Good afternoon. Welcome to the Conference Call of BrasilAgro for the Earnings of Q3, 2020. We have with us Mr. Andre Guillaumon, CEO and Mr. Gustavo Lopez, Administrative Officer and Investor Relations Officer. Be informed that the presentation is recorded. And all the participants will be in a listen-mode only.

Next, we will begin the Q&A session exclusively for investors and analysts when further instructions will be supplied.

[Operator Instructions] The audio is being presented simultaneously through our website, www.brasil-agro.com, where you will find the slides in a PowerPoint.Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of BrasilAgro's management and on information currently available.

Thus, they involve risks and uncertainties, so they are based on information that is currently available.As we said, they involve risks and uncertainties and depend on circumstances that may or may not occur.

Investors should understand that general economic conditions, industry conditions and other factors may affect the future of BrasilAgro and the results may differ materially from those expressed.Now I'd like to pass the floor to Mr. Andre Guillaumon, Chief Executive Officer, who will begin the presentation. Mr. Andre, you have the floor..

first, preserve life, guarantee life of our employees and third parties and all those who work with us; second, is that once we guarantee the life and the safety of people, we also guarantee the safety of our operations.So, this has been the great objective of the company, and we will talk more about this.Page 3, please.

Here, talking about the pandemic coronavirus. As I said, we have a Prevention Risk Committee and we mapped risks that we could run. So we mapped the risks involving people, the people who had comorbidity, and we did this in January. These were - these are a way working in the home office.

And after the decree, the state decree at headquarters, we also began to work in home office.So we haven't had any problems. The team is very motivated, and we have delivered satisfactory results.

The fundamental point is to say that most of our units we have a contingency plan for them to avoid people having to move around, thus, avoiding circulation. Our employees are staying more time at the units, at the farms. So, we have a war room operation to guarantee the safety of the operation and exposure of people to the pandemic.

This has involved hard work and agro business has given a good example for us to overcome this crisis.Apart from this, when the pandemic began, we had a great concern with logistics. And today, looking the numbers show the measures that we took at the beginning. We saw that we could have logistics problems.

So we try to foresee - we accelerated sales, we accelerated the removal and - of the inventory.Until now, we haven't had any great problems in terms of interruption of logistics.

But the company had the third quarter, and you will see the numbers that are very different from last year as a result of the pandemic and the need to take precaution to avoid logistics collapse.So all the risks were well-planned. These points are analyzed on a daily basis, weekly basis.

And we have taken action to have a smaller impact on the operations and people.Page 4, it's important to highlight, the company has delivered constant growth in its activities and its operations. We'd like to remind you, our business has a different strategy. We have a combination of two vectors; operational vector and real estate vector.

And this differentiates us from the marketing, gives us more stability in the results. So every year, we want operational growth and also constant search for real estate appraisal.Here, we can show to you what happened during this campaign.

We ended the planting of the second corn crop, so we have an increase in soybean from 51 million to 54 million hectares. Here, we have corn, the harvest. Here, I'd like to tell you we had a great increase in the second corn crop year-after-year.We have been telling you this.

When we took over operations in Xingu, to have more safety in the first year of operations in Xingu, we planted. We wanted to plant more. This year was a very good year for this. We were able to plant more than 80% of the planted area, part in corn, part in beans, the new culture we're introducing in the company for exports.

So we have done constant work to improve the recurring delivery of results and consequently, the real estate result.Sugarcane; we - there was a reduction in the planted area as you can see. And this is the demobilization. We are leading some areas where the real estate was - suffered appraisal.

So we are in a ramp-up phase in some farms, especially Sao Jose Maranhao, Sao Jose Farm. So first, 57,000; next year, 65,000; this year, almost 80,000 tons. And surely, there will be growth and we will get to the same levels as in the Midwest.Now pasture, this is also - it's always a transmission phase to mitigate risk. So we used - this also helps us.

