BrasilAgro Companhia Brasileira de Propriedades Agrícolas - Q1 2024

Transcript

Ana Paula Zerbinati (Investor Relations Manager & Institute Director)

Good morning! We would like to begin a conference call of BrasilAgro Q1 2024, 2023, 2024. Reminding you that our year goes from July 1st-June 30, following the harvest year. So now we're reporting on the first three months of 2024, Q1 2024. We're a little earlier today, but we have some information on the screen for asking questions. Those who are hearing in English, the presentation is available in chat, and to hear simultaneous translation, please click on Simultaneous Translation. I'd like to thank you all for your presence. André, Gustavo are with us once again, and I would like to pass the floor to André to begin.

André Guillaumon (CEO)

Thank you, Ana. I'd like to thank you all for participating here, and we will try to be as brief as possible in the explanations, talking about the challenges we have had during the year, and we want to leave a lot of time for the Q&A session that are very good during this opportunity together. So I'll try to accelerate the presentation so we can spend time with questions. Here, we have the highlights. Net revenue, Q1, BRL 272 million. Net profit, BRL 30 million, adjusted EBITDA, BRL 23 million. Later on, we will see that there was a drop in net profit in relation to Q1 last year, approximately 29%. When we look at the estimates, we have the same estimates, 2.6 million tons with grains, cotton, sugarcane, a small reduction in the planted area. We will give you more details.

This reduction comes because we stopped planting corn in some units where we saw that productivity is risky and due to the current production costs, we're being very strict in choosing the highest productivity levels because the price of corn is low. Dividends, we approved this during the last meeting. The company, once again, is paying dividends. We know that this is very important for many investors, and here we are sure that having flexibility, we can be more aggressive. I said this many times, if we have projects, we, we will hold on. And the fourth, the fourth here, very important, the planted area—the growth of planted area by 11,000 hectares in... and independent of the reduction in the planted area of corn.

Well, to talk about this growth, the growth in the last three years, and you follow us, you know that the company was a great seller of farms. So to maintain the planted area as at the same time as you are selling farms, land, so we're accelerating transformation. We accelerated new projects to transform pasture land into cultivated area, and we have sold—we know we have sold farms. This is very positive when we look at this in the medium and longer-term, the company growing. And below that, here we have some details of the reduction in our. We intended to plant 186,000 hectares, and this is what we reduced. We reduced 4,200 hectares of corn, 5,000 hectares of winter crop corn, and 3.5 other crops.

And some areas were excluded, especially, and some were substituted by different crops. So we have soybean increasing, an increase in soy, 3,700 hectares, and beans also. Here, the company is not inventing the wheel. We have been planting beans for a long time. We developed this market. We developed export markets for beans and also the internal market for beans. We made partnerships with cold storage because you have seasonality here, and you have to wait, so we have cold storage to wait for better prices. And this graph on the right, the breakdown of crops, is very interesting. When you look at the medium and longer-term, this shows how the company is preparing itself. It is diversifying itself. Every time you have a greater diversification of crops, what do we want? We want to attenuate volatility of commodities.

If you looked at this graph five years ago, it was a pie chart that was half and half, sugarcane and soybean. The company has been working to manage and with growth of other crops that will give us better added value in the. There is a learning curve also here. The other graph, land ownership, we see the cultivated areas. I always say this, this combination is the winning combination, the combination of our own land with leased land, where our own land allows us to have a more efficient use of capital and leased land to mitigate the volatility of operational results. Because we're leasing areas in places where there is more stability of production, allowing the company to accelerate its growth and development of new areas.

So this slide shows very well how the company is going, how it's preparing itself, and how it is evolving. Well, here, a little more detail. You calculate EBITDA, we know. So here, a summary of what we will have, our projections for soybean, corn, also winter crop, and beans in thousands of tons, 250,000 tons of soybean. We're talking about 100,000 tons of corn. We're talking about more than 10,000 tons of beans, a lot of beans and cotton, and also winter crop for cotton. This shows the company is diversified, the change in mix that we're proposing, and we have been doing. This is not only for one year. We're building this during the last few years. Next. Here, the new participants, I will talk about the status. Everyone followed the planting.

