6-K 1 lndpr2q15_6k.htm EARNINGS RELEASE QUARTER ENDED DECEMBER 31, 2014 lndpr2q15_6k.htm - Generated by SEC Publisher for SEC Filing

 

FORM 6-K
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934

dated February 10, 2015

BRASILAGRO – COMPANHIA BRASILEIRA DE PROPRIEDADES AGRÍCOLAS
(Exact Name as Specified in its Charter)

BrasilAgro – Brazilian Agricultural Real Estate Company

U(Translation of Registrant’s Name)

1309 Av. Brigadeiro Faria Lima, 5th floor, São Paulo, São Paulo 01452-002, Brazil

U(Address of principal executive offices)

Julio Cesar de Toledo Piza Neto,

Chief Executive Officer and Investor Relations Officer,

Tel. +55 11 3035 5350, Fax +55 11 3035 5366, ri@brasil-agro.com

1309 Av. Brigadeiro Faria Lima, 5th floor

São Paulo, São Paulo 01452-002, Brazil

U(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F x   Form 40-F o 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T
Rule 101(b)(1): U                   

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T
Rule 101(b)(7): U                   

Indicate by check mark whether by furnishing the information contained in this Form, the registrant is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o   No x 

If “Yes” is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b): Not applicable.

 

 

 

 

Earnings Release

Quarter ended

December 31, 2014

 

São Paulo, February 10, 2015 – BrasilAgro (BM&FBOVESPA: AGRO3) (NYSE: LND), the Brazilian leader in acquiring and developing rural properties that offer high potential for price appreciation in Brazil, announces its consolidated results for the quarter ended December 31, 2014. The consolidated quarterly information is prepared in accordance with International Financial Reporting Standards (IFRS).

 

Highlights

 

*     Net revenue of R$ 71.9 million in 6M15.

*     Net income of R$ 2.8 million in 6M15.

*     Adjusted EBITDA of R$ 2.3 million in 6M15.

*     Construction of a silo in Bahia with grain storage capacity of 20 thousand tons.

*    End of the fifth year of sugarcane supply, delivering 724 thousand tons.


 

 
 

Message from Management

The period was marked by the reduction in commodity prices and the appreciation of the U.S. dollar, a scenario that contributed to an expected agricultural production margin below the average of the past few years. In this context, we reduced the planted area of the 2014/2015 harvest, as announced in the previous quarter and did an organization restructuring, reducing administrative costs and leasing 6,583 hectares to third parties in Bahia, minimizing costs and the Company’s operational risk.

We closed 6M15 with Net Revenue of R$ 71.9 million, Net Income of R$ 2.8 million and Adjusted EBITDA of R$ 2.3 million, reflecting the sale of 651 thousand tons of agricultural products (soybean, corn and sugarcane) in 6M15.

Regarding our operational activities, we concluded planting the 2014/2015 grain harvest in 48,187 hectares in the properties in Brazil, and also planted 6,554 hectares of pasture in the Preferência Farm and 8,466 hectares of sugarcane in the Alto Taquari and Araucária Farms. In Paraguay, we concluded planting in 10.500 hectares of grains and 3.135 hectares of pasture, corresponding to 92% of the total planted area. The Company’s total planted area came to 78,044 hectares.

In 6M15, we ended the fifth year of sugarcane supply, delivering 724 thousand tons to ETH. Sugarcane results show the region’s consolidation as a producer, with better gross margin and yield than traditional sugarcane regions, such as the state of São Paulo, for example.

Still regarding operational activities, we began the construction of a silo in Bahia, with grain storage capacity of 20 thousand tons. The construction of the silo improves the Company’s grain sales strategy in the region and mitigates logistics risks in production distribution.

In relation to property development, we obtained licenses to develop additional 7 thousand hectares in Paraguay and began the transformation process in 10 thousand hectares in the properties in Brazil and Paraguay.

In December 2014, we held the BrasilAgro Day, an event that gathered more than 40 investors, with the attendance of all our executive officers. The event discussed the sector’s prospects for the upcoming harvest years and our plan for the next few years.

We are fully committed and aligned with our plans to improve results, pursuing solid and sustainable growth.

 

Release 2Q15

2

 
 

Property Portfolio

At the date of this release, the Company’s property portfolio consisted of 276,440 hectares across five Brazilian states and Paraguay, as shown in the table below:

        Total Area  Arable Area (3) 
Properties  Location  Acquisition Date  Project  ha  ha 
Cremaq Farm  Baixa Grande do Ribeiro/PI  Oct / 06  Grains  27,807  18,622 
Jatobá Farm  Barreiras/BA  Mar / 07  Grains and cotton  31,606  24,254 
Alto Taquari Farm  Alto Taquari/MT  Aug / 07  Sugarcane  5,186  3,666 
Araucária Farm  Mineiros/GO  Apr / 07  Sugarcane  8,124  5,982 
Chaparral Farm  Correntina/BA  Nov / 07  Grains and cotton  37,182  27,414 
Nova Buriti Farm  Januária/MG  Dec / 07  Florest  24,247  19,004 
Preferência Farm  Barreiras/BA  Sep / 08  Grains and Pasture  17,799  14,237 
Parceria II Farm  Ribeiro Gonçalves/PI  Nov / 131  Grains  7,181  7,181 
Cresca2  Boquerón/Paraguai  Dec / 13  Grains and Pasture  117,307  59,619 
Total        276,440  179,979 
1- BrasilAgro entered into an agricultural exploration partnership at the Parceria II Farm for up to 11 harvests.
2- Total property area, BrasilAgro has a 50% equity interest in Cresca S.A.
3- Excluding legal reserves and permanent preservation areas (APP)

 

We leased 6,583 hectares of the Jatobá Farm to third parties during the 2014/2015 cycle, which can be extended to one more harvest year. The leasing has the purpose of reducing the Company's operational risk, taking into consideration climate changes in Bahia in recent harvests and the lower operating margin.

