Cresud Sociedad Anónima, Comercial, Inmobiliaria, Financiera y Agropecuaria WT EXP 030926 (CRESW) Q2 2026 Earnings Call Transcript

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Overview

The earnings call presents a mixed outlook. Positive factors include the largest campaign in history, expected growth in planted area, and dividend payments. However, challenges such as delayed harvests, competitive pressures, and financial losses due to exchange rates weigh negatively. The Q&A reveals optimism about BrasilAgro and IRSA but highlights uncertainties in trade agreements and commodity prices. Overall, the sentiment is balanced, leading to a neutral rating.

Key Financial Performance

Hectares Planted A reduction of 6,000 hectares planted compared to the previous quarter due to strict planting conditions and focus on areas with positive margins.

Winter Crops Yield Yield was 10% higher than expected due to good weather and increased fertilizer use in Argentina. However, wheat prices were not favorable.

Cattle Activity Positive results with sustained prices and increased investments in feedlots in Argentina. Production increased from 7,000 tons to 10,500 tons of beef year-over-year.

Sugarcane Production Lower production in Brazil due to adverse conditions affecting yields.

Dividend Payment Cresud paid ARS 93,000 million (~$64 million) in dividends, with 70% in cash and 30% in kind (IRSA shares).

Debt Issuance Issued $117 million in local capital market bonds to repay debt maturities, with interest rates of 5.75% and 7.25% for 1-year and 3-year tenures, respectively.

IRSA Results Positive results of ARS 248.8 million compared to a loss last year, driven by gains in fair value of investment properties and improved revenues in malls, offices, and hotels.

Net Result Net result of ARS 183.9 billion, with ARS 74.4 billion attributable to controlling shareholders. This was influenced by gains in fair value of investment properties and negative FX results.

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Operating Highlights

Improved crop yields: Achieved 10% higher yields for winter crops compared to expectations, driven by better use of fertilizers in Argentina.

Cattle production expansion: Increased beef production from 7,000 tons to 10,500 tons by improving feedlot facilities and intensifying cattle rotation.

Export tax reductions: Argentina reduced export taxes on key crops like soybean (26% to 24%), corn (9.5% to 8.5%), and wheat (9.5% to 7.5%).

Beef export growth: Argentina's beef export quota to China increased by 17%, and the U.S. market access expanded from 20,000 tons to 100,000 tons.

Debt management: Issued $117 million in local bonds to refinance debt maturities for the year.

Dividend distribution: Paid $64 million in dividends, with 70% in cash and 30% in kind (IRSA shares).

Real estate operations: No real estate transactions in the first half, but expected to close deals by year-end.

Expansion in Brazil: FyO expanded operations in Brazil, trading 300,000 tons, with plans to grow further in the larger Brazilian market.

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Risk or Challenges

Weather Conditions: While weather conditions were generally favorable, there were some areas with insufficient rain, particularly in Brazil and Paraguay, which could impact crop yields, especially for corn.

Commodity Prices: Prices for key commodities like soybean and corn remain low in real terms, leading to reduced margins for farmers despite increased production.

Input Costs: Higher input costs are compressing margins, making it challenging to maintain profitability.

Sugarcane Yields: Lower production results in Brazil due to issues affecting sugarcane yields, negatively impacting financial performance in this segment.

Debt Management: The company issued $117 million in bonds to manage debt maturities, which could increase financial risk if market conditions worsen.

Real Estate Transactions: No real estate transactions were closed in the first half of the year, which could impact revenue diversification and financial performance.

Regulatory and Tax Environment: While there were small reductions in export taxes, the regulatory environment remains challenging, particularly in Argentina, where taxes on exports are still significant.

Currency Risks: Fluctuations in exchange rates, particularly in Argentina, have led to financial losses, impacting overall profitability.

Delayed Harvests: Harvests for key crops like soybean and corn are delayed in some regions, which could affect revenue timing and cash flow.

Competitive Pressures: The agricultural sector is experiencing decreasing margins due to technological advancements and increased competition, which could impact long-term profitability.

