Cresud SACIF y A (CRESY) 2010 Q3 法說會逐字稿

Good morning. My name is Cassandra, 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 2010 conference call.

It will be hosted by Alejandro Elsztain, CEO; David Perednik, CAO; and Gabriel Blasi, CFO. 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) Thank you, you may now begin your conference.

Good morning, everybody. We are going to talk about the third quarter fiscal year 2010 conference call. The net income that Cresud achieved for the nine first months amounted ARS185 million, compared to ARS4.7 million in the same period of previous fiscal year.

The operating income of this nine-months was ARS416 million composed of ARS344 million (sic - see Press Release) coming from IRSA segment and ARS32.6 million coming from Cresud agribusiness segment, which had a record of a loss of ARS28 million last year, last nine months.

Rises in the price of beef cattle and improved weather conditions for agricultural production have underpinned the increase in our business -- agribusiness operation income during this fiscal year.

We continue our expansion plan in Brazil as reflected by our agreement to purchase Tarpon's equity interest in BrasilAgro. And IRSA, our real estate investments have shown a very sound year-on-year performance.

We can see in next page, in page number 3, that the weather evolution and the soil condition have recovered a lot. And we can see from the green in the map of Argentina show the improved humidity in our farms as we compare last year average of that farm comparing to this year. And so in general in almost all the farms it was a good rain and that it's improving for the mainly for coarse grains that they are soybean and corn that they are going to appear in the last quarter.

The crop perspectives in page 4 for this campaign for Argentina, in soybeans there is a big rebound. Last year with the drought the total yield of the country was 32 million tons and the USDA is forecasting 50 million tons for the country and the same big increase in corn where there was a reduction in area but it increased because of very good rain. And some increase in wheat that was finished on last year.

So the country after a drought year, it's turning good year and so the sector is in much better condition than previous year of 2009.

If we go to page 5, we can see the breakdown of our land and there are two news that we could talk about. Paraguay, we increased the amount of hectares of purchase from the option we exercised 3,500 hectares for $350 each and that is the change of last quarter in Paraguay's option.

And in the case of Brazil the increase was main because of we purchased a new farm, the ninth farm and we are going to talk in BrasilAgro's explanation. The other is almost the same.

Regarding the production statistics for the first nine months of the year you can see that there is a small decrease in the land under crop production in the upper left of page 6 with an increase in the owned and under-construction land put into production and the increase is mainly represented in the leased land.

Regarding the planted area and the harvest progress, as you can see in the upper right on the soybean as of the closing date of the quarter, or the first nine months of the year, we have completed 50% of the harvest. Sunflower has been fully completed, on corn 19% was completed, and thee wheat was fully completed.

Regarding dairy production there are no significant shifts in the first nine months of the year compared to the prior fiscal year. And in the beef cattle we have reduced the amount of cattle heads selling in the market and the (inaudible) is expressing that situation with an [increase] of almost 20%.

Going to next page, the beef and milk prices, the environment continued to be very positive. The steer prices have more than doubled for the last 12 months, and you specifically -- you can see that the trend continued to go up for the last part of the year, during last quarter. In the case of the milk, a similar situation, we have an increase of almost -- more than 50% since June last year.

In Cresud International, in the case of BrasilAgro, we acquired the ninth farm. It's a 14,000-hectare farm at BRL37 million. This summer harvest initiated 28,000 hectares of soybeans and 3,700 hectares of other crops. BrasilAgro has still a very strong cash position of BRL219 million.

There was an agreement to increase Cresud's participation in BrasilAgro, acquiring Tarpon's stake. After the pending transactions are executed, our stake in BrasilAgro may increase to below 36% assuming that warrant-holders do not exercise their rights to purchase shares.

In the case of Paraguay and Bolivia, there we sold 3,000 hectares and there are new 3,000 hectares under development in Paraguay. We acquired 3,600 hectares in Paraguay at $350 per hectare that I mentioned before, following the option -- the exercise that was included in the 100,000. And we exercised that because we could develop now those and we began but we have the time of exercising the rest for more than three years.

And we -- in the Argentinean portfolio update, we have agreed to sell off Tali Sumaj, a farm that was mainly for cattle raising, and that is going to -- we signed the agreement and the final execution will be very soon. That is a sale for $4.8 million and that reflects a big gain for the Company that will be probably next quarter. That is 12,700 hectares in the province of Catamarca and the decision of selling that because this farm because of lack of rain have not the potential of performing after for grain production.

So the capital was achieved and the gain was announced, so we said, let's [bet] again making a big gain that we are going to reflect next quarter.

With respect to the financial statements the income statement of Cresud as of 31st of March 2010, our net income increased from ARS4.7 million to ARS184.7 million. This is -- it's important to mention that we are consolidating IRSA's financial statement for the second and third quarter because during the first quarter, we had less than 50% of the share by the shareholders' participation.

With respect to the results from production of our agribusiness segment, in 2009, we had a loss of ARS15.1 million as of the third quarter of 2009, and this 2010 in the third quarter, we had an increase -- an income of ARS1.5 million. We expect the gross profit -- it increased 69.8% from ARS366 million gain for the-nine months period to ARS621 million in 2010.

