Cresud S.A. Warrant 2021-08.03.26 on Cresud Q3 FY2023 earnings call

Management Statement and Operational Highlights

• Crop Conditions: Argentina is severely affected by drought, impacting yields; Brazil and other regions are less affected. Government's new soybean price will compensate drought effects in the future.
• IRSA Performance: IRSA has historical high occupancy, EBITDA recovery, and completed deleveraging. It paid a high dividend, and Cresud received dividends from IRSA.
• Farmland Sales: A large farmland sale in Brazil (BRL407 million) with a significant gain to be recognized in Q4.
• Dividends: Paid a 6% dividend yield and a 2.2% capital stock distribution to shareholders.
• Input Costs: Fertilizer costs have decreased by 30% year-to-year, helping margins for the next campaign.
• Climate Outlook: Waiting for the change from Niña to El Niño to normalize weather conditions, especially crucial for wheat production in Argentina.

Segment Performance

• Agricultural Segment: This year has mixed conditions; Argentina is heavily affected by drought, leading to lower yields, while Brazil and other regions are less impacted. Year-to-year, yields are down by 4% for the total region, with soybean, corn, and sugarcane as the main products. Revenue contribution from these crops is significant but affected by climate and cost pressures.
• Real Estate (IRSA): Cresud controls 56.8% of IRSA shares. IRSA has seen historical high occupancy (97% for offices, 100% for AAA buildings), EBITDA recovery, and deleveraging. It paid a high dividend (13% yield), and Cresud received dividends from IRSA, BrasilAgro, etc.
• Farmland Sales: A big transaction in Brazil (BRL407 million sale of two parcels) with a significant gain to be recognized in the fourth quarter.
• Service Areas: Two companies running almost 50% of shares; one had lower volume in Argentina due to drought but aims to increase market share; another marketplace for agriculture is stable but not growing due to drought, focusing on breakeven.

Guidance

• Next campaign is expected to have lower prices but more liquidity in real estate outside Argentina.
• Brazil intends to grow its farmland area from 280,000 hectares.
• Anticipate farmland price increase in Argentina if export tax and exchange rate issues improve.

Risks

• Adverse Climate Conditions: Drought in Argentina severely affects yields; delay in rain could further impact wheat production.
• Cost Pressures: High input costs, particularly fertilizers, initially pressured margins.
• Exchange Rate and Inflation: Impacts on financial results due to inflation and exchange rate fluctuations.

Q: When can ADR investors expect to receive the cash and stock dividend?

A: We are working with Bank of New York as a trustee. Expect Bank of New York to fix the record day next week, with payment 10 days later.

Q: Forecast for rain in the next 12 months?

A: There's a delay in the change from Niña to El Niño. Rain expected but not as anticipated; wheat is strongly affected if no rain soon.

Q: Plans on listing a brokerage company?

A: Maybe for Brazil expansion, but no immediate plans for Argentina; could consider raising capital for Brazil's business needs.

Q: Reduction in fertilizer costs?

A: Fertilizer prices have dropped 30% year-to-year, helping margins for the next campaign.