BrasilAgro Companhia Brasileira de Propriedades Agrícolas. Quarterly Information ITR March 31, 2018 with report on review of quarterly information

Transcription

1 BrasilAgro Companhia Brasileira de Propriedades Agrícolas Quarterly Information ITR with report on review of quarterly information FRM/LA/TP 365i/2018

2 Quarterly Information Contents Independent auditor s report on review of quarterly information... 3 Revised quarterly information Balance sheets... 5 Statements of operations... 7 Statements of comprehensive income (loss)... 8 Statements of changes in equity... 9 Statements of cash flows Statements of value added Notes to the quarterly information

3 Rua Castilho, 392-4º Andar - 42 Brooklin - São Paulo - SP CEP Brasil T: (A free translation into English from the originally previously issued in Portuguese) Independent Auditor s Review Report on quarterly information To the Shareholders, Board of Directors and Officers of BrasilAgro Companhia Brasileira de Propriedades Agrícolas) São Paulo - SP We have reviewed the accompanying individual and consolidated interim financial information of BrasilAgro Companhia Brasileira de Propriedades Agrícolas () contained in the Quarterly Information Form ITR for the quarter ended, which comprise the balance sheet as at and the related statements of income and comprehensive income for the three-month and nine-month periods then ended and changes in shareholders equity and the cash flows for the ninemonth period then ended, including a summary of significant accounting practices and other explanatory information. The 's management is responsible for the preparation of the individual and consolidated interim financial information in accordance with Accounting Pronouncement CPC 21 (R1) Interim Financial Reporting, and in accordance with international standard IAS 34 Interim Financial Reporting, issued by the International Accounting Standards Board IASB, as well as for the fair presentation of this information in conformity with the standards issued by the Brazilian Securities and Exchange Commission (CVM) applicable to the preparation of Quarterly Information ITR. Our responsibility is to express a conclusion on this interim financial information based on our review. Scope of the review We conducted our review in accordance with Brazilian and International Standards on Review Engagements (NBC TR 2410 and ISRE 2410 Review of Interim Financial Information Performed by the Independent Auditor of the Entity, respectively). A review of interim financial information consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. 3

4 Conclusion on the individual and consolidated interim financial information Based on our review, nothing has come to our attention that causes us to believe that the accompanying individual and consolidated interim financial information included in the quarterly information referred to above is not prepared, in all material respects, in accordance with CPC 21 (R1) and IAS 34, applicable to the preparation of Quarterly Information (ITR), consistently with the rules issued by the CVM. Other matters Statements of value added We have also reviewed the individual and consolidated statements of value added for the nine-month period ended, prepared under the responsibility of s management, the presentation of which in the interim information is required by the rules issued by the CVM applicable to preparation of Quarterly Information (ITR), and as supplemental information under IFRS, whereby no statement of value added presentation is required. These statements have been subject to the same review procedures previously described and, based on our review, nothing has come to our attention that causes us to believe that they are not prepared, in all material respects, consistently with the overall individual and consolidated interim financial information. Audit of the previous period s and year s amounts The amounts related to the year ended June 30, 2017 and to the three-month and ninemonth periods ended March 31, 2017, presented for comparison purposes, were previously audited and reviewed by other independent auditors, whose reports thereon, dated August 29, 2017 and May 05, 2017 respectively, had no modification. São Paulo, May 07 th, Baker Tilly 4Partners Auditores Independentes S.S. Fábio Rodrigo Muralo Uma empresa-membro da Ernst & Young An independent member of Baker Tilly International 4

5 Balance Sheets (In thousands of reais) Assets Note 3/31/2018 6/30/2017 3/31/2018 6/30/2017 Current assets Cash and cash equivalents ,034 29,001 16,780 43,798 Marketable securities 5.2 1,115 1,408 1,149 6,972 Operations with derivatives 6 3,804 3,199 3,809 4,090 Accounts receivable and sundry receivables 7 29,551 20,051 65,146 54,026 Inventories 8 19,630 13,030 32,075 22,658 Biological assets 9 46,348 17, ,583 38,260 Transactions with related parties 27 7,651 3,714 2,639 1,298 Noncurrent assets 122,133 88, , ,102 Biological assets 9 11,418 8,820 32,136 13,435 Restricted marketable securities 5.2 9,427 8,982 17,952 17,088 Operations with derivatives Deferred taxes ,231 30,609 31,727 53,780 Accounts receivable and sundry receivables 7 13,343 16,094 39,859 44,605 Investment properties 10 80,212 78, , ,799 Transactions with related parties 27 18,796 35,640-35,640 Investments 11.a 543, , ,426 Property, plant and equipment 12 32,083 31,885 72,018 54,745 Intangible assets 1,320 1,634 1,364 1, , , , ,191 Total assets 853, , , ,293 The notes are an integral part of the individual and consolidated quarterly information. 5

6 Balance sheets (In thousands of reais) Liabilities and equity Note 3/31/2018 6/30/2017 3/31/2018 6/30/2017 Current liabilities Trade accounts payable and other liabilities 14 25,081 27,944 52,941 55,615 Loans and financing 15 44,967 43,141 89,578 56,620 Labor obligations 5,097 9,813 6,962 11,513 Operations with derivatives 6 8,746 3,978 8,746 3,978 Payables for purchase of farms 13 1,706 22,085 1,706 24,646 Transactions with related parties 27 18,244 5,781 2,526 4, , , , ,156 Noncurrent liabilities Trade accounts payable and other liabilities ,489 1,520 Loans and financing 15 31,330 9,976 86,859 55,555 Provision for legal claims 25 1,062 1,380 1,295 1,594 32,392 11,356 95,643 58,669 Total liabilities 136, , , ,825 Equity Share capital 17.a 584, , , ,224 Capital reserve 1,153 1,525 1,153 1,525 Treasury shares 17.c (35,208) (36,797) (35,208) (36,797) Income reserves 68,615 68,615 68,615 68,615 Additional dividends proposed 17.d - 6,486-6,486 Comprehensive income 17.e 12,552 43,415 12,552 43,415 Retained earnings 85,641-85,641 - Total equity 716, , , ,468 Total liabilities and equity 853, , , ,293 The notes are an integral part of the individual and consolidated quarterly information. 6

