BrasilAgro Presentation. March, 2011

Transcription

1 BrasilAgro Presentation March, 211 1

2 BrasilAgro Brazil competitive advantages Farmland Investment 2

3 BrasilAgro Farmland Investment 3

4 Short summary on BrasilAgro Company created to implement the Cresud s successful business model in Brazil: capable of profiting from the commodities production and from the land appreciation BrasilAgro went public in 26 at BMF&Bovespa Stock Exchange ( Novo Mercado ) as a business plan (BM&FBOVESPA: AGRO3) Launch of the Level I ADR Program in 21 (Ticker: BRCPY) We have accumulated a portfolio of 175 thousand hectares until now, all in cerrado region faraway from Amazon biome. We have started our farming operations in 27/8 crop, since then we have developed 52.2 thousand ha and we will cultivate 63 thousand ha during 21/11 crop representing a CAGR of 42.5%. Until now we have sold one farm with an appreciation of 113% within 17 months. According to Delloite independent valuation (Dec/1), BrasilAgro s properties had an appreciation of 111,1% since acquisition. 4

5 Shareholders structure Market Mr. Elie Horn (Cape Town LLC) Cresud was founded in 1935, went public in Buenos Aires stock exchange in 196 and on Nasdaq in 1997 One of the largest holders of farmland in Argentina: over 65 thousand ha in 2 properties located in one of the most fertile areas in the world Over 85 thousand hectares under management in Argentina, Bolivia and Paraguay 3 plus years of track record in the agribusiness sector/rural real state. Sold 17 farms in the last 8 years averaging appreciation over 1% Producer of soybean, corn, wheat, sunflower, beef and milk Value drivers: agricultural activities and complementary rural real estate operations Mr. Elie Horn is Chairman of the Board, CEO and controlling shareholder of Cyrela Brazil Realty S.A. ( Cyrela ) Cyrela (CYRE3) is one of the most recognized and largest player in Brazil s commercial and residential real estate markets Cyrela has built a track record of sound investment and steady growth Cyrela s market cap. of approx. US$4.4 billion 5

6 Potential business models Main farmland related investments alternatives in Brasil: four different business models Lease and Plant Acquire and Plant Acquire and Lease Land Acquisition and Development Risk Return High Low Investor leases the property from third parties Does not benefit from farmland price appreciation Agricultural operational gains Low committed capital Investor buys a productive land and operates it Benefits from farmland price appreciation Agricultural operational gains High committed capital Investor buys a productive land and lease it to third parties Benefits from farmland price appreciation Leasing incomes High committed capital Investors buys a raw land, develop and operates it Benefits from farmland price appreciation Agricultural operational gains Benefits from land transformation Medium committed capital 6

7 BrasilAgro business model The company has a unique business model that creates value through real state appreciation and agricultural production Raw Land Value generation 1 2 Land Transformation Cash flow operations The land development creates value by itself, regardless the farmland price appreciation The state of art agriculture allow us to generate a strong operational cash flow Land value Forestry Cattle Grains Management Expertise Sugarcane 3 Baseline appreciation Any farmland price appreciation should generate a positive impact 7

8 Farmland portfolio of 175 thousand ha BrasilAgro has a diversificated portfolio reducing operational and financial risks Grains Total area: 115,849 ha Production area (1) : 82,58 ha Location: Piauí, Bahia and Maranhão PRODUCTION CAPACITY (Ha) Potentially productive 73% Environmental reserve 27% Sugarcane Total area: 17,316 ha Production area (1) : 12,595 ha Forestry Location: Goiás, Mato Grosso and Mato Grosso do Sul Total area: 24,247 ha Forestry 13,8% Cattle 1,2% Sugarcane 9,9% Production area (1) : 19,4 ha Location: Minas Gerais 175,211 ha Beef / Cattle Total area: 17,799 ha Grains 66,1% Production area (1) : 14,237 ha Location: Bahia NOTE 1: Potential production area for BrasilAgro as estimated by the Company 8

