BrasilAgro. Corporate Governance. Financial Results. Brazil Competitive Advantages. Farmland Investment

Transcription

1 2015

2 2 BrasilAgro Corporate Governance Financial Results Brazil Competitive Advantages Farmland Investment

3 BrasilAgro

4 4 Short Summary on BrasilAgro March 31, 2015 Leader in the development of rural properties. Acquisition of 319,000 hectares of land in Brazil and Paraguay. Development of 100,000 hectares in less than 9 years of operation. Sale of 49,904 hectares with high levels of appreciation. Cultivation of 80,000 hectares during 2014/15 harvest year.

5 5 BrasilAgro Business Model The company has a unique business model that creates value through real state appreciation and agricultural production Land transformation The land development creates value by itself, regardless the farmland price appreciation Value Generation Cash flow operations The state of art agriculture allow us to generate a strong operational cash flow Baseline appreciation Any farmland price appreciation should generate a positive impact

6 6 BrasilAgro Business Model The development, and hence land value appreciation, aims at a steep change in profitability per hectare by placing the land to its highest and best use Land transformation process Land acquisition Transformation Ramp-up production yields Mature land Undeveloped land (cerrado) Pasture Clearing Soil correction Ramp-up of the initial crops yields Building of soil content structure Soil maturity High yields

7 7 BrasilAgro Business Model The land development creates value by itself, regardless the farmland price appreciation Ramp-up production yields Cash flow operations Ideal point of sale $ $ IRR α + β α land development β baseline appreciation β t t

8 8 Robust and Consistent Growth 319,000 (1) ha of land acquired and 100,000 ha transformed and 49,904 ha sold Land acquisition (1) (thousand ha) Developed area (thousand ha) Sold area (thousand ha) 25, ,3 87,3 19,6 75, , ,1 23, ,8 2,0 2, /07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 07/08 08/09 09/10 10/11 11/12 12/13 13/14 07/08 08/09 09/10 10/11 11/12 12/13 13/14 ¹ not included 7,181 ha of Parceria II Farm, which BrasilAgro has agricultural partnership to operate this areas. BrasilAgro holds 50% of Cresca S.A.

9 Robust and Consistent Growth Undisputed leadership in the rural real estate scenario with a proven track record Colômbia Venezuela Deep knowledge on Latin America s farmland scenario Equador BrasilAgro s rigorous acquisition process confers a unique competitive advantage to quickly deploy the capital Peru Bolívia Brasil Experienced team to select the best acquisition opportunities Paraguai MM ha Primary analysis 30.0 Site visit 6.0 Chile Argentina Uruguai Detailed due diligence 2.5 analyzed countries 9

10 10 Operational Capabilities A unique combination of diversification, operational skills and commercialization capabilities Diversification Operational Commercialization 2014/15 crop planted area breakdown 12% 13% Sugarcane Corn Other Grains 1% 10% 64% Soybean Pasture State of the art producing technology Strongly skilled team capable of making the best strategic decision regarding the crop Management model based on a strong leadership on site We operate our farms by outsourcing all machinery processes Access to subsidized credit lines to finance the Company s working capital Sophistication and efficiency in products commercialization Benefits from gains of scale Deep understanding of the commodities markets gives us the ability of developing pricing strategies capable of benefiting from market trends and volatility The monitoring of the hedging position and exposure is made through advanced controlling tools

11 11 Operational Capabilities Operational and financial control Operational control and management BrasilAgro management team consolidate sophistication, technology and field knowledge: efficient control tool and integrated process through SAP that reaches the farm level Our operational controlling toll comprehend all agricultural operational process: (i) planting, (ii) soil fertilizing, (iii) chemical spray and (iv) harvest

12 Portfolio Evolution Total area (ha) Arable area (ha) 78,459 56, , , , , , , , , , , ,116 (1) 114, ,259 (1) 269,259 (1) 172,798 (1) 172,798 (1) 6% 3% 5% 7% 7% 11% 13% 19% 25% 38% 41% 19% 36% 12% 31% 17% 33% 94% 84% 76% 68% 55% 48% 45% 57% 50% 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 developed under development undeveloped Acquisitions (ha) 78,459 66,616 17,799 14, ,931 (2) - 319,163 (R$ mm) Sales (ha) - - 2, ,447 19,647 25,788-49,904 (R$ mm) ,6-246,3 1 not included 7,181 ha of Parceria II Farm, which BrasilAgro has agricultural partnership to operate this areas. 2 Brasilagro holds 50% of Cresca S.A. 12

