Cresud SACIF y A (CRESY) 2015 Q4 法說會逐字稿

Good afternoon, everyone and welcome to Cresud's Full Year of 2015 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.

After management's remarks, there will be a question-and-answer session for analysts and investors. At that time, further instructions will be given. (Operator Instructions).

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

I'll now turn the call over to Mr. Alejandro Elsztain, Chief Executive Officer. Please go ahead, sir.

Hello. Good afternoon, everybody. We are beginning our results of fiscal year 2015 and here we begin in the page number 2 about the highlights for the whole year.

We can see that our revenues grew 23% comparing to last year, achieving ARS5.6 billion. Our operating income, almost ARS2.8 billion, it's a 135% comparing to last year's numbers. The net income for the Company for the year was a gain of ARS750 million comparing to a loss of ARS1.4 billion last year in 2014. If we talk about the Cresud shareholders, the gain for the Cresud shareholders was ARS114 million, comparing to a loss of almost ARS1 billion last year.

If we talk directly about the farming industry, we are [experiencing] a good year, it was a good year in harvest almost in the whole region. We planted 211,000 hectares and we had very good [skills] in majority of our farms. But the prices of the world were very bad and that affected us a lot in the farming industry. So the effect of good yields was not compensated because of the drop on the prices and we had lower results in the farming that we're going to show you later.

In the other side, we had very good results on the development and in the sales of farms. We had a record of farm sales and we had a gain of ARS551 million that compensated that gain to the sales that we didn't have last year. So the poor results in farm is lower when comparing to last year was more than compensated because of that gain in the farm land sales. The development dropped comparing to last year, but still 11,500 hectares of development for that year.

If we talk about the other things, the packing and the other companies that we have, we had an effect of the loss of ARS19 million. Comparing to last year, that was much higher, because the meatpacking plant (inaudible) and the other companies FyO and Agricultural Leases having good results. In the euro zone, we had very positive results coming from IRSA Rental segment and asset sales of investment properties. The EBITDA grew 91%, reaching ARS2.8 billion last year.

If you move to next page, in page number 3, we see the evolution of planted areas, [with 211,700] hectares in the whole region and the development -- we were reducing, we are expecting the [direction] that just came to Brazil and the [directions] coming to the country. So that's why we are decreasing our speed of development. We have a lot of land bank on stock. We are going to increase in the time that we expect it would. So, we are now planning what to do for next year, but that's the reason we were decreasing our speed and this is not because of the case we have less land, we have a lot of land bank on stock so we are expecting to increase the speed for the future.

If we move to page number 4, we see the appreciation and this is a graph that compares the world, the highest prices, Iowa price corn belt of the United States and how correlate the price of the land of the world. And the next is corn belt of Argentina and the prices of Brazil, Paraguay and Bolivia. So we saw a cycle of 10% to 15% or 20% growth, compound growth for the last 10 years. Signs of purchasing, purchases Brazil and purchases Bolivia and Paraguay. So we had a very good cycle.

And if we move to next page, page number 5, we can see the price of soybean, soybean going to 8 or 9, going to a 16 level or 10 today, 9 today and the evolution of our sales. Our total sales in the past was almost $10 million. In average, we grew from $20 million in 2011, $26 million in 2012, $61 million in 2013, $21 million in 2014 and we have the record of $133 million of total sales, having a gain of $72 million, that is ARS500 million for the gain on the rent on these segments. And so the record -- having the record price of soybean, so we decided to sell big portion of our portfolio.

Here in the next page, in page number 6, the first one is the only one we did in Argentina. This is a transfer of La Adela to IRSA. This is no gain recognition, because this is to our company IRSA, the Urban property at $24 million and we [don't] enough recognition. But in the other side, Bolivia, Paraguay and Brazil giving ARS550 million recognition, the one in Bolivia, sale of $7 million, giving a $3 million gain, the same in Paraguay, a $15 million giving $5 million gain and the $89 million giving $64 million gain in Brazil. So when does and appreciations that of 20% in case of Bolivia, 70% because we're paying those [days] the option of Paraguay, and in the case of Cremaq sales in Brazil, the sale of the last portion was almost 12% internal rate of return and with a combination of the land before, the total sale of this land gave us a 13% in dollars, almost 20% or 21% in reais. So big sales, highest of our history and -- so we was our record, where the price of the land is very, very, very appreciation comparing to the past.