9 Asset Valuation Properties Location Acquisition date Total area Accounting value Capex Acquisition + capex Delloite valuation Appreciation ha R$ MM R$ MM R$ MM R$ MM % São Pedro Chap.do Céu/GO Set / ,9,2 1,2 24,2 137,8% Cremaq B. Gr. do Ribeiro/PI Out / , 42,9 84,9 191,2 125,2% Jatobá² Barreiras/BA Mar / , 18,9 51,9 156,5 21,4% Alto Taquari Alto Taquari/MT Ago / ,2,1 33,3 64,1 92,6% Araucária Mineiros/GO Abr / ,4,6 71, 134,5 89,5% Chaparral Correntina/BA Nov / ,8 13,4 61,3 144,5 135,8% Nova Buriti Januária/MG Dez / ,5,5 21,9 22,2 1,% Preferência Barreiras/BA Set / ,5 2,8 12,3 25,4 15,7% Horizontina Tasso Fragoso/MA Abr/ ,2 2,6 39,8 53,5 34,4% Total BrasilAgro part ,6 82,1 386,6 816,1 111,1% 31,3 8,2 381,4 8,4 19,8% 1 Engenho² Maracaju / MS ,2, 1,2 21,6 ³ 112,5% (1) BrasilAgro owns 9% of Jatobá and the Maeda Group the remaining 1%. (2) Engenho farm was already sold (3) Sale price. 9

10 1 Land acquisition/transformation 177,2 ha of land acquired and 52,2 ha transformed into grains, sugarcane and pasture areas. Land acquisition evolution (ha) Developed area (ha) Land acquisition / transformation 17,9 37,2 17,8 14,4, /8 28/9 29/1 21/11 High expertise to perform technical, environmental and legal due diligence before the acquisition Enabled team to obtain environmental permits to clean the area Well structured operational process to clean and prepare the area to be cultivated Access to subsidized credit lines to finance the development capex * Estimated 1

11 2 Operational capabilities A unique combination of diversification, operational skills and commercialization capabilities Diversification Operational Commercialization 21/11* crop planted area breakdown ForestryCotton Rice/Milleto 4,6% 3,8%,4% Pasture 7,% Corn 8,% Sugarcane 13,9% Soybean 62,3% Diversified portfolio of properties (regions, cultures) State of the art producing technology Strongly skilled team capable of making the best strategic decision regarding the crop Management model based on a strong leadership on site We operate our farms by outsourcing all machinery processes Access to subsidized credit lines to finance the Company s working capital Sophistication and efficiency in products commercialization Benefits from gains of scale Deep understanding of the commodities markets gives us the ability of developing pricing strategies capable of benefiting from market trends and volatility The monitoring of the hedging position and exposure is made through advanced controlling tools * Estimated 11

12 2 Operational capabilities Our operational controlling toll comprehend all agricultural operational process: (i) planting, (ii) soil fertilizing, (iii) chemical spray and (iv) harvest Sample of controlled items: Distance between planted seeds Number of planted seeds per meter Fertilizer portion per meter Chemical spray: number of drops per cm² Harvest: wasted grain per hectare BrasilAgro management team consolidate sophistication, technology and field knowledge Efficient cost control tool Integrated process through SAP that reaches the farm level Quarterly auditing procedure on accounting reports and process Among others 12

13 3 Deep knowledge of Brazilian farmland landscape Undisputed leadership in the rural real estate scenario with a proven track record BrasilAgro s rigorous acquisition process confers a unique competitive advantage to quickly deploy the capital Number of farms for sale Total area of the farms for sale (thousand ha) Number of visited farms MM ha Primary analysis 22. Site visit 2.5 Detailed due diligence 1. Number of farms where we performed technical due diligence ,533 7, , 1, ,5 2,536 1, ,7 2, , 1, ,19 1, ,3 1, ,6 4, ,6 Deep knowledge on Brazil s farmland scenario Experienced team to select the best acquisition opportunities. 13

14 Case Study Cremaq Farm At Acquisition Current PI Baixa Grande Ribeiro 19.8 thousand ha with grains (soybean, corn, rice and cotton) Storage facility for 1,2 million bags of soybean/corn 25 Km of roads, of which 37 km of gravel roads (suitable for heavy weight trucks) 18.8 thousand ha in native vegetation 3. thousand ha with grains 5 workers houses (practically destroyed) 2 supplies warehouses (practically destroyed) 1 main house 1 lunch room direct employees Acquisition (Oct-6) Land: R$42.mm Capex (to Dec-1) Capex: R$42.9 mm Valuation (Dec-1) Market Value: R$191.2 mm Appreciation: % In the same period, average land appreciation in Brazil was 61% 14

15 Case Study Jatobá Farm At Acquisition Current BA Jaborandi 1.9 thousand ha with grains (soybean) 182 Km of internal roads direct employees 24.3 (1) thousand ha of total arable area corresponding to 5.7 thousand ha of native vegetation and 18.6 thousand of harvested forest Few practically destroyed buildings Acquisition (Mar-7) Land: R$33. mm Capex (to Dec-1) Capex: R$18.9 mm Valuation (Dec-1) Market Value: R$156.5 mm Appreciation: 21.4 % In the same period, average land appreciation in Brazil was 46% (1) BrasilAgro owns 9% of Jatobá and the Maeda Group the remaining 1%. 15

