Cresud Sociedad Anónima, Comercial, Inmobiliaria, Financiera y Agropecuaria (CRESY) Q3 2025 Earnings Call Transcript

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Overview

The earnings call presents mixed signals. While there is a notable profit turnaround and credit rating upgrade, significant challenges remain, including operating results decline, losses in grains and FyO, and supply chain issues. The Q&A reveals uncertainties about dividends and long-term strategies, which dampen positive sentiments. Given these mixed factors, the stock is likely to remain stable in the short term.

Key Financial Performance

Profit ARS 35 billion (compared to a loss last year). This change is attributed to a recovery in the mall segment, where tenant sales increased by 13.4% compared to the previous year.

Tenant Sales Increased by 13.4% compared to the previous year, indicating a recovery trend.

Operating Results Drop of 83% year-over-year, primarily due to inflation adjustments and the impact of the dollar's appreciation.

FyO Loss Loss of ARS 19.9 billion compared to a profit of ARS 29.8 billion last year, attributed to seasonality and the absence of special dollars for farming.

Grains Loss Loss of ARS 5.4 billion compared to a profit of ARS 21.6 billion last year, influenced by stock valuation at current prices and lower productivity.

Sugarcane Positive evolution with higher prices and productivity, although offset by increased costs.

Cattle Production Increased by 24% compared to the previous year, with prices significantly higher than inflation.

Fair Value of Investment Properties Loss lower than last year, primarily due to inflation adjustments affecting property values.

Net Financial Line Positive number of ARS 86.5 billion compared to ARS 145 billion last year, driven by the appreciation of the peso affecting dollar-denominated debt.

Net Gain ARS 57.9 million compared to a loss of ARS 39.9 billion last year, reflecting overall improved performance.

Net Debt Remains at $300 million, with a correction noted in the reporting of gross debt.

Credit Rating Upgrade to AAA for both CRESUD and IRSA in February.

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Operating Highlights

Sugarcane Production: Higher yields and prices compared to last year.

Cattle Production: 24% increase in cattle production with higher prices.

FyO Services: Forecasting over 7 million tons for the year with a 6.7% market share in Argentina.

Market Expansion in Brazil: FyO services are beginning to show positive results, doubling last year's numbers.

Real Estate Sales: Expecting sales in Los Pozos and Alto Taquari in Brazil before the end of the year.

Operational Efficiency in Cattle: Increased margins due to higher volume and productivity.

Commodity Prices: Stable prices for soybeans and a rebound in corn prices.

Removal of Capital Controls: Reduction of the gap in currency exchange rates, positively impacting farmers' income.

Debt Management: Net debt remains at $300 million with a recent upgrade to AAA credit rating.

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Risk or Challenges

Climate Risks: Drought conditions in northern Argentina and Paraguay have negatively impacted yields for summer crops, particularly soybeans and corn, with some regions experiencing over 50% crop loss.

Commodity Price Fluctuations: Commodity prices, particularly for soybeans and corn, are subject to volatility due to global market conditions, including recent tariff reductions between China and the U.S. which may affect future pricing.

Regulatory Changes: The removal of capital controls in Argentina is expected to impact the agricultural sector positively, but any future regulatory changes could introduce uncertainty.

Economic Factors: The economic situation in Argentina, including inflation and currency fluctuations, poses risks to financial performance, particularly in terms of valuing investments and operational costs.

Supply Chain Challenges: The agricultural sector is facing challenges related to input costs and supply chain disruptions, which could affect profitability and operational efficiency.

Real Estate Market Risks: The real estate segment is experiencing slow sales, particularly in Brazil, which may impact future revenue generation.

Debt Management: CRESUD's net debt remains at $300 million, and any changes in interest rates or economic conditions could affect debt servicing capabilities.

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Guidance & Outlook

Leasing Growth: Expecting to continue growing in leasing for next year, driven by increased planted areas in Argentina and Brazil.

Commodity Prices: Stable prices for soybeans and a rebound in corn prices are anticipated, with expectations of reduced costs in the next campaign.

Capital Controls: Removal of capital controls in Argentina is expected to positively impact future results.

Cattle Production: Forecasting a production increase of 24% in cattle, with higher prices expected.

FyO Expansion: FyO is expected to surpass last year's numbers, indicating growth in services in Argentina and Brazil.

Revenue Expectations: Forecasting a 23% increase in yields in the region, with mixed results expected in soybeans and corn.

Net Income: CRESUD finished the nine-month period with a gain of ARS57.9 million compared to a loss of ARS39.9 billion last year.

Debt: Net debt remains at $300 million, with a credit rating upgrade to AAA for both CRESUD and IRSA.

Cattle Margins: Margins for the next nine months in cattle production are projected at $7 million.

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Shareholder Return Plan

Net Debt: $300 million

Gross Debt: $349.7 million

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Key Q&A

Q:Are you planning to distribute dividends this exercise?

A:The decision will be taken on October. So our shareholders' meeting will be in October. We have to submit the proposal around September. So it's not decided yet, so I can't comment anymore about that.

Q:Can you give more color on the sub-transactions at IRSA and the motivation for doing swap instead of developing?

A:We enter in all the details about Ramblas in the webcast of IRSA. The motivation is to give speed to the project. We are giving land to the developers, who will develop and pay us with square meters in the future.

Q:What is CRESUD's long-term intention with its ownership in IRSA?

A:IRSA is a controlling shareholder, and we are not imagining any big change these days.

Q:Can you explain the negative results of FyO and if we can expect a dividend policy for the coming years?

A:The EBITDA of FyO is very good, expecting $15 million. The company intends to help farmers after production, and we are projecting more volume for this year compared with the previous year.

Q:Are you seeing any meaningful improvements in farmland prices in Argentina?

A:There is a big chance of a drop in the price of land in the U.S. and Brazil compared to an increase in Argentina due to macro situations. We expect to buy some new pieces in Argentina.

Q:If you sell farms, how would you use that capital?

A:It completely depends on the situation. We are trying to swap mature farms for new ones and may buy back shares or reduce debt.

Q:How do you expect to deal with a $200 million maturity next year?

A:We will likely tap the local capital market, as we have been taking advantage of more liquidity in Argentina.

Q:Review of Unclear Management Responses

A:Management avoided giving a direct answer regarding the dividend distribution decision, stating it will be made in October without further details. Additionally, the response about CRESUD's long-term intention with IRSA lacked clarity, as it was vague and did not provide specific future plans.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

CRESY Transcript

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The earnings call presents mixed signals: while Cresud received significant dividends and has an optimistic outlook on farmland prices and expansion, there are concerns about commodity price volatility, currency risks, and unclear management responses. The Q&A highlights potential sales and expansion but lacks specificity, which may cause investor hesitation. Overall, the sentiment is neutral as positive and negative factors balance out.

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The earnings call summary indicates strong financial performance with positive net income and reduced net debt. The company is also benefiting from favorable government policies in agriculture, which should enhance liquidity and opportunities. The Q&A section reveals management's optimism despite some uncertainties, such as the drought in Brazil, which they expect will not materially impact results. Additionally, the announced buyback program and high dividend yield are likely to positively influence stock price. However, debt management risks and supply chain challenges are concerns, but overall sentiment is positive.

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CRESY Report

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