Brasilagro Companhia Brasileira de Propriedades Agricolas

BOVESPA:AGRO3

Earnings Call Transcript 2021-Q1

[Elisa Castelani, executive]

Good afternoon. Thank you very much once again for participating. It's a pleasure to announce new results Q1 2021. This quarter finished on September 30, 2020. Today, we have here with us myself, Elisa from Investor Relations; Mr. Andr Guillaumon, our Chairman; and Mr. Gustavo Lopez, our CFO and Investor Relations Director.

First, we will have a presentation on result earnings, and then we will have a Q&A session for investors and analysts. We are transmitting live on YouTube. If you have questions, please access our website, www.brasil-agro.com. And please access webcast Q1 2021, then you can join the platform. Please fill out your name and then send the question. If you have any difficulties, there is a support button on the bottom right. And you can get in touch with the technician to help you. The presentation is available for download on this platform and also on our website. If you have any difficulty, please get in touch with us by e-mail, [e-mail]. Before we begin, I would like to mention that any declarations that may be made during this webinar concerning business perspective of BrasilAgro projections, operational goals, financial goals are based on beliefs and assumptions of the company's Board and on information currently available. They involve risks and uncertainties because they refer to future events and therefore, depend on circumstances that may or may not occur.

Investors should understand that general economic conditions, industry conditions and other operational factors may affect the future performance of BrasilAgro and lead to results that may differ. So having said this, I would like to pass the floor to our Chairman, Mr. Andr Guillaumon. Sir, you have the floor.

[André Guillaumon, executive]

Thank you, Elisa. I would like to thank all the participants. It's very gratifying to be here with you again, talking a little about the company in Q1 2021. We're very proud due to some very good results. And the market is in a very different situation with a pandemic, political uncertainties, we have many things happening. But I believe that Agro business in Brazil has been very resilient, has delivered consistent results, and this is what we will show to you. I always see that Agro business or better -- the pandemic generated in civil society the perception and the importance of Agro business. We can stay at home because of Agro business that guarantees our lives. And here, we always had 2 concerns, very intrinsic to our day to day work, which were to guarantee people's lives, people's safety and also guarantee our operations.

It has been a year. The beginning of 2021 and the beginning of Q1 have been complex times, but we are persistent. We are humble. We're learning a lot with this. And here, it's very good. I believe this is the second or third webinar in this format. So the digital acceleration that we're seeing would take decades in Agro business. So that was a positive result that the pandemic brought. We have seen much more digitalization. So let's see, Page 1, where -- Page 2 with the highlights.

I would like to mention some very relevant highlights. We had Q1 with a net revenue of BRL 229 million. This represented -- and represents a net profit of BRL 75.7 million and adjusted EBITDA, BRL 68.2 million. I believe it's a very robust quarter. We will see that most of these results come from operational results, very few from real estate. So this shows us that the company with real estate and operations has always met the expectations of investors. In Q1, we have estimates for the harvest 2021, 2.6 million tons of sugarcane, grains and cotton; 154,000 hectares in production. Then we will go into detail about this number later. But it's important to say, year after year, the company is increasing the productive area in spite of selling assets. So the combination of this strategy, real estate and operations guarantees this growth, has guaranteed the expressive growth in production and also, we have real estate that is very important.

The combination of these 2 strategies. We are the only company that does this in an effective way. We have in our DNA, the capacity to deliver operational results and also robust real estate results. So this differentiates us from the market.

To celebrate last year, which finished on June 30, we brought last month through the general meeting, the approval of dividends worth BRL 42 million, representing BRL 0.71 per share. This will be impaired -- this will be paid on October 20. We have the meeting on October 12, and we will -- we are bringing you the information about these payments in the next few days.

Next page. I talked about our concern with COVID, coronavirus. We have worked hard. We have worked in a remote way. The company was already getting ready for a home office or work at home, but not that strongly. So we were able to work at home and guarantee these results we are bringing to you. The adoption of many measures. We mentioned this in the last meeting at the beginning of the year. Our concern was the delivery of the harvest. And then we said how will we crush or gain ethanol? And we saw that things worked out and Agro in Brazil with its capacity, resilience and characteristical decentralize has overcome the problem for the pandemic. Contingency plans continue. We're very concerned because now in the first calls, we said we wanted to guarantee the harvest. Now, we are concerned, we're ending the harvest of sugarcane, and we began to plant the next harvest in some states. It's pretty much advanced.

