Post on 07-Dec-2018
transcript
Cotton lint yield for 2017/18 crop year revised to 1,810 kg/ha (1.3% above the figure disclosed on 2Q18)
Record EBITDA and Net Income in 9M18 of R$398MM and R$373MM, respectively
Lavoura de soja da safra 2018/19 com excelente aspecto na Pantanal Farn/MS. Picture taken on October, 23 (plantas com 23 “DAE” – Days after emergency)
Soybean pilot 2018/19 crop year with excellent aspect on the Pantanal farm/MS.
Photo taken on October 23 (plants with 23 “DAE” – Days after emergency).
Porto Alegre, November 13, 2018 – SLC AGRÍCOLA S.A. (Bovespa: SLCE3; ADR: SLCJY;
Bloomberg: SLCE3BZ; Reuters: SLCE3.SA), one of world’s largest producers of grains and
fibers, announces today its results for the third quarter of 2018. The following financial
and operating information is presented in accordance with International Financial
Reporting Standards (IFRS). The information was prepared on a consolidated basis and is
presented in thousands of Brazilian Real, except where stated otherwise.
NOTE: 3Q17 and 3Q18 refer to the cumulative three-month periods from July to September of the years 2017 and 2018, respectively. 9M17 and 9M18 refer to the cumulative nine-month periods from January to September of the fiscal years 2017 and 2018, respectively. HA refers to the horizontal percentage variation between two periods and VA refers to the percentage representativeness of the account over a given total.
INVESTOR RELATIONS DEPARTMENT
IVO MARCON BRUM Chief Financial & Investor Relations Officer FREDERICO LOGEMANN
IR & Strategic Planning Manager ALISANDRA REIS
IR Specialist MÔNICA PIVA
IR Assistant
3Q18 CONFERENCE CALL
Date: Nov. 14, 2018 Wednesday
PORTUGUESE 10:00 a.m. (Brasilia)
7:00 a.m. (New York) 12:00 p.m. (London)
Dial-in: +55 (11) 2188-0155 Replay 7 days: +55(11)2188-0400
ENGLISH 12:00 p.m. (Brasilia) 9:00 a.m. (New York)
2:00 p.m. (London) Dial-in: +55 (11) 21880155
Dial-in: :+55 1 646 843 60 54 (NY Connection) Replay 7 days: +55(11)2188-0400
RELEASE 3Q18
RELEASE 3Q18
CONTENT
TABLE OF REFERENCE – TABLES 5
TABLE OF REFERENCE – FIGURES 6
MESSAGE FROM MANAGEMENT 7
MARKET OVERVIEW 10
OPERATING PERFORMANCE 15
FINANCIAL PERFORMANCE 19
INDICATORS 30
LOCATION OF UNITS 32
DISCLAIMER 32
EXHIBIT – BALANCE SHEET – ASSETS 33
EXHIBIT – BALANCE SHEET – LIABILITIES 34
EXHIBIT – STATEMENT OF INCOME FOR THE YEAR 35
EXHIBIT – STATEMENT OF CASH FLOWS 36
Page 5 of 37
Release 3Q18
TABLE OF REFERENCE – TABLES
Table 1 Financial Highlights ............................................................................. 8
Table 2 Initial and Updated Yield Estimate, 2017/18 Crop Year ........................ 16
Table 3 Planted Area by Crop ......................................................................... 17
Table 4 Planted Area by Land Ownership .................................................... 17
Table 5 Property Portfolio .................................................................................... 17
Table 6 Land Development .............................................................................. 18
Table 7 Machinery and Storage Capacity ..................................................... 19
Table 8 EBITDA Conciliation .......................................................................... 19
Table 9 Net Revenue .........................................................................................20
Table 10 Volume Invoiced ................................................................................20
Table 11 Variation in Fair Value of Biological Assets ................................20
Table 12 Cost of Goods Sold ........................................................................... 21
Table 13 Realization of the Fair Value of Biological Assets ...................... 21
Table 14 Cotton Lint and Cottonseed Gross Margin .................................. 22
Table 15 Soybean Gross Margin ..................................................................... 22
Table 16 Corn Gross Margin ........................................................................... 22
Table 17 Gross Income ..................................................................................... 23
Table 18 Breakdown of Production Cost by Crop (%) ................................ 23
Table 19 Production Cost in R$/hectare ...................................................... 24
Table 20 Selling Expenses ............................................................................... 24
Table 21 Administrative Expenses ................................................................. 25
Table 22 Net Financial Income (Expense) .................................................... 25
Table 23 Gain (Loss) from Derivative Operations ....................................... 25
Table 24 Adjusted Net Financial Income (Expense) ................................... 25
Table 25 Financial Net Debt ............................................................................ 26
Table 26 Net Income ......................................................................................... 28
Table 27 Hedge Position ................................................................................... 29
Table 28 Capital Expenditure ......................................................................... 29
Table 29 Return on Equity ..............................................................................30
Table 30 Return on Net Assets .......................................................................30
Table 31 Return on Invested Capital .............................................................30
Table 32 Net Asset Value – NAV .....................................................................30
Table 33 Changes in Working Capital ........................................................... 31
Page 6 of 37
Release 3Q18
TABLE OF REFERENCE – FIGURES
Figura 1 Cotton Yield Kg/ha ................................................................................... 7
Figure 2 Soybean Yield kg/ha ................................................................................ 7
Figure 3 Corn Yield kg/ha ...................................................................................... 7
Figure 4 Change in Commodity Prices, in U.S. dollar, from January to
September 2018 ................................................................................................. 10
Figure 5 Cotton Price in International Market vs. Brazil .......................... 10
Figure 6 World Cotton Production and Consumption ................................ 11
Figure 7 Ending Stocks – China ...................................................................... 11
Figure 8 Soybean Price in International Market vs. Brazil ....................... 12
Figure 9. Figure 9 Soybean – Premium on Chicago (Parnaguá) ............... 12
Figure 10 Brazil Soybean Exports to China (January to September) ..... 13
Figure 11 Corn Prices in International Market vs. Brazil ......................... 13
Figure 12 World Corn Production and Consumption ................................ 14
Figure 13 Cotton Lint Yield Comparison ............................................................. 15
Figure 14 Evolution of Breakdown of Planted Area by Property Type .... 18
Figure 15 Changes in Maturity of Land Portfolio (Planted Area) ............. 18
Figure 16 Breakdown of Production Cost, 2018/19 Crop Year ........................... 23
Figure 17 Breakdown of Adjusted Gross Debt (R$ thousand) ................. 26
Figure 18 Changes in Net Debt/EBITDA Ratio ........................................... 27
Figure 19 Gross Debt Amortization Schedule (R$ thousand) .................. 27
Figure 20 Summary of Gross Debt Profile .................................................... 27
Figure 21 Gross Debt by Index and Instrument ......................................... 28
Page 7 of 37
Release 3Q18
MESSAGE FROM MANAGEMENT
Close of 2017/18 Crop Year During the third quarter of 2018, we concluded harvesting of the cotton and corn crops
for the 2017/18 crop year. With 72% of cotton processing already completed (base date Nov. 1), the average cotton lint yield (1st and 2nd crop) is currently estimated at 1,810
kg/ha, 1.3% above the guidance given in 2Q18, 8.3% above the initial forecast and 6%
above the Brazilian average for the period, according to CONAB. The soybean harvest
had already been concluded in the second quarter. As reported in the previous earnings
release, the soybean yield was 3,739 kg per hectare, a new record for the Company. The
soybean yield surpassed the target in 11.4% and was 10.2% higher than the Brazilian average, based on CONAB figures. The corn yield was lower than the initial forecast,
due to the premature end of precipitation in some regions, which affected the second
corn crop in Brazil as a whole. The final yield, however, which was above the guidance
given in 2Q18, at 5,622 kg/ha, 19.1% higher than the Brazilian average for the crop,
but 18.6% lower than the initial forecast.
The second straight crop year with yields significantly above the trend line is a reflection of the current strategy with higher focus on efficiency gains and on expanding the advantage over the country's average yield.
Figura 1 Cotton Yield Kg/ha
Figure 2 Soybean Yield kg/ha
Figure 3 Corn Yield kg/ha
1,807 1,810
1,708
Crop 2016/17
Crop2017/18
Brazilian Average(1)Crop 2017/18
(1)Source: CONAB
3,282
3,739
3,394
Crop 2016/17
Crop2017/18
Brazilian Average(1)Crop 2017/18
(1)Source: CONAB
6,680
5,622
4,721
Crop 2016/17
Crop2017/18
Brazilian Average(1)Crop 2017/18
(1)Source: CONAB
Cotton lint (First and second crop average)
6% above national average
Above record yield of 2016/17
Soybean
10.2% above national average
13.9% above 2016/17
Second-crop corn
19.1% above national average
Page 8 of 37
Release 3Q18
Record Financial Results
The improvement on the operational front supported unprecedented financial results for the nine-month period, with Adjusted EBITDA of R$397.6 million (up 26.6% on the
prior-year period) and Net Income of R$373.0 million (up 60.4% on same basis).
In 3Q18, EBITDA and Net Income decreased in comparison with 3Q17. However, in our
business, quarterly variations must be accompanied by contextualization. The lower
EBITDA basically reflects the displacement of invoiced soybean volumes between the quarters. In 3Q18 we had both anticipation of soybean shipments - that is, a higher percentage of the crop invoiced on the first semester of the year – and also volumes
postponed to the last quarter, the latter stemming from the event of freight tabulation,
which delayed withdrawal of the product by some customers. We expect to invoice
approximately 85,000 tons of cotton, 166,000 tons of soybean and 130,000 tons of corn
in the fourth quarter of 2018.
In the case of Net Income: due to the dynamics of appropriation of Biological Assets, the
distribution of net income between quarters was different between 2017 and 2018, as
it is impacted by the difference between market prices at harvest time (which serve as
the basis for the calculation of Biological Assets) and the prices hedged by the Company. In 2018, a larger portion of the expected profit for the year was recognized in the first
half, leaving less value to be recognized in the third and fourth quarters.