16 Brazil Competitive Advantages Brazil competitive advantages 16

17 Agricultural products ranking Brazil is among the leading countries in several different agricultural activities, figuring among the top producers and exporters for most of the agricultural products Soy Corn Coffee Country Production Net Exports Country Production Net Exports Country Production Net Exports USA 1st 1st USA 1st 1st Brazil 1st 1st Brazil 2nd 2nd China 2nd Vietnam 2nd 2nd Argentina 3rd 3rd E.U 3rd 6th Colombia 3rd 3rd China 4th Brazil 4th 2nd Indonesia 4th 4th Índia 5th Mexico 5th Ethiopia 5th 6th Paraguay 6th 4th Índia 6th Mexico 6th Canadá 7th 5th Argentina 7th 3rd Índia 7th Sugar Meat Orange Juice Country Production Net Exports Country Production Net Exports Country Production Net Exports Brazil 1st 1st China 1st Brazil 1st 1st Índia 2nd USA 2nd 2nd USA 2nd E.U 3rd 4th Brazil 3rd 1st E.U 3rd China 4th Germany 4th 4th Mexico 4th 2nd Thailand 5th 2nd France 5th South Africa 5th USA 6th Índia 6th China 6th Mexico 7th Spain 7th Australia 7th 17

18 Agricultural farmland potential in Brazil The great amount of available arable land along a great rainfall level gives Brazil an unbeatable combination. Brazil has the potential to more than double its grain area only by converting pastures alone BRAZILIAN TOTAL AREA BREAKDOWN (In million ha ) BRAZILIAN TOTAL AREA BREAKDOWN (In million ha ) 9 14,9 119, , Total area Source: Embrapa and FNP Amazon forestry Pantanal Dry land Indian reserve and conservation units Avaiable land ¹ According to our estimates, roughly 7% of total raw land area have to destined to legal reserves and can not be used for agriculture Pastures Arable area Raw land Source: Embrapa and FNP 18

19 World supply of fresh water Regions with abundance of fresh water in excess of population needs have a favorable position by exporting water in the form of commodities Renewable Water Resources NY4JD1 (bn m³/yr) 8,233 4,57 3,51 2,92 2,838 2,83 2,132 1,913 % World's 1,897 Others 23,563 Water Population Ratio North America 15% 8% 1,9x South America 26% 6% 4,3x Total = 55,149 Source: FAO 19 Europe Africa Asia 8% 13%,6x 11% 13%,8x 36% 6%,6x Australia & Oceania 5% 1% 5,x

20 Farmland Investment BrasilAgro 2

21 Farmland Investment Farmland, as an asset class, distinguishes itself among other alternatives as having an outstanding risk/return profile RISK & RETURN 18,% Energy index 16,% 14,% Return 12,% 1,% 8,% 6,% Farmland (TR) - USA Farmland - USA Debt bonds 7-1Y S&P 5 (TR) Agricultural index Metals index 4,% Housing prices 2,% T-bill 1Y,%,% 5,% 1,% 15,% 2,% 25,% 3,% 35,% Source: Bloomberg, USDA, Damodaran and BrasilAgro analysis NOTE 1: Data on Agricultural, Metals and Energy Index: NOTE 2: Data on T-bill 1Y: NOTE 3: Data on Debt Bonds 7-1 y: NOTE 4: Data on Housing Prices: Risk NOTE 5: Data on Farmland USA considers only the land prices and is back to NOTE 6: Data on Farmland (TR Total Return) USA considers the land prices and an hypothetical leasing and is back to NOTE 7: Data on S&P 5 (TR Total Return):

22 Farmland prices Mature farmland prices have increased in real terms over time US CORN BELT FARMLAND PRICES IN REAL TERMS Given that there has not been any transformational change in the farms, why is there a baseline appreciation? AVG Farmland price (US$ / Acre) Source: USDA, U.S. Bureau of Labor Statistics 22

23 Farmland price value drivers Commodity price is not the value driver for farmland price appreciation Historically, farmland prices have consistently outperformed soybean prices SOYBEAN PRICES & US CORN BELT FARMLAND PRICES IN REAL TERMS (1988 = 1) Soybean prices Farm prices Source: Bloomberg, USDA 23

