Good morning everyone and welcome to SLC Agrícola’s Q4 2024 Earnings Conference Call. My name is Rodrigo Gelain.

I am the Financial Manager and Investor Relations Officer. Joining me today are our CEO Aurélio Pavinato and our CFO and IRO, Ivo Brum.

It is a pleasure to be with you this morning. Please note that this conference is being recorded and will be available on our Investor Relations website, where you can also find the presentation.

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If you're listening to the audio conference in English, you can also mute the original audio if desired. For the Q&A session, we kindly ask you to submit your questions via the Q&A icon at the bottom of your screen.

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We would like to remind you that the information shared in this presentation as well as any statements made during this call regarding business outlook, projections and operational and financial goals, are based on management's beliefs and assumptions as well as currently available information. Forward-looking statements are not guarantees of future performance as they involve risks and uncertainties.

They refer to future events. So investors should consider economic conditions, market factors and other operational variables that may affect SLC Agrícola’s future performance and lead to outcomes differing from those expressing these statements.

I will now turn the floor over to our CEO, Aurélio Pavinato to begin our presentation. You may proceed.

Thank you very much, Gelain. Good morning everyone.

We appreciate your participation in SLC Agrícola’s Q4 2024 earnings conference call. Let's begin please with Slide 4, where we'll say a words about the cotton market.

Cotton prices closed December at approximately $0.70 per pound, reflecting the global supply and demand dynamic. According to USDA data, projected global cotton consumption for the season harvest is 116.5 million bales, while production is expected to reach 120.9 million bales, resulting in a supply surplus of 4.4 million bales.

While the U.S. faced losses, China experienced production growth with favorable climatic conditions and growth of approximately 17% or 4.75 million bales.

This contributed to maintaining a global supply surplus. Moving to Slide 5, let's discuss soybeans.

The 2024, 2025 harvest in the United States started favorably with an expected production of 118.8 million tons, an important recovery from the 113.3 million tons recorded in the previous year. At that time, the U.S.

soybean output declined by over 9 million tons. In Brazil, the 2024, 2025 harvest has seen irregular rainfall, particularly in Mato Grosso do Sul and Rio [ph] Grande do Sul, where a combination of high temperatures and below average precipitation have created uncertainty regarding the final production volume.

As the harvest progresses in Brazil and production estimates are revised, we will gain a clearer view on the national output, still pending the results in harvests that are underway. So therefore, it's fundamentally important to monitor the South American harvest, especially in Brazil, so that we can consolidate the global supply and demand level.

Since the expectations of the cereales [ph] exchange show decreases in soybeans regarding the prior climate. The global supply and demand balance is expected to show a surplus of 11.6 million tons.

Now let's move to Slide 6 to discuss corn. Corn prices in the CBOT spot contract and in the Brazilian domestic market followed a positive curve throughout January and December 2024.

Currently, the global supply and demand is expected to show a production deficit of 19 million tons, marking the largest shortfall in four years. Following Brazil's record exports in 2023, 2024 saw a significant reduction in comparison to the previous cycle, and this was primarily due to an increase in domestic corn consumption, driven largely by higher demand from the corn ethanol industry, which has contributed to a lower exportable balance of the commodity.

According to UNAM data, Brazil is expected to consume 8 million tons of corn for ethanol production in 2024, 2025, 4 million tons more than the 2023, 2024 mark, representing an annual increase of 25% in the demand for the biofuel. These developments are crucial in reshaping global corn export dynamics as Argentina, Brazil, Ukraine, together with the United States remain the leading suppliers of corn.

Moving to Slide 8, let's say a few words about our operational performance for the 2023, 2024 harvest, the previous one. Cotton harvesting suffered with lower rainfall that affected the west of Mato Grosso, with a significant reduction in rainfall in October, November and December 2023, soybean reaching 3,264 kilos per hectare, 17% less than budget.

And cotton harvesting concluded in September with an average yield of 1,922 kilos per hectare, slightly below our projections, minus 8.8%. And then second corn crop corn was also harvested in September with a yield of 7,093 kilos per hectare, 6.5% below projections.

The loss in yields were the main factors affecting our 2024 results in comparison to 2023. I will now turn it over to Ivo Brum, who will discuss our financial performance.

Ivo, please go ahead.

Thank you, Pavinato. Please let's turn to Slide 10, where we present some key highlights.

Net revenue for the year reached nearly BRL 7 billion, driven by cotton shipments reaching 364,000 tons. However, net revenue declined by 4% compared to 2023 due to lower than expected soybean and corn yields in 2023, 2024 harvest.