Table 1 Financial Highlights
(R$ Thousand) 9M17 9M18 AH 3Q17 3Q18 AH
Net revenue 1,152,326 1,296,156 12.5% 459,587 408,451 -11.1%
Change in Fair Value of Biological Assets 340,753 656,799 92.7% 101,442 129,134 27.3% Gross income 509,984 730,385 43.2% 155,556 114,498 -26.4%
Gross margin 44.3% 56.4% 12.1 p.p 33.8% 28.0% -5.8 p.p Operating income 399,314 600,779 50.5% 114,095 68,755 -39.7%
Operating margin 34.7% 46.4% 11.7 p.p 24.8% 16.8% -8.0 p.p
Net profit 232,634 373,042 60.4% 70,500 35,587 -49.5%
Net Margin 20.2% 28.8% 8.6 p.p 15.3% 8.7% -6.6 p.p
Adjusted EBITDA(1) 314,087 397,588 26.6% 116,834 88,298 -24.4%
Adjusted EBITDA Margin 27.3% 30.7% 3.4 p.p 25.4% 21.6% -3.8 p.p
Net debt(2) 844,882 1,189,668 40.8% 844,882 1,189,668 40.8% (1) Excluindo os efeitos dos Ativos Biológicos, pois não representam efeito caixa e excluindo a Baixa do Ativo Imobilizado (2) Ajustada pelos ganhos e perdas com derivativos;
Net debt increased during the year, but the Net Debt/EBITDA ratio remained at a very
comfortable level of 1.45 times. The higher debt balance is explained by the sharp
expansion in planted area for the new crop year (mainly due to the incorporation of a new production unit - Pantanal Farm), which increased working capital requirements.
Start of 2018/19 Crop Year
The 2018/19 crop year began in the second half of September with the planting of soybean, which, as of November 9, already was 80% complete. The distribution and
intensity of precipitation was excellent in all regions, which supported the good
implementation of crops.
The revised estimate is to reach a total planted area of 457,000 hectares in this new
crop year, which would be 13% higher than in the 2017/18 crop year. A highlight is the 28% increase in cotton planted area, 38.3% of which is in the second-crop regime, as per our another of our current strategy pillars that is growing in value crops. The total
second-crop planted area expanded 18.7%, seeking to optimize the use of our assets.
Production cost per hectare for the 2018/19 crop increased 19.4% over the 2017/18
crop year, basically due to the significant depreciation in the Brazilian Real against the
U.S. dollar along 2018, with this effect to be offset proportionately by the increase in
Page 9 of 37
Release 3Q18
Revenues, due to the execution of the Company’s hedging strategy (that has precisely
this purpose). Therefore, there should be no downward pressure on margins.
With regard to yields for this new crop year, compared to the yields projected for the
2017/18 crop year, we estimate a 1.7% increase in cotton (average of 1st and 2nd crops),
a 4.6% increase in soybean and a 2.2% decrease in the corn 2nd crop. The weather in the next crop year is expected to be normal: based on the November 5 report from the
National Oceanic and Atmospheric Administration (NOAA) of the U.S. Department of Commerce there is a 70% to 75% probability of a low-intensity “El Niño, which generally
promotes good agriculture development in Brazil.
Therefore, our expectations for the 2018/19 crop year are highly favorable given the aforementioned factors - planted area, yields, costs and weather - and we project a
continuation of the good level of profitability for this new crop year.
Other Significant Events in the Quarter
“Best in Agribusiness” Award, by the magazine Globo Rural. ranked first among
agricultural production companies.
“Best of Dinheiro 2018” Award, the award is given by the magazine IstoÉ
Dinheiro, which recognizes companies with best practices in financial
management, social responsibility, innovation and quality, human resources
and corporate governance;
Institutional Investor Magazine - Latin America Executive Team (Small
Caps, Agribusiness)
1st place in Best ESG/SRI Metrics
1st place in Best IR Professional (Frederico Logemann)
1st place in Best IR Team
2nd place in Best CEO (Aurelio Pavinato)
2nd place in Best CFO (Ivo Brum)
2nd place in Best Analyst Day
3rd place in Best IR Program
IR Magazine Brazil Awards 2018, for the best Investor Relations Program in
Brazil, in the Small Caps category.
Page 10 of 37
Release 3Q18
MARKET OVERVIEW
Figure 4 Change in Commodity Prices, in U.S. dollar, from January to September 2018
COTTON
The average cotton spot price on the ICE US during 3Q18 was de 84.4 USc per pound,
slightly below the average price in the prior quarter, but presenting a downward trend
towards the close of the quarter. As such, prices at the end of September returned to
the same levels observed at the start of the year.
Figure 5 Cotton Price in International Market vs. Brazil
Supply and demand in the short term, however, remains favorable for cotton, with
consumption following a solid upward path in recent years to set new records, with
70
80
90
100
110
120
130
140Cotton - ICE: 100 Soybean - CBOT:89 Corn - CBOT:105 Commercial Dollar: 110
Source: Bloomberg
(01/01/2018 = 100)
1Q18 2Q18 3Q18
200
220
240
260
280
300
320
340
360
380
400
50
55
60
65
70
75
80
85
90
95
100
01/01/17 01/04/17 01/07/17 01/10/17 01/01/18 01/04/18 01/07/18
R$ c
/lb
U$ c
/lb
ICE US$ c/lb Esalq R$ c/lb
Source: Bloomberg
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
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Release 3Q18
production growing more slowly, which points to yet another year of drawdowns in
global stocks. The recent decline in prices is explained by the uncertainties arising from
the trade war between the United States and China.
Figure 6 World Cotton Production and Consumption
In the United States, the world’s largest cotton exporter, USDA data indicate that
production will be 4.3 million tons, approximately 6% lower than the last crop year,
basically due to the severe drought in Texas (the country’s main cotton producing state).
Combined with the drought in Texas, hurricanes Florence and Michael not only caused additional losses in the volume produced (estimated at up to 220,000 tons and not yet considered in USDA figures), but also affected the quality of the fiber produced. Since
Brazilian cotton is of high quality, on par with that of U.S. and Australia, a production
shortfall in the United States provides space for Brazil to gain share in global trade. In
the current scenario of major uncertainties due to the current trade dispute, we already
have observed a reduction in China’s appetite for importing agricultural products from
the United States, which could also benefit Brazil, given the potential redistribution of agricultural products in global trade. According to CONAB, Brazil’s cotton lint
production should surpass 2 million tons in 2018, which would represent growth of over
30% on the prior crop year. Brazil’s cotton exports are projected to reach some 900,000
tons in the 2017/18 crop year (10% of global trade).
Figure 7 Ending Stocks – China
26,0
20.923.2
26.9 26.524.3 24.7 25.3
26.8 27.8
0
5
10
15
20
25
30
2014/15 2015/16 2016/17 2017/18 2018/19
Mil
lion
of Ton
s
Production Consumption
Source: USDA
14.6
12.3
10.0
8.3
6.5
0
2
4
6
8
10
12
14
16
2014/15 2015/16 2016/17 2017/18 2018/19
Million
of Ton
s
Source USDA
Page 12 of 37
Release 3Q18
SOYBEAN
The average spot soybean price on the CBOT was 14% lower than the average price in
the prior quarter and 12% lower than the price at the start of the year, basically due to
the confirmation by China of the 25% duty on soybean imports from the United States,
which is one of the developments of the trade war cited earlier. This comes along with the good conditions for the U.S. crop in 2018/19, whose harvest was more than 70%
concluded as of October 28, according to the USDA.
Figure 8 Soybean Price in International Market vs. Brazil
Despite the lower prices in Chicago, the prices paid in Brazilian real to Brazilian producers
remain at higher levels than a year ago, given the BRL/USD depreciation during the year, as well as the premiums in U.S. dollar practiced currently in the Brazilian market (basis), as shown in Figure 9.
Figure 9 Soybean – Premium on Chicago (Parnaguá)
50
55
60
65
70
75
80
85
90
95
100
8,0
8,5
9,0
9,5
10,0
10,5
11,0
11,5
12,0
01/01/17 01/04/17 01/07/17 01/10/17 01/01/18 01/04/18 01/07/18
R$/sc
US
$ /
bu
sh
el
CBOT US$/bu Esalq R$/sc
Source: Bloomberg
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
40
90
140
190
240
290
340
Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18
Cen
ts/lb
ush
el
Spot
Source: Bloomberg
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Release 3Q18
The trade dispute between China and United States explains this price difference in the
local market, and is also helping Brazil to increase its share as a supplier to China, as
confirmed by the record exports from Brazil to China during 2018. According to data
from SECEX, Brazilian soybean exports to China in 2018 in the first nine months of
2018 were 55 million tons, approximately 15% higher than in the same period last year.
Figure 10 Brazil Soybean Exports to China (January to September)
Source: http://comexstat.mdic.gov.br/pt/geral
According to the USDA forecast for the 2018/19 crop year, China’s soybean imports should remain similar to that observed in the prior crop year (94 million tons), offering
conditions for demand for Brazilian soybean to remain stable.
CORN
The average corn price of the first contracts traded on the Chicago Board of Trade
(CBOT) in 3Q18 was slightly lower than the average price in the previous quarter and,
by the end of September, was basically at the same level observed at the start of 2018.
In Brazil’s domestic market, however, prices in Brazilian real remained at high levels, reflecting the BRL/USD depreciation over the year and the crop shortfall, which also led
to a premium in the domestic price in relation to the price in Chicago, even in U.S. dollar.
Figure 11 Corn Prices in International Market vs. Brazil
47,744
55,066
20.000
25.000
30.000
35.000
40.000
45.000
50.000
55.000
60.000
2017 2018
Th
d T
on
s
20
25
30
35
40
45
50
3,0
3,5
4,0
4,5
01/01/17 01/04/17 01/07/17 01/10/17 01/01/18 01/04/18 01/07/18
R$/S
c
US
$/B
ush
el
CBOT - US$/bu Esalq - R$/sc
Source: ESALQ-USP, CBOT/CMA
1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18
Page 14 of 37
Release 3Q18
In the global market, a second year of deficits (demand exceeding production) should
support prices in the short/medium term. Despite the strong level of production in the
United States in the 2018/19 crop year (whose harvest was 68% concluded on October
28, according to the USDA), shortfalls in Brazil and Argentina reduced the volume of
supply during the year.
Figure 12 World Corn Production and Consumption
In Brazil, corn production stood at 80.8 million tons in the 2017/18 crop year, according
to data from CONAB, 17% lower than in the same period last year, basically due to the
shortfall in second-crop corn.
This scenario could continue to support domestic prices if the export program were
successful.
