Brasilagro Companhia Brasileira de Propriedades Agricolas

BOVESPA:AGRO3

Earnings Call Transcript 2023-Q1

[Unknown]

Good afternoon to all. We're here once again for the earnings of BrasilAgro Q1 2022-2023. Just to clarify for those who are beginning to follow us that fiscal year goes from June to June every year. So today, we will be talking about the first 3 months of the harvest '22-'23. I have here Mr. Andre Guillaumon, our CEO; and Gustavo Lopez, our CFO. Okay, you have the floor, Andre.

Before that, I'd like to mention concerning Q&A. [Operator Instructions]

[Audio Gap]

[André Guillaumon, executive]

Well, there's a lot to see, but we already see some trends, and we will clarify this during our chat today. So as always, feel free to ask questions, to participate this forum. We wanted to have participation.

Okay, let's go to the presentation. This is the first highlight, the first slide. And as always, we have the highlights. We have financial highlights, operational and real estate.

In terms of finance, the company closes the quarter were BRL 299.8 million, net profit BRL 42 million, adjusted EBITDA BRL 107 million. Later on, we will give you more details. We know that last year, we had spectacular results.

In terms of operations, 1.7 million tons of sugarcane. We began planting soybean. We have 38% of soybean is already planted, especially in Mato Grosso and Goias. The climate has been stable. And in terms of real estate, like we say, our companies in the market, we're buying and selling all the time, identifying business opportunities that will bring profitability for our investor.

So in this quarter, we'd like -- we had 2 movements. And so we had a purchase and a sale. We purchased Fazenda Panamby. Later on, we will give you more details. And yesterday night, we announced the first sale, a fraction of our operation in Paraguay.

Well, let's talk about Panamby. Panamby is a farm in a very productive region in Mato Grosso. It is here, 10,800 hectares, of which 5,400 hectares are agricultural land. This area in the past 5-10 years ago, they were planted. Then they transformed this into pasture. It wasn't their main focus. Their focus was cattle raising and we acquired this real estate to transform all this area, which is pasture, into agricultural land. It is a very good region with large producers and we believe it has a great potential for a second crop. It's in a region that is very favorable, BRL 285.6 million.

And on the right, we also made the first sale in Paraguay. We're very happy. Our member here in this forum, we announced in a timid way. For example, Jatoba farm, when we came to announce that we were selling the first 600 hectares of farm that had a large agricultural land and in Paraguay, it's not different. We have an operation. We've been there for 5, 6 years producing. We had spectacular years. We had 3 years with a drought that affected production, but it shows that we have potential.

And here I reinforce some aspects. We began planting cotton also in Paraguay. Last year, 800 hectares. This year, we will increase cotton and the whole region is planting more cotton. The group was one of the first -- we were one of the first to plant soybean now more than 80,000 hectares. There was very little cotton in the next harvest. Paraguay should have 15,000 hectares of cotton. It's economically feasible. We see here $1.5 million. And here, we see a TIR of 27.9%. And if we analyze this in reals, 42.2% return. We're selling 500 useful hectares and it still has a lot of area to be sold and some part of this to be transformed still.

So this shows this shows that there is liquidity in this region. And it shows the company is being efficient in capturing these profitabilities with these opportunities. Well, here -- this is a backdrop. Gustavo will be talking about this. We have been showing this graph, we showed this graph on a larger scale in the past and now we have reduced it. So we began showing a picture in the short term, soybean 176, now 184.

I'd like to remind you that this is corn, BMF corn, so we began with 101, now 89. Cotton, a crop that had a strong drop due to the scenario that you know very well, the possibility of a worldwide recession, interest rates. Cattle raising a little of the effect linked to our exports to China and also the volume. We believe that there the volume would be smaller. We're talking about food, soybean at a high price, but the number -- the volume of confined cattle was high.

Ethanol, when we look back in the beginning of the pandemic, here we see the numbers then during the year, 3,000, and more recently we had an impact due to the changes due to tax on gasoline. This removed a little the competitiveness of ethanol lower the price of ethanol. And this harvest will produce more sugar than ethanol. This product suffered and Consecana, the last line, due to the same reasons.

Well, while a recurring question at the beginning of the war, we have shown how we would deal with this issue. And fertilizers were discussed in the media on television, a country that has 27% of its GDP focused on agriculture needs fertilizer. So during many calls, we purchased fertilizer in advance. We bought in advance the fertilizer. So chloride, we bought before the Ukrainian war. Then there were the embargoes and we purchased phosphate. Fertilizers, we bought later. There was space.

We bought fertilizers and the price of fertilizer with phosphate continued to drop. And nitrogenated, it depends on the price of natural gas in Europe with ups and downs. So when we look at the price, here we see the average price. So we had fertilizers at 1,350. Today, 675. And when we look at chloride, the same, $740 in the past. These historical prices normally are 390, 400. We bought at 700. We thought it was a good deal. And now we're seeing these prices dropping a lot.

