Good afternoon. Welcome everyone to BrasilAgro's Second Quarter 2021 Results Conference Call. I'm Ana Paula Ribeiro, Manager for Investor Relations and I have André Mr. Guillaumon, CEO and Mr. Gustavo Lopez, Administrative Officer and Investor Relations Officer. This live webcast is being recorded and you'll be in the listen-mode only.

Next, we will have the Q&A session exclusively for investors and analysts, when further instructions will be given. The audio is being presented simultaneously on the Internet, www.brasil-agro.com where you'll find the slides of the presentation that we will have today.

Before proceeding, I'd like to clarify concerning the declarations that may be made laid here during the conference concerning the business perspectives of BrasilAgro projections and operational goals. They're based on assumptions and beliefs of the board of the company.

They involve risks and uncertainties, they refer to future events and therefore depend on circumstances that may or may not occur..

Thank you, Ana Paula. I would like to thank all the participants; it's a great pleasure to be here to talk about our worst quarter, Q2 2021. We bring here many new things, many events that happened with us and in the market in the last few days. So let's begin the presentation. And we'd like to talk about the company and Q2.

We will be presenting Q2 2021 and we have a lot of information to share with you to clarify many points, for those who follow us, those who are analysts and I say it is a company that has consistently delivered solid results. And it is a company that has real estate results together with operational results.

And now we're at a very good time for commodities. We will have a lot of good operational results. Well, I'd like to call your attention to the highlights of the quarter.

We closed with a net revenue of BRL348 million, net income of BRL52.2 million, adjusted EBITDA BRL116.7 million, and a new fact that we would like to inform most of you're already aware, the capitalization that the company did recently now, last Wednesday. And with this, we can see a very promising future concerning the liquidity of the company.

We have no doubts that the consistent delivery will take price of shares to where they should be and we had a challenge liquidity.

Well with this capitalization this increases our float and this for you, who are investors, you have been asking us for this, it makes sense now, we're a company with a consistent delivery of results that come joins real estate with operations and now with liquidity. This was missing in our basket of products.

Production of sugarcane, we closed in December. We needed the harvest from Mato, more than 2.2 million tons. We have been growing consistently in sugarcane with very solid results in sugarcane. Well, I'd like to talk about the follow-on; I always like to say to comment.

We're now; we have structural issues and market issues, now we have a combination of both. We believe that it is a very positive time for commodities; we had around talking to investors. Mark, for example, market situation for example in Asia 40% of the animals were lost, they have the largest herd of pigs.

So there was a lack of animal protein on a global level with the loss of these animals. And this brought euphoria to commodities in order to recover the inventory of animal protein around the world..

Thank you, Andre. Good afternoon. Let's continue here. Now with focus on EBITDA and adjusted EBITDA, and we have been following the results. And we have here, the EBITDA, Q2 2021 including and excluding also results from derivatives.

Here we can see that in the quarter, we have EBITDA BRL48.156 and we have also this reflects the increase in the price of commodities. We began with, we can see the inventory of corn, and until by December, we have sold this inventory. Then we see a positive result here and also consistent results with sugarcane too.

In November 2 million tons, and also an increase in price, here we've seen BRL0.60 to BRL0.65. This brought a good impact. We see here BRL70 million, you can see here last year and in the previous year we had BRL52,000, this year. We see the difference of BRL100 million here. So this gives us good expectations, positive expectations for June 30.

We understand the market is seeing a good harvest and I'll repeat this is very positive for the results of the company. On the next page, during the previous year, we had operational results BRL70,100 million and here we see that, we see the harvest six months of 26 months of 2021, we see EBITDA much higher. And this is due to corn and soybeans.

But here the impact is here, we have good expectations this year. Here I'd like to mention to sugarcane. We were not that optimistic when the pandemic began. We thought that demand could be affected due to the pandemic and we're closing this semester with good productivity, prices too, firm prices. And in terms of margin too, good expectations.

We can see this in the graph normally our -- we can see the impact of sugarcane and now normally we had 50%, 50% in terms of revenue and results between grains and sugarcane. And now we see over 76%. On the next page, the income statement, Page 12.

Here we have the results of the quarter in terms of operations, the result was very positive, the final result is negative. And here the main impact you can see here financial results André mentioned. We sold part of soybean and corn and the higher prices, the rising prices had a negative impact on the operations.