 

*     Development of Areas

 

We are transforming an area of approximately 10 thousand hectares (Brazil and Paraguay).

 

In Paraguay, we obtained licenses to transform additional 7,000 hectares and we are already in the process of transforming 3,000 hectares during the 14/15 harvest year.

 

On December 31, 2014, 17% of our properties were developed, 33% were under development and 50% were still undeveloped.

 

Release 2Q15

3

 

 
 

 

Due to the difficulties we have been facing in regard to obtaining licenses for the Nova Buriti Farm, we are studying the best options for the future of the property.

*     Silo in Bahia

We began the construction of a silo in Bahia, at the Chaparral Farm, with grain storage capacity of 20 thousand tons. The construction of the silo improves the Company’s grain sales strategy in that region, in addition to mitigating logistics risks in production distribution.

The construction will take place in two stages. The first phase will include the construction of a silo with capacity to store 10 thousand tons of grains and the production processing structure (cleaning and drying) and the second phase will include the construction of another silo with capacity to store additional 10 thousand tons of grains.

The project was fully financed at the rate of 4% p.a., 60 months duration and 12-month grace period, totaling the financing amount of R$10.7 million.

 

Release 2Q15

4

 

 
 

Agricultural Operations Performance

Until the preparation of this release, we had concluded planting the 2014/2015 grain harvest in 48,187 hectares in the properties in Brazil, and also planted 6,554 hectares of pasture in the Preferência Farm and 8,466 hectares of sugarcane in the Alto Taquari and Araucária Farms. In Paraguay, we concluded planting in 10,500 hectares of grains and 3,135 hectares of pasture, corresponding to 92% of the total harvested area. The Company’s total planted area came to 78,044 hectares.

The table below gives a breakdown of planted area by farm:

Planted Area  Sugarcane  Soybean  Corn  Pasture  Other Grains  Total 
Cremaq Farm    14,965  1,963      16,928 
Jatobá Farm    9,535  1,196      10,731 
Alto Taquari Farm  3,622          3,622 
Araucária Farm  4,844          4,844 
Chaparral Farm    10,535  2,538      13,073 
Preferência Farm        6,554    6,554 
Partnership II Farm    7,455        7,455 
Cresca (Paraguay)    5,756  3,180  2,665  3,236  14,837 
Total 14/15  8,466  48,246  8,877  9,219  3,236  78,044 
*planting in Paraguay ends late February.           

 

*planting in Paraguay ends late February.

 

*     Grains

We planted a total of 42,490 hectares of soybean and 5,697 hectares of corn in the Cremaq, Jatobá, Chaparral and Parceria II farm.

Up to the publication of this release, we had completed the planting of 92% of the grain area in Paraguay, totaling a planted area of 12,172 hectares, divided into soybean, corn and sorghum.

The development of the corn crop in the Bahia farms was impacted by the weak rainfall during January. It is still not possible to measure the impact on corn productivity, which has been recovering with recent rainfall. The soybean crop has been developing well in all properties.

*     Sugarcane

In 2Q15 we ended the fifth year of sugarcane supply, when we delivered 724,000 tons to ETH.

The Alto Taquari and Araucária Farms are planted with 8,466 hectares of sugarcane.

 

Release 2Q15

5

 

 
 

The chart below shows the sugarcane results appropriate at sugarcane harvest year (April to November):

  year calendar 
Sugarcane harvest year results     
  2013  2014 
Tons harvested  662,674  723,593 
Hectares harvested  8,062  7,141 
TCH - Harvested Tons per Hectares  82.20  101.33 
TRS - Total Recoverable Sugar  138.24  136.98 

 

*     Pasture

The Preferência Farm has 6,554 hectares of pasture, 4,633 hectares of which are leased to third parties for cattle raising. In Paraguay we have 3,236 hectares of pasture.

*     Cattle raising

In December 31, 2014 Cresca owned 1,912 heads of cattle in Paraguay.

 

Release 2Q15

6

 
 

Financial Performance

The consolidated financial statements were prepared and are being presented in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board.

EBITDA and Adjusted EBITDA

             
EBITDA (R$ thousand)  2Q15  2Q14  Change  6M15  6M14  Change 
Gross Profit (loss)  1,472  (2,255)  n.a.  9,426  476  1880.3% 
Selling expenses  477  (1,200)  n.a.  (371)  (3,166)  -88.3% 
General and administrative expenses  (6,336)  (7,396)  -14.3%  (13,412)  (14,027)  -4.4% 
Other operating income/expenses, net  (4,237)  1,892  n.a.  (5,580)  1,447  n.a. 
Depreciation and amortization  2,719  1,462  86.0%  9,337  8,642  8.0% 
EBITDA  (5,905)  (7,498)  -21.2%  (600)  (6,628)  -90.9% 
  
Adjusted EBITDA (R$ thousand)  2Q15  2Q14  Change  6M15  6M14  Change 
Gross Profit (loss)  1,472  (2,255)  n.a.  9,426  476  1880.3% 
Elimination of gains on biological assets (grains and sugarcane planted)  3,271  860  280.5%  (180)  3,415  n.a. 
Selling expenses  477  (1,200)  n.a.  (371)  (3,166)  -88.3% 
General and administrative expenses  (6,336)  (7,396)  -14.3%  (13,412)  (14,027)  -4.4% 
Other operating income/expenses, net  (4,237)  1,892  n.a.  (5,580)  1,447  n.a. 
Hedge results  -  -  n.a.  2,219  (669)  n.a. 
Adjusted Depreciations 1  2,821  2,746  2.7%  6,826  5,989  14.0% 
EBITDA Cresca2  (637)  -  n.a.  3,360  -  n.a. 
Adjusted EBITDA  (3,169)  (5,354)  -40.8%  2,288  (6,536)  n.a. 
1- Adjusted depreciation includes depreciation of the already harvested grain and sugarcane cropsl.
2- Considers 50% of Cresca s EBITDA.