And normally, all the operations have begun to plant [indiscernible] Midwest, more advanced, [indiscernible] a little late, but this is what we normally have in these regions. Later on, we can clarify the climate conditions during the year.

At the bottom, we see what happened with commodities, soybean, since a couple of years ago. Now we have an exponential growth of the price.

Next page, please. On the next page, I believe here, I mentioned on the first graph on the left, the growth of the planted area, cultivated area. So we were able, in spite of selling land, in spite of selling land, we maintained the growth of cultivated area. When you compare '18/'19 and '19, '20; 135,000, 153,000 and now 155,000. So here 2 facts that happened during our harvest '19/'20: a sale of some areas in the state of Bahia, removing 3,000 hectares from production. These were sold. And we also had a renovation of a lease contract in Mato Grosso. It was not renewed. This also removed 7,500 hectares. In spite of the sale -- in spite of losing 10,000 hectares of production, we still have positive numbers year after year. Why? Because of our capacity to transform new areas, to add new areas to the productive area of the company, generating operational results and also price appreciation.

On the right, we have the breakdown of the cultures, the crops. You can see soybean going from 54 to 59. Corn, roughly the same number, small reduction in one of the harvest. This is due to the lease in Mato Grosso that we did not renovate.

But we also see corn and also beans, important crop, beans. We have production of beans for the domestic market. Last year, we exported beans for the first time to India. So beans from Mato Grosso are going directly to -- for consumers in [ 6-kilogram ] bags to India. So apart from transforming, apart from generating value for shareholders, the appreciation of the price of land, we are also, with our products, bringing commodities and high value-added products.

Sugarcane, this graph is very good. We see a reduction in the planted area with an increase in production. It's good to talk about this later on. We will see what is happening with our production, productivity. Productivity has grown with -- in an expressive way, which enables us to have a smaller area with sugarcane and being able to plant other crops in their [ rent. ] Also, we see cattle raising. I always said that cattle raising is the transitory activity, but we tried to demobilize in the last few months of some operations with cattle; we continue other areas with cattle. Cotton this year we are planting cotton, not very much, but we're learning with these results. We had a harvest for cotton with a productivity of [ 310 ] [indiscernible]. And this enables us to trust in this and increase. And we have the other crops. Most of them are other crops and some of our areas that are leased to third-party. The objective is to capitalize even more our land. Those who lease our land are potential buyers of this land in the future.

This is the graph that shows -- once again, here on this graph, we have product reduction numbers. Soy bean, 160,000 tons to 185,000 tons in the next campaign, or from 41,000 to 49,000 tons also the second harvest of corn. Our -- the lease in Mato Grosso was not renewed 4,000 hectares, 4,000 hectares of corn. So this is due to the -- this is the reduction. Beans, 2.3 thousand tons of beans and 3.3 thousand tons of beans in the second harvest. Then cotton, the reduction. One of the reasons it's planted area and also productivity. We always prepare a budget, which is conservative to avoid problems when we deliver results.

In summary, total grains and cotton produced. We have 322,000 tons, now 345,000 tons, which enables the company to be a large player, a strong player.

Page 6. Here, I go into some detail, especially cattle raising. I believe you're tired of hearing it for us, cattle raising is a transitory activity. And even being transitory in the last year, it generated an expressive result, we understand that it can mitigate the volatility of operational results. And this is what we see. As I said, we have maintained our projection of 15,000 heads of cattle in the next harvest.

We already had 21,000, 22,000 heads of cattle. We had a reduction due to the demobilization and the sale of Fazenda Jatob. The pasture area, we decreased harvest after harvest, and this shows the demobilization of Jatob farm. We reduced from 13,000 to 10,000 hectares with cattle raising. And we have an increase of GMD. We know that Jatob was a farm where we have lower numbers than in Preferncia farm. We have an increased GMD gain of weight due to having a more profitable operation.

Next page, the great highlights of the company. We're proud of announcing this to you. I always say that our commitment, we try to deliver in a consistent way. 3 years ago when we said we were beginning a project in So Jos that, that would be very challenging with very low productivity we got to work. First year, 57,000 tons of sugarcane, which is what we had. And now we're closing the harvest with almost 90,000 tons here. Later on, we will show this in detail. This allows us to be an important player with 90,000 tons. We had at the beginning of the year, a lot of tension in sugarcane, a tremendous challenge, the price of ethanol. When you look at the price of ethanol, it arrived at 1,300. The -- and today, it's 2,400. So in the beginning, we tried to preserve cash. We reduced the plantation, but now the productivity has been very good, well above what we have estimated the productivity of ethanol. And this allows us to be an important player.