13 13 Property Portfolio March 31, ,440 hectares in Brazil and Paraguay Colômbia RR AP Equador Peru AC AM RO PA MT TO MA CE PI BA RN PB PE AL SE Diversified portfolio reducing operational and financial risks Sugarcane 5% Forestry 8% Pasture 6% Chile GO Bolívia MS SP Paraguai PR SC RS Argentina Uruguai MG ES RJ Environmental reserve 35% 276,440 hectares Potentially productive 65% Grains 80% Sold farms BrasilAgro s farms Agricultures partnerships

14 BrasilAgro s Farmland Portfolio Farms Location Acquisition Date Project Total Area Acquisiton Value Capex¹ Acquisition + Capex Internal Valuation² ha R$'MM R$'MM R$'MM R$'MM Cremaq PI Oct/06 Grains ,9 28,9 64,8 238,8 Jatobá BA Mar/07 Grains ,4 31,8 65,2 247,1 Araucária GO Apr/07 Sugarcane ,2 1,3 57,5 172,3 Alto Taquari MT Aug/07 Sugarcane ,2 0,1 33,3 109,8 Chaparral BA Nov/07 Grains ,7 15,1 61,8 221,7 Nova Buriti MG Dec/07 Forestry ,6 0,4 22,0 29,1 Preferência BA Sep/08 Pasture and Grains ,0 18,8 29,8 47,0 Cresca S.A. (4) Paraguay Dec/13 Pasture and Grains ,0-62,0 78,8 Parceria II (5) PI Nov/13 Grains Sub-Total ,0 96,4 396, ,6 Brazil Paraguay Horizontina MA Apr/10 Grains ,7 15,2 52,9 75,0 Sep/ Cresca S.A. (4,6) Paraguay Dec/13 Pasture and Grains ,0-20,0 34,3 Apr/14 3 Farms Already Sold Location Acquisition Date Project Total Area Acquisiton Value Capex 3 Acquisition + Capex Sale Value ha R$'MM R$'MM R$'MM R$MM Engenho MS Jan/07 Sugarcane ,1-10,1 22,0 Jun/08 São Pedro GO Sep/06 Sugarcane ,3-10,3 26,0 Sep/11 Araucária GO Apr/07 Sugarcane 394 3,8-3,8 10,3 Mai/13 Cremaq PI Oct/06 Grains ,3 4,7 11,0 37,4 Mai/13 Araucária GO april/14 Sugarcane ,7-10,7 41,3 jun/14 Sub-Total ,9 19,9 118,8 246,3 Sale Date Total ,9 116,3 515, ,9 1 Considers the net investment in area development, restructuring and roads up to 06/30/14 2 As of 06/30/14 3 Considers the net investment in area development, restructuring, and roads up to the sale date 4 Brasilagro holds 50% of Cresca S.A 5 BrasilAgro signed a partnership in Parceria II Farm for up to 11 crops 6 BrasilAgro acknowledged Cresca s as equity Value already captured: R$ MM Total value created: R$ 876,2 MM 14

15 15 Case Study Horizontina Farm MA Tasso Fragoso At acquisiton Current 7.5 thousand ha of grains 60 Km of internal roads direct and indirect employees Location: Tasso Fragoso / MA Total area: 14,359 ha Arable area: 8,567 ha Acquisition value (Apr/10) Capex (Up to Sep/12) Sale value (Sep/12) Real estate value created Appreciation = 42% IRR = 27% R$ 37.7 MM R$ 15.2 MM R$ 75.0 MM R$ 22.1 MM