And, but as André mentioned, we have part of the harvest sold and we had a rise in prices. When we look at the results, we see revenues here, we see the revenues from sugarcane, revenues from cattle raising, revenues from farm leasing.

Here we sold during the Harvest of 2020, six months of 2019, six months of June 2020, we sold this at 92, and now, we had a hedge position selling at 120. So, this is -- this has this impact. Gross profit. We can look at gross profit here. This, here; we'd like to mention other revenues.

Here we purchased the company Agrifirma this year, we -- if we have no contingencies in accounting, there is a variance here. The price had gone up in December 31. We have an expectation of positive results for June 30, if we're able to harvest soybean and corn. I believe that here we have a picture before the follow-on.

So we have BRL380 million in the farms with soybeans. We understand that we should continue calculating this position for soybean. Now in terms of investments. We are -- this -- can see here, the numbers, these numbers are from June 30. Here we're showing in liabilities, we have the derivatives and receivables.

This is the effect of volatility mentioned in the year-end report; here we don't have included the next harvest. On the next page, we can see here, we understand that our debt is low. Our challenge, as we mentioned, is to lengthen the duration of this debt.

Here we have one part maturing in the next 12 months and then in the next 18 months and we have now this new debt and we'll decrease this with receivables. We had a drop in debt. Also we can see derivatives here. Total indebtedness you'll see the change here. We -- net debt is a little higher, and we have BRL390 million.

So we -- so the company is not leveraged. On the next page, net asset value NAV. So you can see here the market have upside potential, the company continues developing. This will have an effect on the portfolio and those who don't follow us; here you can see the numbers, the value of the shares.

And you can see here, the possible increase upside potential, the company becoming more visible to the market, more liquidity and this will help us as a large company. Here we see the potential. And next page, here we see the evolution of the price of our shares, AGRO3 in the stock market.

And this is we have a commitment to increase liquidity, we're paying dividends and having more investors. Thank you. And now we can begin the Q&A session..

Thank you, André, Gustavo. Now we'd like to go on to the Q&A session only for investors and analysts. ..

We have a question from Pedro Soares, BTG. Hi, Pedro.

What is the conclusion of the follow-on and your comments in which you will now grow rapidly? Can you give us a forecast of the use of these proceeds for land? Apart from this with the current market situation, how much do you believe you will pay for each hectare?.

Well, Pedro, thank you for the question. As I said in the beginning, the great challenge of the company is to allocate these funds quickly. We're negotiating. We have some negotiations that are pretty much advanced. But we have -- we're doing this with a lot of responses of being transparent, any due diligence process.

As we say, we look at all the documentation, these are -- these take 60 to 90 days. So if purchase, let's say that on the day of the pricing, if we have an agreement that's already signed, that due diligence solvency of the seller, and also the ownership of the land, and also environmental licenses, all of this takes around 90 days.

We've done a lot of acquisitions, and this is the time it takes to complete an acquisition 90 days. The speed of allocation going into formalizing contracts and due diligence, we hope that in six to eight months, we will be capable of allocating these resources considering acquisition time, documents, transfer.

So this is the horizon that we estimate for the allocation of the funds. The second question is very valid too where you heard a lot and we're focusing looking for new areas to be converted.

We -- so I'll try to talk about prices when we talk about land to be converted, pasture land, pasture land for example, we calculate, we estimate acquisitions around BRL15,000 -- BRL18,000 per hectare and then you’ll have a need of CapEx around three to four.

Why three to four? It depends on the situation of the pasture land, if it's good, if it's clean, if it needs land development. So we're estimating a hectare, we're talking about net areas. So when you look at a farm in Mato Grosso, 35% of legal reserves, we're talking about the net arable land.

In general terms answering you the acquisition is around 15 and CapEx of 3 to 4, BRL15,000 per hectare with BRL3,000 to BRL4,000 of CapEx, so we hope to increase our production more in another 25,000 hectares. And then you can estimate the increase in cash flow. Thank you, Pedro..

One more question concerning the follow-on from Mr. . Why the increase in capital? Do you have other investments after Bolivia? I believe you already answered most of it. But if you wish to supplement your comments, André..