7 Statements of operations Nine-month period ended (In thousands of reais, except earnings per share) Note 7/1/2017 to 3/31/2018 7/1/2016 to 3/31/2017 7/1/2017 to 3/31/2018 7/1/2016 to 3/31/2017 Net revenue 19 88,182 62, ,491 68,839 Gain from sale of farm Changes in fair value of biological assets and agricultural products Reversal of (provision for) impairment of agricultural products, net , ,127 1,801 74,629 5, (255) 882 (437) Cost of sales 20 (70,047) (52,908) (130,474) (58,769) Gross profit 37,792 10,939 94,528 18,951 Selling expenses 20 (2,784) (524) (4,347) (537) General and administrative expenses 20 (17,598) (17,132) (21,619) (19,638) Other operating revenues (expenses), net 22 35,844 (5,748) 35,872 (5,736) Equity pickup 11.a 53,588 2,596 14,699 (3,730) Operating profit (loss) before financial results and taxes Net financial income (expenses) 106,842 (9,869) 119,133 (10,690) Financial income 23 33,440 55,840 57,378 71,475 Financial expenses 23 (44,243) (34,960) (67,217) (49,271) Profit before income and social contribution taxes 96,039 11, ,294 11,514 Income and social contribution taxes 16.2 (10,418) (4,828) (23,673) (5,331) Net income for the period 85,621 6,183 85,621 6,183 Basic earnings per share reais Diluted earnings per share reais The notes are an integral part of the individual and consolidated quarterly information. 7

8 Statements of operations Three-month period ended (In thousands of reais, except earnings per share) 1/1/2018 to 3/31/2018 1/1/2017 to 3/31/2017 1/1/2018 to 3/31/2018 1/1/2017 to 3/31/2017 Net revenue 14,495 10,745 17,907 11,092 Gain from sale of farm ,854 Changes in fair value of biological assets and agricultural products 17,991 1,148 32, Provision for impairment of agricultural products, net (38) (130) (31) (186) Cost of sales (14,501) (7,506) (16,225) (7,482) Gross profit 17,947 4,257 34,179 7,519 Selling expenses (net of reversals of provisions) (1,655) (402) (2,257) (417) General and administrative expenses (5,633) (5,297) (6,829) (5,964) Other operating revenues (expenses), net 36,911 (145) 37,116 (119) Equity pickup 32,403 1,293 16,096 (1,430) Operating profit (loss) before financial results and taxes 79,973 (294) 78,305 (411) Net financial income (expenses) Financial income 6,863 18,767 14,381 21,147 Financial expenses (28,669) (11,826) (31,705) (15,363) Profit before income and social contribution taxes 58,167 6,647 60,981 5,373 Income and social contribution taxes (4,183) (2,106) (6,997) (832) Net income for the period 53,984 4,541 53,984 4,541 Basic earnings per share reais Diluted earnings per share reais The notes are an integral part of the individual and consolidated quarterly information. 8

9 Statements of comprehensive income Three- and nine-month periods ended (In thousands of reais, except earnings per share) Notes and 7/1/2017 to 3/31/2018 7/1/2016 to 3/31/2017 Net income for the period 85,621 6,183 Comprehensive income to be reclassified to income for the year in subsequent periods: Effect on the conversion of the investment abroad 17.e (247) (1,321) Write-off of effect on the conversion of joint venture due to spin-off 17.e (30,616) - Total comprehensive income 54,758 4,862 Notes and 1/1/2018 to 3/31/2018 1/1/2017 to 3/31/2017 Net income for the period 53,984 4,541 Comprehensive income to be reclassified to income for the year in subsequent periods: Effect on the conversion of the investment abroad (161) (2,775) Write-off of effect on the conversion of joint venture due to spin-off (30,616) - Total comprehensive income 23,207 1,766 The notes are an integral part of the individual and consolidated quarterly information. 9

10 Statements of changes in equity Notes Capital Capital reserve Treasury shares Legal reserve Income reserves Reserve for investment and expansion Additional dividends proposed Comprehensive income Retained earnings Total equity At June 30, ,224 1,525 (36,797) 10,386 58,229 6,486 43, ,468 Payment of additional dividends 17d (6,486) - - (6,486) Time-barred and unclaimed dividends 17d Exercise of shares granted 17.c - (372) 2, ,827 Acquisition of treasury stock 17.c - - (610) (610) Net income for the period ,621 85,621 Effect on the conversion of the investment abroad 17.e (247) - (247) Write-off of effect on the conversion of joint venture due to spin-off 17.e (30,616) - (30,616) At 584,224 1,153 (35,208) 10,386 58,229-12,552 85, ,977 Income reserves Reserve for investment and expansion Notes Capital Capital reserve Treasury shares Legal reserve Comprehensive income Retained earnings Total equity At June 30, 2016 Originally restated 584,224 1,771 (37,203) 9,020 80,665 7,533 40, ,015 Effects of Amendments to IAS41 and IAS , ,473 At June 30, Restated 584,224 1,771 (37,203) 9,020 82,138 7,533 40, ,488 Proposed additional dividends (22,000) 22, Payment of additional dividends (29,533) - - (29,533) Exercise of shares granted - (246) 1, Cancellation of treasury shares ,881 - (14,881) Acquisition of treasury stock - - (6,678) (6,678) Net income for the period ,183 6,183 Effect on the conversion of the investment abroad (1,321) - (1,321) At March 31, ,224 1,525 (27,924) 9,020 45,257-38,684 6, ,969 Additional dividends proposed The notes are an integral part of the individual and consolidated quarterly information. 10

