the Company. As a reminder, the Company has consolidated assets of BRL669 million, one-third of that in cash.

During this period, BrasilAgro is transforming 18,000 hectares, reaching the sum of over 41,000 hectares of land to be put in production, increasing its planted area 44%, reaching 48,000 hectares of land divided into different activities. At the beginning of the summer season, the Company started with 31,000 hectares of planted land.

You see there in the low-left graph the compound growth since the Company started its operation has been 48%, reaching the 48,000 hectares of land to be put into production. Remember that the Company has eight farms with 155,000 hectares of land available. And the hectares planted at the beginning of the first quarter under summer crops is 31,000 hectares with an increase of 41%, devoting 27,000 hectares to soybean production.

Now David Perednik will comment on the income statement for the Company.

Good morning. (inaudible) the income statement of our first quarter 2010, first of all, we have to say that we are comparing two different sets of information, due to the fact that as of September 30, 2008, Cresud had IRSA included in the line of results from interest in related companies because Cresud holds less -- held less than 50% of the shares of IRSA, while in the quarter of September 30, 2009, IRSA is being consolidated line by line within the financial statement of Cresud.

Gabriel and Alejandro have already mentioned all the operating -- the different lines of the operating income of the agribusiness; we have to add that with respect to the real estate business. The operating income that IRSA is bringing to Cresud financial statement is ARS109.9 million in 2009. And the operating income consolidated is coming from a loss of ARS8 million last year to ARS90.3 million in 2009.

With respect to the financial results, our financial result is the increase -- the loss from --sorry, and increase here -- it's a loss from ARS6 million last year to ARS42.4 million loss this year. This is due to the fact of a different subject -- a higher loss of ARS39.1 million in our financial interest net between both periods. This is including ARS36 million loss from our consolidated real estate business segment of IRSA. That means that IRSA is bringing the interest of the debt in 2009, while last year in 2008, that was -- everything was consolidated in -- result from interest in related companies.

A higher loss of ARS15.4 million generated by foreign exchange net between both periods, and this also coming mainly from IRSA segment, from the real estate business. We had a higher gain of ARS0.3 million generated by financial operations and a higher gain of ARS4.8 million between both periods originated by other financial results, mainly due to the impact of debit and credit tax.

With respect to the line of result from interest in related companies, last year, we had a loss of ARS37 million, including IRSA. And this year, we have a gain of ARS93.6 million. This was basically -- the ARS93.6 million is bringing ARS97.2 million from Banco Hipotecario share in IRSA financial statement. And last year I've already mentioned the ARS37 million were mainly due to the result of IRSA, ARS33.9 million, BrasilAgro a loss of ARS2.5 million in 2008.

With respect to the income tax from almost zero last year, we have here a loss of ARS15.3 million. And this is due to the fact that we have net income subject to tax -- to income tax. And with respect to the minority interest from almost zero last year, we have in this financial statement a loss of ARS61.4 million. And this is coming from the minority interest of the consolidation of IRSA financial statement in Cresud.

IRSA is currently bringing ARS132 million gain. That means that the minority interest of the shareholders that are not Cresud are bringing a loss to this financial statement of ARS66.4 million from the ARS61 million. The other figures are coming from Alto Palermo, the minority interest ARS6.8 million, and in [Jaojao] a gain of ARS2.3 million.

Therefore, we have as a result of the above mentioned, a net income that increased 265.3% from ARS37.4 million loss to ARS61.8 million gain for the three-month period ended September 30, 2009.

Thank you, David. Moving to page nine, wrap up on the debt book of Cresud, which the standalone debt of the Company, $75 million, short-term $25 million. We have $20 million, which are related to the crop production financing. This is mainly for finance exports. The two notes that we issued during the period, we are going to comment on that later. And the seller's note on Bolivia Farms is $16 million.

Adding to that, IRSA consolidated debt brings up the total debt of the group to $487 million with cash of $51 million. The consolidated net debt is $435 million, exacting the amount of notes of the Company that have been acquired, both by Cresud and Alto Palermo. The consolidated total debt after the bond purchase is $339 million.

We move to next page on page ten, couple of comments on the financial side. The Company issued during the period in the local capital market two small notes related to the business, ARS50 million note, accruing Badlar plus 300 bps. Badlar is a rate related to deposits -- to bank deposits published by Banco Central, 270 days maturity. And the series I note, $8.97 million, if it were into pesos, ARS34 million, one year bullet at the interest rate of 7.20% payable quarterly. The total book was 2.25 times bigger than the amount of money that the Company raised.

On the other hand, an allotment of 25 million shares bought back by Cresud during the crisis in fiscal year 2009 is going to be distributed among shareholders according to shareholder meeting decision of October 29, 2009. This means that 0.0530 shares per share or 0.23 shares per ADR, the record date for this will be November 20, already announced earlier this week. On the other hand, on the same assembly, ARS60 million cash dividend was authorized by the shareholder meeting and will be paid in a later date.

As a conclusion, the Company, as always, first quarter on the agricultural side is not so relevant. Production figures are recovering, thanks to the recovery on the rain pattern. And we have a significant increase in the price environment for our production. And related, the rest of the portfolio as we have already seen is contributing very significantly to the Company results for the period.

Thank you very much. Now we are open to Q&A.

(Operator Instructions)

And there are no questions at this time. Do you have any closing remarks?

Well, thank you very much for your time. And [we're with] you in the next call.

This concludes today's conference call. You may now disconnect.