In the next page, we can see what we did in Cremaq. This is one good example of the mission of the group on the transformation of the land. This is a farm we bought for BRL40 million, at the beginning, almost not developed, we began development, cleaning the land, putting the agriculture, fertilizing, correcting the land, giving the houses for the employees, giving a lot of investment in direct and indirect employment, 120 kilometers of roads. So after doing that, we sold 100% of that farm. Now we have in the Company like $100 million in stock to make new purchase and paying dividends and buying back shares.

So I will introduce to Carlos Blousson, the General Manager of Argentina and Bolivia, to speak about the market of the countries of the region.

Thank you, Alejandro. Good evening everyone. I'll continue with page number 8.

As expected, weather conditions were positive in the region with good rains in quantity and also well (inaudible) in the area. Temperatures were normal for the season, both rain and thunderstorms generated good production conditions.

Argentina [presented a good year] of results in general allowing good yields in productions. The weather condition in the fields were normal in the last quarter and remained stable throughout the period. Rains in Bolivia and Paraguay also [returned to normal rain]. Production -- forecast production of all the different country, Argentina soybean production for this campaign increased 12%, reaching about 51 million tonnes, this is a record in soybean productions.

With regard to corn, production is stagnant (inaudible) for this campaign, a number which has been similar for the last three years. These are the consequence of the high production costs and the low price making this crop unattractive to the farmers. Soybean production in Brazil continued its positive trend and it reached a 9% rise to 95 million tonnes. Corn production increased [5% reaching 94 million tonnes], due to the positive weather conditions.

Regarding 2015-2016 Company in United States, the soybean planting area is expected to increase slightly compared to corn, because of the better soybean price. Both soybean and corn in United States continued their higher production levels with a slight decrease in corn because (inaudible) by soybean, reaching a 107 million tonnes and 348 million tonnes, respectively. This positive increase in production has improved the relationship between supply and demand, thus continuing to affect the commodity price.

Going to the next -- moving to page number 9, where we focus in corn and soybean, we would like to show the evolution of the stock-consumption ratio of the soybean and corn in United Stated and Europe. Soybean stock-consumption ratio has increased 6% year-to-year and this ratio in corn has maintained its positive growth levels.

Going to the page number 10, the low commodity price levels, as you can see, soybean and corn prices during last quarter maintained their lows, at historical levels. These price levels are a consequence of the good production in North America. The original hedge level is 82% in soybean and 43% in corn.

To slide number 11, crop productions, the crop production levels in the full country increased 32% more than the previous years, reaching 627,000 tonnes. The crop breakdown is 52% soybean, 24% corn, 4% sunflower, 3% wheat and others. Soybean and corn productions increased their yields due to weather condition and good management. Sugarcane productions also increased 40% year-to-year.

Moving to the slide number 12, drop on cattle production. The cattle production in Argentina increased 13% to [7,900 tonnes] due to improved weather condition and good management decisions. The cattle stock is [70,700 head] and price in Ar pesos increased 15% in the last year, above annual inflation levels.

New production reached [17.5 million] liters. Daily milking cows reached [2,200 heads] and the milk productions per cow per day increased to 21.5 million. Meat price increased 30% near to the retention levels. Thank you. Matias will continue with the presentation.

Thank you, Carlos. Good evening, everybody. Going to page 13, here we include the description of our investment in IRSA, remember that we control 64.8% of IRSA. And here we include the different results from IRSA segment.

So in shopping center, we increased by 29% reaching ARS1.8 billion in shopping sales and ARS1.327 billion in EBITDA of shopping centers, that is a 31% increase. The rest of the segment, we had very good results in offices, an increase of 23% in revenues and 18% in EBITDA. In hotels, 20% in revenues, 13% in EBITDA. And an important increase in sales and development, IRSA disposed some investment properties and also a building in Manhattan, Madison building, so we increased significantly results from the sales and development business line.

EBITDA margin of shopping centers amount 74.6% against 73.1% in the previous year and the offices on a consolidated basis, 71.4% against 69.6%. So, shopping center is still the most important segment for IRSA, amounted 50% of the consolidated results of IRSA and excluding the sales and development, 75%.

