BrasilAgro - Companhia Brasileira de Propriedades Agricolas (LND) 2014 Q1 法說會逐字稿

Good afternoon, everybody, and thank you for holding. The BrasilAgro First Quarter 2014 Conference Call will begin in a few moments. Thank you for your patience.

Good afternoon. Welcome everyone to BrasilAgro's First Quarter 2014 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 management and on the 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 the 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 Piza, chief executive officer.

Sir, you may begin your conference.

Thank you. Welcome everybody to our first quarter call. As we all know, this is the first [front] measure of the year for us as we begin our year July 1st. First, it's a trimester of preparation for the next campaign.

So if you could turn to our presentation, page 2, a few highlights for the quarter.

Net revenues of almost BRL40 million. Dividend payments of BRL0.10 per share, which is a major accomplishment for us. We're very proud of it. Over 12,000 hectares of area to be developed this year, and as of now, 66,000 hectares to be planted. Again, these numbers are as of now. I'm going to talk a little bit more about it later.

On page 3, a little bit about soybean price evolution in the last few months. One thing that is quite interesting is there's incredibly high correlation between -- negative correlation between soybean prices and exchange rate.

And I believe that this drop -- [fortune] drop in prices recently have been somewhat offset by their exchange rates. But nevertheless, the Caribbean we are seeing right now is under at a lower point than last year. It's still way above average prices, which should drive -- continue to drive interesting profits for farmers everywhere, which reflect on page 4 on farmland prices.

We continue to see farmland prices appreciating starting in Brazil throughout the regions. Of course, some regions appreciated more than others, but the overall prices continue to be quite strong. And given the fact that farmers are seasonally on interesting profits, it seems to be the case.

The question that lies ahead is what's going to happen next year if you have sudden changes in corn prices or soybean prices with that farming prices continue to hold its value. And those are very interesting questions to answer or even how the [rocket] value of farmland throughout Brazil will change and have different -- and we believe different regions you'll behave different, opening up opportunities for us to continue to expand our operations.

And then on page 5, a little bit about (inaudible) evolution. Last year we reached 76,000. As of now, we are planting 66,000. But as I said before, expect this number to go up.

We continue to develop more farms, more land that should be put into production this year. We're just doing very careful. We've learned in the past that the areas that you rush to plant typically did not give good returns, so instead of planting everything, we'd be very cautious in selecting the areas that are really with good preparation before planting, so we're being careful. But I do believe and very confident this number will go up and we're going to be discussing it on our next call.

Also, in terms of land development, we have reached a peak in 2010-2011 up 20,000 hectares. And then we're roughly developing around 12,000, 13,000 hectares a year, and we expect this year to continue to be -- towards a strong path of 10,000 to 12,000 hectares to be developed.

And an important part of it will be put into production for next year because as we have more selectively now in terms of what we plant in that area, but we're being conservative in our planting now a little bit incorporating next year, so looking for an interesting growth this year in terms of planting preparation for planted areas.

On page 6, a little bit of our commercialization status, they have roughly 62 percent of our soybean hedges and that 62% refers to the 66,000 hectares, so if there's more area, this number will go down, roughly at BRL12.9 per bushel, probably 5% to 6% above current prices, an exchange rate of roughly 2.37. If I interrupted to the numbers, it would be around 2.41.

Well, on page 7, adjusted EBITDA and again, it's always good to explain why we do that and what kind of changes we do, already done to come up with the number we believe best represents our managerial efforts.

The adjusted EBITDA by adding back or throwing back all the biological assets impact that are not related to current operations, also adding back other depreciation. And also you add back all the financial impact or the hedges that we do have on the provisional counterpart. So by doing that, we're at minus 1.1. That's given the quarter that we don't have much in terms of production going on. We don't have much of sales going on, but I think it is pretty reasonable and somewhat in line with what we expect.

I do believe given the seasonality of the company we have to wait and see the full cycle of the year to actually do a full assessment of the result, but it's pretty much in line of what we expect.

Continuing with that, on page 8, income statement, roughly we had this year, little less grain that we captured in our inventory after June 30, (inaudible) for driving revenues down, a little bit more of sugarcane. That is the main difference.

And, of course, some adjustments in biological assets on sugarcane and on the way we account for the cost of biological assets creating those difference. But again, this is somewhat estimating future gains that you always have to keep them addressing our assumptions. That is the bulk of the difference here in terms of gross profits.

And then in terms of financial results, much better than last year, if you remember correctly, last year, we had a hedging position that was losing cash, but later offset by, actually, selling price of the farm.

And this year, our hedging positive is positive. That is the reason why we have a much better financial results.

Having said that, they're pretty much the same loss of the period, which again given the fact that it is a highly seasonal business, (inaudible) of what we expect.

Also on page 10, a quick planning on corporate governance. We addressed shareholders' meeting BRL0.10 per share of dividend, which is something very important to us given the fact we are a very young company, massive investments, the fact we're still repaying our dividends even though it's not much, it means a lot. We are on the right path and it already is a little bit impacting the shareholders not only in terms of capital gains, in terms of appreciation of our funds, but also generating earnings to the distributors.

Also, we have a full board of directors now. We had seven members until last term, now we have 9, 4 of which are independent board members more than complying with Novo Mercado rules. We also have our Fiscal Council two members, one of which elected by minority shareholders.

So this is what we have to present on this quarter. And we can move to Q&A now.

Thank you. The floor is now open for questions. (Operator Instructions). Our first question comes from Robbie Jane of HSBC. Please go ahead.

Hi, good morning. My question was regarding could you update us on your plans for buying new land as to what areas are you looking at. Is it Brazil? Is it outside Brazil and LatAm? That would be helpful.

Hi, this is Julio. Thanks for the question. Could you please repeat it? That was very hard for us to understand it.

I just wanted to get an update on your plans for buying new land. Would that -- are you looking more within Brazil at this point or are you looking outside in other parts of Latin America?

(inaudible). I would just say that we are primarily looking into Brazil. This is, of course, is our main focus and that is what we did and have some very -- I would say, careful going through some deals that we're working [all in all]. But apart from that, we are always keeping our eyes out for international opportunities. We envision the company in the future going abroad, but, of course, Brazil is always the primary market we are focusing on.

But as I said, we'd like to always be looking around something for international opportunities, our rivals are surely going to be looking at it.

Thank you. That's very helpful.

(Operator Instructions). As there are no further questions, I'll turn the call back over to Mr. Julio Piza for final considerations. Mr. Piza, you may give your final considerations now.

Thanks everyone for joining today. As I said, this quarter is a quarter of preparation for us as we don't have much preparation activity going on. So, hopefully in December, when generating or presenting our first half -- our first financial of the year, we'll have a plenty of interesting details regarding this crop and what do we expect out of it. So thank you very much and see you all in a couple of more months.

Thank you. This concludes today's Brasilagro's First Quarter 2014 Results Conference Call. You may disconnect your lines at this time.