South America Calling
Alastair Stewart South America Correspondent

Wednesday 11/14/12

SLC Agricola 3Q Results Disappoint

Even amid near-record soybean and corn prices, Brazil's largest publicly listed farm, SLC Agricola, is struggling to keep investors happy.

Late Tuesday, the corporate producer reported third quarter results that came in well below expectations and included net losses for the quarter and the first nine months of 2012.

Concerns over its inability to post strong results mean SLC's shares are currently trading 34% off their 52-week high at $9.90 per share in New York.

The company reported net revenues of R$268 million ($132 million) last quarter, down 3% on the year, which was attributed  to lower-than-expected yields following excessive rain in Mato Grosso and drought in Bahia during the 2011-12 season, a reduction in the amount of soybeans sold on the year before and falling cotton prices.

Meanwhile, costs of goods sold surged, 31% on the year, due to the increased volumes of cotton and corn sold compared with soybeans but also because input costs rose across the board.

The result: Margins slid.

The Q3 cotton margin dropped 48% on the year to R$50 ($24.63) per metric ton, despite an 11% increase in unit price, year-on-year. Similarly, the Q3 soybean margin slid 24% to R$180 ($88.67) per ton, while unit price rose 32%, and the Q3 corn margin fell 50% to R$70 ($34.48) per ton on a 6% unit price drop.

The bottom line also made for uncomfortable reading with a net loss of R$303,000 ($149,000) recorded for the last quarter, compared with R$62.6 million ($30.1 million) in the year-before period.

The company attributed the losses in part to financial losses incurred on rising debt linked to land purchases -- in Brazil, land purchases are commonly indexed to soybean prices and so the recent run up in quotes has raised the value of outstanding payments on land. But this can't be dismissed as a quarterly blip since the company also reported a nine-month loss of R$12.4 million ($6.1 million).

According to SLC Agricola Chief Executive Arlindo Moura, margins should recover in the fourth quarter, when the company will have a lot of cotton to bill, but admitted that the climatic difficulties in 2011-12 "ate up" a lot of their profits.

Most worrying about this statement is that the weather problems in Mato Grosso and Bahia were marginal compared with the drought losses in the south, where SLC doesn't farm.

It would be a mistake to extrapolate from these numbers that SLC is in dire straits. After all, it is the accountants' job to limit taxable income and production margins remain decent.

But it does highlight the difficulties in transforming high commodity prices into farming profits and also how uncomfortable the investment community remains with the volatility involved in agriculture.

The company's share price dipped 0.8% to R$19.39 in morning trade in Sao Paulo.

SLC is one of the biggest grain farms in Brazil with nearly 650,000 acres in production and just over 100,000 acres in the land bank.

Amid skyrocketing land prices, the acquisition of new plots has proven one of the most profitable parts of SLC's business in recent years.

They were very active purchasers in 2010 and 2011 but, speaking during a conference call Wednesday morning, SLC's Moura said the recent jump in soybean prices have driven the local land market much higher, making it "difficult" to buy.

Currently there are very few opportunities to by "large areas" in the eastern and western Cerrado region, where SLC operates, he added.

"But with the more recent decline in soybean prices, the outlook should improve next year," he told analysts.


Posted at 9:11AM CST 11/14/12 by Alastair Stewart
Post a Blog Comment:
Your Comment:
DTN reserves the right to delete comments posted to any of our blogs and forums, for reasons including profanity, libel, irrelevant personal attacks and advertisements.
Blog Home Pages
August  2015
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30 31               
Subscribe to South America Calling RSS
Recent Blog Posts
  • Upturn in Brazilian Fertilizer Demand
  • Brazilian Fertilizer Sales Stable in July
  • Floods Threaten Argentine Wheat Crop
  • Argentine Farmers Plant Defensively
  • Brazil 2015-16 Cotton Area to be Lowest in 13 Years
  • Brazil's Crisis and Forex
  • Brazilian Soy Industry Nervous About Chinese Moves
  • Brazil Focuses on Integration
  • Brazil's Corn Market Sees Busy July
  • Brazil to Plant More Soy In 2015-16
  • Brazil Intacta Royalty Controversy
  • Brazil's Soy Industry Raises Soybean Export View
  • Brazilian Chicken Exports Strong
  • Brazilian Soy Rust Threat
  • Argentine Farmers Must Declare Soy Seed Origin
  • Argentina to Plant Less Wheat
  • Brazil To Set New Corn Export Record In 2015
  • The Debate Over Brazilian Soybean Area
  • Brazilian Farmers to Use Less Fertilizer In 2015-16
  • Brazil Second-Crop Corn Forecasts Rise