Brasilagro Companhia Brasileira de Propriedades Agricolas

BOVESPA:AGRO3

Earnings Call Transcript 2024-Q3

[Ana Paula Zerbinati Gama, executive]

Good morning, everyone. We're here for another earnings call from BrasilAgro Third Quarter mini January to March 2024. For those of you who are not familiar with our calendar, this is what our fiscal year looks like.

Thank you to André and Gustavo for joining us.

For those of you who are watching this in English, the presentation will be made available in the chat. If you want to listen to this earnings call, please make sure you select the language of your choice at the bottom part of your Zoom screen. In this quarter, we're going to see some results that are lower than expected. So André and Gustavo will have a hard job to accomplish during this call. However, I believe we are very resilient in our business. And once again, we have proven that we have a winning strategy.

With that, I'll hand the floor over to André and Gustavo.

[André Guillaumon, executive]

Good morning, everyone. Once again, it is my joy to join you today. I'll talk about our last quarter. In the previous earnings releases, we talked about possible sales. I told you we were working for that. And today, we're going to give you more details on these commercial transactions. After that, I will give you more details on the harvesting details for the summer crops. I'll talk about how things have been evolving. We've got quite a lot of information to share with you.

Now on the slide, you see the highlights, BRL 552 million of net revenue, BRL 6 million negative net income and BRL 16 million is our adjusted EBITDA. After that, we'll give you more details on the numbers, and we'll talk about our strategy for that.

We harvested 66,000 hectares of soybeans, totaling 202,200 tonnes in Brazil, Paraguay and Bolivia. The main news we have to share with you during this earnings call is the fact that we sold a fraction of the Chaparral Farm, BRL 364 million worth of sales, and we have finally arrived to the state of Sao Paulo growing sugarcane.

We're looking for more of an attractive mix between ethanol and sugar production. We saw that in the past year. This correlation was a bit hard and most recently, with the pricing policy or the parity pricing policies from Petrobras.

Now number one, let's talk about transactions. Chaparral Farm is where we've been working with our portfolio for over 16 years, many changes have been implemented over this time. And so far, we had not sold any plot of this lands. Now this is an important transaction to show you that the frontier to the State of Bahia that we decided to go for back in the day was a correct decision to be made.

Between the acquisition price and investments that were made in land. I'm talking about CapEx, infrastructure, buildings, they totaled BRL 125 million. We worked on this arable lands of 26,000 hectares. We sold 8,800 hectares. We sold this for BRL 364 million and this comes to show that we've always been quite conservative and careful as we assess and price the company's lands.

If you do the math and if you look at BRL 364 million and you divide that by the acreage we sold, and if we multiply that by 26, then you'll see that this farm is worth BRL 1.9 billion. That is to say that we sold 1/3 of the farm for BRL 364 million. That shows how much value we can generate.

We invested BRL 125 million. And if everything goes well in terms of sales, and I believe that in the next years, we should have more aggressive multiple rates for soybeans. We're talking about more than BRL 1 billion. So BRL 125 million was invested and this value increased to more than BRL 1 billion in assets. That's how much value we can generate in our business.

To your right-hand side, you can see a new farm that we have leased to grow sugarcane. It's an important plot. We're now working with an important national player. We're beginning this season with 5,000 hectares, we'll get to an additional 1,900 hectares by 2029, and we should total 7,000 hectares.

In this transaction, it's important to highlight that we now have sort of a different commodity mix now. We've got sugar and ethanol production. We had been talking about this challenge. Beforehand, we said we were going to go for that move. We said we were going to sell farms, and we also said we were going to lease lands to grow sugarcane, so that we could improve the company's commodity mix. And that's what we're now delivering.

Now let's talk about our season. Moving away from real estate. I wanted to show you some charts. So we can use them as guidance to discuss our numbers. On the first chart, you can see the macro region of Araguaia, where we have our operations. What do we see here? November and December were below average. The yellow line is the history average. So you can see in November and December were below average. October was quite close to average numbers, which allowed us to plant everything inside the proper planting window. It was a fantastic year in terms of planting speed.

And despite November and December -- despite the fact that they were below average that didn't really hurt the crops as happened in other Mato Grosso farms. But you can see how hard it was for everyone really to finish the planting season and have space for the second crop. And then January, February and March were critical months as per usual. That's quite an attractive rainfall rate.