11 Statements of cash flow Nine-month period ended (In thousands of Reais, except earnings per share) Notes 7/1/2017 to 3/31/2018 7/1/2016 to 3/31/2017 7/1/2017 to 3/31/2018 7/1/2016 to 3/31/2017 CASH FLOWS FROM OPERATING ACTIVITIES Net income for the period 85,621 6,183 85,621 6,183 Adjustment to reconcile net income Depreciation and amortization 20 7,980 5,619 18,364 7,201 Gain from surplus value due to spin-off 11.a (5,040) - (5,040) - Write-off of effect on the conversion of joint venture due to spin-off 17.e (30,616) - (30,616) - Net book value of property, plant and equipment and intangible assets disposed of 404 1, ,587 Write-offs of properties for investments Equity pick-up 11.a (53,588) (2,596) (14,699) 3,730 Effect of foreign exchange variation Unrealized gain on derivatives, net 23 1,997 (9,553) 1,855 (9,553) Short-term investments, foreign exchange and monetary variation and other financial charges, net 10,550 (7,431) 15,052 (7,291) Adjustment to present value of receivables from sale of farms, machinery and financial lease, net (3,885) 2,888 Deferred income and social contribution taxes ,378 4,828 22,053 3,055 Fair value of biological assets and agricultural products after depletion 9 (19,127) (1,801) (74,629) (5,464) Set-up (reversal) of provision for impairment of agricultural products, net 8.1 (530) 255 (882) 437 Allowance for doubtful accounts 20 (94) 264 (744) 269 Provision for legal claims 22 (318) 526 (299) 545 7,757 (1,894) 12,613 3,728 Changes in working capital from operations Trade accounts receivable (9,709) (3,085) (1,351) (1,762) Inventories (7,016) 3,027 (8,199) 15,758 Biological assets (8,832) (15,027) (24,395) (25,648) Taxes recoverable 4,621 1, (349) Operations with derivatives 1,632 2,729 2,514 20,573 Other receivables 327 (871) 243 (1,250) Trade accounts payable 7,025 5,112 9,462 8,685 Related parties 11,767 16,122 (2,782) 17,305 Taxes payable (877) (1,910) (1,744) (2,437) Income and social contribution taxes - - (286) (2,643) Labor charges (4,716) (4,083) (4,551) (3,829) Advances from customers (3,402) 169 (4,820) 72 Other liabilities (463) (47) (461) (4,976) Net cash generated by (used in) operating activities (1,886) 1,642 (23,331) 23,227 CASH FLOWS FROM INVESTING ACTIVITIES Acquisitions of property, plant and equipment and intangible assets (6,344) (8,815) (27,263) (21,599) Acquisitions of investment properties (7,225) (5,805) (17,851) (109,800) Redemption of (investment in) marketable securities, net ,937 6, ,728 Dividends received 12,593 21, Decrease (increase) in investments and shareholding interests 9,635 (69,602) - - Payment for purchase of farms (10,967) - (13,672) - Advance for future capital increase (18,785) (3,024) - - Cash received from sale of farms in the period - - 5,588 - Net cash generated by (used in) investing activities (20,303) 20,690 (47,039) (6,671) CASH FLOWS FROM FINANCING ACTIVITIES Loans and financing raised 15 63,666 36, ,144 38,268 Interest paid on loans and financing 15 (4,092) (1,879) (7,166) (6,137) Repayment of loans and financing 15 (38,769) (21,148) (66,043) (46,394) Treasury stock, net of shares exercised (610) (5,848) (610) (5,848) Dividends paid (12,973) (32,042) (12,973) (32,042) Net cash generated by (used in) investing activities 7,222 (24,681) 43,352 (52,153) Increase (decrease) in cash and cash equivalents (14,967) (2,349) (27,018) (35,597) Cash and cash equivalents at beginning of period ,001 16,123 43,798 54,204 Cash and cash equivalents at end of period ,034 13,774 16,780 18,607 (14,967) (2,349) (27,018) (35,597) The notes are an integral part of the individual and consolidated quarterly information. 11

12 Statements of value added Nine-month period ended Revenues Notes 7/1/2017 to 3/31/2018 7/1/2016 to 3/31/2017 7/1/2017 to 3/31/2018 7/1/2016 to 3/31/2017 Gross operating revenue 19 91,600 64, ,661 71,847 Gain from sale of farm ,854 Change in fair value of biological assets and agricultural products 9 19,127 1,801 74,629 5,464 Provision for impairment of agricultural products, net (255) 882 (437) Other revenues 35,844 (5,748) 35,872 (5,736) Allowance for doubtful accounts 20 (94) 264 (744) ,007 60, ,300 75,261 Inputs acquired from third parties Cost of sales (62,539) (47,819) (112,592) (52,098) Materials, energy, outsourced services and other (7,625) (5,071) (9,415) (5,534) (70,164) (52,890) (122,007) (57,632) Gross value added 76,843 7, ,293 17,629 Depreciation and amortization 20 (7,980) (5,619) (18,364) (7,201) Net value added produced (used) by the 68,863 2, ,929 10,428 Value added received through transfer Equity pickup 11.a 53,588 2,596 14,699 (3,730) Financial income 23 33,440 55,840 57,378 71,475 87,028 58,436 72,077 67,745 Total value added to be distributed 155,891 60, ,006 78,173 Personnel and charges Direct compensation 8,763 8,292 10,299 9,274 Benefits 1,878 2,129 2,137 2,246 Severance fund (F.G.T.S.) Taxes, charges and contributions Federal (includes Income Tax and Social Contribution, deferred) 14,493 9,271 31,196 11,458 State , Local Financing Financial expenses 43,419 33,614 66,347 47,477 Rentals Interest on own capital Retained net income for the period 85,621 6,183 85,621 6,183 Value added distributed 155,891 60, ,006 78,173 The notes are an integral part of the individual and consolidated quarterly information. 12