, good afternoon. Thank you for the question. Yes, answering you in a transparent way. Yes, we have things that are in our pipeline, negotiations that are pretty much advanced. We -- so yes, we have also things well advanced in the pipeline for quick allocation of these resources.

We'll have also the resources coming from the harvest in Bolivia, it's an ongoing operation, they're beginning to harvest. And now as of March, April, we begin to harvest sugarcane too in Bolivia. So part was already allocated in the Bolivia. We'll have results in the next 60 to 90 days due to the harvest.

Reminding you that in Bolivia, you have the crop and the winter crop and also the harvest of sugarcane, we have 1,900 hectares of sugarcane last year, they produced 80 tons. So, an important revenue coming from the sugarcane in Bolivia.

Answering your question, yes, we have negotiations that are advancing very rapidly for the allocation of these resources buying new plots of land..

The next question from Eduardo the results of the derivatives.

What are the forecasts for the next several quarters?.

Yes. A comment we have 3 million of bags of soybean to be produced. And here what happened 120, we have hedging, and on December 31, it was 150, we have this impact as you saw. We understand that on March 31, we will have most of the harvest. And from then on, we'll correct this distortion that you see, we had estimated the results.

In this, we had estimated soybean at 90 and now at 120, 130 per bag, we have -- we will have 18 million more. We believe that this value is very good. It will -- the results in derivatives will remain negative. The only concern is the amount of soybean that we already sold. But we have a policy of selling only 50% before the harvest.

So we have these values. We have these amount sold as I said. The risk of the company would be, if we had a problem in the harvest. So the results, we believe the results for March 30, and June 30 will be very positive..

The next question comes from Anthony Gordon, Genagra. Hi, Tony. The reduction of the NAV per share due to the increase in capital..

Hi, Tony, thank you for the question. Let's try to clarify more. The increase in capital around 20 million shares, 20 million in a horizon of 62 million. So we're talking about an increase of the shareholder base equivalent to 30%. So this is the reduction of the NAV per share.

If I were to do this without inclusion, but it's important to say that we received BRL440 million that will be included in the value -- in the assets of the company. Bolivia was spot with the 34% discount in relation to market price, this helps.

So when you do the calculation, you had a dilution of 30%, but you have an increase in NAV of BRL440 million or if we don't look at it that way, we can increase it by BRL260 million to BRL270 million in cash and BRL160 million in new areas with a discount of 34%.

If you consider that, if you add to these BRL160 million of Bolivia, 34% discount, I'm calculating this quickly, I would be adding BRL48 million. So it's like adding BRL200 million to the portfolio of the company, adding BRL200 million in the portfolio, BRL270 million in cash.

So now it's important to say that the great engine is we have an increase in liquidity and this was always a pushback that we had less liquidity and we confirm this by increasing the capital, bringing liquidity is fundamental to close this gap of NAV.

Gustavo mentioned all our properties have been evaluated for at the price of June 30, last year 2020 we will reevaluate them on June 30, 2021. This should correct a lot the NAV of the company due to the new prices of commodities. We believe that we're not going to use the spot price.

But they'll show a curve reflecting the trends of commodities, it should be positive. If you ask me, I believe, yes, then after the transaction and after the inclusion of Bolivia even with 20 million more shares, we should have an NAV around BRL35 and BRL40 even after the transaction, after the dilution.

I believe that the inclusion of Bolivia, the cash and property at a higher value, we should have a company around BRL35, BRL40 per share..

The next question investor Gustavo.

Good afternoon, how is Brazil are there using the new technologies 5G Internet, biotechnology to increase productivity?.

Okay, I'll try excellent question, I will try to answer. We have many things being used, a lot of technology. Let's begin with our bio fertilizers, bio inputs. We have bio factories. We began to use this four harvest ago, four years ago on an experimental basis and we increased our bio factories.

In this harvest we have five bio factories in different units that supply 100% of our needs. So, this is a technology we're using.

We believe a lot in this, bio factories, biofertilizers better balance I always say that we -- agriculture went to chemicals and now then organic and now it will stabilize, it will stabilize with a combination of chemical and bio. So, we're using this on a -- in -- on different scales in different crops.

For example, insect control, pest control, increase in resistance to fungus. So many bio products, we have used in the company this year, initially, I'd say that André, what is the company's vision, initially it hasn't brought a reduction in cost, but it increased efficiency.