It's important to stress, as I said, we have a large volume of planted area. This began to be used in our areas in July when we began to use fertilizer and then plant the second crop. So we had a deadline to make decisions until July. Also because of the volumes were large buyers 80, 90, 1000 tons. You can't buy this a week before. So we bought in advance. I would say that we made more better decisions than bad decisions. There was a great uncertainty. Everyone bought. So here, you see the pie chart. We have 91% already bought the inputs. And we still have 9%, 10% to be bought basically not [ progenated ] in the second campaign. When we say second campaign, we're talking about the second crop, winter crop and also sugarcane in February-March.

And the graph below shows the volume delivered. So we're considered not only with a fertilizer, but also the delivery. And more recently, delivery reached high volumes. And we saw there were many problems with roads being blocked, but I can tell you that 84% has been already delivered. So we have no deficit in any unit. All the units are planting in Xingu. They finished planting, the others are planting and they have their fertilizer guaranteed.

And it was a year with a lot of volatility. And we always try to have the best combination of revenue cost, but there was this uncertainty with fertilizer. Well, here, as I always say, here we reinforce that we're diversified. This graph shows our company, geographic distribution. In agriculture, you have to diversify. This is very important. So when you have this diversity, you can attenuate also climate problems many times.

We saw, for example, the corns in Mato Grosso higher. In Mineiros via an important advantage in terms of logistics in comparison with Mato Grosso. So the acquisition of the new acquisition, we have some leasing contracts. The company was very efficient with its partnerships. We included areas in Xingu, [indiscernible], 5,000 hectares, we diversified in a region in Mato Grosso, to the West, Comodoro, other areas in Xingu too.

So the company was very efficient. As we always say, the combination of our own land with leased land. And the last sale while here -- although in the last year, you're talking about Q1, but during the last year, you know how the company was efficient in selling assets. So year after year, we're being able to grow the planted area.

This is very important. It represents cash, stability in the operational result, always trying to bring foreseeability for investors. We know that this business has a lot of volatility. Agriculture has volatility. How do we attenuate this volatility? Looking at the pie chart, you can see the breakdown of crops where we have an enormous diversification of the portfolio, soybean, beans, also here corn, this and sugarcane and cotton. And the pie chart on the right shows our area that is cultivating with our own land, leasing for our production. So this balance is fundamental.

I always say that our own land brings real estate results and operational results. Leased areas were always focused in being in stable areas. And the combination of these 2 strategies, the way we see it, is a winning strategy. Enabling important real estate gains and lowering the cost with leased land and also giving us more stability in the results. So this strategy is strong inside the company, and we're always calibrating this strategy, adapting it for it to be efficient.

Well here, a new graph. Congratulations. Here we're using this graph to see better where we are and what we are doing. We were careful in placing the main crops, beginning of the planting, then harvest. This helps us to see better and understand better the results from one quarter to another, not only seasonality. And here, we have also commercial factors. For example, when you harvest in Q3, it doesn't mean you're going to sell in Q3. There is seasonality, but we will explain.

As I said, soybean, we have 30-plus percent already planted. We began now, we will begin next week planting corn. We're talking about the second crop, the summer corn a little in Bahia. The beginning of the planting of beans, also cotton. This happens on 2 occasions. In November, we begin to plant cotton in Bahia. We continue until middle of December. And in January, we plant the second crop cotton in Mato Grosso.

So it's a very dynamic business and there's always a challenge, and I always say, we're always monitoring the climate because it affects us all year round. When we talk about the climate, we have good news. We mentioned this in the previous call, La Nina becoming weaker. This is a characteristic that favors the large region that produces in Brazil. So a weak La Nina. Well, what would be the ideal to plant under La Nina, the first semester of the calendar year. We had La Nina effect and in the first semester of the next year, El Nino. Why? La Nina anticipates rain. So when you have El Nino, you have longer rainy period.

So the rainy season becomes larger and this always helps agriculture in Brazil. Brazilian farmers love this. So you have sugarcane harvest that develops better with the situation in April-May until June. So we're telling you that plantations are -- planting is uniform and we're -- also we believe we will have a more neutral year next year, a more normal situation for rainfall. And this is very positive for Brazilian agriculture and for us.

Well here is summary. I always highlight that cattle raising, it's a transition for us. We transformed pasture land into agricultural land. If you transform a lot of -- if you transform pasture land into agricultural land, you have a lot of volatility in the first 2 years. So cattle raising, we used to attenuate this volatility. In the last few years with everything we have seen, apart from being an excellent activity that mitigates risk and helps the value of the portfolio, it has also been very profitable, cattle raising.

Here a little of the number of heads of cattle, here pasture land. Close GMD is the average gain -- weight gain for us. It's 600 grams and what we had in the first 3 months, 350 grams. This for us is very positive and I'll explain. The first quarter is made up of dry months, July, August and September, where there is -- we don't have too much pasture. So although the graph shows an expressive difference between estimated and actual and well, I believe here, just to reinforce again, we're always monitoring profitability.

