2019-2020 financial performance

GRI 102-45

In the 2019/2020 harvest year, net revenue was R$559.1 million, comprised by R$71.5 million from farm sales and R$487.6 million from sale of agricultural products and farm leasing.

Soybean revenue increased by R$33.5 million in 2020 compared to 2019, from R$161.7 million, related to the sale of 137,100 tons at R$1,179.44 per ton, to R$195.2 million, related to the sale of 166,100 tons at R$1,174.92 per ton.

In 2020, corn revenue was up by R$25.0 million year on year, from R$10.0 million, related to the sale of 21,300 tons at R$469.36 per ton, to R$35.0 million, related to the sale of 84,700 tons at R$413.60 per ton.

The increase in volume of grains sold reflects the absorption of new production areas. In contrast, prices in each region influenced revenue per ton as they consider factors such as distance for production outflow. In this sense, there was an impact in 2020 over 2019, mainly due to the production volume added by Partnership V Farm, located in the state of Mato Grosso. In 2020, the incorporation of Arrojadinho and Rio do Meio Farms increased soybean and bean revenues.

Sugarcane revenue was up by R$32.4 million in 2020 versus 2019, from R$160.5 million, related to the sale of 1.8 million tons at R$90.09 per ton, to R$192.9 million, related to 2.1 million tons at R$93.55 per ton. The increase in per-ton sugarcane price was due to the higher TRS (total recoverable sugar) of sugarcane sold. In the same period, there was a TRS price increase per harvested ton of sugarcane, from 0.639 R$/kg in 2019 to 0.672 R$/kg in 2020.

Understanding TRS

Total Recoverable Sugar represents sugarcane quality, that is, its capacity of being transformed into sugar or alcohol. To understand the best harvest time, samples are collected to assess sugarcane quality. TRS calculation is linked to the prices of sugarcane products, which are sugar and alcohol. When those prices change, TRS price also changes.

BREAKDOWN OF EBTIDA FROM OPERATIONS (DOES NOT INCLUDE ADMINSTRATIVE EXPENSES)

Net Revenue from Sales (R$ thousand)	2020	2019
Total	559.06	535.132
Farm sales	71.492	177.222
Soybean	195.207	161.719
Corn	35.026	10.016
Bean	3.18	-
Cotton	13.052	-
Sugarcane	192.942	160.476
Cattle Raising	32.674	16.795
Leasing	14.68	8.52
Other	807	384

Derivatives

BrasilAgro’s risk policy is geared towards hedging cash flow and for such, the Company is always concerned not only about the main revenue items, but also production cost items. Therefore, the Company monitors on a daily basis:

a) international prices of the main agricultural commodities produced by the Company, usually priced in US dollars;
b) base premium, which is the difference between the international and domestic prices of commodities;
c) exchange rate;
d) the prices of the main items capable of considerably impacting the costs of freight, fertilizers and chemicals.

Due to the high volatility of the US dollar, chiefly due to the Covid-19 pandemic, we suffered a negative impact in the income from derivative operations. In 2020, the result of derivative operations was a negative R$40.7 million, of which negative R$55.8 million was related to currency operations and R$14.8 million to commodity operations. However, this impact will be greatly offset by cash accounts, as Company’s assets, such as inventories and biological assets, are sold.

Real estate performance

Market value of the Portfolio
Market value of BrasilAgro’s farms, on June 30, 2020, was R$1.9 billion vs. R$1.5 billion in the previous year. In addition to the impacts of soybean price increase, which influences the value of agricultural lands in Brazil, this increase was due to investments and soil maturity as a result of the Company’s actions. Considering 2019’s asset base, BrasilAgro’s portfolio value was up by 11%.

BrasilAgro assesses the market value of its farms annually and, every two years, market value is appraised by an external and independent consulting firm. The most recent external appraisal was carried out on July 31, 2019 and estimated market value of BrasilAgro’s properties was R$1.5 million, in line with the market value assessment prepared by the Company.

In order to estimate market value, the following factors are considered:
(I) development level of the property;
(II) soil quality and maturity;
(III) agricultural suitability and potential.

Farm	Location	Area in 06/30/2019 (hectares)	Area in 06/30/2020 (hectares)	Internal appraisal (R$ thousand)		Independent appraisal (R$ thousand)
				06/30/2019	06/30/2019	06/30/2019	06/30/2020¹
Jatobá Farm	Bahia	18,073	14,930	231,646	242,503	376,040	192,612
Alto Taquari Farm	Mato Grosso	5,291	5,103	174,580	194,504	125,910	127,322
Araucária Farm	Goiás	5,534	5,534	163,008	190,276	135,170	141,169
Chaparral Farm	Bahia	37,182	37,182	373,014	417,660	397,500	417,717
Nova Buriti Farm	Minas Gerais	24,212	24,212	35,822	35,313	23,180	24,167
Preferência Farm	Bahia	17,799	17,799	65,172	68,160	61,510	67,671
São José Farm	Maranhão	17,566	17,566	211,988	247,572	168,260	175,293
Arrojadinho Farm	Bahia	-	16,642	-	88,482	-	84,825
Rio do Meio Farm	Bahia	-	12,288	-	122,687	-	120,791
Serra Grande Farm	Piauí	-	4,489	-	30,273	-	-
Morotí (Paraguay)	Paraguayan Chaco	59,585	59,585	216,018	235,270	190,954	191,331
Total		185,242	215,330	1,471,248	1,872,701	1,478,524	1,542,898

Note 1: Independent appraisal in July 2019 due to Agrifirma merger.