Adjusted EBITDA total BRL 2 billion with an adjusted EBITDA margin of 29.4% and free cash flow generation of BRL 34 million. Cash flow was impacted mainly by the lower gross revenue from soybean and corn and investments in expanding planted areas and the acquisition of minority shareholders in SLC LandCo as announced for the amount of BRL 524 million.

In spite of this, our leverage remained under control at 1.8 times. Regarding investments in 2024, we see in Slide 18 the breakdown between maintenance and expansion.

Total investments in 2024, BRL 1.1 billion were invested, of which BRL 533 million in investments allocated to expansion of planted area. Maintenance CapEx represented 51.5% in a total of BRL 567 million, ensuring operational continuity.

Key investments included machinery, equipment, soil correction and infrastructure with a highlight to the expansion of irrigation at [indiscernible] Piratini Farm, where BRL 62 million were invested together with the investment in silos. Now moving to Slide 12, let's turn to our debt profile.

Adjusted net debt closed the quarter at BRL 3.7 billion with a net debt over adjusted EBITDA ratio of 1.8 times. That was impacted primarily by lower soybean productivity and an increase of 10.6% in the planted area which requires of course working capital and CapEx.

Moving to Slide 13, in the year 2024 we lengthened our final maturities and issued two CRAs very successfully showing that the market trusts our strategy for growth. At the end of 2024, 70% of our debt was long-term with an average cost of 13.1% in January.

We can now proceed to Slide 14, where we present the 2024 results for our seed in 2024 the seed business contributed BRL 106 million EBITDA with an EBITDA margin of 14.4% and net income of BRL 54 million with a net margin of 7.3%. On Slide 15, we see sales by channel.

There was an expansion in our portfolio with an increase in sales of 39% in sales to third parties and a margin of 9.4 percentage point increase in relation to 2023. On Slide 16, we outline our 2025 sales estimates.

Soybean seal seeds sales to third parties are estimated at 1.4 million bags, a 12% increase from the previous year. Cotton seed sales including third parties and internal use are projected at 145,000 bags, 1.2% increase.

Moving to Slide 17, we will discuss the distribution of the parent company's net income. Management proposes distributing 50% of the parent company's 2024 adjusted net income totaling BRL 241 million, to be paid in May 2025.

This corresponds to a dividend yield of 3.1%. Now I’ll turn it back to Pavinato, who will discuss the outlook for 2024-2025 and 2025-2026 harvests.

Please let’s go to Slide 19, where we show the evolution of the planted area for 2024 and 2025 harvests. The planted area grew 10.6% compared to 2023-2024, totaling 731,000 hectares.

On Slide 20, we provide a brief summary of the operations that supported this expansion. During the year we announced the expansion of our joint venture with Agro Penido, in the Pioneira.

We also entered a joint venture with Agropecuária Rica also in the Preciosa and signed a new lease agreement in the State of Piaui, land annexed to Fazenda Parnaguá Farm. Combined, these three operations expanded our potential planted area by 60,000 hectares for the 2024-2025 harvest.

Moving to Slide 21, we've reviewed the status of the current harvest. The planting of early and super early soybeans, which enables the cultivation of second crop cotton and corn, began in late September with a slight delay because of the rains, putting soybeans in the optimal window for high productivity potential.

So far, 65% of soybean has been harvested and we expect to exceed our initial projections. Cotton crops also show good productivity potential and due to delay in soybean planting, we shifted approximately 4,600 hectares of second crop cotton to second crop corn.

Cotton planting was completed and corn planting also has been concluded. The volume of harvested soybeans and adjustments and planting schedules justify our revised yield forecasts as follows.

Soybeans budgeted 3,076 kilos per hectare. Our current forecast is one bag above 4,043 kilos per hectare, an increase of 1.7% over budget and 23.9% higher than the 2023-2024 harvest.

First crop cotton budget at 2,041 kilos per hectare. Currently we have a forecast of 2,034 kilos per hectare, yet 2% higher than the 2023, 2024 harvest.

Second crop cotton budgeted 1910. Current forecast 1812, therefore 0.8% lower than the 2023-2024 harvest owing to the delay in finishing the harvesting.

Corn budgeted 7,542 kilos per hectare and current forecast 6,982 kilos per hectare minus 7.4% and 1.6% lower than the 2023-2024 harvest, also related to delay in planting soybeans in the ideal schedule. Now let's review the cost estimates.

The estimated cost per hectare for 2024-2025 harvest is 5.4% lower than in the 2023-2024 budget. This reduction is mainly due to declining prices of fertilizers, pesticides and seeds, which are closely correlated with commodity prices.