Going to page 14, the main explanation of our operating income on a consolidated basis at Cresud level. We have this year a very important increase in results from farmland sales. As Alejandro explained, this year was a record in our story of disposal of farms mainly in Brazil and in Bolivia and some in Paraguay. So the result increased from ARS78 million in the previous fiscal year to ARS551 million in this fiscal year. We sold last year 2,000 hectares and this year 54,000 hectares. So that is the main explanation of this increase.

In the farming segment, here we divide between milk, cattle, grains and sugarcane. And we have lower results from ARS131.1 million of loss in the previous fiscal year to a loss of ARS224.1 million. The main explanation here came from the grain segment, where we have lower results, lower prices of the commodities. So that affected mainly the result in Argentina. Although we have very good yields for the campaign, the lower results and increasing cost generate a higher loss for this fiscal year. The rest of the segment were more or less in line from the previous fiscal year.

In the other segment that includes our industrial results, the rentals and the services, rental and services and the results from FyO, our brokerage firm, we have lower results than the previous year. The previous year we reached a gain of ARS15.7 million against a loss of ARS19 million in this fiscal year. This is mainly explained by the results from our meatpacking facility that generates lower results, that is mainly because of the increase in the cost of the head of cattle that it was not transferred to the sales price on the meat and that generate a lower result. And the exports going down as well. So, and we can transfer the increasing costs to the prices of their product. In the Urban segment, IRSA, that is results that (inaudible) has explained from IRSA, we have a very good result that is 103% more than the previous fiscal year, explained mainly from the rental segments and the investment property sales.

Going to page 15, our consolidated net income when you see the different -- the main difference between the different lines. I' just explained the operating income. The net financial results, in the previous year, we had a loss of ARS2.574 billion against a loss of ARS1.295 billion this fiscal year, so it's a reduction in the loss, mainly explained by FX losses, lower FX losses in the previous fiscal year, we have a devaluation in Argentina of 51% that affects mainly our dollar-denominated debt. So, the exchange rate went from [ARS5.39 to ARS8.13] in the previous fiscal year. And in this fiscal year, we had a devaluation of 12% from [ARS8.13 to ARS9.09]. So, this reduction or lower devaluation generates lower FX losses by ARS1.367 million.

Then the other important difference between this year and the previous fiscal year was income tax. In the previous fiscal year, we generate a credit of ARS389 million against a loss of ARS303 million in this fiscal year. Here it's mainly explained by IRSA, we sold the Madison building in Manhattan that generate taxes, also the farms that we sold in BrasilAgro and also a part of the investment properties that IRSA sold generate this increase in taxes.

With all this explanation, we finished this fiscal year with a net result of ARS756 million of gain against a loss of ARS1.4 billion attributable to our shareholders and facilities, ARS114 million against a loss in the previous fiscal year of almost ARS1 billion.

Going to page 16, here we have the breakdown of our debt. The total consolidated debt of the Group is $803 million. This is the net debt. At Cresud standalone, we have a total debt of $329.5 million and the rest came from IRSA and BrasilAgro. So the relation between net debt to asset at book value is 45.9%. Remember that here we account all the asset at acquisition cost plus CapEx, less amortization, so we -- here it is not representative of our fair value of the properties sold, so this ratio at fair value is much lower.

Debt amortization schedule, this is as of June 30. After that, we issued a new bond at Cresud level to refinance part of the amortization that we have in this fiscal -- this year, calendar year, ARS68.9 million, so we almost refinanced most part of that to a longer-term. So with this, we finish the presentation and open for your questions. Operator?

Thank you. The floor is now open for questions. (Operator Instructions). And there are no questions at this time.

Operator, here we are. So, if there are no questions, operator?

There are no questions.

Perfect. So closing the year, we closed a very good year at the real estate level, real estate, the urban and agriculture, very good on farms, in productivity. We expect normal conditions for the climate, the conditions of the farms are good today, we are expecting the good campaign, some things are changing on the environment in macro, on the region, Brazil had a lot of changes during this period, and so we expect to have a normal translation from next year and keep doing our job of developing and selling later. So thank you very much and have a very good day.

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