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Guidance & Outlook

Weather and Crop Expectations: The company expects balanced weather conditions and a normal or almost normal crop yield across Argentina, Bolivia, Brazil, and Paraguay. However, some delays in corn planting in Brazil and Paraguay due to lack of rain are noted. Soybean and corn harvests are expected to peak in April through September.

Export Tax Reductions: The Argentine government is reducing export taxes on key crops, including soybeans, corn, and wheat. This is expected to improve liquidity in the agriculture and cattle sectors.

Cattle Production and Pricing: Cresud plans to increase beef production from 7,000 tons in 2023 to 10,500 tons in 2026 by intensifying cattle rotation and expanding feedlot capacities. The company anticipates benefiting from rising beef prices due to reduced global cattle stocks and increased demand.

Real Estate Transactions: The company expects to close real estate transactions in the region by the end of the fiscal year, particularly in Argentina, where activity has been minimal in recent years.

FyO Expansion: FyO, Cresud's trading and advisory branch, is expanding operations in Brazil, aiming to replicate its success in Argentina. The company expects significant growth in Brazil, which has a crop size more than double that of Argentina.

Debt Management: Cresud has raised $117 million through local capital market bonds to cover 2026 debt maturities. The company has also completed a dividend payment of $63.7 million, partially in cash and partially in shares.

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Shareholder Return Plan

Dividend Payment: Cresud paid a significant dividend of ARS 93,000 million (approximately $64 million). 70% of this was paid in cash, while 30% was distributed in kind and IRSA shares. Additionally, almost 1% of Cresud shares were paid as dividends.

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Key Q&A

Q:What is your view on the rather depressed share price of BrasilAgro? Would you consider increasing your shareholding?

A:Alejandro Elsztain stated that Brazil is in a special moment politically, with upcoming presidential elections. He noted optimism in the Brazilian market, citing improvements in the currency exchange rate. He highlighted the undervaluation of BrasilAgro shares due to a combination of owned and leased land. Cresud currently owns 35% of BrasilAgro and is optimistic about the situation, considering increasing its stake.

Q:Are you going to exercise your IRSA warrants or exchange them in the newly introduced cashless option? Are sufficient funds available to fully exercise the warrants?

A:Matias Gaivironsky confirmed that Cresud will exercise the warrants on a cashless basis. He explained that IRSA has significant liquidity, with over $300 million in cash, and Cresud plans to increase its stake in IRSA to 55%.

Q:Are there any provisions or conditions in the trade agreement with the U.S. or the FTA with the European Union that have direct implications, positive or negative, for the products that you focus on?

A:Alejandro Elsztain mentioned that the main impact is on beef, with positive implications for Argentine farmers. He noted that the Hilton quota in Europe and less strict health conditions in the U.S. are beneficial. He did not see significant impacts on soybeans or corn.

Q:What is the chance of the Mercosur agreement with Europe being ratified, and when could that happen?

A:Alejandro Elsztain described this as a political question, noting resistance from European farmers, particularly in France. He mentioned that while some portions of the agreement have been approved, the final portion has not. He expressed optimism about the American agreement being easier to approve.

Q:If commodity prices stay low, what steps will you take to lower operating costs to be operationally profitable or more profitable?

A:Alejandro Elsztain explained that Argentine farmers have learned to adapt to scarcity by rotating land less, using lower inputs, and employing variable cost technologies. He highlighted the use of machinery equipped for variable application of seeds, herbicides, and fertilizers to reduce costs and compensate for lower margins.

Q:How are fertilizer prices affecting Cresud?

A:Alejandro Elsztain stated that fertilizer prices impact Brazil more than Argentina due to richer land in Argentina requiring less fertilization. He noted that global events, such as war, could further affect fertilizer costs, impacting farmers worldwide.

Q:Review of Unclear Management Responses

A:Management avoided providing a direct answer to the question about the Mercosur agreement with Europe being ratified. Alejandro Elsztain described it as a political issue and did not provide a clear timeline or specific details.

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Earnings Word Cloud

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

CRESY Transcript

Cresud Sociedad Anónima, Comercial, Inmobiliaria, Financiera y Agropecuaria WT EXP 030926 (CRESW) Q2 2026 Earnings Call 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.

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

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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.

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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.

CRESY Report

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