We had some problems in planting, but basically, we have areas in the Araguaia Valley, 100% of the land planted in this region, Mato Grosso, doing very well. At the end of October, beginning of November, we began to plant in Mapitoba. So we already began planting in the state of Bahia. Irrigated. Now, the irrigated crops have been already planted some time ago, and we're accelerating the planting in Bahia and Piauí, since Mato Grosso, we're only in the new areas, we are finishing the planting. Beginning of the planting, beans begins now, this week, to plant beans. And beans, here we're talking about beans, it is in new areas. It's not in old areas. And cotton, too. Here, apart from the window, there are demands. We're projecting cotton, for example, on November 20th. These are the areas in Bahia.

We'd like to remind you that in cotton, we have three types of crops. We have the summer cotton, then in the beginning of January, we begin to plant the winter crop, as we call it. And then in January, we also begin to plant cotton in irrigated areas in Bahia. Last year, we have a beautiful productivity, above 410-420 bushels per hectare, showing that the company is doing its homework. We're learning this culture, and we begin, we believe it adds a lot of value to us. Cattle raising, as I always say, it's a transitional activity. We have in Paraguay two units in Bahia, Araldo Jardim and Preferência in here. We had a marginal operation with cattle that we are dismantling now.

But basically, when we look at GMD, GMD gain, average gain in weight, this quarter is, is not a good quarter for this. We're within the projections, we're doing this, we're looking at the KPIs, but this quarter is the most affected because there is a drought. So we're looking at the drought months, July, August, and September, which have a drought, wherein you have a lower average gain of weight. Even in December, we're talking about 260 grams only. So this was we had this projection. The way we do this curve, it begins with 150-200 grams of average weight gain. Then there's a peak in January and February, 850 grams per month, and then it begins to drop. In February, it's still high, March, it drops, April, it begins to drop.

And then, why? This curve follows the availability of food and all, and food depends on rainfall. So, in Q1, there is a problem because of drought. Sugarcane, we are finalizing the harvest, the volume, an increase in TCH. You have all followed this increase in TCH in the sector as a whole. We have a lot to improve here in sugarcane. I'm sure we want to improve this even more, the productivity, since. And we're making heavy investments in irrigation in our unit with sugarcane in the state of Maranhão. So we're going to increase this TCH in the next few years. Here, I don't know if I'm going too quickly. I'm trying to accelerate. So Ana is looking at me. She tries to rush me. Well, here, hedge. Here, final, this is the final situation. You have some product sold in the quarter.

In the next, we will erase 23, and we will have only 24. This shows the management of the company. Soybean, when we talk about the harvest, 2022, 2023, we had basically a sale of at $14.5 per bushel. Let me see here. Okay. Oh, I had it here. So we have the dollar with 5.47 exchange rates, which was a good combination. We can also show to you what hurt us. You have Chicago, but due to a super harvest in Brazil, historically, the whole sector had been projecting positive premiums. We have positive premiums for a long time, and this year, with the super harvest, there's this brought very negative premium, premiums, which had an impact on price. We will...

The 2023-2024 harvest, we can see soybean 50% sold, practically 50% sold. We began to do this in the past when we began to buy fertilizer. So we have a harvest sold at $13.12 and a dollar at BRL 5.37 exchange rate. When we go to corn, we're looking at 2023-2024, 45% sold, $47.02. Cotton, we accelerate a lot. This is traditional to do this in the market, to accelerate the sale due to some operations and due to the purchase of agro-chemicals, 72% sold, sold at $82.5 per bushel and dollar at BRL 5.53 exchange rate. So the company has tried to do its best to have efficiency in the sale. You know very well about the exchange rate.

The exchange rate, it now is different from what you see here, but we're always alert to capture these numbers. Now, ethanol, this market, we have a lot of derivatives here, not as much as we would like to, because it's not such a net market as others, but we did 23% of sale derivatives. And when, when we talk about 2023, 2024, sugarcane, sugarcane is harvested in April next year, 4% is sold. One extremely important factor, and it's very important to follow, are receivables from farms. You know that we sell farms always, always to receive in bags, by bags of, based on bags of soybean. So we monitor this PNL of receivables. So we have an important volume.

When you look at the top, the volume is large of what we have to sell in, soybean in terms of receivables from the sale of farms. This is to illustrate, as we always do, we see a descending curve in the price of some commodities. Some are more stable, like cotton, soybean; after it stabilized, cattle raising began to react, then stopped. And we have the great challenge, which has been ethanol. We are a large producer of sugarcane, but it's for mills that produce biofuels, and this is the result of the price policy of biofuels from Petrobras. We're suffering this impact, biofuel, especially ethanol. So it's a great challenge we have for next year. We are looking to expand sugarcane in units that have production, not only biofuels, but also sugar, mills that produce.

