Cresud S.A. Warrant 2021-08.03.26 on Cresud Q1 FY2024 earnings call

Management Statement and Operational Highlights

• Climate and Planting: Better climate conditions in Argentina for summer crops; BrasilAgro began sowing normally in Mato Grosso with 35% of soybean planted.
• Los Pozos Farm: Sold 4,200 hectares of Los Pozos farm for $2.3 million, with an accounting gain of ARS 700 million due to dollar valuation. Remaining surface of Los Pozos is 235,000 hectares.
• FyO Details: Traded tons at 5.5 million tons, market share ~8%, EBITDA improved.
• IRSA Activities: IRSA had strong performance in segments, sold assets, and provided significant dividends to Cresud.
• Cresud Financials: Fair value gain from IRSA investment, net debt decreased, dividend distribution issues with ADRs due to regulatory constraints, repurchase program extended by 180 days.

Segment Performance

• Farming: In Argentina, better climate conditions for summer crops; BrasilAgro in Brazil had 35% of soybean planted in Mato Grosso with some Nino impact in Mapitoba. Sugarcane in Brazil had lower prices and increased costs, leading to lower margins. Cattle had a slight loss due to inflation. Grains and corn account for ~75% of planted surface.
• FyO: Traded 5.5 million tons in the year, a small growth from the previous year. Market share for soybean, corn, and wheat was ~8%. EBITDA improved compared to prior years.
• IRSA: Strong financial and operational performance with growing occupancy in shopping malls, good performance in hotels, slight recovery in office occupancy. Sold assets and received significant dividends from IRSA.

Guidance

• Planting Area: Expect to plant 290,000 hectares in 4 countries, a slight increase from the previous campaign.
• Real Estate: Expect more sales and purchases in Argentina and Brazil, with active real estate market in Brazil.
• Dividends: Plan to distribute dividends, working on resolving ADR distribution issues.
• Debt: Current debt levels are comfortable with conservative leverage (LTV).

Risks

• Regulatory: Challenges in distributing dividends to ADR holders due to new CMB regulations.
• Climate: Nino impact on Mapitoba in Brazil could affect crops.
• Market: Commodity price corrections and input cost changes impacting margins.

Q: Are you seeing opportunities to buy land in Argentina or in the region? And do you expect to sell more farms in the region?

A: First quarter had no sales/purchases. Second quarter saw the Los Pozos sale. More sales expected in next quarters. Active real estate market in Brazil, with leasing activity in Argentina being considered for purchases.

Q: You have mentioned about the problem to distribute cash dividends and shares to ADR holders, how long could it take in your opinion? Also, if unsuccessful, what might be the plan-B that investors could await?

A: No clear time frame due to government regulations. Working with regulators to find a solution. Funds are in a money market fund to mitigate inflation impact until a solution is found.

Q: What would be a comfortable level of debt that you're aiming for Cresud?

A: Current debt levels are comfortable with a very conservative LTV. The current levels are felt comfortable as they are in line with the company's asset control.