24 Farmland price value drivers The high correlation between soybean and fertilizers indicates that higher soybean prices does not reflect on higher cash flow per hectare and vice versa SOYBEAN PRICE & FERTILIZERS PRICE /2/1995 1/7/1995 1/12/1995 1/5/1996 1/1/1996 1/3/1997 1/8/1997 1/1/1998 1/6/1998 1/11/1998 1/4/1999 1/9/1999 1/2/2 1/7/2 1/12/2 1/5/21 1/1/21 1/3/22 1/8/22 1/1/23 1/6/23 1/11/23 1/4/24 1/9/24 1/2/25 1/7/25 1/12/25 1/5/26 1/1/26 1/3/27 1/8/27 1/1/28 1/6/28 1/11/28 1/4/29 1/9/29 1/2/21 NPK (U$ / ton.) Soybean price (cts / bu) Source: Bloomberg 24

25 Farmland Investment The main driver pushing farmland prices upward is the increasing world grain area Higher demand for grains Combination of factors to make the new areas economically viable Not enough growth in productivity New areas in production Productivity Producing cost Commodity price Higher cash flow to all agricultural area Higher farmland prices New production areas have higher producing cost in $ per ton 25

26 Farmland price value drivers The main factor pushing farmland prices upward is the world production area increase Given that new areas have higher production cost (USD / Ton), the expansion on the world agricultural area requires a combination of factor (price, cost, productivity) capable to generate a positive cash flow to this newly opened areas. This same combination of factors should increase the earnings and, therefore, the farmland prices for agricultural area as a whole. WORLD PRODUCTION AREA & CORN BELT FARMLAND PRICES (US) AVG Farmland price (US$ / Acre) World Production Area (ha) Source: USDA, FAO 26

27 Higher demand for food Meat demand¹ is highly correlated with per capita GDP higher levels of income provides richer protein diets MEAT PER CAPITA CONSUMPTION IN 23 In kg / capita / year and US$ per capita / year y = 15,1ln(x) - 78,51 R² =, Source: FAO, USDA and BrasilAgro analysis ¹ I s worth notice that approximately: 1.3 and 5.4 kilogram of soybean and corn, respectively, are needed to produce 1 kg of beef;.7 and 2.5 kilogram of soybean and corn, respectively, are needed to produce 1 kg of pork;.6 and 1.1 kilogram of soybean and corn, respectively, are needed to produce 1 kg of poultry. 27

28 Higher demand for food Demand for food will remain rising as developing countries drive the world economic growth According to IMF projections, countries with GDP per capita of less than US$1, will be responsible for more than 6% of world GDP growth for the next 6 years; WORLD GDP GROWTH BREAKDOWN (In %) 53% 4% 78% 75% 47% 6% 22% 25% (E) Countries with GDP per capita < US$ 1. Countries with GDP per capita > US$ 1. Source: IMF 28

29 Productivity growth vs demand growth Productivity growth has not been enough to offset the increasing demand. This shortage is expected to increase within the next ten years PRODUCTIVITY GAINS (% p.y) PRODUCTION GROWTH (% p.y) AGRICULTURAL AREAS INCREASE (% p.y) From 1967 to ,19% From 1967 to ,76%,55% From 1987 to 27 1,28% From 1987 to 27 2,%,71% From 27 to 218,63% From 27 to 218 2,9% 1,45% Source: FAO, USDA and BrasilAgro analysis NOTE 1: 218 scenario is based on USDA projections 29

30 Need for new areas to be developed Within the next ten years more than 6% of the world increasing in grain production should came from new opened areas WORLD GRAIN PRODUCTION INCREASE BREAKDOWN BY SOURCE 38,8% Increase of 18 mm ha 75,7% 6,6% Productivity Gain Increase in area 61,2% 24,3% 39,4% From 1967 to 1987 From 1987 to 27 From 27 to 218 Source: FAO, USDA and BrasilAgro analisys 3

31 Contacts Júlio Toledo Piza CEO and IR Officer BrasilAgro - Companhia Brasileira de Propriedades Agrícolas Avenida Brigadeiro Faria Lima, o. Andar - CEP São Paulo - SP Brazil Telephone: +55 (11) Fax: +55 (11) Ana Paula Ribeiro Investor Relations ana.ribeiro@brasil-agro.com BrasilAgro - Companhia Brasileira de Propriedades Agrícolas Avenida Brigadeiro Faria Lima, o. Andar - CEP São Paulo - SP Brazil Telephone: +55 (11) Fax: +55 (11)