Cresud SACIF y A (CRESY) 2016 Q1 法說會逐字稿

Good morning everyone and welcome to CRESUD's first quarter 2016 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 and the earnings release issued last week are also available for download on the Company's website. After management's remarks there will be a question-and-answer session for analysts and investors.

(Operator Instructions)

Before we begin I'd 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 risk 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 will now turn the call over to Mr. Alejandro Elsztain, Chief Executive Officer. Please go ahead, sir.

Thank you very much. Good morning. We are beginning our conference call of the first quarter of 2016 and we can see in the main highlights for this period that the financial consolidated results we see in revenues, a growth of 6.6% comparing to last year to ARS1.6 million.

The operating income for the balance sheet was ARS670 million, 12% higher last year. And the net income this year we had the loss of ARS361 million, and this is mainly explained to a change in valuation method of our investment in IDBD because of a lawsuit that we lost in the first and now we are going to the court and that is the main explanation of the difference to last year a gain of ARS22 million.

If we talk about the farming we are expecting a Nino campaign that represents better range, better yields, higher than the average and good weather conditions in the whole region. The planting area -- planted area, it's a decrease, comparing to last year we are achieving 176,000 hectares. This is a 16% decrease and it's mainly explained because of the sale of some farms like the Piaui farm in Brazil, Cremaq, or some reduction in leasing area in Argentina, 6,000 hectares less.

We are very conservative at the moment of leasing, asking for much lower rental prices to have a very positive. And now it's changing the environment for the prices of the commodities in Argentina mainly and that is probably changing the results that we are expecting because of the election coming very soon.

The low commodity prices are affecting all of our portfolio in all the regions and there was a big drop we saw on the prices mainly on the corn and soybeans is affecting margins in the whole region too. For the sale for the farms this quarter we didn't sell, we are expecting some sales for the year but not in the first quarter so we are comparing last year that we had some sales to this year that we didn't.

In the development of land we are going to show you later but this year there is a decrease on that speed. We have an operating loss in the meatpacking facility in Fyo and our leases and this is mainly explained by the packing plant. The packing plant is having losses, big losses this quarter because of the low exchange rate and the situation of the industry is very bad but we are expecting a big recovery after the changing of the measures for exporters for the next government.

In the urban segment there were very positive results in the rental segment. And the sale of investment properties the EBITDA grew 14% achieving ARS780 million. So these are the main highlights for the year.

If we move to the next page we can see the drop in the planted area that I explained before. We go to this 176,000 hectares being almost half is soybeans, 25% is corn and the rest in the other products and in the development you can see a big drop to 4.4. This is what it is today in the process of doing the development.

Now we are discussing to increase the speed in maybe in Paraguay and in Argentina, in both countries we have permits. We are waiting for better conditions for improving and we're doing more and developing more land, some of the permits are ready so we are deciding when to do. The decided is 4,400 hectares but maybe we can decide to do more for the Company.

If we move to the next page we see the sales. We were very active selling last year in 2015. We achieved this on almost $35 million of sales. Up to now in this balance sheet we didn't close any deal but we are expecting to close some sales of farms in this balance sheet.

I introduce Mr. Carlos Blousson our manager, General Manager for Argentina and Bolivia. Please, Carlos.

Thank you Alejandro. Good morning everyone. I will talk about this quarter the weather condition, the relationship between the stock and conceptions, commodity price levels and sugarcane, cattle and milk production.

If we go to slide 5 we can see how good weather conditions in the region allowed a positive start during this planting moment. Rainfall for the summer is about average as we're going through a Nino.

As we can see in the map Argentina presents goodwill and continuing general, particularly good in the northeast of the country. In Brazil even though the rain season started late the rains went back to the average levels along with normal soybean and corn productions. With regard to productions the USDA forecast a continuous upward trend in soybean and a steady high production level in corn as you see in the graphic in this slide.

Let's go to slide 6. As a consequence of this good productions both in soybean and corn we can see on this slide how world stocks in these grains increased during the last three campaigns. Soybean global stock grew from 21% to 28% in the global stocks and corn global stock increased from 15% to 20% in the stock works.

Let's go to the next page, slide 7. This very global stock reflects basically on this low price.

As you can see in the graphic the graph shows how soybean price almost equal that of 2010 here when the stock levels were also as high as today. We can see something similar happening with corn where the low price of 2010 are similar to today's price.

