Julio Piza - CEO.

Paulo Valaci - Brasil Plural.

Good morning, welcome everyone to BrasilAgro’s Second Quarter 2015 Results Conference Call. Today’s live webcast and presentation may be accessed through BrasilAgro’s website at www.brasil-agro.com. We would like to inform you that this event is recorded and all participants will be in a listen-only mode during the company’s presentation.

After BrasilAgro’s remarks, there will be a question-and-answer session for analyst-only. At that time further instructions will be given. [Operator Instructions] Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of BrasilAgro management and on information currently available to the company.

They involve risk and uncertainties because they relate to future events and therefore depend on circumstances that may or may not occur. Investors should understand that conditions related to the macroeconomic scenario, industry and other factors could also cause results to differ materially from those expressed in such forward-looking statements.

Now I’ll turn the conference over to Mr. Julio Piza, Chief Executive Officer. Sir, you may begin your conference..

Thank you and welcome everybody to our first semester conference call. I’m going to be discussing the results from July 1 to December 31 which is of course our first semester.

If you can move through the presentation please, on Page 2, the highlight for the semester, we’ve finalized the fifth year of sugarcane supply, a total 724,000 tons of sugarcane delivered. And I will now go over the results, pretty good numbers [ph]. We’re estimating for this year a total planted area of a little over 78,000 hectares.

And as we had discussed it in our last call, we tried to see [ph] and the effects that we have been very conservative in picking the areas specifically to plant in order to cope with the low margins and pressure on prices. And that’s the result of that. Also, we are finalizing the construction of a silo and a grain storage facility in Bahia.

Also, we keep on getting all the environmental permits in Paraguay which is a very good news. We keep on developing it and expect Paraguay to become more and more important in our portfolio. From a financial perspective in net revenues, and it’s over R$72 million in EBITDA, adjusted EBITDA of R$2.3 in the semester.

These are the highlights, and then I’m going to go over the details later. On Page 3, a little bit of what’s been happening over soybean prices. And we have kind of lighter line is the price in dollars, so dollars per bushel.

And we’ve experienced the sharp decrease in prices, in fact, seven months ago in dollar [ph] which was accompanied by - followed by a reduction in prices in Brazil as well in R$. So then, in the last quarter of the last year there is this kind of decoupling between Brazil and - the prices in Brazil and prices in US.

So because of the exchange rate, there is this gap that we are seeing here in the chart. And actually it is quite impressive. If we look in to the last seven years, we are with prices in R$, I would say at both average and in dollars below average. So this is an interesting situation.

So as a farmer, you should plan correctly in terms of hedging, in terms of your financial structure, for instance, not having dollar liabilities. You are actually not that bad, of course, perhaps that is at the end of last year but it’s still pretty decent I would say.

So when I look internally, when we started applying for this campaign seven or eight months ago, we were looking into July ’15 prices for roughly R$53, R$54 per bag at the farm. That number went down all the way to R$44 back in September last year. That’s the forward price, right. And now, we’re expecting something close to R$51 or R$52.

So we are almost back to the expectations we had before this sharp decrease in prices. But that is true if you are actually careful in your financial structure and you don’t have - you are not short dollars rate for any reason. Page 4, that looks [ph] foreign prices in Brazil, that S&P study. According to them, prices continue to go up.

We always like to point out, there’s always a delay in terms of what happens to the commodity prices and the land prices. It takes a while for things to get adjusted. I do believe there will be some adjustments, especially when you think about regions. So we expect that to happen.

But from an overall perspective the market is still strong in terms of prices. Liquidity is lower than it was before. Although it hasn’t happened, any kind of substantial changes in price yet. But a number of transactions has led into that right now. Page 5, operating performance. This is the broke down by farm, by crop that we are doing this year.

In Paraguay, not everything is planted, which is expected. We should finalize it in another week or so. And this is when we plan to invest in a specific region. And we start doing it in mid-December and you go all the way to mid-February. So it’s part of how we operate there. But this is the breakdown.

Soybean continues to be our most important crop from an area perspective. But from a value perspective and EBITDA contribution, sugarcane is almost as important as soybean. And also, we have cattle now [ph]. So we exporting our cattle operation in Paraguay, 2,000 heads.

And we’re still very small, but as we get development and start developing more and more hectares there, that number will increase. So all the licenses that we already got, we will make that number roll up. So, Page 6, continuing on the operational performance, sugarcane is finalized [ph] 2014.