Area harvest -- we want to harvest 25,000 hectares. Until now in September, we already harvested 19,000. These numbers are from September. We have the harvest in October, November, especially in Maranho in the north of the country and in the Midwest. Midwest is -- has already finished the harvest. Production in the last harvest, we had a production of 1.7 million. Now 2.2 million, an impressive increase. And in these months we had an important recovery of prices. The third graph is very interesting -- average productivity of the company in spite of having growth in production, this growth comes basically -- this is nice to announce with increases in productivity. It is not due to a larger area. The area is getting smaller, and we're having an increase in productivity and production. Our operations are large. We are large providers of sugarcane to sugar mills, and we have apart from a very productive culture for Brazilian standards, we have a premium, which is the pricing in So Paulo. So it allows us to be very -- to have a very attractive product and consistent delivery of results.

Next page. Here I would like to talk about the first slide, where we talk about soybean harvest 2021. And I say once again, the company is and is always making efforts to guarantee the margin. The year began in July 1. So we're always looking at the price of our commodity, our inputs. So we have, on the current date, 66% of the soybean harvest that we are planting now already sold and sold at these prices, $9.33 a bushel and we have the exchange rate BRL 5.23. We began to sell soybean at the beginning of the year even before the exchange rate went up. So it's important to say that we have a very conservative situation, and we want to guarantee the margin that we committed ourselves to.

Then we have corn at 2019, 2020. We see here 145,000 tons, 100% sold. And in 2021, we have a volume of corn committed, 60,000 tons already, 45% coverage. Everyone -- when we look at the picture of 3, 4 months ago, we see an important demand for meat. We knew that corn would have a greater upside than soybean, we were more conservative in the corn. And we see that corn recovered a lot. And we will have this production to sell at attractive prices from now on. Cotton, which represents very little of our billing, but an important price in the last harvest. We had these levels of prices and this is dollar/ pound. And in this harvest, we have a projection, 76% already sold at the price of $0.65 per pound and also the exchange rate already guaranteed. So this is an overview of our position for commodities.

Now I'd like to pass the floor to Gustavo, our Investor Relations and CFO of the company. He will talk about the accounting numbers and also the results. Gustavo, you have the floor.

[Gustavo Lopez, executive]

Thank you, Andre. Thank you very much to all those who are participating in our conference call for Q1. Now let's go on to Slide #9. Here, we can focus on the lower half. We understand that the best way to see the EBITDA generation of the company is by excluding all the effects of gains on biological assets and also adding and excluding the results of derivatives that we had during the quarter.

What we can see is that from a profit of BRL 75 million, which is what Andre mentioned, we get to an adjusted EBITDA of BRL 68 million for Q1 '21. And when we compare this with the same period last year, we had BRL 57 million, 18%, we can see. It's important to say that in Q1 last year, we had not recorded the sale of a farm, and this resulted in BRL 16 million. And this year, we did not have any sale of farms. We had some clauses of a sale we made in September 2018. Which had 130 hectares. And in July this year, we delivered this area. And on that opportunity, we haven't recorded this, and we did this in this quarter.

Also, all the -- in all the contracts, there is a clause that we will do a measurement. And based on measurements, we make adjustments, and this gave us a result of BRL 5 million. So it's important to mention here, we can see that the EBITDA generated was very robust and a result that makes us optimistic for the future.

Now here, on the next page, we can see operational results. Excluding the effects that I mentioned. And here, it's important to say that during this quarter, we sold 45,000 tons more, especially corn. And apart from this, in all the products, especially soybean and corn, we were able to get prices 30% higher than in Q1 of the previous year. And also, sugarcane, as mentioned, we saw that we could -- this could have an effect on the company's results, and we are very optimistic for the future.

What happened is that the prices became very high and both in sugarcane and other crops. So this generated a price per ton, 9% higher than last year here, and this generates a very positive result. We can see here BRL 62 million on the last line. So we're very optimistic because those who are following our results, before the devaluation of the currency, we always said that we were around BRL 70 million, BRL 80 million. So we want -- we believe that looking at the whole harvest. We will be very close to these numbers. On the right, we have a breakdown of the EBITDA of operations. And in Q1, we can see here the numbers. We're selling the inventory of grains, and the main engine of this cash generation is sugarcane.

