BrasilAgro - Companhia Brasileira de Propriedades Agricolas (LND) 2024 Q3 法說會逐字稿

Good morning, everyone. We're here for another earnings call from BrasilAgro third quarter meeting, January to March 2024. For those of you who are not familiar with our calendar, this is what our fiscal year looks like. Thank you to André and Gustavo for joining us.

For those of you who were watching this in English, the presentation will be made available in the chat. If you want to listen to this earnings call, please make sure you select the language of your choice at the bottom part of your Zoom screen.

In this quarter, we're going to see some results that are lower than expected. So André and Gustavo will have a hard job to accomplish during this call. However, I believe we're very resilient in our business and once again we have proven that we have a winning strategy.

With that, I'll hand the floor over to André and Gustavo.

Good morning, everyone. Once again, it is my joy to join you. Today I'll talk about our last quarter. In the previous earnings releases, we talked about possible sales. I told you we were working for that and today we're going to give you more details on these commercial transactions. After that I will give you more details on the harvesting details for the summer crops. I'll talk about how things have been evolving. We've got quite a lot of information to share with you.

Now on the slide you see the highlights, BRL552 million of net revenue, BRL6 million negative net income and BRL16 million is our adjusted EBITDA. After that we'll give you more details on the numbers and we'll talk about our strategy for that. We harvested 66,000 hectares of soybeans totaling 202.2 thousand tons in Brazil, Paraguay and Bolivia.

The main news we have to share with you during this earnings call is the fact that we sold a fraction of the Chaparral farm, BRL364 million worth of sales. And we have finally arrived to the state of Sao Paulo, growing sugarcane. We're looking for more of an attractive mix between ethanol and sugar production. We saw that in the past year, this correlation was a bit hard, and most recently with the pricing policy, or the parity pricing policies from Petrobras.

Now, number one, let's talk about transactions. Chaparral farm is where we've been working with our portfolio for over 16 years. Many changes have been implemented over this time, and so far, we had not sold any plot of these lands.

Now, this is an important transaction to show you that the frontier to the state of Bahia that we decided to go for back in the day, was a correct decision to be made. Between the acquisition price and investments that were made in land. I'm talking about CapEx infrastructure, buildings, they total BRL125 million.

We worked on this arable lands of 26,000 hectares. We sold 8.8 thousand hectares. We sold this for BRL364 million. And this comes to show that we've always been quite conservative and careful as we assess and price the company's lands. If you do the math, and if you look at BRL364 million, and you divide that by the acreage we sold, and if we multiply that by 26 then you see that this farm is worth BRL1.9 billion. That is to say that we sold a third of the farm for BRL364 million. That shows how much value we can generate.

We invested BRL125 million. And if everything goes well in terms of sales, and I believe that in the next years, we should have more aggressive, multiple rates for soybeans. We're talking about more than BRL1 billion. So BRL125 million was invested and this value increased to more than BRL1 billion in assets. That's how much value we can generate in our business.

To your right hand side, you can see a new farm that we have leased to grow sugarcane. It's an important plot, we're now working with an important national player. We're beginning this season with 5000 hectares. We'll get to an additional 1.9 thousand hectares by 2029. And we should total 7000 hectares.

In this transaction, it's important to highlight that we now have sort of a different commodity mix now. We've got sugar and ethanol production. We had been talking about this challenge beforehand. We said we were going to go for that move. We said we were going to sell farms. And we also said we were going to lease lands to grow sugarcane so that we could improve the company's commodity mix. And that's what we're now delivering.

Now, let's talk about our season. Moving away from real estate, I wanted to show you some charts so we can use them as guidance to discuss our numbers. On the first chart, you can see the macro region of Araguaia, where we have our operations. What do we see here? November and December were below average. The yellow line is the history average.

So, you can see November and December were below average. October was quite close to average numbers, which allowed us to plant everything inside the proper planting window. It was a fantastic year in terms of planting speed. And despite November and December, despite the fact that they were below average, that didn't really hurt the crops as happened in other Mato Grosso farms.

But you can see how hard it was for everyone, really, to finish the planting season and have space for the second crop. And then January, February and March were critical months, as per usual. That's quite an attractive rainfall rate. Now, the second chart shows rainfall in Bahia that will be reflected in the company's acreage.