We have used this too - cattle raising to mitigate risks. Consequently, we also allowed the soil to mature with pasture. And then we can plant with more stability because of the organic material from cattle raising, physical benefits when we go from pasture to crops.Cotton, we are in a learning phase, and we're looking at this.

When prices allow for us to make more progress. This year, we increased a little. It's a challenging crop. So, you have seen what is happening with the price of oil. This has a direct correlation with synthetic fibers. And we saw the drop in oil prices.

So it's a challenging culture.Others, most of these are the leased areas to third parties, leased areas. Well, this we can see year-after-year growth in the productive land, a year that was difficult and we increased by 15%.Page 5, please. Here we see the increase. Soybean, 91% of the harvest completed with a yield that is above what we expected.

We had a projection. So we - year-after-year too, we have an increment - an increase in production.Now corn and the second crop. Here, we see a great increase. And we already mentioned in previous calls, when we begin these cultures. There is a difficulty in stabilizing the use of water.Finally, we found the best area, the best time.

And we migrated to corn, increasing the second crop. So this is mostly in Xingu where we are planting more than 80% of the area with corn with excellent perspectives.Also, beans that we introduced. Beans are an extra alternative in the second harvest. And also, we had some areas that already have beans. And we thought we should diversify more.

It's an enormous challenge. It has a lot of volatility in price, beans. And we're making efforts to guarantee positive results in beans. All of this generates an increase in production year-after-year of 31%. Total production increased 31%.

You can see the numbers, and later on we will give you the details.Well, going on to Page 6, we see here, this is fundamental, cattle raising is a transition phase for us. And it mitigates volatility in the first years, and this is very important.

Since it's a transition activity, we're not going to have the best gains because you don't design the phase for constant cattle raising. Since it's a transition phase, this gives an operational result, but reminding you, this has helped with good results.I believe that we - you have been following us and the market.

You see the scarcity of animal protein around the world due to coronavirus in China. So the price of meat increased a lot, went up a lot. And right now, at this time of crisis, so we are really using the higher prices. And this gain is helping us.So it's fundamental to share to you. We have a GNG with a small variance.

We're a little lower than last year. We will - believe we will improve this basically because of the beginning of rainfall. The reason is the beginning of rainfall is a little late. Rain fall is a little bit late in Bahia.And Paraguay. Paraguay, you know well. This year, Paraguay suffered a lot. The town has suffered. And we had lower rainfall.

So, this brings us some signs showing that it's a transitional activity. We must be prepared for this.We're also seeing more liquidity in some regions, especially Bahia, State of Bahia. They had cattle raising. And now we are transforming cattle raising into agriculture.

So high prices of meat, of beef, and more liquidity in Bahia had us adopt a strategy to reduce the number of herds of cattle. You must all be alert to this point.

We want to show to the market that we have the capacity, the mobility and the agility to make the right decisions at the right time.On the next page, I would like to conclude saying - reinforcing this point. The company is still concerned in guaranteeing the sustainability of its results. We work with hedge. This year, we saw a lot of volatility.

We saw the exchange rate going up a lot. Later on, you will see. So we are working with hedge. We are hedging. And the company is always trying to guarantee the results, according to our commitment. And this year is the year when small producers that don't do hedge, don't do anything will have a competitive edge.

So they are having a revenue that is higher.But on the other hand, this is positive even for us. Because our business, we have two areas, real estate and agriculture. So our strategy involves these two things, guaranteeing the growing sustainability, guaranteeing constant results during the years, and right now, guaranteeing operational results.

And certainly, the market will have good surprises for us in terms of price of land and the increase in margins.Now I'd like to pass the floor to Gustavo, and he will give you further details..

Thank you for participating. And we hope you are all in good health. Let's continue on Page 8. Here, we have the company's EBITDA for the nine months, BRL140 million. And last year, you can see it was BRL185 million.

To understand better, we want to adjust this EBITDA, excluding effects, especially sugarcane, and we included the harvest.You see the adjusted EBITDA for these nine months, BRL78.4 million. Last year, it was BRL71 million. So we see here a variance. And we must say that last year, we sold farms. And this year we have BRL21 million this quarter.