The company today has a position. We have receivables from farms sold. This is a picture of our situation. Soybean 57% sold, soybean here, 555, the company was efficient in selling receivables from farms very effective 34% sold with an exchange rate of 5.9%. Now when we look at '21-'22, we have already sold practically all the harvest and the second harvest. We have 20% of the corn sold.

Cotton, the company has also hedged. Here, we have, with this distribution of rain, we made some changes in Mato Grosso, cotton sold at a price of 88.98% and percentage of hedge, 45.94%. It's crop that suffered a lot, but we have an effective hedge position in cotton. In the case of ethanol, a new product, and we have been hedging for ethanol, 33%, 38% sold at an average price that you can see here. When you look at the spot price, 2,700, the cubic meter of ethanol and the company has almost 40% sold at a higher price.

Well, now I'd like to pass the floor to Gustavo. He will explain the revenue. Okay, Gustavo, you have the floor.

[Gustavo Lopez, executive]

Thank you, Andre. Thank you. I'd like to thank all those participating. This is the Q1. We always said that last year was a spectacular year in terms of cost and price. And now we will explain this effect. Andre mentioned during this quarter we had the following of the company, the harvest of sugarcane. When you compare a quarter with another, the production of sugarcane was similar. Sales were similar.

And now we will see margin. Last year, when we sold sugarcane, we had an average of BRL 1.3 per kilogram. Entering this quarter, as you know, the government policy, they gave tax exemptions, ICMS, and this made ethanol a little less competitive. And with this, we sold at BRL 1.10. So we had an impact on the price.

On the other hand, Andre mentioned we are working with a fertilizer that is more expensive. CCT also is more relevant. So all of this provokes a drop in the margins. Later, we will try to show that the margins continue being very good when we compare with historical averages. The second effect that we will see here during -- in the first quarter in 2022, we had 70,000 tons of soybeans and 40,000 tons of corn. And this year, we tried a different strategy. We tried to sell most of the soybean and corn in the first semester of this year. And we had 25,000 tons of soybean and 60,000 tons of corn.

So we can look at net revenue of the company, BRL 378 million, first 3 months of last year, then we will show tons and prices. Here, we have a summary and we see the impact of 21%, a drop of 21% when we compare with last year. We will see that we have a sale of soybean that is a little less, a little more of cotton. When we look at June, we're talking about BRL 50 million difference between price and quantity. And on the other hand, sugarcane that I mentioned that we were selling 16% less, there will be an impact of BRL 95 million.

When we look at the company's EBITDA, last year, we had BRL 120 million. This year, we're talking about BRL 106 million and the BRL 223 million of last year, BRL 18 million of this EBITDA comes due to the sale of soybean that I mentioned, 60,000 tons that we sold of soybean and the corn that we sold.

On the other hand, we had an EBITDA of BRL 140 million from sugarcane, for this tonnage that we sold, we harvested and sold. And we made a sale at BRL 185 per ton and BRL 85 of cost. So the margin was BRL 100. When we translate this in reals per hectare, we're talking about BRL 9,000 per hectare profit. This year, we had a smaller amount. We sold less grains and this million tons that we had last year, we sold roughly BRL 159 per ton. The cost is 95 and the margin now is BRL 60 per ton. So when we compare a year with the other, we have 50% difference in the margin in sugarcane and the rest also is seasonal. It depends on the amount of product that we carry. When we look at the company's profit, net profit last year, BRL 107 million. This year, BRL 42 million profit.

On the next page, here we explain this difference. Soybean last year, during the quarter, we sold 60,000 tons. This year we're talking about 19,000 tons. And when we look at the price per ton, it was better. But this -- the volume is smaller. There was a drop in the volume, and this has an impact on the results. Corn, we sold more tons, but it didn't compensate the variation in soybean due to the price. In sugarcane, as I mentioned last year, we sold -- the tonnage was very similar, but the price last year was 175 -- 185, sorry, and this year, BRL 159, a drop in the price.

These main -- these 3 products had an impact on net revenue here. And when we look, we see here net revenue, BRL 378,000 last year, this year BRL 299,000. And here, we see the EBITDA, which reached 50%. So we begin to see a drop in this quarter, especially because it's the only product that we're producing, but we should expect during this year to have an EBITDA margin of 60% of what we had last year.

In soybean, last year, we had a margin of BRL 1,000 per ton, BRL 4,500 per hectare. And today, what we're expecting is BRL 600 per ton and BRL 2,800 per ton. So a drop in sugarcane too, same thing. Last year, we had 600 -- we had a cost of BRL 85 per ton for sugarcane. When we convert this BRL 9,000 per hectare. And this year, for this harvest, we're expecting the cost BRL 95, we're talking about a margin of BRL 60. When you talk about hectares, BRL 4,500 profit.