Well, the planting window in the state of Bahia happens a bit later as compared to Mato Grosso. Mato Grosso September, October, and Bahia late October, early November. And what you can see on the chart is that there was not accumulated rainfall to start planting earlier in Bahia, but it's quite a particular state. This is one of the new lands we're now planting and by year we have to be quite careful when it comes to the planting season.

So what you see in November and in October, like we said in previous earnings calls, that got in the way of this planting window for soybeans and we are quite mindful of that. So we reduced soybeans acreage in the company and the two first charts show you that. November and December were quite critical months for us.

Then Bahia crops did really well. As of January, February, March and April, they really contributed to our soybeans production. Our yields were great, and we're now harvesting corn and cotton and we should see quite great yields as well. So we saw that Mato Grosso was not as hurt as the central region.

In Bahia, we benefited from rainfall this year and in Paraguay, the last chart, you see a positive surprise once again. When you look at the average numbers and the charts, while they're quite different, rainfall happened in April in Paraguay. Critical months in Paraguay happened later January, February and March. So you see rainfall quite below average, which made our yields decrease.

So, you see Mato Grosso is above average. In Bahia, we're doing well with cotton and in Paraguay, this comes to explain why we're doing bad with soybeans. Because the pod filling season, January and February, we saw rainfall below average.

Now, rainfall in March and April is benefiting Paraguay. So, that it's been quite useful in the past months. Those three charts are the explanation for the changes you see on the slide. When we look at the company's total number, 185,000 hectares to 171,000 hectares. That happened because of the reduction in the planting window.

We saw that planting season was delayed in the central regions of Brazil, which hurt our second crop. And it's also important to say that when we made this decision in terms of cost, well, corn margins were very low. So we were mindful. We decided to go for breakeven. We would reduce the planting acreage. And that had an important impact to the company in terms of corn planted areas. Especially second crop, or winter crop corn. And this chart shows you the consequences of rainfall, I talked about in the previous slide.

Now, on this slide, you see that we have harvested 95% of soybeans. We're now beginning to harvest corn. We have harvested beans and cotton while they are about to begin as well. What you can see is that there's been a reduction in yields for soybeans, especially because there was a reduction in acreage. And also a negative contribution of our Paraguay lands. And also you can see the breakdown of all the other crops. We'll give you the economics on that in a few moments.

On the slide you can see the numbers from July '22 to April '24. On the first chart you see the Paranagua soybeans, corn and cotton. For cotton, what we see is that there was a slight recovery. And recently we've seen a drop.

And then I'll talk about what positions changed. You can see that there's been a significant reduction in commodity prices in the past two years. We hadn't seen such an intense cost reduction. But the charts show you that the margins that we saw before and during the pandemic look quite different.

Now let's talk about costs. MAP in this interval window -- by the way, let me look at the column at the center for KCL. When you look at the '23, '24 season, we were buying that for $614 per ton. In early 2022 -- before early 2023, he corrects himself before the war. Then chloride also that $1,200 per ton. We bought at $620. So in this season, we saw the price going down to $614. And now for the '24 '25 season we're now buying chloride at $415 per ton.

Like I said, the alligator mouth is now closing in the chart we've been seeing important cost reductions. So during peak times, soybeans were at BRL5,000. Last year, we operated at BRL4,000, BRL4,100. And now for 2025, we see cost reductions should get down to BRL3,500 or BRL3,600 especially because of this input prices we're now showing you.

We have advanced in terms of potassium chloride chemicals. And now we're waiting a bit because we know phosphates should see a price decrease because of the demand in the northern hemisphere.

The demand is going down because we're now at the end of the planting season in the northern hemisphere. So those who had to buy phosphates and fertilizers in the northern hemisphere, MAP and DAP, well, they've done so already. And now like we know we're going for a low demand period in the northern hemisphere, which is where most fertilizers are purchased in the globe.

Now, it's the second time we show you this charts. We wanted to look at the price history, especially at the first chart, the basis numbers. What we see is a trend, a trend for a reduction. I've been planting soybeans from the moment we planted with negative basis, that was 30 years ago. Then in the past five or six years we started operating with positive basis points.