At the top, we see ethanol, at the bottom, sugar. I don't remember, I've been working in this area for 30 years, I never saw sugar with the prices we have today, and no doubt, this has paid well. This has been good for the mills, price of sugar. Here we see the costs. Today, there's an article that came out, and they used the letter X. And what is the X that I'm talking about? We saw prices which dropped and also costs. So we had a cost of product that is high because you can see here, fertilizer from BRL 950 that we paid in the last harvest, now urea, BRL 650, and today, you see new levels, new price levels. The harvest 2023-2024, buying urea below BRL 400. Chloride, we bought earlier.

There's also the issue to buy. It made sense at the time, and also interesting exchange rate. So, and map, you can see here, we were able to close with lower prices. Or you can also see on the right, percentage of coverage. Here you can see NPK. These percentages are not 100%, reminding you, we have an important part of sugarcane, winter crops, and irrigated areas, where we don't have the costs yet. Well, now I'd like to pass the floor to Gustavo.

Gustavo Lopez (CFO and Investor Relations Officer)

So I showed the scenario, now the numbers. Thank you, André. Well, made my job easier, showing the impact.

First of all, I'd like to thank all those participating in our call, and as Ana said in the beginning of this conference call, it's important to highlight that we're beginning a new year, Q1 2023-2024, showing a net profit, BRL 30 million. Here, 11%, adjusted EBIT, BRL 23.4 million, with a different from the same period last year. And with a net revenue of BRL 272 million, with a total mix that is higher than the previous quarter. This drop in net profit in relation to the same period last year, from 42-30, is due to the drop in prices that André mentioned in commodities, especially sugarcane, soybean, and corn.

Although the company has been effective in doing hedge, we didn't imagine that this we would have this impact in the premium and the basis, and this told us that we had to sell the soybean close to the costs we had. The costs were very high, and they affected the operating margins. This impact that you can see here was partially compensated by receivables of real estate, receivables from the sale of farms and real estate. Here we see the EBITDA margin, 90%, historically was 30%-35%, shows the scenario that the business is going through this, the impact of this super harvest with soybean put pressure on the premiums and also affected the price of corn and sugar, too, sugarcane, too.

So the company has to choose what kind of product it will plant, and we don't see reasons that could really bring a recovery of prices. So we had to sell with tight margins, especially in the case of corn. That's why we looked at our strategy, and we're changing our mix, product mix for 2023-2024, planting less corn. So we're trying to mitigate these operational losses, and we're decreasing the planted areas of corn by 1,000 hectares. Also, during this whole period, we delivered 1,000,000 tons of sugarcane. Very good harvest. When we look at our indicators, the productivity is much better than last year. This confirms that the market in Brazil is increasing the productivity.

Let's see how this impact of price and higher costs, price of fertilizer from the previous year, this is having an impact this year, and it provokes a drop in margins. Well, next slide. Let's see here the main numbers, the highlights. Here we see all the products. It's important to highlight the impact on soybean, corn, and sugarcane. This drop in the price of commodities. Also, we had a worse exchange rate. The exchange rate we used was worse. We used to sell at BRL 900 per ton, now it's BRL 850, almost 30% less, and the cost goes up due to the cost per ton, I'm saying, due to the impact of fertilizers and agro-chemicals. The results, we have BRL 650 per ton, although we have more tons sold.

We can also see in the case of corn, normally there is a correlation. We see historical correlation. One bag of soybean represents 2.4 bags of corn. We have this correlation. Now it's above, it's in excess of 3. So we don't see reasons to believe the price will go up. So we believe it's better to sell than to wait for higher prices. And here we see that the contribution is negative in corn. Sugarcane, we see here the price dropping 22 BRL per ton, 15% less due to the drop. Last year, we sold at $0.0115, and in this quarter, we sold at $0.90. We had a drop, and the cost per ton went up 22% with a gross result.