Moving to the slide 8 about the production in sugarcane, cattle and milk the sugarcane production grew by 33.8% in September 2015 compared to the last year 2014 because Brazil added 4,000 hectares per area and a good yield for the rest of the production. Cattle production in Argentina reached 1,500 tonnes. This production grew this year due to an improvement in weather condition and good management decisions going back to historical levels.

There was also an increase in the number of assets to 68,900 and there was a slight growth in price only 7% below annual inflation levels. Milk production reached 4.5 million liters with less daily milking cows to 2,000 heads milking cows and an increase in the milking production cow per day due to an increase in productivity. The milk price fell 10% because of a weak lower production offer.

Thank you everybody. Now Matias will continue with the presentation.

Thank you very much, Carlos. Going to page 9, here we have the description of our investment in IRSA. IRSA had very good results during the quarter, mainly driven by the rental segment, shopping centers and offices with EBITDA growth 37% in shopping centers.

In offices you can see a decrease but it's mainly the costs of the reductions in the surface because we have sold some square meters during the quarter. Sales of development increased 47% in revenues and increased 14% in EBITDA. This quarter we sold offices compared with the previous year that we sold the Madison Building in Manhattan.

Hotels grew 14% and margins maintaining good levels in shopping centers at levels of 78% -- almost 78% and offices 71.5%. The breakdown of EBITDA, shopping centers is the most important part of the portfolio.

So going to page 10 here we have the breakdown of operating income in the different segments of CRESUD on the agricultural part. The first quarter always has more effects on prices than the production, so there is in terms of the production it's not the most relevant quarter for CRESUD.

Farmland sales this year we haven't sold in this quarter anything so there is that increase from the ARS12 million of the previous year that was mainly the sale of 24,000 hectares in Paraguay compared with only the cost that we allocate to the segment. In the farming you can see a better result in terms of grains from a loss on the previous year of ARS55 million to ARS26.7 million in this year and more or less the same results in the other segments. So probably we will wait to see the campaign in the further quarters.

In the other segments here we have an important decrease in the results that is (technical difficulty) segment.

In page 11 there is the explanation of the other line below the operating income. The associates and the joint venture decreased from a loss of ARS102 million in the previous year to ARS496.7 million this year. The main explanation is the recognition of a further loss on the investment of IRSA in IDB.

IRSA had to change the methodology of valuation over the investment and that generated a further loss. They are not recognizing longer the price of the shares in the market. They have to put their own valuation method for the shares because of a change in the criteria of the valuation.

The net financial results, there is an increase from ARS340.8 million loss to ARS446.9 million. Here the inventory remained at the same levels. The cost of the debt at the same levels, the valuation that affect our total denominated debt was in line from the previous year.

So this quarter the valuation was 3% against the same level of the previous year, so there is no increase in recognition of results. So the main difference between this year and the other, the previous year is the valuation of the investment of IRSA in Condor, the former Supertel Company that is valued at mark to market and also the valuation of bonds in the market that we have in the portfolio on a consolidated basis.

So with all these results we finished the quarter with a net loss of ARS361.8 million against a gain of ARS21.7 million in the previous quarter. Attributable to CRESUD shareholders is minus ARS282.2 million and noncontrolling interest minus ARS69.6 million.

Going to the next page 12, the breakdown of our debt, our net debt total $811.5 million at CRESUD standalone is $340 million. On the bottom part of the slide you have the breakdown on the amortization schedule of our debt. We've been comfortable with the shortened debt for this year and the next year we have amortization for $67.4 million that we plan to restructure with the local market.

Net debt to assets are 48.5%. That is on an historic value, remember that we value all of our assets at the historical acquisition cost plus CapEx. So this is not reflecting the fair value of our assets overall but is still at book value is below the 50%.

So with this we've finished the presentation. Now we open to answer your questions.

(Operator Instructions)

Okay, operator. Just to finish our conversation we have a very good or normal situation on the climate, some new conditions on the countries like Argentina that is really changing and there is a big promise of changing the condition on taxes for our products and that will be affecting our margin for the future. And so we are optimistic of the campaign with our assets team and clients we sell some of our farms to, so we expect a good campaign for CRESUD.

So thank you very much for everybody and have a very good day. Bye.

Thank you. This concludes today's presentation.

You may now disconnect your lines at this time. Have a great day.