1,023,180
972,891
1,078,309
1,034,226
1,068,305
970,444988,914
1,036,011
1,065,317
1,099,030
900.000
950.000
1.000.000
1.050.000
1.100.000
1.150.000
2014/15 2015/16 2016/17 2017/18 2018/19
Th
d T
on
s
Production Consumption
Page 15 of 37
Release 3Q18
OPERATING PERFORMANCE
2017/18 CROP YEAR
In 3Q18, the cotton harvest was completed on 95,124 ha (first and second crop), with
the harvest of second-crop corn also completed in the period. With 72% of cotton processing already completed (base date Nov. 1), the average cotton lint yield (1st and
2nd crops) is currently estimated at 1,810 kg/ha, 1.3% above the guidance given in 2Q18,
8.3% above the initial forecast and 6% above the Brazilian average for the period,
according to CONAB.
Figure 13 Cotton Lint Yield Comparison
The harvest of second-crop corn ended with a yield of 5,622 kg/ha, 18.6% below the
initial forecast, but 19% above the Brazilian average for this crop, according to CONAB.
The shortfall in second-crop corn in Brazil was due to the premature suspension of
precipitation at the end of the crop year.
SOYBEAN
As reported in 2Q18, the soybean yield was 3,739 kg per hectare, which is a new record
for the company. Yield exceeded the target set by 11.4% and was 10.2% higher than the Brazilian average, based on CONAB figures.
COTTON 1ST CROP
After completing the harvest of 57,832 ha of first-crop cotton, the yield estimate was
revised to 1,893 kg/ha of cotton lint, up 16.6% from the previous year and a new record
for the company. The final yield will depend on the conclusion of processing. To date, the yield is 11.3% above target.
1,807
1,671
1,787
1,810
1,708
1600
1650
1700
1750
1800
1850
Final Yield
Crop
2016/17
Initial Yield
Crop 2017/18
Yield Update
Crop 2017/18
2Q18
Yield Update
Crop 2017/18
3Q18
Yield -
Brazilian
Average
CONAB
Kg/h
a
Page 16 of 37
Release 3Q18
COTTON 2ND CROP
The harvest of 37,292 ha was concluded, with the current cotton lint estimate at 1,682
kg/ha, which represents a yield increase of 9.3% on the 2016/17 crop year. In relation
to the initial forecast, the increase was 3.3%. The final yield is pending the conclusion
of processing.
CORN 2ND CROP
The harvest of 76,931 ha was concluded on September 13 with a yield of 5,622 kg per
ha, 4.3% above the guidance given in 2Q18 and 18.7% below the initial forecast, but
19% above the Brazilian average for the crop, according to CONAB.
The lower yield was due to the premature end of precipitation at the end of the crop year,
especially in the state of Maranhão and in eastern Mato Grosso state (see more details
in the 2Q18 release).
YIELD
Table 2 Initial and Updated Yield Estimate, 2017/18 Crop Year
Yield (kg/ha)
Crop 2017/18 Crop 2018/19
(a) Initial Estimate
(b) Current Estimate
∆ (b x a)
(c) Initial Estimate
∆ (c x a)
Cotton Lint 1st crop 1,699 1,893 11.4% 1,749 2.9% Cotton Lint 2nd crop 1,628 1,682 3.3% 1,622 -0.4%
Cotton Seed 2,142 2,348 9.6% 2,176 1.6% Soybean 3,360 3,739 11.3% 3,515 4.6%
Corn 2nd crop 6,912 5,622 -18.7% 6,760 -2.2%
2018/19 CROP YEAR
The 2018/19 crop year began in September with the planting of super-early and early
soybean varieties on the farms located in the states of Mato Grosso, Mato Grosso do Sul
and Maranhão, as well as on irrigated areas in the states of Bahia and Goiás.
SOYBEAN
The planting of super-early and early soybean varieties, which enables the planting of
second-crop cotton and corn, began in the last ten days of September. The area planted
by November 9 was 193,081,97 ha in the states of Mato Grosso, Mato Grosso do Sul,
Goiás, Bahia and Maranhão, which represents 80.0% of the estimated soybean area. We managed to plant 100% of the super-early and early soybean varieties, and to date
the crops are presenting excellent development.
Page 17 of 37
Release 3Q18
PLANTED AREA
The following table presents the latest data on planted area for the 2018/19 crop year
and a comparison with the previous crop year.
Table 3 Planted Area by Crop
Crop Mix
Planted Area Planted Area Share
Δ% 2017/18 2018/19(1) 2018/19 ------------------ ha ------------------ %
Cotton 95,124 121,777 26.6 28.0 Cotton 1st crop 57,832 73,089 16.0 26.4
Cotton 2nd crop 37,292 48,688 10.7 30.6 Soybean (Commercial + Seeds) 230,164 243,323 53.2 5.7
Corn 2nd crop 76,931 88,850 19.4 15.5 Others crops(2) 2,228 3,084 0.7 38.4
Total Area 404,446 457,034 100.0 13.0 (1) Weather factors may affect the planted area forecast. (2) Wheat, corn 1st crop, corn seed and sorgum.
Table 4 Planted Area by Land Ownership
Area Mix
Planted Area Planted Area Share
2018/19 Δ% 2017/18 2018/19(1) ------------------ ha ------------------ %
1st Crop Area 288,607 316,560 69.3 9.7 Owned Land 108,516 110,557 24.2 1.9
Leased Area 106,540 131,843 28.8 23.7 Joint Ventures Area(2) 38,879 39,487 8.6 1.6
LandCo Area(3) 34,672 34,672 7.6 0.0 2nd Crop Safra 115,839 140,474 30.7 21.3
Owned Land 60,659 62,410 13.7 2.9 Leased Area 36,235 54,942 12.0 51.6
Joint Ventures Area(2) 7,035 8,516 1.9 21.1 LandCo Area(3) 11,911 14,606 3.2 22.6
Total Area 404,446 457,034 100.0 13.0 (1) Weather factors may affect the planted area forecast. (2) Areas owned by Grupo Roncador and Mitsui. (3) A SLC Agrícola holds an interest of 81.23% in SLC LandCo.
LAND PORTFOLIO
The portfolio of properties under our management on November 13 is presented below:
Table 5 Property Portfolio
Crop 2017/18 Area (ha) Owned(1) SLC LandCo(2) Leased Joint
Ventures Under
Control Total
Planted(3)
Farms State -------------------------------------------------------------ha ----------------------------------------------------------- Pamplona GO 17,911 3,857 21,768 21,399
Pantanal MS 25,803 25,803 41,343 Planalto(7) MS 15,006(7) 1,635 16,641 22,273
Planorte MT 23,454 23,454 31,481 Paiaguás MT 28,124 15,806 43,930 66,805
Perdizes(5) MT 28,846 13,276 42,122 27,421 Pioneira(4) MT 19,435 19,435 27,950
Panorama BA 10,373 14,253 24,626 21,735 Paladino(5) BA 20,053 20,053 20,053
Piratini BA 25,356 25,356 7,506 Palmares BA 16,195 831 15,943 32,969 23,864 Parnaíba(8) MA 31,398(8) 11,270 42,668 45,461
Palmeira MA 10,200 15,859 26,059 21,302 Planeste MA 22,785 16,622 39,407 54,704
Parceiro BA 27,556 3,680 10,795 42,031 14,340
Paineira (6) PI 12,892 12,892 -
Parnaguá PI 23,736 23,736 9,398
Total - 225,118 86,501 131,843 39,488 482,950 457,034 (1) Own property, includes Legal Reserve. (2) SLC Agrícola currently owns 81.23% of SLC LandCo, while the Valiance fund owns 18.77%. (3) Including
the second crop. Weather factors may affect the planted area forecast. (4) The Pioneira Farm is part of the joint arrangement with Grupo Roncador. (5) The Perdizes and Paladino Farms are part of the joint arrangements with Mitsui in SLC-Mit. (6) Farm leased to third parties. (7) Donation of 2,431
hectares to the Taquari River Headwaters State Park in Mato Grosso do Sul. (8) Termination of the acquisition contract.
Page 18 of 37
Release 3Q18
CURRENT POSITION OF OUR LANDBANK
AREAS UNDER DEVELOPMENT PROCESS The current position of our landbank is presented below:
Table 6 Land Development
SLC Agricola Farms Areas in transformation Areas in licensing process
(ha) (ha) Palmares - 601
Parnaíba - 1,464 Parnaguá - 3,426
Parceiro - 6,698
Sub Total - 12,189
SLC LandCo Farms Areas in transformation Areas in licensing process
(ha) (ha) Parnaíba (1) - 4,749
Piratini 9,993 - Parceiro (1) 2,645 -
Sub Total 12,638 4,749
Total 12,638 16,938 (1) Areas acquired by SLC LandCo to be developed jointly with these farms. Note: The estimate of areas in the licensing process could change due to georeferencing.
The following chart shows our planted area broken down by type of property:
Figure 14 Evolution of Breakdown of Planted Area by Property Type
CHANGES IN MATURITY OF LAND PORTFOLIO
Figure 15 Changes in Maturity of Land Portfolio (Planted Area)
57% 53% 49%
43% 47% 51%
Crop2016/17
Crop 2017/18
Crop 2018/19
Planting in Own Area Planting in Leased Area
12% 5%1% 1%
88% 95% 99% 99%
2015/16 2016/17 2017/18 2018/19
Immature Areas Mature Areas
Immature Areas = less than 3 years of harvesting
Page 19 of 37
Release 3Q18
MACHINERY AND STORAGE CAPACITY
The following table presents the machinery owned by the Company and its current storage capacity:
Table 7 Machinery and Storage Capacity
Machinery Quantitye
Tractors 198
Grain Combines 181 Cotton Pickers 74
Planters 197 Self-propelled sprayers 144
Storage Capacity Grains Cotton
Tons 613,700 115,981
% Production(1) 44% 53% (1)Estimativa com base na área plantada e produtividades estimadas para o ano-safra 2018/19.