16 16 Case Study Araucária Farm At acquisiton Current GO Mineiros 100% with sugarcane 226 Km of internal roads direct jobs Location: Mineiros / Go Area: 9,682 ha Arable area: 7,205 ha Acquisition value: R$ 70 million Sold Area Acquisition + CAPEX (Apr/07) Sale Nominal Value Real estate value created Total: 394 ha Arable: 310 ha R$ 3.8 MM R$ 10.3 MM (April/13) R$ 6.5 MM Appreciation = 171% IRR = 20.2% (1) Total: ha Arable: 913 ha R$ 10.7 MM R$ 41.3 MM (Jul/14) R$ 30,7 MM Appreciation = 288% IRR = 19.2% (1) (1)internal rate of return (real estate + production) from the first disbursement to the expected receipt of the last installment in accordance with soybean futures curves (CBOT) and the exchange rate

17 Case Study Cremaq Farm At acquisition Current PI Baixa Grande do Ribeiro Location: Baixa Grande do Ribeiro/ PI Total Area: ha Arable Area: ha Acquisition Value: R$ 42 million 21.3 thousand ha planted with grains Warehouse facility with a storage capacity of 1.2 million bags of soybean/corn 120 Km of internal roads direct and indirect employees Sold Area (May/13) Acquisition + CAPEX (Oct/06) Sale Nominal Value (May/13) Real estate value created Appreciation = 240% IRR = 23.8% (1) Total: 4,957 ha Arable: 3,263 ha R$ 11.1 MM R$ 37.4 MM R$ 26.4 MM (1)internal rate of return (real estate + production) from the first disbursement to the expected receipt of the last installment in accordance with soybean futures curves (CBOT) and the exchange rate 17

18 Corporate Governance

19 19 Shareholders Structure High level of corporate governance 39.76% Free Float 60.24% IPO: May, ,226,600 shares R$ 584 mm

20 20 Corporate Structure Board of Directors 44% of Independent Directors Compensation Committee Executive Committee Fiscal Council CEO and IRO Julio Toledo Piza Chief administrative officer Gustavo Javier Lopez Commercial officer Diego Chillado Biaus Chief operating officer André Guillaumon

21 Financial Results

22 22 Financial Results- Annual Year ended June 30 th, 2014 and 2013 EBITDA (R$ 000) EBITDA (R$ thousand) Change Gross profit (loss) ,5% Selling expenses (10.239) (14.028) -27,0% General and administrative (30.378) (29.233) 3,9% Other operating revenues/expenses 285 (3.539) n.a. Depreciations ,5% EBITDA (5.228) n.a. Adjusted EBITDA (R$ 000) Adjusted EBITDA (R$ thousand) Change Gross profit (loss) ,5% Elimination of gains on biological assets (grains and sugarcane planted) (15.342) n.a. Selling expenses (10.239) (14.028) -27,0% General and administrative (30.378) (29.233) 3,9% Other operating revenues/expenses 285 (3.539) n.a. Hedge results (17.998) n.a. Adjusted Depreciations (1) ,5% Adjusted EBITDA ,0% 1- A Adjusted EBITDA includes depreciation made of grains and sugar cane harvested from Nova Buriti and Preferencia and administrative.

23 23 Financial Results- Quarterly Period ended March 31 st, 2015 and 2014 EBITDA (R$ 000) EBITDA (R$ thousand) 3Q15 3Q14 Change 9M15 9M14 Change Gross Profit (loss) 13,142 6, % 22,568 7, % Selling expenses , % , % General and administrative expenses -5,641-6, % -19,053-20, % Other operating income/expenses, net -1, n.a. -3,732 1,152 n.a. Depreciation and amortization 2,669 3, % -12,006 11, % EBITDA 11,707 1, % 11,107-5,342 n.a. Adjusted EBITDA (R$ 000) Adjusted EBITDA (R$ thousand) 3Q15 3Q14 Change 9M15 9M14 Change Gross Profit (loss) 13,142 6, % 22,568 7, % Elimination of gains on biological assets (grains and sugarcane planted) -5, % -5,880 3,261 n.a. Selling expenses , % , % General and administrative expenses -5,641-6, % -19,053-20, % Other operating income/expenses, net 1, n.a. -3,732 1,152 n.a. Hedge results 356 3, % 2,575 2, % Adjusted Depreciations 1 3,801 4, % 10,627 10, % EBITDA Cresca 2-1,381 - n.a. 1,979 - n.a. Adjusted EBITDA 6,114 6, % 8, % 1- Adjusted Depreciation includes depreciation of harvested grains and sugarcane and the Nova Buriti and Preferência farms, as well as administrative depreciation. 2- Considers 50% of Cresca s EBITDA. The Cresca s EBITDA includes the sale of 24,624 hectares in the amount of US$ 14.8 million held in April 2014, which was Recorded in 1Q15 after the grant of the deed, which occurred in July 2014