There's a drop here, a difference of BRL 45 per ton. When we consider BRL 20 per ton versus 89.90, we see that we have a margin of 1,800 per hectare, when historically it used to be two, 2,800, 3,500. So you see the drop, the impact that André mentioned, and the variance in some costs, especially last year, higher costs, gave us a margin of 15%. Historically, it was 30%. Here, we can see the EBITDA, adjusted EBITDA. Here, we always calculate excluding biological assets and also adjusted by derivatives during this period, and we added here all the expenses, depreciations, and amortizations. For Q1 2024, adjusted EBITDA, BRL 23 million. Last line, approximately BRL 20 million from sugarcane and BRL 3 million net from the sale of the inventories of soybean, those grains that were harvested last year.

When we see 2023 first quarter, this adjusted EBITDA was BRL 106 million. In 2023, 60 million came from sugarcane, 950,000 tons delivered, and BRL 44 million were from the inventory of soybean and corn. We had BRL 21 million in soybean and the rest in corn. On the right, you see a breakdown. As we mentioned, this operational adjusted EBITDA is recurring during this quarter, sugarcane that is more relevant. And during Q3, Q4, when the corn and soybean and cotton are harvested, they begin to be harvested and sold. It is around 40% for soybean, 40% sugarcane, and the rest, 20%. On the next slide, here we have our debt, net debt of the company.

We have here a short-term debt, a short-term debt, BRL 208 million. We have BRL 750 million in working capital that we need to plant these 80,000 hectares. So 30% of this working capital, we work with third parties and the rest with our own capital. And as we always say, the company has very little leverage, BRL 554 million. In cash, we have BRL 399 million. Net debt, BRL 108 million. On the right, you see, we have a debt below. The interest rate we pay is 97% of the CDI index, so we're, we have low. We pay low interest rates. We have here the tons that we have, the amount of soybean we have from the sale of farms.

Our company has a very comfortable position in terms of debt. Here, to show to you the value of our shares in the stock market and in the US. Here we see a graph that we show the evolution. Here you can see we will pay dividends now, and the share is discounted. We trust that we will have a good harvest, soybean and corn, and with the adjustments we made, we will mitigate the climate risks and the possibility of selling farms continues. We continue selling farms. We will continue to deliver positive results. So thank you very much, and now we'd like to begin the Q&A session.

Ana Paula Zerbinati (Investor Relations Manager & Institute Director)

Thank you, Gustavo. Thank you, André. Well, this is an invitation, a reminder. We will have our BrasilAgro Day on December first.

After some years of the pandemic, we will open this year for also investors, individuals also. We have limited entries. Please tell us if you're interested in our Agro Day. It's going to be very good. We will have the presence of our executives, André, Gustavo, André and Gustavo, but we will also bring our operations director, Énder, all our team of managers, strategy, legal, new business, purchasing, environment, and we will be there to make this event even better.

Well, I will pass the floor to Thiago Duarte from BTG.

Thiago Duarte (Head of Equity Research)

Okay. Thank you, Ana. Good morning, André, Gustavo. It's a pleasure to talk to you. I'd like to focus on two questions. The first...

The first, we see a change in mix, in the mix and the reasons, André talked a lot about this, but when we look at area, crops, and volume produced, we see a drop in the yield, in the productivity expected, especially for grains, especially soybean, because it seems early. There's a lot of discussion in the last few weeks about late planting of soybean. What are the reasons? Why, why are there so many problems in planting? Maybe not that much in Mato Grosso, but also in others. Or I'd like to know if there are other reasons for this, for delayed planting. The second question, in the last call, you mentioned, you discussed expectations of margins for soybean for this harvest, you talked about 1,700-2,250 BRL per hectare.

And now, your current expectations, does it make sense to continue with this profitability expected in soybean for the harvest that is beginning now? Thank you.

André Guillaumon (CEO)

Thiago, as always, we like very much your questions, intelligent questions. Thank you. First question, there is a drop. I will explain. It's not due to the climate yet. The company in the last year, I mentioned that the company has been growing. We're growing 11,000 hectares in planted area year after year, even with the sale of farms. So if we, if we add the acquisitions and leases and leasings, for example, Regalito Farm, 6,000 hectares, São Domingos Farm, 3,000, Panambi Farm, 5,700 hectares. Included in the, in the last harvest, we included one, and now we're including the rest, plus developed land.

So when you look at the dilution of yield, I have good news for you, Thiago. It's not El Niño, it's because we're adding a lot of new land. And you know very well, these new areas have a lower productivity. So when you look at yield, it's not the company making a decision, it's the opposite. In mature areas, we're being very aggressive, looking for this high productivity. But the fundamental thing and this difference, we have almost 15,000 hectares when we include Chaparral and some areas in Paraguay, we have more than 15,000 hectares of land in the first year, in their first year. Everything was well done. Most of these areas we developed, so it's their first year now. So in these areas, we will not have more than 50 bags of productivity.