Now going on to the next page, Page 11. Here, we have the income statement, and we have here BRL 75 million. Profit last year, we had BRL 40 million. Last year, we still had the sale of the farm, BRL 16 million, plus BRL 5 million, and the operational results explains this performance. So we have a gross profit here. We heard this gross profit, as you can see here, from sugarcane. Soybean, we see here 1,170 per ton. Corn, which last year, we sold for 320 per ton. Today, it's 510 per ton. And this generated a very, very good operational results. With -- we can see here the sales. The costs, administrative expenses. We see here last year, we had -- we recognized part of this. And we have also financial result that you can see here, 15. Last year, it was 1.

And here, the main effect here, you can see the numbers on Page 10. We have the costs here -- one -- the cost of the company here. And on the other hand, we have the sale of farms. We also make adjustments every month based on the exchange rate and the price of soybean. And this gave us a very good appreciation, compensating the results and also the derivatives. The amount that we have sold for soybean is here, and this was compensated. So the result, BRL 75 million.

Let's go on to the next. Here, we have the income statement, a very good performance. And here, we see current assets, cash and cash equivalents, BRL 224 million. Accounts receivable, short and long term, due to the sale of sugarcane. I mentioned this, the receivables that -- also that we have and also the sale of the farm. We -- this is here, Paraguay, we booked at market value, but all the farms are at -- all the other farms are booked at cost value. Here, we have BRL 1.479 billion. We have here also the circulating assets as you can see. We're in a comfortable position, noncirculating, BRL 1.5 billion.

When we look at liabilities, we see that loans and financing had a drop. We made a payment of BRL 50 million. This was the first installment. We have another 2. And we see here cash equivalents. The net debt, you can see here. So here, equity, you can see. We have shares also in our treasury, and the payment of dividends that will happen shortly. We have here also our obligations with suppliers and other liabilities, too.

Page 13. Here, we see the company's debt. It's important to mention that this is in local currency, reais or guaranees from Paraguay for the cost -- average cost of the debt here on the right, 4.6%. It's a good rate. It's a low rate. In the short term, BRL 208 million. And total debt, BRL 455 million. And in 2020, we had BRL 14 million. When we see the adjusted net debt, we see that the net debt reaches BRL 171 million. On the right, we have total debt, BRL 455 million. And here, we have the maturity dates. The -- we have these commitments. Although we have a debt of BRL 455 million, we have receivables. We have a longer term. And today, we have BRL 230 million that will become mature between 2 and 5 years. And less than 1 year, BRL 208 million. And this -- we're now working to lengthen these maturity dates to delay this.

On Page 14, we have a dividend payment, Andre mentioned. We will be paying these dividends in November. And here, we have the -- this is the mandatory dividend according to Brazilian law.

On Page 15. Well, here, we have the net asset value, BRL 1.2 billion. Here, we see the number of shares. So market cap, BRL 1.3 billion, market value, BRL 1.3 billion, as I said, according to yesterday's price of the shares. We understand that the company has an enormous upside potential and our investors are always following the price of shares. We believe it's a -- the company is an excellent opportunity. Agro business is doing very well, as we saw. So it's an excellent opportunity to make profit.

On the last page, page -- final page, we have the price for the shares of AGRO3: BRL 21.81. And here we show this graph. If you can see the performance of our shares here, and we see the appreciation, 35% and the BOVESPA index almost negative. So a very resilient share, our share, an excellent share. Once again, we invite you to invest even more in AGRO3.

Now we can begin the Q&A session.

[Elisa Castelani, executive]

[Operator Instructions] So to begin, Thiago Duarte, BTG Pactual asks the following question.

On the market, as you mentioned, Andre, agro business has an important role not only in the volume but also the profitability of the of the main crops has risen in a significant way, has increased. To this, we add the cost of capital low interest rate and we have a scenario for appreciation of rural properties. Apart from the impact that this can have on the portfolio of Brazil agro, how is the company going to position itself? Should we wait more to buy more rural properties?

[André Guillaumon, executive]

Thank you, Thiago. Okay. We're getting used to the technology during the pandemic. So Thiago, once again, thank you for being with us. You always have very intelligent questions. It's a great pleasure to talk to you right now. Well, being very direct, as I always say, agro is very resilient Agro, we saw times of crisis. The price of land did not drop. And when we have euphoria, the price of land, rural properties did not -- the prices did not go up. So we have an attractive margin.