FINANCIAL PERFORMANCE
EBITDA
Table 8 EBITDA Conciliation
(R$ thousand) 9M17 9M18 AH 3Q17 3Q18 AH
Net revenue 1,152,326 1,296,156 12.5% 459,587 408,451 -11.1%
Change in Fair Value of Biological Assets 340,753 656,799 92.7% 101,442 129,134 27.3% (-) Cost of Goods and/or Services Sold (983,095) (1,222,570) 24.4% (405,473) (423,087) 4.3%
Cost of Goods (795,152) (837,939) 5.4% (328,971) (301,093) -8.5%
Realization of the Fair Value of Biological Assets (187,943) (384,631) 104.7% (76,502) (121,994) 59.5% Gross Income 509,984 730,385 43.2% 155,556 114,498 -26.4%
(-) Sales Expenses (48,892) (63,446) 29.8% (19,674) (22,122) 12.4% (-) General and administrative expenses (51,229) (59,991) 17.1% (18,732) (22,562) 20.4%
General and administrative (32,565) (37,431) 14.9% (10,828) (12,733) 17.6% Participations Results (18,664) (22,560) 20.9% (7,904) (9,829) 24.4%
Administrative Fees (10,648) (11,495) 8.0% (3,381) (2,349) -30.5%
(-) Other operating revenues (loss) 99 5,326 n.m. 326 1,290 295.7% Other revenue 99 5,326 n.m. 326 1,290 295.7%
(=) Income from Activity 399,314 600,779 50.5% 114,095 68,755 -39.7% (+) Depreciation and amortization 65,103 63,971 -1.7% 27,384 23,093 -15.7%
EBITDA 464,417 664,750 43.1% 141,479 91,848 -35.1%
(-) Change in Fair Value of Biological Assets (note 7) (340,753) (656,799) 92.7% (101,442) (129,134) 27.3% (+) Realization of the Fair Value of Biol. Assets (note 23) 187,943 384,631 104.7% 76,502 121,994 59.5%
(+) Write-off of fixed assets 2,480 5,006 101.9% 295 3,590 n.m.
Adjusted EBITDA 314,087 397,588 26.6% 116,834 88,298 -24.4%
Adjusted EBITDA Margin 27.3% 30.7% 3.4 p.p 25.4% 21.6% -3.8 p.p (1) Excludes the effects from Biological Assets, since they are noncash. (2) Excluding write-off of Property, Plant and Equipment. *NE: Note in the Quarterly Information (ITR) In 3Q18, Adjusted EBITDA was R$88,298 thousand, 24.4% lower than in 3Q17. The
variation is explained by the lower corn yield in the comparison of the 2016/17 and
2017/18 crop years, which affected the margin of invoiced products between quarters (via an increase in unit cost), and by the lower volume of soybean invoiced in the period
(since invoiced volume was concentrated in the first half of the year), with a slight
reduction in margin.
In the nine-month period, however, Adjusted EBITDA was a record R$397,588 thousand,
with margin of 30.7%, which represent growth of 26.6% and margin expansion of 3.4 p.p.
compared to 9M17. The growth in Adjusted EBITDA in both periods is basically due to
the result of cotton. Most of the cotton invoiced in the first nine months of 2018 is from the 2016/17 crop year, which reported a much higher yield than that of the 2015/16
crop year (which originated most of the cotton invoiced during 9M17). We also had an
increase in volume invoiced and sale prices. Soybean also benefitted EBITDA in the
nine-month period, through an increase in volume invoiced and a decline in unit cost,
given the lower yield in the comparison of the 2016/17 and 2017/18 crop years.
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Release 3Q18
NET REVENUE
Net Revenue in 3Q18 contracted 11.1% on the year-ago period. The reduction is mainly
due to the soybean volumes invoiced, given the concentration of volume invoiced in the
first half of the year, as well as the postponement of invoicing to the fourth quarter.
In 9M18, Net Revenue grew 12.5%, led by the cotton and soybean crops. Net revenue
from cotton increased 55.9% in 9M17, reflecting the 33.7% higher volume invoiced,
which is explained by the record yield in the 2016/17 crop year, combined with the
9.3% increase in unit price. The soybean volume invoiced increased 9.4% from 9M17,
due to the higher yield in the current year, as mentioned above.
Table 9 Net Revenue (R$ Thousand) 9M17 9M18 AH 3Q17 3Q18 AH
Net Revenue 1,152,326 1,296,156 12.5% 459,587 408,451 -11.1%
Cotton lint invoiced 308,595 481,144 55.9% 122,756 188,677 53.7% Cotton seed invoiced 61,345 45,842 -25.3% 54,590 31,482 -42.3%
Soybean invoiced 619,452 710,172 14.6% 173,587 126,247 -27.3%
Corn invoiced 90,143 95,756 6.2% 74,971 86,205 15.0%
Others (invoiced) 19,630 20,151 2.7% 17,611 13,342 -24.2% Hedge income 53,161 (56,909) n.m. 16,072 (37,502) n.m.
Table 10 Volume Invoiced
(Tons) 9M17 9M18 AH 3Q17 3Q18 AH Volume Invoiced 1,175,140 1,257,382 7.0% 624,967 559,863 -10.4%
Cotton lint 58,238 77,865 33.7% 24,533 27,188 10.8% Cotton seed 98,029 122,490 25.0% 88,140 89,580 1.6%
Soybean 639,399 699,331 9.4% 175,928 118,693 -32.5% Corn 303,876 290,317 -4.5% 268,302 264,475 -1.4%
Other 75,598 67,379 -10.9% 68,064 59,927 -12.0%
Table 11 Variation in Fair Value of Biological Assets
(R$ Thousand) 9M17 9M18 AH 3Q17 3Q18 AH Change in Fair Value of Biological Assets 340,753 656,799 92.7% 101,442 129,134 27.3%
Cotton lint 216,535 346,989 60.2% 94,229 132,675 40.8% Cotton seed 32,296 23,563 -27.0% 13,963 8,161 -41.6% Soybean 105,193 278,734 165.0% - - -
Corn (16,213) 216 n.m. (6,750) (11,556) 71.2% Other 2,942 7,297 148.0% - (146) -100.0%
The variation in the fair value of biological assets is calculated by multiplying the estimated yield (in the month prior to the harvest) by the market price at the farm, net of taxes, less
costs incurred.
The recognized apportionment of the variation in the fair value of Biological Assets in 2Q18
increased 27.3% compared to 3Q17, amounting to R$129,134 thousand. In 9M18, this
increase was 92.7%, to R$656.8 million.
This significant increase is mainly explained by the expectations of higher margins for the cotton and soybean crops, mainly due to the higher yield compared to the previous crop
year, and by the expansion of cotton area in the current crop year.
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Release 3Q18
COST OF GOODS SOLD
Cost of goods sold decreased 8.5% in 3Q18, due to the lower soybean volume invoiced,
which was partially offset by the higher unit costs of cotton, corn and soybean.
Except for corn, whose higher unit cost is due to the lower yield in relation to the
previous crop year, the increases in the unit costs of cotton and soybean this quarter do not reflect the expectations of the crop year as a whole (which is for a reduction in
unit costs compared to the prior period), and were due to the mix of farms that shipped
the product in 3Q18 versus 3Q17.
In 9M18, cost increased 5.4% basically due to the higher cotton and soybean volume
invoiced and to the higher unit cost of corn. This effect was partially offset by the
reductions of 12% and 5.8% in the unit costs of cotton and soybean invoiced in the period, respectively.
Table 12 Cost of Goods Sold (R$ thd) 9M17 9M18 AH 3Q17 3Q18 AH Cost of Goods Sold (795,152) (837,939) 5.4% (328,971) (301,093) -8.5%
Cotton Lint (205,265) (241,479) 17.6% (68,987) (87,882) 27.4%
Cotton Seed (44,352) (31,317) -29.4% (37,971) (19,537) -48.5%
Soybean (444,915) (458,237) 3.0% (141,234) (102,291) -27.6%
Corn (80,748) (92,143) 14.1% (70,876) (85,004) 19.9%
Others (19,872) (14,763) -25.7% (9,903) (6,379) -35.6%
Table 13 Realization of the Fair Value of Biological Assets
(R$ thd) 9M17 9M18 AH 3Q17 3Q18 AH Realiz. of the fair Value of Biol. Assets (187,943) (384,631) 104.7% (76,502) (121,994) 59.5%
Cotton Lint (55,853) (125,724) 125.1% (44,398) (61,559) 38.7% Cotton Seed (13,564) (14,493) 6.8% (13,557) (8,999) -33.6% Soybean (132,570) (238,157) 79.6% (33,412) (49,183) 47.2% Corn 16,649 (253) n.m. 15,425 183 -98.8%
Others (2,605) (6,004) 130.5% (560) (2,436) 335.0%
ANALYSIS OF MARGINS BY CROP
To contribute to a better understanding of margins by crop, in this section, the gain
(loss) from currency hedge is allocated among cotton, soybean and corn.
Cotton Lint and Cottonseed
Of the cotton invoiced in 3Q18, 94% is associated with the 2017/18 crop year. In 1H18
and 9M18, gross margin increased compared to the same period last year. Margin increased 9.0% in 3Q18, due to the 12.1% increase in unit price, which was partially
offset by the increase in unit cost of 14.9%.
As mentioned before, this increase in cotton unit cost in the quarter does not reflect the
expectations for the crop year as a whole, which was explained by the impact on the
mix of farms that invoiced the product this quarter compared to the mix in 3Q17.
In 9M18, the higher margin is due to the better prices and yield, with a reduction in
unit cost. In 9M18, most of the cotton invoiced originates from the 2016/17 crop year,
whose yield was significantly higher than in the 2015/16 crop year.
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Release 3Q18
Table 14 Cotton Lint and Cottonseed Gross Margin Cotton Invoiced 9M17 9M18 AH 3Q17 3Q18 AH
Cotton Lint Invoiced
Volume Invoiced Ton 58,238 77,865 33.7% 24,533 27,188 10.8% Net Revenue R$ thd 308,595 481,144 55.9% 122,756 188,677 53.7%
Result of currency hedge R$ thd (11,132) (46,375) 316.6% 10,884 (22,702) n.m. Net inc. adj. for the res. of currency hedging R$ thd 297,463 434,769 46.2% 133,640 165,975 24.2%
Unit Price R$ / Ton 5,108 5,584 9.3% 5,447 6,105 12.1% Cost Total R$ thd (205,265) (241,479) 17.6% (68,987) (87,882) 27.4%
Unit Cost R$ / Ton (3,525) (3,101) -12.0% (2,812) (3,232) 14.9% Unitary Margin R$ / Ton 1,583 2,483 56.9% 2,635 2,873 9.1%
Cotton Seed Invoiced Volume Invoiced Ton 98,029 122,490 25.0% 88,140 89,580 1.6%
Net Revenue R$ thd 61,345 45,842 -25.3% 54,590 31,482 -42.3% Unit Price R$ / Ton 626 374 -40.3% 619 351 -43.3%
Cost Total R$ thousand (44,352) (31,317) -29.4% (37,971) (19,537) -48.5% Unit Cost R$ / Ton (452) (256) -43.4% (431) (218) -49.4%
Unitary Margin R$ / Ton 174 118 -32.2% 188 133 -29.3%
SOYBEAN
Soybean unit margin in 3Q18 decreased 32.5% from 3Q17. This margin reduction was due to the increase in unit cost, due to the change in the mix of farms that invoiced the
product between the periods (in 3Q18, the farms that invoiced soybean had weaker
performances compared to those that invoiced the product in 3Q17). However, note that
the expectation for 9M18 is for an increase in soybean margins, given the higher
productivity and stable sales prices, which offset the increase in cost per hectare.