And this explains this difference of BRL85 million.It's important to highlight, Andre mentioned the impact in the margins. As he mentioned, we have better margins as we buy the inputs. And we began the last harvest in soybean with a price of $9 a bushel. And in the past, we had $9.60.

And the market - you will remember, the market had lower values for the bushel.When we look at the margins in local currency, we see $46 million. And we had a budget. And the market, the exchange rate dollar real arrived now at BRL5.60 to $1. So there were gains in commodities.

And also, we have gains due to the devaluation of the Brazilian currency.When we look at physical sales, we follow this. The impact on cash. And we have the deliveries of the contract. We have impacts. We began to accelerate sales. As you can see, 40,000 tons because of the better exchange rate. And also the logistics risks because of the coronavirus.

And this had an impact of BRL26 million, as we can see here. Once again, we have the expectation that as we continue to sell, we will compensate this.On Page 9. Here, if we remove the effect of the sale of farms two years ago, we had operational EBITDA here due to the sale of Agroserra Farm and also areas that were leased.

We can have thus values around BRL70 million in cash.Here, we see that we have adjusted EBITDA, BRL57.755 million. Here, we still have to harvest 50% of the soybean harvest that is yet to be done. The harvest continues. We still have to include here corn and cotton.

If we consider the BRL40 million that we have, we believe that in the next quarter we will have amounts that will be higher.Also, on the right, we have a breakdown sugarcane during this year. This ends in - on June 31. We had a super harvest last year, 2019. And this had an impact on our EBITDA. Now we want to have 50% from crops.

We were mentioning cattle raising has a small participation, a small share. And we are increasing the planted area.Page 10, the results. BRL85 million; last year, BRL140 million. And we would like to highlight the gross profit of the company. Last year, BRL194 million part from real estate, BRL89 million from operations.

This year, we have BRL158 million, BRL20 million from real estate, and BRL138 million from operations, from agriculture. So, our strength is the combination of these two results, agriculture and real estate. We have a lot of volatility, and we want positive results in order to pay dividends.

This is the commitment we have.Another line we can see, administrative expenses. Here, the difference is - difference between this and the previous quarter. We had an impact, taxes that we had accrued, other revenues and - other revenues, operation expenses. These are the costs we had to include the new company. Here, financial results.

BRL15 million, this is the cost of financing the debt. This is the service of the debt for nine months. And here, we see the details. We see we have some adjustments and also all the receivables we have BRL294 million.Page 11, here, it's important to stress, this includes the new company in Sigma [ph].

Here, BRL8 million, the new shares, and main impacts that we had when we included this new farm and the properties for investment. Here, these the new farm - the cost of including the new farms.Special item, the farms that were bought, these are being incorporated at market value. Another line were loans, the company has debt in U.S. dollars.

So we also have debt in local currency at much lower interest rates. And with this loan, we paid our debt in U.S. currency.Another point, accounts receivable and receivables due to the sale of farms. During the short term, you can see May, June, July and August.

So here, we see the net worth went to BRL1.103 billion.On Page 12, we see the company's debt on March 31, BRL443 million. We can see here total debt. We converted the loans from U.S. dollars to Brazilian reals. We have here cash BRL89 million net debt here. We have amounts receivable due to farms that were sold.

Here, the average cost of the debt, 5.9% a year. And here, we have the amortization on the right.Page 13, here, we see - we have a book value of net equity BRL1.1 billion. Here, number of shares, 62,104. And when we adjust to market value of the properties, as we mentioned, we have BRL1.3 billion and also 1 point - NAV, BRL1.845 billion.

Market value, BRL1.3 billion, and potential for upside in the sale, 40.9%. We believe that it's an excellent investment. And also, we see also better margins until the end of the year for cattle raising.Page 14, here, we have the price of the shares. And here, the important point we want to highlight.