24 24 Financial Results Portfolio Appraisal INTERNAL APPRAISAL (BrasilAgro) In R$ thousand Farm Period Sales BrasilAgro BrasilAgro Period Sales 06/30/ /30/2014 Cremaq 37, , ,342 Jatobá - 227, ,127 Chaparral - 196, ,751 Preferência - 39,648-47,044 Alto Taquari - 107, ,827 Araucária 1 10, , ,274 Nova Buriti - 28,657-29,101 Horizontina 75, Cresca (50%) ,442 78,856 Fair Value 122, ,712 16,442 1,145,321 Total Invested (acquisition + CAPEX) 3 339, , Not included the sale of 1,164 ha of the Araucária Farm. As a reference, our internal appraisal of Araucaria after the sale would be $ million. 2- Refers to the 50% of Cresca held by BrasilAgro. 3- Value of the acquisition, plus investments in buildings, improvements and the clearing of areas, less accrued depreciation. The value on June 30, 2014 includes the acquisition value and investments in Cresca.

25 25 Financial Results Net Revenues (R$ million) Adjusted EBITDA (R$ million) 122,8 22,3 19,9 172,3 185,6 33,7 131,3 9,2 79,5 71,9 4,3 2,3 10/11 11/12 12/13 13/14 6M15 Agricultural Products Sale Farms Sale 10/11 11/12 12/13 13/14 6M15 * Semester ended December 31, 2014.

26 Brazil Competitive Advantages

27 27 Agricultural Products Ranking Brazil is among the leading countries in several different agricultural activities, figuring among the top producers and exporters for most of the agricultural products Soy Corn Coffee Country Production Net Exports Country Production Net Exports Country Production Net Exports Brazil 1st 1st USA 1st 1st Brazil 1st 1st USA 2nd 2nd China 2nd Vietnam 2nd 2nd Argentina 3rd 3rd Brazil 3rd 3rd Indonesia 3rd 3rd China 4th E.U. 4th Colombia 4th 4th India 5th Argentina 5th 2nd Ethiopia 5th Paraguay 6th 4th Mexico 6th Honduras 6th 5th Canada 7th 5th India 7th 5th India 7th 7th Sugar Meat* Orange Juice Country Production Net Exports Country Production Net Exports Country Production Net Exports Brazil 1st 1st China 1st Brazil 1st 1st India 2nd 3rd USA 2nd 2nd USA 2nd 2nd E.U. 3rd 5th Brazil 3rd 1st E.U. 3rd 4th China 4th Germany 4th 3rd Mexico 4th 3rd Thailand 5th 2nd Russia 5th China 5th USA 6th India 6th South Africa 6th 5th Russia 7th Mexico 7th Australia 7th Source: USDA, 2012 *FAO, 2010

28 Nov-Dez 2006 Mar-Abr 2007 Jul-Ago 2007 Nov-Dez 2007 Mar-Abr 2008 Jul-Ago 2008 Nov-Dez 2008 Mar-Abr 2009 Jul-Ago 2009 Nov-Dez 2009 Mar-Abr 2010 Set-Out 2010 Jan-Fev 2011 Jul-Ago 2011 Nov - Dez 2011 Mar - Abr 2012 Jul - Ago 2012 Nov - Dez 2012 Mar - Abr 2013 Jul - Ago 2013 Nov - Dez 2013 Mar-Abr 2014 Jul-Ago 2014 Nov-Dez Farmland Prices HISTORICAL FARMLAND PRICES In R$ / ha LAND APPRECIATION PER REGION Last 12 months RR AP AC AM Average: +17,0% PA RO MT TO MA PI CE RN PB Average: +6.4% AL SE BA PE Average: +8.1% Mineiros - GO (grain area) Roda Velha - BA (grain area) Sorriso - MT (grain area) Roda Velha - BA (native vegetation) Balsas - MA (native vegetation) MS GO MG ES Average: +6.1% SP RJ PR Average: +6.1% RS SC : Federal District Source: FNP Jan/Feb 2015