So this is what is happening with productivity, new areas being added. The second question, margin is very good. We have been confirming, we have been confirming the cost of production, even with some drops, better than what we expected, drops in cost. So our cost of production is 4,000 BRL per hectare. Our expectation, and we said in the past, we, soybean should be 124 BRL, depending on the units. So when you look at the average productivity, we will have 1,700-2,500. 1,700, lower productivity, 2,500, higher productivity, and also units where you have higher freight costs and lower. Mato Grosso, for example, in Bahia, we have a better price because of better logistics, better freight prices. So that's our answer, Thiago.

Thiago Duarte (Head of Equity Research)

Also, are you, are you worried about the evolution of, of the—due to the problems with sowing soybean, planting soybean? I know it's a difficult question because we're talking about probabilities. Time will tell us, but just to try to measure your concern with this discussion, which has become important in the last two, three weeks. Well, where we are more concerned in the. Especially, we're concerned with Mato Grosso. Why?

André Guillaumon (CEO)

Because Mato Grosso, you have to you have a window to plant, to be able to plant corn also. Fortunately, why fortunately? Today, we have three positions. We're in the south, Alto Taquari, Vale do Araguaia, Xingu, and we have now positions in the west of Mato Grosso, Vale do Guaporé. I will show you how it works. Vale do Guaporé, new area, low expectations, very little in winter crop, less pressure.

Xingu and Taquari, the planting is fast. We have winter crop and corn. When you look at Mato Grosso, the rain, this year, we were able to plant in a very fast way in Xingu, the fastest planting. This is when?... We were able to plant very rapidly. It's not only climate. We worked with machines, service companies, and we planted Xingu very rapidly. So we began planting Xingu, the best year in history. We began to plant on September 27th. This year, we used to plant on September 27th, this year, September 22nd, all of Xingu, most of it, before October. And we had something very good in Xingu. One thing is planting before October, but so we planted in a well-distributed way. Well, this is when we look at Mato Grosso. When we look at Bahia, what is the concern?

The first El Niño.

So we readjusted. We began to plant in Bahia, in the state of Bahia, early. We have three people who are specialists. Our forecasts is not to have lack of rain. Possibly, we will have difficulties in planting due to excess rain, so we prepared ourselves to plant as quickly as possibly, worried with excess rainfall. After the 15th, things will change. We will have a lot of rain, and we're concerned with the excess rain, because we have to plant in a fast way until November 15th. So in a certain way, the vision for soybean is we're doing well. And for example, if we had a lot of winter crop in Guaporé Valley, we would have a problem. In Mato Grosso, we're late, São Domingos. There, we don't have pressure from winter crops.

It's its first year, first year, there will be no winter crop. But this Guaporé region has, is very similar to Tangará. So we're looking at it, but since we don't have a winter crop, it's, we're planting, but we're okay because we won't have ... It's a new area, we won't have a winter crop there.

Thiago Duarte (Head of Equity Research)

Excellent answer.

André Guillaumon (CEO)

Thank you, André.

Ana Paula Zerbinati (Investor Relations Manager & Institute Director)

Next question, Pedro Fonseca, XP.

Pedro Soares (Equity Analyst)

What are your expectations for the price of soybean and corn over the next weeks? Do you see any risk of a drop in prices in Chicago, if the climate maps in December get better?

André Guillaumon (CEO)

Pedro, that's a million-dollar question.

Okay. I always say that when we have these questions, we have to look at structural issues and others. I'll try to answer. Corn. Let's begin with corn.

Like Thiago just asked, we saw some regions in Mato Grosso with difficulties in planting soybean. So this, that brings a pushback in the production of corn, because to give an idea of the importance of the window for planting corn, in our data, one week of delay, you have the possibility of a 15% drop in production. The corn planted on January 15 produces 15% more than the corn planted on January 22. In 22, and on, and, corn planted on January 22 produces 15% more than corn planted on January 29. You may have a year when you have longer rainfall. So structurally, we have this problem of planting that is delayed in Mato Grosso, delayed planting. The second point, which is what I mentioned, why we reduced, why we had a drop in the planting of corn.