This was due to our -- an increase -- a slight decrease in our gross profit on our crop segment from ARS0.1 million gain to ARS6.1 gain, a 61% increase in our gross profit in beef cattle segment from ARS0.4 million loss to ARS0.7 million loss. And 100% increase in gross profit from our milk segment from ARS1.7 million gain to ARS3.4 million gain.

We had a 9.8% increase in our gross profit from our consolidated real estate business segment of IRSA from ARS356 million gain in 2009 to ARS605.2 million gain in 2010. Our operating income increased [282.5%] from ARS108.9 million gain in 2009 to ARS416.6 million gain in 2010.

It's important to mention that we had a significant increase in holding results from ARS3 million loss in 2009 to ARS64.2 million gain in 2010. And this was mainly driven by our beef cattle segment that had an increase in the prices of the cattle of almost 68% during the last two quarters.

With respect to the financial results, there were -- we had an increase in the loss of ARS[63] million from a ARS27.6 million loss in 2009 to ARS91.1 million loss in 2010. We had a higher loss in our financial interests that is including our consolidated real estate business of IRSA. We had a lower -- a loss of ARS55.9 million generated by foreign exchange debt that also is including the real estate business of IRSA.

And we have the -- no recurrence of the gain that we had last year on the repurchase of notes issued by IRSA of ARS137.5 million.

With respect to the results from interests in related companies, we had an increase from ARS70 million loss in the last -- in the 2009 to ARS140.2 million gain in 2010, and this was mainly driven by an increase of ARS180 million from our shares in the Banco Hipotecario.

With respect to the income tax last year, we had a loss of [ARS32.4] million while this year in 2010 we had a loss of ARS105 million and this is mainly driven by the increase in the operating results of both IRSA and Cresud. And with respect to the minority interest last year we had an income of ARS26 million while this year we had a loss of ARS175 million. And this is reflecting the minority interest on the business that we are consolidating. This was mainly driven from IRSA, the minority interest that -- from the shares that we don't have -- that we'd have from IRSA.

Therefore, the increase in the net income was of ARS180 million from ARS4.7 million last year to ARS184.7 million in 2010.

Regarding the debt situation, as of March 31, there are no significant changes. The total debt of Cresud is $130 million, the percentage -- $70 million of short term debt in pesos after one year; $40 million represented by a [refinance] of the exports; and the rest are composed mainly by the local notes that were issued during last year.

On the consolidated base, the total net debt is $468 million considering the net cash brought by and consolidated by IRSA and also the bonds that had been acquired which roughly would present between 20% to 25% of the total issuance of notes of the [Group].

Please, operator, if you have any questions.

(Operator Instructions) Your first question comes from the line of Pedro Herrera of HSBC.

Good morning, gentlemen. Can you just give us a little rundown on what's going on with -- in terms of the export grains, the wheat and soybean taxes et cetera, all the export issues with the government in addition to the beef issues with the government?

Yes. There -- in the case of grain there is nothing that is changing. You know that the taxes are different in soybean than corn and wheat. And the country is waiting for any measures coming from the government for pushing more other crops than soybeans.

The recent -- the soybeans is the higher taxed, but because of the opening of stock market it's still the more attractive for a crop in the country. And that is pushing a lot of hectares under soybeans production. So it will be the farmers that are waiting, in the case of corn and wheat mainly, the reduction of those taxes and more clear signs from the governor on the opening of the market for those two for recovering prices and recovering areas for next campaign.

In the case of beef again [in here] there is not the problem of taxes, but here the problem is the restrictions of exports. And recently the government began to talk about an opening of exports, giving like 20,000 tons per months to the packing plants to export every month. And in giving to our Company too like 400 tons per month of exports.

So they are reopening what they closed because of them trying to keep the price of the beef very cheap, some moments of these -- of the year they close directly the exports of the country. Now, they are reopening these exports for beef, Argentine beef. At the same time they are -- now they're making some measures about importing food. They are restricting the importation of food.

Okay, thank you.

(Operator Instructions) I'm showing no other questions at this time, sir.

Okay, what we have seen in the last nine months is, from the growth perspective there was a recovery on climate and that will affect and will impact probably next quarter on the harvest of coarse grain, soybeans and corn. In this too the first quarter was very bad because the drought coming in the pastures too but today the environment of the pastures are much better.

We are going to keep developments in Argentina in our Los Pozos and other projects, increasing agriculture for next campaign and doing the same in Paraguayan -- with Carlos Casado increasing the size of production in that country too.

In case of Brazil we are keeping the pace of buying new farms and developing the existing. The price on cattle and milk are showing this recovery and it's increasing the margins for next campaign. In the case of crops the last quarter will bring these big products of Cresud, that -- they are soybeans and corn.

And finally, we are still seeing the land [like the] hedge for inflation. Foreigners are coming to the region and seeing and trying to buy more land. And not only in Argentina, but in the rest of the region. So we are very glad of having the [future] value of land and increasing production for the next year.

Thank you very much and have a very good day.

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