Now the second chart shows rain falling by year that will be reflected in the company's acreage. Well, the planting window in the state of Bahia is a bit -- happens a bit later as compared to Mato Grosso. Mato Grosso September, October and Bahia late October, early November. And what you can see on the chart is that there was not accumulated rainfall to start planting earlier in Bahia, but it's quite a particular state.

This is one of the new lands we're now planting. In Bahia, we have to be quite careful when it comes to the planting season. So what you see in November and in October, like we said in previous earnings calls, that got in the way of this planting window for soybeans, and we are quite mindful of that. So we reduced soybeans acreage in the company. And the 2 first charts show you that November and December were quite critical months for us.

Then Bahia crops did really well. As of January, February, March and April, they really contributed to our soybeans production. Our yields were great, and we are now harvesting corn and cotton, and we should see quite great yields as well.

So we saw that Mato Grosso was not as hurt as the central region in Bahia. We benefited from rainfall this year and in Paraguay, the last chart, you see a positive surprise once again, when you look at the average numbers and the charts, while they're quite different. Rainfall happened in April in Paraguay. Critical months in Paraguay happened later January, February and March. So you see rainfall quite below average, which made our yields decrease.

So you see Mato Grosso is above average in Bahia. We're doing well with cotton and in Paraguay, this comes to explain why we're doing bad with soybeans because the pod filling season, January and February, we saw rainfall below average. Now rainfall in March and April is benefiting Paraguay. So that has been quite useful in the past months.

Those 3 charts are the explanation for the changes you see on the slide.

When we look at the company's total number, 185,000 to 171,000 hectares that happened because of the reduction in the planting window. We saw that planting season was delayed in the central regions of Brazil, which hurt our second crop. And it's also important to say that when we made this decision in terms of costs, well, corn margins were very low. So we were mindful. We decided to go for breakeven. We would reduce the planting acreage and that had an important impact to the company in terms of corn planted area, especially second crop, our winter crop corn. And this chart shows you the consequences of rainfall I talked about in the previous slide.

Now on the slide, you see that we have harvested 95% of soybeans. We're now beginning to harvest corn. We have harvested beans and cotton, while they are about to begin as well. What you can see is that there's been a reduction in yields for soybeans, especially because there was a reduction in acreage and also a negative contribution of our Paraguay lands. And also you can see the breakdown of all the other crops. We'll give you the economics on that in a few moments.

On this slide, you can see the numbers from July '22 to April '24. On the first chart, you see the Paranaguá soybeans, corn and cotton. For cotton, what we see is that there was a slight recovery. And recently, we've seen a drop. And then I'll talk about what positions changed. You can see that there has been a significant reduction in commodity prices in the past 2 years. We hadn't seen such an intense cost reduction, but the charts show you that the margins that we saw before and during the pandemic look quite different.

Now let's talk about costs and maybe in this interval window -- by the way, let me look at the column at the center for KCL. When you look at the '23/'24 season, we were buying that for $614 per tonne. In early 2022 before -- early 2023, before they were, then chloride was so that $1,200 per ton. We bought at $620. So in this season, we saw the price going down to $614.

And now for the '24/'25 season, we're now buying chloride at $415 per tonne. Like I said, the alligator mouth is now closing in the chart. We've been seeing important cost reductions. So during peak times, soybeans were at $5,000 last year, we operated at $4,000, $4,100 and now for 2025, we see cost reductions should get down to $3,500 or $3,600, especially because of this input prices we're now showing you.

We have advanced in terms of potassium chloride, chemicals and now we're waiting a bit because we know phosphates should see a price decrease because of the demand in the northern hemisphere. The demand is going down because we're now at the end of the planting season in the Northern Hemisphere, so those who had to buy phosphates and fertilizers in the Northern Hemisphere, MAP and DAP, while they've done so already and now like we know, we're going for a low demand period in the Northern Hemisphere, which is where most fertilizers are purchased in the globe.

And it's the second time we show you this charts, we wanted to look at the prices, especially at the first chart, the basis numbers. What we see is a trend, a trend for a reduction. I've been planting soybeans from the moment we planted with negative basis that was 30 years ago than in the past 5 or 6 years, we started operating with positive basis points.