13 Notes to the quarterly information 1. General information BrasilAgro Companhia Brasileira de Propriedades Agrícolas ( BrasilAgro ), ( ) or ( Parent ) was incorporated on September 23, 2005 and is headquartered at Avenida Brigadeiro Faria Lima, 1309, in São Paulo with branches in the States of Bahia, Goiás, Mato Grosso, Minas Gerais, Maranhão, Piauí and in Paraguay, in the State of Boquerón. The holds interest in other companies ( subsidiaries) and its corporate purpose includes: a) Agriculture, cattle raising and forestry activities of any type and nature and rendering directly or indirectly related services; b) The import and export of agricultural products and inputs and those related to cattle raising activity; c) The purchase, sale and/or rental of properties, land, buildings and real estate in rural and/or urban areas; real estate brokerage involving any type of operations; d) Holding interest, as a member, in other companies and commercial ventures of any nature, in Brazil and/or abroad, directly or indirectly related to the purposes described herein; and e) Management of its own and third-party assets. The and its subsidiaries have 10 (ten) farms in 6 (six) Brazilian states and 1 (one) farm in Paraguay, with total area of 228,377 hectares Spin-off of joint venture Cresca S.A. On October 5, 2016, the signed an agreement with Carlos Casado S.A., the sole partner of the in the joint venture Cresca S.A., each holding 50% interest in the capital, by which the partners undertook to sell to third parties or divide equally, all the assets and liabilities that meet the definition of a business, including rural properties, within a term established in the agreement. Since the assets and liabilities of Cresca were not sold to third parties within the established term, the parties decided to divide them in proportion to the interest held by each in the capital, under the agreement signed on December 31, As a result of this transaction, the now has the following two subsidiaries to receive Cresca s assets to be spun off: - Palmeiras S.A. ( Palmeiras ) Subsidiary that fully received cattle, inventory and contracts (including labor); such transfer to the subsidiary was concluded on June 30, 2017, as described in Note 1.6 to the financial statements of June 30, Agropecuária Moroti S.A. ( Moroti ) Subsidiary that received on February 9, 2018, upon conclusion of the formal spin-off process, all other assets and liabilities of Cresca attributed to Brasilagro, including land and debts. 13

14 1. General information -- continued 1.1. Spin-off of joint venture Cresca S.A. -- continued On February 9, 2018, the spin-off of Cresca was concluded; the portion of assets and liabilities attributed to the was transferred to the wholly-owned subsidiary Agropecuária Moroti S.A. As part of the spin-off, the and Carlos Casado, partners in the joint venture, decided to waive the interest for late payment on the loans taken by Cresca S.A. for the partners. BrasilAgro s share was R$16,563 (Note 23). After the spin-off, considering that the came to have control of assets and liabilities that were earlier jointly controlled, as required by IFRS 3 Business Combinations, the assets acquired and liabilities assumed were measured once again at the fair value on the date of acquisition, and the gain/loss was booked in the result. The estimated fair value of the assets and liabilities spun off and transferred to Moroti is shown below: Book value Effect of surplus value Fair value Assets 135,916 11, ,359 Cash and cash equivalents 153 (1) 152 Accounts receivable, inventories and other receivables 4,117 (13) 4,104 Recoverable taxes 1, ,837 Investment properties 129,750 11, ,952 Other property and equipment other than land Liabilities 20,338 6,403 26,741 Trade payables, taxes and other liabilities 1,624 6,321 7,945 Loans 18, ,796 Fair value of the business acquired 115,578 5, ,618 As shown above, since the investment was recorded in the as R$115,578 and the fair value assessed was R$120,618, the recorded a gain of R$5,040 (Note 22).The fair value of assets and liabilities was estimated on a preliminary basis, and is expected to be concluded by June 30, Moreover, the had recorded the effects of conversion of investments abroad under other comprehensive income. After the spin-off, as required by the accounting principles, the accumulated effect of conversion of investments abroad (R$30,616) was written off from other comprehensive income and booked in the result of the period, under Other Operating Revenue (Expenses) (Note 22). 2. Basis of presentation and preparation of quarterly information The significant accounting policies applied when preparing these financial statements are described below. These policies are being consistently applied in all periods presented, unless otherwise stated. 14

15 2. Basis of presentation and preparation of quarterly information -- continued 2.1. Basis of preparation and presentation The s Board of Directors is entitled to change s individual and consolidated quarterly information after its issuance. On May 7, 2018, the Management approved the disclosure of this quarterly information. The individual and consolidated quarterly information is presented in thousands of reais ( R$ ), which represents the s presentation and functional currency. The individual and consolidated quarterly information was prepared in accordance with technical pronouncement CPC 21 (R1) Interim Financial Statements and with international accounting standard IAS 34 and presented in accordance with the standards issued by the Brazilian Securities Commission ( CVM ). The accounting practices, policies and main judgments on the estimates adopted in preparing the quarterly information, and, are consistent with those adopted and disclosed in Notes 2.1 to 2.27 and Note 3 to financial statements for the year ended June 30, 2017, which were reported on August 29, Considering the above, the quarterly information should be read together with the financial statements for the year ended June 30, The non-financial data included in this quarterly information, such as number of hectares owned by the, among others, has not been subject to audit procedures, or any review from our independent auditors Notes included in the financial statements at June 30, 2017 not presented in this quarterly information The preparation of this interim information involves the exercise of judgment by the s Management on the relevance and on alterations that should be disclosed in the notes to the financial statements. Accordingly, this interim information includes only selected notes and not all the notes to the financial statements for the year ended June 30, As permitted by Letter 03/2011 issued by CVM, Note 7.2 Recoverable Taxes and its references to the financial statements of June 30, 2017 have not been presented in this quarterly information. 3. New standards, alterations and interpretations of standards The decided against the early adoption of any other standard, interpretation or alteration that has been issued but has not become effective yet. The nature and effectiveness of each of the new standards and alterations are described below: 3. New standards, alterations and interpretations of standards -- 15