So for example, a hectare or a bag, either when the farmer has -- gets a better price, we expect a price of land also to appreciate. Although we had an important variation in our portfolio, we are very conservative in evaluating the rural properties, Deloitte also. We sold 14 properties. Our amounts were always higher than those of Deloitte. So we see an important appreciation in the price of land. Also, the cost of capital is low. With this, we could have a good result. When you have low cost of capital, capital migrates to real assets. So we add up these effects to know the potential for appreciation. We have profitability in most of the crops, and we have a cost of capital that is low.

I always say that our business is buying and selling. We have to be efficient in buying and selling. We have to understand that this is cyclic. Whenever when one wants to sell, we have to buy. Whenever one is buying, we have to sell. So this is the challenge. This is the game we like to play in the company. So I would say that, yes, we're preparing the company to be more aggressive in acquisitions, but we have a good appreciation. Gustavo mentioned we saw the appreciation of our receivables. In the past, it was $330 million. We had a small sale. Today, we have EUR 400 million in receivables. This impact also happens in the company's portfolio. So I would tell you that if -- if soybean continues on this level, the next appraisals will come on much -- with much higher prices. And this is a way to guarantee profitability for our investors. And yes, we will always be working on this, Thiago.

In a year with the pandemic, we were able to operate on both sides. We were able to buy farms and sell farms. This is rare, I always say. So this year, if you ask me will the appreciation happened, we're always looking at this to make acquisitions. And I always say, yes, we have to continue. Okay. Can you all hear me?

[Elisa Castelani, executive]

Well, thank you, Thiago, for the question. Philippe Viera. Good after congratulations for the consistent results. I would like to ask some questions. The first, has the farmer recovered with the rains in the last few days because they planted -- they had to plant these crops a little later?

The second question. With the attractive prices for grains, do you believe it's time to accelerate the purchase of land for the company?

And the third, you mentioned that the reduction in production is due to the end of leases. Don't you take into consideration these impacts because you planted later on in the year?

[André Guillaumon, executive]

Good. Three questions. We could spend all afternoon answering these questions. Let's answer the first question. It's a proxy of the third in general. Plantations in Mato Grosso in the Midwest had a lot of problems. Yesterday, I was talking to producers, farmers, large farmers, and they have 80%, 85% of the -- their area planted. Last year, they had 100% already planted. So being very direct.

Yes, there will be an impact if we continue with the climate conditions with the historical levels. If we look at the rainfall in April, May, June, yes, this delay will have an effect and will delay the second harvest. Now it's important to look forward the perspectives in terms of winter. If winter has more rainfall, this can help this crop that we planted later on in the year. This happened in Mato Grosso in the state of Mato Grosso.

There's one thing in the market that we cannot price yet since it was complex when we planted, it had a higher risk. So we have to follow the market from now on, the estimates for productivity, the first harvest of soybean. Since we had problems with soil humidity, some areas are not as we would like them to be, and this can compromise or bring some type of variation in the production. I talked about corn. Corn, yes. It's difficult to quantify. As I said, it depends on winter.

But when I talk about accelerating, your second question, you say accelerate now that there is a boom, I'd like to remind you that we're a transformation company. We're always looking for areas that are not generating results. We buy these areas. For example, if you say, if we want to buy areas with soybean, the price will be high linked to commodities, linked to the price of commodities. But I'd like to say that we're always looking at opportunities to buy. Sometimes, for example, cattle ranchers that have a pasture that is degraded or others who had a lot of leverage. So as I said, yes, we should be selling more. We should be more sellers because the price is very attractive. But we will always look at purchase because we want to buy also and to see if we can buy and transform the land. As I said, we're not going to buy land that is planted ready nor corn. So we're buying land that is not generating the good results and once you have commodities growing. So these properties, the price will not have risen or will not be as high as the others with high prices. So we're going to buy assets that are not generating results. And if you buy land that is generating excellent results, it doesn't make sense. You're right. To buy land that is not generating results may be a good opportunity.

Now how is the company behaving in relation to what is happening in the small harvest, second harvest? We're very conservative. The projection for the projections. We understand that every corn, all soybeans -- sorry, planted in the Midwest and South are land that can have corn in the second harvest. So we -- the numbers that we showed are conservative. We were able on this date -- to date -- yesterday, with most of the second harvest already planted. So soybean in the second harvest is already planted. So this enables us to say, we -- so we don't have a commitment in terms of planted area. We will see La Nia and also rain during winter to see if we increase or pushback. But I tell you, we are conservative. We may have 2,000 less in the off-season harvest. So we work with this range. There is a factor that is important, the harvest in January, February. That's another driver that is very important. If we have a complex harvest then -- so in general, we're prepared -- the numbers, we gave you the estimates. As I said, they are all conservative. We are realistic in the off-season harvest. So soybean planted until October 30, and these numbers we showed you are for soybean planted until October 30.