Main operational changes in the period

GRI 102-10

Jun/2020 – sale of 1,875 hectares (1,500 arable hectares) in the Jatobá Farm, in Jaborandi (BA). The nominal sale value was R$45.0 million (approximately R$30,010/arable hectare).
Apr/2020 – acquisition of Serra Grande Farm, in Baixa Grande do Ribeiro (PI) with 4,489 hectares, of which 2,904 are arable hectares and suitable for grain crops. The acquisition amount was approximately R$25.0 million (R$8,600/arable hectare).
May/2020 – sale of 105 arable hectares in the Alto Taquari Farm, located in Alto Taquari (MT). Nominal sale amount was R$11.0 million (R$105,000/arable hectare).
Jan/2020 – Agrifirma merger was completed, adding 28,930 hectares to BrasilAgro’s portfolio.
Oct/2019 – US$1.0 million investment in Agricultural Fintech Agrofy, focused on the development of the agricultural sector’s operational chain.
Sep/2019 – sale of 85 hectares, 65 of which are arable, in the Alto Taquari Farm, in Alto Taquari (MT), at the nominal amount of R$5.5 million (close to R$84,817/ arable hectare).
Aug/2019 – sale of 1,134 hectares, of which 893 are arable hectares, in the Jatobá Farm, in Jaborandi (BA), at the nominal amount of R$23.2 million (~R$25,961/arable hectare).

Incorporations

Agrifirma

On January 27, 2020, we completed the merger of Agrifirma, announced on November 22, 2019. The completion of this transaction granted BrasilAgro the control and consolidation of Grupo Agrifirma’s operations, comprised by Agrifirma Brasil Agropecuária S.A. and its subsidiaries. The return of 663,480 shares to BrasilAgro was determined, reflecting the variation of each Company’s shareholders’ equity between the beginning of the negotiations and the date the incorporation was completed. This return is comprised by a portion in shares and a portion in subscription warrants.

As a result of the transaction, we added 28,930 hectares to our portfolio, appraised by Deloitte at R$205.6 million. The incorporated areas are located in the Western region of the state of Bahia, close to the Jatobá and Chaparral farms, and are suitable for grains and cattle raising. They also have a large irrigation potential, which translates into economies of scale, synergy with our already existing operations and a dilution of administrative expenses.

Serra Grande Farm

Another important transaction was the acquisition of Serra Grande Farm, located in the city of Baixa Grande do Ribeiro (state of Piauí). The farm has a total area of 4,500 hectares, with 2,900 arable hectares suitable for grain cultivation. On May 18, 2020, the Company executed a Purchase Agreement in the amount of R$25,047, with the first installment in the amount of R$11.0 million, for the land. On June 30, 2020, the agreement refers mainly to the delivery of 162,000 soybean bags in 3 annual installments of 54,000 bags each. The Company maintains its liability measured at fair value through the result, as required by CPC 46/IFRS 13.

Agrofy

In 2020, the Company has also invested US$1.0 million in the Agriculture Fintech startup Agrofy, focused on developing the agricultural sector’s operational chain. This effort seeks innovation and a better use of technology to achieve greater business efficiency and sustainability. The startup is an on-line marketplace with a complete range of e-commerce solutions, tailored to meet the needs of retailers and their partner channels, seeking alternative ways to connect farmers and suppliers.

Sales of Property

Sale of Property	Jatobá Farm	Alto Taquari Farm	Alto Taquari Farm	Jatobá Farm
Sale Date	June/20	May/20	October/20	September/20
Location	Jaborandi - BA	Alto Taquari - MT	Alto Taquari - MT	Jaborandi - BA
Area (hectares)	Total: 1,875/ Arable: 1,500	Total: 105/ Arable: 105	Total: 85/ Arable: 65	Total: 1,134/ Arable: 893
Acquisition Amount + CAPEX	R$3.7 MM	R$1.3 MM	R$1.2 MM	R$1.7 MM
Nominal Sale Value ¹	300 bags/arable ha R$45.0 MM	1,100 bags/arable ha R$11.0 MM	1,100 bags/arable ha R$5.5 MM	302 bags/arable ha R$23.2 MM
Gain ¹	R$41.3 MM	R$9.7 MM	R$4.3 MM	R$21.5 MM
IRR - R$	0.143	0.211	0.214	0.147

Operational performance

Agricultural operations
In the 2019/2020 harvest, BrasilAgro’s planted area grew 13.5% compared to the previous harvest. It is important to note that this increase in planted area was the result of the enhanced productivity of the Company’s crops, chiefly soybean, despite the 2018/2019 sales, when BrasilAgro had 13,000 mature hectares in its portfolio.