We had to, we had to decide. When you look at the winter crop, producer had 110 bags. When they, when they have 110 bags in the winter crop, they began collecting corn at 140 and ended at 78. So what did we do this year? We said, "Oh, let's stop." What is, what is the corn at 70-80? That's corn you plant in February. You get only-- You have a, a drop, 70-80 bags per hectare. So we, we purged an important area where we used to have corn. We're not -- what we do, the whole sector does, so in a certain way-... producer did the same, everyone did the same. So this difficulty in planting, constant production, all these problems with a higher break-even.

The only factor we cannot measure yet, which is structural, the level of adoption of technology. All grains, C4 plants, are dependent on nitrogenated products, and the market reduced. So when you have the planting window, when you have a drop in productivity, then you will have less productivity because of late planting. And the third point, which is technological package, these are the three drivers that can push the corn up and down. These three are pointing in the same direction, a drop in production. So we hope that there will be a drop and a correction, especially soybean and corn. So we're looking at $2.3-$2.5. It went up to $3.6, came back. So in the case of corn, we may have, in the next harvest, a recovery in price.

When you see or look at demand, I'm optimistic, too, for some reasons. We see- we saw a small recovery in beef. We knew, we know that beef is the engine of all, all the types of meat. We see a small recovery, and the experts are saying there will be a recovery in cattle raising in 2024, 2025, and this may affect corn. And the main issue is how much will be sent to China, whether we will export the 35 million tons to China. So that's the picture for corn. I'm optimistic concerning the price of corn due to the points I mentioned. Soybean. Soybean, Brazil, with everything we mentioned, everything we saw, the added areas. So we haven't seen what may happen. We have El Niño in the south. We had this intense rain.

For example, in the south of the country, Rio Grande do Sul and Paraná, these are the third largest producers of soybean. So there's a lot of uncertainty in soybean to be conservative. I believe that the third point I'd like to mention about soybean, we have a great political geo-tension, geopolitical tension, and I believe that any further increase in the tension may affect soybean. Let's hope this will not happen. Let's hope we will have peace, but there's a, a great, geopolitical tension, and we know that this brings demands for soft commodities and the conflict we're seeing in the last few months, if it continues or if it, if there is an increase in... In terms of Chicago, we believe that without these issues, we trust in these levels we have.

We believe it, it'll be a difficult basis, a difficult year for basis, maybe better than last year. Farmers also learn. Farmers learn that the—in the case of soybean, I'm more optimistic with corn than soybean. I believe soybean will continue with these prices, especially due to these geopolitical tensions. Another question from Pedro: How do we see the purchase of land after the rise in prices? What are we seeing in relation to the purchase of land? Supplementing, we have a question from Evaldo Batista. Real estate, whether we can buy land now. I said yesterday, this is the good thing about BrasilAgro. We can join the two strategies: selling land, selling real estate, and operations. I, I like to see the full glass. A difficult sector, drop in some margins. There's an important liquidity. We continue with good liquidity.

We had seven, eight years of very high margins. Farmers are still capitalized. They have money. So I believe that we will continue having liquidity. We're working. We're a thermometer. People come to us to buy and sell. And I can say that there are many people looking at our assets, wanting to buy our assets. So in the next conference calls, I hope to give you good news about real estate. As I said, we have a lot of things happening. So the market continues buying land. There's a lot of interest in buying land. We have to look at everything structurally. This business will continue being very good. The world needs more food, and this is where we can increase. And we have here in Brazil, we have winter crops. When you look at the return rates, we're conservative.

Because the price of sale of our assets will be the market. The price of purchase of what we buy, we, we decide. So the challenge, the greatest challenge, you have to make a projection for the exchange rate and the price of, of soybean. So we see with these prices in Chicago, it's not the price of the, it's not the price of the past, but prices are attractive due to our exchange rate in dollars. Like I said, I like to see the glass full of water. We see some opportunities already of financial stress. You know this very well. We bought land bank, land for transformation, but also stress. So we see high interest rates in Brazil in the last few years, high interest rates. The market isn't showing a recovery. Interest rates are still very high.