Back in the day, Chicago and basis sort of offset. But if you don't consider the trade war between China and the U.S., what you can see is that the market has been working with positive basis points because of the demand from Chinese consumers. And now we see a new basis standard, which stands out for us. We believe that because of the yield increase we've been seeing in the past 5 years ago. I mean, 5 years ago, we were talking about 130 tonnes -- 130 million tonnes and now we see 150 million tonnes, what happened in Mato Grosso it is still to happen in [indiscernible].

Now I would like to draw your attention to this basis curve. It's been showing to be resilient despite being in different levels. Now the exchange rate is just fluctuating not that much. And the soybean prices in Chicago, you see we begin at $15 per bushel in March 2023, which reflects the demand and the crop failure in Argentina in the previous season. And then after Argentina came back to the game with their 15 million tonnes, then we saw a decrease in soybean prices. That's just our bread and butter. We know that soybean prices are at $12, and we'll show you what the position is in a few moments.

Now in terms of changes in prices, this is how we've been operating. At the top, you see the current season. We've got 80% of our crops already sold. Our average price was USD 1,305 per bushels. The exchange rate BRL-USD is at 5.31. Now a few moments ago, I told you that we have advanced in terms of chloride negotiations, and we did that because we're now fixing those prices. We're always looking at the contribution margin. So we started selling soybeans already. This is for the next season, and we were a bit more aggressive exchange rate wise, and we sold at 5.43 already.

So that is to say we are already thinking about our cost composition for the future. At the bottom, you see our farm receivables. This is very important for us. We're talking about a company that grows 240,000 to 250,000 tonnes of soybeans. And in terms of farm receivables, if you think of sales that have been published, but that are to be accounted for in the next quarter and sales that are going to be accounted from Taquari when we delivered part of that in the past, and we're going to deliver part of that now. This totals more than 540,000 tonnes.

So these figures are very important. We consider them to be part of the year's P&L. Now for soybeans, we are at $12.93 with exchange rate of 5.43 and we're selling for 2025 already, both in terms of the exchange rate and soybeans.

Cotton. We were happy enough to be able to sell forward. We -- out of this harvest that is now beginning in early July, 87% has been sold forward at BRL 82.28, and I think we were quite efficient in terms of selling forward with exchange rate of 5.61, which is a great combination of the [ Araguaia ] prices for this cotton that is to be harvested. And I'm sure this will contribute to our yearly results and will help us strengthen our results for the first quarter next year.

We have been selling cotton forward for the next season. Now the main challenge here we have has to do with corn. So far, we have sold forward only 55% of corn at BRL 42. We're talking about BMF corn at roughly BRL 43 for corn. Now since the company has already been working with sugar and other tools, we know that we've got ethanol at BMF, but we're also looking into some derivative tools with banks so that we can sell ATR forward. That is for the '23/'24 season, we have sold forward at BRL 1.08. The company always sells their own ATR at a premium price as compared to CONSECANA Sao Paulo.

Well, I think that's it. With that, I'll hand it over to Gustavo. Gustavo, I just set the stage, so you can now finally talk about our numbers. Thank you.

[Gustavo Lopez, executive]

Thank you very much. I just apologize, I think I have a problem with my computer. In any case, thank you very much to all of you who joined us for this session. Now let's try to explain our figures in a simple way to all of you. Of course, considering the context, André mentioned in terms of yield increases. So let's begin with the right-hand side, our fiscal year earnings.

You see the amounts we sold, we also see prices, unit prices. Here, we can see the impact of the premium price for soybeans at lower value. Our derivative sales are way above the values that are being practiced in the market, which is generating a positive result. But we have other products in our mix that don't really allow us to work with derivatives. For example, ethanol, corn, those had quite a relevant impact.

In the 9 months 2024, we accumulated BRL 6 million in losses as compared to the same period last year. We were at BRL 25 million, BRL 26 million. To your right-hand side, you see prices, BRL 1.3 million in results. And you see the numbers for soybeans, cotton, sugar that decreased by 20%. You see how corn prices behaved, we saw significant cost reduction or price reduction namely 44%.

We had more products being sold, especially in terms of sugarcane, however, this higher volume only brought BRL 6 million to us. So when we look at it, this is the quantity, this is the rate we get to. You can also see costs for corn and soybeans. We had very similar prices in BRL per tonnes as compared to the previous year.

Now what allowed us to save money for the company was sugarcane and cotton because we reached high yields for cotton. We could grow at lower cost per hectare. And for sugarcane, that happened because we already started working with lower fertilizer prices as compared to the previous year.