The behavior of our shares above the BOVESPA index, the Brazilian stock market index in Brazil. So our shares are trading at a higher price. And the increase in liquidity that we had in the last 12 months, BRL1 million per day and BRL2 million if you consider the nine months.I believe, we see here on the graph that the share price is strong.

We are carrying out many activities. We have the devaluation of the local currency. And also, we see that the market continues to have volatility. So we can see that we're on the right track - the right company on the right track.We'd like to thank you all. And now we'd like to begin the Q&A session..

Thank you. We would like to begin now the Q&A session only for Investors and Analysts. [Operator Instructions] Our first question is from Pedro Soares, BTG Pactual Bank..

Good afternoon, Andre, Gustavo. The first question, you talked about the strategies, contingency, evaluating investments. Can you talk about the results of this? And concerning investments, which investments are at risk? Well, we believe that agro business, certainly grains is in a good situation. But normally, the company is well capitalized.

So are you - do you believe it's time to accelerate acquisitions? Do you believe it's the time to sell or to make acquisitions? Are you optimistic about more sales this year?.

credit, investments and acquisition.So, we are also looking at the results. We believe that BRL85 million is the number. We still have soybean to be harvested and also corn and cotton. We have to analyze the impact. For next year. We see that even if - for example, we see the prices of sugarcane have dropped because of the oil crisis.

But we still have margin, last year too. And we think that is soybean and corn.Today, we have BRL1700 per hectare. So these are the results. In the future, we will see the price..

Okay, well explained. Thank you..

The next question comes from Luciana Carvalho, Bank of Brazil..

Good afternoon, Andre, Gustavo. Two questions. One is about the sale of land. You said that margins improved in agro business. Looking at macroeconomic conditions, the Europe environment, can this change - for example, you are making - you are having good results in agriculture.

Does this change your strategy to sell land? And looking at liquidity, is there any change in the dividend policy?.

Thank you, Luciana. First, we will see the two; sale of land. We had been seeing, you all know, low interest rates make the real estate market grow, when interest rates are low. Yes, the situation has changed. Talking about real estate, we would like to highlight that the margin agro business has been very high.

As Gustavo said, we do believe we're working strongly. I hope to have good news for you soon, very soon.Sale of land, I believe we will be able to sell very well. So, farmers are buying land because the results are very good. And farmers, I was talking to our sales team soybean is BRL102 a bag.

So farmers are very happy with these prices and the profitability. So I trust that it will be a good year for the sale of land, and we should take advantage of this opportunity. I believe this will happen in the next few months, why?The land market is always sold after the harvest.

So the farmers at the end of the harvest, they sell, and then they buy land. Since in December and January now, everyone sees that the profitability was good. Yes, I believe the land market will be very good. And in spite of the macro points with the impact, we see the U.S.

currency going up, the local currency being devaluated, but the sale is in local currency.So not all the costs are in dollar, but the revenue is in dollars. So this has a positive impact. So with some exceptions like cotton. We - you have also synthetic fibers dropping in price because of the oil crisis.

But we are beginning to see that in the future, margins will improve for cotton.In terms of dividends, liquidity. We will pay our dividend policy, the mandatory amount, 25% of the profits - 25% of the profits will be paid as dividends by law. But if we have new sales, yes, we will try to pay these as dividends. It's difficult to tell you.

Well, in the next conference call, we will be able to tell you how aggressive we will be in paying dividends.We'd like to remind you, I always tell our shareholders, our objective is to deliver profitability and sustainability and also look at opportunities. So we have interesting opportunities. So it's like a scale.

We always want to really think of our investors and also to keep our company in the long-term..

Thank you..

Our next question comes from Victor Saragiotto..

Andre, Gustavo, quick question. I went to Mato Grosso. We heard that the company called Optimus is having problems.

Talk about your relationship with sugar and ethanol plants who are having problems?.

Well, you chose the right place to hide from the virus in the State of Mato Grosso. You are in a very good location. So, we have been planning. The council, the Risk Committee are also alert to this. We have receivables now from April, most of the receivables were paid in April. Part of the payments were delayed to the beginning of May.