16 continued Pronouncement Description With effect from CPC 48 Financial Instruments Correlation with international accounting standards IFRS 9 Financial Instruments: Classification, measurement, impairment and hedge accounting. Fiscal years beginning on and as of January 1, 2018 (equivalent to July 1, 2018 for the ). CPC 47 Revenues from agreements with clients IFRS 16 Leases Correlation with international accounting standards IFRS 15 on recognition of revenue from transactions of agreements with clients. Refers to the definition and guidelines of the lease agreement envisaged in IAS17. Fiscal years beginning on and as of January 1, 2018 (equivalent to July 1, 2018 for the ). Fiscal years beginning on and as of January 1, 2019 (equivalent to July 1, 2019 for the ). Moreover, the does not expect the following new standards or alterations to have a significant impact on its financial statements: Alterations to CPC 10 (IFRS 2): Share-based payment with regard to classification and measurement of certain share-based payment transactions; Alterations to CPC 36 Statements (IFRS 10) and CPC 18 Investment in Associates and Joint Ventures (IAS 28) with regard to sales or contributions of assets between an investor and its associate or joint venture. The project of implementing the new pronouncements CPC 48/IFRS 9 Financial Instruments, CPC 47 / IFRS 15 Revenue from contracts with clients and IFRS 16 Leases, as well as the preliminary analysis conducted by the Management in 2016, will include hiring external specialists to aid the in identifying and measuring the final effects on the initial adoption date, identifying the needs for changes in the computerized systems used, design and implementation of appropriate internal controls, policies and procedures that are required to collect and disclose information required by these new pronouncements. Until the date of publication of this quarterly information, Management had not concluded evaluating the effects of these new pronouncements and hence is not able to disclose these effects. The early adoption of these new accounting standards is not allowed for listed companies, according to practices adopted in Brazil. 16

17 4. Financial risk management The financial risk management adopted in the preparation of the quarterly information is consistent with that adopted in Note 4 to the annual financial statements for June 30, 2017, disclosed on August 29, Notes 4.1, 4.2, 4.4 to 4.7 disclosed in the annual financial statements for June 30, 2016 did not have significant changes Analysis of exposure to financial asset and liability risks a) Foreign currency risk This risk arises from the possibility of the incurring losses due to fluctuations in exchange rates, which reduce the nominal values of assets or increase the values of liabilities. This risk also arises with respect to commitments to sell existing products in inventories or still in formation, at prices to be set, depending on the exchange rate. b) Interest rate and indices risk This risk arises from the possibility of the incurring losses due to fluctuations in the interest rates or indices which increase financial expenses with respect to contracts for the acquisition of farms, indexed by the IGP-M ("FGV") c) Commodities risks This risk arises from the possibility of the incurring losses due to fluctuations in the market prices of agricultural products Estimate of fair value of derivative financial instruments a) Sensitivity analysis Management identified for each type of derivative financial instrument the situation of variation in foreign exchange rates, interest rates or commodities prices which may generate loss on assets and/or liabilities which is being hedged or, in the case of derivative financial instruments related to transactions not recorded in the balance sheet, in the fair value of the contracted derivatives. The sensitivity analysis aims at measuring the impact from the changes in the market variables on the aforementioned financial instruments of the, considering all other market indicators comprised. Upon their settlement, such amounts may differ from those stated below, due to the estimates used in their preparation. 17

18 4. Financial risk management -- continued 4.2. Estimate of fair value of derivative financial instruments -- continued a) Sensitivity analysis -- continued This analysis contemplates 5 distinct scenarios that differ among them due to the intensity of variation in relation to the current market. On, as reference for scenarios probable, I, II, III and IV a variation in relation to the current market of 0%, -25%, -50%, +25%, +50%, respectively, was considered. The preparation of the Probable Scenario took into consideration the market prices of each one of the reference assets of derivative instruments held by the at the closing of this year. Since all these assets are inserted in competitive and open markets, the current market price is a satisfactory reference for the expected price of these assets. Accordingly, since the current market price was the reference for the calculation of both book value of derivatives and the Probable Scenario, the result of the latter one is the same, because the rates and prices of each operation maturity were used. The assumptions and scenarios are as follows: Probable scenario Scenario I -25%) Scenario II -50%) Scenario III +25% 3/31/2018 Scenario IV +50% Soybean - R$ / bag April 20, 2018 (CBOT) Soybean - R$ / bag April 30, 2018 (CBOT) Soybean - R$ / bag May 14, 2018 (CBOT) Corn - R$ / bag May 15, 2018 (BMF) Soybean - R$ / bag May 30, 2018 (CBOT) Soybean - R$ / bag June 22, 2018 (CBOT) Soybean - R$ / bag July 27, 2018 (CBOT) Corn - R$ / bag September 17, 2018 (BMF) U.S. dollar April 3, U.S. dollar May 30, Interest (rate%) July 2, % 4.73% 3.15% 7.88% 9.45% Interest (rate%) August 27, % 4.67% 3.12% 7.79% 9.35% Interest (rate%) May 10, % 4.79% 3.20% 7.99% 9.59% Interest (rate%) August 15, % 6.86% 4.58% 11.44% 13.73% 6/30/2017 Probable scenario Scenario I -25%) Scenario II -50%) Scenario III +25% Scenario IV +50% Soybean - R$ / bag July 2017 (CBOT) Cattle - R$ October 2017 (BMF) Soybean - R$ / bag November 2017 (CBOT) Soybean - R$ / bag April 2018 (CBOT) Soybean - R$ / bag June 2018 (CBOT) Soybean - R$ / bag July 2018 (CBOT) U.S. dollar August 3, U.S. dollar July 28, U.S. dollar May 30,