Previous year, we were at the crisis because of the Ukraine Russia war that impacted logistics and fertilizer prices. When you look at the savings and the higher amount of product sales was not enough to offset prices that we had in these 9 months. Even if this was offset with the financial results at BRL 43 million, what we see is that we generate positive results considering that here is where we see derivative results as well that haven't yet been realized and part of them have.

Let's look at the adjusted EBITDA. Last year, BRL 168 million. At the bottom, you see the annual adjusted EBITDA chart. We try to find what really impacted this reduction. Soybeans at BRL 43 million, corn BRL 63 million. And I think this was the main product that considering our production in the company and considering our exposure in Mato Grosso state with the main season and the double crop, we had a production of 150,000 tonnes. And this year, we reduced this acreage by 10,000 hectares because of the tight margin or because of negative margins that happened sometimes according to the input and fertilizers need soybeans, BRL 18 million and some expenses with administration costs, which helps explain this reduction in the adjusted EBITDA.

Like André said, in the first half of this year, when we see the results last year, we were at a loss. But this year, we are at BRL 30 million. Like André said during this first quarter, we usually don't work that extensively with sugarcane. Soybean production is now to be harvested and transported to different storage facilities.

Last year, we were more aggressive in terms of sales. Premium prices were going down, but this year, the company decided to carry this over to the second half of this year. Now we're revisiting this strategy and trying to go a bit faster because premium prices are picking up.

Nowadays with $13 per bushel and BRL 5.35 exchange rate, if we consider minus 60 points to 10 positive points. We're talking about 10 BRL per bag of soybeans, production will be at 200,000 tonnes, 3.3 million bags. We're talking about BRL 33 million. These are the figures we're going for. That's why we decided to carry this over and not sell so much in the first quarter of this year and that, of course, has an impact because no operational income is generated, but the sales costs are still there.

We still have to transport products to the storage facilities. We still have to store this production. Additionally, we've got fixed costs, administrative expenses and also, we have to consider that the receivable amounts that André mentioned that have been accounted for our present value at BRL 550 million.

But I have to update this number constantly since they're going to be paid in bags of soybeans, we have to update these indicators on a quarterly basis for soybean prices, premium prices, dollar exchange rate. And in the past 3 months, there was a negative impact amounting to BRL 20 million. So like André said, our expectations moving forward is that we now begin to sell a great part of this soybeans. We usually bring 30% to 40% of our EBITDA -- of our operational EBITDA to the company. Selling part of this lands to Chaparral as far as we understand, the results for this year should be quite positive.

On the next slide, we see our margins. When we look at soybean margins last year, 29%; this year, 13%. Corn, we see that sort of lost some space in our product mix. We see that prices have been quite unstable. Last year's margins were already high. We used to think of 25% to 30%. That's what we expect for such crops.

But this year, since we have stored -- we have storing facilities that are important in the region of [indiscernible], we had to sell our production and because of that we couldn't really have positive results. We are now revisiting our investment strategy in this region. This was the lesson we learned, and we have to decide whether or not a plant will be built so that we can reduce volatility and impact to the company's [ results ].

For sugarcane, we see production from 25% to 17%. The cost per tonne had gone down. But despite that, the price impact was quite intense. We began last year with ATR at [ 1.3, ] and we ended the season with at $0.90 or $0.95. So there was a major impact and that also made margins decrease to the 17%. Now for cotton, we're learning more and more about this crop. We got a team of technicians and experts, we are now incorporating this crop in areas where we plan to expand irrigation facilities, and I believe this crop will become increasingly relevant for the company.

We always look at the company's adjusted EBITDA.

We also look at the financial results, taxes, depreciation, amortization. We eliminated the effects of gains on biological assets. And you see the final difference from BRL 150 million to [ BRL 11 million ] and remember before that included the BRL 12 million in real estate sales that happened last year. When we think of the 9 months 2023, what we usually say is that the company has 40% of sugarcane -- EBITDA that comes from sugarcane and 40% from soybeans. And usually 20% comes from corn and cotton.

Now we see that corn margins. If you do the math, you'll get to BRL 35 million plus EBITDA generated because of this impact of corn.