As I said before, with 700,000 pounds of sugarcane delivered. That represented over 101 tons per hectare which is a fantastic result. It is a, I’ll say, average time of the sugar rate [ph], our 2.5years basically averaged. So to deliver 101 is - we are very, very happy and pleased with our results.

Finally, there’s a great message that the region that we chose to go with sugarcane is very good and very suitable for this product. You can see that we have rising average as there has been a [indiscernible] definitely higher than the rest of the result including São Paulo which is the most advanced state for sugarcane.

So it’s pretty solid performance and the sugar confidence also has been very good. So when we’re looking for our financials, we’ll see that actually sugarcane has been driving it fantastic and a positive impact for us. So we’re very pleased with the results we’ve achieved there.

Also, in Bahia this year we decided to build a silo which we believe is essential to manage not only the flow, the state of flow [ph] so we can manage better logistics, get better prices, we can sell corn at a different - with a different scheme [ph] so we can reach producers, poultry producers directly for instance, but also we greatly improve our operational efficiency in the farms in Bahia.

Because now we can plan better and start all the harvesting processes earlier and, say, have a more linear harvest which will greatly increase operational efficiency.

All of the money that we are putting on this specific investment is being financed with the NGF [ph] and as we all know with very effective rates, roughly 4% a year in the R$ and five years to pay. So we’re pleased with that.

Construction is well into final steps right now and we expect to have the first shipment of soybeans going through it in a month or so. On Page 7, that’s our hedge position. Few elements span out. The pie chart on the left is physical sales, so 71% of our expected soybean output has been sold already.

And by that we mean we have agreed on logistics, we have agreed on port basis [ph] premiums, what [ph] trading companies and the physical volume is committed. On the right side, we have the price discussion on it. And there we have a little bit less, pretty much the same of soybean [ph], 29% of the volume worth of prices was in U.S.

dollars either by having OTC contracts or future contracts at the BOD [ph] and our average price is $10.70 which is roughly 10% or 11% of both product [ph]. And on the accelerate [ph] position, we have sold so far 34.4% of our position in dollars at 2.71 which is below the current forward price.

We’ll still have on a 6% of our dollar position to sell and we’re already doing that. So they will of course converge to defend that [ph] but when we turn to our position, I’d say that we are currently well above market profits.

On Page 8, EBITDA and adjusted EBITDA and I would like to point out that what we do here and what we try to do here is actually offer the best of our operational performance so we changed and add back, and subtract from the EBITDA, so this is the EBITDA, all of the elements that are non-operational.

So for instance, all the world [ph] biological assets, we removed it from the constellation so we can have a very good understanding of what actually happened in those six months. And what we have here, we’re pleased with that and we have 2.3 if we compare to last year of minus 6.5, is pretty good, the results.

And I think the company is on track to actually deliver a positive - and it’s important to notice that we don’t have any of the current soybean, corn crop impacting this number yet because that is still in place. It hasn’t been accounted for.

So we are - the cost then, the company is under - on a track to actually deliver a positive EBITDA, but I don’t think we’d sell any farm [ph] which is something of a goal [ph] for us. So we can have the fruition of results having placed [ph] our portfolio of farms.

On Page 9, the income statement, also pleased, positive in number, linear to [ph] our tax credits, it’s pretty good. I’d like to point out here, the sugarcane result which is fantastic compared to last year. The grain has also improved but we might have an inventory liquidation period impacting here.

So it’s not as important as the sugarcane which has shown a very good result. Also, just pointing out on other operating income, the minus 0.5, 0.6 million compared to positive 1.4, the vast majority of this is a tax provision that we expect to actually get reversed rather shortly.

And also, last year, there was a reversion of a previous provision which actually delivered a 1.4 positive number. But the vast majority of this say over [ph] 60% or 70% of these numbers actually are tax provisions.

On Page 10, our balance sheet, two [indiscernible] I’d like to point out, the first one, we keep our farms in Brazil at costs, look [ph] for our property, investment properties or property for investment. Our main assets that we have, all that cost. So we don’t have any right cost [ph] any fair value.

Apart from current rate, it actually helped to make an adjustment last year business because of the sale. That impact, you can actually see in our - over here in our other results. We can see that run off from BRL8.4 million to BRL21.5 million and that is the impact of adjusting the price of Paraguay after we sold a piece of it recently.

So now the company, actually our net worth went up, which is actually pretty interesting because the company can actually offer a proposed natural [ph] shareholders meeting to start using that BRL21 million either for dividend or for shares buyback. So we are pleased with that and actually it reflects the brand that we are creating.