So the margin will have a drop. There will be an impact on margin due to higher costs. Soybean and corn, it's the cost that went up. So we have 30% more cost due to fertilizer. So when we see this adjusted EBITDA, once again adjusted EBITDA BRL 223,000 versus BRL 107, this includes sugarcane. And for Q1 here, this includes sugarcane. And the difference is the inventory that we already sold.

Okay. Well, here, this shows once again the impact of the main crops. Here, we see BRL 823 million. From the net profit, we deduct depreciation, amortization, taxes, and then we add fair price of assets that were produced but not sold, derivatives, and we get to BRL 220 million last year. 60% in sugarcane and the rest is soybean, 60,000 tons that we had last year, a little less corn this year. EBITDA dropped and the participation of sugarcane continues to be relevant. These are the 2 main crops: sugarcane and soybean.

We began the year now. I believe that during the next quarter, we will harvest more sugarcane. We will have everything planted. And for Q3, Q4, we will begin to suffer the impact of soybean and corn. We're optimistic to have a positive operational result. But once again we were not able to get the margins that we had in the previous year because the cost for corn, sugarcane and soybean had an increase. The cost went up when we compare.

On the next slide, we will show here the company's numbers. We didn't have great changes. We will have a cash and equivalent cash, which is very similar. And investments went up. We included Panamby farm that was bought. These 2 were recorded at cost, the receivables for the sale of farms. We have part of this in the short-term, part in the long term, BRL 480 million.

And here too, a farm that we sold and will deliver Alto Taquari. We have to record this. In 2024, we will record the sale. We see the loans. We're paying for some loans and the liability, this farm part of it, we paid with receivables and operational cash due from the farm that we sold in part will remain as a debt, and we call this acquisition to be paid. Well, the company's numbers are very healthy.

Now we will see some details of the company's debt. We have a debt of BRL 400 million with a cost 93% of the CDI index. We have 1/3 with IPCA. Here, we have some pre-fixed loans too. And now we have a debt of BRL 150 million to pay for the next harvest, but the situation is very comfortable reminding you that we have receivables from the sale of farms that are not included here, BRL 150 million, and the rest in the next year.

Here, the company's dividend. We said we want to pay dividends in a recurring way. On October 27, we approved BRL 300 million to be paid as dividends on November 16. And we will continue working. So next year, by selling farms and operational results, we want to continue paying dividends.

This is also important to highlight during this semester with the administration council, Alejandro, Isabella Saboya, Eliane, Lustosa, Mariana, Director of the company, they worked during the semester for us to really adapt the company to the rules of the SEC. We created an audit committee. Soon we will mention and communicating the members, and we approved also policies for transactions, compensation also for the auditing committee.

And with this, we conclude many changes and adaptations that we made. And the tax committee, the fiscal committee that continues. We continue to work with the audit committee and fiscal counsel. And we understand that with this, once again, we reinforce our commitment in terms of looking for better policies for governance and transparency.

On the last graph, this shows the evolution of our shares AGRO3, we continue to work, to have a better price for our shares. We understand that we have a discounted price, the combination of operations and sale of real estate. We will continue saying that we want everyone to know our business well. And we invite potential investors to invest in the company because we understand that we have a very good position.

Thank you. And now we'd like to begin the Q&A session.

[Unknown]

Thank you, Andre. Thank you, Gustavo. We have here Pedro from XP and Henrique from BTG to ask questions.

[Pedro Fonseca;XP Inc.;Analyst, analyst]

My first question is about the allocation of capital. Considering this outlook, more difficulty in buying farms. And as you mentioned, results should continue to be above historical levels. Talk to us about allocation of capital, dividends. Can we expect a dividend yield more in line with history 6%, 7%? Or can we expect something in line with the last year close to 10%? That's my first question.

And the second point, whether you could give us more details about the sale of the farm. It had an attractive yield, but it seemed very small, small sale. Can you explain the strategy of the company behind the sale? Wouldn't it make sense to sell more? Or can we expect more sales of this size later on?

[Gustavo Lopez, executive]

Pedro, thank you for the questions. We could spend a long time talking about these 2 questions. Okay, let me try. First, our challenge is to be an anti-cyclic company. We have to sell farms when everyone is buying and buy farms when everyone is selling. This is the magic of our business. It's simple, but difficult to execute. We love these simple things that are complex in their execution. You are right in saying that and I've been reinforcing this, we should sell more because of the liquidity in the market. The company will continue being a seller and a buying company when we see good opportunities to generate value for the shareholders.

In a certain way, we will continue with turning the portfolio. We have an amount that we believe it's important to sell every year, and this brings stability of results. So going back a little, we didn't talk about this number, the BRL 520 million in profit that we had in the middle of the year. BRL 300 million comes from operations and BRL 240 million comes from real estate sales. And this is what we intend to do. We're balancing operational results with the sale of real estate. If this happens and this is what we want, the company continues being an important payer of dividends.

