Cresud SACIF y A (CRESY) 2012 Q3 法說會逐字稿

Good afternoon, everyone, and welcome to Cresud's Third Quarter 2012 Results Conference Call. Today's live webcast, both audio and slide show, 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 and the earnings release issued last week are also available for download on the Company website. (Operator Instructions).

Before we begin, I would like to remind you that this call is being recorded and that information discussed today may include forward-looking statements regarding the Company's financial and operating performance. All projections are subject to risks and uncertainties, and actual results may differ materially. Please refer to the detailed notes in the Company's earnings release regarding forward-looking statements.

I will now turn the call over to Mr. Alejandro Elsztain, Chief Executive Officer of Cresud. Please, go ahead, sir.

Hello. Good afternoon, everybody. We begin the third quarter 2012 conference call. And in the page number 2 talking about the highlights of this quarter, we had during the season, we have sold more than 205,000 hectares, and we have ended harvest of wheat, 12,000 tons, and sugar cane, 220,000 tons. Soybean and corn harvesting is taking place during this month.

In the beginning of this fiscal year, we started consolidating BrasilAgro, having a significant impact in our financial and operating numbers.

The crop production grew by 540% comparing to the first nine months of fiscal year 2011, reaching 870,000 tons. Thanks to consolidation of BrasilAgro, that added 619,000 tons of sugarcane and the late harvesting of part of our corn plantation in Argentina, totaling 132,000 tons versus 63,000 last year.

Operating income of Cresud totaled almost ARS500 million, a 2.1% fall comparing last nine months of 2011.

Net income for the period was ARS67 million, compared to ARS141 million of last year, and the main reason for that decrease was the net financial losses. During this period, Argentina had experienced a severe drought caused by La Nina that affected the country's core productive area. This expected to hold a mild impact in the farms of our portfolio as they are located in areas not affected so dramatic to the drought. To give you an idea, we are expecting almost 10% decrease in soybeans comparing to budget, a 14% decrease in the case of corn comparing to our budget for those farms.

After the closing of this period, we purchased 570,000 ADRs issued by IRSA, representing almost 1% of the outstanding shares of the Company for a price of $4.9 million. And Cresud has increased its stake, achieving 64.2% of IRSA.

Today, we are going to introduce to the conference call our General Manager of Cresud Argentina, Carlos Blousson. Carlos Blousson began to work with us since 16 years, and after surpassing many positions, beginning being consolidation manager, after that he went to be the manager for Bolivia and Paraguay and recently was appointed to be General Manager for Cresud Argentina. So I will introduce Carlos Blousson to the presentation. Thank you very much, and very welcome, Carlos.

Thank you, Alejandro. Good afternoon. Page number 3 about (inaudible), you heard in the press about soybean moving in the last six months, increased to 77%, and corn and wheat maintained similar levels. Soy price evolution in the last two years increased 50%, and in the last six months, 24%.

Milk price evolution in the last two years increased 25%, and in the last six months, 3.7% less.

Page 4. Area under crop production, the country breakdown. In the last year, the total hectares is 205,000 (inaudible). And the countries -- Argentina 108,000, Brazil 65,000, Bolivia 24,000, and Paraguay 8,000.

The breakdown of the crop production, 50% is soybean and 20% corn and less other production like sunflower and wheat and sugar cane.

Page 5. The beef cattle and milk production, about milk production in the last nine months, the milk production increased by 41% to 5.2 kilos to 7.3 million kilos and the [stock] of the cattle maintained near to 70,000 cattle for total. Milk production in the last year, milk production per cow per day increased to 19 liters per cow to 22.5 liters per cow, but the total production reduced near to 19% because in the last year there was consolidation in only milk production farm and sold one of the milk farms, La Juanita.

Page 6. Area under development in 2012 in hectares per country, for Paraguay is 4,035 hectares, and divided 2,021 produced in the fiscal year 2011/2012 and the other 2,014 produced in the next fiscal year. In Argentina, the number is for total 20,320 hectares in production in the fiscal year 2011. In 2012 is 3,729 and in the next fiscal year is 6, 593. Industrial is -- the area produced in 2011. 2012 is 19,800 hectares.