We're talking about BRL7 million - BRL8 million, sorry. BRL4 million were paid and BRL4 million were delayed for the month of May.We had no problems with the sugar mills. This company always considers us as a priority supplier. We had no impact during the harvest.

We received all the payments on a controlled basis, only BRL4 million are to be paid in May. And you heard about funds that acquired the control of this company. I talked to the Board of Directors. We are talking to the holding company. I believe that either way, it will be positive for suppliers, whoever takes control of the company.

And I can tell you, most of our sugarcane is in the best sugar mill, the one that you mentioned, Taquara.So it's a very productive area. The sugar mill is working at almost a 100% capacity. We believe that they are doing well. We have followed this closely and it's fundamental. We have sugar and ethanol. We know that their EBITDA is positive.

What used to hurt their business was the capital structure. They had a debt that was very difficult to pay. So the company had a positive EBITDA, more than BRL1 billion.

And if you remove the interest they pay, the service of the debt, they could recover depending on these creditors.The information we have is that everything is going well, the negotiations, until the day before yesterday. But the information we had recently is that the creditor meeting to happen this week will happen. We're looking at this.

We're following. But in terms of financial impact, it's almost zero. The 95 million tons that we developed, we were paid with the exception of these BRL4 million that was delayed for one week.So we're very optimistic. They continue working. The sugar mill continues. They are generating flow. So I'm very optimistic.

I believe that it will be good because I believe in that, know it's the best sugar mill they have. And I believe things will continue well there..

Let me ask you another question. If we - you mentioned that they continue having problems. Would it make sense to exchange sugarcane to soybean in that region or -.

Excellent question. We have been doing that. We're doing that. As of two years, we stopped investing in sugarcane. You can see that we have soybean and corn. So these are areas that were converted to soybean and corn. So, with two crops, you will have a better return than sugarcane. So in Taquara, we have 3600 hectares. We bought another 1000.

And we're planting soybean and corn. We're doing that because our objective, we have volume since we had excellent gains in productivity in sugarcane. We could afford to plant different crops in some areas.So we have done what you said, and we have migrated from sugarcane to soybean. Also, this region, we know that we - there is always a trade-off.

So we would like to, if necessary, we can migrate more land and also, we can sell the land over there because the prices are very high there. Land prices are high. So we have the option also to sell the land. So we have a privileged position in terms of this..

Thank you..

Since there are no more questions, I would like to pass the floor to Mr. Andre Guillaumon for his final comments..

Well, I'd like to thank all the participants during this hour. We have a commitment. We will continue focused on delivering results. I believe, not only I, the Brazilian agro business is now stronger after this pandemic. The world is looking for places where they can source safe food, and Brazilians has a unique position. So we are cautious.

We're working hard with the ministry. We have done a brilliant work. We believe a lot in agro business.And so, agro business in Brazil will have a unique opportunity to supply food to the world. And this will happen more and more. We will be suppliers of protein, and this helps cereal, helps exports.

We're very optimistic with Brazilian agro business in the long-term. So we depend on diplomacy and where we want - we don't want anyone talking in a negative way about China. This hurts us. We want to preserve the relationship with China.Agro business in Brazil is - has this productivity because of Asia, China.

So we don't want anything negative in relation to the diplomacy and our relations with China.

We have a lot to learn, and agro business will come out of this stronger and stronger.Due to the points we mentioned and the image of Brazil, agro business at this time of crisis, not only in Brazil, this give you an example of the importance of everyone having food to stay at home in quarantine.

So this changes the vision of people about agro business. Agro business is no longer the villain, but it is the hero. And we are involved in this production chain, and we are working.Thank you very much and count on our hard work, our support and our Investor Relations department. If you need any clarification, call us.

And once again, count on Brazilian agro business. Thank you..

Thank you. The conference call of BrasilAgro is concluded. We thank you all for participating. And we wish you a good afternoon..