In terms of policy, we're in the Novo Mercado distribution of 25% of the net profit to shareholders. But in a recurring way, we have been paying more. And I have no doubt that the day we need to buy large assets, we will say, okay, let's invest because shareholders know our capacity to generate value for them. So I believe this is a point that I'd like to stress and clarify the point concerning dividends.

The second point is very good question. Why did you sell a small amount of land? It's small, linked to a leasing operation for the buyer. We believe that this sale will not stop here. We will continue selling with other fractions like this one. These are new regions, Pedro. When you have a large company producing in the region, they say, "Oh, it's because it's a large company." If you -- why small? When you have small farmers producing, it's produce good. Some people say, "Oh, it produced -- the production is good because it's a large company." Well, this fraction, a small amount of land is aimed at bringing new entrepreneurs to the region.

When I talked about the sale, I talked about the sale of Jatoba. Very similar, both sales. In the Jatoba farm, we sold initially 600 hectares then. So also very important sale that shows that the assets appreciated and the company's capacity to generate value a sale, like you said, a small sale, but with the return rate that is high. Andre, why didn't we sell more?

[André Guillaumon, executive]

This is a driver that doesn't depend on us. We work actively to sell. But whether it's going to be a small amount or a big amount, we sell. We're analyzing proposals of larger sales and the focus is to reach 3,000 to 3,500 per hectare. Remember that we paid $280 for this land. And today, we're selling at $603,000. So I'm not worried because it's small, but the company had the right strategy. This asset has liquidity. And even more, when you have liquidity for small, you have liquidity for the large. The opposite is not true. When you have liquidity only for large clients due to logistics, efficiency and other things, you don't have efficiency to sell to small farmers. So selling to small farmers doesn't worry me. Selling only to large farmers worries me.

So I believe that the second point, we're very optimistic with cotton and [indiscernible] will be an important crop because it has high fertility. And cotton, cotton crop to be consolidated in a region, it generates real estate value. So adding up everything, a small sale, but this doesn't worry us. It's because when you have small sales, you also have large, the opposite no. Did I answer your question?

[Unknown]

While answering Pedro, Andre answered 2 questions that came in writing concerning dividends. Since our results was smaller than expected. So we have answered the question on dividends. There is another question, whether we will have a distribution of dividends this year because of the sale?

So now I'll pass the floor to Henrique from BTG for his question.

[Henrique Brustolin, analyst]

My question is a follow-up in terms of capital allocation. I'd like you to focus on growth. We saw the company in the last few years, consolidated its business model. And now with strong numbers when we have the impression that the space for appraisal of NAV seems slower. Now the commodity stabilized. So I'd like to hear from you what are the main opportunities and priorities of the company for growth in the next few years? And buying more land? What is the strategy or leasing land or verticalizing? So what are the main priorities from now on?

[André Guillaumon, executive]

Well, a good question, Henrique. Thank you once again for participating. I will begin talking about where we're looking. What you said makes sense. There's a stability in the price of commodities. But you should remember that the company has part of its portfolio in the case of Paraguay, we have transformation. This will attach value to the land. When we look at Brazil, you have a few assets to be transformed, but we still have the ramp up. The growth in yield of areas that were transformed in Fazenda [indiscernible].

And I would say to you, even if you stabilize the price of commodities, you have an important value. For example, when you have an area in the Savannah, it's called 100 -- it's worth 100 bags. The next year, it's going to be worth the cost of CapEx plus year. Then cost of CapEx and to premiums until it stabilizes, and it gets to 350 bags, like in Bahia, 354,000 bags. So this is important. In spite of the speed of transformation being slower because most areas were already transformed, there is still a large part of the portfolio appreciating in value. This is important to highlight.

Now where are we headed? More and more, we're showing the company being -- having recurring results. As I mentioned about this harvest, we added 10,000 hectares that were leased. Only 1,000 are being included in this harvest. So 8,000, 9,000 will be included in the next harvest. In regions where we have a giant where we have a giant potential to have a second crop. So what do we have? We have value generation in the appreciation of the portfolio. We have also new areas with leasing that we leased, and we will continue working to -- by balancing crops. We grew a lot in grains this year.

Let's see if we can diversify more, have a better mix. The company continues to grow. So when we put acquisition of Panamby plus leasing, more than 25,000 hectares that will be in operation in the next few years. This is very good. 25,000 hectares is an expressive amount. The third driver of results is in verticalization of some production units. I mentioned here irrigation projects in Bahia that are being implemented. We already have part B implemented.

Yesterday, we discussed with the teams and people from outside these projects. We discuss them. So we have a third driver for value generation, diversification and intensifying production in some units in Bahia. So when you look in the short term, I'm looking at the next 3 years, not 10, the company will continue to grow, transforming areas that were bought. And in a certain way, you are right with a lower risk, you have a great appreciation of the multiples, the land transformed in the last 3, 4, 5 years.

So the growth of leased area, this is the challenge we have to have a third crop or irrigated land, especially in Bahia. We have projects to expand irrigation for sugarcane. It should require results, but will give us good results, especially in Maranhao. We have a project for expansion for irrigation in Marine, increasing even more the profitability from these areas.