In 9M18, margin decreased 3.3%, since the reduction in the invoiced price was only
partially offset by the decrease in unit cost (the latter resulting from the better yield). Note, however, that in the whole of the crop year, soybean invoice prices should remain
stable in relation to 2017, which, combined with the better yields, should support
expansion in soybean margin.
Table 15 Soybean Gross Margin Soybeans Invoiced 9M17 9M18 AH 3Q17 3Q18 AH
Volume Invoiced Ton 639,399 699,331 9.4% 175,928 118,693 -32.5%
Net Revenue R$ thd 619,452 710,172 14.6% 173,587 126,247 -27.3% Result of currency hedge R$ thd 60,340 (3,994) n.m. 1,778 (8,369) n.m. Net inc. adj. for the res. of currency hedging R$ thd 679,792 706,178 3.9% 175,365 117,878 -32.8%
Unit Price R$ / Ton 1,063 1,010 -5.0% 997 993 -0.4%
Cost Total R$ thd (444,915) (458,237) 3.0% (141,234) (102,291) -27.6% Unit Cost R$ / Ton (696) (655) -5.9% (803) (862) 7.3%
Unitary Margin R$ / Ton 367 355 -3.3% 194 131 -32.5%
CORN
The corn invoiced in 3Q18 was produced in the 2017/18 crop year. Corn unit margin
was negative in the quarter and in 9M18. This variation is due to the lower yield in the
2017/18 crop year compared to the 2016/17 crop year, with a consequent increase in unit cost.
Table 16 Corn Gross Margin
Corn Invoiced 9M17 9M18 AH 3Q17 3Q18 AH
Volume Invoiced Ton 303,876 290,317 -4.5% 268,302 264,475 -1.4% Net Revenue R$ thd 90,143 95,756 6.2% 74,971 86,205 15.0%
Result of currency hedge R$ thd 3,953 (6,540) n.m. 3,410 (6,431) n.m. Net in. adj. for the res. of currency hedging R$ thd 94,096 89,216 -5.2% 78,381 79,774 1.8%
Unit Price R$ / Ton 310 307 -1.0% 292 302 3.4% Cost Total R$ thd (80,748) (92,143) 14.1% (70,876) (85,004) 19.9%
Unit Cost R$ / Ton (266) (317) 19.2% (264) (320) 21.2% Unitary Margin R$ / Ton 44 (10) n.m. 28 (18) n.m.
Page 23 of 37
Release 3Q18
GROSS INCOME
Table 17 Gross Income
(R$ Thousand) 9M17 9M18 AH 3Q17 3Q18 AH Gross Profit 509,984 730,385 43.2% 155,556 114,498 -26.4%
Cotton lint 92,198 193,290 109.6% 64,653 78,093 20.8% Cotton seed 16,993 14,525 -14.5% 16,619 11,945 -28.1%
Soybean 234,877 247,941 5.6% 34,131 15,587 -54.3% Corn 13,348 (2,927) n.m. 7,505 (5,230) n.m.
Others (242) 5,388 n.m. 7,708 6,963 -9.7% Biological Assets 152,810 272,168 78.1% 24,940 7,140 -71.4%
Gross Income in 3Q18 amounted to R$114,498 thousand, with margin of 28%, a
decrease of 5.8 percentage points from 33.8% in 3Q17. Excluding effects from Biological
Assets, Gross Income decreased 17.8%, essentially due to the lower soybean volume
invoiced and the decrease in corn margin.
In 9M18, Gross Income increased 43.2% from 9M17, with margin of 56.4%, up 12.1
percentage points in relation to the same period last year. Excluding the apportionment
of Biological Assets, Gross Income advanced 28.3%. The main crop that contributed to
the increase in Gross Income was cotton, with higher volume and price combined with
a lower unit cost.
PRODUCTION COST
The following chart presents a breakdown of our average production cost in the 2018/19
crop year:
Figure 16 Breakdown of Production Cost, 2018/19 Crop Year
Table 18 Breakdown of Production Cost by Crop (%)
% Cotton Soybean Corn
Average
2018/19
Average
2017/18 Variable Costs 82.5 74.5 78.8 79.3 76.7
Seeds 9.4 14.2 20.1 12.2 12.4 Fertilizers 21.8 18.9 31.7 21.8 19.0
Chemicals 27.4 22.4 11.6 24.0 21.7 Pulverização Aérea 1.9 1.2 1.5 1.6 1.8
Fuels and Lubricants 4.2 5.0 5.0 4.6 4.5 Labor 1.1 0.7 0.6 1.0 1.0
Ginning 8.4 2.3 2.7 5.7 6.8 Maintence of machinery and quipments 3.6 5.1 3.9 4.1 5.0
Others 4.8 4.6 1.7 4.4 4.3 Fixed Costs 17.5 25.5 21.2 20.7 23.3
Labor 7.8 10.3 8.6 8.8 9.7
Depreciation and amortization 3.2 5.7 3.8 4.1 5.6 Leasing 4.7 7.1 6.8 5.7 5.2
Others 1,9 2,4 2,1 2,1 2,7
24%
22%
12%
10%
10%
8%
4%
6%4%
Defensivos
Fertilizantes
Sementes
Mão de Obra
BeneficiamentoMan. máquinas e implementos
Outros
Depreciações e Amortizações
Arrendamentos
Combustíveis e Lubrificantes
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Release 3Q18
Our estimates of total production cost per hectare for the 2018/19 crop year are
presented below:
Table 19 Production Cost in R$/hectare
A B C(1)
Total (R$/ha)(2) Budget 2017/18 Achieved 2017/18 Budget 2018/19 C/B C/A Cotton 1st crop 6,811 7,140 8,187 14.7% 20.2%
Cotton 2nd crop 6,023 6,002 7,475 24.5% 24.1% Soybean 2,311 2,355 2,697 14.5% 16.7%
Corn 2nd crop 1,814 1,754 2,119 20.8% 16.8% Custo médio total (1) 3,368 3,433 4,020 17.1% 19.4%
(1) According to the position on September 30, 2018 (budget amounts). Figures may suffer changes by the end of cotton processing
and the sale of grains. (2) Total average cost weighted by area.
The costs per hectare estimated for the 2018/19 crop year registered an average
increase in Brazilian real of 19.4% compared to the 2017/18 crop year, basically due to
the depreciation in the Brazilian real against the U.S. dollar in the period, since
approximately 55% of costs are denominated in dollar. This increase will be offset by a
proportionate increase in revenues, due to the Company’s hedge policy. Accordingly, we
expect a continuation of the good margins levels for the next crop year.
SELLING EXPENSES
Selling expenses increased 12.4% and 29.8% in 1Q18 and 9M18, respectively, compared to the same period last year. The main factors contributing to this variation were the
higher volume of cotton invoiced and the higher export expenses. Selling expenses
corresponded to 4.9% and 5.4% of net revenue in 9M18 and 3Q18, respectively.
Table 20 Selling Expenses
(R$ Thousand) 9M17 9M18 AH 3Q17 3Q18 AH
Freight 19,624 23,517 19.8% 9,769 9,466 -3.1%
Storage 17,070 20,291 18.9% 5,746 5,983 4.1%
Commissions 3,929 7,266 84.9% 879 2,234 154.2%
Classification of Goods 651 956 46.9% 551 613 11.3%
Export Expenses 7,101 10,818 52.3% 2,541 3,468 36.5%
Others 517 598 15.7% 188 358 90.4%
Total 48,892 63,446 29.8% 19,674 22,122 12.4%
% Net Revenue 4.2% 4.9% 0.7 p.p 4.3% 5.4% 1.1 p.p
GENERAL AND ADMINISTRATIVE EXPENSES
In 3Q18, General and Administrative Expenses increased 17.6% from 3Q17. In 9M18,
they increased by 14.9%.
These changes are shown before expenses with Profit Sharing, since it varies in
accordance with the Company’s net income expectation.
Explanations for the main variations follow:
a. Personnel expenses: increase due to the wage increase under
collective bargaining and to the adjustment in headcount;
b. Fees: expenses with topography and legal advisory services;
c. Software maintenance: expenses with updating and purchasing
licenses.
General and administrative expenses corresponded to 3.1% and 2.9% of Net Revenue in
3Q18 and 9M18, respectively, stable in relation to the previous year.
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Release 3Q18
Table 21 Administrative Expenses (R$ Thousand) 9M17 9M18 AH 3Q17 3Q18 AH
Expenses with personnel 17,261 19,725 14.3% 5,894 6,710 13.8%
Fees 2,899 3,517 21.3% 1,058 1,105 4.4% Depreciations and amortizations 847 1,034 22.1% 289 375 29.8%
Expenses with travels 1,023 1,615 57.9% 399 788 97.5% Software maintenance 2,760 3,378 22.4% 844 1,145 35.7%
Marketing/Advertisement 1,170 1,477 26.2% 89 101 13.5% Expenses with Communications 1,741 1,760 1.1% 643 510 -20.7%
Rentals 621 609 -1.9% 213 211 -0.9% Labor, Tax and Environmental Contingencies 341 (45) n.m. (76) (124) 63.2%
Electricity 99 127 28.3% 29 38 31.0% Taxes and other fees 406 613 51.0% 68 180 164.7% Contribuitions and donations 814 692 -15.0% 486 335 -31.1%
Other 2,583 2,929 13.4% 892 1,359 52.4%
Subtotal 32,565 37,431 14.9% 10,828 12,733 17.6% % Net Revenue 2.8% 2.9% 0.1 p.p 2.4% 3.1% 0.8 p.p
Provision for profit share program 18,664 22,560 20.9% 7,904 9,829 24.4%
Total 51,229 59,991 17.1% 18,732 22,562 20.4%
NET FINANCIAL INCOME (EXPENSE)
Table 22 Net Financial Income (Expense) (R$ Thousand) 9M17 9M18 AH 3Q17 3Q18 AH
Revenues (expenses) with derivatives (21.619) 40.138 n.m. (12.632) 10.581 n.m. Interest (54.396) (53.304) -2.0% (16.804) (18.911) 12.5%
Monetary variation (1.398) - -100.0% 1.202 - -100.0% FX variation 23.445 (38.808) n.m. 14.340 (15.875) n.m.