Let's hope interest rates will drop to 8%-9%, which are still high for those who had a lot of leverage. So I believe there's still opportunity, and we will begin to have some opportunities of financial stress or people rebalancing their portfolio. Businessmen who... Because the price of land went up a lot in the last 7 years. I'm optimistic. We begin to see also liquidity, greater liquidity in Paraguay. We're having a liquidity in Paraguay that is very high. Things that we didn't see in the past, we're beginning to see. So we will continue doing our homework, we will continue buying, we will continue selling land. And sometimes you sell more, sometimes you buy more. In the last few years, in the last calls, in the last 10 calls, I'm saying that we were selling more. Now, there is a balance.

There will be sale, yes. Will there be purchase? Yes. And we're beginning to see some opportunities.

Ana Paula Zerbinati (Investor Relations Manager & Institute Director)

The next question is from Renato Santos. He wants to know about the dividend policy. Will it continue in 2024? Will there be other payments of dividends, and when will these dividends that have been approved, when will they be paid?

André Guillaumon (CEO)

Hi, Renato. Well, let's begin. Payments. Our payment is for November 24th, thirty days after the general assembly. So payment will be made November 24th. Now, concerning next year, we will work so the company can continue with operations and the sale of land. In operations, we see a drop in price. In the last year, we saw this in sugarcane. And now, how sugarcane will behave? Actually, ethanol. Ethanol can put pressure, raising or decreasing dividends last year, so ethanol can affect this. So we hope to have the next harvest with better prices. So the company has tried to be a good payer of dividends. When you look at our average, you will see that in the last few years, dividend yield has been one of the best in the market, and our objective is to continue to be a company that has a good dividend yield.

When you have a lot of opportunities, sometimes we have to pay less, and our return on investment has been 5x. So when we say: "Wait, we have an opportunity to buy something," then later, this will also bring dividends. Now, in the medium longer-term, we want to be a company that is an important payer of dividends. This helped the company to have a lot of liquidity in our shares. We know the importance of liquidity for our shares, and this helps us to always pay dividends. And let's hope this is the first quarter, we're in Q1. Let's hope with the whole team to have a positive result, so we can continue being a strong company in the payment of dividends. Thank you, André.

Just supplementing the answer, we don't have a dividend policy that is pre-established, so the company, the rule is to pay at least 25% of the profit in dividends and the difference, the additional dividends, we don't have a policy. We have these assumptions that André imagined, that the management follows to define how much and whether we will pay additional dividends. Now, continuing the next question, Reynaldo Verissimo. He says, congratulations for the results, and he wants to know about El Niño. Are there crops that can be affected, for example, cotton in Bahia, can it be affected? Hi, Reynal- hi, Reynaldo. Well, Reynaldo knows a lot about the state of Bahia. What did we do in the company? We have increased the planted area with cotton, but most of it has been in irrigated land. Irrigated land, most of the cotton.

Foreseeing the possibility of El Niño, we had a drop in the non-irrigated cotton in Bahia. So we have irrigation in Araldo Jardim. They just implemented another 600 hectares of irrigated land, and this includes cotton in the next cycle. So we're alert. The concern with El Niño is Bahia, state of Bahia, but I would say that more important than total volumes is the distribution. I'll give you a number. You look at last year. Last year was a year when we had a lot of frustration with the climate in Chaparral, and last year, we had 1,300 millimeters. 1,300 millimeters last year, difficulties in production. If we look at the best year in... The best year when Chaparral produced since 2008, it was a year when we had 980 millimeters of rain.

It is fundamental because El Niño affects volumes. Now, for us, distribution, if 500—if you have rainfall of 500, the plant will use 100, the rest goes away, the rain. We want to know the distribution. Of course, there are statistical issues, greater probability, but we had years with El Niño, with 900 millimeters of rain, with excellent productivity in Bahia. So the attention now is to, and the decisive rain is after January 20-February 20. In this period, January 20-February 20, if we have one or two rains, well-distributed rains, we'll have a good year, even with the probability of El Niño bringing less rainfall. So especially cotton and the crops in Bahia affected by El Niño.

In parallel, not only BrasilAgro, but the whole sector, the company has been working a lot in Bahia to increase our coverage. If you go to a farm in Bahia, we have a 3-year plan to plant sorghum and other crops to cover the land and to avoid volatility. When the soil is well covered. Now, if you have an El Niño with a lot of stress, if you have 35 days without rain, no coverage will last. But in Bahia, since this plan has been put into effect for more than 3 years, we have tried to have a better stability, even in years with El Niño, because the soil is covered. So there's the climate issue, and also what we have done to mitigate these effects.