Back in the day, Chicago and basis sort of offset, but if you don't consider the trade war between China and the US, what you can see is that the market has been working with positive basis points because of the demand from Chinese consumers. And now we see a new basis standard which stands out for us.

We believe that because of the yield increase we've been seeing in the past five years ago -- I mean five years ago we were talking about 130 tons -- 130 million tons, and now we see 115 million tons. What happened in Mato Grosso, so it's still to happen in Rio Grande do Sul.

Now we'd like to draw your attention to this basis curve. It's been showing to be resilient despite being in different levels. Now the exchange rate is just fluctuating not that much, and the soybean prices in Chicago, you see we begin at $15 per bushel in March 2023, which reflects the demand and the crop failure in Argentina in the previous season.

And then after Argentina came back to the game with their 50 million tons, then we saw a decrease in soybean prices. That's just our bread and butter. We know that soybeans prices are at $12 and we'll show you what the position is in a few moments.

Now, in terms of changes in prices, this is how we've been operating. At the top, you see the current season, we've got 80% of our crops already sold. Our average price was USD1,305 per bushels. The exchange rate BRL-USD is at 5.31. Now, a few moments ago, I told you that we have advanced in terms of fluoride negotiations and we did that because we're now fixing those prices. We're always looking at the contribution margin. So we started selling soybeans already.

This is for the next season, and we were a bit more aggressive exchange rate wise, and we sold at 5.43 already. So that is to say, we are already thinking about our cost composition for the future.

At the bottom you see our farm receivables. This is very important for us. We're talking about a company that grows 240,000 to 250,000 tons of soybeans.

And in terms of farm receivables, if you think of sales that have been published but that are to be accounted for in the next quarter, and sales that are going to be accounted for from Taquari. When we delivered part of that in the past, and we're going to deliver part of that now. This totals more than 540,000 tons. So these figures are very important.

We consider them to be part of the year's P&L. Now, for soybeans, we are at 12.93 with exchange rate of 5.43. And we're selling for 2025 already, both in terms of the exchange rate and soybeans. Cotton, we were happy enough to be able to sell forward, out of this harvest that is now beginning in early July, 87% has been sold forward at 82.28.

And I think we were quite efficient in terms of selling forward with exchange rate of 5.61, which is a great combination of the Aruba prices for this cotton that is to be harvested. And I'm sure this will contribute to our earliest results and will help us strengthen our results for the first quarter next year.

We have been selling cotton forward for the next season. Now, the main challenge here we have has to do with corn. So far we have sold forward only 55% of corn at BRL42. We're talking about BMF corn at roughly BRL43 for corn.

Now, since the company has already been working with sugar and other tools, we know that we've got ethanol at BMF, but we're also looking into some derivative tools with banks so that we can sell ATR forward. That is, for the '23' 24 season, we have sold forward at BRL1.08. The company always sells their own ATR at a premium price as compared to cana-de-acuca Sao Paulo.

Well, I think that's it. With that, I'll hand it over to Gustavo. Gustavo, I just set the stage so you can now finally talk about our numbers. Thank you.

Thank you very much. I just apologize, I think I have a problem with my computer, says Gustavo. In any case, thank you very much to all of you who joined us for this session.

Now, let's try to explain our figures in a simple way to all of you. Of course, considering the context Andre mentioned in terms of yield increases. So let's begin with the right-hand side. Our fiscal year earnings. You see the amounts we sold, we also see prices, unit prices.

Here we can see the impact of the premium price for soybeans at a lower value. Our derivative sales are way above the values that are being practiced in the market, which is generating a positive result. But we have other products in our mix that don't really allow us to work with derivatives. For example, ethanol, corn, those had quite a relevant impact.

In the nine months 2024, we accumulated BRL6 million real in losses as compared to the same period last year. We were at BRL25 million to BRL26 million. To your right hand side, you see prices, BRL1.3 million in results. And you see the numbers for soybeans, cotton, sugar, that decreased by 20%. You see how corn prices behaved we saw significant cost reduction, or price reduction, namely 44%.

We had more products being sold, especially in terms of sugarcane. However, this higher volume only brought BRL6 million to us. So when we look at prices and quantity, this is the rate we get to. You can also see costs for corn and soybeans we had very similar prices in BRL per tons as compare to the previous year.