Other financial revenues (expenses) (6.521) (3.207) -50.8% (2.169) (763) -64.8%
Total (60.489) (55.181) -8.8% (16.063) (24.967) 55.4%
% Net Revenue -5.2% -4.3% 0.9 p.p -3.5% -6.1% -2.6 p.p
Table 23 Gain (Loss) from Derivative Operations (R$ mil) 9M17 9M18 AH 3T17 3T18 AH
Swap de Dívida em Dólar para Real (21.619) 40.137 n.m. (12.632) 10.581 n.m.
Total (21.619) 40.137 n.m. (12.632) 10.581 n.m.
Note: In accordance with Note 20 of the Quarterly Information (ITR)
Note that, since most of debt in USD was swapped to BRL and the remainder is
designated as hedge accounting, so that the effects of exchange variation are recorded
as Sales Revenue and only after payment of the principal – the exchange variation on
dollar-denominated debt does not affect Net Financial Income (Expense) when we
analyze the aggregate figures, since any gains and losses on such debt not allocated to hedge accounting are offset by gains/losses in an equal proportion to the respective
swap.
For a better understanding of this impact, we suggest analyzing below Table 24 -
Adjusted Net Financial Income (Expense).
Table 24 Adjusted Net Financial Income (Expense)
(R$ thd) 9M17 9M18 AH 3Q17 3Q18 AH Interest (65,776) (53,718) -18.3% (20,757) (20,451) -1.5%
FX Variation net of swap operation 13,206 1,743 -86.8% 5,661 (3,754) n.m. Monetary Variation (1,398) - -100.0% 1,202 - -100.0%
Others financial revenues (expenses) (6,521) (3,207) -50.8% (2,169) (763) -64.8%
Total (60,489) (55,181) -8.8% (16,063) (24,968) 55.4%
% Net Revenue 5.2% 4.3% 0.9p.p. 3.5% 6.1% -2.6p.p
In 3Q18, the net financial result was a negative R$24,968 thousand, against R$ 16,063
thousand also negative in 3Q17. The main factor that contributed to this variations was the FX oscillation, impacting Accounts Receivable and Accounts Payable.
In the accumulated period of 9 months, the main variation is interest payment, and the
reduction is due to the renegotiation of financing rates.
Page 26 of 37
Release 3Q18
DEBT
Adjusted gross debt stood at R$1,634,507 thousand at September 30, 2018,
representing a slight increase of 1% on gross debt in 2Q18. The following chart shows the changes in adjusted gross debt in nine months:
Figure 17 Breakdown of Adjusted Gross Debt (R$ thousand)
Adjusted net debt in 3Q18 increased to R$1,189,668 thousand, from R$1,093,858
thousand in 2Q18, as shown in the following table:
Table 25 Financial Net Debt
Average Interest Rate (%) Consolidated
(R$ thd) Index 2Q18 3Q18 2Q18 3Q18
Applied in Fixed Assets
Finame – BNDES Pré, TJLP¹ and Currency Basket
5.50% 5.45% 101,993 95,828
101,993 95,828
Applied in Working Capital
Rural Credit Pré 6.98% 6.81% 186,489 191,969
CRA CDI 6.55% 6.55% 201,112 204,381 Working Capital Pré 7.20% 7.20% 184,840 188,013 External Loans Pré 6.50% 6.50% 201,820 204,996
External Loans CDI 7.55% 7.56% 442,810 446,027 External Loans US$, Libor³+Pré 6.79% 6.89% 48,820 51,664
Working Capital CDI 7.20% 7.20% 296,484 311,468
1,562,375 1,598,518
Total Indebtedness 6.99% 6.98% 1,664,368 1,694,346
(+/-) Gains and losses with derivates connected with applications and and debts 47.109 59.840
(=) Adjusted Debt 1,617,259 1,634,507
(-) Cash 523,401 444,839
(=) Adjusted Debt 1,093,858 1,189,668
EBITDA of las 12 months 850,622 822,085
Adjusted Net Debt/Adjusted EBITDA 1.29x 1.45x
Adjusted Net Debt/NAV 27.3% 29.6% (1) Long-Term Interest Rate (TJLP). (2) London Interbank Offer Rate (Libor): Interest rate charged by London banks used as a reference for most loans in the international financial system. (3) Transactions with gains and losses from Derivatives (note 20 of the Quarterly Information). (4) Final Interest Rate with swap; (5) Financial settlement amount.
Net debt increased 8.8% to R$1,189,668 thousand, while the Adjusted Net
Debt/Adjusted EBITDA ratio increased from 1.29 times in 2Q18 to 1.45 times in 3Q18.
The higher working capital needs spurred by the expansion in planted area and the
inclusion of a new production unit (Pantanal Farm) explain the debt increase.
1,578,117
500,893 (466,222)
(58,341) 76,060 52,782 (48,782) 1,634,507
Adjusted Gross Debt
Dec/2017
New Loans Amortization of
Principal
Interest
Amortization
Interest
Appropriation
FX Variation SWAP Variation
(MTM)
Adjusted Gross Debt
Sep/2018
Gross Debt Negative Variation Positive Variation
Page 27 of 37
Release 3Q18
The following chart presents the changes in the Net Debt/EBITDA ratio:
Figure 18 Changes in Net Debt/EBITDA Ratio
The following chart shows the total debt amortization schedule:
Figure 19 Gross Debt Amortization Schedule (R$ thousand)
Figure 20 Summary of Gross Debt Profile
474
739 766
851 822 845 829 875
1.094
1.190
1.78
1.12 1.14 1.291.45
-0,5x
0,5x
1,5x
2,5x
3,5x
4,5x
5,5x
-
200
400
600
800
1.000
1.200
1.400
Sep-17 Dec-17 Mar-18 Jun-18 Sep-18
R$
MM
Adjusted EBITDA Adjusted Net Debt Adjusted Net Debt X Adjusted Ebitda
444,893
464,925
724,399
358,147
43,858 11,31731,861
Cash Flow 2018 2019 2020 2021 2022 After 2022
55,04%
44,96%
96,84%
3,16%
Short Term Long Term R$ US$
(1) Weighted average rate of debt in R$ (2) Weighted average rate of debt in USD
6.98(1)
6.89(2)
Page 28 of 37
Release 3Q18
Figure 21 Gross Debt by Index and Instrument
NET INCOME
Table 26 Net Income (R$ thousand) 9M17 9M18 AH 3Q17 3Q18 AH
Income before taxes on profit 338,825 545,598 61.0% 98,032 43,788 -55.3%
Income Tax and Social Contribution on Profit (106,191) (172,556) 62.5% (27,532) (8,201) -70.2%
Consolidated Net Income for the Period 232,634 373,042 64.0% 70,500 35,587 -49.5%
Assigned to parent company 220,094 347,162 57.7% 68,791 35,793 -48.0% Assigned to non-controlling company
members 12,540 25,880 106.4% 1,709 (206) n.m.
% Net Revenue (1) 20.2% 28.8% 8.6 p.p 15.3% 8.7% -6.6 p.p
In 3Q18, Net Income ended the period at R$35,587 thousand, down 49.5% from 3Q17.
The variation is mainly due to the decline in Gross Income, reflecting the lower soybean
volume invoiced (given the higher concentration of exports in the first half in comparison with prior-year period) and the lower corn margin caused by the lower yield.
In 9M18, we reported again record net income of R$373,042 thousand, up R$140,408
thousand in relation to 9M17. Net margin expanded 8.6 percentage points, ending the
period at 28.8%. This is mainly due to the cotton crop, with the higher volumes invoiced, better price and lower unit costs, combined with the higher soybean volume invoiced.
CURRENCY AND AGRICULTURAL COMMODITY HEDGE
The Company’s sales revenues are generated mainly by the trading of agricultural
commodities such as cotton, soybean and corn, which are quoted in U.S. dollar on international exchanges, such as the Chicago Board of Trade (CBOT) and the
Intercontinental Exchange Futures US (ICE). Therefore, we are actively exposed to
variations in foreign exchange rates and in the prices of these commodities. To protect
from currency variation we use derivative instruments, with the portfolio of these
instruments basically comprising non-deliverable forwards (NDFs) and option contracts.
In line with the Company’s Risk Management Policy, whose purpose is to obtain a pre-established Adjusted EBITDA margin with a combination of factors such as Price,
Foreign Exchange and Cost, most of the instruments for protecting against commodity
price variation are accomplished through advanced sales directly with our clients
(forward contracts).
We also use futures and options contracts negotiated on the exchange and swap and
option transactions contracted with financial institutions. The mark-to-market
adjustments of future, swap and option transactions are recorded under financial
income (expense).
The hedge position on October 30, 2018 for commodities (in relation to the estimated
total volume invoiced) and currency (in relation to the total estimated revenue in U.S. dollar) is shown below, broken down by commercial hedge and financial hedge:
56.8%
39.8%
3.05%
PRE CDI OTHERS LIBOR
60%
12%
11%
11%
6%
Extermal Loans CRA Rural Credit BNDES
Page 29 of 37
Release 3Q18
Table 27 Hedge Position Fiscal Year 2018 2019
FX Rate(1) Hedge (%) R$ / US$ Hedge (%) R$ / US$
FX Hedge 95.5 3.4530 56.7 3.5794 Commitments(1) 2.2 1.9418 2.0 1.9418
Total 97.6 3.4194 58.7 3.5240 Cotton Hedge (%) US¢ / pound(2) Hedge (%) US¢ / pound(2)
Commercial Hedge 100.0 79.48 59.9 81.10 Financial Hedge (4) - - 8.7 85.10 Cotton – Total Hedge 100 79.48 68.6 81.6
Soybean Hedge (%) US$ / bushel(2) Hedge (%) US$ / bushel(2) Commercial Hedge 99.0 10.76 32.3 10.86
Financial Hedge(4) - - - - Commitments(3) - - 12.3 -
Soybean – Total Hedge 99.0 10.76 44.6 10.86 Corn Hedge (%) R$/Bag(5) Hedge (%) R$/Bag(5)
Commercial Hedge 88.5 19.63 12.0 21.61 Corn – Total Hedge 88.5 19.63 12.0 21.61
(1) Commitments with debt payments in U.S. dollar. (2) Based on FOB Port (prices at our production units are also influenced by transport expenses and possible quality discounts). (3) Natural hedge with payments related to land acquisitions and leasing agreements in soybean bags. (5) Farm price.
