André Guillaumon - CEO Gustavo Lopez - Administrative and IR Officer

Good afternoon. Welcome everyone to BrasilAgro's Q2 2018 Results Conference Call. Today, we have with us Mr. André Guillaumon, CEO; and Mr. Gustavo Lopez, Administrative Officer and Investor Relations Officer. We inform that today's live webcast and presentation maybe accessed through BrazilAgro's website. Next, we will begin the Q&A session exclusively for investors and analysts when further instructions will be supplied. [Operator Instructions] Today's live webcast and presentation maybe accessed through BrazilAgro's website at www.brazil-agro.com, where we have also the PowerPoint presentation. Before proceeding, let me mention the forward-looking statements are based on beliefs and functions of BrazilAgro's management and on information currently available to the company. They may involve also risks and uncertainties because they relate to future events and therefore depend on circumstances that may or may not occur. Investors should understand that conditions related to macroeconomic scenario, industry-related [ph] factors could also cause results to differ materially from those expressed in such forward-looking statements. Now, I'd like to turn the conference over to Mr. André Guillaumon, Chief Executive Officer, who will begin the conference. Mr. André you have the floor. André Guillaumon: Good afternoon to all. It's a great pleasure to be with you once again to tell you about our results, our earnings in Q2 '18 and also we're available to all the participants to answer questions. Once again it's a great satisfaction to be able to share with you in a transparent way the results, our business segment perspectives and also the results. Once again thank you very much. I would like everyone to be on Page 2 where we always talk about the highlights of the quarter. And here the great highlight as we mentioned previously. The great change in terms of net revenue. And this Q2 everything that we had planned in the…

Thank you. Good afternoon. Now we'd like to go onto Page number 9 and on this page we see a adjusted EBITDA. The first part, EBITDA. According to accounting months and at the bottom we have adjusted EBITDA. The company understands this is the best way to see the cash generation of the company. So here we see the results we included adjusted depreciation and in areas of grains and sugarcane harvested and we excluded biological assets. You can see that in six months 2017 the results R$1.9 million and for the same period 2018, here we have R$59.1 million. And this increments in the [indiscernible] we acquired São José Farm the partnership in sugarcane [technical difficulty] in the next semester we should include the EBITDA results of the grains that we're estimating and the rest of the production and livestock. On the next page, here we see the income statement. We can observe net profit, last year. Net revenue R$1.6 million last year and now R$31.6 million and reminding you that in the first semester of the previous year we still have cash from the sale of [indiscernible] farm. We have invested the money in the financial market and as of January 2017 we acquired a farm and we leased a part and we exchanged financial results for operational results. In the gross profit, we had R$11.4 million and now R$60.3 million. R$11.4 million were the results that came from the Midwest in the sugarcane farms and the inclusion of 17,000 hectares of sugarcane generated this difference reaching R$60 million. And we have here apart from sugarcane and 1.4 million tons that were delivered during this period neared [ph] R$38.90 [ph] per ton or R$1,950 per hectare. Last year we had R$12 million from sugarcane. 35,000 tons at a…

[Operator Instructions] our question comes from [indiscernible] from Bradesco Bank.

My question has to do with the sugarcane operation. Gustavo said that there was a drop in the margin? Will the next harvest 2018-2019 will those margin improve for sugarcane? And also working capital, you expect an improvement in this line. What happened during the quarter? Thank you.

Thank you for the question. Concerning sugarcane, in this semester this harvest. We had the following; half of the contract in the Midwest a little over half, we had linked this to sugarcane the other 4,000 hectares and with the price above the market. When we leased part of the land, we made a contract similar to the one we had in the Midwest and using as parameter as the sugarcane in São Paulo. And this gave us a billing following the standards. Additionally, we defined the 15,000 hectares. They had an investment by the other party. The party to whom we leased and this will present the price that we mentioned per hectare and leveraged the margin of the result. What we're expecting for next year? We're expecting a little higher prices, a little higher than what we were able to get this year. The first six months of harvest, between March and September. We had prices that were lower than in the last two years. We had this year. We had a difference that we were not able to capture and we believe that next year we will have higher prices. The margin we're estimating 5% above the current price, but it will depend on the tonnage that we can harvest and our estimated productivity. It's still a little early to see this. We have rainfall. We're trying to understand still the growth of the sugarcane plantation. Additionally Rafal [ph] I'd like to supplement. Gustavo explained very well the issue of margin, what happened in our results and I believe you would like to note what we expect. You're probably looking at many sugarcane. Now the scenario is different because Petrobras's price policy has changed when buying ethanol and this is giving us more transparency, more security. We…

Very clear. Thank you.

[Operator Instructions] since there are no more questions, we'd like to pass the floor to Mr. André Guillaumon for his final comments. André Guillaumon: Well, thank you very much for being with us and once again, we shared with you the partial results and we'd like to reinforce our message. We will continue working with our hard work to deliver more and more solid results. Here we make a comment, that company has a positive EBITDA and we know you all know that a great strength are the results from real estate. So we're on the new level. A company that delivers operational results independent of the sale of land and this was a great concern that some investors had. It is a period when we are beginning to sell assets in a more intense way, by our clients, our real [ph] producers those who produce soybean and grain and these farmers see they have to know that there will be a good harvest. So we should expect that the company in the next few months should announce real estate transactions that will add to this operational results that we show you. Once again thank you very much and we're available for any clarifications through our investors relation manager and [indiscernible] and Gustavo. If you have questions please get in touch with us and we are very interested for you to understand our business model. It's an innovative model and you will understand our functions and value generation. Once again thank you very much for participating in this call. We are available and we will continue with hard work in the next six months to deliver important results. Thank you.

Thank you. The conference call is now concluded. We thank you all for your participation. Wish you good afternoon.