Cresud SA Q2 FY2023 earnings call

Management Statement and Operational Highlights

• Achieved a record planted area of close to 290,000 hectares combining owned and leased farms.
• Increased stake in IRSA to 56.7% during the semester, with IRSA showing strong EBITDA and occupancy levels.
• Received dividends from subsidiaries including IRSA, Brasilagro, and FyO.
• Implemented a share buyback program with ARS 4 billion approved, and ~32% of the plan executed.
• Brasilagro has good rain results for corn and soybeans, but sugarcane is negatively affected by price, yield, and cost issues.
• Real estate sales in the first semester were low compared to last year, with only two small sales, but optimistic for second semester activity.

Segment Performance

• Brasilagro: Corn and soybeans expected to be good due to good rain results, but sugarcane is negatively affected with lower prices, yields, and higher costs compared to last year. Revenue contribution from sugarcane has decreased.
• Real Estate: Last year's first semester was affected by strong real estate sales in Brazil, but this year only two small sales occurred in the first semester, with optimism for more activity in the second semester.
• Agriculture: Mixed conditions by country; drought in Argentina has affected margins, while Brasilagro is less impacted. Climate in Argentina, especially drought, has influenced crop margins, but Brasilagro's rain results are positive for corn and soybeans.

Guidance

• Expect more active real estate sales in the second semester.
• Optimistic on Argentina land prices improving if the government implements measures to support farmers.
• Brasilagro's corn and soybeans are expected to be good, but sugarcane remains a concern.
• Plan to continue the deleverage process and maintain leverage levels as seen in consolidated results.

Risks

• Drought in Argentina impacting agriculture margins and crop yields.
• Sugarcane in Brasilagro facing challenges with lower prices, yields, and higher costs.
• Real estate sales variability from year to year.
• Tax and legal issues, including provisions for lawsuits and fair value losses on investment properties due to inflation and devaluation effects.

Question and Answer

Q: Do you expect farmland sales in Argentina for the next semester?

A: Yes, optimistic, with more activity expected in Brazil than Argentina.

Q: Will the drought in Argentina have an impact on commodity prices?

A: Could affect soybean supply, potentially leading to positive price effects due to lower volumes from Argentina.

Q: Reason for the significant tax credit in the latest quarter results?

A: Supreme Court ruling allows inflation adjustment in tax balance sheet, reversing previous losses and generating a gain.

Q: Provision for the lawsuit increase?

A: New claim from IRSA in Israel, with a provision created due to a conservative approach as per legal defense assessment.

Q: Fair value losses on investment properties?

A: Related to inflation and devaluation; valuations in dollar terms are flat, but pesos show losses due to currency effects.

Q: Guidance on dividend and share repurchase?

A: Continue share buyback program, no specific dividend guidance yet; plan to maintain leverage levels.

Q: Outlook on agricultural land prices?

A: Brazil has liquid and attractive land prices, while Argentina's prices expected to rise if government improves farmers' situation.