1- Adjusted depreciation includes depreciation of the already harvested grain and sugarcane cropsl.

2- Considers 50% of Cresca’s EBITDA.

 

EBITDA was calculated as gross profit adjusted by general, administrative, and selling expenses, other operating revenue and expenses and depreciation expenses. Adjusted EBITDA was calculated by excluding biological assets in progress (sugarcane and grains) and adjusting for the harvest’s derivative results and depreciation expenses, including the depreciation of fixed assets of the farms and administrative installations, developed areas and permanent crops.

The Cresca’s EBITDA in 6M15 includes the sale of 24,624 hectares in the amount of US$ 14.8 million held in April 2014, which was recorded in 1Q15 after the grant of the deed, which occurred in July 2014.

 

Release 2Q15

7

 
 

Income Statement

 

(R$ thousand)  2Q15  2Q14  Change  6M15  6M14  Change 
Revenues from grains  8,527  1,353  530.2%  34,285  16,301  110.3% 
Revenues from sugarcane  12,842  2,168  492.3%  38,844  27,800  39.7% 
Revenues from leasing  571  165  246.1%  957  387  147.3% 
Revenues from farm sale  -  -  n.a.  -  -  n.a. 
Other revenues  1,548  561  175.9%  2,726  807  237.8% 
Deductions from gross revenue  (2,235)  (563)  297.0%  (4,850)  (2,367)  104.9% 
Net Sales Revenue  21,253  3,684  476.9%  71,962  42,928  67.6% 
Change in fair value of biological assets and agricultural products  1,871  (556)  n.a.  9,645  634  1421.3% 
Reversal of impairment of net realizable value of agricultural products after harvest  195  -  n.a.  (1,778)  (15)  11753.3% 
Net Revenue  23,319  3,128  645.5%  79,829  43,547  83.3% 
Cost of agricultural products sale  (21,847)  (5,383)  305.8%  (70,403)  (43,071)  63.5% 
Cost of farm sale  -  -  n.a.  -  -  n.a. 
Gross Profit (loss)  1,472  (2,255)  n.a.  9,426  476  1880.3% 

 

*     Net Revenue from Sales

             
Net Revenue (R$ thousand)  2Q15  2Q14  Change  6M15  6M14  Change 
Total  21,253  3,684  476.9%  71,962  42,928  67.6% 
Soybean  2,370  1,147  106.7%  19,616  11,379  72.4% 
Corn  5,274  89  5840.4%  12,217  4,178  192.4% 
Sugarcane  12,297  1,903  546.3%  37,615  26,787  40.4% 
Leasing  112  163  -31.1%  430  67  543.2% 
Services  126  -  n.a.  262  -  n.a. 
Others  1,073  383  180.4%  1,823  517  252.7% 
  
Tons  2Q15  2Q14  Change  6M15  6M14  Change 
Total  232,122  41,147  464.1%  650,933  459,836  41.6% 
Soybean  3,478  1,431  143.1%  22,179  11,950  85.6% 
Corn  17,241  258  6584.9%  40,190  11,926  237.0% 
Sugarcane  211,321  39,351  437.0%  588,432  435,660  35.1% 
Others  82  107  -23.6%  132  300  -56.1% 

 

In 2Q15, net revenue from sales totaled R$ 21.3 million, an increase of 476.9% from the same period in the previous fiscal year.  

Grain net revenue (soybean and corn) in 2Q15 grew 518.7% year-over-year, from R$1.2 million, from the sale of 1,700 tons of grain, to R$7.6 million, from the sale of 20,700 tons of grains.

In 6M15, net revenue from sales totaled R$71.9 million, a 67.6% decrease year on year, resulting from (i) the 40.4% increase in revenue from sugarcane and (ii) the 104.6% increase in grain revenue.

Soybean revenue in 6M15 grew 72.4% over the previous year, from R$11.4 million (sale of 11,900 tons at R$952.23 per ton) to $19.6 million (sale of 22,200 tons at R$884.42 per ton).

Corn revenue increased by 192.4% year-over-year, from R$4.2 million (sale of 11,900 tons at R$350.30 per ton) to R$12.2 million (sale of 40,200 tons at R$303.98 per ton).

Despite the reduction in soybean and corn average price per ton, net revenue from grain sales increased by 104.6%, from 23.8 thousand tons in 6M14 to 62.4 thousand tons in 6M15, due to the higher sales volume in the period.

Release 2Q15

8

 
 
 

Sugarcane revenue in 6M15 grew 40.4% over 6M14, from R$ 26.8 million, from the sale of 436,000 tons at R$61.49 per ton, to R$37.6 million from the sale of 588,000 tons at R$63.92 per ton of sugarcane to ETH. The increase in the price of sugarcane per ton was due to the 7% increase in the average TRS price, from R$0.45 per kg in 6M14 to R$0.48 per kg in 6M15, the average TRS harvested por ton dropped 3%, from 143.31 kg/ton in 6M14 to 139.01 kg/ton in 6M15.

