Cresud SACIF y A (CRESY) 2011 Q4 法說會逐字稿

Good morning, everyone, and welcome to Cresud's (inaudible) Fourth Quarter 2011 Results Conference Call. Today's live Webcast, both audio and slideshow, may be accessed through the Company's Investor Relations Website at www.cresud.com.ar\ir by clicking on the banner Teleconference. The following presentation on the earnings release issued last week are also available to download on the Company's Website. (Operator instructions). Before we begin, I would like to remind everyone that this call is being recorded.

And the information discussed today may include forward-looking statements regarding the Company's financial and operating performances. All projections are subject to risks and uncertainties, and actual results may differ materially. Please, refer to the detailed notes in the Company's earning release regarding forward-looking statements.

I would now like to turn the call over to Mr. Alejandro Elsztain, Chief Executive Officer of Cresud, and Gabriel Blasi, CFO. Please, go ahead, sirs.

Hello. Good morning, everybody. We are beginning our conference call of the fiscal year 2011 that closed June 30.

If you move to page number 2, we see the highlights of the year. This year, we can accomplish the combination of both the Company grew in size and in the region, and the net income increased to last year. But we can talk is the agribusiness segment grew a lot comparing year to year. Operating income from the agribusiness segment amounted to ARS168 million, increasing 180% comparing to previous year. And that is a combination of both good yields and good prices that we're going to show you later.

The Argentine agribusiness industry saw improvement in the amount of tons produced per hectare in the beef/cattle production and prices and dairy margins, and Cresud's international agribusiness activities show improved results. And one of these good results was the result of Bolivia that has again a good combination of yields and prices.

Cresud has consolidated the financial statements of BrasilAgro, June 30, its Brazilian subsidiary, effective as from June 30, and our interest is 35.75% of BrasilAgro.

We made progress in developments inside Agropecuaria Anta and Los Pozos, adding 6,000 hectares more to the agriculture this year. We [additioned] 5,300 in Paraguay, and we additioned more hectares in BrasilAgro.

There was one sold. That was La Juanita farm in the province of Buenos Aires that was an $18 million sale, and the majority of that was gain we're going to show you later. And we sold 900 hectares in Bolivia for a price of $3.6 million.

We purchased two new farms in Bolivia for $13.5 million, and we bought 40% -- that is not included in the presentation. We bought 40% of a farm of almost 1,000 hectares in Mendoza near the region of wines that we are going to put on wine production soon. 40% of that company was bought for $2.4 million of the money that Cresud invests in that farm in Mendoza.

If we move to page 3, we can see the evolution of prices for the main crops, the main grains. This is the CBOT evolution. And we see almost 50% in soybeans and wheat and 100% in corn increase of prices year to year. Not all of that is reflected in the Argentine market, but the majority of that is reflected in the rest of Latin markets.

If we see the evolution of Argentine harvest, we can see that, in wheat, there was a growth, 11 million to 15 million tons. Our forecast for next year, a small drop. There was a decrease in corn from 23 million to 22 million tons and a very important increase for next campaign, 2011/2012. And there was a drop in soybeans crop from 54 million tons to 49 million tons and a recovery for next campaign. These are USDA forecasts for next campaign.

If we move to page 4, we see that (inaudible) the grain, in the beef, there was an increased price too. There was a 30% increase in pesos in the steer price, a 17% increase in pesos in the milk prices. And we can see here our evolution. There was near double production in beef, a big recovery from the drought of last year. This was a normal or better than normal production in beef.

A small reduction in production in milk because of the reduction of La Juanita farm. La Juanita was sold last year, so half of the year was on production, and half of the year was not on production. And a part of that was a small reduction of the dairies of the El Tigre farm. We decided that, because of prices of dairy -- of the cows was so high, we deducted part of the stock. We said -- let's stay with the best cows, and we sold near 500 cows from our stock. But, having that clean, we are going to see that margins were almost stable or better this year comparing to last year in dairy too.