[Elisa Castelani, executive]

Perfect. Thank you [ Felipe ] for the question. Luciana Carvalho, Banco Brasil. She says, "Congratulations for the results. First question, sugarcane. Andr mentioned gains in productivity with a reduction -- even with the reduction in the year. You also mentioned a harsh winter and fires that may impact. Could you give us more details on what we can expect in productivity? Will it continue? The second question, capital structure, you decreased the cost of debt from 6.2% to 4.6% in Q1. But you reduced the maturity date from 2 to 1.2 years. Is there space to improve this during 2021? What are your expectations for capital structure and leverage?

[André Guillaumon, executive]

Luciana, 2 questions. Banker's questions. Good. Yes. Let's see. The first question on sugarcane. We -- the consequence of the productivity is due to what we have been doing in the last few years. So the company, even having a reduction in the area, will have gains in productivity. We have plantation or cane plantations that have been renewed in So Jos.

In the last few years in the Midwest, with the economic situation we had -- we had insecurity. We had insecurity in the sugar mill we were delivering -- we reduced plantations. Last year, we already increased the planted area. We negotiated with the sugar mill, and they began to recover their situation. So one depends on the other.

So in Maranho, we have a project that is taking off. We have some projects with irrigation that are in progress, Phase 1, 2, 3. Phase 1 was implemented. So this productivity also comes from Phase 1. We have Phase 2, Phase 3, which will bring more increments in productivity. So in the Northeast, productivity, we will have the same productivity in the north that we have in the Midwest and South. So here in the Midwest, we closed the harvest, which -- with a fantastic ATR. Gustavo mentioned the price of sugarcane. And we closed the un -- units with 150.2 kilograms of ATR per ton of sugarcane. It's a spectacular average, attractive price.

Although we had a part of the year with lower prices, in the Northeast, we went up. We reached at the productivity of 90 tons. To say that you're producing 90 tons per hectare in Maranho is a good number, and we're still working with the materials. When you get to a mill, not all the materials you have are the right ones or ideal ones. And sugarcane, you know, sugarcane -- it's not like a seed. So we planted places for seedlings today. And this -- then goes to commercial scale. So this is what we are using to increase the amount of sugar in the Northeast. The Northeast has this tradition. Now sugarcane must be resistant, and we know this resistance and productivity are characteristics that don't go hand-in-hand. With sun and irrigation, we can work with less resistant types. We're doing this, it should improve even more. So sugarcane, yes, we will continue working to have more gains. You mentioned something very important. We were always transparent. We had a harsh winter in the Midwest and South, and we had an important burning of sugarcane. This reached some plantations that were ready for harvest and some that have already been harvested. In the sugarcane that was ready for harvesting, no effects. In those that we had already harvested, where we had placed fertilizer, and were beginning to -- we lost. So what are we doing? We're applying herbicide once again, an extra cost, and also nitrogenated fertilizer, once again. So we already mapped this price increase is BRL 1.7 million, BRL 1.8 million in extra costs because of the burned area. 1,300, 1,400 hectares. So answering your first question about sugarcane.

Now talking about the debt structure and capital structure, I always say that we like to be sitting. We don't want to be passengers. We want to drive the car. We will never put the company in a situation to sell assets to pay debt. All the effort we have made, we had an important quantum leap in the debt when we bought Agrifirma, BRL 120 million, a debt that was unpayable. Imagine, they had U.S. currency, plus 12% a year. We brought this debt to reals at 5.5% a year. So we exchanged -- we did a swap in the terms of the debt with the bank. And interest in credit and this brought leverage.

We are working with financial institutions, as Gustavo said, to lengthen the profile of the debt. We want to have some debt that is efficient, but we want to be in a comfortable situation that -- so we will only sell farms when it's good business and not sell farms to pay debts. We're always concentrated on this. We need a debt structure where with a normal year or an abnormal year, we don't want losses and we don't want to have to sell land to pay debts.

[Gustavo Lopez, executive]

Just supplementing, Andr. Concerning the first question. In fact, the number of tons were mentioned with this impact in this -- in the So Jos farm this year, we had a productivity above the capacity of the sugar mill to receive the sugarcane. This allows us to continue with these numbers.