Services revenue in 2Q15 totaling R$ 126,000 came from an advisory services provision agreement related to the development of land owned by Cresca.

*     Biological Assets

        Gain/Loss  Gain/Loss 
(R$ thousands)  Soybean  Corn  Sugarcane     
        12/31/14  12/31/13 
Production fair value  -  2,758  37,439  40,196  26,339 
Production cost  -  (2,356) (32,292) (34,648) (25,645)
Gain and loss on agricultutal products  -  402  5,146  5,548  694 
Gain and loss on biological assets  3,457  1,145  (505)  4,097  (59) 
Change on biological assets fair value  3,457  1,547  4,641  9,645  634 

 

The agricultural products of the Company and its subsidiaries essentially correspond to the sugarcane and second corn crops and are measured at fair value.

 Gains or losses in the variation of the fair value of biological assets are determined by the difference between their fair value and their book value. Book value includes investments and costs effectively incurred until the moment of appraisal.

In 2Q15, the Company recorded a gain of R$9.6 million from biological assets and agricultural products, comprising gains of R$3.5 million from soybean, R$1.5 million from corn and R$4.6 million from sugarcane.

The table below shows the results of the sugarcane:

  Fiscal period   
  6M15 (six  Sugarcane Crop 
Sugarcane Crop 2014  month period  (Apr to Nov 
  ended  2014) 
  12/31/14)   
Net Revenues  37,615  46,087 
Cost of Sales  (37,439)  (46,127) 
Gain (loss) of agriculture products  5,146  8,271 
Profit  5,323  8,231 
 
Tons harvested  588,432  723,593 

 

Release 2Q15

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*     Inventories

(R$ thousand)  Soybean  Corn  Others  Sugarcane  Gain/loss on  Gain/loss on 
          12/31/2014  12/31/2013 
Total  (569)  (1,209)  -  -  (1,778)  (15) 

 

Inventories of agricultural products are measured at their fair value at harvest, considering the average harvest price in line with the prevailing accounting standard. A provision to adjust inventories at the net realized value of agricultural products is constituted when the fair value of the inventory is higher than the realized value. The realization value is the sales price estimated during the normal course of business less estimated selling expenses. The adjustment at realizable value is booked in the period income statement under “Impairment of agricultural products after harvest”.

On December 31, 2014, the amount recognized under impairment of agricultural products was R$1.8 million.

*    Production costs

Production Cost 2013/2014
(R$/ha) 		 2012/2013
(R$/ha) 		 Change
Soybean  1,668  1,919  -13% 
Corn  2,384  2,645  -10% 
Sugarcane  4,824  4,326  12% 

*    Cost of Goods Sold

             
(R$ thousand)  2Q15  2Q14  Change  6M15  6M14  Change 
Cost of Goods Sold  (21,381)  (8,327)  156.76%  (66,621)  (45,405)  46.7% 
Soybean  (1,946)  (1,750)  11.2%  (14,926)  (12,982)  15.0% 
Corn  (6,529)  (67)  9654.7%  (14,894)  (3,459)  330.6% 
Sugarcane  (11,288)  (4,754)  137.5%  (34,159)  (26,212)  30.3% 
Leasing  (973)  (759)  28.3%  (1,888)  (1,340)  40.9% 
Others  (645)  (998)  -35.4%  (755)  (1,413)  -46.6% 
  
(R$ thousand)  2Q15  2Q14  Change  6M15  6M14  Change 
Cost of biological assets  (466)  2,945  n.a.  (3,782)  2,335  n.a. 
Soybean  (586)  107  n.a.  (4,555)  2,474  n.a. 
Corn  1,918  8  n.a.  3,864  (931)  n.a. 
Sugarcane  (1,918)  2,822  n.a.  (3,279)  613  n.a. 
Leasing  (54)  -  n.a.  -  -  n.a. 
Others  174  8  2154.7%  189  179  5.8% 
  
(R$ thousand)  2Q15  2Q14  Change  6M15  6M14  Change 
Total of cost of goods sold  (21,847)  (5,383)  305.87%  (70,403)  (43,071)  63.46% 
Soybean  (2,532)  (1,642)  54.2%  (19,481)  (10,507)  85.4% 
Corn  (4,612)  (59)  7708.7%  (11,030)  (4,390)  151.2% 
Sugarcane  (13,207)  (1,932)  583.5%  (37,439)  (25,599)  46.2% 
Leasing  (1,027)  (759)  35.3%  (1,888)  (1,340)  40.9% 
Others  (471)  (991)  -52.5%  (566)  (1,234)  -54.2% 

 

In 6M15, the cost of goods sold (COGS) came to R$70.4 million. Due to the fair value adjustments of agricultural products, changes in costs between exercises are directly linked to the market prices of commodities at the time of harvest.

 

Release 2Q15

10

 
 

In 6M15, total soybean COGS increased by 85.4% year-over-year, from R$10.5 million, from the sale of 11,900 tons at R$879.27 per ton, to R$19.5 million, from the sale of 22,200 tons at R$878.34 per ton.

In 6M15, total corn COGS increased by 151.2% over 6M14, from R$4.4 million, from the sale of 11,900 tons at R$368.13 per ton, to R$11.0 million, from the sale of 40,200 tons at R$274.45 per ton.

Despite the lower average cost per ton of soybean and corn, grain COGS increased by 104.8%, as a result of the higher traded volume in the period, which grew from 23,800 tons in 6M14 to 62,400 tons in 6M15.