29 29 Agricultural Farmland Potential in Brazil The great amount of available arable land along a great rainfall level gives Brazil an unbeatable combination. Brazil has the potential to more than double its grain area only by converting pastures alone BRAZILIAN TOTAL AREA BREAKDOWN (In million ha ) BRAZILIAN TOTAL AREA BREAKDOWN (In million ha ) 104,9 119, ,8 Raw Land Arable Area Pastures Total Area Amazon Forestry Pantanal Dry Land Indian reserve Available Lands and consevation units ¹ According to our estimates, roughly 70% of total raw land area have to destined to legal reserves and can not be used for agriculture Source: Embrapa and FNP 2007

30 World Supply of Fresh Water Regions with abundance of fresh water in excess of population needs have a favorable position by exporting water in the form of commodities Renewable Water Resources NY004JD1 (bn m³/yr) 8,233 4,507 3,051 2,902 2,838 2,830 2,132 1,913 % World's 1,897 Others 23,563 Water Population Ratio North America 15% 8% 1,9x South America 26% 6% 4,3x Europe Africa Asia 8% 13% 0,6x 11% 13% 0,8x 36% 60% 0,6x Australia & Oceania 5% 1% 5,0x Total = 55,149 Source: FAO 30

31 Farmland Investments

32 Return 32 Farmland Investment Farmland, as an asset class, distinguishes itself among other alternatives as having an outstanding risk/return profile RISK & RETURN 25,0% 20,0% Energy Index 15,0% Farmland (TR) - USA Metals Index S&P 500 (TR) 10,0% Debt Bond 7-10Y Agricultural Index 5,0% Farmland - USA T-bill 10Y Housing Prices - USA 0,0% 0,0% 5,0% 10,0% 15,0% 20,0% 25,0% 30,0% 35,0% 40,0% Risk Source: Bloomberg, USDA, Damodaran and BrasilAgro analysis NOTE 1: Data on Agricultural, Metals and Energy Index: NOTE 2: Data on T-bill 10Y: NOTE 3: Data on Debt Bonds 7-10 y: NOTE 4: Data on Housing Prices: NOTE 5: Data on Farmland USA considers only the land prices from 1990 until NOTE 6: Data on Farmland (TR Total Return) USA considers the land prices and an hypothetical leasing from 1990 until 2010 NOTE 7: Data on S&P 500 (TR Total Return):

33 Farmland Prices Mature farmland prices have increased in real terms over time US CORN BELT FARMLAND PRICES IN REAL TERMS US$/Acre Given that there has not been any transformational change in the farms, why is there a baseline appreciation? Source: USDA, U.S. Bureau of Labor Statistics 33

34 34 Farmland Price Value Drivers Commodity price is not the value driver for farmland price appreciation Historically, farmland prices have consistently outperformed soybean prices SOYBEAN PRICES & US CORN BELT FARMLAND PRICES IN REAL TERMS (1992 = 100) Soybean Price US Corn Belt Value Source: Bloomberg, USDA

35 35 Farmland Price Value Drivers The high correlation between soybean and fertilizers indicates that higher soybean prices does not reflect on higher cash flow per hectare and vice versa SOYBEAN PRICE & FERTILIZERS PRICE US$/ ton cts/bu Source: Bloomberg NPK (US$ / ton.) Soybeam price (cents / bushel)

36 36 Farmland Investments The main driver pushing farmland prices upward is the increasing world grain area Higher demand for grains Combination of factors to make the new areas economically viable Not enough growth in productivity New areas in production Productivity Producing cost Commodity price Higher cash flow to all agricultural area Higher farmland prices New production areas have higher producing cost in $ per ton

37 37 Farmland Price Value Drivers The main factor pushing farmland prices upward is the world production area increase Given that new areas have higher production cost (USD / Ton), the expansion on the world agricultural area requires a combination of factor (price, cost, productivity) capable to generate a positive cash flow to this newly opened areas. This same combination of factors should increase the earnings and, therefore, the farmland prices for agricultural area as a whole. WORLD PRODUCTION AREA & CORN BELT FARMLAND PRICES (US) Source: USDA, FAO US$ per hectare World Production Area (Ha '000)