19 4. Financial risk management -- continued 4.2. Estimate of fair value of derivative financial instruments -- continued a) Sensitivity analysis -- continued This sensitivity analysis aims to measure the impact of variable market changes on the aforementioned financial instruments of the, considering all other market indicators included. Upon their settlement, such amounts may differ from the ones stated below, due to the estimates used in their preparation. 19

20 Notes to the quarterly information 4. Financial risk management -- continued 4.2. Estimate of fair value of derivative financial instruments -- continued a) Sensitivity analysis -- continued Amounts in thousands reais R$ CONSOLIDATED Scenario I - Scenario I - Possible Scenario II - Remote Scenario I - Possible Scenario II - Remote (*) annual average rates At Probable Decrease -25% Decrease -50% Increase 25% Increase 50% Operation Risk Balance (R$) Notional Rate Balance (R$) Rate Balance (R$) Rate Balance (R$) Rate Balance (R$) Rate Balance (R$) Rate Investment CDI 10, % (9) 6.30% (159) 4.73% (318) 3.15% % % Marketable securities LFT SELIC % % (1) 4.73% (1) 3.16% % % Marketable securities CDI 19, % (17) 6.30% (301) 4.73% (601) 3.15% % % Cash - USD USD 6,065 1, (122) 3.39 (1,547) 2.54 (3,093) , , Total cash and cash equivalents 35,259 1,825 (148) (2,008) (4,013) 2,008 4,013 Financing in Paraguay - Palmeiras USD (426) (128) 3.32 (28) (361) 4.24 (722) 5.09 Financing for Working Capital CDI (16,638) % % % % (263) 7.88% (524) 9.45% Financing for Machinery and Equipment FINAME TJLP (1,321) % % % % (22) 8.44% (45) 10.13% Financing for sugarcane TJLP (11,608) % % % % (196) 8.44% (392) 10.13% Total financing (b) (29,993) (128) (13) 842 1,683 (842) (1,683) Araucária II Soybean bags 5,152 75, (1,288) (2,576) , , Araucária III Soybean bags 7, , (1,904) (3,809) , , Araucária IV Soybean bags 10, , (2,517) (5,034) , , Jatobá Gleba 12A Soybean bags 7, , (1,899) (3,798) , , Total receivables from farm 30, ,566 - (7,608) (15,217) 7,608 15,217 Transactions with derivatives, net Grains (5,323) (1,808,213) (a) - (a) 20,127 (a) 44,591 (a) (28,800) (a) (53,264) (a) Transactions with derivatives, net USD (418) (33,790) (a) - (a) 1,208 (a) 14,388 (a) (25,151) (a) (38,331) (a) Transactions with derivatives, net Swap ,810 (a) - (a) (10,013) (a) (9,333) (a) (11,431) (a) (12,151) (a) Margin - LFT Socopa SELIC % (1) 6.30% (13) 4.73% (26) 3.15% % % Total derivatives (a) (4,296) (1,777,193) (1) 11,309 49,620 (65,369) (103,720) Cresca, net USD (1,265) (381) 3.32 (27) (323) 4.24 (647) 5.09 Cresud, net USD (95) 2.54 (190) Total related parties (892) (269) (20) (228) (457) (*) SOURCE Risks: Bloomberg (a) For sensitivity analysis of derivative positions, forward rates and prices at each maturity date of the operation were used, according to the table above; (b) Sensitivity analysis of financing does not include fixed-rate loans. 20

21 Notes to the quarterly information 4. Financial risk management -- continued 4.2. Estimate of fair value of derivative financial instruments -- continued b) Liquidity risk The prudent management of liquidity risk implies the maintenance of sufficient cash and short-term investments to comply with its financial commitments, due to the mismatch of term or volume between the estimated receivables and payables. The table below shows the 's financial liabilities by group of maturity based on the remaining period at the balance sheet date up to the contract maturity date. The amounts disclosed in the table are the discounted contractual cash flows, in addition to the net derivative financial instruments, whose fair value is disclosed. With respect to payables for the purchase of farms all outstanding amounts at and June 30, 2017 are payable upon the fulfillment of certain conditions precedent by the sellers and as a result its payment date cannot be determined and have been considered as payable on demand in the table below and no interest or other financial charges have been considered. financial liabilities Note Less than one year From one to two years From three to five years Above five years Total At Trade accounts payable Derivatives Loans and financing Acquisitions payable Transactions with related parties , ,768 8, ,746 89,578 30,056 6,939 49, ,437 1, ,706 2, ,526 At June 30, 2017 Trade accounts payable , ,805 Derivatives 6 3, ,978 Loans and financing 15 56,620 16,428 15,128 23, ,175 Acquisitions payable 13 24, ,646 Transactions with related parties 27 4, ,784 21

22 4. Financial risk management -- continued 4.3. Capital management As per the table below, the presents net debt of loans, acquisitions payable and trade accounts payable and the financial leverage index. 3/31/2018 6/30/2017 Total loans and financing (Note 15) 176, ,175 Total acquisitions payable (Note 13) 1,706 24,646 Total trade accounts payable (Note 14.1) 47,768 37,805 Total derivatives (Note 6) 8,746 3, , ,604 Less: cash and cash equivalents (Note 5.1) (16,780) (43,798) Less: marketable securities (Note 5.2) (19,101) (24,060) (35,881) (67,858) Net debt 198, ,746 Total equity 716, ,468 Financial leverage index 27.72% 16.59% Restated 4.4. Hierarchy of fair value and financial instruments by category The balances of trade accounts receivable and payable at book value, less impairment, are assumed to approximate their fair values. The fair value of financial liabilities for disclosure purposes is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the for similar financial instruments. The adopts CPC 40/ IFRS 7 for financial instruments that are measured in the balance sheet at fair value, which requires disclosure of fair value measurements by level of the following fair value measurement hierarchy: Quoted (unadjusted) prices in active markets for identical assets or liabilities (level 1); Information, in addition to quoted prices, included in level 1 that are observable in the market for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) (level 2); Inputs for assets or liabilities that are not based on observable market data (that is, unobservable inputs) (level 3). 22