In 6M15, total sugarcane COGS grew by 46.2% over 6M14, from R$25.6 million, from the sale of 436,000 tons at R$58.76 per ton, to R$37.4 million, from the sale of 588,000 tons at R$63.62 per ton.

*    Selling Expenses

(R$ thousand)  2Q15  2Q14  Change  6M15  6M14  Change 
Selling expenses  477  (1,200)  n.a.  (371)  (3,166)  -88.3% 
Freight and storage  (50)  (25)  100.5%  (195)  (270)  -27.8% 
Allowance for doubtfull accounts  (338)  (129)  162.6%  (714)  (396)  80.6% 
Sales Commission  (46)  -  n.a.  (91)  52  n.a. 
Others  912  (1,046)  n.a.  629  (2,552)  n.a. 

 

In the quarter ended December 31, 2014, selling expenses totaled R$371,000, 88.3% down on the previous year.

The variation in other selling expenses results mainly from the provision for onerous soybean sales contracts through the analysis of fixed prices lower than costs. In 6M15, onerous contracts came to R$579 thousand.

In 6M14 expenses with the opening of an area in the Horizontina Farm, carried out before the property was delivered to the buyer totaling R$1.4 million and provisions for doubtful accounts amounting to R$982.0 thousand, non-recurring this year.

*    General and Administrative Expenses

(R$ thousand)  2Q15  2Q14  Change  6M15  6M14  Change 
General and administrative expenses  (6,336)  (7,396)  -14.3%  (13,412)  (14,027)  -4.4% 
Depreciations and amortizations  (335)  (378)  -11.3%  (671)  (717)  -6.4% 
Personnel expenses  (3,354)  (3,972)  -15.6%  (7,755)  (8,443)  -8.1% 
Expenses with services provider  (1,540)  (1,541)  -0.1%  (2,454)  (2,400)  2.3% 
Leases and Rents  (129)  (187)  -31.1%  (361)  (354)  2.0% 
Others sales  (978)  (1,318)  -25.8%  (2,171)  (2,113)  2.7% 

 

In 2Q15, general and administrative expenses decreased 14.3% over the same period in the previous year, from R$ 7.4 million to R$ 6.4 million.

In 6M15, general and administrative expenses decreased 4.4% over the same period in the previous year, from R$ 14.0 million to R$ 13.4 million.

 

Release 2Q15

11

 
 

This variation was mainly due to the decrease of 8.1% in personnel expenses. This decrease is a result of the organizational restructuring held by the Company.

*     Other operating revenues / expenses

In 6M15, operating expenses came to R$5.6 million. This amount refers chiefly to: (i) the termination of the agricultural partnership agreement in Bahia (ended in June 2014); (ii) the partial write-off of intangible assets related to the sale of 24,624 hectares under Cresca’s land rights and exploration agreement and (iii) the provision for losses from corporate income tax offsetting credits for fiscal year 2009.

In 6M14, other revenues came to R$1.4 million, related to the reversal of provisions for environmental contingencies in 2013 due to the change in the classification of the process for possible.

*     Financial Result

             
(R$ thousand)  2Q15  2Q14  Change  6M15  6M14  Change 
Interest  (1,929)  (178)  983.7%  (4,905)  (4,041)  21.4% 
Monetary variations  (705)  (544)  29.6%  (1,393)  (1,033)  34.8% 
Foreign exchange variations on liabilities  2,311  1,166  98.2%  2,369  858  176.1% 
Unwind of present value adjustment  6,782  1,967  244.8%  5,562  1,655  236.1% 
Results with derivatives  3,193  1,334  139.4%  10,683  5,799  84.2% 
Other financial income / expenses  714  2,390  -70.1%  3,691  5,565  -33.7% 
Total  10,366  6,135  69.0%  16,007  8,803  81.8% 

 

The consolidated financial result is composed of the following items: (i) interest on financing; (ii) the monetary variation on the amount payable from the acquisition of Alto Taquari and Nova Buriti Farms; (iii) exchange variation of the companies’ USD cash position and Cresca’s receivables; (iv) present value of Cremaq, Araucária and São Pedro Farms’ sales receivables, which is linked to the soybean bag prices , (v) income from hedge operations and (vi) bank fees and expenses and returns on cash investments with the FIM Guardian fund, Banco Itaú and Banco BTG Pactual.

Monetary variations refer to the amount payable for the acquisition of the Alto Taquari Farm, which is adjusted by the CDI interbank deposit rate and the Nova Buriti Farm, which is adjusted by the IGPM general market price index.

Foreign exchange variations refer to margin deposits as collateral for derivative transactions at offshore brokerage houses and Cresca’s receivables.

Increased balance of realization of present value over assets and liabilities is chiefly due to the adjustment to fair value of farms accounts payable denominated in soybeans.

*     Derivative Operations

Our risk policy primarily aims to hedge the company’s cash flow. In this context, we are concerned not only with the main components of our revenue, but also the main components of our production costs. We therefore monitor on a daily basis: a) the international prices of the main agricultural commodities produced by the company, usually expressed in U.S. dollars; b) the base premium, i.e. the difference between the international and domestic commodity price; c) exchange rates; and d) the prices of the main components such as freight, fertilizers and chemicals, that can significantly impact costs.

 

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The points considered when deciding on the price and margin hedging strategy and tools are listed below:

·        Estimated gross margin based on the current price scenario.

·        Standard deviation from the estimated gross margin for different pricing strategy scenarios.

·        Analysis of the estimated gross margin in stress scenarios for different hedge strategies.

·        Comparison between current estimates and the company’s budget.

·        Comparison of the estimated gross margin and the historical average.

·        Market expectations and trends.

·        Tax aspects.