38 38 Higher Demand for Food Meat demand¹ is highly correlated with per capita GDP higher levels of income provides richer protein diets MEAT PER CAPITA CONSUMPTION IN 2009 In kg / capita / year and US$ per capita / year y = 16,378ln(x) - 96,548 R² = 0, Source: FAO, USDA and BrasilAgro analysis ¹ I s worth notice that approximately: 1.3 and 5.4 kilogram of soybean and corn, respectively, are needed to produce 1 kg of beef; 0.7 and 2.5 kilogram of soybean and corn, respectively, are needed to produce 1 kg of pork; 0.6 and 1.1 kilogram of soybean and corn, respectively, are needed to produce 1 kg of poultry.

39 39 Higher Food Demand Food demand will remain rising as developing countries drive the world economic growth According to IMF projections, countries with GDP per capita of less than US$10,000 will be responsible for more than 51% of world GDP growth for the next 6 years; WORLD GDP GROWTH BREAKDOWN (In %) 46% 49% 78% 75% 54% 51% 22% 25% (E) Countries with GDP per capita < US$ Countries with GDP per capita > US$ Source: IMF

40 40 Productivity growth vs. Demand growth Productivity growth has not been enough to offset the increasing demand. This shortage is expected to increase within the next ten years Production Growth (% p.y.) Productivity Gains (% p.y.) How this growth will occur? Total area growth (millions of ha) Land appreciation in real terms in the Corn Belt USA (% p.y.) From 1971 to ,14% 1,86% 40% 60% ,20% From 1981 to ,77% 1,84% -1% 101% ,05% From 1991 to ,76% 1,35% 22% 78% ,87% From 2001 to ,64% 1,40% 51% 49% ,68% From 2011 to ,61% 0,91% 46% 54% 52.0??? Source: FAO, USDA and BrasilAgro analysis NOTE 1: 2022 scenario is based on USDA projections Growth Area Productivity Gains

41 Productivity growth vs. Social development The increase in productivity made a huge social impact in the country. The higher the rural development level the lower the literacy and poverty rate. PRODUCTION vs. INPUTS (Index = 100) Production Inputs (labor force, land and capital) Productivity RURAL DEVELOPMENT INDEX Rural development level (IDR) Number of cities Rural resident population Literacy rate¹ Extreme rural poverty² Million % Average (%) Average (%) Low ,4 41,5% 74,2% 35,3% Regular ,5 28,4% 82,4% 17,5% Average ,0 16,7% 90,8% 4,9% High ,0 13,4% 93,1% 1,8% Total ,9 100,0% 85,1% 15,5% SOURCE: CNA, Gasques, J.G, E.T.; Valdez, C.; Bacchi, M.R. Produtividade da Agricultura brasileira e os efeitos de algumas políticas 1 Persons over ten years 2 Proportion of people in poverty conditions 41

42 42 Contacts Investor Relations BrasilAgro - Companhia Brasileira de Propriedades Agrícolas Avenida Brigadeiro Faria Lima, o. Andar - CEP São Paulo - SP Brazil Telephone: +55 (11) Fax: +55 (11)

43 43 Disclaimer Forward Looking Statements This presentation may contain certain forward-looking statements and information relating to BrasilAgro Companhia Brasileira de Propriedades Agrícolas ( BrasilAgro or the Company ) that reflect the current views and/or expectations of the Company and its management with respect to its business plans. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words like believe, anticipate, expect, envisage, will likely result, or any other words or phrases of similar meaning. Such statements are subject to a number of significant risks, uncertainties and assumptions. We caution that a number of important factors could cause actual results to a differ materially from the plans, objectives, expectations, estimates and intentions expressed in this presentation. In any event, neither the Company nor any of its affiliates, directors, officers, agents or employees shall be liable before any third party (including investors) for any investment or business decision made or action taken in reliance on the information and statements contained in this presentation or for any consequential, special or similar damages. The Company does not intend to provide eventual holders of shares with any revised forward-looking statements of analysis of the differences between any forward-looking statements and actual results. This presentation ad its contents are proprietary information and may not be reproduced or otherwise disseminated in whole or in part without BrasilAgro s prior written consent.