So the increase in efficiency will allow us in the next few years to have a cost reduction with less expenses with chemicals, due to a greater efficiency with bio and chemicals. That's the first point. Now, in terms of new technologies.

We're very close to these new technologies, 100% of the operation has Geo GPS, geo positioning, we have all the planting and most of the harvest, with Geo positioning, which allows us to generate productivity maps, and also maps for planting.

We have increased the adoption of new technologies, concerning climate monitoring in partnership with many companies, some start-ups, others know that we have a lot embedded, 100% of our units have real-time monitoring of the climate, which gives us a good efficiency.

You can have a rainfall map, the rainfall map, when you decide on the weekend; we can create climate maps every single day. The company is always innovative. We were the first in Agro business in Brazil to implement SAP for management data farm.

So every part, every stretch is considered cost center, we have a lot of technology embedded monitoring programs, Zoho Technical, we have Taurus. And the next wave of Agriculture 4.0. We have a lot of things being adopted many things, in the pipeline, specially sensor. This has been very useful in the company, drones; we've used a lot of drones.

And what is missing. And this is a problem not only of BrasilAgro, the work that is being done the large projects, connectivity. We're making efforts in this area, connectivity. For example, the office is connected, the challenge, we're very optimistic. This coverage is increasing. We've seen pilot projects. We will see 5G.

Let's hope that 5G will bring us more productivity, more scale and more efficiency for our operations. So all these technologies. We have a quality team and we're using sensing. We prepared a couple of years-ago, a book of dreams.

We sat down with all the areas we mapped the new technologies, cattle raising controls, internal controls also accounting new things, we mapped 23 new technologies and most of them 4.0. And we understood those that brought the most of the results in the short-term. So we established priorities, we're implementing.

So we implemented five in the first year and this is constant. Yes, it's a book of dreams. I'll give you an example. People from cattle raising would like to count the cattle in different ways. So we have infrared cameras, sensing, the things we're including, and this will increase the efficiency.

Today, our scales are all integrated with SAP automatic capture, animal by animal, the weight and the animal with a chip, all animals have chips, so a lot of embedded technology. And the good news of all of this, the speed of this technology has been tremendous. You have to -- you need a NASA department to do a follow-up everything that comes.

So we have looked at those that generate value. In the short-term, we're implementing this, new things that generate value in the medium and long-term. All of this is mapped. And we have a schedule for execution to put into practice those that generate in the short-term, then later on in the medium and the long-term. So everything is mapped.

We have five new technologies implemented, and we have a pipeline and the market is always bringing us new things. So where I'm saying that this will be the Great Green Revolution in the next decade, 4.0 Agriculture, 4.0 bringing more efficiency..

The next question Gabriela. Congratulations for the results..

Thank you. Gabriela..

Do you intend to maintain the sales of farms?.

Well, Gabriela, thank you. Okay, say hi to Werner. Yes, today our team right now is working on this in some regions, especially in Brazil.

Yes, we're doing this, the sale of farms, it's important to say that farmers -- farmers -- they -- we begin to see, we're seeing the commodity market is booming and another point, Gabriela, there's always a delay between commodity prices going up and being transformed profitable, soybean may be worth 150.

But people are planting, they haven't sold yet. And also, this year, in 2020 Brazilian producers sold a lot of the crops in advance. This shows that they have a lot of risk management. This brings stability in the medium and long-term. But a year when we had an important rise in commodities becomes favorable.

So yes, there should be land purchasing, we have to be anti-cyclic when everyone is trying to buy, we should sell. And now we have to do both things with the increasing capital. But yes, it's possible to sell because we're always buying in the lower shelves, and selling what is ready.

So we buy what doesn't generate results, these land prices haven't gone up in price and those -- the land that is generating results we sell. So we buy a land to develop and then sell, okay, we can't buy land, we can't buy land that is developed, it would be too expensive.

But in general, we are -- we will be a seller in the next few months and capable to allocate this cache of the follow-on to the next few months too. Thank you..

congratulations for the results.

Do you have any expectation of changing the hedge policy?.