In line with our policy, the Company began building hedge positions for the 2014/15 harvest year in the first half of 2014. These positions essentially involve the physical purchase of fertilizer and the sale of soybean and dollar futures

Hedge Position as of February 5th, 2015

Crop Soybean FX
% hedge¹    Price (USD/bu.)  % hedge²    BRL/USD 
14/15  71.1%    10.70  34.4%    2.71 
1- Percentage of volume in tons of soybeans locked in.
2- Percentage of expected revenue in USD.

 

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Balance Sheet

*     Properties for Investments

The fundamental pillars of the Company’s business strategy are the acquisition, development, exploration and sale of rural properties suitable for agricultural activities. The Company acquires rural properties with significant potential for generating value, subsequently holding the assets and carrying out profitable agricultural activities on them. Once we acquire our rural properties, we begin to implement high-value-added crops and to transform these rural properties by investing in infrastructure and technology, while also entering into lease agreements with third parties. In line with our strategy, when we deem a rural property has reached its optimal value, we sell it to capture the capital gains.

The rural properties acquired by the Company are booked at their acquisition cost, which does not exceed their realized net value, and are recognized under “Non-Current Assets”.

Properties for investment are evaluated at their historical cost, plus investments in buildings, improvements and the clearing of new areas, minus the depreciation accrued according to the same criteria detailed for fixed assets.

Investment Properties Acquisition value Investments Investment
Properties		 Propertie
Appraisal
(06/30/2014)
In December 31, 2014  238,077  111,766  349,843  1,066,466 

 

The acquisition of Cresca will be booked as a joint-venture and, therefore, recognized as an investment and its results as equity income.

The write-offs in the period, were due to buildings, the clearing of areas and construction in progress.

 

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*     Indebtedness

The table below shows BrasilAgro’s short and long-term loans and financing on June 30, 2014 and September 30, 2014.

Loans and Financing (R$ thousand)  Expiration  Annual Interest Tax - %  12/31/2014  06/30/2014  Change 
Short term           
Financiamento de Custeio Agrícola - BNB e Itaú  Nov-15  7,51 to 15,12  55,510  44,712  24.2% 
Financiamento Projeto Cremaq e Jaborandi - BNB  Dec-15  TJLP + 3,45 and 4,45 / SELIC + 3,45 / Pre 7,23  10,215  12,742  -19.8% 
Financiamento de Máquinas e Equipamentos - FINAME  Dec-15  5,50 to 8,70  1,729  1,814  -4.7% 
Financiamento de cana-de-açúcar - Itaú  Jul-15  TJLP + 3,00 to 3,10  1,548  2,985  -48.1% 
      69,002  62,253  10.8% 
Long term           
Financiamento de safra - Itaú  Jul-15  TJLP + 3,00 to 3,10  -  1,610  -100.0% 
Financiamento de Máquinas e Equipamentos - FINAME  Nov-16  5,50 to 8,70  462  1,056  -56.3% 
Financiamento Projeto Cremaq e Jaborandi - BNB  Oct-21  TJLP + 3,45 and 4,45 / SELIC + 3,45 / Pre 7,23  53,796  55,243  -2.6% 
      54,258  57,909  -6.3% 
Total      123,260  120,162  2.6% 

 

The bulk of the Company’s debt comprises loans and financing from development banks and/or government development agencies, through direct and indirect lending, at interest rates that are cheaper than the market rates. Government development agencies disbursed financing of R$61.2 million along 6M15.

In 2Q15, we also contracted the financing for the construction of a silo in Bahia. The total financed amount came to R$10.7 million, at the rate of 4% p.a., with 60 months duration and 12-month grace period.

The balance of loans and financing came to R$123.2 million and R$120.2 million on December 31, 2014 and June 30, 2014, respectively.

In addition, the balance of accounts payable on acquisitions on December 31, 2014 was R$46.4 million, 3.6% up on June 30, 2014, due to the restatement of the installments, which are adjusted by the IGPM inflation index, the CDI interbank rate and the U.S. dollar.

Acquisitions payable (R$ thousand)  12/31/2014  06/30/2014  Change 
Alto Taquari Farm  27,453  26,060  5.3% 
Nova Buriti Farm  18,986  18,760  1.2% 
Total  46,439  44,820  3.6% 

 

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Corporate Governance

*     BrasilAgro Day

On December 18, the Company held the BrasilAgro Day with the presence of a sector specialist, where topics related to the market were discussed and the Company’s future plans.

All the members of the board of executive officers were present at the event and we had the presence of more than 40 people, among investors, shareholders, market analysts and other market professionals.

Capital Markets

*     Share performance

On January 27, 2015, pursuant to article 20, XII of the Bylaws, article 30, paragraph 1, “b” of Law 6404/76, article 2 of CVM Instruction 358/02 and article 14 of CVM Instruction 10/80, the Company canceled 195,800 shares held in treasury.  The Shares were acquired through the Company’s share buyback program.

The Company’s capital stock of R$584.2 million did not suffer any alteration as a result of the cancellation of the shares, but it will now be divided into 58,226,600 common shares.

On February 9, 2015, BrasilAgro’s shares (AGRO3) were quoted at R$8.30, giving a market cap of R$483.3 million, while its ADRs (LND) were quoted at US$3.05.

 

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Definitions 

Harvest 2012/2013 fiscal year begun on July 1, 2012 and ended June 30, 2013. 

2Q14 quarter ended December 31, 2014. 

Harvest 2013/2014 fiscal year begun on July 1, 2013 and ended June 30, 2014. 

2Q15 quarter ended December 30, 2014. 