Now, what allowed us to save money for the company was sugarcane and cotton. Because we reached high yields for cotton. We could grow at lower cost per hectare. And for sugarcane, that happened because we already started working with lower fertilizer prices as compared to the previous year.

Previous year we were at the crisis because of the Ukraine-Russia war that impacted logistics and fertilizer prices. When you look at the savings and the higher amount of product sales was not enough to offset prices that we had in these nine months. Even if this was offset with the financial results at BRL43 million. What we see is that we generate positive results, considering that here is where we see derivative results as well that haven't yet been realized and part of them have.

Let's look at the adjusted EBITDA last year, BRL168 million. At the bottom you see the annual adjusted EBITDA chart. We tried to find what really impacted this reduction, so we see soybeans at BRL43 million, corn BRL63 million. And I think this was the main product that considering our production in the company and considering our exposure in Matto Grosso state, with the main season and the double crop, we had a production of 150,000 tons.

And this year we reduced this acreage by 10,000 hectares because of the tight margin or because of negative margins that happen sometimes according to the input and fertilizers need. So it means BRL18 million and some expenses with administration costs, which helps explain this reduction in the adjusted EBITDA.

Like Andre said, in the first half of this year, when we see the results last year we were at a loss, but this year we are at BRL30 million. Like Andre said, during this first quarter, we usually don't work that extensively with sugarcane. Soybean production is now to be harvested and transported to different storage facilities.

Last year, we were more aggressive in terms of sales. Premium prices were going down. But this year the company decided to carry this over to the second half of this year. Now we are revisiting this strategy and trying to go a bit faster because premium prices are picking up. Nowadays with $13 per bushel and 5.35 exchange rate. If we consider minus 60 points to 10 positive points, we're talking about BRL10 per bag of soybeans.

Production will be at 200,000 tons, 3.3 million bags. We're talking about BRL33 million. These are the figures we're going for. That's why we decided to carry this over and not sell so much in the first quarter this year. And that, of course, has an impact because no operational income is generated but the sales costs are still there. We still have to transport products to the storage facilities. We still have to store this production.

Additionally, we've got fixed costs, administrative expenses. And also we have to consider that the receivable amount that Andre mentioned that have been accounted for are to present value at BRL550 million. But we have to update this number constantly. Since we're going to be paid in bags of soybeans we have to update these indicators on a quarterly basis for soybean prices, premium prices, dollar exchange rate. And in the past three months there was a negative impact amounting to BRL20 million.

So, like Andre said, our expectations moving forward is that we now begin to sell great part of this soybeans. We usually bring 30% to 40% of our EBITDA, of our operational EBITDA to the company, selling part of this lens to Chaparral. As far as we understand, the results for this year should be quite positive.

On the next slide, we see our margins. When we look at soybean margins last year 29% this year, 13%. Corn, we see that sort of lost space in our product mix. We see that prices have been quite unstable. Last year's margins were already high. We used to think of 25% to 30%. That's what we expect for such cross. But this year, since we have stored, we have storing facilities that are important in the region of Shingle, we had to sell our production, and because of that, we couldn't really have positive results.

But we're now revisiting our investment strategy in this region. This was a lesson we learned. And we have to decide whether or not plant will be built so that we can reduce volatility and impact to the company's results. For sugarcane, we see reduction from 25% to 17%. The cost per ton had gone down. But despite that, the price impact was quite intense.

We began last year with ATR at 1.3, and we ended this season with at $0.90 or $0.95. So there was a major impact and that also made margins decrease to the 17%. Now for cotton, we're learning more and more about this crop. We've got a team of technicians and experts. We are now incorporating this crop in areas where we plan to expand irrigation facilities.

And I believe this crop will become increasingly relevant for the company. We always look at the company's adjusted EBITDA. We also look at the financial results, taxes, depreciation, amortization, eliminated the effects of gains on biological assets. And you see the final difference from 150 to 11.

You remember before that included the BRL12 million in real estate sales that happened last year. If you think of the nine months 2023, what we usually say is that the company has 40% of sugarcane or EBITDA that comes from sugarcane and 40% from soybeans, and usually 20% comes from corn and cotton.