Now moving to Slide 23, we present the current hedge positions for 2024-2025 and 2025-2026 harvests. We continue selling soybeans for the 2024-2025 harvest, reaching 75.1% of estimated production in commitments.

We have locked 49.1% of cotton production and 35% of corn. Additionally, we have hedged currency in line with commodity sales.

For the 2025-2026 harvest, we initiated fertilizer purchases securing 50% of nitrogen fertilizers, 82% of potassium chloride, 77% of phosphates, and 30% of pesticides. We also advanced hedge positions for 2025-2026, with 45.7% of soybean production hedged, including commitments and 6.6% of cotton.

Cotton is typically traded in the short-term and as a result there is currently no market liquidity for hedging for the 2025-2026 harvest. Now moving to Slide 24, we disclose a brief summary of the acquisition that was revealed by material fact on March 6.

We announced the acquisition of Sierentz Agro Brasil for $135 million. The transaction involves 100% leased land totaling approximately 96,000 hectares.

Upon completion and closing of the deal, around 33,000 hectares have already a binding proposal for the acquisition of operational rights by tariffs, a condition for the transaction. SLC will operate 63,000 hectares, approximately 100,000 hectares of planted area considering second crops.

The production plan is to maintain soybean and corn cultivation in the initial years, with cotton being introduced from the third year of operations. SLC Agrícola is expected to take control of the operation starting July 1, 2025.

Moving to Slide 25, we illustrate the strategic impact of this transaction. The new acquisition will enable a 14% increase in planted area for the 2024-2025 harvest, as well as greater strategic diversification of our land portfolio helping to mitigate climate risks.

We can now move on to Slide 27, where we will highlight ESG achievements and awards we received. We once again received the Great Place to Work Certifications for the Agriculture Sector and Rio Grande do Sul.

Additionally, we were awarded the Mental Health Seal granted by the same organization. This certification evaluates employees’ mental health status and we achieved the operational level reinforcing our commitment to the wellbeing and quality of life of our team.

On Slide 28, we received in August the Gold Seal from the Brazilian GHG Protocol Program for the Company's 2023 inventory regarding greenhouse gas emissions. In the seed business, we achieved the triple championship of the MESC Award, which reflects SLC seeds ongoing commitment to providing high quality seeds and exceptional service to our clients.

To finish, we won the Transparency Trophy ANEFAC in October for the sixth time. This is a recognition of the transparency and quality of our financial statements.

And now on Slide 29, we see the Certification in Regenerative Agriculture. We have received this award for our role in Regenagri and the Farms Planalto and Pamplona have been certified since 2023.

We now added the Farms Palmares, Pantanal, Planeste and Planorte. Together these units account for 137 million certified hectares, a very significant improvement towards our big dream.

Thank you very much and now we will open for the Q&A session.

Thank you very much Pavinato. We will now begin the Q&A.

Kindly submit your questions in writing all at once and wait for the company's reply. [Operator Instructions] Our first question is from Gabriel Barra, Citi.

Please go ahead and open your microphone. I think Gabriel is not with us.

Pedro, you can go ahead now.

Good morning. First of all, thank you very much for taking our questions.

I have two questions about the seed business. I would like to understand what you expect for 2025 and what's the rationale behind your sales targets?

Why do you expect lower growth in cotton since you were going to grow your planted area of cotton in this harvest? And what do you expect in terms of pricing for 2025?

Do you expect prices to drop because both crops are going to be planted? And also, what are the main highlights of the operation?

I think that even with the growth in volume and the adverse climate, you were able to secure a positive EBITDA margin. Could you comment on that?

Good morning, Pedro. In our seed business, we are growing our market and soybean seed market is huge in Brazil and growth of sales in the next year echoes our strategy.

Now, growth in cotton sales follows a different dynamic. In cotton there are major farmers planting cotton in Brazil.

Most of our seed production is employed internally. We are trying to develop a cotton seed market right now and that's why we are moving more slowly in relation to our expectations of growth in cotton seed sales.

That's why we are not really betting so much on that. But depending on the planted area, this could result in higher or lower internal demand and the numbers might change.

Now, as for… Did I understand your question correctly about seed prices? Well, they're correlated with the commodity price.

Obviously, a small share of the seed price is derived from the grain. We have royalties, in fact, that make up the price because of the biotechnology and germ plasma used.

So we believe that seed prices will stabilize and probably that they could actually increase in comparison to the previous cycle because there the commodity prices in BRL were slightly lower than current prices. Yes, considering prices in BRL, both soybeans and cotton.