Harvest 2014/2015 fiscal year begun on July 1, 2014 and ended June 30, 2015. 

 

Disclaimer 

The statements contained in this document related to the prospects for BrasilAgro s businesses, projected operating and 

financial income and growth are merely projections, and as such are based exclusively on management s expectations. 

These expectations depend materially on market conditions, the performance of the Brazilian economy, the industry and 

international markets, and are therefore subject to change without prior notice. 

 

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Income Statement (R$ ‘000)

  2Q15  2Q14  Change  6M15  6M14  Change 
Revenues from grains  8,527  1,353  530.2%  34,285  16,301  110.3% 
Revenues from sugarcane  12,842  2,168  492.3%  38,844  27,800  39.7% 
Revenues from leasing  571  165  246.1%  957  387  147.3% 
Revenues from farm sale  -  -  n.a.  -  -  n.a. 
Other revenues  1,548  561  175.9%  2,726  807  237.8% 
Deductions from gross revenue  (2,235)  (563)  297.0%  (4,850)  (2,367)  104.9% 
Net Sales Revenue  21,253  3,684  476.9%  71,962  42,928  67.6% 
Change in fair value of biological assets and agricultural products  1,871  (556)  n.a.  9,645  634  1421.3% 
Reversal of impairment of net realizable value of agricultural products after harvest  195  -  n.a.  (1,778)  (15)  11753.3% 
Net Revenue  23,319  3,128  645.5%  79,829  43,547  83.3% 
Cost of agricultural products sale  (21,847)  (5,383)  305.8%  (70,403)  (43,071)  63.5% 
Cost of farm sale  -  -  n.a.  -  -  n.a. 
Gross Profit (loss)  1,472  (2,255)  n.a.  9,426  476  1880.3% 
 
Selling expenses  477  (1,200)  n.a.  (371)  (3,166)  -88.3% 
General and administrative expenses  (6,336)  (7,396)  -14.3%  (13,412)  (14,027)  -4.4% 
Depreciations and amortizations  (335)  (378)  -11.3%  (671)  (717)  -6.4% 
Personnel expenses  (3,354)  (3,972)  -15.6%  (7,755)  (8,443)  -8.1% 
Expenses with services provider  (1,540)  (1,541)  -0.1%  (2,454)  (2,400)  2.3% 
Leases and Rents  (129)  (187)  -31.1%  (361)  (354)  2.0% 
Others sales  (978)  (1,318)  -25.8%  (2,171)  (2,113)  2.7% 
 
Other operating income/expenses, net  (4,237)  1,892  n.a.  (5,580)  1,447  n.a. 
 
Financial result  10,366  6,135  69.0%  16,007  8,803  81.8% 
Financial income  19,973  12,847  55.5%  50,643  21,008  141.1% 
Interest on Financial Investments  1,851  2,652  -30.2%  5,074  5,998  -15.4% 
Interest on assets  1,260  357  252.9%  2,551  707  260.8% 
Monetary variations  -  -  n.a.  -  -  n.a. 
Foreign exchange variations on liabilities  3,275  858  281.7%  6,761  858  688.0% 
Unwind of present value adjustment  7,933  7,378  7.5%  20,163  7,378  173.3% 
Realized results with derivatives  2,780  3,389  -18.0%  10,189  4,782  113.1% 
Unrealized results with derivatives  2,874  (1,787)  n.a.  5,905  1,285  359.5% 
Financial expenses  (9,607)  (6,712)  43.1%  (34,636)  (12,205)  183.8% 
Bank charges  (1,137)  (262)  334.0%  (1,383)  (433)  219.4% 
Interest on liabilities  (3,189)  (535)  496.1%  (7,456)  (4,748)  57.0% 
Monetary variations  (705)  (544)  29.6%  (1,393)  (1,033)  34.8% 
Foreign exchange variations on liabilities  (964)  308  n.a.  (4,392)  -  n.a. 
Unwind of present value adjustment  (1,151)  (5,411)  -78.7%  (14,601)  (5,723)  155.1% 
Realized results with derivatives  (259)  -  n.a.  (841)  -  n.a. 
Unrealized results with derivatives  (2,202)  (268)  721.6%  (4,570)  (268)  1605.2% 
 
Equity pick up  (1,279)  -  n.a.  (2,082)  -  n.a. 
Profit (loss) before income and social contribution taxes  463  (2,824)  n.a.  3,988  (6,467)  n.a. 
Income and social contribution taxes  717  1,445  -50.4%  (1,226)  2,019  n.a. 
Profit (loss) for the year  1,180  (1,379)  n.a.  2,762  (4,448)  n.a. 
Outstanding shares at the end of the period  58,422,400  58,422,400  58,422,400  58,422,400  58,422,400  58,422,400 
Basic earnings (loss) per share - R$  0.02  (0.02)  n.a.  0.05  (0.08)  n.a. 