PROPERTY, PLANT AND EQUIPMENT / INTANGIBLE ASSETS
The main investments in 3Q18 were:
(i) Acquisition of agricultural machinery and tools, mainly at the Paiaguás
farm; (ii) Soil correction mainly at the Perdizes, Paiaguás and Pioneira Farms;
(iii) Buildings and facilities, mainly at the Paiaguás, Planorte and Perdizes
farms.
Table 28 Capital Expenditure
CAPEX (R$ thousand) 9M17 AV 9M18 AV 3Q18 AV
Machinery, implements and equipment 36,053 32.0% 58,712 37.4% 36,745 38.7%
Land acquisition 4,374 3.9% 575 0.4% - 0.0% Soil correction 20,750 18.4% 26,251 16.7% 17,072 18.0%
Buildings and facilities 23,707 21.0% 27,221 17.3% 15,200 16.0% Cotton ginning plant 786 0.7% 12,158 7.7% 12,158 12.8% Grains storage 11,655 10.3% 5,080 3.2% 4,116 4.3%
Soil cleaning 4,284 3.8% 2,796 1.8% 1,667 1.8% Vehicles 2,480 2.2% 5,118 3.3% 2,820 3.0%
Aircraft - 0.0% 8,823 5.6% 229 0.2% Software 5,977 5.3% 5,173 3.3% 2,245 2.4%
Property improvements - 0.0% 180 0.1% 110 0.1% Others 2,600 2.3% 4,931 3.1% 2,545 2.7%
Total 112,664 157,017 94,908
Page 30 of 37
Release 3Q18
INDICATORS
The Company believes that the calculation of Return on Equity, Return on Net Assets
and Return on Invested Capital should consider, in addition to operating income in the
period, the net annual appreciation (based on the report of an independent auditor
prepared every year) in the value of its land.
Table 29 Return on Equity (R$ million) 2010 2011 2012 2013 2014 2015 2016 2017 Net Revenue 59 160 38 97 70 121 16 289(4)
Net Land Appreciation SLC Agricola(1) -36 179 222 313 396 108 130 (24) Net Land Appreciation LandCo (1)(2) - - 48 61 32 32 69 44
Subtotal 23 339 308 471 498 261 215 309 Shareholder ’s Equity(3) 1,839 2,063 2,407 2,924 3,608 3,748 4,219 4,275 Return 1.3% 16.4% 12.8% 16.1% 13.8% 7.0% 5.1% 7.2%
(1) Based on the independent appraisal report (Deloitte), updated as of June 2017, net of taxes. (2) Adjusted by the interest of 81.23% held by SLC Agrícola in SLC LandCo. (3) Adjusted by the appreciation in the value of land properties. (4) Net Income from Agricultural Operations.
Table 30 Return on Net Assets (R$ million) 2010 2011 2012 2013 2014 2015 2016 2017
Net Profit 59 160 38 97 70 121 16 289(3) Net Land Appretiation(1) (36) 179 271 373 428 140 199 19
Subtotal 23 339 309 470 498 261 215 308
Invested Capital 2,598 3,196 3,635 4,113 4,696 5,017 4,857 4,997
Working Capital 395 504 626 641 733 739 561 613 Fixed Assets(2) 2,203 2,692 3,009 3,472 3,963 4,278 4,296 4,384
Return 0.9% 10.6% 8.5% 11.4% 10.6% 5.2% 4.4% 6.2% (1) Based on the independent appraisal report (Deloitte), updated as of June 2017, net of taxes. (2) Adjusted by land-price appreciation. (3) Net Income from Agricultural Operations.
Table 31 Return on Invested Capital
(R$ million) 2010 2011 2012 2013 2014 2015 2016 2017
Operating Income 126 257 145 150 190 285 110 504(4) Adjusted IR (38) (87) (72) (35) (40) (78) 20 (133)
Adjusted Operating Income 88 170 73 115 150 207 130 371 Apreciação de Terras Líquida(1) (36) 179 270 374 428 140 199 19 Operating Results w/ Land 52 349 343 489 578 347 329 390
Invested Capital 2,110 2,527 2,987 3,753 4,329 4,788 5,010 5,021
Gross Debt (CP e LP)(2) 450 640 811 1,170 1,332 1,711 1,807 1,471 Cash(2) 110 131 157 376 355 671 1,016 725
Net Debt (2) 339 509 654 794 977 1,040 791 746 Shareholder’s Equity (3) 1,771 2,018 2,333 2,781 3,352 3,748 4,219 4,275
Return 2.5% 13.8% 11.5% 13.0% 13.3% 7.2% 6.6% 7.8% (1) Based on the independent appraisal report (Deloitte), updated as of June 2017, net of taxes. (2) Adjusted by the interest held in the subsidiaries. (3 )Adjusted by land-price appreciation. (4) Operating Result from Agricultural Operations.
Table 32 Net Asset Value – NAV (R$ million) 9M18 SLC Agrícola Farms (1) 2,520
SLC LandCo Farms(2) 682 Infrastructure (excl. land) (3) 886
Accounts Receivable (excl. derivates) (3) 86 Inventories (3) 1.243
Biological Assets(3) 150 Cash (3) 455
Subtotal 6,023 Suppliers(3) 274
Adjusted Gross Debt (3)(4) 1,523
Outstanding debt related to land acquisitions (3) 14
Subtotal 1,812 Net Asset Value 4,211
Net Asset per Share 44.2 (1) Based on the independent appraisal report (Deloitte), updated as of June 2017, net of taxes. (2) Based on the independent appraisal report (Deloitte), updated June/2017, net of taxes, adjusted by the interest held by SLC Agrícola in the subsidiary. (3) Adjusted by the interest held by
SLC Agrícola in the subsidiaries. (4) Gross Debt adjusted by operations with derivative instruments and the interest held by SLC Agrícola in the
subsidiaries.
Page 31 of 37
Release 3Q18
Table 33 Changes in Working Capital Working Capital Variation 2017 9M18 ASSETS Accounts Receivable 168,128 93,796 Inventories 569,524 1,352,832 (-) Biological Assets + Inventories Adjustment ( non cash) (76,735) (370,456) Recoverable Taxes 45,908 51,483 Biological Assets 522,997 168,262 (-) Biological Assets (non cash) (21,094) - Expenses incurred in advance 8,354 6,664 Subtotal 1,226,099 1,306,177 LIABILITIES Suppliers 424,041 305,140 Taxes, rate and sundry contributions 28,414 12,230 Social charges and labor legislation obligations 62,701 55,865 Provisions for tax, environmental and labor risks 2,446 2,402 Others 232,528 197,215 Advances from clients 98,652 123,173 Dividends payable 83,598 10,822 Leases Payable 37,486 44,859 Others accounts payable 3,792 18,361 Subtotal 964,658 770,867 TOTAL 261,441 536,110 Change in WC - 274,669
Page 32 of 37
Release 3Q18
LOCATION OF UNITS
DISCLAIMER
This release makes statements concerning future events that are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of our Management and on the information currently available to the Company. Forward-looking statements include information on our current plans, beliefs or expectations, as well as those of the Company’s directors and officers. Forward-looking statements include information on potential or assumed operating results as well as statements that are preceded, followed by or include the words "believe," "may," "will,” "continue," "expect," "project," "intend," "plan," "estimate" or similar expressions. Forward-looking statements and information provide no guarantee of performance. Because they refer to future events, they involve risks, uncertainties and assumptions and as such depend on circumstances that may or may not occur. The Company's future results and creation of value for shareholders may differ significantly from the figures expressed or suggested in the forward-looking statements. Many factors that will determine these results and values are beyond our capacity to control or predict.