That's why we believe that prices will stabilize. So it will depend on our efficiency and production cost.

If we are able to reach prices that are the same or lower than last year, then we can have better prices in the next one.

Thank you.

Thank you, Pedro. Our next question is from Isabella Simonato, Bank of America.

Good morning, Isabella. Please go ahead with your question.

Good morning, Gelain, Pavinato, and Ivo. Can you hear me?

Yes.

Two questions, please. How do you feel the grain markets, especially soybean, cotton and corn, considering the trade war between China and the United States?

We see the United States losing competitiveness and we think that the Brazilian exports will increase. What do you see in terms of price and opportunities in this scenario?

Also, when we look at the expansions last year that were very relevant in your leverage, how do you feel the expectations for deleveraging if this could we expect that you continue to expand your areas? I think that, or did you reach a size that's good enough for you for the next two crop seasons?

Well, thank you. Thank you, Isabella, very strategic questions.

So first of all, let's address commodity prices and how they will be affected by the trade war. So first a brief summary right?

And then Ivo will talk about leverage. Well, how do we view the agricultural commodities market without taking Trump into account?

When we look at the curve of supply and demand, especially inventory and consumption globally at this juncture, we are in soybean, you know, has a higher ratio of inventory consumption. It would be normal to have an inventory of 28% and and today we have 30% in soybeans.

But where are these stocks? They are in China.

If I exclude China from the picture, China has 43 million tons of soybeans stocks. It would be normal to have a rate of 18% and excluding China, we have globally 16%.

So we have high soybean inventories, but all of them in China, located in China, and this will provide sustained prices. Now, when we look to corn, the normal ratio is 28%, and today it's 23% inventory consumption.

So that's why corn has been sustaining higher prices. And once again this year, there was a deficit between production and consumption.

And when we simulate the 26, 26 harvest globally, we'll see a deficit in corn production over consumption, consumption over production. So there will be a positive pressure on corn prices, which also indirectly sustains soybean prices.

So our vision is that soybean and corn prices today are being traded at low levels, especially soybean, that the prices will remain at these levels and there could be some peaks as well, depending on climate effects. Whenever there is an extreme climate effect, we see a rally in prices.

This is our perspective in relation to prices. In the case of cotton, we see demand that's always fluctuating.

So that's why, you know, cotton, even when the inventory and consumption ratio is adequate, prices dropped significantly, always related to insecurity. Oh, a recession will hit in Europe and the United States.

So after this, then, you know, Trump took office and Trump today is creating insecurity in relation to demand and this put prices of cotton under pressure. So we believe that in our vision, prices are being created at low levels, you know, below production costs in most cotton producing countries, which is at a level of $0.67 and it's this insecurity that's creating pressure on prices.

So, you know, so far the first month of the Trump administration have been very turbulent because tariffs are on, tariffs are off. This creates a lot of insecurity.

So the Trump effect over cotton is negative. This is the short of it, not on the demand for cotton, but the demand of apparel and clothing, everything that's made of cotton and that reflects the European and American GDPs.

In relation to corn and soybeans, I think I showed that we believe that the prices will remain stable with more positive volatility than negative. So trans trade policies are raising prices in the United States, prices are now slightly lower than they would be before if weren't for the trade war.

But in the case of Brazil, the decrease of prices in Chicago was offset by the premiums in Brazil. So the premiums that were negative for trump now they are $0.50 corn and $0.70 in future prices for July and August, so we don't see any losses in prices owing to the trade war.

If the trade war continues, we believe that Brazilian agriculture will benefit in Brazil. Brazil will be seen as a safe source of supply for food and this is how we view prices and the connection with Trump.

Okay, leverage. Good morning, Isabella.

First of all, it's important to remember that we have BRL 11 billion in land that support our leverage. We have debt that's far lower than our assets.

In this half of the year, we will deliver a half of the cotton volumes from this season and soybean will be probably higher than budget. So this is another source of revenue.

With this, our advice is to have at the most two times and net that over a bit. So when we are below two times, we will continue to pursue growth.

So if any opportunities arise, we will consider them and we can continue the expansion looking to the four. When we didn't grow our land, we quickly decreased leverage and we were even below one time ratios and we actually had to engage in a share buyback because we didn't have any opportunities for expansion.

So when it's below this level times we'll continue to grow and our strategy has been shown to be very consistent and adequate.

Thank you, thank you very much, very clear.

Thank you, Isabella. Our next question is from Julia Rizzo, Morgan Stanley.

Good morning, Julia. You can proceed with your question.

Can you hear me?

Thank you very much. I have two questions.