So let’s point out those two elements. All the plants in Brazil and of course, Paraguay had a small adjustment because of the farms we sold, the piece we sold, and therefore that impacts our reserves. In a nutshell, that’s what we had to discuss with you guys. We can actually move to Rene right now. Thank you..

Thank you sir. The floor is now open for questions. [Operator Instructions] And the first question will come from Paulo Valaci of Brasil Plural. Please go ahead..

Hi, Julio. Thank you for the opportunity. I have two questions. The first is on CapEx. If I’m not mistaken, I think in previous releases, you guys would break down the maintenance CapEx and growth CapEx. I was hoping you could have some granularity on that this time around.

And then the second question is, the release mentions there’s roughly 2,000 heads of livestock that BrasilAgro works with today. I was wondering if you could share with us some of the economic results with that, if we could maybe calculate what that operation would create [ph] in you guys, in terms of EBITDA on absolute basis. Thank you..

Well, thanks for your questions. I will start with the second one on the cattle. Paraguay has a very - all the region in Paraguay offer a very interesting opportunity for cattle. That specific operation, we are expecting and we’re purchasing [ph] and we’re going near, I’d say roughly $200 per hectare of margin, per hectare per year on cattle.

So if you can assume that we are roughly putting up on a roughly 1.2 heads per hectare, you can do the math yourself. You can see if we have effective operation down there. And actually in Paraguay, different from Brazil and different from Argentina, the price of this year of the young cattle is actually cheaper than the terminated cattle.

And that’s pretty interesting. It’s actually different in Brazil, it’s much more expensive to buy calves or more specially calves proportion and of any of those in Paraguay. So it is a pretty collective activity and probably [ph] expecting and budgeting, roughly $200 per hectare in it. And so from - pretty relevant, pretty interesting.

Especially when you think about Brazil, that first year soybean, negative, it can be negative. So it is in fact is an attractive alternative as you saw moving those hectares in Paraguay while you have to wait to move it from cattle to soybean. So we’re pretty happy with that [ph].

Going back to your first question, if you could repeat it, I got it then you were discussing CapEx and maintenance and something else.

And I couldn’t understand, so could you please repeat it?.

Sure, sure. The question was on what the breakdown is between maintenance and growth CapEx. Previously in other releases, you have the CapEx growth attributed to growth in hectares.

So opening new hectares, developing new hectares unless CapEx was used from maintenance from the current operations which I assume to be the CapEx related to this [ph] performance to the place where you already planned. And I didn’t see that initially, so --.

I think it’s less than 10% of the CapEx is maintenance, the rest of it is growth. I mean how to think or have to just keep in mind that a strong growth is actually related to silo which is something that is not revealed every year. But a chunk of it, the bulk majority of it is growth.

And a part of this growth is actually [indiscernible] of say roughly 25% of the silo, 25% to 30% of the silo. And that 10% is related to maintenance, so even more than that or even larger [ph] than that, and the rest of it is growth on new areas. So actually, there is a carryover in fact from last year that actually impacts the result.

So we’ve kind of slowed down a little but there is a carryover, in fact, that drags out on [ph] to the next quarters. So that number actually will decrease next quarter, most likely..

Okay, thank you..

[Operator Instructions] I’m now showing no additional questions. At this time, we will conclude the question-and-answer session. I would like to turn the call back over to Mr. Julio Piza for his final consideration. Mr. Piza, you may give your final considerations now..

Thank you. Thank you, everyone, for joining us for an interesting quarter from an operations perspective. If we go back to a couple of calls back when we were discussing last year’s, we were somewhat pleased with the real estate, not as pleased with our operations satisfaction by yield.

And now we can say that we are very happy with the operations so far. I do believe the sugar cane was a fantastic surprise. We are very happy. I’ll just say that soybean is looking good up to now. You never know what’s going to happen in the next month or so but it’s looking good up to now. So we’re confident on a positive operations result.

On top of that, I do see an interesting year for the company. This combination of lower commodity prices and higher exchange rate can add some pressure into the system. So all of the operations’ end result that were funded [ph] were U.S. dollars will be in [indiscernible] in the coming months.

And there, I’m positively sure we’ve opened up possibilities for the company in terms of growth. So I see a tough year but with very interesting opportunities for a company such as ours that has a very clean balance sheet and aspirations for growth. So thank you very much and see you all in three months. Thank you..

Thank you, sir. Ladies and gentlemen, this concludes today’s BrasilAgro second quarter 2015 results conference call. You may disconnect your lines at this time..