And now looking at specialty crops and cotton so that we can reduce volatility in our results. And for soybeans, in the 9 months, 2024, we know that the alligator effect happens in terms of costs and revenue, but we already understand how that works. And as we discuss the budget for the next season, we see that the margins are becoming more stable at more reasonable costs. Prices tend to be lower, but we see that there is no great disparity between those other components.

On the slide, we see our debt. Our total debt was at BRL 770 million. We began at BRL 550 million in June 2023. In December, we mentioned that we had a debenture of BRL 160 million so we could implement 4,000 hectares of irrigation in Bahia. And cash on March 31, we were at BRL 247 million. That used to be BRL 433 million minimum cash we expected in December. Accounts for all receivables for soybeans, corn, cotton and sugarcane, so we're quite at a comfortable situation.

Net, that is at BRL 481 million, BRL 516 million is our receivables for the farm sales, which have not been accounted for on this number. We got an additional BRL 460 million to be accounted for considering our current price for soybean bags. 103.6% of the CDI index that should be paid with our working capital as we pay for the season.

We usually do that 30% with third-party capital and the rest of that our own capital despite having tight margins. Our debt is at BRL 450 million for the long term.

So as far as we believe, it's quite a reasonable structure. As the capital markets, we got shares being sold in the Brazilian stock market and in the U.S., these are the share prices we collected yesterday. I think that's it.

Thank you very much. We'll now move over to the Q&A session.

[Ana Paula Zerbinati Gama, executive]

Thank you, Gustavo. Thank you, Andre. Our first question comes from Pedro Fonseca from XP.

[Pedro Fonseca, analyst]

With regards to the farm sales, what would be the current trigger? And what do we expect if you think of the USDA report that is to be published tomorrow with regards to grains? And how do you think of capital allocation after this farm sale? Are we going to repurchase shares? Are there going to be dividends? Or are we going to invest that in growth?

[Ana Paula Zerbinati Gama, executive]

Pedro, he's looking for guidance. So André, watch out for this question, okay?

[André Guillaumon, executive]

Thank you, Pedro. It's always a pleasure to answer your questions. Let's talk about our farm sale. Once again, the company shows how resilient it is. And once again, this comes to show our strategy. We always say that we want our companies to generate results in ag operations and we also want to look for results by selling farms.

In the past years, we've been selling a lot because of land prices, because of liquidity for growers. But this year, we didn't really know if this was going to happen, but we are selling land. This was an expressive sale. It's worth mentioning that we're selling land only. We didn't sell the headquarters or buildings. We're still operating in this area intensively.

And this money will bring some more breadth to us so we can do what we know what to do. That's what our business is like. We want to buy, sell. Before we were selling more. We may now pick in being more at a balanced position, but we are going to sell land whenever great deals arise. And now we're going to use this money to bring a new breadth to our portfolio.

Our challenge is to be a cyclic company. And I think we've been doing a good job in the past years. I don't have any details to give you in terms of buybacks or dividend distribution. We still have to have that debate with the Board. But like I say, mandatory dividends in the market account for 25%. And in the past years, we've always been contributing with our shareholders. Prices were high. We had lower possibility of allocation because of land prices and now we're going for a different direction. But I'm sure we're still going to be a company that brings good results to our shareholders.

Now when you ask about USDA soybeans, well, the previous USDA report showed 155 million tonnes roughly. The next report is to be disclosed. The expectations we have and that the market has is to guide to 152 million, 153 million tonnes. That is the number that we should see soon. The market always foresees that somehow. And I think that has already been happening. We see price rallies already going about and with what happened in Southern Brazil with the disasters, there's still soybeans to be harvested.

In the past weeks, we saw the tragedy and the disaster that happened. And of course, not only lives were lost, but there is a big challenge to the economy of the whole state. And soybeans, of all, follows that trend.

As I showed you in the basis chart, we may still see positive effect to Brazil. We had been recovering before our farm selling was low, the basis charge was already recovering. And I'm sure this disaster will impact ships transportation, and that may impact the basis chart. I think Gustavo was very fortunate in his comments when he said that we have to do our homework in terms of Chicago and the exchange rate and we did it.

And we're now working on the basis of carrying over more soybeans to the second half of this year because we thought local crushers might demand that. And what we did was over the past week to fast track specific particular sales. Our vision for basis is quite particular. We're going to have basis working distinctly going for a trend of recovery. When we harvested, we were at minus 60 or minus 80 basis points, and now we're talking about positive 10 or positive 20, that's quite a significant difference, which is what Gustavo said. That is worth 10 BRL per bag of soybeans, which really impacts our results. I hope I answered all your questions.