Now we see that corn margins, if you do the math, we'll get to BRL35 million, less EBITDA generated because of this impact of corn. We're now looking at specialty crops and cotton so that we can reduce volatility in our results.

And for soybeans in the nine month 2024, we know that the alligator effect happens in terms of costs and revenue, but we already understand how that works. And as we discussed the budget for the next season, we see that the margins are becoming more stable at more reasonable costs. Prices tend to be lower, but we see that there is no great disparity between those other components.

On this slide we see our debt. Our total debt was at BRL770 million. We began at BRL550 million in June 2023. Now, in December we mentioned that we had a debenture of BRL160 million, so we could implement 4000 hectares of irrigation in Bahia.

Then cash on March 31, we were at BRL247 million. That used to be BRL433 million, the minimum cash we expected in December accounts for all receivables for soybeans, corn, cotton and sugarcane. So we're quite at a comfortable situation.

Net debt is at BRL481 million. BRL560 million is our receivables for the farm sales, which have not been accounted for on this number. We got an additional BRL460 million to be accounted for, considering our current price for soybean bags. 103.6 of the CDI Index, that should be paid with our working capital as we pay for the season.

We usually do that 30% with third-party capital and the rest of that own capital, despite having tight margins. Our debt is at BRL550 million for the long term. So as far as we believe, it's quite a reasonable structure. There is the capital markets, we got shares being sold in the Brazilian stock market and in the US. These are the share prices we collected yesterday. I think that's it.

Thank you very much. We now move to the Q&A session.

Thank you, Gustavo. Thank you, Andre. Pedro Fronseka, XP.

He asks, with regards to the farm sales, what would be the current trigger and what do we expect if we think of the SDA report that is to be published tomorrow with regards to grains? And how do you think of capital allocation after this farm sale? Are we going to repurchase shares? Are there going to be dividends? Or are we going to invest the that in growth? Pedro? He's looking for guidance. So Andre, watch out for this question. Okay?

Thank you, Pedro. It's always a pleasure to answer your questions. Let's talk about our farm sale. Once again, the company shows how resilient it is. And once again this comes to show our strategy. We always say that we want our companies to generate results in Ag operations. And we also want to look for results by selling farms. In the past years, we've been selling a lot because of land prices, because of liquidity for growers.

But this year, we didn't really know if this was going to happen, but we are selling land. This was an expressive sale. It's worth mentioning that we're selling land only. We didn't sell the headquarters or buildings. We're still operating in this area intensively, and this money will bring some more breath to us, so we can do what we know what to do.

That's what our business is like. We want to buy, sell. Before we were selling more. We may now begin being more at a balanced position, but we are going to sell land whenever great deals arise, and now we're going to use this money to bring a new breath to our portfolio.

Our challenge is to be a cyclic company, and I think we've been doing a good job in the past years. I don't have any details to give you in terms of buybacks or dividend distribution. We still have to have that debate with the Board. But like I say, mandatory dividends in the market account for 25%, and in the past years, we've always been contributing with our shareholders.

Prices were high. We had lower possibility of allocation because of land prices, and now we're going for a different direction. But I'm sure we're still going to be a company that brings good results to our shareholders.

Now, when you ask about USDA soybeans, well, the previous USDA report showed 155 million tons, roughly. The next report is to be disclosed. The expectations we have and that the market has is to get to 152 -- 153 million tons. That is the number that we should see soon. The market always foresees that somehow, and I think that has already been happening.

We see price rallies already going about, and with what happened in southern Brazil, with the disasters, there's still soybeans to be harvested. And in the past weeks, we saw the tragedy and the disaster that happened. And of course, not only lives were lost, but there is a big challenge to the economy of the whole state. And soybeans well, follows that trend.

As I showed you in the basis chart we may still see positive effect to Brazil. We had been recovering before our farm selling was low, the basis chart was already recovering. And I'm sure this disaster will impact ship transportation and that may impact the basis chart. I think Gustavo was very fortunate in his comments when he said that we have to do our homework in terms of Chicago and the exchange rate, and we did it.

And we're now working on the basis of carrying over more soybeans to the second half of this year because we thought local crushers might demand that. And what we did was over the past week to fast track specific, particular sales.