I would love to explore the issue of the global inventories in corn and soybean. It was interesting to hear that China has more than the rest of the world and what's the impact on Brazil, since our most important client today is China.

So if you could make a connection between this and Trump. Well, Trump won, was more incisive in relation to agriculture than he's being right now, in spite of all uncertainty.

So it would be interesting, while you've talked about the pressure on prices in Chicago, that it's being offset by the premiums in Brazil. So do you think that this premium incorporates higher tariffs, you think or do you think that the premiums will go down?

I think this is it. And then I would like to ask a follow-up on production costs.

In 2018, China depended on the United States on agricultural products to a certain level, that’s completely different from right now. They had soybean stock of 23 million tons.

Now they have 43 million tons. In 2018, half of the imports into China came from the United States and half came from Brazil.

Now they closed the year, 26 million tons were imported from the United States, 73 million tons were imported from Brazil in 2024. The expectation for 2025 is that China will import around 80 million tons from Brazil and 21 million tons from the United States.

So China's reliance on the United States for food has decreased dramatically. Looking at corn, it was a moment in which China was importing a lot.

They tried transgenic, and they are now importing 295 million tons in the current cycle. Last year, they imported 1.3 million tons of corn, almost nothing from Brazil.

So, China did five years ago or three, four years ago, importing 20 million tons, 30 million tons of corn. Now imported 4 million tons of corn in 2024.

And the expectation for 2025 is 8 million tons of corn. So China does not depend on the U.S.

for corn imports. Even if China imports soybeans, zero soybeans from the United States, they will not go hungry because they can import from Argentina and Brazil and in cotton is no different.

Last year they imported 760,000 tons and Brazil is growing its cotton production. Very soon, Brazil will be able to meet China's demand.

And they are reducing imports because many industries are now migrating to countries such as Vietnam. So very soon, China will not depend on the United States for cotton.

So this dependency between China and the United States in agriculture has significantly decreased. The question is, will there be a new trade agreement between China and the United States in the area of agriculture?

We believe not. There could be a trade agreement, but agriculture will not be the pillar for this trade agreement.

There will be other geopolitical and strategic poise and this war is much more geopolitical than commercial, in fact, in our understanding. So, we do not believe, because a trade agreement, as we saw under Trump-1, could not be beneficial for Brazil because it's a trade agreement.

China would be importing large volumes from the United States and this would decrease our share. But we don't believe this is the case any longer.

So our vision is that, we have this positive outlook on demand for the Brazilian production. Well, when I said that China is stocked up, if I exclude China from the world, we would have normally 18% in the balance between inventory and consumption.

But if I exclude China, the ratio, the soybean ration would be at 17%. So inventories in soybeans are high, but they are all in China.

So globally they are just normal. 17% to 18%.

This is a normal ratio, a normal balance. So once again, this is something that shows that our perspective makes sense.

Now premium offsets, well, this is driven by rumors more than facts. 10%, of soybean imports.

So the 10% more of premium for Brazil in prices, in fact. So if the price is 10% and there is a tariff of 10%, it's going to be $1 in a premium that we will have, that we would have in relation to the normal premium.

And then the normal premium is based on supply and demand. For Brazil, what's normal is a positive 50% premium.

It's bad when there is a negative premium, as we had with the oversupply in Brazil in recent seasons. So in this year the normal premium would be at zero or negative as it was one month ago.

Now it has climbed $0.50, $0.60, so 6% in comparison to the 10% that is expected from the tariff. So, this is the short of it about cotton.

I said that we, that inventory levels are normal in the world and cotton is 67%. In the case of cotton, when USDA makes the analysis in July and August, they always have high levels of inventory.

And globally this inventory is also in China. When I exclude China, the normal inventory level is 18%.

It's now at 17%. So cotton prices are low because of the uncertainty in demand and supply.

Otherwise, there's no justification for prices this low. The positive point is that when the, when there are positive prices in the first quarter, the north will plant cotton.

China, India, Pakistan and the United States, they will plant cotton. And this is positive because cotton planting countries will reduce the current planted areas because of the low prices.

For example, in February, cotton was being traded at low prices in the United States. And this did not impel American farmers to plant cotton.

So they expect a reduction in the cotton planted area that's just getting started. March, April, a reduction of 15% in the cotton planted area.

In the United States and climate forecast is not good. There is a draft forecast in the cotton planting regions, so they are not expecting rain.

So on one side we have the area reduction that is expected and climate that will be unfavorable for cotton in the Northern hemisphere. So that's why we believe that the prices will be sustained with possible upsides as well.

What was the second question?