Concerning debt, we're working. We have made a great effort. Andr mentioned we -- to remind you, 30% as you saw, are there. And as you say, if we consider the receivables, if we look at the receivables, we have a low debt. What we mentioned here with the current price of commodities, we have a good productivity. This enables us to transform this into cash and this cash we're working with the banks, and we want to accelerate production and generate cash.

[Elisa Castelani, executive]

Yes. We have a lot of questions. Time is almost over. If your question is not answered, we can talk later. Our e-mail is there. We're available to -- you can contact us by email. [ Fabiano ] wants to know the credit risk of sugar mills. Do you see potential to plant more sugarcane?

[André Guillaumon, executive]

Well, Fabiano, an excellent question. We began the year -- we wanted to know until when the sugar mills would be able to crush -- we saw that there was a reduction in the capital, the use of -- the sale of ethanol and gasoline went down, diesel oil went down. And there was a recovery so oil is back at $45 and the exchange rate creates a buffer in the price of gas and this allows us to have a good price for ethanol. If oil continues at these levels and if the pandemic stabilizes, as we have seen, we will have these levels for ethanol.

Sugar, you are following, we saw sugar during the year going from $0.10 per pound to $0.14 per pound in the last 12 months, an important rise in the price of sugar. And this is due to the frustration and problems in the production of sugar in India. So I would say, I understand that the payment capacity or the solvency of the sugar mills. Today's picture is better than the picture of 1 year, 1.5 years ago. Of course, we have some groups that had leverage in dollar. And I would say that we're working with projections -- these are not our projections -- to close the harvest, ethanol and sugar at 67 cents per pound and to begin the next harvest with these levels or even higher levels for one reason. We talked about the south, and we will have a reduction of sugarcane in the next harvest, although the sugar mills recovered, the renovation of sugar plantations is not sufficient. And you follow us, Brazil being different from other commodities, we're stagnated in the production of sugarcane. For 10 years, 580 million. Production is flat -- we will serve a lot with a lack of sugar around the world. Do we have doubts? Yes, the pandemic. Pandemic is an exception, and it reduces the consumption of sugar.

We see India with problems. So we believe we will have a good year for ethanol in the next harvest. And we understand that this issue of the exchange rate is protecting the price of gas. We will have years with attractive prices. We're looking at this. We're looking at expansion in this sector, and we will work strongly. We have expertise, we can deliver consistent results. And during the next few months, let's see if we can bring news in terms of expansion. So expansion, I always say we will have expansion, diversifying risk. If you ask me, what is your dream? We have almost 2.7 million tons of sugarcane with 2 creditors. We would like to increase this number, 3 million, 4 million, but diversifying in terms of sugar mills.

[Elisa Castelani, executive]

[ Anderson ] from [ Malkin and Marsu ], are asking about internal return rate for the sale of farms and regions where the company intends to buy land. Sergipe -- state of Sergipe, state of Alagoas?

[André Guillaumon, executive]

Well, I'll answer the first question about rates. We have delivered return rates around 20%. If you look at our weighted average, you should expect that if the asset stays in our portfolio for a long time, rates go down. But 22% in 3 years is one. 16% in 8, 10 years is also an excellent rate. And I believe it's -- this will have a good result for shareholders. We want to continue delivering similar rates. What changes? Today, you don't have large plots of land to buy like we had 10 years ago. We have to buy smaller farms and for this, we need transformation and acceleration capacity. So the market, for example, you buy a farm at higher prices than 10 years ago. But you will buy lower amounts. You're not going to buy a farm of 30,000 hectares. There are few available. You will buy 5,000, 7,000 hectares. The -- in this type of farm, we have a good speed of transformation. It can be ready in 1.5 to 2 years. So this is where we believe we can still deliver attractive return rates during the years.

Well, the second question, where we intend to expand? I always say that the frontier, the boundary is technological, not geographical. Today, we have technology, and we have pressure in terms of sustainability. The great migration or the expansion should happen on pasture areas. We have 192 million hectares of pasture. There are numbers between the authorities, 42 million, 49 million hectares of cattle raising that have a high potential for agriculture. So yes, we're going in that direction. You mentioned the state of Sergipe, smaller farms. We looked at a few cases. It has an interesting logistics advantage. It is right next to the port so this is the second closest area to the ports. So we may look at this region if we find interesting units, I always say. So we're seeing where we can add value to property and get good results. This is what we will buy.

[Elisa Castelani, executive]

Well, to conclude some questions on in terms of how you're looking at sustainability. Mr. [ Souza ] says, "What are the contingencies for fires, if we're interested in participating in the sustainability area of the stock market?"