So in 3 minutes, I tried to say yes. There is value to be generated by the portfolio. There is value in the leased land, diversification of portfolio and the company is looking at all these opportunities.

[Unknown]

Now we have some questions in writing. The first came in is all concerning a point that Gustavo mentioned. So concerning the creation of our auditing committee, he wants to know if this will have an impact. Is there any impact with creating the audit committee?

[André Guillaumon, executive]

Well, you know me. I'm an agronomist, but I learned quickly to. Let me tell you about the committee. The committee is something that the SEC in Brazil asked us. So we prepared the committee. Initially, we had a feeling that the audit committee would substitute of the attributes of the fiscal council, but we maintained the fiscal council with its attributes. And now we have an audit committee made up of independent and counselors of the company that will follow with a different -- they will act differently from the council, the fiscal council.

So I'd like to share with you. The council is analyzing if the numbers are well calculated. The auditing committee goes further to see if the process is performing well. This is -- I see that this can help the company. It will -- it shows that we're in tune with the capital markets and this -- and we were always this way. We were the first to participate -- every time we have a transaction, we have an assembly. I learned a phrase from a lawyer. And he said, it's not enough to be, you have to show that you are. So this will show transparency, governance and the zeal we have with small investors, minority investors. It shouldn't change the company's life because the company's life is to identify assets, buy assets, invest and then sell. So this -- they will be reviewing things to guarantee that we're efficient with no risks generating transparency in the governance for all investors in the company. So it's -- the SEC that our CBM demands this, and I believe it will improve things.

[Gustavo Lopez, executive]

Just to supplement, the company had the fiscal council. We had a fiscal council. They had the same attributes as the auditing committee. The main difference between the fiscal committee and the auditing committee is in internal controls. We have this department in the company, and they report not to the management. So this is the main change that we see. So we understood that the fiscal council, it was kind of -- the fiscal council was temporary. It was requested by the minority shareholders. So now the fiscal council will analyze the company's accounts, the numbers, and they will collaborate with the hiring of auditors, also approving and reviewing the increase in capital and the auditing committee begins to look at internal controls. So that's the idea that's the change.

[Unknown]

We have Rodrigo asking a question. Rodrigo?

[Unknown Analyst]

A follow-up question on irrigation. Andre, does it make sense to buy the equipment or to rent the irrigation equipment?

[Unknown]

Before Andre answers, I'll include a question from Antonio [indiscernible] to talk more about the new irrigated areas. Brazil and Cosan are becoming very strong in irrigation. So he'd like to hear more about this.

[André Guillaumon, executive]

Well, I'll begin with the second question. It's important for us to separate. I saw that our colleague mentioned Cosan. We're talking about 2 large irrigation projects. We have an important irrigation project in sugarcane. And this one in Bahia, which is more focused -- it is focused on the production of grains and cotton. Okay. In the case of sugarcane, we're in regions that are marginal and not Cornbelt. And even in the regions that we follow the mid-south, it has gone through instabilities in terms of drought. The logic that everyone is looking at for irrigation is to have more stability.

Yesterday, I was in a chat session and people were talking about an increase in the last few years in the productivity of soybean, cotton, corn and in sugarcane. Our production, we got to 600 million tons, 530. If this year is good, it will be 570, 580. So the sugarcane sector with more credibility, and we have this, and more foreseeability with the demand of biofuels and the price of sugar, which seems that it changed, the sector is trying to increase productivity. And this productivity goes through attenuating the lack of rainfall. You must attenuate the lack of rainfall.

The first question, thank you, Rodrigo. Good question. We're always looking at these aspects. Initially, we made a very good operation. We leased irrigation equipment. So we always look the operator who is offering leasing. We analyze if it's worth the cost and we look at the cost we know that subsidized lines are a few. So we always have to compare. When you look at leasing, it's very advantageous. It's a great advantage. The company supplies equipment and we pay an amount per millimeter irrigated. There's a minimum amount. We adopted this. We have one unit that is leased. We have others that are different, more capital incentive, more dynamic than [indiscernible] larger too.

And yesterday, in the chat, we talked about leasing or using our own capital. In general lines, what's -- why leasing was so important. You had a low interest rates in the U.S. And these irrigation companies have access to capital outside. So they would take out the money abroad and finance farmers. With higher interest rates outside Brazil. These credit lines decreased or became more expensive.

Today, with the picture today, analyzing the economic cost of doing it internally with our own money, it's feasible in the medium term and long term irrigation projects. We have more production stability, better yield. I'll give you an example. We ended the harvest of Fazenda do mato, a new region, a new farm, and we had irrigation. We had an irrigation with 217 bags in general. If you ask me, what is the logic? This land, when it's mature, it's worth 350, 400 banks. How much is endowed land that can generate a cotton harvest of 350 plus 217 for cotton?