So, if we move to page 5, we see areas consolidated under crop. And we see the evolution of Cresud and how the consolidation of the region is growing in area by country. And we see, from 2007, where we were planting almost 50,000 hectares, we finished this year with almost 180,000 hectares. We are forecasting for next year 218,000 hectares.

This is the breakdown by country, being Argentina, the biggest. The second is Brazil. The third is Bolivia. And the fourth is Paraguay. And we can see the tons of harvest, [closed as of June 30] near 600,000 tons were done in the whole region.

And, next year, we are planting, like 20% growth, from 183,000 to 220,000 hectares in the whole region. This is a combination. The majority of that is owned area -- this is the 150,000 hectares owned -- 52,000 hectares of lease, and 11,000 hectares areas under concession. This is the long-term lease we have (inaudible) project [inside].

If we move to page 6 -- 7 -- sorry, we can see that, this year happened something that never happened in the past. A portion of our crop was delayed and didn't appear at June 30. So the numbers we are giving you is having near 20% of tons that didn't come, but they are going to come the first quarter. This is mainly explained in Argentina with corn. Soybeans is almost finished. But the corn, because it was planted mainly in the north of Argentina, was delayed. And there are a lot of tons that are going to appear and a lot of margin that is going to come the first quarter of this year. But, in general, we have a small operational segment in the first quarter. This year, the first quarter will be bringing these, mainly, tons of corn from the north of Argentina, some in Bolivia, and some in Paraguay. The soybeans was almost finished, and wheat and sunflower were finished.

With this delay, we see the evolution that we had an increase in volume of 21% of soybean year to year and a 35% in volume in corn. So what we have this year was a good combination of size, big surface, good yields, and good prices.

This is the next page, 8. We can see the evolution of soybeans of 2010 was 2.5 tons per hectare; this year was 2.9 tons per hectare. And, in the corn, we have 6.1 tons last year, and, this year, we have 7 tons per hectare of yield. And we can see the average count of the country, and Cresud this year surpassed the average of the country. We were in regions that suffered less the drought. The corn beds suffered a little more. And our Company surpassed the average of the country in yield of these two main products of the country.

If we move to page 8 (sic - see Slide Presentation), we can talk about gross profit and EBITDA of activities. In gross profit, we divide it in crops local and crops international. Next year, we are going to show the EBITDA of BrasilAgro too. Up to now, we didn't consolidate the results of BrasilAgro. That's the reason why we didn't show you the EBITDA of BrasilAgro that was positive too, because we didn't consolidate in this balance sheet.

Crops local grew 253% (sic - see Slide Presentation), 1,500% (sic - see Slide Presentation) in crops in the rest of Latin; that is, Bolivia and Paraguay. We grew in cattle from a negative to ARS14.5 million (sic - see Slide Presentation) in cattle production. And, in milk, having a very smaller amount of cows, we grew 29% (sic - see Slide Presentation) gross profit year to year too.

What we see in EBITDA, we come from negative numbers in crops (local) last year because of drought to ARS15 million positive, in international to ARS26 million profit, in cattle to ARS69 million profit compared to ARS63 million last year, and, in milk, 46%.

So we see evolution on size and prices and yield in the whole region.

If we move to page 10, we can talk about our subsidiary BrasilAgro, where we have 35.75% of the shares. We had an appraisal that showed an increase of 100% over the acquisition costs to the [audit] that Deloitte did of our farms that we bought recently.

The net sales of crops increased 90% comparing year to year. Nets of sugar -- Sales of sugar cane achieved ARS25 million. And the EBITDA of BrasilAgro was ARS32 million, the first time that has a positive EBITDA coming from agricultural operations. And, an achievement of growth in area, we closed 58,000 hectares, and we are still transforming. Next year, the number is surpassing 70,000 hectares of planted area in BrasilAgro.