[Ana Paula Zerbinati Gama, executive]

Next question by Tiago Lima.

He is asking about the current moment. If this is a proper time for new acquisitions, if we have any agreement that is ongoing that we could mention. Well, I think Paulo is really looking for guidance here.

Now the second question from Tiago if the company has any plan to increase the amount of leasings in the next fiscal year and if that strategy may mean that we're going for an asset -- lighter asset business.

[André Guillaumon, executive]

Great question, Thiago. I'll begin with your last question. The company has 3 pillars to it: the strategy, processes and people. This strategy has to be alive. We have to revisit that constantly, but I'll talk about what we believe for the business. We truly believe that we can combine these 2 businesses. We can be asset light. And part of the question is to be answered with this next comments.

We know that ag businesses have variable liquidity and that is very cash demanding. In the past years, we've seen an expansion. We saw abundance in resources, and now we see the consequences of that in the market. That only shows that we're going down the right way. We have assets, and we have a combination of that with leasing approaches. Leased assets that bring operational results in the mid to long term is important, and our own assets have to bring more capital cost efficiency for the company.

If we go for an asset-light model, then we have to foresee important changes to our liquidity. And we believe that there is no silver bullet here, but we believe we should be at 50% to 55% ratio with more operational results efficiency and efficiency in capital costs.

We don't want to be a fully operational company with very few assets because we now have to sell lands when we find good deals. But to make that happen, we need to have a capital structure that is robust, that is an intrinsic characteristic of our business. We also have to operate differently from what other companies do. And to do that, we have to be capital intensive.

As to the first question, we always deliver our promises. We told you the company was still going to sell lands. We're still looking into other possibilities. But we're also looking into buying more assets because of financial stress in the market. Many news are disclosed. Some of them are real, some of them are not. But when we are about to go for a deal, you may be sure we're going to publish a relevant fact for investors, but we have nothing in our pipeline nowadays.

[Ana Paula Zerbinati Gama, executive]

Thank you, Andre. One more question regarding input purchases. Considering 100% of our 2023/'24 import has been bought already, can we expect to see lower costs for the last quarter?

I think Gustavo can take this one.

[Gustavo Lopez, executive]

Well, we haven't yet purchased 100% of our inputs for the next season. We have done so for this current season, yes. What we see, budget-wise, for the next season, the one that is to be planted as of September, October '24 to be harvested in '25. Well, we'll see a reduction in chemical prices and fertilizer prices.

The first version of our budget shows about 15% reduction as compared to current prices. When we assessed fertilizer prices, we've got BRL 700 million of costs. This is the cost for sugarcane, soybeans and corn. Out of this value, BRL 250 million are to do with fertilizers. And we've seen a difference that's been quite lower as compared to the history average.

If we compare low soybean prices at $11 -- or USD 11.5 at 5.05% exchange rate minus 30 premium and still prices had a great ratio. So that has been purchased already. Part of the chemicals have already been bought because we saw a 16% decrease as compared to previous years in U.S. dollars. So as far as we understand, the '24/'25 season is going to be seeing lower costs for all the crops. I hope I answered your question.

[Ana Paula Zerbinati Gama, executive]

Next question by Caio Araujo. He asks about the companies that -- is this debt level going to be the same for the next years? Can that impact dividend distribution?

[André Guillaumon, executive]

I can take this one. When you look at the company's debt, when you look at absolute numbers, they may stand out. But when you look at the company's net debt, it is negative. Why? Because we've got farm sale receivables that have been accounted for partially because we have some part of that already concluded and part of that, that hasn't yet been concluded.

So just a quick note, the [ Chaparral ] farm sale has already been concluded. We received the first part of payment, but it hasn't been accounted for in this quarter because we still had some harvest to be done. And for that -- for us, we can only consider that transaction from an accountancy standpoint whenever we actually transfer the property.

So between this quarter and the next one, we should consider an additional BRL 210 million of the net result from this farm sale. And it's also worth mentioning that our debt -- when you look at receivables from farms, our cash products to be received, then the net debt is negative. And that is important.

