BrasilAgro - Companhia Brasileira de Propriedades Agricolas (LND) 2012 Q2 法說會逐字稿

Good afternoon. Welcome, everyone, to Brasilagro's second quarter 2012 results conference call. Today's live webcast and presentation may be accessed through Brasilagro's website at www.brasil-agro.com.

We would like to inform you that this event is being recorded and all participants will be in a listen only mode during the Company's presentation. After Brasilagro's remarks there will be a question and answer session for analysts only. At that time further instructions will be given. (Operator Instructions).

Before proceeding, let me mention that forward looking statements are based on the beliefs and assumptions of Brasilagro's management, and all information currently available to the Company. They involve risks and uncertainties, because they relate to future events and, therefore, depend on circumstances that may or may not occur.

Investors should understand that conditions related to the macroeconomic scenario, industry and other factors could also cause results to differ materially from those expressed in such forward looking statements.

Now, I'll turn the conference over to Mr. Julio Toledo Piza, Chief Executive Officer. Sir, you may begin your conference.

So, welcome, everyone, to our second quarter conference call, so [watching] me to page 2 and our presentation can start. We have here the highlights of this quarter.

So we completed over 65,000 hectares of planted area. We still have a few more hectares to do on second crop that we just have essentially started. Also, we have finalized our second year of supply -- of sugarcane supply to ETH, delivering over 600,000 metric tons of sugarcane.

Also our net revenues, and in the first six months of our fiscal year 2012, have been almost BRL83 million, which is significantly higher than it was last year. Also, a net income of over BRL40 million (sic - see slide 2).

And adjusted EBITDA, which for us is the most relevant metric, the one that truly reflects how this Company is doing operationally, we have achieved over BRL31 million in the semester. Just as a reference, the year 2011, the whole 12 months of 2011, we had over BRL21 million of EBITDA, so in the first six months of this year we have already accumulated over, [therefore], a 50% increase over last year as a whole. So we're quite pleased with that result as well.

As we always do before moving into the financial data of the Company, a quick glance at the market. On page 3 we have the soybean price evolution, you can see that in reais at the Paranagua port and also Chicago prices. And you can see that, first of all, in reais, as you already know, our volatility is much lower.

And also important to say that in reais we have actual level of 2008, which are both [solid] average prices, which, of course, lead to a very strong farmer income, which, of course, turns into interesting farmland prices. So on page 4 we have the latest FNP data on Brazil and, you can see, across all regions farmland prices have gone up. As a trend that hasn't stopped in the last three, four, five years.

Of course, as a result [there are no realty] issues with that [energy] report, but as a general trend it's something that we are seeing that is in the market. Farmland prices are quite strong; farmers are buying farms everywhere so the market is pretty strong.

As for the Company, on page 5 a quick glance in our hedging positions. We still have some soybean left from last year, that is being finalized, the commercialization of it

And on page 6 how we are looking for next year which is going to -- we should start a harvest pretty soon. We have over 55% sown, prices significantly above the current one. So we're looking into very decent prices for the Company this year, we're quite confident we can deliver and we are expecting to see results.

On page 7, probably the most important one for us, that's the EBITDA and adjusted EBITDA. EBITDA, the first one is just a simple taking the numbers out of the net income to arrive at this EBITDA. But for us this number is not an important one; the important one is adjusted EBITDA. And explaining again, as we did last time, what we are doing here is just trying to understand and trying to show how the Company did operationally.

So on sugarcane we are considering the revenues for this quarter, or for the six months, per semester, and associated costs to produce the sugarcane. And on grains we're considering the results of the grains that we have harvested in the period. So it's a very straightforward look into the Company.

As for hedge, we just take from the financial results the hedge results related to products that we have already accounted for in the EBITDA. So for instance, everything that is '10/'11 -- hedging results related to '10/'11 has already been accounted in the EBITDA. Everything that is '11/'12, the harvest '11/'12 is just sitting in financial side of the income statement. It hasn't moved up to the EBITDA, because we didn't move up the product, so it's still there.

And in that metric, as we said before, over BRL31 million this quarter, which is in line with our expectations; BRL31 million for the semester, which is a very good result, remembering that we haven't accounted for the soybean, that it's already planted. So the moment we do that we should be facing a very strong result.

On the total net income are some important facts. The cost of sales is above what it was last year, basically, because of a stronger presence of sugarcane in the mix. And, according to [IFRS rules], the cost of goods sold of the sugarcane is based on fair value. Therefore, it's always very close to the net revenues and, as you have seen, a significant change in prices. So that is explanation for the cost of goods sales.

Also, on SG&A the important difference here is a tax issue, which is called the [water] sales. Up to last year we had fiscal fees as part of SG&A, and now it's in our cost of goods sold, and that is the reason here the difference.

So this is, in a nutshell, the main messages we have, so we can move up to Q&A. Thank you.

(Operator Instructions). Pedro Richards, Raymond James.

I wanted to know if you could give any guidance on the impact of La Nina on the Summer crop yield expected so far for this harvest, and maybe compared to the previous harvest.

La Nina's effect has been -- we have had very little effect of La Nina on our crops. As you know, all the crops, our beans and corn are in the North East of Brazil being affected, or if we have in a positive way. So we are being -- we've been, actually very little affected by the impact of the La Nina on the center left (inaudible), what is the border line of the region of Brazil that has been affected.

And the rest of Brazil, we're going to know this better when we start harvest of sugarcane in May. But we do not expect to have significant impacts there. We might have some on the sugarcane, but again on the beans and corn side, on the grain side, we haven't had any significant impact so far.

Okay, thanks.

(Operator Instructions). I'll now turn the floor back over to Mr. Julio Toledo to offer any final considerations. Sir you may give your final considerations.

Thank you everyone for joining us in our call. So this is a quarter that we are in after planting before harvesting, so results are to be building up based on what we have achieved so far. And based on the situation of our crops and our farms, we're confident we're going to have a very strong year; that it will significantly increase the results of our Company and on compared to last year.

So thank you very much and see you next quarter.

Thank you. This concludes today's Brasilagro's 2012 second quarter results conference call. You may disconnect your lines at this time.