Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Brazil became the world's leading cotton exporter in the '22, '23 season, surpassing the United States.
- SLC Agricola SA (SLCJY, Financial) achieved a 73% increase in current revenue despite a decrease in net revenue.
- The company has hedged a significant portion of its production: 92% of soybeans, 69% of corn, and 59% of cotton for the '23, '24 season.
- SLC Agricola SA (SLCJY) successfully raised over BRL1 billion through the issuance of CRA to extend its debt profile.
- The company expanded its joint venture with Agro Penido, adding 1,700 hectares with a planting potential of 30,734 hectares.
Negative Points
- Net revenue for the first quarter decreased due to lower prices and reduced soybean sales volume.
- Cash flow for the quarter was negative BRL543 million, mainly due to reduced soybean production payments and machinery payments.
- Adjusted net debt ended the quarter at BRL4.2 billion with a net debt over adjusted EBITDA ratio of 1.99 times.
- Soybean margins were pressured due to lower productivity in Mato Grosso, resulting in a gross profit of only BRL52 per ton for the quarter.
- The '23, '24 season was characterized by irregular rainfall distribution and heat waves, affecting crop development and yields.
Q & A Highlights
Q: What can we expect in relation to the evolution of costs per hectare for the next season? Will the crop mix remain the same, or will there be changes?
A: (Aurelio Pavinato, CEO) We are finalizing our budget and planning, especially with new leases. We need to analyze the soil to determine the crop mix. We expect costs per hectare to decline, but we need about 30 days to finalize the details.
Q: Can we expect a decline in cost per hectare compared to the previous year?
A: (Aurelio Pavinato, CEO) Yes, costs will go down due to adjusted margins and lower input prices. However, we cannot provide a specific percentage at this time.
Q: What factors affected soybean margins this quarter?
A: (Ivo Marcon Brum, CFO) Soybean margins were pressured due to lower productivity in Mato Grosso. We recommend looking at year-to-date figures for a more accurate picture.
Q: What are the prospects for land expansion and lease opportunities for the '24, '25 season?
A: (Aurelio Pavinato, CEO) The lease window for the current season is closing, but we are seeing more opportunities due to lower prices. We are delivering growth this year and will continue to look for strategic deals.
Q: How do you interpret the relation between the company's market cap and your land valuation?
A: (Ivo Marcon Brum, CFO) We are frustrated as our land is valued at BRL11.5 billion, but our market cap is around BRL8.5 billion. We believe our cash generation is not being fully recognized.
Q: How is SLC dealing with extreme climate events, and will there be changes in the crop mix this season?
A: (Aurelio Pavinato, CEO) Extreme climate events are becoming more frequent. We manage volatility by optimizing our crop mix for each farm to maximize efficiency. We do not anticipate major changes in the mix.
Q: What do you expect in yields for the land under your management, and what are the implications for paid leases?
A: (Aurelio Pavinato, CEO) Yields will continue to increase due to improvements in crop management. Lease costs are more influenced by cash generation and margins rather than yields. We expect lease costs to remain flat or decrease in the next two years.
Q: Are you considering a new share buyback program given your land valuation?
A: (Aurelio Pavinato, CEO) We are considering continuing our share buyback program as our share price is below our expectations.
Q: What are the international outlook and USDA announcements regarding soybean and corn?
A: (Aurelio Pavinato, CEO) The U.S. is having a good season for soybean and corn, but cotton is not doing well. Global supply and demand for corn are balanced, but soybean inventories are high, leading to lower prices. We expect adjustments in planted areas globally to rebalance margins and supply.
Q: What are the risks related to climate and government policies in Argentina?
A: (Aurelio Pavinato, CEO) Argentina is competitive internationally and has land expansion potential. Climate events and government policies will add volatility to the market. Argentina's production will impact international soybean and corn markets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
