Negative Points

• Brasilagro - Cia Bras de Prop Agricolas ( NYSE:LND ) reported a net loss of BRL90 million for the fiscal year, a sharp decline from the BRL138 million profit in the prior year, primarily due to adverse weather events like frost and wildfires impacting sugarcane and cotton yields.

• The sugarcane segment suffered a significant setback, with approximately 650,000 tonnes less commercialized than the previous year, leading to a nearly BRL60 million reduction in EBITDA due to lower volume and an inability to dilute fixed costs.

• The company faced high input costs, particularly for fertilizers like MAP, which surged from BRL580 to BRL840 per ton due to global supply disruptions, squeezing margins despite efforts to mitigate through strategic purchasing.

• Cotton production was negatively impacted by quality and productivity issues from the previous harvest, leading to a strategic reduction in planted area and contributing to the overall weak financial performance.

• Brasilagro - Cia Bras de Prop Agricolas ( NYSE:LND ) is grappling with a high cost of capital (around 14%), which has increased the company's debt burden to BRL1.2 billion and reduced net earnings, prompting a focus on deleveraging rather than aggressive expansion.

• The company experienced operational challenges, including a delay in sugarcane harvesting in the Northeast due to plant issues and a reduction in cattle raising GMD by 8-9% year-over-year, partly due to the sale of Fazenda Preferencia, which disrupted operational metrics.

Q & A Highlights

Q: What are the assumptions behind the improved cost per hectare guidance for some crops, especially given higher fertilizer prices? Also, is the sugarcane harvest guidance factoring in the risk of excessive rains that have impacted other sector players? A: Andre Guillaumon (CEO) explained that cost improvements stem from strategic purchasing of fertilizers at favorable exchange rates, increased use of own seeds (nearly doubling production at the Chaparral unit), and better selection of planting areas. Regarding sugarcane, he noted that most of the company's concentration is in the Northeast (Monte Cristo) and Midwest, where operations are progressing well, while delays in Sao Paulo are more related to plant scheduling. Gustavo Javier Lopez (Chief Administrative Officer) added that reduced investments in land maturation and stabilized costs have also contributed to the improved cost outlook.

Q: With a land portfolio that is now ~55% developed, what is the expected pace of land sales? And after selling land, how will the company prioritize capital allocation between deleveraging and buying new land, especially with El Nino volatility ahead? A: Andre Guillaumon (CEO) stated that the company will continue its core strategy of buying, transforming, and selling land. He indicated that while sales are expected, the company may be more of a buyer than a seller in the coming period, actively seeking origination opportunities with financial partners. He clarified that the higher proportion of developed land is due to recent portfolio acquisitions (e.g., Agrifirma) that were already partially mature. The company remains committed to its model, which combines operational results with real estate appreciation, and will balance deleveraging with new acquisitions based on profitability.

Q: Given the share price trades at a significant discount to NAV (BRL19 vs BRL38.17), why does the Board prefer paying dividends over buying back its own shares at a 50% discount? A: Andre Guillaumon (CEO) defended the dividend decision, arguing that the proposed BRL30 million dividend (0.9% of portfolio value) is more of a symbolic gesture to demonstrate commitment to shareholders and maintain a strong, active retail investor base (which has grown from 5,000 to 138,000 individuals). He argued that this intangible value provides liquidity and stability to the share price. He noted that the company has already bought back 10% of its shares in the past and that currently, reducing the high-cost debt (with interest rates around 14%) is a more effective way to create value than a small buyback.

Q: Can you elaborate on the main drivers behind the BRL90 million net loss for the fiscal year, and what is the outlook for the coming year? A: Gustavo Javier Lopez (Chief Administrative Officer) attributed the loss primarily to a significant drop in sugarcane EBITDA (approximately BRL60 million less) due to frosts in Sao Paulo and wildfires in Maranhao, which reduced volumes by ~650,000 tonnes. Cotton also underperformed due to quality and productivity issues. These negative impacts were partially offset by strong results in soy and corn, which benefited from higher productivity and favorable currency hedging. Looking ahead, management expects a recovery driven by better commodity prices (soy already locked in above $12), a rebound in sugarcane productivity, and the carryover effect of delayed harvests.

Q: How is the company managing its high cost of capital and debt levels, and what is the strategy for the upcoming harvest? A: Gustavo Javier Lopez (Chief Administrative Officer) stated that the company is focused on reducing debt, with a plan to use receivables and operational results to pay down liabilities. They intend to avoid renewing certain expensive debt instruments (CRAs) and are working on a better allocation of CapEx, which has historically been around BRL150 million per year. The strategy includes being more selective with planting areas, reducing exposure to capital-intensive crops like cotton in non-irrigated areas, and focusing on crops with better margins and lower risk, especially with the El Nino weather pattern forecast.

Q: What is the company's view on the recent commodity price movements, and how are they positioning for the next cycle? A: Andre Guillaumon (CEO) noted a recent rally in commodity prices, with cotton recovering significantly (from ~BRL65-68 to almost BRL90) and sugar prices also rising due to global supply concerns (El Nino in India, reduced production in Thailand). He expressed optimism about the next cycle, stating that soy prices are already locked in at over $12, more than 10% higher than last year, which should translate directly into improved EBITDA. The company is also seeing positive signs for ethanol price recovery, which would benefit its sugarcane operations.

Q: Can you provide more details on the company's land portfolio value and the drivers of its appreciation? A: Andre Guillaumon (CEO) highlighted that the portfolio value increased to BRL3.34 billion from BRL3.1 billion. This appreciation is driven by three main factors: (1) land value appreciation in specific regions benefiting from different liquidity hubs in Brazil, (2) area maturity, which is the core value creator as land with more crop years becomes more valuable, and (3) efficient sales processes. He emphasized that even in a challenging year for agribusiness, the company's model of transforming land continues to generate value for shareholders.

Q: What were the key operational achievements during the year despite the challenging financial results? A: Andre Guillaumon (CEO) highlighted significant productivity gains across several crops. Soy production increased by 19% due to higher productivity, corn production rose 30%, and cotton productivity increased by almost 50% year-over-year. The company also made strategic decisions to reduce area for less profitable crops like beans (by 70%) while increasing productivity by 40%. These achievements demonstrate the company's focus on efficiency and data-driven decision-making, using AI and telemetrics for real-time management.

Q: How is the company approaching the upcoming El Nino weather pattern, and what changes have been made to the planting strategy? A: Andre Guillaumon (CEO) explained that the company has reduced its total planted area, particularly for soy (by 6-7%), by displacing marginal areas with poor productivity histories. These areas are being used for other purposes, such as lower-technology corn or vegetation coverage, to avoid allocating capital to risky crops during a year with strong El Nino risk. The company is also being more cautious with cotton, focusing only on mature, irrigated areas, and will reassess its strategy in the next 50-60 days as weather forecasts become clearer.

QFor the complete transcript of the earnings call, please refer to the full earnings call transcript .