A small explanation of the sale of La Juanita, the only farm we sold in Argentina. We sold for $18 million. We made a sale result of $12.5 million, so the majority is gain. The book value, like all of the farms, is very low comparing to existing prices.

If we move to page 12, we can show what happened in Bolivia. One small portion of a small farm -- It was a 2,000 [hectares] farm. We sold near half of that. We sold 910 hectares. The acquisition price was $2,300 [per hectare]; it was paid in 2009. And we sold for $4,000 [per hectare]; so $3.6 million sale, a big gain. [Small percentage with big rotation.]

We sold that because we found two new purchases to make in Bolivia. We bought one farm for $5 million and another farm for $8.4 million. This is one farm of 2,300 hectares, the majority for agricultural. The average price for that is $2,100 [per hectare]. And the second one is for sugar cane. A majority is planted, and the rest are going to plant soon. We paid $3,100 per hectare.

So we are beginning sugar cane, like we are doing in Brazil, in Bolivia too. We think the cost of acquisition is cheaper, cost of implantation is cheaper, and the margin is very high too. And we have the contract with (inaudible) [milling] that is one existing that it's buying and a new one that is being done in the region. So we are beginning this industry of sugar cane in Bolivia too.

Some more details about the purchase of Mendoza that we bought for $1.6 million the 40% percentage that Cresud bought. This is a total surface of 929 hectares, and it was abandoned. We have to begin the plantation of the wine, and we are beginning probably in the year 2012 in partnership with another Argentine company.

I will introduce Gabriel Blasi to talk about (inaudible) of Cresud.

Regarding cost reduction, if you go to page 15, we have an agreement for shared services between Cresud and its subsidiaries, IRSA and Alto Palermo. Because of this agreement, Cresud provides services to Alto Palermo and IRSA, allocating costs to each company. All structure management is centralized in Cresud.

We have synergies between the companies by sharing the structures like human resources, finance, institutional relations, administration and control, IT, procurement, risk and processes, internal auditing, and contract. Occupation costs and salaries of each area are allocated according to measurable parameters, which are timely audited by Deloitte (inaudible).

Coming to the income statement for fiscal year 2011 on page 16, if we look at the results of production of Cresud, it has increased more than seven times, reaching ARS126 million for the period. The agricultural business with the sales give us total gross profit of ARS228 million, more than three times growth compared to the prior year.

If we look at the feedlot, slaughter, and real estate, that result is in line with last year and consolidated gross profit of more than ARS1 billion, an 18% growth compared to the prior period.

Regarding the consolidated operating income, we have reached ARS727 million, a 24% growth compared to the prior year, coming a significant part of the increase -- the biggest part of the increase coming from the agricultural operation, about ARS100 million and ARS40 million from the real estate result.

Regarding the financial results, the increase in the level of debt at IRSA's level mainly explain the very strong increase of the financial cost in Cresud's balance sheet because of the consolidation. We have in line the result for related companies. And all that bring us up to a net income of ARS212 million, 14% higher than prior year.

It's important to address -- Alejandro already mentioned, but, just for your consideration -- that we are consolidated BrasilAgro on a net worth base with no impact in results -- significant impact in results for this year, which might, of course, be different in the next year, according to the positive evolution that the Brazilian operation is showing to us year to year.

Going to page 17 regarding our consolidated debt, at Cresud level, the consolidated debt of the Company is -- the net debt is $616 million. The consolidated debt is $811 million. We have a cash consolidated position of $171 million and debt repurchase on a consolidated basis among the different companies of $23 million. At Cresud level, the debt is $192 million with short-term debt of $70 million that is important to address that, last week, Cresud had refinanced this debt, issuing three years' note (inaudible) of $60 million with a 7.5% coupon with a three-year tenure, which has refinanced the biggest part of the short-term debt of the Company. And the rest of the debt is composed by small securities, which are placed in the local capital market and roll over concurrently in each maturity. And the rest of the debt is $167 million at Alto Palermo level and $452 million at IRSA level.

