Cresud SACIF y A (CRESY) 2022 Q3 法說會逐字稿

Good morning, everyone. I'm Santiago Donato, Investor Relations Officer of Cresud, and I welcome you to the third quarter fiscal year 2022 results conference call. First of all, I would like to remind you that both audio and slide show may be accessed through company's Investor Relations website at www.cresud.com.ar, by clicking on the banner webcast link. The following presentation and the earnings release 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 the 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 note in the company's earnings release regarding forward-looking statements.

I will now turn the call over to Mr. Alejandro Elsztain, CEO. Please go ahead, sir.

Good morning, everyone. We are beginning our third quarter results. And if you can go to Page #2, we can begin speaking about climate. And the region is really suffering a drought that was affecting summer crops. And now we are in the harvest time and the climate is still dry, affecting now again the winter crops for next campaign. And we are going to see on the evolution of the prices of the commodities, a big explanation of why the prices are so high. It's a combination of many campaigns, North America and South America combination of lower results, making smaller stocks on the commodities that we are running. There was a big improvement on margins because of this increase in on prices, but higher costs, mainly driven by fertilizers coming from the region of the world.

If we -- speaking about the farmland liquidity in these 9 months, we only saw some sales on Brazil and their liquidity on the farms is huge and a lot of transactions on that market, a lot of interest of the farmers to keep buying more land in Brazil. So we are now speaking about 9 months of higher EBITDA coming from agribusiness segment. Matias will explain in the segments in grain, sugarcane and farm sales, we have very good results in this year.

The net gain, when we speak about the summary of these 9 months, we can see higher agriculture operating results and net financial results very positive and income tax. So we are achieving ARS 16 billion to the controlling company, controlling to a loss of last year numbers, and Matias will explain deeper later.

Related to the Urban segment through IRSA, we are recovering our EBITDA strongly. Mainly in the shopping center industry, we are seeing occupation close to normality. So hotels are recovering mainly slow-slow. So we are seeing, again, operational in the rental business that last year was very bad. And so -- and at the same time, we are finishing the merge of IRSA and IRSA Commercial Properties that we are going to see this in the next days.

We can now move to the next page, and we can see how the prices of soybeans were stable, and we were seeing the trend in '21. And the commodity prices and soybeans, that is probably the more relevant for Argentina and Brazil, we can see that the evolution was garnered, but after the many volatility in the weather and dryness in the United States, and they saw that it was normal and was good. But later, we began to see some linear effects in Argentina and Paraguay, we began to see that increasing the prices.

And we went from the 13 level to the 16/17. And after that, we began to see some normalization, but the crisis came with a war in Ukraine and Russia. So the combination of lot of many campaigns in Americas. And now the logistic problem that is -- that were affecting having a lot of corn and wheat reserve in Ukraine is still not achieved. So making a lot of -- plus the climate conditions on the market.

Now climate in the U.S., again, U.S. is dry again, so it's affecting probably the next campaign too, is making the combination of logistic, stocks, and we can move now to the next page, we can see in the Page #4, stocks of the markets are mainly in the U.S., still very low, and they're really putting pressure on prices in the soybeans and in the corn. And these days, because of the use of fertilizers, that is really increasing a lot the cost of the corn mainly, is really tightening more the corn and wheat, those 2 markets are very tight. And in the soybean, now it's being affected because of the dry of next campaign in the U.S.

So we see the increasing of the prices, the small decrease that last year was a appealing but from December to now, there was the last increase of this 14%, showing the stock evolution that is really tight and the markets are meeting the food and the food for the animals and for the human beings. And the regional condition is still dry. And we are seeing in our harvest -- in Brazil, really, the drought was really more affected in the south of Brazil, where BrasilAgro is not -- really in the south of Brazil, we have no farms. We are mainly in the Central, BrasilAgros. So finally, we are yielding what we expected on the budget. So finally, our yield in Brazil was very good. In Bolivia was enough good, the affectation of yield was mainly in the north of Argentina and the worst was in Paraguay.

So the South of Brazil that we were not was affected and really, we didn't have that effect. And the South of Brazil was affected in sugarcane that we have not sugarcane neither. So we were very positive in Brazil not being affected, but yes, the prices that we had a lot of gains on the prices.

In Argentina, some affectation made us to lose some crops in the North, mainly in site. The South was close more normal. Recently, we had an effect that was in frozen that came before. In April, we suffered -- in end of March, early frozen on the crops that affected mainly soybeans and corn. So really, the climate is affecting this year yields, but prices are more than compensating those effects.

And we can see in the Page #5, the evolution of service. And this year is really a good combination of volumes. We can see the volume of Argentina, 120,000 hectares, 110,000 hectares in Brazil, 14,000 and 13,000 hectares in Bolivia and Paraguay, the 255,000 being the soybeans 45%, corn 27%, sugar cane 10%. That is really relevant. It's much more intensive crop. And we can see volumes are better than last year. So with the combination of what I explained before, still we have better yields to the total. And with this existing price is making us a very, very good operational year of the company.

