Cresud S.A. Warrant 2021-08.03.26 on Cresud Q2 FY2023 earnings call

Management Statement and Operational Highlights

• Planted Area: Achieved a record planted area in the region, including owned and leased farms, with close to 290,000 hectares of total land.
• Drought Impact: Argentina was significantly affected by drought, but Cresud's farms were less impacted due to better location. Brazil's conditions were better for most crops.
• Brasilagro Performance: Had good rain results for corn and soybeans but faced challenges in sugarcane.
• Real Estate: Q2 2023 had only small sales compared to strong sales in Q2 2022, but optimistic for second semester activity.
• IRSA Investment: Increased stake to 56.7%, with strong EBITDA, 100% occupancy of a building, and successful debt resolution.
• Dividends: Received dividends from IRSA, Brasilagro, and FyO, and distributed cash dividends.
• Share Buyback: Approve buyback program of ARS 4 billion, with 32% executed so far.

Segment Performance

• Agricultural: Sugarcane in Brasilagro had lower results this year due to negative impacts on prices, yields, and costs compared to last year. Grains also saw a reduction in adjusted EBITDA. Real estate had only small sales in Q2 2023 compared to significant sales in Q2 2022. Brasilagro had good rain results for corn and soybeans but was affected in sugarcane. IRSA investment saw increased stake to 56.7% and strong operational and financial results with increasing EBITDA.
• Revenue Contribution: Sugarcane and grains are key segments in agriculture, with sugarcane's contribution affected by current conditions, and grains showing a reduction. Real estate's contribution is lower in Q2 2023 vs Q2 2022. IRSA's performance impacts the overall results through dividends and stake increase.

Guidance

• Second Semester: Optimistic on increased real estate activity, especially in Brazil.
• IRSA and Brasilagro: Expect continued strong results from IRSA's operations and Brasilagro's good rain-affected crops.
• Leverage: Maintain consolidated deleverage process, with free cash flow available for future projects.

Risks

• Drought Impact: Argentina's drought affected agriculture margins, especially for crops like soybeans.
• Sugarcane Challenges: Brazil's sugarcane faced negative impacts on prices, yields, and costs.
• Tax and Legal Matters: Significant tax credit reversal due to Supreme Court decision, and provision for a lawsuit related to IRSA's investment in Israel.

Q: Do you expect farmland sales in Argentina for the next semester of this year 2023 and also in the region?

A: Yes, some movement in Argentina, more optimistic in Brazil due to liquidity and farmer behavior.

Q: Do you think the drought in Argentina will have an impact in commodity prices?

A: Yes, could have a positive impact on soybean prices due to low volume from Argentina.

Q: Here we have many questions from our investors, if we can explain the reasons for the significant tax credit in the P&L in the latest quarter results?

A: Reversal of tax effect due to Supreme Court decision allowing inflation recognition in tax balance sheet.

Q: What you expect of that ruling regarding the provision of the lawsuit that increase in the second quarter and if there can be any other related lawsuits going forward?

A: Created a provision for a lawsuit claim against IRSA, no expectation of more claims.

Q: Related to the fair value losses on investment properties that jumping in the second quarter – we can discuss reasons for that and outlook going forward?

A: Due to inflation and devaluation effects on peso-denominated valuations, valuations in dollar terms are flat but peso terms show losses.

Q: Any guidance on dividend and share repurchase going forward? And also, your targets of leverage going forward?

A: Continue share buyback program, no dividend guidance yet, maintain consolidated deleverage.