Our vision for basis is quite particular. We're going to have basis working distinctly, going for a trend of recovery. When we harvested, we were at minus 60 basis points or minus 80 basis points. And now we're talking about positive 10 basis points or positive 20 basis points. That's quite a significant difference, which is what Gustavo said. That is worth BRL10 per bag of soybeans, which really impacts our results. Hope I answered all your questions.

Next question by Tiago Lima. He is asking about the current moment, if this is a proper time for new acquisitions, if we have any agreement that is ongoing that we could mention. Well, I think Paulo is really looking for guidance here.

Now, the second question from Tiago. If the company has any plan to increase the amount of leasings in the next fiscal year, and if that strategy may mean that we're going for an asset lighter asset business.

Great question, Tiago. I'll begin with your last question. The company has three pillars to it, the strategy, processes and people. This strategy has to be alive. We have to revisit that constantly. But I'll talk about what we believe for the business. We truly believe that we can combine these two businesses. We can be asset light. And part of the question is to be answered with this next comment. We know that Ag businesses have variable liquidity. And that is very cash demanding.

In the past years we've seen an expansion, we saw abundance in resources, and now we see the consequences of that in the market. That only shows that we're going down the right way. We have assets and we have a combination of that with leasing approaches. Leased assets that bring operational results in the mid to long term is important and our own assets have to bring more capital cost efficiency for the company.

If we go for an asset light model, then we have to foresee important changes to our liquidity. And we believe that there's no silver bullet here, but we believe we should be at 50% to 55% ratio with more operational results efficiency and efficiency in capital cost.

We don't want to be a fully operational company with very few assets because we know we have to sell lands when we find good deals. But to make that happen, we need to have a capital structure that is robust, that is an intrinsic characteristic of our business. We also have to operate differently from what other companies do and to do that, we have to be capital intensive.

As to the first question, you know we always deliver our promises. We told you the company was still going to sell lands. We're still looking into other possibilities but we're also looking into buying more assets because of financial stress in the market.

Many news are disclosed, some of them are real, some of them are not. But when we are about to go for a deal, you may be sure we're going to publish a relevant fact for investors. But we have nothing in our pipeline nowadays.

Thank you, Andre. One more question, question regarding input purchases. Considering 100% of our 2023 - 2024 input has been bought already, can we expect to see lower costs for the last quarter? I think Gustavo can take this one.

Well, we haven't yet purchased 100% of our inputs for the next season. We have done so for this current season. Yes. What we see, budget wise for the next season, the one that is to be planted as of September, October '24 to be harvested in '25, well, we'll see a reduction in chemical prices and fertilizer prices.

The first version of our budget shows about 15% reduction as compared to current prices. When we assessed fertilizer prices, we've got BRL700 million of costs. This is the cost for sugarcane, soybeans and corn. Out of this value, BRL250 million are to do with fertilizers, and we've seen a difference that's been quite lower as compared to the history average.

If we compare low soybean prices at $11 or $11.5 at 5.05 exchange rate, minus 30 premium and still prices had a great ratio. So that has been purchased already. Part of the chemicals have already been bought because we saw a 16% decrease as compared to previous years in US dollars. So as far as we understand, the '24-'25 season is going to be seeing lower costs for all the crops. I hope I answered your question.

Next question by Kayo Araujo. He asks about the companies that, is this debt level going to be the same for the next years? Can that impact dividend distribution?

I can take this one. You know, when you look at the company's debt, when you look at absolute numbers, they may stand out, but when you look at the company's net debt, it is negative. Why? Because we've got farm sale receivables that have been accounted for partially because we have some part of that already concluded and part of that, that hasn't yet been concluded.

So just a quick note. The Chaparral farm sale has already been concluded. We received the first part of payment, but it hasn't been accounted for in this quarter because we still had some harvest to be done. And for that, for us, we can only consider that transaction from an accountancy standpoint whenever we actually transfer the property.

So between this quarter and the next one, we should consider an additional BRL210 million of the net result from this farm sale. And it's also worth mentioning that our debt, when you look at receivables from farms, our cash products to be received, then the net debt is negative. And that is important.

Now, going back to Tiago's question, that is how things have to be, because we need to buy lands when they are a good deal, and we have to sell them when the deal is good as well. So we need to have a safe, healthy debt level, considering Ag standards and the standards of our real estate business.

