CRESY — Cresud Sociedad Anónima, Comercial, Inmobiliaria, Financiera y Agropecuaria

CRESY Q3 2023 Earnings Call Summary

1. Key Financial Results and Metrics:

• Cresud reported a significant decline in operating income, down 59.2% year-over-year, primarily due to adverse agricultural conditions in Argentina and increased costs.
• The company posted a net income of ARS 36 billion, with a controlling interest of ARS 20.4 billion, compared to ARS 64.7 billion in the previous year.
• A dividend of ARS 9.5 billion was announced, equating to a 6% annual yield, with shares distributed from a buyback program.
• The company’s debt situation improved, with a credit rating upgrade from AA to AA+.

2. Strategic Updates and Business Highlights:

• Cresud achieved a record planted area of 28,000 hectares across four countries, with a focus on stability and client acquisition in real estate.
• The company is actively involved in farmland sales, particularly in Brazil and Paraguay, with a significant transaction expected to be reflected in Q4 results.
• Investment in IRSA increased by 3%, with strong performance in tenant sales and occupancy rates post-pandemic, contributing to Cresud's dividend income.

3. Forward Guidance and Outlook:

• The company anticipates a recovery in soybean prices due to government interventions, which may positively impact future yields.
• Despite current challenges, management remains optimistic about the agricultural outlook, particularly in Brazil, and plans to expand service offerings.
• The forecast for the next agricultural campaign is cautious, with expectations of lower prices but improved liquidity in real estate markets outside Argentina.

4. Bad News, Challenges, or Points of Concern:

• The adverse climate conditions in Argentina have severely impacted crop yields, with soybean yields expected to drop by 47% and corn by 28%.
• High input costs, particularly for fertilizers, continue to pressure margins, despite a recent 30% drop in fertilizer prices year-over-year.
• The overall operational margins are worse than last year due to lower commodity prices and higher costs, creating a challenging environment for farmers.

5. Notable Q&A Insights:

• Management highlighted the ongoing drought in Argentina and its potential long-term effects on wheat production if rains do not materialize soon.
• There are plans to explore capital raising for expansion in Brazil, contingent on the company's growth strategy.
• Questions regarding the timing of cash and stock dividends were addressed, with expectations set for a 10-day processing period through the Bank of New York.
• The company acknowledged a significant drop in fertilizer costs, which may help margins in the upcoming campaign, although the overall input cost environment remains challenging.

Overall, Cresud is navigating a difficult agricultural landscape, particularly in Argentina, but is leveraging strategic initiatives in real estate and investments to position itself for future recovery.