I repeat, we're always saying that the land is worth a multiple of the EBITDA generated. So we have this verticalization, changing the multiples of the land or, for example, how much am I spending to change this multiple. But the numbers are very good. If you want to go into the numbers, we're available.

[Unknown]

Okay. We have a question from Filipe. Okay, Filipe, I will read your question. Next time, please. We want you to say the question.

Since you have a more challenging climate in Argentina, will grains really benefit in the short term? How do you see the climate in Paraguay after a challenging year, I will correct after a few challenging years in Paraguay? And the third, which regions are the focus for acquisition? I mentioned on the border. But is there any region where you are more interested?

[André Guillaumon, executive]

Yes. Grains. Yes. As I always say, we there's -- we will see many things. We do a follow-up. We have the Argentine market, and we look at the climate in Argentina. Yes, your question is very pertinent. There is, yes. We are worried the plantation of the first crop in Argentina is late. This changed and affects -- this affects the choice of crops. But as I said, if we have a lending and reinforcing or losing strength, it's better, and this will improve things in the south and in Argentina. So what is happening is we have worse -- the situation is worse in Argentina in relation to Brazil. We know that most of the productivity, Filipe, or the potential of production happens when you have a good installation when you have lack of rainfall and variances, this will cause a drop, and this may affect productivity in the future.

Now it's like we say the game begins in day 0. Paraguay, we believe it improved a lot. When we look at forecasts, we have 2 metrologists that follow us, plus a climate company, 3 meteorologists writing reports all the time. We -- it's good to remind you, when we talk about long term, these are mathematical models, but there was a forecast of a small summer in January-February, and this is decreasing. It hasn't disappeared. But when you look initially, 35 days with summer, today '20. And we know that with the fertility of the soil in Paraguay, this facilitates things a lot.

Third question, Paraguay grains -- okay regions, which regions will we focus on? Well, regions where there is value, normally on the border, but we already bought areas in the beginning. We bought areas that were not near the border. Well, situation was different. We had a decapitalized agriculture and with more leverage. So we have focused a lot on these regions. We talked about pasture. We're trying to balance more the productivity in Paraguay through leases and in more stable areas like we did in Bolivia last year with new leasing operations, we leased lab. So we're looking at this. We're looking at the geographic diversity and also the balance between your land and leased land. So our focus is areas where we can unleash value.

[Unknown]

What is the forecast for next year in terms of cash, investments and sales?

[André Guillaumon, executive]

Well, I will begin, Gustavo can help me. In terms of sale, I mentioned this. The company has a goal for us to sell a part of the portfolio every year. So when people ask me, I say we will try. If you say I want to foresee, look at the results of the last 5 years, we will try to do something similar. Of course, we're understanding that we are more sellers. We can be more aggressive in sales. And if you sell an area that is appreciated, we will look for another that is an opportunity. So we sold some mature areas, and we substituted them for new areas, Panamby and other operations. So in the end, the company grew in production land. So the company grew. This is what we're always looking at. If you look at the average in the last 5 years, it will give you a good idea. We look at these opportunities all the time.

Investments, let's talk about investments now. Investment, we have approved by the administration council. This includes everything. New areas in some regions, transformation of soil, investments in irrigation, investments in technology, investments in geoprocessing. We have dedicated a lot of time for this. Gustavo is leading connectivity projects in some of our units to have 100% Internet. We have Internet of things. At the farms, this has been important. So this year, we should have a CapEx with structuring -- restructuring of various transformation from pasture land to grains, increase in fertility to buy cotton and smaller projects with irrigation.

So we have approximately BRL 100,000 in CapEx. So sale, same average CapEx, BRL 100 million approximately. And cash flow I gave you the number, sale less CapEx and operational results, you know how our cash will behave. Gustavo, would you like to comment?

[Gustavo Lopez, executive]

I believe that it's important to share how we think. We work with a budget, operational budget, as Andre mentioned, we sell farms, and we see 34% goes to our partner, the government, 85% for shareholders and 35%-30%, we say for investment. Andre mentioned restructuring of various planting sugarcane infrastructure. And as I mentioned during the presentation of the results, last year, we had an EBITDA BRL 400 million. Today, 60% of this value. And these are our expectations for cash generation.

So normally we make a payment equivalent to 35% down payment. And this year, we have BRL 140 million, BRL 150 million to receive from the sale of farms. So it's -- we're going to have a positive cash generation year. And the amount approved was BRL 130 million. Part has the irrigation, part does not have. So in general terms, in terms of cash flow, we're very positive.

[Unknown]

One last question to close. From Douglas Rebeiro, please comment on the difference between book value and internal evaluations of the same assets and price discovery of sales?

[André Guillaumon, executive]

Okay. We have worked a lot on this. We work every year on this. How we evaluate? Every 2 years, we use outside auditors and every year, internal evaluation. This is an internal valuation. We look at the multiples when we look at the price attributed to our property, we always do the following. The asset, you don't sell it or better, the best way to sell assets is in installments. That's when we capture the best profitability.