Yields in the soybeans are a little better than last year, in corn a little affected bit less than last year. In the sugarcane, we have less service that is affected, but it's not greater. It's total service affecting the sugarcane. We have a little more heads of cattle and less production on this year because we recovered stock at the end, but the majority of the year we're having less animals on the farms of the company.

The 2 examples on Page #7 of the farms we explained before, and we go first to farms in Brazil, making very high internal rates of return, close to 56% in reals and 20% in real is the second. So little -- not big pieces really. They are small pieces, still 7,000 hectares. Total productive radius, 4,500 hectares. So not big service of sales in the quarter, but really big gains, bringing us more than $40 million gain, so giving us a lot of gains to the balance sheet. I'm expecting to keep this buying and selling all over the region in the 4 countries, but this 9 months only Brazil (inaudible).

Talking about the 2 branches that we have, one through FyO and through Agrofy from 1998 with the grand history, but they are beginning to be relevant. We are taking some pages to explain what is happening because really, the EBITDA these companies are bringing to the balance sheet of Cresud are growing quarter-by-quarter.

In the case of FyO, today is the largest agricultural commercial service of the country. This year, we are expecting to pass through this company close to 7 million tonnes. So this represents a big portion of the Argentine crop. Comparing to Cresud, it's more than 10x Cresud size in Argentina, but they are taking from all kind of farmers and making all kind of service to farmers from inputs, from outputs, from futures and options, servicing, consultancy. This company is really becoming relevant. Look at the increase in the EBT evolution. Today, this year, we're expecting more than $20 million in the evolution of this company that Cresud runs 50%, 50.1% of the shares. And this company is making 5%, 6% of total Argentine harvest. So relevant bigger player of Argentina, largest broker of the country and now beginning the expansion to Brazil through the brokerage business and beginning the expansion of selling of inputs like fertilizers to the rest of the region, including Paraguay, Bolivia, Uruguay and Chile.

So these are -- this company is really beginning to be relevant. And to give you a flavor of this company, we had 0 debt up to now. And this year, we are able to raise the bond at 0 coupon, because of the strength of this company is beginning to be very relevant to the strategy.

In the other side, Agrofy, this is a marketplace for agriculture, a big marketplace arriving to South America regions is intending to go to Mexico in '23, but now it's in the rest of South America. And is the largest marketplace of agriculture. From the beginning, Cresud had 30% some. Today, after dilutions and many international investors like Syngenta, like Bunge, like recently Yara, the company has capitalized at more than $100 million. And we recently raised capital in December '21. Before all of these noises on the market, the company raised $29 million to make this expansion to the region. So a typical marketplace for agriculture business in the region.

Now I will introduce Mr. Matias Gaivironsky to the presentation.

Thank you, Alejandro. Good morning, everybody. Taking a moment to review the investment in IRSA. We can see a very good recovery after the pandemic. As you know, we suffered a lot during the last 2 years. Most of our operations in malls were closed for 9 months. And now we see a good recovery. Last quarter, the retail sales surpassed 21% pre-pandemic levels. So we are very happy with that evolution. Occupancy is going up in the malls. So very good operations.

We were also very active in all the fronts at IRSA level. During the quarter, we did some disposals, some acquisitions. Here, we can see 2 important disposals. We sold 5 floors in the Della Paolera building and also the Republica building in block. So we sold an entire building. So the cash position of the company and also the leverage of IRSA is decreasing significantly.

Also during the quarter, we fulfilled the merge between IRSA and IRSA Commercial Properties. In the past days, the CMB already did the inscription of the merge. So in the coming days, we will exchange the shares of IRCP for IRSA shares and then delist IRCP from Buenos Aires Stock Exchange and also in NASDAQ.

If we go to Page 11, we can see how we close our 9-month period as of March 31. We are finishing with a net income of ARS 31.6 billion gain compared with a loss during the last year of ARS 14.3 billion. Here, we have several different drivers of this result. I will explain deeper each of them. On the operational side, we will see that we are having very good results. In the financial side, we have an important gain in line 13 related to the appreciation of the peso in Argentina against the inflation. And also important to mention during the last year, most part of the it was related to the deconsolidation of the investment in Israel, that this year we don't have any results on that.

So before going to the next page, in the line 6, also it's important to mention the change in the fair value that mostly affect our Urban business in Cresud. We don't recognize the value of our properties at fair value. It's more historical plus inflation. But in IRSA level, we adjust every quarter the numbers and that generated a loss.