Well, since we were talking about the weather, about climate, I understood based on your previous comment that you believe that the deficit in corn will continue even with the increase of the planted area for corn in 2025-2026. Right.

Can you tell us a little bit more about these expectations? And of course I don't want to take any more of your time.

But the last question is about cost and hedging, which I believe is a little behind schedule for the period. I don't know if you have a different vision for them for the following periods.

Well, in our simulations for the 2025-2026 corn crop, global supply will be lower than consumption. Consumption is growing.

Consumption for protein is growing in Brazil and China and other corn consuming countries and we have also an expansion of demand of corn free ethanol. This year we should have 22 million tons being used for ethanol production.

India has started to produce sugar caned ethanol. Now they shifted this to corn.

So it's domestic production in the domestic corn production in India is being used for ethanol production and they are importing more corn for food. So growth in corn demand is consistent.

And also considering the trending curves next year, even with an expanded planted area in the United States, we shouldn't see production above consumption. There is a surplus in corn.

When we look at the corn and soybean curves along the year, soybean grows consumption 10 million tons per year and corn grows 24 feet. But it also increased 7 million tons a year for ethanol.

So that's why corn is growing consistently and sustaining its prices. Now inputs, in fact, we have made more progress this year in comparison to the previous year in fertilizers.

We're moving at the same pace. Both potassium and phosphate and also ammonia sulfate has already been purchased.

It's not urea, the 50% I was talking about. And we have enough time to purchase urea with the perspective of a deal in Ukraine at the end of the war.

So when we look at the purchases for the 2025, 2026 season, they are giving us opportunity for a positive price adjustment. As for crop protection, it was the other way around at this time of the year last year they were at a high the prices and we waited.

We made the purchase in April and May and we were able to benefit from lower prices. This year in the traditional market, prices are at attractive levels.

So that's why we are making progress in the negotiations.

Thank you. Our next question is from Matheus Enfeldt, UBS.

Matheus, could you please activate your camera and microphone?

Good morning, Pavinato, Ivo, Gelain. I have two questions.

Well, the output for CapEx 2024, 2025, 2024 was an important year with growth of the 10% and for 2025-2026 you're growing your land in 100,000 hectares. And I know that you said that CapEx would be relatively low, but I would like to think of the total CapEx for 2025 because we're starting off with a larger planted area.

So I imagine that maintenance CapEx will probably go over BRL 700 million year round and so should we expect a relevant growth in CapEx of 5% to 10%? Does it make sense or is there, or am I assuming this incorrectly?

Now, about pots and prices, I think that you were very clear in the short-term, but I'm not concerned in the medium and long-term. Brazil has found out it's a great producer of cotton and of course, we'll continue to expand cotton planted area.

And even with this price of 60 to 70 per pound, we'll continue to see more planted area in cotton and in the new normal, Brazil will continue to put pressure on this market in the medium term. So my question is, is there anything that Brazil can do to drive demand globally similarly, with what we did with ethanol?

Can we become demand drivers to try to balance this market where supply keeps on growing?

Thank you very much for the question about CapEx. I think it's a good question.

In the BRL 135 million that we spent on the purchase of Syrians, we included machinery as well. This includes machinery, so all the CapEx is included.

There could be some adjustments. That is pretty much it.

So you are correct, as we expand our planted area, our maintenance CapEx increases as well. So if you make the formula, this is the trend, that will be a small increase in the CapEx area.

It's only natural and we can of course make any adjustments needed to your model. So we cannot say if CapEx is going to increase 5% to 10%.

I would say no actually, because everything has been incorporated. We see an increase in maintenance CapEx related to this area.

We want to continue growing 30,000 to 35,000 hectares per year, but let's try to focus on that. We have room to grow.

And CapEx was around BRL 1 billion in 2024. I think it will be probably within this range.

Matheus, about cotton demand, a very complex question. Cotton competes with synthetic fiber.

This is the competition. So and Brazil competitiveness far exceeds any competitor.

When think of the production cost and this is what I keep on and keep on saying that we have to continue working on production cost because like this we'll be able to increase volume and sell more. Well, there is the option always, for the buyer to buy cotton or synthetic fiber and it's important to think of the end consumer.

And this is what EMBRAPA is doing with the [indiscernible] program to drive consumption of cotton in Brazil. And we're talking to the American and Australian association so that we can develop a project to increase cotton consumption.

But it's a difficult fight because the competition is fierce with synthetic fibers. So when we look at the global scenario, Brazil will take the position of other countries.

Other countries will reduce their planted area and Brazil will increase its planted area and occupy more space. So our focus has to be high product, high yield, low cost so that we can sell with a profit at $0.60, $0.70.