Page number 7 you can see regional farms portfolio. The production regarding farms (inaudible) last year and in the last year, in 2012, total area to put in development 34,200 hectares. Development in Paraguay, 4,000, in Brazil 19,800, in Argentina 10,300. And relative to land development, future development, in Argentina 120,000 hectares, in Brazil 50,000, in Paraguay 60,000.

Page 8, the hedge position as now consolidate the four countries. In Soybean the hedge is 98%, (inaudible) of the price is $406,000 per ton and in corn the (inaudible) is 51%, the price is $202 per ton.

Now David Perednik, the administrative manager of the Company administration will give a presentation about the income statement.

Good afternoon. Our income statement as of the 31st of March 2012 compared to 2011, the results from production increased 154% from ARS42 million to ARS95.9 million in 2012. It's important to state that Cresud's consolidated income statement of 2012, March, includes the consolidated results from BrasilAgro in the 9-month period and the P&L after the 1st of March in 2011 does not include BrasilAgro consolidated data. This fact is affecting the comparability of the income statement. So with respect to the results from sales, it increased 36.9% from ARS79 million to ARS108 million in 2012.

Our gross profit increased by 67.6% from ARS152 million to ARS204 million. We also incorporated the feed lot and slaughter segment that lost 261% from ARS2.9 million to ARS10.5 million due to the consolidation of cattle and our slaughter factory. The real estate segment coming from IRSA increased by ARS85 million, 14.2%, from ARS602 million in 2011 to ARS688 million in 2012. This was mainly due to the gain of [shopping centers] and (inaudible) fees and other non-segment (inaudible) in our segment offset by lower costs of ARS41 million from consumer financing on sales and development on sales (inaudible)

The operating income decreased 2.1% from ARS512 million a gain for 2011 to ARS501 million in 2012. It's important to state that the operating income from the agricultural business is decreasing 76% due to the decrease in the holding results of this year compared to 2011 by ARS60 million or 104%. And the selling expenses and administrative expenses are coming with an increase of 135%, now 154% due to the consolidation of the products and also on selling and administration of BrasilAgro.

With respect to the financial results, the financial results had a decrease of 62.4% comparing 2011 we have a financial result for ARS254 million. In 2012 we had for the 9-month period ARS380.8 million. These main variations were due to a higher loss of ARS85 million generated by net financial interest, higher gain of ARS9.9 million generated by financial operations, and a higher loss of ARS31.3 million on the debt generated by the rate of exchange, the US dollar rate of exchange that has a higher depreciation in 2012 compared to 2011.

With respect to the result from interest in related companies, they decreased 12.3% from ARS98.9 million to gain to ARS86.8 million in 2012. Income tax was ARS89.1 million loss in 2011 compared to ARS51.2 million in 2012. Therefore, our net income decreased by 52.7% from ARS141.8 million in 2011 to ARS67.1 million in 2012.

On the next page you can see what I have already explained separated in the different parts. Agricultural business, sales from farms, feed lots/slaughter, real estate, financial results, equity invested, income tax and minority interest.

Now is going to speak our CFO Matias Gaivironsky.

Hello, everybody. Thank you, David. Turning to page 11, here you can see the breakdown of our debt which is right here we have on a consolidated basis all the information. We can separate between the different companies. Cresud total debt right now is $248 million. IRSA's debt is $473 million, while APSA debt is $143 million. So that gives you a total consolidated debt of $865 million and then you have to deduct from that total debt of we have in our hands that will represent in the market $12 million and the cash that we have that is $129 million, so that gives you a total net debt of $724 million.

You can see the ratios, net debt to EBITDA is 3.3 times on a consolidated basis and debt to assets 32%, but remember that the assets are booked by the enormous market values. So when you see the amortization schedule, you see $114 million for this year. We are working towards issuance of bonds in the local capital markets to redistribute part of the debt on extended general debt.

So I open to questions. Please, Operator. So we invite for questions. Operator? Again, Operator, we are inviting investors for questions. Melia?

(Operator Instructions). Pedro Herrera, HSBC.

Hi, guys. Quick couple of questions. Have you, in the last quarter, have you -- what have you seen out there in terms of valuation of farm land in Argentina? Have values based on the things that have happened in the last couple of months, two, three months, have you seen land values change? One, first question. The second, are you at some point going to provide third party valuation of your land?