[André Guillaumon, executive]

Excellent question. That is an enchanting question. I'd like to stay here talking about this for a long time. When we talk about sustainability, it involves the environment, socially and also economic. So I will try to do this step by step.

In terms of the economy, we did our IPO and the rules, the governance, if this is -- we did our IPO. We had to audit our numbers and present them every 3 months since 2006, 2007. So the IPO brought a maturity to the company in terms of governance and so this is a discipline that we have.

So social, it's very good. The regions where we made transformations were very poor regions. And we said that we have to take care of the region where we're present. We're always very engaged in social projects. So we're satisfied. This is a number I will mention for the first time. We already built 6 municipal schools in regions where we're present. Schools with more than 250 children. We have been doing a lot in the last few years. And to celebrate everything we have done, we did something important last year. We inaugurated the BrasilAgro Institute. It is responsible for leading these projects. I always say, Ana Paula, Ana Paula. We used to do this. And now it's not only a dream of a Director. No, it's everyone's dream. The Institute, BrasilAgro Institute is alive. It has people. It is focused on social projects, on education in the communities where we are. So most of the investments are in educational projects, preparation of teachers, many good things. And the best, we have as an assumption, a policy, to donate 1% to 1.5% of the company's profit every year. So we have a strict control. Most of these resources are being used, and someone can say, what if you don't have profit during a certain year? We have a reserve. These are projects, long-term projects. We have an institute that works on this.

And the third pillar which is environmental. This is in our DNA. You mentioned a company that transformed more than 140,000 hectares of land. We did everything. So we have nothing against us. We have a partnership with environmental agencies. We are partners. We are certified by NGOs. There's an NGO called Ona Pintada. We're partners of this NGO, and they take care of animals and -- in this land. So if you have it stabilized, it means that the smaller animals are also stabilized. We have this concern. We have this in the company, more than 1 unit certified.

We have many environmental policies that are very good and if you want to -- if you want to know more, we have a department that focuses on the environment. We began to participate in a pioneer project in Brazil for carbon with [ Siemens ] and Bayer. We're one of the pioneer companies. So this is in our DNA. Since 2006, when we got the first licenses to develop areas, we had to be concerned about this, and we did this. So we're working with agencies, NGOs, we have partnerships. We have a lot of agreements with parks -- we have units right next to some parks, and you can talk to the managers of these parks and saying what we do. Our fire trucks are always working with them. We have brigade trucks where we plant. And these trucks also work and fight fires in these preservation areas. Our unit in So Jos has 14 fire trucks. So they do a follow-up. It's a robust structure in the region. There is no group of fire -- farm in with 14 trucks. In the Midwest, we have a robust structure to fight fires in our units and also fires in preservation units.

So I tell you that we -- the company is -- the company is doing its work. We've been working on sustainability during the last few years. We're a step ahead of Brazilian agro business, looking for solutions and also to take care of sustainability. What is missing is to work more on certifications. We do a lot of things in this area. And we need more certification to go to markets that will give us better margins. So this is what is missing. We have the structure, we have the people. We have the systems designed to take care of this. Last year, we obtained some good certifications. We have, for example, sustainable cotton certification -- Chaparral farm is certified. In terms of responsibility, we have many good things. And we can talk about this if you wish. We can talk more about this.

[Elisa Castelani, executive]

Thank you very much, Andr and Gustavo, for your time. We'd like to thank the participants, our Investor Relations department is available. Our e-mail is [e-mail]. Please send your questions and we will answer, and we will continue talking. For us, it's a great joy to talk to you. We could spend a lot of time, but we have our agenda. Andr, your final comments?

[André Guillaumon, executive]

Well, once again, I'd like to thank you all who stayed with us for 90 minutes. So in the past, we had calls that didn't last an hour. Today, we have 90 minutes. You can be sure that apart from all these good things, we have a team of managers that is very qualified. This is something that we take care of. We are forming new leaders. As we say, we want this to be something permanent. We have training programs. We are forming leaders. The company was certified by Great Place to Work. So we have this in our DNA, and we need to continue this. To continue, any company should have financial health and also leaders being trained. We do this all the time. So thank you very much. I would like to thank the company's team what we brought here, Gustavo and I are only voice bearers. So there is an army of people behind us generating these results. Thank you very much. You, shareholders, investors, we are committed. We will continue working to deliver consistent results. Thank you.

[Statements in English on this transcript were

spoken by an interpreter present on the live call.]