I think this is the future for cotton in Brazil. Thank you.

Our next question is from Guilherme Guttilla, BTG Pactual. Good morning, Guilherme.

Please open microphone.

Good morning. I’d like to talk about cotton.

There was a projection reduction, but still carry inventory. So is it really worth to sell cotton in the next season?

And also a quick question. You were talking about comedy price expectations, but we would like to ask what are you expecting in terms of yield for cotton in the near future?

In 2024 we delivered part of the 2023 and part of the 2024 seasons, but it was equivalent to a whole crop season. We expanded cotton in 2023, 2023, 2023, 2024 and now in 2025 we will deliver volumes equivalent to the ones in 2024 because the balance to be carryover from 2023 to 2024 is similar to the one we have from 2024 to 2025.

And we'll be harvesting in July and August. And now with the planted area expansion, we'll see more cotton in the 2025, 2026 season.

But this will be only recognized in 2027 because we're harvesting in 2025, we'll deliver part of the production. Then there will be a balance for 2026.

We'll deliver part of the 2026 season and the expansion volume will be delivered in terms of volume in 2027. This is the volume scenario for cotton in the near future.

I think we can look here, yes. In the release you see net income Table 16.

Well, 2023, 2024, this was 40% for cotton up to 2024, 40%. Now if you look at the year-to-date in 2024, we have 39% of net income.

In 2023 it was 35%, but we had a very significant loss. So margins are very consistent between 37% and 40%.

So as Pavinato said, prices fluctuate, but the costs also get adjusted. So I think that margins are very consistent and use this as a guide.

If you look at the hedge or how much we hedge, the price in dollars is lower -- 2023, 2025 that we deliver in 2025 and 2026 prices are lower R$ 0.769 versus R$ 0.81, but the exchange was BRL 143. So the price in Imperial of the 2024, 2025 season is higher than the previous.

Higher than the previous proxies so the expectations of profitability. Even with the low prices of cotton at 70%, we believe that we'll maintain our profitability.

Thank you very much.

Our next question is from Pedro Fonseca, XP. Please go ahead, Pedro.

Thank you very much for this opportunity. Firstly, about cost.

I think that you were, I think that your input acquisition was very effective. But when we think that in the first guidance and looking to the future, does it make sense that there is room for a revision with lower cost than expected, considering that you manage costs very efficiently.

This is my first session. And then I would like to explore with you, what have you seen in relation to new technologies and how should we see the marginal gains of the company, especially in terms of opportunities?

Can you give us details by crop? It would be great to see whether there is room for increases in productivity.

This is my question.

Well, about costs. Yes, I think that we managed the inputs last year in a very positive window.

But we always look at price at the price and cost ratio. If prices are not improving and there were no significant improvement, improvements then the price will remain the same with the fact that is in the exchange.

So I don't really see prospect for cost reductions. I think, the likelihood is zero.

We could, of course, make an acquisition that will have an impact. But we are now acquiring crop protection.

It's only normal that the vendors want to increase prices. But with commodity prices as stable as they are, it doesn't make sense to see any increases.

Of course, we have also inflation in BRL to think about. But there is a correlation between cost and price in this definition.

And for new technologies let's turn it over to Pavinato.

If the exchange is depreciated as it is now, our costs will be lower. So there could be adjustments in cost reductions that are negative in U.S.

dollars perspective. Well, technology and productivity gains, they are helping us become more efficient and increase yields.

Everything that we are investing, digital culture is making us more competitive. The productivity and yields we have reached in Brazil are very positive, surprisingly positive.

Now the climate is becoming more volatile. We have to be prepared for climate events because they're taking place more often.

It's not because you have higher yields that you'll be able to reach potential every year. But when we make the comparison between the technologies and the yields we reach inside bean, for example, with a farm with 85 bags per hectare and our average is 60 something, well, there is room for increasing yield in some farms and regions.

Of course, it's a matter of adjusting to the new realities and market conditions. So we are feeling optimistic about growing our productivity in the near future.

And at the same time, we believe that volatility and productivity will be more frequent. That's why we have this geographic diversification.

So if there is a draft in one region or extension, excessive rainfall in another one, we can maintain the averages for all cultures. In corn, we are consolidated second crop corn, something that's really very substantial in terms of volume.

We are producing 9,000, 10,000, 11,000 per hectare and kilos in some farms. So we are investing in the drying capacity so that we can plant corn sooner.

If we plant by February 20, instead of 7,000 kilos per hectares, we can reach 9,000 kilos per hectare. Of course, investing also in nitrogen and fertilizer, but this is the potential that we can explore.