SLC Agrícola FARMS 1. Paiaguás – 66,805 ha ¹ 2. Planorte – 31,481 ha 3. Pamplona - 21,339 ha ¹ 4. Planalto - 22,273 ha ¹ 5. Parnaíba - 45,461 ha ¹ ²
6. Palmeira – 21,302 ha1
7. Parnaguá – 9,398 ha 8. Paineira – leased farm 9. Parceiro – 14,340 ha ² 10.Palmares – 21,302 ha ¹ 11.Pantanal – 41,343 ha
Joint Venture with Mitsui Co. 13. Perdizes – 27,421 ha ¹ 14. Paladino – 20,053 ha
SLC LandCo Farms (SLC Agrícola 82%, Valiance 18%) 15. Planeste – 54,704 ha ¹ ²
16. Panorama – 21,735 ha ² 17. Piratini – 7,506 ha ²
Joint Venture with Roncador Group 12. Pioneira – 27,950 ha ¹
12
3
4
57
89
101213
1416
17
6
11
Page 33 of 37
Release 3Q18
EXHIBIT – BALANCE SHEET – ASSETS
(R$ thd) 2017 AV 9M18 AV AH
Current assets 2,250,339 42.5% 2,304,300 42.1% 2.4%
Cash and cash equivalents 611,539 11.6% 393,734 7.2% -35.6% Short-term interest earning bank deposits 137,789 2.6% 51,105 0.9% -62.9%
Accounts receivable 168,128 3.2% 93,796 1.7% -44.2% Advances to suppliers 9,017 0.2% 3,596 0.1% -60.1%
Inventories 569,524 10.8% 1,352,832 24.7% 137.5% Biological assets 522,997 9.9% 168,262 3.1% -67.8%
Recoverable taxes 45,908 0.9% 51,483 0.9% 12.1% Securities and credits receivable 123,657 2.3% 128,524 2.3% 3.9%
Operations with derivatives 47,140 0.9% 46,392 0.8% -1.6% Intercompany transactions - - 7 0.0% 100.0%
Other accouns receivable 3,916 0.1% 5,579 0.1% 42.5% Prepaid expenses 8,354 0.2% 6,664 0.1% -20.2%
Assets held for sale 2,370 0.0% 2,326 0.0% -1.9% Non-current assets 3,043,346 57.5% 3,175,083 57.9% 4.3%
Recoverable taxes 62,841 1.2% 88,209 1.6% 40.4%
Deferred inceome and social contribution taxes 18,760 0.4% 18,506 0.3% -1.4% Operations with derivatives 23,766 0.4% 36,291 0.7% 52.7%
Advances to suppliers 57,763 1.1% 46,176 0.8% -20.1% Prepaid expenses 2,567 0.0% 2,687 0.0% 4.7%
Other credits 17,029 0.3% 14,364 0.3% -15.6% 182,726 3.5% 206,233 3.8% 12.9%
Investment Property 202,243 3.8% 202,069 3.7% -0.1% Property, plant and equipment 2,647,977 50.0% 2,751,859 50.2% 3.9%
Intangible 10,400 0.2% 14,922 0.3% 43.5%
2,860,620 2,968,850 Total Assests 5,293,685 100.0% 5,479,383 100.0% 3.5%
Page 34 of 37
Release 3Q18
EXHIBIT – BALANCE SHEET – LIABILITIES
(R$ thd) 2017 AV 9M18 AV AH
Current liabilities 1,662,232 31.4% 1,802,804 32.9% 8.5%
Suppliers 424,041 8.0% 305,140 5.6% -28.0% Loans and financing 860,976 16.3% 925,306 16.9% 7.5%
Taxes, rates and sundry contributions 28,414 0.5% 12,230 0.2% -57.0% Social charges and labor legislation obligations 62,701 1.2% 55,865 1.0% -10.9%
Advances from clients 98,652 1.9% 123,173 2.2% 24.9% Debts with related parties - - 885 0.0% 100.0%
Operations with derivatives 42,583 0.8% 219,648 4.0% 415.8% Securities payable 17,543 0.3% 14,466 0.3% -17.5%
Provisions for tax, environmental and labor risks 2,446 0.0% 2,402 0.0% -1.8% Dividends payable 83,598 1.6% 10,822 0.2% -87.1%
Leases payable 37,486 0.7% 44,859 0.8% 19.7% Others accounts payables 3,792 0.1% 18,361 0.3% 384.2% Non-current liabilities 929,626 17.6% 1,020,999 17.4% 2.3% Loans and financing 728,198 13.8% 765,437 14.0% 5.1%
Deferred taxes 186,975 3.5% 185,860 3.4% -0.6% Operations with derivatives 14,372 0.3% 69,647 1.3% 384.6%
Other debits 81 0.0% 55 0.0% -32.1% Shareholders' equity 2,701,827 51.0% 2,725,227 49.7% 0.9%
Capital 947,522 17.9% 947,522 17.3% 0.0%
Capital reserves 110,566 2.1% 106,640 1.9% -3.6% (-) Treasury shares (60,596) -1.1% (42,276) -0.8% -30.2%
Profit reserves 404,975 7.7% 201,702 3.7% -50.2% Retained Losses - - 349,363 6.4% 100.0%
Other comprehensive income 1,110,732 21.0% 967,761 17.7% -12.9% Non-controlling shareholders in subsidiaries 188,628 3.6% 194,515 3.5% 3.1% Total Liabilities 5,293,685 100.0% 5,479,383 100.0% 3.5%
Page 35 of 37
Release 3Q18
EXHIBIT – STATEMENT OF INCOME FOR THE YEAR
(R$ thd) 3Q17 3Q18 AH 9M17 9M18 AH
Net Revenue 459,587 408,451 -11.1% 1,152,326 1,296,156 12.5%
Cotton lint 122,756 188,677 53.7% 308,595 481,144 55.9%
Cotton seed 54,590 31,482 -42.3% 61,345 45,842 -25.3%
Soybean 173,587 126,247 -27.3% 619,452 710,172 14.6%
Corn 74,971 86,205 15.0% 90,143 95,756 6.2%
Others 17,611 13,342 -24.2% 19,630 20,151 2.7%
Hedge revenue 16,072 (37,502) n.m. 53,161 (56,909) n.m.
Variation of Biological assets 101,442 129,134 27.3% 340,753 656,799 92.7%
Cost of goods sold (328,971) (301,093) -8.5% (795,152) (837,939) 5.4%
Cotton lint (68,987) (87,882) 27.4% (205,265) (241,479) 17.6%
Cotton seed (37,971) (19,537) -48.5% (44,352) (31,317) -29.4%
Soybean (141,234) (102,291) -27.6% (444,915) (458,237) 3.0%
Corn (70,876) (85,004) 19.9% (80,748) (92,143) 14.1%
Others (9,903) (6,379) -35.6% (19,872) (14,763) -25.7%
Biological assets (76,502) (121,994) 59.5% (187,943) (384,631) 104.7%
Gross Income 155,556 114,498 -26.4% 509,984 730,385 43.2%
Operating expenses/income (41,461) (45,743) 10.3% (110,670) (129,606) 17.1%
Sales expenses (19,674) (22,122) 12.4% (48,892) (63,446) 29.8%
General and administrative expenses (18,732) (22,562) 20.4% (51,229) (59,991) 17.1%
General and administrative expenses (10,828) (12,733) 17.6% (32,565) (37,431) 14.9%
Provision for profit share program (7,904) (9,829) 24.4% (18,664) (22,560) 20.9%
Management compensation (3,381) (2,349) -30.5% (10,648) (11,495) 8.0%
Other operating income (expenses) 326 1,290 295.7% 99 5,326 n.m.
Inc. (loss) bef. Finan. Inc. (loss) and taxes 114,095 68,755 -39.7% 399,314 600,779 50.5%
Financial income 34,635 84,135 142.9% 156,390 177,964 13.8%
Financial expenses (50,698) (109,102) 115.2% (216,879) (233,145) 7.5%
Income (loss) before income tax 98,032 43,788 -55.3% 338,825 545,598 61.0%
Income and social contrib. taxes (27,532) (8,201) -70.2% (106,191) (172,556) 62.5%
Current (10,248) 1,773 n.m. (16,492) (37,770) 129.0%
Deffered (17,284) (9,974) -42.3% (89,699) (134,786) 50.3%
Net Income (loss) for the period 70500 35,587 -49.5% 232,634 373,042 60.4%
Assig. to Memb. of the Parent Company 68,791 35,793 -48.0% 220,094 347,162 57.7%
Attrib. to Non-Controlling Partners 1,709 (206) n.m. 12,540 25,880 106.4%
Page 36 of 37
Release 3Q18
EXHIBIT – STATEMENT OF CASH FLOWS
(R$ thd) 3Q17 3Q18 AH 9M17 9M18 AH
Net cash from operational activities 299,549 36,768 -87.7% 107,593 203,470 89.1%
Cash generated in operations 132,378 114,260 -13.7% 417,462 510,209 22.2%
Net inc. (loss) bef, income and social contrib, taxes 98,032 43.788 -55,3% 338,825 545.598 61,0%
Depreciation and amortization 27,384 23.093 -15,7% 65,103 63.971 -1,7%
Income from write-off of permanent assets 340 5.034 n.m. 2,630 10.789 310,2%
Investment capital gains (losses) 22,744 37.777 66,1% 140,463 135.258 -3,7%
Int., foreign exc. var. and price-level restatement 991 1.039 4,8% 3,199 3.280 2,5%
Share-based compensation (24,940) (7.141) -71,4% (152,810) (272.168) 78,1%
Variation in biological assets - - - (496) - -100.0%
Prov. (rever.) of invent. Adjust. and onerous contracts 7,827 9.705 24,0% 19,005 22.516 18,5%
Prov. (reversal) of profit sharing and labor conting. - - - - - -
Other ajusts - 965 100.0% 1,543 965 -37,5%
Changes in assets and liabilities 167,171 (77,492) n.m. (309,869) (306,739) -1.0%
Trade accounts receivable (39,822) (53.200) 33,6% (37,267) 74.332 n.m.
Inventories and biological assets 48,692 165.101) -439,1% 21,024 (151.289) n.m.
Recoverable taxes (2,423) (21.973) 806,9% (15,391) (30.939) 101,0%
Accounts receivable - 1 100.0% 565 (80) n.m.
Interest earnings bank deposits-pledged 71,609 385 -99,5% 46,666 86.684 85,8%
Other accounts receivable 10,498 14.596 39,0% (4,837) 2.614 n.m.
Advances to suppliers 10,950 22.162 102,4% 11,592 17.009 46,7%
Suppliers 53,312 180.494 238,6% (239,816) (132.132) -44,9%
Taxes and social payables 1,656 (13.698) n.m. (13,045) (43.785) 235,6%
Debts with related parties
Operations with derivatives 9,250 (26.214) n.m. (34,559) (73.957) 114,0%
Securit. Payabe (3,846) - -100.0% (8,122) (4.409) -45,7%
Advances from clients 72,625 (29.005) n.m. 111,485 24.522 -78,0%
Lease (13,735) 2.826 n.m. (15,739) 7.373 n.m.
Other accounts payable 751 30.310 n.m. 26,571 20.923 -21,3%
Income tax and social contribution paid (3,464) (12.130) 250,2% (6,746) (46.142) 584,0%
Dividends received - - - - - -
Interest paid (48,882) (7.562) -84,5% (152,250) (58.341) -61,7% Net cash used in investment activities (58,797) (112,263) 90.9% (98,317) (175,413) 78.4%
In Investment - - - - - -
In biological assets - - - - - -
In Fixed assets (57,551) (110.235) 91,5% (93,860) (170.330) 81,5%
In investment property - - - - - -
In Intangible assets (1,246) (2.028) 62,8% (4,457) (5.083) 14,0%
Net cash before cash used in investment activities 240,752 (75,495) n.m. 9,276 28,057 202.5% Net cash generated/(consumed) in financ. activities (17,493) (2,681) -84.7% (400,921) (245,861) -38.7%
Sale (repurchase) of shares (21,549) 360 n.m. (20,639) (75.753) 267,0%
Loans and financing obtained 382,107 37.289 -90,2% 717,460 496.106 -30,9%
Loans and financing paid (378,051) (40.330) -89,3% (1,083,520) (466.222) -57,0%
Dividends paid - - - (14,222) (199.992) n.m.
Increase (decrease) in cash and cash equivalents 223,259 (78,176) n.m. (391,645) (217,804) -44.4%
Opening balance of cash and cash equivalents 273,836 471,911 72.3% 888,740 611,539 -31.2%
Closing balance of cash and cash equivalents 497,095 393,735 -20.8% 497,095 393,735 -20.8%
For a better understanding of our effective cash generation, we recommend the following
adjustment:
Adjustment of the calculation of Net Cash before Financing Activities, excluding
variations in the line Financial Investments, given our understanding that variations in
this line do not impact effective cash generation. (R$ thousand) 3Q17 3Q18 AH 9M17 9M18 AH
Reported Free Cash Flow 240,752 (75,495) - 9,276 28,057 202.5% Variation on interest earning bank deposits 71,609 385 99.5% 46,666 86,684 85.8%
Adjusted Free Cash 169,143 (75,880) n.m. (37,390) (58,627) 56.8%
Page 37 of 37
Release 3Q18
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