I think Gustavo can give you some more color on this, but we've got an important payment to be made from now to the next 10 following months. These numbers are worth BRL200 million.

Gustavo, can you give us some more details on it?

Sure, Andre. Now, capital structure wise, we believe this has to be reasonable. And we usually include that in the covenants of our fundings. 30% of the company's portfolio, well, that level is manageable. Our portfolio is at BRL3.3 billion after we sold the farm, this may go down to BRL3 billion, assuming that our debt could be at BRL1 billion. But we're talking about net debt at BRL550 million.

Well, our company demands short-term capital because out of this BRL700 million, we're also looking at interest rates, margins and the best ratios so that we can make the most 30%, 40% or maybe 50% of this season. At BRL300 million for the short term, well, up until this level, we'll feel quite comfortable.

For the long term, we've got projects that we look into very carefully, projects to invest in land, irrigation projects, BRL170 million to implement such projects, projects that we believe that will increase our EBITDA by BRL30 million to BRL40 million real with irrigated lands. So these are the indicators we always assess, and then we follow that up closely.

My personal opinion is that we should be a little more leveraged. But oftentimes when we make decisions or whenever there is an interesting project at site, then we have a hard time because the market is quite volatile because of the interest rates, and we know quite well what the agriculture cycles look like. But we have to be mindful so that leverage does not compromise our real estate results.

Thank you, Andre. Thank you, Gustavo. This is the end of our Q&A session. Thank you very much once again, everyone, for joining us. Thank you for your audience. I know there were many earnings calls happening at once at the same time, so thank you.

Now, for those of you who were based in Sao Paulo, we're now carrying out a campaign to collect supplies to send to the population of Rio Grande do Sul state, especially drinkable water, clothes. If you want to drop by your donations in our office, we're going to be sending them to Rio Grande do Sul state.

We are located at Faria Lima. You may contact our institute or my IR assistants. We are fully available to receive your donations and to send them to the state of Rio Grande do Sul.

With that, I'll hand the floor over to Andre for his final remarks. Thank you very much once again.

Thank you, Juana. That's a good reminder. BrasilAgro will also be helping the population of Rio Grande do Sul state. Now, I would like to wrap up by thanking you for your trust. I know you are following up on the company. We are quite resilient. We hit an all-time high in terms of land purchase and sales. This is part of our DNA. So thank you very much. You know, we promise and we deliver our promises.

During these earnings calls, we have been showing you that over and over again. We know that sometimes we'll have harder or easier semesters because of production volatility, price volatility. But during this quarter we are going to see expressive price volatility.

But we are quite confident in this activity. We trust that. Like I say, you know, when the alligator mouth closes again, then we become resilient, and we bring 30% to 35% of EBITDA margin. This is what is going to happen when we move from $8 per hectare to [$6000] per hectare, we are going to see EBITDA margins that will show how competitive we are as a sector.

Thank you very much everyone. You may trust, rest assured that we are going to bring positive results for the end of the year that will be closing late July. This will show you how resilient we are and that our business and operations as well as real estate are quite strong. We have been working on technology quite strongly.

We have got many projects that are going about real fast in terms of connectivity, bio approaches, biotechnologies, always with a focus on having better results. Gustavo, said it really well. In December we had the debenture launch were implementing the second part of the project. 1000 hectares have already been implemented. We are now going for another round of 700 hectares with irrigation that should be deployed by the end of this year with very high profitability.

Gustavo, mentioned cotton on [pivot] that has been bringing us positive surprises. So, once again thank you very much for your trust. Rest assured that the company is resilient and were working hard to be able to deliver this result. You see only three faces here, but there is a full army of people who are working quite hard to make this happen. Thank you very much everyone. Have a good week.

Now before we wrap up, let me talk about this army of people. They told me, I forgot to talk about two important things. Donations will be received by the end of next week, the 17, and also the institute is also contributing. We're going to match all donations, so we're doubling down on the donations that you give.

That's it, let's wrap. Thank you very much. Enjoy the week.

Statements in English on this transcript were spoken by an interpreter present on the live call. The interpreter was provided by the company sponsoring this event.