When you sell it in installments and the market for land in Brazil is always in installments. Those who pay cash will get an important discount. If they get an important discount, we don't want to be the sellers. We have agricultural land where the payment is made in installments. This is important. When we evaluate all our areas, we analyze maturity and multiples. For example, soybean, when we talk about the Central area in Brazil, we have a multiple of bags per hectare. If you look at our evaluation year after year, you will see an appreciation. You will see x million. And then next year, more bags of soybean.

I was talking the other day with investors. If we have a vision that is more optimistic or pessimistic for commodity, we will attribute more or less value to the portfolio because, as I say, you pay and then if you have a more optimistic vision for soybean, you will have a larger flow. And when you bring it to present value, it will generate more value. So the logic is where you place soybean. I would even like to have a price of $14 in the next 5 years. No one here can validate or believe in something like this. So we have a vision of medium and long term for commodities. We convert soybean BRL 235. What is BRL 135? It's a dollar rate, and we convert to soybean 100 pounds weight.

Now if you look at soybean, today we sold soybean at BRL 170. We sold it today. If you take this price and perpetuate this in the model, you will generate an extra BRL 1 billion in the company's portfolio. No one here, neither manager nor the company, knowing we make money by delivering results. Why? When we look at sales and looking at your question in a recurring way, we sold between 6%, 10%, 12% above the outside evaluation. So I'm talking about external evaluation.

When you look at the company's numbers, when you look at the sale, for example, how much was this portfolio worth and we sold this part. In a certain way, I believe that it's between 8%, 10%, 12%, maximum 15% of extra value. In a certain way, I believe this doesn't compromise the managers work or the risk of purchaser sale. But it brings a realistic, realistic definition. So if you look at this year versus last year, we had an appraisal of BRL 200 million, but I'd like to remind you that we also sold, so we lost.

So we had a real gain year after year of 15%, 16%, but I say once again, everything follows the assumption of what we believe in and what we believe will be the price of soybean. If we believe that soybean will continue at high prices, the asset is worth a lot. Now if you think it will go back to a reasonable area, the portfolio would be -- will be adjusted. And since we're talking about these are not cash sales. So this is good because first, the evaluation is not in the company's numbers. So according to our logic, we try to be more realistic because we have already made 16 transactions involving sale of land, and they were all in this range, 5%, 10% above the evaluation price. That's what we sold it for.

And we're looking at the market, buying and selling. I believe that the evaluation methodology is a comparative one. We have a picture of our currency that I'm receiving offers for our assets and also to buy assets. So we have a great accuracy in the price of land. We had in our database more than the majority being land in Brazil. So we created intelligence in this area. And if you ask me, are you conservative? No, we're realistic. We're a realistic company. We don't sell dreams and we want to develop in a recurring way to the investors.

[Gustavo Lopez, executive]

Andre, just to supplement the property, we have a possibility to opt between the cost and market value. And in the past, when we began this discussion internally, this was a point that we considered to make this decision, especially because there's a great subjectivity in terms of how you price the soybean in the future. So today, what should we do internally or externally to understand if we need an impairment. If the value is lower than our cost, then we should recognize this loss. But it's difficult.

Normally, our portfolio includes farms that we bought at $1,200, $1,500 per hectare. The transformation cost to 2,500 on average, and there is no farm that is sold below this amount. So the best way to price recognized result is when we sell because before an investor could question, we could distribute dividends. Because of this result due to the variance in the price of land. We thought the best way would be to record the cost and recognize the gains, the profit when we sell. Andre mentioned all these -- all the farms were booked at -- in this way.

[Unknown]

Well, thank you, Andre, Gustavo, for your time. We had a little more than 1.5 hours. The year is beginning, a very good audience. Thank you to all who participate and ask questions. We're making progress with more transparency, and it's important to have your questions, your feedback.

I will pass the floor to Andre, we want to close and we will meet again in the next results.

[André Guillaumon, executive]

Thank you, Ana. Thank you for the team, Daisy, Camilla, and thank you to all the participants. We have to thank this beautiful public, these people who trust in the company's management. And here, we are committed. We have worked more and more on this. And I say once again, so we work on people, sustainability in the near term and long term. The company this year was won a prize, one of the 5 best companies to work in agribusiness, in our segment, midsize companies. This shows that we're on the right track, working with the right people and with this engagement for consistent delivery of results.

As Ana said, the year is beginning, it seems that we will have a better climate than last year, especially in Paraguay, in the middle of Brazil ,too, sugarcane, with more rain. This will help the production of sugarcane. So farmers or businessmen are always optimistic, but we're realistic because we're always looking at processes, strategies and people working on these pillars all the time. This is our commitment, not only my but all the managers and also you who trust in us in managing your resources.

Thank you very much. The questions we were not able to answer, please get in touch with Ana in Investor Relations, and we will answer them. And if you want to talk to us, we're available. Thank you very much once again.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]