23 4. Financial risk management -- continued 4.4. Hierarchy of fair value and financial instruments by category -- continued thousand R$ Notes Assets Current Fair value through profit or loss Loans and receivables Total 3/31/2018 6/30/2017 Fair value Fair value through Loans and Fair value Level 2 profit or loss receivables Total Level 2 Cash equivalents ,093-10,093 10,093 28,639-28,639 28,639 Marketable securities 5.2 1,149-1,149 1,149 6,972-6,972 6,972 Trade accounts receivable, net ,707 39,707 39,707-35,167 35,167 35,167 Receivable from sale of farm, net ,011-12,011 12,011 9,136-9,136 9,136 Transactions with derivatives (c) 6 3,809-3,809 2,998 4,090-4, Transactions with related parties 27-2,639 2,639 2,639-1,298 1,298 1,298 Non-current Marketable securities ,952-17,952 17,952 17,088-17,088 17,088 Trade accounts receivable, net Receivable from sale of farm, net ,422-18,422 18,422 22,592-22,592 22,592 Operations with derivatives (c) Transactions with related parties ,640 35,640 35,640 Total 64,077 42, , ,668 88,518 72, , ,302 The following table presents the Group's assets and liabilities that are measured at fair value, as well as the level of hierarchy: Designated at fair value through profit or loss Financial liabilities at amortized cost 3/31/2018 6/30/2017 Designated at fair Financial value liabilities through at Fair value profit or amortized Fair value Level 2 loss cost Total Level 2 thousand R$ Notes Total Liabilities Current Trade accounts payable ,768 47,768 47,768-37,805 37,805 37,805 Loans and financing (a) 15-87,154 87,154 87,154-55,001 55,001 55,001 Financial lease sugarcane crop - Partnership III (b) 15 2,424-2,424-1,619-1,619 - Transactions with derivatives (c) 6 8,746-8,746 8,002 3,978-3, Acquisitions payable 13-1,706 1,706 1,706-24,646 24,646 24,646 Noncurrent Loans and financing (a) 15-65,741 65,741 65,741-33,095 33,095 33,095 Financial lease sugarcane crop - Partnerships III and IV (b) 15 21,118-21,118-22,460-22,460 - Total 32, , , ,371 28, , , ,356 (a) The book value of loans and financing presented in the financial statements approximates the fair value, since the rates of these instruments are substantially subsidized and there is no intention of early settlement; (b) Financial lease is measured at fair value in Level 3; (c) The derivative transactions negotiated at active market are measured at fair value at Level 1, overthe-counter transactions are measured at Level 2, as presented in the table above. During the nine-month period ended, there was no reclassification of financial instruments between Levels 2 and 3. 23

24 5. Cash and cash equivalents and marketable securities 5.1. Cash and cash equivalents CDI* 3/31/2018 6/30/2017 3/31/2018 6/30/2017 Cash and banks 6,508 10,068 6,687 15,159 Repurchase agreements 55% to 92% 7,436 18,933 10,003 28,639 Bank deposit certificate 95% ,034 29,001 16,780 43,798 (*) Interbank Deposit Certificate The has R$6,065 (R$9,839 at June 30, 2017) in and the same value (R$9,872 at June 30, 2017) in, of bank balances in U.S. dollars on which does not bear any interest Marketable securities 3/31/2018 6/30/2017 3/31/2018 6/30/2017 Exclusive fund quotas - FIM GUARDIAN (a) Variable income transactions - 1, Bank Deposit Certificate (a) 1,115-1,114 - Banco do Nordeste (BNB) ,502 Treasury financial bills (c) ,468 Total current 1,115 1,408 1,149 6,972 Bank deposit certificates (a) 9,427 8,982 9,427 8,982 Banco do Nordeste (BNB) (a) (b) - - 8,525 8,106 Total non-current 9,427 8,982 17,952 17,088 Marketable securities 10,542 10,390 19,101 24,060 a) Indexed to rates from 98% to 102.5% of the CDI Interbank Deposit Certificate. b) The securities in BNB consist of CDBs provided as collateral for financing from BNB Bank, to be held up to the end of the contract maturing in July c) National Treasury Bills indexed to Selic rate. 24