Now we are inviting to investors and analysts to ask us questions, please, operator.

(Operator instructions). Pedro Richards, Raymond James.

My first question is regarding the upcoming 2012 season -- if you could give any guidance on total planted area and crop mix.

And, then, regarding also the upcoming season, if you could, share with us your outlook regarding weather, prices of commodities, and supply costs compared to the previous season. Thanks.

In page 5, is the breakdown for next year. We are expecting growth again. We are finishing this year with these 180,000 hectares. We are (inaudible) to this 218,000 hectares for next campaign. The majority -- The breakdown of countries here is explained too.

The prices are very firm. Comparing year to year, prices of our two main products -- they are corn and soybeans are favored. We are expecting higher prices year to year. And part of that is taken by higher costs. Costs of fertilizer increased, and seeds increased.

So we are expecting for next campaign -- First, we have a very small amount of hectares for winter crops. The majority of that is planted in October, November, and December in all of the countries. The only part is planted now -- a big part is Bolivia, and it's going well -- a little dry but well. But the majority of that planted area is a summer crop. So about conditions we cannot talk. We need rain in September, October, November because that is the time that you need it.

In price, firm. In scale, we're increasing in size. And, in costs, there is a big portion of an increase of prices taken by cost. There was an increase of costs in the majority of the costs of the region.

Okay. Thanks.

Pedro Herrera, HSBC.

A quick couple of questions. One is -- There are reports that there's going to be some restrictions imposed on buying on agricultural properties in Argentina by foreigners. Could you just give us a discussion on how you think that will affect, in general, land valuations and land valuation appreciation going forward? The first question.

The second is in terms of your beef/cattle. How do you see beef/cattle prices evolving over the next 12 to 18 months. Do you see cattle prices coming down at some point soon?

Well, going to the first part of the question, really, there are several different approaches to the issue and many, many projects, so it can be premature to think that in the real way this will behave.

But, just to mention, if you look at the price of the Argentine land in the long-term trend -- not, I will say, probably, the last five years which the foreign investment in agricultural land has been more widespread all over the world -- If you look at, for instance, a 50-year series of Argentina, you will find out that the prices have been always growing up very steadily, regardless the presence of foreign investors, and even in periods of very low foreign investment in the whole economy as a whole. So it might be very, very tricky to try to imagine this impact.

And, on the other hand, the biggest part of the farms that are bought and sold in Argentina have been deals between locals in the past years. This is a very new trend for the country as a whole.

And no one knows how the rule will go, Pedro. The law is under discussion in the whole region, every country discussing differently -- Uruguay, Argentina, Brazil. And some are discussing about how foreigners are going to enter. For example, in Argentina, the discussion is -- they are thinking of approving foreigners to develop new areas and regions and new activities. The majority of the foreign investment came to develop areas. So, if this is the case, the foreigners are going to keep doing what they were doing.

So, for us, it's too early to talk about something that -- Argentineans is a very keen of buying. And, probably, they did financing. In Brazil, it's the same. When you are buying or selling your farms, given finance, probably the locals are going to buy. So it's tough to talk about how it will be affected in the future.

In the case of cattle, the cattle was growing, and there is a lack of stock in the country. Analysts are talking about two years of lack of stock. So prices are going to be -- per the analysts to be two years, at least, firm because of drought effect of the past and needs to recover cows. So that is the condition about two next years, firm price of cattle in the country.

Thank you.

(Operator instructions). And, at this time, there are no further questions.

I would like to address something else about the packing plant in that business. We are losing money, and this affected our balance sheet this year. Now we are thinking and moving for new measures to reduce that loss. It's the only business in Cresud that is giving losses.

We are going to keep developing new areas in the Company in the reserves, and we are searching for new regions and new countries for doing more. So we think we have the perfect platform to do bigger scale and to farm more for the future. We have food in all the regions, and the Company intends to keep growing for the next balance sheet.

Thank you very much, and have a very good day.

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