Cresud's 2025 Q4 Earnings Call: Contradictions Emerge in Argentina Liquidity, Farm Sales, and Valuation Strategies

The above is the analysis of the conflicting points in this earnings call

Guidance:

• Planted area expected to surpass 300,000 hectares in FY26; record grain campaign with higher leasing mix and intensification.
• Winter rains in Argentina favorable; expect good yields; adopting precision tech to improve margins and reduce inputs.
• Cattle: strong prices and margins; herd expansion in Argentina and Paraguay; continued feedlot intensification.
• Services: Brazil brokerage volumes expected to double next year; ongoing growth in Argentina.
• Real estate: plan more transactions in Argentina as liquidity improves; opportunistic buys in undervalued farms.
• Financing: plan to refinance remaining FY26 maturities; continue deleveraging; WACC ~12%.
• Macro tailwinds: reduced export taxes and near-zero FX gap should benefit margins.

Business Commentary:

• Agricultural Production and Climate Impact:
• In Cresud's fiscal year 2025, agricultural production faced challenges due to climate conditions, particularly in Argentina and Paraguay.

• The agricultural campaign was significant in size, with a mix of leasing and owning land, but was affected by water scarcity, impacting yields, notably at Los Pozos Farm and Paraguay farms.

• Commodity Pricing and Variable Input Costs:

• Commodity prices remained relatively stable, with some input costs like crop protection seeing significant corrections but others, like fertilizers, maintaining high prices.

• This stability and cost variation affected margins, impacting agricultural activity in Argentina.

• Economic and Political Conditions in Argentina:

• Argentina experienced positive developments, including the removal of capital controls and grain taxes reduction, which positively affected farmers.

• The reduction in grain taxes from 33% to 26% for soybeans and from 12% to 9.5% for corn improved operational margins.

• Real Estate Sales and Market Trends:

• Cresud achieved significant gains from real estate sales, with four transactions resulting in total gains of $56 million.

• The gains were attributed to the land value increase in Argentina, driven by favorable climate conditions and reduced taxes.

• Cattle Industry Expansion:

• The cattle industry experienced growth, with increased head counts and higher prices.
• This expansion was driven by better margins and improved production, with a focus on intensifying cattle activities in Argentina.

Sentiment Analysis:

• Management expects a 'record' planting surpassing 300,000 hectares and is 'very optimistic.' Cattle prices and margins are 'very good' and expanding. Argentina’s export tax cuts and 'gap close to 0' FX convergence are described as 'really very favorable' for margins. IRSA delivered a 'very good year' with rental EBITDA up 15.3% YOY and shopping malls at a 10-year record.

Q&A:

• Question from Unknown (Investor): Cresud appears undervalued, with market cap roughly equal to its IRSA stake. What actions will management take to unlock value?
  Response: Continue returning capital via dividends and share buybacks (within regulatory limits) and simplify the corporate structure; cannot execute arbitrage between IRSA and Cresud.

• Question from Unknown (Investor): Will the company buy or sell farms in Argentina, and what are price trends?
  Response: Pursue both sales of revalued assets with less potential and purchases of undervalued farms as liquidity improves; in Brazil, wait for further price adjustments before buying.

• Question from Unknown (Investor): What is the outlook for the next campaign regarding prices and climate?
  Response: Plan record planting (>300,000 ha) with tech-driven margin gains; winter rains are favorable; expect strong cattle prices/margins and significant growth in services, particularly doubling Brazil volumes.

• Question from Unknown (Investor): What is Cresud’s cost of capital and best investment opportunities?
  Response: WACC ~12%; prioritize increasing land leasing in Argentina, opportunistic Brazil farm buys, investing in technology, and leveraging strong balance sheet to secure longer-term leases.