Now going back to Thiago's question. That is how things have to be because we need to buy lands when they are a good deal and we have to sell them when the deal is good as well. So we need to have a safe healthy debt level considering ag standards and the standards of our real estate business. I think Gustavo can give you some more color on this, but we've got an important payment to be made from now to the next 10 following months. These numbers are worth BRL 200 million.

Gustavo, can you give us some more details on it?

[Gustavo Lopez, executive]

Sure, André. Now capital structure-wise, we believe this has to be reasonable. And we usually include that in the covenants of our fundings. 30% of the company's portfolio, well, that level is manageable. Our portfolio is at BRL 3.3 billion after we sold the farm. This may go down to BRL 3 billion, assuming that our debt could be at BRL 1 billion, but we're talking about net debt at BRL 550 million.

Well, our company demands short-term capital because out of this BRL 700 million, we're also looking at interest rates, margins and the best ratio so that we can make the most, 30%, 40% or maybe 50% of this season at BRL 300 million for the short term. Well, up until this level, we feel quite comfortable.

For the long term, we've got projects that we're looking to very carefully, projects to invest in land, irrigation projects, BRL 170 million to implement such projects. Projects that we believe that will increase our EBITDA by BRL 30 million to BRL 40 million with irrigated lands. So these are the indicators we always assess and then we follow that up closely.

My personal opinion is that we should be a little more leveraged, but oftentimes, when we make decisions or whenever there is an interesting project at site, then we have a hard time because the market is quite volatile because of the interest rates. And we know quite well what the agriculture cycles look like, but we have to be mindful so that leverage does not compromise our real estate results.

[Ana Paula Zerbinati Gama, executive]

Thank you, Andre. Thank you, Gustavo. This is the end of our Q&A session. Thank you very much. Once again, everyone, for joining us. Thank you for your audience. I know there were many earnings calls happening at once at the same time. So thank you.

Now for those of you who are based in Sao Paulo, we are now carrying out a campaign to collect supplies to send to the population of Rio Grande do Sul state, especially drinkable water, clothes. If you want to drop by your donations in our office, we're going to be sending them to Rio Grande do Sul state. We are located at Faria Lima. You may contact our institute for my IR assistance. We are fully available to receive your donations and to send them to the state of Rio Grande do Sul.

With that, I'll hand the floor over to André for his final remarks. Thank you very much once again.

[André Guillaumon, executive]

Thank you, Ana. That's a good reminder. BrasilAgro will also be helping the population of Rio Grande do Sul state. Now I would like to wrap up by thanking you for your trust. I know you're following up on the company, we are quite resilient. We hit an all-time high in terms of land purchase and sales. This is part of our DNA. So thank you very much.

We promise and we deliver our promises. During these earnings calls, we have been showing you that over and over again. We know that sometimes we'll have harder or easier semesters because of production volatility, price volatility. But during this quarter, we are going to see expressive price volatility, but we're quite confident in this activity.

We trust that, like I said, when the alligator mouth closes again, then we become resilient, and we bring 30% to 35% of EBITDA margin. This is what is going to happen when we move from $8 per hectare to [ 6,000 ] per hectare, we are going to see EBITDA margins that will show how competitive we are as a sector. Thank you very much, everyone

You may trust, rest assured that we're going to bring positive results for the end of the year that will be closing late July. This will show you how resilient we are and that's our business, and operations as well as real estate are quite strong. We've been working on technology quite strongly. We've got many projects that are going about real fast in terms of connectivity, bio approaches, biotechnologies, always really focused on having better results.

Gustavo said it really well. In December, we had the venture launched. We're implementing the second part of the project, 1,000 hectares have already been implemented. We're now going for another round of 700 hectares with irrigation that should be deployed by the end of this year with very high profitability.

Gustavo mentioned, cotton [indiscernible], that has been bringing us positive surprises. So once again, thank you very much for your trust. Rest assured that the company is resilient, and we are working hard to be able to deliver these results. You see only 3 phases here, but there is a full army of people who are working quite hard to make this happen. Thank you very much, everyone. Have a good week.

[Ana Paula Zerbinati Gama, executive]

Now before we wrap up, let me talk about this army of people. They told me I forgot to talk about 2 important things. Donations will be received by the end of next week, the 17th. And also the institute is also contributing. We're going to match all donations. So we're doubling down on the donations that you give. That's it. That's a wrap. Thank you very much. Enjoy the week.

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