So enter into more detail in next page, we can see the evolution of the main economic drivers. The effects, we can see that the devaluation during the year was 16% in both in the official exchange rate and the dollar and the blue chip swap and the dollar MEP against an inflation of 40%. So the appreciation of the currency in real terms was 17%. That means that every time that we recognize results from our assets, we have to market debt loss. And regarding our debt, we post a gain. And that affect in the line in the change in the fair value, as I explained in IRSA level and in the debt that we will see in the next page.

In Page 13, the most relevant operating metric, our adjusted EBITDA, we can see excellent results in the agribusiness with probably a record in our history of ARS 18.3 billion gain against last year ARS 13.7 billion. We see good numbers in each of -- on all the lines, farmland sales, as Alejandro mentioned, we sold during the quarter or during the 9-month period in Brazil, 2 farms with very good gains. In the farming, excellent results in all the lines, grain, sugarcane recovering very or increasing with important numbers against last year. FyO, as Alejandro mentioned, also generating excellent results. So we are very happy on the performance on the operational side.

In the Urban segment also, we can see in the 9-month period, important recoveries more related to the condition of the malls during the last year that were closed because of the pandemic. If we comparate this number with pre-pandemic level, we are still lagging 2020 numbers, but the recovery quarter-by-quarter is very important. So the trend is going up.

In the offices, we have a different effect. This is more related to the disposals that we did that we are reducing a little the surface of our office portfolio, but also because of the revenue generation that is more related to dollars and since the dollars are -- has a lower devaluation than the inflation, 2021 numbers look higher than this year. In the hotels, also, we are seeing a good recovery and sales and development. We have sales during the year, but last year, we sold more.

In Page 14, we see the other line that suffer an important recovery or important gain during the 9-month period, the financial line, and this is related to also the difference between the FX and the inflation. So we can see in the line 2, the net exchange differences, we are posting a gain of ARS 19.2 billion.

Finally, on Page 15, we can see the evolution of our debt that maintained similar levels than previous year. After the end of the quarter, we collected a dividend from BrasilAgro. So we already collected $16 million. So we will see the decrease or the decrease in the net debt probably in the next quarter, BrasilAgro paid BRL 200 million dividend. This is an anticipated dividend. And remember that we collected also in October, a similar amount.

The debt amortization schedule, we have a challenge during the beginning of next year in February 2023 related to some notes that we issued in the past that expired for $113 million. So we are working in order to refinance that. According to the Central Bank regulation, we will be forced to refinance 60% -- at least 60% of that obligation. So the Central Bank is not giving the companies all the dollars to repay, so we will need to do some sort of refinancing of that obligation.

And lastly, that we mentioned this in the last call, but in February, the company issued a new dollar linked note with expiration in 2025 at an interest rate of 2% fixed. That was new regarding our liability structure.

So with this, we finished the formal presentation. Now we open the line to receive your questions.

(Operator Instructions) The first questions come from [Federico Lassari]. If we expect to pay -- to distribute dividends this year in Cresud or IRSA?

Thank you, Federico. As you know, the timing to decide the dividend is more close to our shareholders meeting in October. This year is a challenging year in terms of the liability structure. So we are working on that. And probably, we will decide the dividends after that. As you know, every time that we can pay dividends, we did it in the past. So that is a good guidance on how we think our capital structure, but it's too soon to say exactly if we're going to pay or not this year.

Here, we have another question from [George Gorman]. You need to unmute, George, to be able to ask. George, if not, you can write the question in the charts.

There's a new question. Do you expect to sell more farms in the near future in the fiscal '22 or the beginning of 2023?

Tough to predict. Generally, we don't speak about things that can happen, and we like to speak about things that happened. We are under big negotiations for sure, in the countries, in the 4 countries. So really could come, but now we are in May and our balance sheet finishes in June. So we have 1.5 months. But the real estate is active for this quarter, for next quarter, yes, we'll be active in the 2 sites in the buying and the selling. So yes, for sure. I'm not sure if we're going to close some transactions that will be included on the 30th of June.

There is here a question regarding IRSA from [Ludovic Castro], when we sell offices, transactions are paid in pesos or in dollars?

Most of the transactions that we did during the year were paid in pesos. So we fixed the price in dollar terms and then we received pesos. But it's not a rule. So we can do any kind of transaction, but during the year, the most common was to receive pesos.

Okay. If there are no more questions, I will now turn back to Mr. Alejandro Elsztain, CEO, for his closing remarks.

Just to thank everybody, we are next quarter finishing the year, good, I would say, and have good yields, but for sure, very good on prices. And the agriculture business is really receiving a lot of comments, newspapers, discussions, logistics. And so really, the business is really much more active than in the past. South America is one of the regions really ready for supplying that for the world and not a lot of areas of the world, really big farms in big operations are really in this part of the world, not in the rest. So we are going to keep doing what we'd like to do and what we know to do, that is to keep buying and selling and farming meantime, doing in big sizes and giving service to the farmers.

So just to thank everyone, and have a very good day. Thank you.