Thank you, Pedro. No, the market is not showing recently operations, so we cannot talk about how is the market on valuation. We are thinking on doing valuation in the IFRS requirements that will be next year. And on that, they are going to release to the market, but the market on farms is quiet. You know that the farmers are liquid enough and they have no debt, so having many years of good rental. So they are not (inaudible) to the market and probably these days are not -- I did not hear about any operation upset (inaudible) you mentioned about the exchange rate. So I cannot talk about if they change. I think they are still same.

Okay, thank you.

Pedro Richards, Raymond James.

Hi, Alejandro and Matias. Thanks for the call and congratulations, Carlos, for the new position. So going to slide 4 when you show the evolution of planted area, I wanted to ask you if you could share with us your forecast for the 2012/2013 upcoming harvest. How much hectares are you planning to increase planted area? If you are planning to switch and increase one crop over the other and how supplies costs are coming compared to last year? Thanks.

Thank you for the question. The budget is [stable] very early. We are deciding to own is easier to list. We are in the process of listing, but it's quiet. You know that the strategy about listing is very small comparing. It's 20% or 25% in listing to the 75% in owning. So we are growing, incorporating the new developments, but every year we are increasing the size of developed in Brazil, in Paraguay, and in Argentina. So we are going to incorporate more. The listing up to now is quieter of last year, so probably will be something like this year or something a little higher, but not a big change because the increase in size of the development maybe can be decreased some in listing if the market is like it is today.

Okay, and are you planning to increase the planted area of one crop over the other one? Taking into account the integration of the government in the market?

I think we'll be not very different of last year. The biggest will keep being the soybeans and sugarcane is growing bigger because the case of Bolivia that we are going to harvest this year 1800 [cross talk]. This year we are going to increase 1,500 of sugarcane in Bolivia. But the big ones won't change dramatically. Soy will be bigger, soybeans for sure.

And one last question regarding the market in Argentina. So how serious are the rumors of higher intervention in the farming sector in Argentina regarding the market of commodities, of trading the commodities of the farmland market?

We didn't hear about increasing intervention, so maybe you can tell us that. Up to now what we are seeing, it's the measures that are in the market and so we are not calculating more intervention, nothing.

So in terms of higher export taxes, it seems that this year was really bad for the sector, so that wouldn't be an alternative. But maybe doing a different foreign exchange rate for the sector or increasing intervention in the farmland market, there is a bill that was sent to the Congress about this. You don't see any higher intervention as it is today?

We cannot say what will happen in the future. We saw that a lot of (inaudible) was applied last year that yes, there is a rescission of purchasing from farmers. Yes, that is something that it is. The increasing on targets in that, we haven't any idea. Really, we are not expecting that to happen in this period.

Okay, and one final question. What's the long-term strategy of Cresud regarding its stake in IRSA? If you can comment on that? (inaudible)

You know that we like, strategically we like the stake of IRSA and every time we consider the strategy for increasing that stake. And when the market gives the opportunity, we do that. So we think it's a very good portfolio and Cresud likes it very much.

So what should we expect to see in ten or five years from now regarding the stake in IRSA?

No, I can't -- up to now we are growing IRSA market. We obviously are going to sell, but basically it is going down, we are increasing the stake. We have not any targets, so we are doing what the market allows us and what we see opportunistically, but there is not a target that is in terms to have. In this condition, we found the opportunity of purchasing this, and we did. Like the other targets, we are growing from near zero to 64%.

Okay, thanks a lot for the call, Alejandro.

This concludes the question and answer section. At this time I'd like to turn the floor back to Mr. Alejandro Elsztain for any closing remarks.

So we can finalize saying that the Company intends to keep the development in the Company and trying to make this hidden value that the Company has this opportunity of developing every year increasing its hectares, that every year are increasing the prices. So we expect to make this good production in the region being diversified in products and in area and in countries, to keep growing, to more activity, the Company is growing, [share count] is growing. So we hope to see you next quarter with very good results. Thank you very much and have a very good day. Bye.

Thank you. This does conclude today's presentation. You may disconnect your line at this time and have a nice day.