PLANTED AREA (THOUSAND HECTARES)

Area in Production by Land Ownership (hectares)	18/19 Harvest	19/20 Harvest	Share in the 19/20 Harvest (%)	Change (%)
Own area	71,134	81,978	53,5%	15,2%
Operated by BrasilAgro	57,014	60,106	39,2%	5,4%
Leased to third parties	14,120	21,872	14,3%	54,9%
Leased area	63,817	71,176	46,5%	11,5%
Total	134,951	153,154	100,0%	13,5%

PRODUCTION AREA PER CROP (HECTARES)

Production
BrasilAgro is always aware to add productivity and new crops that bring more profitability to its business, at the same time it is concerned about putting them together with value creation to post good real estate performance. In line with the Company’s strategy to create sound operational results, production increased by 38% in the 2019/2020 harvest, compared to the previous year.

BRASILAGRO GRAIN PRODUCTION (THOUSAND TONS)

Sugarcane

The Company remains alert to the impacts of the Covid-19 pandemic and the oil crisis on sugarcane prices. The ethanol price decline, initially caused by the reasons above, was partially offset by good performance of BrasilAgro’s production. Given the price volatility presented, the Company has marginally reduced sugarcane area, but has maintained production estimates for the 2020 harvest. In April, the harvesting of the new sugarcane crop began. Up to this report, 2,169,507 tons of sugarcane have been harvested, recording Ton of Sugarcane per Hectare (TSH) of 91.0.

Soybean

Soybean production in the 2019/2020 harvest was 3,109 Kg/ha, 1% higher than the initial estimate. In Brazil, soybean production was 3.9% above the initial estimate and 10.4% higher than the previous harvest. In Paraguay, the 68.5% negative variation compared to the initial estimate was due to climate losses, but it is important to note that 75.0% of financial loss will be offset by the Company’s agricultural insurance.

Corn

Bean

Arrojadinho Farm, acquired within the Agrifirma merger, has important areas for bean growing. Due to trade conditions, the Company also allocated 2nd harvest areas in the Chaparral and Partnership V Farms for this crop.

Production was 22.2% lower than estimates because the Company decided to increase Partnership V Farm’s area by 45.0%, during planting season. However, during the crop’s development, climate factors were below expected.

Cotton

Climate conditions in Bahia have been unfavorable during planning season and, therefore, BrasilAgro has reduced cotton planting area by 15.0% compared to the initial estimate, however, during harvest, climate conditions became favorable, allowing a production of 4.570 kg/ha. As of the date of this report, harvest for 100% of the area has been completed and production was 12.83% above estimates.

BrasilAgro’s sustainable cotton production is certified by Better Cotton Initiative
GRI 102-12

BrasilAgro’s cotton production was certified by Better Cotton Initiative (BCI) seal, a not-for-profit organization that brings together different players, such as producers, beneficiaries and retailers who are part of a global partnership to foster and encourage more sustainable cotton production. Several requirements are audited, including environmental, labor and agricultural practices topics. The seal endorses the Company’s concern for the responsible production of such crop.

Cattle Raising

Cattle raising is a transitory activity for BrasilAgro, aiming the transformation of the area. In total, the Company’s inventory comprises 15,100 cattle heads in the Preferência and Jatobá Farms in Brazil and Moroti, in Paraguay, distributed in 13,721 pasture hectares in Brazil and Paraguay. In addition to active pastures, there are other 3,085 hectares of pasture in Chaparral Farm, as part of the opening area strategy, once grass increases the organic matter level in the soil and mitigates impacts that could cause low productivity in new areas.

In 2020, the Company decreased beef production estimates compared to what was initially disclosed, as price increases changed the Company’s initial strategy to purchase calves. Accordingly, Paraguayan operations have been impacted by the coronavirus pandemic, which caused the Chilean market to shut down for imports.

Other

In order to improve the Company’s results, mitigate operational risks and as a real estate strategy, in 2020 BrasilAgro leased 13,778 hectares, in the state of Bahia and in Paraguay, to third parties who are farmers in those regions. The leasing agreements have a 5-year term, and the amount is up to 18% of production, being the minimum amount 5 soybean bags per hectare.

In 2020, the average agreement amount was 15.5% of production, generating net revenue of R$14.7 million for the Company in the period. Additionally, there are 1,689 hectares of other crops, such as grasses cover crops and sorghum, to increase organic matter and speed up soil maturity.

Disclaimer:
The statements contained in this document related to the prospects for BrasilAgro’s businesses, projected operating and financial results 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.

Performance