25 6. Operations with derivatives Risk Currency US$ Currency US$ Currency US$ Currency US$ Currency US$ Currency US$ Currency US$ Currency US$ Currency US$ Maturity Outstanding derivative instruments 3/31/2018 Total Volume / Position Counterparty Receivable Payable Receivable Payable Call option Net Notional (put balance ('000) option) Unit April-18 Options FC Stone - (24) - (24) (24) (1,000) - US$ May-18 Options FC Stone 925 (1,674) 925 (1,674) (749) (16,200) - US$ May-18 Options Macquarie 273 (30) 273 (30) 243 3,000 - US$ May-18 Options Itaú BBA 42 (667) 42 (667) (625) (10,500) - US$ May-18 NDF Macquarie (3,000) - US$ May-18 NDF FC Stone (1,500) - US$ May-18 NDF Bradesco (3,000) - US$ May-18 Acc Macquarie (821) - US$ May-18 Acc Cargill (769) - US$ Current 1,977 (2,395) 1,977 (2,395) (418) (33,790) - US$ Non-current US$ Total risk with currency 1,977 (2,395) 1,977 (2,395) (418) (33,790) - US$ Trading Soybean Soybean April-18 Companies/B CBOT Options anks/cbot - (462) - (462) (462) - (113,393) bags Trading Soybean Soybean May-18 Companies/B CBOT Options anks/cbot 87 (3,082) 87 (3,082) (2,995) - (849,777) bags Trading Soybean Soybean June-18 Companies/B CBOT Options anks/cbot 591 (1,503) 591 (1,503) (912) - (283,482) bags Trading Soybean Soybean July-18 Companies/B CBOT Options anks/cbot - (251) - (251) (251) - (77,107) bags Trading Soybean Soybean April-18 Companies/B CBOT Futures anks/cbot - (128) - (128) (128) - 74,839 bags Trading Soybean Soybean May-18 Companies/B CBOT Futures anks/cbot - (75) - (75) (75) - (29,482) bags Trading Soybean Soybean June-18 Companies/B CBOT Futures anks/cbot - (51) - (51) (51) - (34,018) Bags Trading Soybean Soybean May-18 Companies/B CBOT Futures anks/cbot 338 (318) 338 (318) 20 - (377,893) bags Corn BM&F May-18 Corn Futures BM&F - (226) - (226) (226) - (40,500) bags Corn BM&F Septembe r-18 Corn Futures BM&F - (243) - (243) (243) - (77,400) bags Current (bags) 1,016 (6,339) 1,016 (6,339) (5,323) - Total risk with commodities 1,016 (6,339) 1,016 (6,339) (5,323) - (1,808,21 3) (1,808,21 3) Interest R$ August-23 Fixed DI SWAP Bradesco ,810 - BRL Interest R$ July-18 Fixed DI SWAP ABC - (12) - (12) (12) 10,000 - BRL Interest R$ August-18 Fixed DI SWAP Itaú BBA Jaborandi ,000 - BRL Interest R$ May-19 Fixed DI SWAP Itaú BBA Jaborandi ,000 - BRL Current - (12) 5 (12) (7) 30,000 - BRL Non-current ,810 - BRL Total risk with interest 496 (12) 646 (12) ,810 - BRL / Total risks 3,489 (8,746) 3,639 (8,746) (5,107) 31,020 Margin deposited // Current 3,804 (8,746) 3,809 (8,746) Non-current P&L at March 31, 2018 (Note 23) 18,871 (18,739) 19,121 (18,841) (1,808,21 3) bags 25

26 6. Operations with derivatives -- continued Risk Maturity Outstanding derivative instruments Counterparty Receivable Payable 6/30/2017 Total Volume / Position Receivabl e Payable Net balance Notional ('000) Call option (put option) Currency US$ August-17 BM&F BM&F ,000 - US$ Currency US$ July-17 NDF FC Stone (2,000) - US$ Currency US$ January-18 Options FC Stone - (638) - (638) (638) (2,500) - US$ Currency US$ May-18 Accumulator Macquarie (30) - US$ Currency US$ June-18 Options FC Stone 154 (171) 154 (171) (17) (1,000) - US$ Current 596 (809) 596 (809) (213) (3,530) - US$ Total risk with currency 596 (809) 596 (809) (213) (3,530) - US$ Unit Soybean CBOT Soybean CBOT Soybean CBOT Soybean CBOT Soybean CBOT Live Cattle BM&F July-17 Soybean Futures November-17 Soybean Futures April-18 June-18 July-18 October-17 Soybean Options Soybean Options Soybean Futures Live Cattle Futures Trading Companies/Ba nks/cbot Trading Companies/ Banks /CBOT Trading Companies/ Banks /CBOT Trading Companies/ Banks /CBOT Trading Companies/ Banks /CBOT BM&F 1,377 (2,219) 1,377 (2,219) (842) (24,946) - (408) - (408) (408) - (113,393) - (514) - (514) (514) - (115,661) (335) bags bags bags bags bags head Current (bags) Current (heads) Non-current (bags) Total risk with commodities 1,382 (3,141) 1,382 (3,141) (1,759) - (254,000) (335) 1,397 (3,141) 1,397 (3,141) (1,744) - (253,675) bags head bags Interest R$ November-17 Fixed DI SWAP Itaú BBA ,000 - US$ Current ,000 - US$ Total risk with interest ,000 - US$ Daily adjustments - Currency Daily adjustments - Commodities - (15) - (15) (15) - (13) - (13) (13) Total risks 2,082 (3,978) 2,082 (3,978) (1,896) 3,470 (253,675) Margin deposited 1,118-2,009-2,009 Current 3,199 (3,978) 4,090 (3,978) Non-current P&L at March 31, 2017 (Note 23) 34,897 (20,629) 40,471 (21,733) 26

27 7. Trade accounts and sundry receivable Note 3/31/2018 6/30/2017 3/31/2018 6/30/2017 Trade accounts receivable ,370 14,523 51,718 44,303 Recoverable taxes 2,134 4,219 9,014 7,126 Advances to suppliers ,167 1,866 Other receivables 2, , Total current 29,551 20,051 65,146 54,026 Trade accounts receivable 7, ,478 22,692 Recoverable taxes 11,857 14,374 19,767 20,124 Judicial deposits 25.c 1,430 1,620 1,614 1,789 Total non-current 13,343 16,094 39,859 44, Trade accounts receivables 3/31/2018 6/30/2017 3/31/2018 6/30/2017 Sale of sugarcane 11,887 6,884 22,089 23,637 Sale of grains 12,613 8,249 14,370 11,958 Leases and rentals 579-3, Sale of machinery Sale of farms ,011 9,136 25,379 15,382 52,729 45,164 Allowance for doubtful accounts (1,009) (859) (1,011) (861) Total current 24,370 14,523 51,718 44,303 Sale of machinery Sale of farms ,422 22,592 Total non-current ,478 22,692 Breakdown of receivables by maturity 3/31/2018 6/30/2017 3/31/2018 6/30/2017 Falling due: Up to 30 days 7,763 5,461 19,414 8, to 90 days 16,360 2,406 23,703 15, to 180 days , to 360 days 100 6,260 2,959 20,967 Over 360 days ,478 22,692 Past due: Up to 30 days to 90 days to 180 days to 360 days Over 360 days ,435 15,482 71,207 67,856 27