Well, Gabriela, it's important to see, we have a hedge policy. It's important to see we have to guarantee margin, profitability. So we define a budget in April/May we approved in the Admin Management Council, end of May, beginning of June. And then as of June 1, that's the budget. We have a price defined begin to work, we begin to design.

Now for example, we cannot buy and not sell, we're always monitoring margin. Our policy is clear, Daniel, we can have a hedge position until 80% before planting, not more than 80%. And then as soon as we -- when we begin the harvest, we can get to a coverage of 100% because we have most of the estimates of what we’re harvesting.

So that's the policy, hedging for commodities. Now in terms of exchange rates. We have a policy to have a mismatch of commodities in Chicago or corn Chicago, or beef Chicago. So we have a 5% difference. Since we saw that this year, there was a lot of volatility in commodities and in the exchange rate, we worked with 20% difference.

So, today, we can capture soybeans that went up in Chicago. But if the U.S. currency goes down, the next day, it goes up, the exchange rates our policy up to 80% until planting, until 100%, during harvest, and the exchange rates in commodities in U.S. dollars, a mismatch of 5%. I don't see the need to change this. So it's a good policy.

It's a clear policy, we want to guarantee profitability, we want to guarantee a consistent result. I don’t see the need to change this policy for a new one. What we saw this year was a year of a lot of uncertainty, volatility, as Gustavo mentioned.

We had an important issue in derivatives when you sell physical now and also, we're also very optimistic with premiums in the second semester. So we have the sale of the physical neutralizing derivatives, and then we have an interesting expectation of premiums.

So this Gustavo corrected me until planting its 50%, sorry, so correct until planting 50% after we plant 80%. Well, I believe I answered your question. No, we don't expect any changes in hedging or derivatives. We're a small company but very sophisticated.

So we hedge, soybean, corn, corn we operate Chicago and BMF, Chicago because all the corn of shingle goes for exports, a lot of correlation with Chicago sugarcane.

We're the largest operator of ethanol, although we don't have very much liquidity, we're always monitoring this, we believe that with the pandemic, we had ethanol 1,300 already now 2,200 it's going up. Cotton same thing also an important rise in price. And also cattle too, in cattle we do something even different. We do hedging of the operation.

Everything we'll produce in terms of animal protein, we monitor the P&L, and since our inventory goes to result, we always also do a hedge covering part of this inventory. Let's have an inventory at BRL300 per pound, then if it goes to BRL370, you'll have less value.

So yes, cattle too we're always looking at animal protein, because it interferes in our financial results..

The next question Finance, the future acquisitions should generate synergies with the current properties?.

Well Zhong , yes, some may, some units of these that I mentioned. One of them, I can tell you will generate synergy. Yes, one of the acquisitions and the others are units. Acquisitions in Mato Grosso and some in Taquari. These are units where we have synergies yes in terms of management, we have a base. Our general management is in Palmas.

So we have -- there are lot of energies of ESG, overhead reduction to BrasilAgro. Since it is in the stock market in New York has an overhead, you need auditors, compliance, governance. And this brings security to your investors, but it's a cost.

And in a certain way, we're still a small company in terms of production; we're talking about 155,000 hectares. I would say that the new acquisitions when we think of SG&A and overhead, the company has the capacity to increase its capacity by 60,000 hectares without hiring any new employees.

You'll have people at the farm, technicians at the farm, cafeteria and so forth. This is the direct cost or actually indirect cost of the farm. Now, in terms of synergies, yes, yes. And here, I would like to see, our logic of buying in Bolivia, is to have a synergy with the structure that we have in.

So Gustavo has an enormous challenge of use of making this synergy real. I can't say, probably reducing drastically, the cost in Bolivia, the management cost in Bolivia. Yes, synergies yes, it's a fundamental point that we want in this growth of the company.

Apart from liquidity, you must have the capacity to produce in another 40,000, 50,000 hectares without changing the management structure of the company..

The next question is.

How do you believe for examples do you see many new funds in agriculture, can this impact your business new funds in agriculture?.

Excellent question. I believe that everything that brings liquidity to the market is positive. So if you ask me, André, in the short-term, what do you see liquidity? Tomorrow, we can sell property to management, they have no management, we continue operating, it would be a dream. It's something we're going after actually, it's not even a dream.