Ana Paula Zerbinati (Investor Relations Manager & Institute Director)

The next question from Rafael Flores, probably for Gustavo. What justifies the cost of sales? And as we saw there, 29%, because in this quarter, the relationship is 0.52. Why the cost of sales is so high in 2023?

Gustavo Lopez (CFO and Investor Relations Officer)

Okay, Rafael, thank you for the question. For sale, when we sell a farm, we look at the surface, and we have an estimate of the land and the number of bags of soybean, 1,000 hectares at 300 bags of soybean. What we have seen in our history, when you do the final measurement, we always have a difference of 2.5% up or down. So when we sell these 1,000 hectares, we record only 97.5%, and the other 2.5, we wait for the final measurements. What happens is that it's above or below this percentage, and this creates a distortion between cost and sale. Normally, we do this when we deliver the land. When we transfer the land to the new owner, we make this adjustment.

André Guillaumon (CEO)

You will see that once a year, we have this variance.

Ana Paula Zerbinati (Investor Relations Manager & Institute Director)

Thank you, Gustavo. The next question, Joelito Silva. André will probably answer this. André will need a few hours to answer. What were the reasons for the good results in 2023, 2024? How do you intend to use this in the future? Our year is beginning now. I don't know if he means January, December, or our year. And the second question for 2024, what were the reasons for success? Can you give us more information about this sustainability and social responsibility of the company? BrasilAgro and André loves these topics. Okay, André.

André Guillaumon (CEO)

Thank you. Excellent question. Yes. Let's begin with the first great investments we have done in technology, in biotechnology and bio inputs. And we are investing also digitalization, investments in digitalization. One is connection of the fields. We have partnership with telcos, and I believe this will be an important driver for future results. So bio inputs, biotechnology, connectivity, and new management online systems, new online management systems. We're changing an important tool we have for production management. The technician can do everything nowadays with his cell phone. So these are three important pillars that will bring us results, and we have some projects to have administrative efficiencies. This is being done by Gustavo. We have many things, so we can be more agile in accounting and do more with less, to be more efficient.

Supplementing this, the challenge we have to bring new crops and stability in crops and also people management. The company has spent a lot of time with management tools, courses, online platforms, training, so we're preparing a solid base in the company, so the results will not be based on luck. The results have to be based on good planning and not luck. So the company is preparing itself. When we talk about ESG, as Ana said, yes, I'm passionate about this area. Governance, we made many changes in the last. Although we have shares in the stock market, we opened the capital in the U.S., and all the issues with the SEC in the U.S., we had to be prepared. More recently, in the last year, we have an audit committee. We implemented an audit committee, policies that were intensified.

So I believe, in terms of governance, the company has been very agile. In terms of social issues, Ana Paula is director of the BrasilAgro Institute. This is something that we love. Last year, we had 17 projects. We helped more than 21,000 people. What are we doing next year? We approved in our last meeting an important budget for BrasilAgro Institute, BRL 3 million. BRL 3 million for BrasilAgro Institute. This is always linked to results, so we have a lot of projects and focusing on education. I invite you, I know that you like this. Spend some time with us, come here, and we'll talk about the institute. You will see what we have done in education. In terms of the environment, we have two great challenges: the measuring of greenhouse effect gases.

We're measuring, we're doing this for three crops already, and we have an important work which will be ready, carbon credits. The areas where we avoided deforestation. So we have great projects in this area. This is very important for us. I always say that ESG is becoming important. It's our in DNA. We always transform land, and we're always present with environmental authorities. We're always building schools, and now we used to do this. Social issues, we cannot forget. We have internal and outside social. External, we created the institute. Now, social, internally, I would say we have great policies for equity, many things we're working on and developing. So we would love to have more women, but we need infrastructure.

So when we look at, for example, gender in the units, when you have a good structure, we're one of the best in the market. Now, when you have a new unit where you have lack of structure, so we have to work on structure. So we have spent a lot of time on this. We could spend all afternoon talking about this. I tried to summarize. Environmental, social, and governance, what we have time, and also your first question, the challenges. Not for 2024, Joselito, the company in the next 5-10 years. Excellent. Well, let's close. I'd like to thank the presence of André, Gustavo, for their time to be with us in this conference call. I'd like to thank the participants. We had an excellent number of participants. The year is beginning, a lot of challenges, but also many good things happening.

Thank you very much, and we wish you a good day.