Cresud SA Q1 FY2022 earnings call

Management Statement and Operational Highlights

• Planting and Crops: Planting 262,000 hectares this year, similar to last year. Global stock consumption of soybean (27.7%) and corn (25.4%) low, affecting prices. Current soybean and corn prices similar to budget.
• Farmland Sales: Two transactions in Brazil, not reflected on balance sheet yet. First: 2,900 hectares sold for BRL430 million, internal rate of return 56% real, 40% dollars. Second: 2,700 hectares sold for BRL589 million, to be recognized in steps.
• IRSA Performance: Shopping malls recovering, occupancy up, real sales improving. Offices stable, average rent stable. Hotels in Buenos Aires partially recovering; Llao Llao doing well. Merger proposal between IRSA Commercial Properties and IRSA pending shareholder approval.
• Financial Results: Gain of ARS 2 billion attributable to controlling shareholders. Agribusiness operating income ~ARS 2.3 billion. Urban business loss ARS 4.6 billion vs gain last year. Net financial results positive ARS 3 billion vs loss last year.

Segment Performance

• Agriculture Production: Driven by sugar cane activity with better results due to higher prices from frozen crops in Brazil and oil price increases. Planting area is 262,000 hectares across 4 countries (14,000 in Paraguay, 14,000 in Bolivia, 111,000 in Brazil, 123,000 in Argentina). Crop breakdown: 46% soybean, 27% corn, 9% sugarcane, 3% wheat, others 8%.
• Real Estate (through IRSA): Shopping malls had 90% occupancy (94.3% excluding Falabella), real sales 322% above last year but 10.7% below pre-pandemic. Offices had 78.9% occupancy, average rent $25 per sq m. Hotels in Buenos Aires affected by foreigner restrictions, but Llao Llao in the south of Argentina doing well.
• Agricultural Services: FyO (Cresud owns 50.1%) commercialized 6.4% more grains, EBT close to $15 million. Agrofy (Cresud 20%) expanding regionally, revenues up 87%, annual visits 31 million.

Guidance

• Expect better numbers in real estate as shopping centers and hotels recover.
• Agriculture expected to have a good season with better prices and higher margins.
• Services segments (FyO, Agrofy) expected to continue growing.
• Merger of IRSA Commercial Properties and IRSA pending shareholder approval.

Risks

• Pandemic impact on hotels in Buenos Aires.
• Fluctuations in commodity prices.
• Exchange rate risks affecting financial results.
• Regulatory changes impacting farmland sales and operations.