And also cotton, cotton today we harvest 2,000 kilos per hectare, and we're going to harvest 2,200 up to 3,000 and with this, we're going to reduce the cost per pound of lint produced. So in this very competitive fiber market, our rationale is to boost productivity, not to increase margins, but to secure our margins in the case of cotton.

Very clear. Thank you very much, Pavinato and Ivo.

Thank you. The next question is from Gustavo Troyano, Itaú BBA.

Could you please open your microphone? Could you please activate your microphone and camera?

Good morning. Can you hear me?

Yes, we can.

Hello. Thank you very much for this opportunity.

It's always great to talk to you. My first question, in fact, both of them are about cash flow, but in the first one, well, we already discussed your CapEx expectations for this year.

And what about working capital requirements? Could you say a few words about it?

What are your expectations? Any investments for working capital that are not part of the acquisitions in the last 12 months?

It would be great to give us a little flavor about cash flow generation. And a second question is about capital allocation in your expansion cycle.

We would love to hear your payout expectations for the future. You just paid 50% and I would like to know whether you see room to continue at this level of payout, assuming that perhaps there won't be any other expansion opportunities to seize in the near future.

So, I just would like to know whether you intend to continue distributing value to the shareholders like in the form of dividends.

Well, I think it's important to highlight we have broken down maintenance versus growth CapEx. Growth CapEx is not invested in a single year.

We are increasing, for example our storage capacity, a farm that grew 15,000 hectares and then of course a silo was needed. So we are doing everything we can in the Pioneira Farm.

We are also building a silo in Preciosa Farm as well. Sometimes it's not an instant investment, if we wait for the best moment when this is a necessity for the farm.

In relation to working capital, if we don't grow, we quickly grow our cash and deleverage the company. Along the years we have shown, first of all, payout has been capped at 50%.

This is historical trend. When we are under leveraged, we restart the share buyback program in order to transfer the gains to our shareholders.

So if we think of the future, I think that, 50% payout. I don't see any reasons why this should be decreased or any scenarios, but CapEx will depend on growth and everything will be managed.

It's not going to be on a single investment. We are going to be smart about managing our cash flow and the investments we need to make.

Thank you, Troyano. We have one more question from Laura Hirata, Santander.

Could you please activate your microphone and camera?

Hello, Good morning. Can you hear me?

Yes.

Thank you very much for this opportunity. I have two questions.

Firstly, a follow up of the previous questions. I would like to understand your outlook for fertilizer prices 2025, 2026.

Would you link the source of these fertilizers? We would like to find out more about your sourcing strategy for fertilizers and also profitability strategy considering what you have already sourced.

And now another topic, new crops, in your guidance sorghum, a new area in sorghum. So I would like to understand more about your outlook and we also know that you focus on non-permanent crops.

But I would like to understand if you, since there is a growing demand for biomass, are you thinking of going into this area new crops such as eucalyptus, for example?

Thank you very much, Laura. About fertilizers, as we announced we purchased potassium at 10% lower than in the current crop.

So this is, of course, a positive indication in terms of costs for the new season. And phosphates as well, at very similar prices.

And nitrogen in line just slightly below. So today fertilizer prices are higher than at the prices we purchased them.

So we have to see now the prices, for example, that's why we have a vision that the 2025-2026 crop year should see prices and production costs that are very balanced in comparison to the previous or the current crop. We're going to be recovering margins in 2025, thanks to yield, because it's now back to the normal levels.

And our expectation for the future is that we'll maintain normal margins for the 2025-2026 season with this scenario of low prices and depreciated exchange rates. So it's normal times for margins in the crop.

Not the best, not the worst, sorghum. In the Northeast in Maranhão [indiscernible] has installed an ethanol plant and they have asked for both corn and sorghum.

So owing to scheduling reasons, we cannot plant corn. So we are going to plant sorghum after the corn window so that we can meet the needs of the ethanol industry both in Maranhão and Bahia.

[indiscernible] is also installing a plant in Maranhão and there will be demand for the grains. So this, the ethanol industry is driving demand for corn and also liquidity for corn and the same applies to sorghum.

Now biomass, this is the hot topic. Biomass is being used for the ethanol, so we are analyzing the potential, but it's not our main focus.

We have studied many permanent crops such as fruits and even coffee. We never felt very excited about them, but we are thinking about biomass.

Yes.

Very clear. Thank you very much.

If there are no more questions, the earnings conference call on 4Q24 is now finished. Our investor relations department will be happy to take any questions that you might have.

We thank you for attending. Have a great day everyone.