 

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Balance Sheet (R$ ‘000)

Assets  12/31/2014  06/30/2014  Change 
Current assets       
Cash and Cash equivalents  21,883  86,745  -74.8% 
Markable securities  18,361  21,532  -14.7% 
Trade accounts receivable  43,307  65,010  -33.4% 
Inventories  18,586  40,210  -53.8% 
Biologial assets  64,786  1,421  4459.2% 
Recoverable taxes  3,612  3,749  -3.7% 
Derivative financial instruments  18,090  18,255  -0.9% 
Transactions with related parties  730  723  1.0% 
Other assets  397  442  -10.2% 
  189,752  238,087  -20.3% 
 
Non-current assets       
Biological assets  22,180  31,202  -28.9% 
Restricted marketable securities  13,443  13,782  -2.5% 
Recoverable taxes  30,133  29,849  1.0% 
Diferred taxes  43,294  43,554  -0.6% 
Derivative financial instruments  -  63  -100.0% 
Trade accounts receivable  30,087  37,453  -19.7% 
Receivables from related parties  349,843  334,803  4.5% 
Trade accounts receivable  31,495  26,068  20.8% 
Investment properties  5,879  4,644  26.6% 
  526,354  521,418  0.9% 
 
Investments in unquoted equity instruments  74,939  50,369  48.8% 
Property, plant and euipment  12,485  13,542  -7.8% 
Intagible assets  4,122  4,966  -17.0% 
  617,900  590,295  4.7% 
Total assets  807,652  828,382  -2.5% 

 

 

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Balance Sheet (R$ ‘000)

Liabilities and Equity  12/31/2014  06/30/2014  Change 
Current liabilities       
Trade accounts payable  14,619  8,158  79.2% 
Loans and financing  69,002  62,253  10.8% 
Labor obligations  3,466  8,730  -60.3% 
Taxes payable  5,983  6,501  -8.0% 
Dividends payable  25  25  0.0% 
Derivative financial instruments  4,054  204  1887.3% 
Payable for purchase of farms  46,439  44,820  3.6% 
Transactions with related parties  378  33,237  -98.9% 
Onerous contract  -  579  -100.0% 
Advances from customers  2,647  15,038  -82.4% 
  146,613  179,545  -18.3% 
 
Non-current liabilities       
Loans and financing  54,258  57,909  -6.3% 
Taxes payable  1,992  2,482  -19.7% 
Provision for legal claims  4,133  3,573  15.7% 
Other liabilities  737  967  -23.8% 
  61,120  64,931  -5.9% 
 
Equity - Attributable to equity holders of the parent       
Capital  584,224  584,224  0.0% 
Capital reserves  4,283  4,201  2.0% 
Treasury shares  (1,934)  (1,934)  0.0% 
Others reserves  21,572  8,403  156.7% 
Accumulated losses  (8,226)  (10,988)  -25.1% 
Total equity  599,919  583,906  2.7% 
  
Total liabilities and equity  807,652  828,382  -2.5% 

 

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Cash Flow (R$ ‘000)

  6M15  6M14 
Net Income  2,762  (4,448) 
Adjustments to reconcile net income     
Depreciation and amortization  9,337  8,642 
Fam sale gain  -  - 
Granting of stock options  82  619 
Residual value of fixed assets  1,407  194 
Equity Pickup  253  1,734 
Patrimonial Equivalence  2,082  - 
Gain (loss) on derivatives  (1,335)  (1,285) 
Exchange rate, monetary and financial charges  (1,145)  3,612 
Ajuste a valor presente de contas a receber pela venda de fazendas e máquinas  (5,562)  170 
Provision for Income and social contribution taxes  966  - 
Income and social contribution taxes  260  (2,800) 
Fair value of biological assets and agricultural products and depletion of harvest  (9,645)  (634) 
Reversal of impairment of agricultural products after harvest  1,778  15 
Allowance for doubtful accounts  47  153 
Onerous contracts  (579)  - 
Provisions for lawsuits  2,653  (1,796) 
  3,361  4,176 
Change in operating working capital     
Clients  22,613  88,022 
Inventories  61,909  2,913 
Biological Assets  (87,736)  (60,227) 
Recoverable Taxes  (1,656)  (3,166) 
Derivative Transactions  5,200  (1,047) 
Other credits  (759)  (8,985) 
Suppliers  6,000  1,757 
Related parties  (35,747)  (3,410) 
Taxes  (275)  (1,079) 
Paid income tax and social contribution  (5,264)  (5,510) 
Labor obligations  (1,699)  (766) 
Clients advance  (12,391)  (38) 
Other obligations  (230)  - 
Net Cash generated by (used in) operating activities  (46,674)  12,640 
CASH FLOW OF INVESTMENT ACTIVITIES     
Additions to immobilized and intangible  (1,097)  (1,929) 
Additions to property for investments  (22,064)  (10,559) 
Rescur (Application) for rescue of securities  8,755  9,021 
Farm acquisition payment  -  (2,151) 
Increase in investments and participations  (13,483)  (14,463) 
Cresca joint venture acquisition  -  (8,592) 
Amount received from the sale of farm  10,897  10,369 
Net cash (invested in) operating activities  (16,992)  (18,304) 
CASH FLOW OF FINANCING ACTIVITIES     
Loans and financing  61,191  39,601 
Interest from Loans and Financing  (7,187)  - 
Payment of loans and financing  (55,200)  (44,178) 
Treasury shares  -  (1,934) 
Generated (provided) net cash by financing activities  (1,196)  (6,511) 
Increase (decrease) in cash and cash equivalents  (64,862)  (12,175) 
Cash and cash equivalents at the beginning of the year  86,745  75,694 
Cash and cash equivalents at the end of the year  21,883  63,519 
  (64,862)  (12,175) 

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: February 10, 2015.

 

 

 

 

BRASILAGRO – COMPANHIA BRASILEIRA DE PROPRIEDADES AGRÍCOLAS

 

 

 

 

 

By:

/s/ Julio Cesar de Toledo Piza Neto

 

 

Name:

Julio Cesar de Toledo Piza Neto

 

 

Title:

Chief Executive Officer and Investor Relations Officer

 

Date: February 10, 2015.

 

 

By:

/s/ Gustavo Javier Lopez

 

 

Name:

Gustavo Javier Lopez

 

 

Title:

Chief Administrative Officer