Cresud SA Q3 FY2023 earnings call

Management Statement and Operational Highlights

• Planted Area and Campaign Progress: Mixed conditions this year vs. last, sustained prices but high cost pressures and adverse climate affecting yields, especially in Argentina.
• IRSA: 3% increase in shares, EBITDA recovery, and high dividends received.
• Farmland Sales: Significant transaction in Brazil, a BRL407 million sale, to be recognized in Q4, generating a large gain.
• Service Companies: Traded tonnes down in Argentina due to drought, but positive on market share; residents marketplace stable but adjusting to drought conditions.
• Financial Drivers: Impact of inflation and devaluation on results, with fair value changes of investment properties influenced by these drivers.

Segment Performance

• Agricultural: Planted area combined across four countries is 28,000 hectares. Yields affected by adverse climate, especially in Argentina, with soybean forecasted to have a 47% drop, corn a 28% drop, and wheat a 40% drop. Cost pressures from fertilizers and input costs led to margin decrease. Revenue contribution from soybean, corn, and sugarcane.
• BrasilAgro: Lower productivity, but significant farmland sales expected, particularly in Brazil, with a large transaction in Brazil to be reflected in Q4.
• IRSA: 3% increase in shares, EBITDA recovery, and high dividend yield received.
• Service Areas: Two companies with 50% shares saw traded tonnes down in Argentina due to drought but positive on market share. Residents marketplace stable but affected by drought, adjusting to breakeven.
• Real Estate: Big farmland sale in Brazil to be recognized in Q4, generating a significant gain.

Guidance

• Climate and Campaign: Expectations on rain based on climate change from Niña to Niño; wheat affected if rain doesn't come soon. Next campaign outlook tied to climate trends.
• Farmland Prices: Potential increase in Argentina farmland prices with government measures on exports and dollar policies.
• Dividends: ADR investors can expect payment 10 days after Bank of New York fixes the record date, likely next week.

Risks

• Adverse Climate: Affects yields, especially in Argentina, impacting crop production and revenues.
• Cost Pressures: High costs from fertilizers and inputs continue to squeeze margins.
• Government Measures: Uncertainty in government policies regarding exports and dollars affecting farmland prices and farmer conditions.
• Exchange and Inflation: Impact of inflation and devaluation on financial results, particularly on investment properties and net financial results.

Question and Answer

• 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 payment 10 days after Bank of New York fixes the record date, likely next week.

• Q: Forecast for rain in the next 12 months and next campaign?

A: Delay in change from Niña to Niño; wheat affected if rain doesn't come soon. Next campaign tied to climate trends.

• Q: Plans on listing brokerage company?

A: Maybe for Brazil expansion, but not for Argentina currently; Brazil expansion may require capital raising.

• Q: Reduction in fertilizer costs?

A: 30% drop in dollar terms, helping margins for next campaign, more impact in Brazil than Argentina.

• Q: Outlook for Argentina farmland prices?

A: Prices dropped from peak, but potential increase with government measures on exports and dollars.