So it's a great opportunity for us. There are assets where it makes sense of their assets, the price is very high, and the profitability of a fund would not allow me to work with leasing. Yesterday, I was discussing things with one of these funds. And it makes sense, yes. I don't see pressure in acquisition. I always say it when does it.

This is simple to explain what we do, but it's complex in the execution. And I've said this consistently. There's a great problem between the difference of a real -- of an urban real estate fund and, and a rural real estate fund. The management is very different. So if you've put together a fund and you don't have scale, you will have difficulties.

And I don't imagine any investor would put money in a fund without governance, without security. So this control will be necessary, a lot of governance and they will have to have size, if they don't have size, if they don't have volume, although they have tax exemption, they'll lose control, without governance. So I believe it's possible.

I see this with good eyes, I see this as liquidity. We're a transformer of land. I believe funds will buy ready farms; they don't buy what we like to buy. They don't develop, they buy ready land. And if we have another client, it's an extra, these are extra clients. The funds will not develop plans, because they don't have liquidity for this.

So my answer is yes, I see this going to end-up positive light, the presence of rural funds, real estate funds and extra buyer. But we're talking about three, four funds in Brazil with 66 million hectares. It can bring liquidity. Any large funds would like to be with us in such a project. They buy the assets, they buy from us.

They know that we're there and they can guarantee profitability. One more option for us to channel resources and efforts and bring more profitability to you, shareholders..

Yes, Anderson he says thank you for the excellent life, congratulations. And let's work..

Yes, we're already working, you can be sure that we never stop here..

The last question comes from the new railways can have an impact in your properties and reduce costs, the effect of railways, new railways?.

Excellent question. You've heard me say this many times gains in logistics are for operators in the short-term, then they can always go to competitiveness but that's later on. And your question was about technology. Yes, I believe that it brings a lot of efficiency; we can have good cost reductions. I'll give you an example.

Today, we have sprayers that detects the amount of green, they're weed seekers, they match the leaves and they apply jets only there. So you have higher efficiency, you can work with a higher dosage, because it's directed to the weeds and less aggressiveness to the environment.

An example of a technology that is bringing more synergy, more profitability. So in general, I believe that this always helps in Brazil. And it's a sector that is different from other sectors in Brazil.

It's the sector that has used, adopted more technology, so -- the -- comparing with other sectors, when we compare, so technology has been very adopted heavily in agro. So answering your question, it can bring to us gains in scale and also cost reductions in the medium and long-term.

So there are technologies like biofertilizers, biocontrols that are bringing the results to us. We in Xingu, we have a lot of problems with insects. They make a pinhole in soybean and when you sell, there's a discount.

And in our operations in Xingu, we have five chemicals with the adoption of biotechnology, we reduced the use of insecticides, herbicides to three, we have to apply five times now three, with greater efficiency. We're testing a lot, this in fungus; we're testing this in other areas.

Also a lot of technology, and also Agriculture 4.0 information, we know that information is time and time is money. So Agriculture 4.0 will bring us a lot more efficiency although we're always using state-of-the-art technology. This technology will become less costly, and will give us more profitability in gains and scale..

Well, with this, we'd like to conclude the Q&A session in our conference call. I'd like to pass the floor to André to conclude our call..

Thank you, Ana. Thank you, Gustavo, who were with us during this conference call, thank you to the participants. What we do here is due to the trust you have in us with this consistent delivery, thank you to the team. Yes, we're here, Gustavo, when none of behind us, we have more than 2,000 people working in our operations.

So thank you to the team, which is very committed. Before coming here Gustavo and I spent all morning working on human resources, people management, performance evaluations of managers, it was very good, not only the strategy is clear, not only the processes are robust, but people, the company, values people and the development of people.

Tomorrow, there will be -- we will have other people, other minds and we have to instruct them. The company was certified as a great place to work a few years ago. And I always say that this is the guarantee of sustainability and guarantee to you, investors. We want every leader to invest 35% of their time with people management.

I know it's doing follow-up, giving feedback. This enables us to say this company has a lot of success and we'll continue successful because we work well with people, we have the trust, we deliver results and deliver results means to have your trust as investors. So we're very happy. Now we're going into a new cycle.

And you can be sure that this team will be working in a very solid way for recurring delivery of results, which is what you expect from us. Thank you and a good afternoon..